Modesto City Council
June 27, 2023

cardboard, and paper waste, a 96-gallon recycling container designated for glass, some metals and plastics, and clean cardboard, and a 96-gallon garbage container designated for other household trash. The garbage container is serviced weekly, and the recycling and organic containers are serviced bi-weekly. The bi-weekly organics container collection was approved as a one-year pilot program.

During the first few months of implementation, City staff received an influx of requests for the organics to go back to weekly collection. Residents have the following concerns regarding the bi-weekly organics collection:

1. Overfilled organics containers

2. Decomposition of organics causing odors and attracting pests

3. Cross contamination issues: using recycling and garbage containers to place excess organics.

4. Illegal Dumping
R3 Consulting Group calculated the costs associated with switching from bi-weekly to weekly organics collection and determined it would be $2.99. This fee was determined in 2021 using financial data from FY 19/20, thus staff brought the fee current by applying the

5.1% CPI; the adjusted recommended rate is $3.14.

3. Hiring a Solid Waste Rates Consultant
For Fiscal Year (FY) 22/23 rate review, both solid waste haulers submitted their audited financials; however, City staff found the computer modeling formula outdated and were unable to validate the numbers and data provided. Staff is recommending hiring a consultant to analyze the current rate setting methodology and test it for validity.

Consultant will also conduct an in-depth audit reviewing both hauler’s financials and develop a methodology to calculate the true cost of solid waste services currently being provided to the community and calculate the true cost of services that need to be provided due to changes in law and regulations. The total cost for hiring the rates consultant shall not exceed $150,000.

In accordance with Modesto Municipal Code Sec. 8-3.204(a), Exceptions to Formal Bidding Requirements, the Agreement is for Professional Services and, therefore, exempt from the bidding requirement. The approval for the Consulting services to HF&H Consultants LLC Conforms to Modesto Municipal Code 8-3.204, subsection (a) as they are providing Professional Services for conducting an audit and performance review for the solid waste haulers.

4. Allocation of Waste Adjustments
During the FY 16/17 Solid Waste Rate Study, it was determined that residential, commercial, and industrial customers should be contributing fees based on the allocation of waste combined with the number of customers from each sector. The FY21/22 rate review showed the allocation of waste being 52.95% residential, 26.16% commercial, and 20.89% industrial. These percentage allocations were then utilized in applying the fees accordingly.
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City Council, June 27, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

5. Geer Road Landfill
Geer Road Landfill is located in Stanislaus County, eight miles southeast of the City of Modesto along the Tuolumne River. It is jointly owned by Stanislaus County and the City of Modesto, and accepted waste from 1970 through July 1990. It was formally closed in 1995. Closure and post-closure costs and maintaining final assurances for the life of a closed landfill, are the responsibility of the owners of the landfill. The City and Stanislaus County equally contribute funds to an enterprise account solely for these purposes.

Under a settlement agreement between the City and the County on November 6, 2018, both parties agreed to contribute to the ongoing expenses associated with the landfill closure.

In order to ensure enough funds are available for future post-closure costs for the life of the landfill and for the payment for the settlement agreement, the following Geer Road Landfill Fees are recommended adjustments to the rates: Residential rate increase by $0.66 per household per month; Commercial rate increase by $0.74 per cubic yard per month; and Industrial rate increase by $23.22 per pull.

6. Fuel Rate Adjustment
On June 27, 2006, by Resolution No. 2006-410, Council approved making routine quarterly adjustments as needed to the component of the maximum rates attributable to the cost of fuel. This was due to severe fluctuations in the cost of diesel fuel, which is a significant cost factor for the collection companies. The methodology approved by the Council uses the average diesel fuel prices from the Department of Energy/Energy Information Agency (DOE/EIA) for a prior quarter to set the fuel component for a subsequent quarter. The rate is adjusted up or down accordingly.

When the fuel rates were analyzed for the July 1, 2023 rate review, it was determined that the haulers would receive a fuel rate adjustment of $0.04 for the residential accounts and $ 0.08 for the commercial accounts. This is a decrease of $0.29 to the Residential fuel adjustment of the previous year and a decrease of $0.39 to the Commercial fuel adjustment of the precious year. To calculate the residential fuel component, a factor of 0.30 gallons of diesel fuel per residence per month was used, and for the commercial fuel component, a factor of $ 0.095 gallons of diesel fuel per cubic yard was used. For this rate review, the average diesel fuel prices from January 1, 2023, to March 31, 2023, were analyzed, and staff recommended a fuel adjustment for both residential and commercial maximum rates based on the prices of diesel fuel during that time frame.

7. Pass Through Fees
Pass through fees are fees paid by customers as part of receiving solid waste service, the revenue from which is not retained by the haulers. In an effort to keep the solid waste rates low, the City elected to waive the franchise fees on City pass through fees.

Accordingly, $0.74 was deducted from the residential base rates, $1.46 was deducted from the commercial base rate, and $5.66 was deducted from the drop box rates. #18..
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City Council, June 27, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

FISCAL IMPACT:

The fiscal impact related to the necessary proposed adjustments for residential, commercial, and industrial solid waste collection services are as follows:

Residential Maximum Rate Recommendation
The City has a 3-container collection system: a 96-gallon container for garbage, 96-gallon container for organics, and a 96-gallon container for recycling. Currently, the organics containers are picked up on a bi-weekly basis. City staff received an influx of requests for the City to return to weekly organics collection. The table below shows the monthly residential cost for weekly organics collection.

Current Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $34.73
* Pass through Franchise Fees Reduction $(0.74)
* Proposed Base Rate Adjustment $1.73 $35.72
* Weekly Organics Collection $0.00 $3.14 $3.14
* Fuel Rate Adjustment $0.33 $(0.29) $0.04
Funds Adjustment
* Green Waste $5.01 $0.26 $5.27
* Geer Road $0.15 $0.66 $0.81
* Compost Facility Improvements $1.70 - $1.70
No Additional Changes
* SB 1383 Collection Fee $5.40 - $5.40
* Organic Waste Pre-Processing $1.72 - $1.72
* City Implementation $1.05 - $1.05
* Recycling Fees $0.46 - $0.46
* Carpenter Road $0.70 - $0.70
Total Residential Rate $51.25 $ 4.76 $ 56.01
Staff utilized the data provided by R3 Consulting Group and the most recent CPI to determine that the cost associated with switching from bi-weekly to weekly organics collection will be $3.14. Based on the average diesel fuel prices for January through March, a fuel rate adjustment of $0.04 will be applied to the residential accounts. The green waste fund will be increased by $0.26 adjusted by CPI 5.1%. The Geer Road Landfill fee will be increased by $0.66 to cover future post closure costs and the payment for the settlement agreement. #18..
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City Council, June 27, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

Commercial Maximum Rate Recommendation
The City has a commercial collection system offering one cubic yard to six cubic yard services, with the option of 96-gallon containers for smaller businesses, Rate analyses conducted by staff determined the adjusted cost for one yard of service as shown in the table below.

Current
Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $42.92
* Pass through Franchise Fees Reduction $(1.46)
* Proposed Base Rate Adjustment $0.65 $ 43.57
* Fuel Rate Adjustment $0.47 $(0.39) $0.08
Funds Adjustment
* Green Waste $10.18 $0.52 $10.70
* Geer Road $0.21 $0.74 $0.95
* Compost Facility Improvements $3.08 - $3.08
No Additional Changes
* Litter Abatement $0.59 - $0.59
* Organic Pre-Processing $3.11 - $3.11
* City Implementation $1.90 - $1.90
* Recycling Fees $0.63 - $0.63
* Carpenter Road $0.95 - $0.95
Total Commercial Rate $64.04 $1.52 $65.56
The base rate will be increased by the current CPI of 5.1%. Based on the average diesel fuel prices for January through March 2023, the maximum allowable fuel component for commercial rates is $0.08 per cubic yard. The green waste fund will be increased by $0.52 adjusted by CPI

5.1%. The Geer Road landfill fee will be increased by $0.74 to cover future post closure costs and the payment for the settlement agreement.

Industrial Drop Box/Roll-Off Compactors Maximum Rate Recommendation The maximum rates for industrial drop boxes and roll-off compactors are set for the pick-up charge and daily rental rate only. The actual disposal charge is negotiated directly between the solid waste company and the customer. These services are open to competition between the two authorized collection companies in the City. The current maximum rate per pick-up is $439.24. The base rate will be increased by the current CPI of 5.1%. Based on the rate analysis conducted by staff, the Geer Road landfill fund will be increased by $23.22 to cover future post closure costs and the payment for the settlement agreement. The new rate would be $476.06 per pick-up, to be effective August 1, 2023. The table below shows the proposed adjustments.

The current AB 939 Green Waste Diversion fee is $17.10 and is increased by 5.1% CPI. The new fee of $17.97 will be effective August 1, 2023.
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City Council, June 27, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

Current
Proposed
Adjustment
Proposed
Rate
Contractual Agreement
* Base Rate $383.21 $13.60 $396.81
Funds Adjustment
* Geer Road $6.55 $23.22 $29.77
No Additional Changes
* Recycling Fees $19.71 $ - $19.71
* Carpenter Road $29.77 $ - $29.77
Total Drop Box/Roll-Off Rate $439.24 $36.82 $ 476.06
Solid Waste Rates Consultant
The funding for the solid waste rates consultant will be provided by the solid waste fund. The solid waste fund is funded through the SB 1383 Implementation fees.

Additional Impacts to the General Fund and Streets Fund In order to keep the solid waste rates low, the City elected to waive the franchise fees on City pass through fees. The chart below shows the annual average impact to the City’s General and Surface Transportation funds.

Total Franchise Fees Waived from
Pass Through Fees
Total reduction to
General Fund
Total reduction to
Streets Fund
$ 392,799 $ 247,463 $ 145,336.

COMMITTEE RECOMMENDATION:

This item was presented to Finance Committee on May 22, 2023, and the committee recommended forwarding to Council for approval. The following changes were made after the committee meeting:

1. Recommending Hiring a Solid Waste Rates Consultant

2. Removing franchisee fees from pass through fees
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City Council, June 27, 2023
Annual Adjustment to Maximum Rate Schedule for Solid Waste Collection Services

RECOMMENDED COUNCIL ACTION:

Staff Recommendations:

Resolution approving the Annual Rate Adjustment to the Maximum Rate Schedule for City Solid Waste Collection Services provided by the solid waste haulers, for an increase of $4.76 per month for residential services with weekly green/organics container collection, an increase of $1.52 per cubic yard for commercial services, and an increase of $36.82 per pull for industrial services, to become effective August 1, 2023, and rescinding Resolution No. 2022-276 for the July 1, 2022 annual rate adjustment.

Resolution approving a quarterly fuel rate adjustment to the maximum rate schedule for City Solid Waste Collection Services provided by the haulers, for an adjustment of $0.04 per month for residential services, and an adjustment of $0.08 per cubic yard for commercial services, to become effective August 1, 2023, and rescinding Resolution No. 2022-277 for the July 1, 2022 annual rate adjustment.

Resolution approving an agreement with HF&F Consultants LLC., to conduct an audit and performance review for the solid waste haulers, to analyze the current rate setting methodology and test it for validity, and develop new rates methodology, for a total amount not to exceed $150,000 and authorizing the City Manager, or his designee, to execute the agreement.

Approved by:

Bill Sandhu, Public Works Director
Joseph P. Lopez, City Manager
Attachments:

1. Resolutions (3)

2. Attachment A- Maximum Rate Schedule for City Solid Waste Collection Services

3. R3 Consulting Group Final Draft Report

4. HF&H Draft Agreement
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MODESTO CITY COUNCIL
RESOLUTION NO. 2023 -

RESOLUTION APPROVING THE ANNUAL RATE ADJUSTMENT TO THE

MAXIMUM RATE SCHEDULE FOR CITY SOLID WASTE COLLECTION

SERVICES PROVIDED BY THE SOLID WASTE HAULERS, FOR AN
INCREASE OF $4.76 PER MONTH FOR RESIDENTIAL SERVICES WITH

WEEKLY GREEN/ORGANICS CONTAINER COLLECTION, AN INCREASE OF $1.52 PER CUBIC YARD FOR COMMERCIAL SERVICES, AND AN INCREASE OF $36.82 PER PULL FOR INDUSTRIAL SERVICES, TO BECOME EFFECTIVE AUGUST 1, 2023, AND RESCINDING RESOLUTION NO. 2022-276 FOR THE JULY 1, 2022 ANNUAL RATE ADJUSTMENT
WHEREAS, with the adoption of Ordinance No. 3068-C.S. in November of 1997, the City no longer sets rates for the collection of solid waste in Modesto, and instead performs a comprehensive review of cost information submitted by the contract solid waste haulers; and
WHEREAS, Section 2 (f) of the City’s Service Agreements with its solid waste collectors requires that rates will be reviewed annually by the City and, if deemed necessary by the City Council, maximum rate adjustments shall be made to become effective on July 1 of each year; and
WHEREAS, for FY 22/23 rate review, haulers submitted their audited financials; however, City staff found the computer modeling formula outdated and were unable to validate the numbers. Staff is proposing to hire a consultant to analyze the current rate setting methodology and test it for validity; and
WHEREAS, in lieu of using the existing computer modeling formula, the Green Waste Diversion Program Fees and the Base Rate were increased by 5.1%, in accordance with the Bureau of Labor Statistics Consumer Price Index - West Region (CPI) adjustment ending in March 2023; and
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WHEREAS, on June 14, 2022, by Resolution No. 2022-276, Council approved a three-container collection program, with a 96-gallon organics container, a 96-gallon recycling container, and a 96-gallon garbage container. The garbage container is serviced weekly, and the recycling and organics containers are serviced bi-weekly. The bi-weekly organics container collection was approved as a one-year pilot program; and WHEREAS, during the first few months of implementation, City staff received an influx of requests for the organics container to resume weekly collection due to overfilled containers, odor issues, and pest issues; and WHEREAS, R3 Consulting Group, Inc. calculated the costs associated with switching from bi-weekly to weekly organics collection and determined it would be $2.99.

This fee was determined in 2021 using financial data from FY 19/20, thus staff brought the fee current by applying the 5.1% CPI; the adjusted recommended rate is $3.14; and WHEREAS, the waste allocation for FY 20/21 was 52.95 % residential, 26.16% commercial, and 20.89% industrial; and
WHEREAS, the changes in waste allocation reflect the actual amount of waste from each sector, and residential and commercial allocations decreased, and industrial allocation increased as compared to FY 21/22, and these percentage allocations were then utilized in applying fees accordingly; and
WHEREAS, the Geer Road Landfill fees were adjusted for the future postclosure costs for the life of the landfill and for payment to the settlement agreement between the City of Modesto and Stanislaus County; and
WHEREAS, the Geer Road Landfill Residential rate will be increased to $0.81 per household per month; Commercial rate increased to $0.95 per cubic yard per month; and Industrial rate increased to $29.77 per pull; and
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WHEREAS, the agreements between City of Modesto and Gilton Solid Waste and Bertolotti Disposal Services requires the haulers to pay a franchise fee to the City at the rate of 9.9% and 10.3%, respectively; and
WHEREAS, in an effort to keep rates low for Modesto residents and businesses, the City Council has decided to waive the application of the franchise fee to any pass through fees collected, but not retained, by the haulers, which will result in a deduction of $0.74 from the residential base rates, $1.46 from the commercial base rate and $5.66 from the drop box rates; and
WHEREAS, the current maximum rate for residential service is $51.25, and a $4.76 increase is recommended for a new maximum residential rate of $56.01 to be effective August 1, 2023; and
WHEREAS, the current maximum rate for commercial service is $64.04 for onecubic yard picked up once weekly per month, and a $1.52 increase is recommended for a new maximum commercial rate of $65.56 to be effective August 1, 2023; and WHEREAS, the current maximum rate for drop boxes and roll-off compactor service is $439.24 for one-cubic yard picked up, and a $36.82 increase is recommended for a new maximum commercial rate of $476.06 to be effective August 1, 2023; and WHEREAS, the actual disposal charge for drop boxes is negotiated directly between the garbage collection company and the customer; and WHEREAS, the current AB 939 Green Waste Diversion fee is $17.10 and is increased by 5.1% CPI. The new fee is $17. 97 to be effective August 1, 2023; and
WHEREAS, it was found and determined by the Council of the City of Modesto that the existing schedules of rates and charges for solid waste service in the City of #18..
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Modesto should be revised as recommended above; and
WHEREAS, the fiscal impact related to the proposed adjustments for residential, commercial, and industrial solid waste services will increase revenue to the Solid Waste fund by $628.091, the General fund by $2,069, the Geer Road Landfill fund by $285.627, and the Green Waste fund by $121,006.

NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of Modesto that it hereby approves the Maximum Charges for Solid Waste Services provided by the Solid Waste haulers, as attached hereto as Attachment A, dated August 1, 2023, and incorporated herein by reference. Said Maximum Charges for Solid Wastse Service shall include all other services as stipulated in the Service Agreements and shall become effective August 1, 2023 and shall remain in effect until revised or rescinded by Council.

BE IT FURTHER RESOLVED, that Resolution No. 2022-276 for the July 1, 2022 annual rate adjustment is hereby rescinded effective August 1, 2023. #18..
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The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June, 2023 by Councilmember ?, who moved its adoption, which motion being duly seconded by Councilmember ?, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: __________________________
DIANE NAYARES-PEREZ, CMC, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: _______________________________
JOSE M. SANCHEZ, City Attorney
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MODESTO CITY COUNCIL
RESOLUTION NO. 2023-

RESOLUTION APPROVING A QUARTERLY FUEL RATE ADJUSTMENT TO

THE MAXIMUM RATE SCHEDULE FOR CITY SOLID WASTE COLLECTION SERVICES PROVIDED BY THE HAULERS, FOR AN ADJUSTMENT OF $0.04

PER MONTH FOR RESIDENTIAL SERVICES, AND AN ADJUSTMENT OF $0.08 PER CUBIC YARD FOR COMMERCIAL SERVICES, TO BECOME EFFECTIVE AUGUST 1, 2023, AND RESCINDING RESOLUTION NO. 2022-277 FOR THE JULY 1, 2022 ANNUAL RATE ADJUSTMENT
WHEREAS, with the adoption of Ordinance No. 3068-C.S. in November of 1997, the City no longer sets rates for the collection of solid waste in Modesto, and instead performs a comprehensive review of cost information submitted by the contract garbage haulers; and
WHEREAS, the City sets the maximum rate that the haulers may charge for the various types of services provided under the contracts based on cost data provided by the lowest cost hauler; and
WHEREAS, Section 2 (f) of the City’s Service Agreements with its solid waste collectors requires that when the City adjusts the collection services provided under the Agreements, any additional costs should be covered by adjustments to the maximum rates; and
WHEREAS, the City analyzes the fuel rates using the methodology approved by the Council which uses the average diesel fuel prices from the Department of Energy/Energy Information Agency (DOE/EIA) for a prior quarter to set the fuel component for a subsequent quarter. The rate is adjusted up or down accordingly; and WHEREAS, on June 27, 2006, by Resolution No. 2006-410, Council approved making routine quarterly adjustments as needed to the component of the maximum rates attributable to the cost of fuel; and
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WHEREAS, the fuel rates analyzed for this rate adjustment were based on the Department of Energy average diesel fuel prices from January 2023 through March 2023; and
WHEREAS, this action is to adjust maximum rates for fuel and therefore does not require environmental review; and
WHEREAS, it was found and determined by the Council of the City of Modesto that the quarterly adjustment to the fuel component of the maximum rates should be made.

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Modesto that it hereby approves the quarterly fuel adjustment from January 2023 through March 2023 to the Maximum Rate Schedule for Solid Waste Services, Attachment A, dated August 1, 2023, for an adjustment of $0.04 per month for residential services and an adjustment of $0.08 per cubic yard per month for commercial services and shall become effective August1, 2023 and shall remain in effect until rescinded.

BE IT FURTHER RESOLVED that Resolution No. 2022-277 for the July 1, 2022 annual rate adjustment is hereby rescinded effective August 1, 2023. #18..
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The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June, 2023, by Councilmember? who moved its adoption, which motion being duly seconded by Councilmember? was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: __________________________
DIANE NAYARES-PEREZ, CMC City
Clerk
(SEAL)
APPROVED AS TO FORM:

BY: _______________________________
JOSE M. SANCHEZ, City Attorney
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MODESTO CITY COUNCIL
RESOLUTION NO. 2023-

RESOLUTION APPROVING AN AGREEMENT WITH HF&H CONSULTANTS LLC., TO CONDUCT AN AUDIT AND PERFORMANCE REVIEW FOR THE

SOLID WASTE HAULERS, TO ANALYZE THE CURRENT RATE SETTING

METHODOLOGYAND TEST IT FOR VALIDITY, AND DEVELOP NEW

RATES METHODOLOGY, FOR A TOTAL AMOUNT NOT TO EXCEED
$150,000 AND AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE, TO

EXECUTE THE AGREEMENT
WHEREAS, the City of Modesto has two contracted exclusive franchise hauler agreements with Bertolotti Disposal and Gilton Solid Waste for residential, commercial, and industrial solid waste services, and
WHEREAS, the City sets the maximum rate that the haulers may charge for the various types of services provided under the contracts based on cost data provided by the lowest cost hauler; and
WHEREAS, for Fiscal Year (FY) 22/23 rate review, both solid waste haulers submitted their audited financials; however, City staff found the computer modeling formula outdated and were unable to validate the numbers and data provided; and WHEREAS, Staff is recommending to hire a consultant to analyze the current rate setting methodology and test it for validity; and
WHEREAS, Consultant will also conduct an in-depth audit reviewing both hauler’s financials and develop a methodology to calculate the true cost of solid waste services currently being provided to the community and calculate the true cost of services that need to be provided due to changes in law and regulations; and WHEREAS, in accordance with Modesto Municipal Code Sec. 8-3.204(a), Exceptions to Formal Bidding Requirements, the Agreement is for Professional Services and, therefore, exempt from the bidding requirement. The approval for the Consulting #18..
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services to HF&H Consultants LLC Conforms to Modesto Municipal Code 8-3.204, subsection (a) as they are providing Professional Services for conducting an audit and performance review for the solid waste haulers.

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Modesto that it hereby approves an agreement with HF&H Consulting, LLC., to conduct an audit and performance review for the solid waste haulers, to analyze the current rate setting methodology and test it for validity, and develop new rates methodology, for a total amount not to exceed $150,000.

BE IT FURTHER RESOLVED, that the City Manager, or his designee, is hereby authorized to execute the agreement, in a form approved by the City Attorney. #18..
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The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June, 2023, by Councilmember? who moved its adoption, which motion being duly seconded by Councilmember? was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: __________________________
DIANE NAYARES-PEREZ, CMC City
Clerk
(SEAL)
APPROVED AS TO FORM:

BY: _______________________________
JOSE M. SANCHEZ, City Attorney
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ATTACHMENT A
MAXIMUM CHARGES FOR SOLID WASTE SERVICE – AUGUST 1, 2023 RESIDENTIAL CONTAINERS - Maximum Monthly Rate
Standard container service includes the following:
 1 container each for garbage and organics picked up weekly  1 container for recycling picked up bi-weekly
 2 bulky item collections per year by appointment
 City tree maintenance; collection & composting of green waste and forestry materials  Removal of illegally dumped items in streets and alleys  Drop off program for household hazardous waste
Base Rate $ 35.72
Fuel Adjustment $ 0.04
Weekly Organics Collection $ 3.14
Green Waste $ 5.27
Geer Road Landfill $ 0.81
Compost Facility Improvements $ 1.70
SB 1383 Collection Fee $ 5.40
Organic Waste Pre-Processing $ 1.72
City SB 1383 Implementation $ 1.05
Recycling Fees $ 0.46
Carpenter Road Landfill $ 0.70
Maximum Monthly Rate $ 56.01
Additional Garbage Container - $13.00 each per month picked up weekly Additional Organics Container -8.00 each per month picked up weekly Additional Recycling Container - $8.00 each per month picked up bi-weekly *Containers must be placed in a location set forth in Section 5-5.121 of the MMC. #18..
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COMMERCIAL AND MULTIFAMILY CONTAINERS - Maximum Monthly Rate Weekly rental for Containers shall not exceed the rate for 1 pick-up per week for each size container.

Bin Maximum Rates
Number of Collections Per Week
Container Size 1 2 3 4 5 6
1 CY $ 65.56 $ 131.12 $ 196.68 $ 262.24 $ 327.80 $ 393.36 2 CY $ 131.12 $ 262.24 $ 393.36 $ 524.48 $ 655.60 $ 786.72 3 CY $ 196.68 $ 393.36 $ 590.04 $ 786.72 $ 983.40 $ 1,180.08 4 CY $ 262.24 $ 524.48 $ 786.72 $ 1,048.96 $ 1,311.20 $ 1,573.44 5 CY $ 327.80 $ 655.60 $ 983.40 $ 1,311.20 $ 1,639.00 $ 1,966.80 6 CY $ 393.36 $ 786.72 $ 1,180.08 $ 1,573.44 $ 1,966.80 $ 2,360.16 96 Gallon Cart Maximum Rates
Material Type Number of Collection Per Week
1 2 3 4 5
Recycling/Organics $25.00 $50.00 $75.00 $100.00 $125.00 Base Rate $ 43.57
*Fuel Rate Adjustment $ 0.08
Green Waste $ 10.70
Geer Road Landfill $ 0.95
Compost Facility Improvements $ 3.08
Litter Abatement $ 0.59
Organic Pre-Processing $ 3.11
City SB 1383 Implementation $ 1.90
Recycling Fees $ 0.63
Carpenter Road Landfill $ 0.95
Maximum Rate 1 Cubic Yard $ 65.56
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*Residential and Commercial Fuel Component Adjustments - The fuel component is set annually as part of the base cost. It is reviewed quarterly and adjustments shall be made as needed. The adjustment shall be based on the average price of fuel from January 1, 2023 to March 31, 2023. Average prices shall be determined based on published prices for California from the Department of Energy, Energy Information Agency and a fuel factor based on the haulers’ audited financials at annual rate review each year.

DROP BOX CONTAINERS – Maximum Rate Per Pick-Up
Actual disposal charges are paid and negotiated directly between the customer and the solid waste company. The solid waste company will provide up to 40CY Drop Box containers for stated charges subject only to load limit of transfer vehicle.

An AB 939 Green Waste Diversion Fee of $17.97 per ton is added to the disposal charges.

Base Rate $ 396.81
Geer Road Landfill $ 29.77
Carpenter Road Landfill $ 29.77
Recycling Fees $ 19.71
Maximum Rate Per Pick Up $476.06
Rental Fees
$0.85 per day up to 7-day maximum rental
$3.00 per day for boxes kept 7 or more days without servicing $10.00 per day for boxes kept 21 or more days without servicing #18..
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COMPACTORS – Maximum Monthly Rate
Compactor Rates
Container NUMBER OF COLLECTIONS PER WEEK
Size 1 2 3 4 5 6
1 CY $ 196.68 $ 393.36 $ 584.10 $ 786.72 $ 983.40 $ 1,180.08 2 CY $ 393.36 $ 786.72 $ 1,168.20 $ 1,573.44 $ 1,966.80 $ 2,360.16 3 CY $ 590.04 $ 1,180.08 $ 1,752.30 $ 2,360.16 $ 2,950.20 $ 3,540.24 4 CY $ 786.72 $ 1,573.44 $ 2,336.40 $ 3,146.88 $ 3,933.60 $ 4,720.32 6 CY $ 983.40 $ 1,966.80 $ 2,920.50 $ 3,933.60 $ 4,917.00 $ 5,900.40 Other Compactor Fees
 Hospital Waste Compactors $265.00 per pick-up
 Washing Compactor $30.00
 Disposal Charge Actual charge to be paid by customer
 AB939 Green Waste Diversion Fee $17.97 per ton

EXTRA PICKUPS
Standard containers or equivalent $3.50 plus $2.30/container Detachable containers $12.00 plus $4.15/cubic yard

SPECIAL SERVICE CONDITIONS
In situations where none of the above maximum rates reasonably apply, the cost of service is to be negotiated between the solid waste company and the customer.

COMMERCIAL CONTAINER ONLY–Replacement and Cleaning Services 1 CY 1½ CY 2 CY 3 CY 4 CY 5 CY 6 CY
$10.12 $11.00 $12.10 $15.40 $20.24 $25.08 $29.92
NOTATION: Pursuant to Section 11-6.15(b)(2) of the Modesto Municipal Code, the solid waste company may require a deposit equivalent to two months service charge from customers prior to beginning service. The deposit will be credited back to the customer after 18 months under specified conditions.
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1 STANDARD AGREEMENT

FOR CONSULTANT SERVICES
THIS AGREEMENT, made and entered into in the City of Modesto, State of California, this _______ day of , 2023, (“Effective Date”) by and between the CITY OF MODESTO, a municipal corporation of the State of California, hereinafter referred to as "City", and HF&H Consultants, LLC, a California corporation, hereinafter referred to as "Consultant".

This Agreement is made with regard to the following recitals:

A. The City has determined that an Annual Rate Adjustment should be prepared for the City to the Maximum Rate Schedule for City Solid Waste Collection Services.

B. Consultant represents that it is qualified, willing and able to provide the services to prepare said document(s).

NOW, THEREFORE, in consideration of this agreement, and the mutual promises, covenants, and stipulations hereinafter contained, the parties agree as follows:

1. SCOPE OF SERVICES.

Consultant shall undertake and complete the scope of work as set forth and described in the documents attached hereto and referred to as Exhibit "A" or "Project".

2. TERM OF AGREEMENT.

This Agreement is effective as of the date first written above and will continue in effect until City's acceptance of and payment for all services authorized by City and performed by Consultant, unless terminated earlier in accordance with the provisions of the termination clause in this Agreement.

City hereby gives Consultant notice to proceed with the preparation of the Project, as of the Effective Date of this agreement. Consultant shall diligently proceed with the completion of the Project within the time period set forth in Exhibit "A".
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2 3. COMPENSATION.

Consultant agrees to accept a sum not to exceed $150,000. (maximum compensation) as full remuneration for performing all services and furnishing all staffing and materials for Modesto in accordance with Exhibit "A" , except that additional services may be compensated as described below.

The Compensation shall be paid pursuant in the manner and at the times set forth below:

City shall pay Consultant on a time and materials basis for Consultant’s actual costs for all work called for in Exhibit “A” to this Agreement. All work to be performed under this Agreement shall be billed at the hourly rates set forth in Exhibit “B” attached hereto. Consultant shall submit monthly invoices to City which include detailed tasks, hours worked, and billable rates for all work completed, and detailed receipts for any reimbursable expenses paid by Consultant and identified in Exhibit “B” or approved by the City in writing.

City shall pay Consultant Net 45 Days via manual check.

In the event that additional services are deemed necessary, the Consultant shall provide a written request to the City Representative indicating the reason for additional work, scope and cost of such work. If additional services in excess of this amount are deemed necessary by City Staff, an amendment to this Agreement will be required and must be approved prior to commencing the work.

4. OBLIGATIONS OF CONSULTANT.

Throughout the term of this Agreement, Consultant shall possess, or secure all licenses, permits, qualifications and approvals legally required to conduct business. Consultant warrants that it has all of the necessary professional capabilities and experience, as well as all tools, instrumentalities, facilities and other resources necessary to provide the City with the services contemplated by this Agreement. Consultant further warrants that it will follow the best current, generally accepted and professional practices to make findings, render opinions, prepare factual presentations, and provide professional advice and recommendations regarding this project.
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3 5. PERFORMANCE BY KEY EMPLOYEE.

Consultant has represented to City that Rick Simonson will be the person primarily responsible for the performance of the services referred to in this Agreement. City has entered into this Agreement in reliance on that representation by Consultant. Consultant therefore agrees that percent 20% or more of the time to be devoted to the project that is the subject of this Agreement will be that of the above-named person.

6. OWNERSHIP OF DOCUMENTS/TITLE TO DATA.

Ownership of Documents
All reports, drawings, designs, graphics, working papers and other incidental work or materials furnished hereunder shall become and remain the property of the City, and may be used by City as it may require without any additional cost to City. No reports shall be used by the Consultant for purposes other than this contract without the express prior written consent of City.

Title to Data
If, as a part of the agreement, Consultant is required to produce data such as, but not limited to, drawings, plans, specifications, calculations, models, flow diagrams, visual aids and other related materials, the originals of all such data generated under this agreement will be delivered to City upon the completion or termination of services under the contract. It is understood and agreed that the documents and other materials, including but not limited to those described above, prepared pursuant to this Agreement are prepared specifically for the City and are not necessarily suitable for any future or other use.

All materials, documents, data or information obtained from the City data files or any City medium furnished to Consultant in the performance of this Agreement will at all times remain the property of the City. Such data or information may not be used or copied for direct or indirect use by Consultant after termination of this Agreement without written consent of the City. #18..
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4 7. NEWS AND INFORMATION RELEASE.

Consultant agrees that it will not issue any news releases in connection with either the award of this Agreement, or any subsequent amendment of or efforts under this Agreement, without first obtaining review and approval of said news releases from the City Manager.

8. CONFLICT OF INTEREST.

Consultant warrants that it presently has no interest and shall not acquire any interest, direct or indirect, which would create a “conflict of interest”, as that term is defined in the Political Reform Act (Gov. Code § 81000 et seq), for the Consultant in the performance of this Agreement. Consultant warrants that, in performance of this Agreement, Consultant shall not employ any person having any such interest. Consultant understands that, if this Agreement is made in violation of Government Code § 1090 et seq., the entire Agreement is void and Consultant will not be entitled to any compensation for services performed. Consultant agrees to file a Statement of Economic Interests with the City Clerk at the start and end of this contract if so required at the option of City.

9. AMENDMENTS.

This Agreement, including the Exhibits attached hereto, may be amended only by a writing signed by both Parties. City will not be responsible to pay any charges Consultant may incur in performing services not identified in Exhibit ‘A’ unless first authorized by the City in writing

10. INDEPENDENT CONTRACTOR.

All acts of Consultant, its agents, officers, and employees and all others acting on behalf of Consultant relating to the performance of this Agreement, shall be performed as independent contractors and not as agents, officers, or employees of City. Except as City may specify in writing, Consultant has no authority to bind or incur any obligation on behalf of City. Consultant has no authority or responsibility to exercise any rights or power vested in the City. It is understood by both Consultant and City that this Agreement shall not under any circumstances be construed or considered to create an employer-employee relationship or a joint venture. Consultant, its agents, officers and employees are and, at all times during the #18..
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5 terms of this Agreement, shall represent and conduct themselves as independent contractors and not as employees of City.

Consultant shall determine and control the method, details and means of performing the work and services to be provided by Consultant under this Agreement. Consultant shall be responsible to City only for the requirements and results specified in this Agreement, and, except as expressly provided in this Agreement, shall not be subjected to City's control with respect to the physical action or activities of the Consultant in fulfillment of this Agreement. Consultant is permitted to provide services to others during the same period service is provided to City under this Agreement. If necessary, Consultant has the responsibility for employing other persons or firms to assist Consultant in fulfilling the terms and obligations under this Agreement.

If in the performance of this Agreement any third persons are employed by Consultant, such persons shall be entirely and exclusively under the direction, supervision, and control of Consultant. All terms of employment including hours, wages, working conditions, discipline, hiring, and discharging or any other term of employment or requirement of law shall be determined by the Consultant.

It is understood and agreed that as an independent contractor and not an employee of City neither the Consultant or Consultant's assigned personnel shall have any entitlement as a City employee, right to act on behalf of the City in any capacity whatsoever as an agent, or to bind the City to any obligation whatsoever. It is further understood and agreed that Consultant must issue W-2 forms or other forms as required by law for income and employment tax purposes for all of Consultant's personnel.

11. ASSIGNMENT.

Neither this Agreement nor any portion thereof shall be subcontracted or assigned, other than noted in Exhibit ‘A’, without the express prior written consent of the City in each and every instance. #18..
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6 12. PATENT/COPYRIGHT MATERIALS.

Unless otherwise expressly provided in the contract, Consultant shall be solely responsible for obtaining the right to use any patented or copyrighted materials in the performance of this Agreement. Consultant shall furnish a warranty of such right to use to City at the request of City.

13. NOTICES.

Notice required by this Agreement shall be given in writing and shall be deemed given and effective upon delivery provided that such are delivered in accordance with the provisions of this Section.

Notices shall be delivered either by: (a) personal delivery; (b) overnight courier service which obtains confirmation of delivery; or (c) certified pail, return receipt requested, if delivery is confirmed by a return receipt; or (d) by electronic transmission subject to reasonable proof that the notice was both transmitted and received. Each such notice shall be sent to the parties at the address respectively set forth below or to such other address as a party may designate by written notice given in accordance with the provisions of this Section:

FOR CONSULTANT: Name: HF&H Consultants
Address: 590 Ygnacio Valley Road, Suite 105
Walnut Creek, CA 94596
Attention: Rick Simonson
Phone: (925) 977-6950
Email: [email protected]
FOR CITY: Name: City of Modesto
Address: P.O. Box 642
Modesto, CA 95353
Attention: Rosene Nguyen
Phone: (209) 577-5453
Email: [email protected]

14. INSURANCE REQUIREMENTS.

The Consultant shall provide at its own expense and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to the City as may be required by the Risk Manager of the City. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be #18..
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7 given to the Risk Manager of the City by PINS Advantage Insurance Program, for all of the following stated insurance policies.

In the event the certificates of insurance required hereunder do not provide for notice of cancellation to the certificate holder and/or additional insureds, the Consultant shall provide, and shall require its subcontractors to provide, as an express condition precedent to payment hereunder, an endorsement from their insurers providing that the additional insureds identified herein shall be provided 30 days notice of the cancellation on the policies of insurance required hereunder (10 days notice if the policies are cancelled for nonpayment of premium). In addition, the named insured on all such policies shall provide to the additional insureds identified herein any notices of cancellation of said insurance policies within 5 business days of receipt of such notice. The Consultant shall, as a further express condition precedent to payment for work performed, affirm under penalty of perjury that the required insurance on the project remains in place and said insurance has not been cancelled.
(a) Worker's Compensation - in compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $1,000,000. (b) General Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. This insurance shall indicate on the certificate of insurance the following coverages and indicate the policy aggregate limit applying to: premises and operations; broad form contractual; independent consultants and subcontractors; products and completed operations as applicable.
(c) Automobile Liability insurance with a minimum limit of liability per occurrence of $1,000,000 for bodily injury and property damage. This insurance shall cover any automobile for bodily injury and property damage.
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8 (d) Professional Liability insurance with a minimum limit of $1,000,000 per claim and policy aggregate. If coverage is on a claims made basis it shall be maintained for at least three (3) years following completion of the work.

If at any time any of said policies shall be unsatisfactory to the City, as to form or substance, or if a company issuing such policy shall be unsatisfactory to the City, the Consultant shall promptly obtain a new policy, submit the same to the Risk Manager for approval and submit a certificate thereof as hereinabove provided. Upon failure of the Consultant to furnish, deliver or maintain such insurance and certificates as above provided, this Agreement, at the election of the City, may be forthwith declared suspended or terminated. Failure of the Consultant to obtain and/or maintain any required insurance shall not relieve the Consultant from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the Consultant concerning indemnification. The City, its agents, officers, employees, and volunteers shall be named as an additional insured on all insurance policies required herein, except Workers' Compensation and Professional Liability. The Workers' Compensation insurer shall agree to waive all rights of subrogation against the City, its agents, officers, employees, and volunteers for losses arising from work performed by Consultant for the City. The Consultant's insurance policy(ies) shall include a provision that the coverage is primary as respects the City; shall include no special limitations to coverage provided to additional insured; and, shall be placed with insurer(s) with acceptable Best's rating of A:VII or with approval of the Risk Manager. The Consultant must deliver certificates evidencing existence of the insurance listed above to the City prior to the time the contract is signed.

CONSULTANT shall provide CITY with separate endorsements evidencing proof of the CITY’s additional insured status as to both the general liability and automobile liability insurance policies. In addition, CONSULTANT shall provide CITY with a Workers Compensation subrogation waiver by way of a separate endorsement. All endorsements referenced above must include the applicable policy number.

For any claims related to this project, the CONSULTANT’S insurance coverage shall be #18..
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9 primary insurance as respects the Entity, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the Entity, its officers, officials, employees, or volunteers shall be excess of the CONSULTANT’S insurance and shall not contribute with it.

15. TERMINATION OF AGREEMENT.

Termination for Default
In the event either party fails to perform under this AGREEMENT or breaches any condition contained herein, the other party shall notify in writing the breaching party of the non-performance.

Within 10 days after receipt of notification, the breaching party shall correct any non-performance to the reasonable satisfaction of the non-breaching party, or such other time as may be identified in the notice. Failure to correct any non-performance shall allow the non-breaching party to terminate this AGREEMENT for cause.

Termination by City for Convenience
City may cancel this Agreement at any time, with or without cause, upon written notification to Consultant.

Post-Termination Procedure
Upon receipt of a written notice of termination, the Consultant shall:
a. Cease its work as directed in the notice of termination as of the termination date and see to it that its employees, subconsultants and agents are notified of such termination and act as specified in the notice of termination; b. Terminate all orders and Subcontractors except as necessary to complete any portion of the Work that is not terminated;
c. If directed in writing by the City to do so, assign all right, title and interest in subcontracts and materials in progress to City, in which case the City will have the right at its discretion to settle, or pay any or all claims arising out of the termination of such subconsultants, but in no event shall recovery by any Consultant or subconsultant include lost profits for portions of the Work not #18..
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10 completed or undertaken, including materials not delivered; d. Deliver or otherwise make available to the City all data, drawings, specifications, reports, estimates, summaries and such other information and material as may have been accumulated by the Consultant in performing the Work whether completed or in process;
e. Settle outstanding liabilities and claims, subject to the approval of City; f. Complete performance of such part of the Project as has not been terminated; g. Take such other actions as may be necessary, or as may be directed by the City for the protection and preservation of the Project and/or property related to the Project;
h. If City so requests, and at City's cost, Consultant shall provide sufficient oral or written status reports to make City reasonably aware of the status of Consultant's work on the project.
i. The Consultant understands and agrees that City may, in City's sole discretion, refuse to pay Consultant for that portion of Consultant's services which were performed by Consultant on the project prior to the termination date and which remain unacceptable and/or not useful to City as of the termination date.

City will pay Consultant for work actually completed prior to the receipt of the termination notice or otherwise completed in accordance with the notice of termination. The final payment to the Consultant after termination for convenience shall be limited to amounts due and owing under the Agreement at time of termination, including the following:
a. The cost of settling and paying valid claims arising out of the termination of the Work such as subconsultant agreements or contracts for materials; b. The Agreement price allocable to the portion of the Work properly performed or goods supplied to the work site by the Consultant as of the date of #18..
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11 termination, as determined in accordance with the notice of termination, reduced by any sums previously paid to the Consultant.

16. INDEMNITY.

The Consultant shall hold the City, its agents, officers, employees, and volunteers, harmless from and save, defend and indemnify them against any and all claims, losses, liabilities, judgments or damages from every cause, including but not limited to injury to person or property or wrongful death, including reasonable costs and expenses of defense of any judicial or administrative action, arising directly or indirectly out of any negligent or intentional act or omission of Consultant, or its agents, officers, employees, or volunteers relating to or during the performance of its obligations under this Agreement.

Consultant's obligation to defend, indemnify, and hold the City, its agents, officers, and employees harmless under the provisions of this paragraph is not limited to or restricted by any requirement in this Agreement for Consultant to procure and maintain a policy of insurance.

In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City.

17. DISPUTE RESOLUTION.

Venue for all claims, controversies, or disputes arising out of, or relating to the formation of this Agreement, or the breach, termination execution, enforcement, interpretation, or validity of this Agreement, including the determination of the scope or applicability of this contract provision shall be in the Superior Court of Stanislaus County or the United States District Court for the Eastern District of California. #18..
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12 18. ATTORNEYS’ FEES.

If a party to this AGREEMENT brings any action, including an action for declaratory relief, to enforce or interpret the provision of this AGREEMENT, the prevailing party shall be entitled to reasonable attorneys’ fees in addition to any other relief to which that party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose.

19. ENTIRE AGREEMENT.

This Agreement and its exhibits contain the entire understanding between Consultant and City. All previous proposals, offers and communications relative to this Agreement, whether oral or written, are hereby superseded except to the extent that they have been incorporated into this Agreement.

20. PARTIAL INVALIDITY.

If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

21. WAIVER.

The waiver by any party to this Agreement of a breach of any provision hereof shall be in writing and shall not operate or be construed as a waiver of any other or subsequent breach hereof unless specifically stated in writing.

22. AUDIT.

The City's duly authorized representative shall have access at all reasonable times to all reports, contract records, contract documents, contract files, and personnel necessary to audit and verify Consultant's charges to City under this Agreement.

Consultant agrees to retain reports, records, documents, and files related to charges under this Agreement for a period of four (4) years following the date of final payment for Consultant services. City's representative shall have the right to reproduce any of the aforesaid documents. #18..
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13 23. GOVERNING LAW.

This Agreement shall be governed according to the laws of the State of California.

24. HEADINGS NOT CONTROLLING.

Headings used in the Agreement are for reference purposes only and shall not be considered in construing this Agreement.

25. COMPLIANCE WITH LAWS.

Consultant shall insure compliance with all safety and hourly requirements for employees, in accordance with federal, state, and county safety and health regulations and laws. Consultant shall fully comply with all applicable federal, state, and local laws, ordinances, regulations and permits.

26. CITY BUSINESS LICENSE.

Consultant will have a City of Modesto business license. #18..
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14 IN WITNESS WHEREOF, the City of Modesto, a municipal corporation, has authorized the execution of this Agreement in duplicate by its City Manager and attestation by its City Clerk under authority of Resolution No. 2023- , adopted by the Council of the City of Modesto on the day of _____________ , 2023, and HF&H Consultants, LLC has caused this agreement to be duly executed in duplicate as of the Effective Date.
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CITY OF MODESTO

COUNCIL AGENDA REPORT
DATE OF MEETING:

June 27, 2023
Date: May 2, 2023
TO: Mayor and City Council
THROUGH: Joseph P. Lopez, City Manager
FROM: William Wong, Director of Utilities
SUBJECT: Water Rate Increases
CONTACT: William Wong, Director of Utilities, [email protected], 209-571-5801 DESCRIPTION:

Consider approving the Water System Engineer’s Report prepared by West Yost as complete; the Water Rate Study prepared by Bartle Wells Associates as complete and authorizing Staff to initiate the Proposition 218 process to adjust the City’s Water Rates beginning in Fiscal Year 2023-24 through Fiscal Year 2027-28. (Funding Source: Water Fund) STRATEGIC PLAN ELEMENT:

The recommended action supports the 2020-2025 City’s Strategic Plan Initiatives, Goal D:

Provide safe, efficient, and reliable infrastructure through proactive community investment, maintenance, and sustainability efforts.

BACKGROUND:

The City of Modesto provides water service to over 74,000 accounts consisting of residential, multi-family, commercial, and industrial customers located within the City of Modesto, as well as the communities of Salida, Empire, Grayson, Del Rio, and portions of Turlock and unincorporated Stanislaus County. The City’s water utility is a self-supporting utility enterprise funded by customer revenues from the sale of groundwater and treated surface water purchased from the Modesto Irrigation District.

In 1996, California voters adopted Proposition 218, which amended the California Constitution to establish a process that public agencies must follow when imposing new or increasing property related fees. In 2007, the California Supreme Court ruled that water service fees are property related fees, thus subject to Proposition 218 requirements. Proposition 218 mandates that any property-related fee imposed by a public agency cannot exceed the cost of providing that service by imposing certain restrictions on the rate and fee amounts to be charged, and limits what costs can be funded by the revenue generated by the proposed rates and fees.

Proposition 218 also requires that a public agency mail a notice of the proposed rate increases to all affected property owners or ratepayers and conduct a public hearing to consider the proposed #19..
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City Council, June 27, 2023
Water Rate Increases

increases. The notice must include the proposed rate and fee amounts, state how the rates and fees were calculated, the reason for the fees, and the date, time, and location of the public hearing. The notice must also inform affected property owners or ratepayers that the rate increase is subject to a majority protest, meaning that if more than fifty percent (50%) of affected property owners or ratepayers submit written protests against the proposed rate increase, the increase will not be adopted. The notice must be sent to the affected property owners or ratepayers at least forty-five (45) days before the date of the public hearing.

The City last conducted an in-depth cost of service rate study in 2016, which was approved and implemented by the City Council by Resolution No. 2016-241. This Resolution established rates from fiscal year (FY) 2016-17 through 2020-21. The last rate change occurred October 1, 2021.

Table 1 - Previous Adopted Water Rate Increases (FY 2017-2021) As shown in Table 1, there was a significant first year increase needed to adjust the amount of revenue collected in the Water utility to meet requirements of the City’s financial polices (debt coverage ratio of 1.5 or greater) in FY 2017. This large increase in FY 2017 was due to not raising water rates in FY 2015 and 2016. However, while the City did adopt higher water rate increases of 9% in FY 2019-2020 and 9% in FY 2020-21, City staff readjusted its capital program, and revised its projected revenues and expenses. As a result, City Staff was able to recommend, and Council approved, lower than adopted rates increase of 6% and 2%, respectively.

However, in the current economic environment, changes in the City’s water utility, including escalating operation and maintenance costs due to inflation, new regulatory requirements, and major water system capital improvements requires the City to update its water rate structure, and adopt a new five-year schedule of adjustments.

On December 8, 2020, Council, by Resolution No. 2020-526 approved an agreement with West Yost to update the Water System Engineer’s Report, which identifies all required water system improvement projects to meet current and future growth demands and new regulatory requirements. The Water System Engineer’s Report serves as the basis for the Water Rate Study (Study), providing the justification and allocation of costs for the proposed water Capital Improvement Program between existing and future customer classes.

On December 8, 2020, Council, by Resolution No. 2020-525, approved an agreement with Bartle Wells Associates (BWA) to conduct a comprehensive cost of service review of the water rates and fees, and prepare a new water rate and fee structure that is compliant with all legal requirements of Proposition 218.

DISCUSSION:

The analysis of the completed Engineer’s Report and water system Capital Improvement Program (CIP) cash flow has identified a range of approximately $138 million to $185 million in CIPs FY 2017-2021
Water Rates
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
% increase 25.04% 11.08% 9% 9%
(revised to 6%)
9%
(revised to 2%)
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City Council, June 27, 2023
Water Rate Increases

between FY 2023-2027. Key CIPs to address water system reliability, water quality improvements and regulatory mandates (such as AB 1668 and SB 606) include:
 Strengthen & Replace Water System Pipeline Projects
 New and Replacement Wells and Wellhead Treatment
 Well rehabilitation projects
 Supervisory Control and Data Acquisition (SCADA) upgrades  Water System Security enhancements
 Backup Power/Emergency Generators
 Advanced Metering Infrastructure (AMI)
 Water Storage Tank Improvements
 Sustainable Groundwater Studies and Projects
 Flow Transmission Main Capacity Improvements
 Additional/Upsized Transmission Mains and Pump Stations for South Modesto and Growth Areas
The CIP costs are incorporated into the comprehensive Water Rate Study update. Key rate and fee impacts were analyzed, including:
 Updating the cost of service, including steep inflationary increases  Rate design
 Amount of capital improvement spending
o Reduced capital improvement plan
o Full capital improvement plan
 Developing drought and non-drought rates
 Setting rates to recover operating costs and capital improvements  Evaluating revenue recovery from fixed meter charges vs. volume rate  Funding of capital improvements
o Analysis of different CIP scenarios
o Use of Reserves
o Rate revenues and connection fees
o Debt financing
In an effort to minimize financial impacts to customers and maintain necessary services, staff incorporated a strategy to reduce Operating expenses, adjusting Capital Program budgets, and actively pursued alternative/supplemental funding to support lower rate increases. In addition, while the City’s financial policies do recommend a debt coverage ratio of 1.5 or greater, the City’s financial consultants recommend a debt coverage ratio of 2.0 for a water utility.

Delaying rate increases would result in deferring necessary regulatory and water system required projects, which would cost the rate payers more in the future.

Below is BWA’s comprehensive water cost of service methodology used for the rate Study:
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City Council, June 27, 2023
Water Rate Increases

Project
Initiation
and Data
Collection
Demand
Analysis
LongRange
Financial
Plan
Cost
Allocatio
n
Rate
Design
Prop. 218
Process
BWA’s rate recommendations include modifications to the cost-of-service allocations and water rates. The recommended rates are designed to recover the Water utility’s cost of service and proportionately recover costs from customers. The financial challenges over the next five years will be to maintain debt service coverage and to stabilize revenues with reduced water volume sales, resulting from ongoing water conservation, regulatory mandates, and looming drought conditions. Based on BWA’s analysis, the following proposed increases are needed to meet the revenue requirements for either a Reduced (low) or a Fully funded capital improvement plan:

Table 2 – Proposed Water Rate Scenarios (FY 2024-2028)
FY 2023-24
% increase
FY 2024-25
% increase
FY 2025-26
% increase
FY 2026-27
% increase
FY 2027-28
% increase
Scenario 1
Reduced (Low)
CIP – No Debt
($138M)

4.5% 4.5% 4.5% 4.5% 4.5%
Scenario 2
Full CIP – with
Debt ($185M)*

4.5% 4.5% 4.5% 4.5%* 4.5%*
Scenario 3
Full CIP – No Debt
($185M)

6.5% 6.5% 6.5% 6.5% 6.5%
*Scenario 2 would require $40M in debt financing in FY 2027 and 2028 ($20M each year) The Study prepared by BWA found that prior water rate and fee increases had strengthened the financial condition of the Water Fund. However, current rates are not adequate to fund the needed water system reliability, water quality improvements, and meet regulatory mandates.

The Study developed three capital funding rate scenarios and their associated rate and fee requirements for consideration:
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City Council, June 27, 2023
Water Rate Increases

• Scenario 1 – Reduced (Low) Capital, No Debt. This scenario projects inflation adjusted capital spending to total $138 million over the next five years. This scenario projects that all capital spending will be cash funded which is an average cash expense of $27.6 million per year. Scenario 1 also keeps the Water Fund’s debt coverage ratio above 2.0, maintains the Water Fund’s strong credit rating, covers the cost of service of the water system, funds the capital improvement program budget and supports the financial health of the Water Fund
• Scenario 2 - Full Capital with Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years. This scenario projects that $145 million over the next five years will be cash funded which is an average cash expense of $29 million per year, with the remaining $40 million is projected to be debt financed.

Scenario 2 also keeps the Water Fund’s debt coverage ratio above 2.0, maintains the Water Fund’s strong credit rating, covers the cost of service of the water system, funds the capital improvement program budget, covers additional debt service, and supports the financial health of the Water Fund.
• Scenario 3 - Full Capital, No Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years. This scenario projects that all capital spending will be cash funded which is an average cash expense of $37 million per year. Scenario 3 keeps the Water Fund’s debt coverage ratio above 2.0, maintains the Water Fund’s strong credit rating, covers the cost of service of the water system, funds the capital improvement program budget, and supports the financial health of the Water Fund.

Staff is recommending Scenario 2 - Full Capital Plan with Debt. for the following reasons:
 The proposed 4.5% annual rate increase is below the City’s projected inflationary budget increases of 5.0%
 Provides the City with the same rate increase as Scenario 1, and fully recovers the Water utility’s operational cost of service and necessary capital improvement projects to ensure residents continue to receive clean and safe drinking water.  Provides a gradual increase to reduce wide rate fluctuations and to minimize impacts to the water customers
 Helps the City fund projects and programs to comply with the state water quality and water use mandates, including Assembly Bill (AB) 1668 and Senate Bill (SB) 606  Meets the City’s financial policies, provides the Water Fund with sufficient reserves, and maintains a debt coverage ratio of over 2.0, which is recommended by the City’s financial consultants for the water utility
 While $40M in debt financing is anticipated, City Staff will continue to pursue alternate State and Federal funding opportunities to offset City Water Fund costs to potentially reduce the amount of debt required. Any future increased costs due to the repayment of debt spending will be offset with a potential reduction in operating or capital project costs.

The Water Rate Study allocated cost between fixed costs for customer service and meter size, and variable cost of water used (volume) by meter. The table below reflects the recommended proposed rate schedule that includes the fully funded CIPs (Scenario 2). #19..
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City Council, June 27, 2023
Water Rate Increases

Table 1 – Proposed Water Rates (Scenario 2)
A separate drought surcharge rate to be used only under drought conditions was developed to promote conservation, while minimizing impacts to the Water Fund Revenue. Currently, drought rates will be implemented when the Governor of California declares a state-wide drought, or through City Council action, when local water supplies are unsustainable and reach Stage 3 of the City’s Water Shortage Contingency Plan.

Under drought conditions, customers will pay a higher rate and consume less water, thereby maintaining a similar water bill as a non-drought condition. This surcharge will be implemented to recover the City’s water costs, many of which are fixed and do not decrease when conservation increases, from projected drought-level water use.

In order to maintain the debt coverage ratio above 2.0, maintain the Water Fund’s strong credit rating, and support the financial health of the Water Fund, staff recommends City Council approve moving forward with Scenario 2 as shown above for the new water rates, effective October 1, 2023. Therefore, a Proposition (Prop) 218 protest vote process for water rates must be initiated and a water rate hearing conducted during August 2023.

FISCAL IMPACT:

The City’s water utility relies almost entirely on customer revenues to sustain its operations. The proposed increases will help the City generate sufficient revenues from FY 2023-24 through FY #19..
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City Council, June 27, 2023
Water Rate Increases

2027-28 to cover costs associated with system operational and infrastructure needs required to maintain reliable and high-quality water services. The increases will also allow the City to maintain a debt service coverage ratio above 2.0, which is essential to maintain a strong credit rating and the financial health of the Water Fund.

Modesto’s proposed rate increases in Scenario 2 is in the median in comparison with nearby regional agencies (see below).

COMMITTEE RECOMMENDATION:

This item was considered by the Economic Development Committee at the May 1, 2023, meeting where it was recommended that Scenario 2 – Full Capital with Debt, be forwarded to Council.

CEQA/NEPA REQUIREMENTS:

The adoption of the proposed rate increases does not constitute a project for the purposes of the California Environmental Quality Act (CEQA).

RECOMMENDED COUNCIL ACTION:

Staff Recommendations:

Resolution approving the Water Engineer’s Report prepared by West Yost Associates as complete.

Resolution approving the Water Rate and Fee Study prepared by Bartle Wells Associates as complete.

Recommended
#19..
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City Council, June 27, 2023
Water Rate Increases

Resolution authorizing Staff to initiate a Proposition 218 process to adjust the City’s Water Rates to be effective October 1, 2023 through Fiscal Year 2027-28.

Approved by:

William Wong, Director of Utilities
Joseph P. Lopez, City Manager
Attachments:

1. Resolutions (3)

2. Draft Water System Engineer’s Report

3. Draft Water Rate Study

4. Water Fund Proforma
#19..
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06/27/2023/Utilities/WWong/Item XX 1 2023-XX

MODESTO CITY COUNCIL
RESOLUTION NO. 2023-
RESOLUTION APPROVING THE WATER ENGINEER’S REPORT PREPARED

BY WEST YOST ASSOCIATES AS COMPLETE
WHEREAS, the City of Modesto provides water service to over 74,000 accounts consisting of residential, multi-family, commercial and industrial customers located within the City of Modesto, as well as the communities of Salida, Empire, Grayson, Del Rio and portions of Turlock and unincorporated Stanislaus County, and WHEREAS, on September 2, 2014, by Resolution No. 2014-336, Council approved an agreement with West Yost Associates (West Yost) to prepare a Water Master Plan (WMP), and
WHEREAS, as part of the WMP, West Yost reviewed and revised the Water Capital Improvement Program’s (CIP) anticipated costs and priorities and developed a Water Engineer’s Report, and
WHEREAS, the Water Engineer’s Report is the basis document for the Water Rate and Fee Study, providing the justification and allocation of costs for the proposed water CIP Projects between existing and future customer classes, and WHEREAS, the Water Engineer’s Report is now complete and has identified approximately $220 million in CIP Projects between Fiscal Years 2024 and 2028.

NOW, THEREFORE BE IT RESOLVED by the Council of the City of Modesto that it hereby approves the Water Engineer’s Report prepared by West Yost as complete. #19..
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06/27/2023/Utilities/WWong/Item XX 2 2023-XX
The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June 2023, by Councilmember ?, who moved its adoption, which motion being duly seconded by Councilmember ?, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: _______________________________
DIANE NAYARES-PEREZ, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: ____________________________________
JOSE M. SANCHEZ, City Attorney
#19..
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06/27/2023/Utilities/WWong/Item XX 1 2023-XX

MODESTO CITY COUNCIL
RESOLUTION NO. 2023-

RESOLUTION APPROVING THE WATER RATE AND FEE STUDY

PREPARED BY BARTLE WELLS ASSOCIATES AS COMPLETE
WHEREAS, the City of Modesto provides water service to over 74,000 accounts consisting of residential, multi-family, commercial and industrial customers located within the City of Modesto, as well as the communities of Salida, Empire, Grayson, Del Rio and portions of Turlock and unincorporated Stanislaus County, and WHEREAS, on December 8, 2020, Council, by Resolution No. 2020-525, approved an agreement with Bartle Wells Associates (BWA) to conduct a comprehensive cost of service review of the water rates and fees, and prepare a new water rate and fee structure that is compliant with all legal requirements of Proposition 218, and WHEREAS, West Yost Associates (West Yost) analysis in the Water Master Plan and the completed Water Engineer’s Report identified approximately $220 million in Water Capital Improve Program (CIP) Projects between Fiscal Years 2024 and 2028, and WHEREAS, BWA has prepared the Water Rate and Fee Study and incorporated these CIP costs into the comprehensive Water Rate and Fee Study, and WHEREAS, the Water Rate and Fee Study is now complete and the following key rate and fee impacts have been identified:
 Updating the cost of service, including steep inflationary increases  Rate design
 Amount of capital improvement spending
o Reduced capital improvement plan
o Full capital improvement plan
 Developing drought and non-drought rates
 Setting rates to recover operating costs and capital improvements  Evaluating revenue recovery from fixed meter charges vs. volume rate  Funding of capital improvements
o Analysis of different CIP scenarios
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06/27/2023/Utilities/WWong/Item XX 2 2023-XX
o Use of Reserves
o Rate revenues and connection fees
o Debt financing
NOW, THEREFORE BE IT RESOLVED by the Council of the City of Modesto that it hereby approves the Water Rate and Fee Study prepared by Bartle Wells Associates as complete.

The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June 2023, by Councilmember ?, who moved its adoption, which motion being duly seconded by Councilmember ?, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: _______________________________
DIANE NAYARES-PEREZ, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: ____________________________________
JOSE M. SANCHEZ, City Attorney
#19..
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06/27/2023/Utilities/WWong/Item XX 1 2023-XX

MODESTO CITY COUNCIL
RESOLUTION NO. 2023-
RESOLUTION AUTHORIZING STAFF TO INITIATE A PROPOSITION 218 PROCESS TO ADJUST THE CITY’S WATER RATES TO BE EFFECTIVE OCTOBER 1, 2023 THROUGH FISCAL YEAR 2027-28
WHEREAS, the City of Modesto last conducted an in-depth cost of service rate study in 2016, which was approved and implemented by the City Council by Resolution No. 2016-241, and
WHEREAS, Resolution No. 2016-241 established rates from Fiscal Year (FY) 2016-17 through 2020-21, and
WHEREAS, the last Water Rate change occurred October 1, 2021, and WHEREAS, on December 8, 2020, Council, by Resolution No. 2020-525, approved an agreement with Bartle Wells Associates (BWA) to conduct a comprehensive cost of service review of the water rates and fees, and prepare a new water rate and fee structure that is compliant with all legal requirements of Proposition 218, and WHEREAS, West Yost Associates (West Yost) analysis in the Water Master Plan and the completed Water Engineer’s Report identified approximately $220 million in Water Capital Improve Program (CIP) Projects between Fiscal Years 2024 and 2028, and WHEREAS, BWA has prepared the Water Rate and Fee Study and incorporated the CIP costs of approximately $220 million identified in the Water Master Plan and completed Engineer’s Report into the comprehensive Water Rate and Fee Study, and WHEREAS, the Water Rate and Fee Study is now complete and the following key rate and fee impacts have been identified:
 Updating the cost of service, including steep inflationary increases  Rate design
 Amount of capital improvement spending
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06/27/2023/Utilities/WWong/Item XX 2 2023-XX
o Reduced capital improvement plan
o Full capital improvement plan
 Developing drought and non-drought rates
 Setting rates to recover operating costs and capital improvements  Evaluating revenue recovery from fixed meter charges vs. volume rate  Funding of capital improvements
o Analysis of different CIP scenarios
o Use of Reserves
o Rate revenues and connection fees
Debt financing
WHEREAS, the Water Rate and Fee Study is now complete, and WHEREAS, in order to maintain the Water Fund’s strong credit rating and support the financial health of the Water Fund, Staff will need to initiate a Proposition 218 protest process for water rates, with an anticipated water rate hearing in August of 2023.

NOW, THEREFORE BE IT RESOLVED by the Council of the City of Modesto that it hereby authorizes Staff to initiate a Proposition 218 process to adjust the City’s water rates effective October 1, 2023 through Fiscal Year 2028. #19..
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06/27/2023/Utilities/WWong/Item XX 3 2023-XX
The foregoing resolution was introduced at a regular meeting of the Council of the City of Modesto held on the 27th day of June 2023, by Councilmember ?, who moved its adoption, which motion being duly seconded by Councilmember ?, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmembers:

NOES: Councilmembers:

ABSENT: Councilmembers:

ATTEST: _______________________________
DIANE NAYARES-PEREZ, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: ____________________________________
JOSE M. SANCHEZ, City Attorney
#19..
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PREPARED BY
2022 Water System Engineer’s Report

PREPARED FOR
City of Modesto
Updated April 2023
FINAL REPORT | SEPTEMBER 2022
#19..
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FINAL REPORT | SEPTEMBER 2022
EARYEAR2020
2022 Water System Engineer’s Report
Prepared for
City of Modesto
Project No. 418-60-20-65
4/14/23
Project Manager: Roberto Vera, PE Date
4/14/23
QA/QC Review: Elizabeth Drayer, PE Date
#19..
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N-C-418-60-20-65-WP-R-418-ER
i City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)
Table of Contents

1.0 Introduction ................................................................................................................................. 1

2.0 Summary of Capital Improvement Project Costs ............................................................................ 2

3.0 Water System Background ............................................................................................................ 4

3.1 Water Service Area ........................................................................................................................... 4

3.2 Current and Projected Water Demands ........................................................................................... 4

3.3 Existing Water Supplies .................................................................................................................... 6

3.3.1 Groundwater Supply ............................................................................................................... 6

3.3.2 Surface Water Supply.............................................................................................................. 7

4.0 Justification and Cost Allocation for Proposed Improvements ........................................................ 8

4.1 MRWTP Phase Two Expansion (Category 1) .................................................................................... 9

4.2 City-Side Downstream Improvements related to MRWTP Expansion (Category 2) ...................... 10

4.3 Improvements for South Modesto (Category 3) ............................................................................ 11

4.4 Water Quality Related Studies (Category 4) .................................................................................. 12

4.5 SCADA System Upgrades (Category 5) ........................................................................................... 13

4.6 New Corporation Yard (Category 6) ............................................................................................... 14

4.7 Existing Tank Improvements (Category 7) ...................................................................................... 15

4.8 Extend Water Mains Program (Category 8) ................................................................................... 16

4.9 Strengthen and Replace Water System Program (Category 9) ...................................................... 17

4.10 Install New Wells Program (Category 10)..................................................................................... 18

4.11 Wellhead Treatment Program (Category 11) ............................................................................... 19

4.12 Purchase and Install New Generators Program (Category 12) .................................................... 20

4.13 Water System Security Enhancements (Category 13) .................................................................. 21

4.14 Groundwater Management Program (Category 14) .................................................................... 22

4.15 Urban Water Management Plan (Category 15) ........................................................................... 23

4.16 Water Master Plan (Category 16) ................................................................................................. 24

4.17 Water System Evaluations (Category 17) ..................................................................................... 25

4.18 New Water Tanks (Category 18) .................................................................................................. 26

4.19 Water Meters Program (Category 19) .......................................................................................... 27

4.20 New or Replacement Pumps (Category 21) ................................................................................. 28

4.21 Utility Cuts Program (Category 22)............................................................................................... 29

5.0 Project Schedule and Cost Projections ......................................................................................... 30 #19..
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N-C-418-60-20-65-WP-R-418-ER
ii City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)
Table of Contents

LIST OF TABLES
Table 1. Summary of Five-Year and Ten-Year Water System Capital Improvement Program Costs and Allocations for Existing and Future Customers ......................................... 3 Table 2. Proposed Ten-Year Water System Capital Improvement Program Expenditures by Year .............................................................................................................. 31

LIST OF FIGURES
Figure 1. Water Service Areas ................................................................................................................ 5

LIST OF ACRONYMS AND ABBREVIATIONS
Af/yr Acre-Feet per Year 3
AMI Advanced Metering Infrastructure 17
AWIA America’s Water Infrastructure Act 13
CIP Capital Improvement Project 1
City City of Modesto 1
ENR Engineering News Record 1
GWMP Groundwater Management Plan 14
IRGMP Integrated Regional Groundwater Management Plan 14 mgd Million Gallons per Day 3
MID Modesto Irrigation District 1
MRWTP Modesto Regional Water Treatment Plant 1
Report 2022 Water System Engineer’s Report 1
RRMS Risk and Resilience Management Strategies 13
SCADA Supervisory Control and Data Acquisition 9
SJV Basin San Joaquin Valley Groundwater Basin 5
SOI Sphere of Influence 3
UWMP Urban Water Management Plan 15
VA Water System Vulnerability Assessment 13
WMP Water Master Plan 1
#19..
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N-C-418-60-20-65-WP-R-418-ER
1 City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)
2022 Water System Engineer’s Report

1.0 INTRODUCTION
This 2022 Water System Engineer’s Report (Report) is an essential supporting document to conduct new water rate and capacity charge studies for the City of Modesto (City). It describes and justifies the various capital improvement projects and programs that are needed to provide and maintain reliable water service, including required water supplies, storage volumes, pumping capacities, distribution facilities, and system pressures under different demand conditions. It also identifies associated budgetary-level cost estimates and determines the appropriate cost allocation between existing and future water customers.

The City is proposing to fund the needed water system improvements using a combination of water utility rates, capacity charges (connection fees), and possibly some level of bond financing, as appropriate.

This Report is based on capital improvement projects (CIPs) developed as part of the City’s 2017 Water Master Plan (2017 WMP), on-going CIPs identified in the City’s 2021/22 fiscal year preliminary CIP budget, improvements previously identified in the City’s 2016 Engineer’s Report that have not yet been implemented or constructed, improvements by Modesto Irrigation District (MID) associated with the Modesto Regional Water Treatment Plant (MRWTP), as well as other needed improvements identified by City staff. CIPs identified in this Report are based on the best information available at the time of preparation.

It should be noted that estimated program costs and their associated cost allocations, may change as future conditions change (e.g., change in demands, additional and/or new regulations requiring City to implement groundwater well treatment, increase in pipeline failures leading to more strengthen and replace projects).

It is recommended that the City update program costs and associated cost allocations on a regular basis (e.g., every five years). As summarized in the following sections, program costs and allocations are provided for a five-year period and a ten-year period, with costs allocated to existing and future customers based on projected needs within the ten-year capital improvement plan.

This Report is organized into the following sections:
 Introduction
 Summary of Capital Improvement Project Costs
 Water System Background
 Justification and Cost Allocation for Proposed Improvements  Project Schedule and Cost Projections
#19..
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2022 Water System Engineer’s Report
N-C-418-60-20-65-WP-R-418-ER
2 City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)

2.0 SUMMARY OF CAPITAL IMPROVEMENT PROJECT COSTS
The estimated CIP costs by project category and the recommended allocations between existing and future customers are summarized in Table 1. The new water rate and capacity charge studies will be based on funding only those improvements needed within the next ten years. Thus, the estimated five-year and ten-year program costs are approximately $220 million and $490 million, respectively. Additional information on program costs, and associated timing, is provided in Section 5 of this Report. All costs in this Report have been estimated based on the September 2022 Engineering News Record (ENR) Construction Cost Index of 15083.26 for San Francisco and have been escalated by 4 percent annually 1 to
the year of planned implementation and/or construction.

The CIP costs include allowances for project implementation (i.e., engineering, construction management and program implementation) and a construction contingency. The allowances and construction contingency total 50 percent of the estimated construction cost and are summarized as follows:
 Construction Contingency: 20 percent
 Engineering: 10 percent
 Construction Management: 10 percent
 Program Implementation: 10 percent
As described in Section 4, the cost allocation split between the existing rate payers and future users is specific to each project and is based on a methodology developed for each specific type of CIP. The tenyear CIP cost allocated to existing customers is approximately $407 million (approximately 83 percent of the ten-year cost) and to future users is approximately $83 million (approximately 17 percent of the ten-year cost).
1 The ENR CCI (SF) index was reviewed for the last ten years to determine the appropriate escalation. The yearover-year escalation average is 3.9 percent. For the purposes of this evaluation, a 4.0 percent escalation was used to estimate capital improvement costs for future years. #19..
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Total Cost,
dollars
Costs Allocated
to Existing
Customers,
dollars
Costs Allocated
to Future
Customers,
dollars
Total Cost,
dollars
10-Year Costs
Allocated to
Existing
Customers,
dollars
10-year Costs
Allocated to
Future
Customers,
dollars
1 MRWTP Phase Two Expansion 62 / 38 $10,732,400 $6,654,100 $4,078,300 $27,523,000 $17,064,300 $10,458,700 2 City-Side Downstream Improvements related to MRWTP Expansion 62 / 38 $7,971,000 $4,942,000 $3,029,000 $7,971,000 $4,942,000 $3,029,000 3 Improvements for South Modesto 62 / 38 $10,074,200 $6,246,000 $3,828,200 $30,933,700 $19,178,900 $11,754,800 4 Water Quality Related Studies 100 / 0 $130,900 $130,900 $0 $325,100 $325,100 $0 5 SCADA System Upgrades 100 / 0 $8,448,000 $8,448,000 $0 $9,358,000 $9,358,000 $0 6 New Corporation Yard 100 / 0 $9,035,500 $9,035,500 $0 $10,044,600 $10,044,600 $0 7 Existing Tank Improvements 100 / 0 $7,776,000 $7,776,000 $0 $16,009,100 $16,009,100 $0 8 Extend Water Mains 0 / 100 $2,494,300 $0 $2,494,300 $6,285,200 $0 $6,285,200 9 Strengthen and Replace Water System 100 / 0 $69,059,200 $69,059,200 $0 $197,285,600 $197,285,600 $0 10 Install New Wells 30 / 70 $28,985,700 $8,695,700 $20,290,000 $67,190,900 $20,157,300 $47,033,600 11 Wellhead Treatment 100 / 0 $13,537,700 $13,537,700 $0 $27,045,100 $27,045,100 $0 12 Purchase & Install New Generators 100 / 0 $2,543,100 $2,543,100 $0 $6,902,700 $6,902,700 $0 13 Water System Security Enhancements 100 / 0 $558,600 $558,600 $0 $1,133,100 $1,133,100 $0 14 Groundwater Management Program 62 / 38 $2,154,700 $1,335,900 $818,800 $2,773,900 $1,719,800 $1,054,100 15 Urban Water Management Plan 62 / 38 $383,700 $237,900 $145,800 $745,300 $462,100 $283,200 16 Water Master Plan 62 / 38 $479,504 $297,300 $182,204 $1,213,404 $752,300 $461,104 17 Water System Evaluation 62 / 38 $1,648,100 $1,021,800 $626,300 $2,665,300 $1,652,500 $1,012,800 18 New Water Tanks 62 / 38 $4,168,700 $2,584,600 $1,584,100 $4,168,700 $2,584,600 $1,584,100 19 Water Meters 100 / 0 $38,752,300 $38,752,300 $0 $67,693,000 $67,693,000 $0 21 New or Replacement Pumps 100 / 0 $575,100 $575,100 $0 $1,001,100 $1,001,100 $0 22 Utility Cuts 100 / 0 $934,900 $934,900 $0 $2,072,300 $2,072,300 $0 83 / 17 $220,444,000 $183,366,600 $37,077,004 $490,340,000 $407,383,974 $82,956,604 -- 83% 17% -- 83% 17%
Table 1. Summary of Five-Year and Ten-Year Water System Capital Improvement Program Costs and Allocations for Existing and Future Customers(a) Total
(a) Costs based on September 2022 San Francisco Engineering News Record (ENR) Construction Cost Index (CCI) (15083.26). There is no category 20. Category numbers were kept the same to remain consistent with previous reports and City Program numbers. 5-Year Costs 10-Year Costs
Category Number and Name
Existing / Future
Customer
Allocation,
percent
Total Percent Allocation:

N-C-418-60-20-65-E-CIP_DATABASE
City of Modesto
2022 Engineer's Report
Last Revised: 04-14-23
#19..
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2022 Water System Engineer’s Report
N-C-418-60-20-65-WP-R-418-ER
4 City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)

3.0 WATER SYSTEM BACKGROUND
The City’s existing water system is a conjunctive use system, which utilizes both surface water and groundwater to meet water demands within its water service area. In 2020, the City produced approximately 27,121 acre-feet per year (af/yr) (24.2 million gallons per day, mgd) of groundwater and purchased an estimated 25,983 af/yr (23.2 mgd)2 of treated surface water from MID. The treated surface water and groundwater supplies are used to serve North Modesto (the portion of the City’s contiguous service area north of the Tuolumne River). Groundwater supplies are used to serve South Modesto (the portion of the City’s contiguous service area south of the Tuolumne River) and the outlying areas where the City also provides water service. In the future, additional needed supply will be provided by additional groundwater supplies, pumped from either new wells or existing out-of-service wells that are planned to be rehabilitated.

The characteristics of the City’s water system are described in the following sections:
 Water Service Area
 Current and Projected Water Demands
 Existing Water Supplies

3.1 Water Service Area
The City’s water service area consists of one large contiguous service area and several outlying non-contiguous service areas. The City’s contiguous service area is primarily defined by the current Sphere of Influence (SOI), Salida, North Ceres and some unincorporated Stanislaus County “islands” within or adjacent to the SOI (Empire is within the SOI). The outlying service areas include Grayson, Del Rio, Ceres (Walnut Manor), and portions of Turlock. Figure 1 illustrates the location of the City’s contiguous and outlying service areas.

3.2 Current and Projected Water Demands
The City’s 2017 WMP defined existing demands within the contiguous area to be approximately 71,600 af/yr (63.9 mgd). Based on planned development of vacant areas within the General Plan area, projected water demand at buildout is estimated to be approximately 100,000 af/yr (89.3 mgd).

The City’s 2017 WMP, however, includes existing water demand based on City water use patterns from 2000 through 2013, which is prior to the 2012 to 2016 drought experienced in the State of California.

Since then, the City has been actively implementing water use efficiency and conservation measures that have resulted in a decrease in baseline existing water demand. Actual demand from 2015 to 2020 has ranged from 47,159 af/yr (2016) to 53,104 af/yr (2020), averaging 49,630 af/yr. Since recent actual demands have been lower than the City’s 2017 WMP projections, the City’s 2020 Urban Water Management Plan (UWMP) has reduced the City’s 2017 WMP buildout projections by 15 percent to 86,778 af/yr to reflect more recent and projected water use trends. This Report uses these reduced buildout demand projections (estimated to occur by 2050). 2 These estimates are based on Table 6-13 of the City’s 2020 Urban Water Management Plan. #19..
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0 1 2
Scale in Miles
Notes:

1. Sphere of influence boundary obtained from the City on 11/6/2014.

2. The City's contiguous service area is co-terminus with the City's SOI boundary except for the Salida and North Ceres areas.

3. City limit boundary based on County GIS data downloaded on October 6, 2014.

Turlock
Grayson
Modesto
Salida
Empire
Del Rio
North Ceres
(Portion Served by Modesto)
Ceres (Walnut Manor)
Bret Harte
West Modesto
Shackelford
Stanislaus County
Merced County
CYRD
REEK

ST A NISLAUS RI VE R

SAN JOAQUIN RIVER

DRY CREEK

TUOLUMNE RIVE R

STANISLAUS RIVER
§¨¦5
¬«108
¬«165
¬«99
¬«219
¬«132
¬«33
¬«132
Figure 1
Water Service Areas
City of Modesto
2021 Engineer's Report
Legend
Sphere of Influence (SOI)
Contiguous Service Area
Contiguous Area Outside of SOI
Outlying Service Area
City Limits
WEST YOST - N:\Clients\418 City of Modesto\60-20-65 2020 Engr Rpt\GIS\MXD\Fig1_WtrSrvArea.mxd - bvera - 4/20/2021 #19..
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2022 Water System Engineer’s Report
N-C-418-60-20-65-WP-R-418-ER
6 City of Modesto
Engineer’s Report
September 2022 (Updated April 2023)

3.3 Existing Water Supplies
The City has two existing water supply sources: local groundwater and treated surface water purchased from MID. The combination of these water supply sources allows the City to implement a conjunctive use operational strategy that is described further under the following topics:
 Groundwater Supply
 Surface Water Supply
The following sections are intended to be a brief overview of the City’s water supplies. Additional detailed information can be found in the City’s WMP and the City’s Urban Water Management Plan (UWMP).

3.3.1 Groundwater Supply
The City’s groundwater supply wells are located throughout the contiguous and outlying service areas, and located within the San Joaquin Valley Groundwater Basin (SJV Basin). The City currently has 89 active groundwater wells (including six wells for non-potable uses and two wells on standby). Groundwater supply is pumped from the following three subbasins within the SJV Basin:
 Modesto Subbasin
 Turlock Subbasin
 Delta-Mendota Subbasin
The City’s contiguous service area and some outlying service areas span both the Modesto and Turlock Subbasins. North Modesto, Salida, Empire, and Del Rio, are located in the Modesto Subbasin. South Modesto, Turlock, North Ceres, and Ceres (Walnut Manor) are located in the Turlock Subbasin. Grayson is located in the Delta-Mendota Subbasin. The City has developed a preliminary operational yield of 51,500 af/yr for the three groundwater subbasins (underlying the City’s service area).

The preliminary operational yield is a long-term average used to assess groundwater reliability for planning level type analyses, such as this Report, during all hydrologic conditions (dry, normal, and wet years). This preliminary operational yield is based on historical groundwater pumping by the City and the general conclusion is that if the total, long-term average groundwater pumping quantity is held at or below 51,500 af/yr, then stable groundwater levels will result, at approximately 40 feet above mean sea level within and near the City’s contiguous service area. If groundwater pumping is significantly less than 51,500 af/yr, groundwater levels will likely rise, thereby increasing the quantity of available groundwater stored within the basin for later use via “in-lieu” groundwater banking. Alternatively, if more than 51,500 af/yr is extracted (e.g., during dry years), groundwater levels will likely decline. However, actual groundwater extractions may be lower in wet years and higher in dry years; consequently, the preliminary groundwater operational yield available to the City for the planning period is assumed to be equal to the long-term average, or 51,500 af/yr.

It is worth noting that while the operational yield is currently defined as 51,500 af/yr, it does not imply that the City has the available infrastructure to extract this amount. As described in the various programs in subsequent sections, there are several groundwater well improvements planned. These improvements are intended to bolster the City’s infrastructure to have the ability to extract up to the operational yield.

The City’s various groundwater wells are aging and/or possibly threatened due to declining water quality or because of contaminants of emerging concern. The planned improvements are intended to improve #19..
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the City’s capacity and reliability of these facilities, which are an important facet of the City’s overall conjunctive use strategy.

3.3.2 Surface Water Supply
The City purchases treated surface water from the MID’s Modesto Regional Water Treatment Plant (MRWTP) during all hydrologic conditions (i.e., dry, normal, and wet years). MID has surface water rights on the Tuolumne River, which MID uses to supply some of its raw water to the MRWTP. The first phase of the MRWTP became operational in 1995 and provides the City with an annual average supply of 30 mgd (33,600 af/yr), with a functional peaking capacity of 42.5 mgd that helps meet the Maximum Day and Peak Hour demands of North Modesto. The MRWTP Phase Two Expansion Project was completed in 2016 and doubled the annual average capacity of the MRWTP to 60 mgd (67,200 af/yr). The MRWTP terminal reservoir facilities (booster pump station and tanks) and a portion of the transmission pipelines traversing the City are owned and operated by MID and the delivery of surface water is governed through an existing “Amended and Restated Water Treatment and Delivery Agreement”. #19..
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4.0 JUSTIFICATION AND COST ALLOCATION FOR PROPOSED

IMPROVEMENTS
The following recommended CIPs are necessary to meet projected demands described in the previous section and maintain safe and reliable water service to existing and future customers. These CIP recommendations only identify improvements at a master plan level and do not constitute a design of such improvements. Subsequent detailed design is required to determine the exact sizes, locations, and costs of the proposed improvements. Each recommendation is grouped into one of twenty-one CIP categories based on project type. CIP categories and cost allocations are shown in Table 1.

Costs allocated to existing customers are for those improvements necessary to safely and reliably serve existing customers. Costs allocated to future customers are for those improvements that are necessary to serve future customers after fiscal year 2021/22 and within the buildout planning horizon. The cost split between existing and future customers is clearly defined in the CIP categories based on the type of improvement or the proportionate share of demand for existing versus future customers.

The justification and cost allocation methodology for each individual project or program are described on the following pages.
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4.1 MRWTP Phase Two Expansion (Category 1)
Description
This category was used in the City’s 2016 Engineer’s Report to expand the capacity of the MRWTP from an annual average of 30 mgd to 60 mgd. Most of the costs associated with the MRWTP expansion have been expended. Costs within this category are intended to fund on-going operations and maintenance of the MRWTP, and are based on MID’s long-term maintenance projections.

Justification
Maintenance tasks include replacing filters, membranes, tanks, and pumps once they have reached the end of their useful life, as well as general system upgrades and improvements to the operations building.

These periodic updates ensure the MRWTP is kept up-to-date and able to maintain reliable water service to customers.

Cost Allocation
The cost allocation for existing and future customers for MRWTP maintenance is based on the proportionate share of demands for existing and future customers. The program is expected to require additional funds beyond the 10-year time horizon, as part of routine maintenance, but those are not yet known. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.2 City-Side Downstream Improvements related to MRWTP
Expansion (Category 2)
Description
This program is to provide funding for the design, construction, and rights-of-way acquisition for the Cityside downstream improvements necessary to accommodate the increased production capacity of the MRWTP Phase Two Expansion. This project first received funding under the City’s 2016 Engineer’s Report and is mostly complete. The only remaining Project is Phase II of the previously planned Yosemite Transmission Mains.

Justification
Previous studies evaluated and recommended that conveyance be constructed for the City’s contiguous service area as part of the MRWTP Phase Two Expansion. One project has not been constructed, and is still required to further integrate the MID transmission mains with the City’s distribution system. The proposed improvement will help correct low pressures currently observed during Peak Hour conditions, which will benefit existing customers. It will also help distribute the additional treated surface water and therefore benefit future customers.

Cost Allocation
The cost allocation for existing and future customers for the City-Side Downstream Improvements related to the MRWTP Phase Two Expansion project is based on the proportionate share of demands for existing and future customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.3 Improvements for South Modesto (Category 3)
Description
Since the City has opted out of the regional surface water treatment project using Turlock Irrigation District supplied water, alternative improvements are needed to increase delivery reliability to customers in South Modesto. These improvements specific to South Modesto include new and replacement distribution/transmission pipelines (related to high and low priority fire flow improvements, the strengthen and replace program, and general grid improvements), as well as water meters and a new storage tank with associated booster pump station. Most of these improvements come from recommendations made in the 2017 WMP to support existing and future customers.

Justification
These improvements are needed for the City to better meet peak demands, maintain sufficient service pressures, and better meet future storage deficiencies. Since the South Modesto service area is not completely built out, these improvements would benefit both existing and future customers.

Cost Allocation
The cost allocation is based on the proportionate share of demands for existing and future customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.4 Water Quality Related Studies (Category 4)
Description
This program provides funding for water quality related studies and activities, such as to investigate the presence of uranium and arsenic in groundwater. These studies are needed to identify cost-effective methods to manage groundwater resources for meeting the City's water supply needs.

Justification
Some of the City’s wells are out of service due to water quality concerns. Additionally, it is expected that more stringent regulations on groundwater quality in the future would require the City to shut down, replace, or provide wellhead treatment for more of its existing groundwater wells. These studies are a step in developing a plan to stabilize and manage the City’s groundwater resources.

Cost Allocation
Since these studies address existing wells needed to serve current customers, all of the cost is allocated to existing customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.5 SCADA System Upgrades (Category 5)
Description
This project implements Supervisory Control and Data Acquisition (SCADA) system upgrades to improve the City’s operation and management of the water system.

Justification
The City uses its current SCADA system to monitor and control water system facilities to maintain reliable water service to customers. Improvements to the SCADA system are needed to continue to be able to reliably monitor and control the City’s water system. In 2017, the City undertook a SCADA Upgrade Study to develop a detailed set of requirements for a future SCADA system. The City’s current SCADA system is based on HSQ MISER software and associated proprietary hardware, which has been in place for over 20 years.

Several issues have recently been identified that have prompted the City to undertake a complete overhaul of its SCADA system. These issues generally include: 1) concerns over hardware/software obsolescence; 2) increased demands for access to the SCADA system and collected data for planning and analysis; 3) desire for system functionality enhancements; 4) dependence on a single vendor for SCADA system supply/support; and 5) concerns over SCADA system support.

Cost Allocation
The total cost of the project was estimated to be approximately $18 million. This cost, however, was intended to be split with other City departments and it is estimated that the water system would fund approximately half of this project. There is likely to be on-going annual operations and maintenance costs associated with this program after it is implemented, but these costs are not included since they are not known at this time.

Since the SCADA system is used for monitoring and control of the existing system, and its need for upgrade represents an existing system deficiency, existing customers are allocated 100 percent of the cost of this project. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.6 New Corporation Yard (Category 6)
Description
This project will cover Phase 2 of the new Water Division Corporation Yard located along Litt Road. Phase 1 of construction is complete, however, several site improvements have not yet been completed, which are intended to be captured in Phase 2. Phase 2 improvement include: 1) construction/expansion of the employee parking lot; 2) construction of a new warehouse; 3) construction of material bins; 4) construction of solar canopies over the employee parking lot; 5) vehicle fuel station; and 6) vehicle car wash.

Justification
The City previously identified the need to construct a new corporation yard to replace the existing facility.

The scoping, design and construction of a new building was completed under Phase 1. The site development (as listed above) still needs to be completed under Phase 2.

Cost Allocation
Because the corporation yard supports current system operations, costs for this project are allocated to existing customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.7 Existing Tank Improvements (Category 7)
Description
This program provides funding for interior and exterior enhancements to existing water storage tanks to improve water quality, system efficiency, and prolong their useful life. The improvements are generally routine maintenance items (e.g., tank inspections, re-coating, sealing, replacement of existing appurtenances, generator platforms, etc.) as well as fall protection safety enhancements.

Justification
The goal of this program is to maintain system integrity and prolong the useful life of existing tanks via tank rehabilitation improvements.

Cost Allocation
This program is funded annually and is expected to require additional funds beyond the ten-year time horizon, as part of routine maintenance, but those are not included as part of this Report. Although future customers might receive some benefit from the maintenance of these tanks, the tanks are existing facilities and these improvements are required to help maintain existing system performance. Therefore, 100 percent of the total cost for this category is allocated to existing customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.8 Extend Water Mains Program (Category 8)
Description
This program extends water mains, on an as-needed basis, into developing areas to meet the demands of new growth, based on the recommendations identified in the 2017 WMP. Typically, this includes the installation of 12-inch diameter and larger pipelines, fire hydrants and valves, on a one-half mile grid.

Projects to complete distribution pipeline “looping” are included to improve service reliability to new water service areas.

Justification
As needed, this program includes the installation of new and/or upsized water mains that contribute to creating a distribution grid by extending or looping existing water mains to help maintain adequate system performance. These pipes will also enable the City to more efficiently integrate and distribute additional treated surface water from the MRWTP Phase Two Expansion.

Cost Allocation
This program is required to support demands from future customers. Therefore, costs are allocated entirely to future users. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.9 Strengthen and Replace Water System Program (Category 9) Description
This category includes distribution and transmission pipeline replacements for high and low priority fire flow improvements, as well as grid improvements that were recommended in the 2017 WMP. In addition, this program replaces and upgrades deficient water mains throughout the water system that have reached the end of their useful life, on an as-needed basis.

Justification
Pipelines have a finite life expectancy, and eventually corrode, leak, or otherwise fail. This program aims to replace pipelines before they reach the point of failure. This program also includes pipelines that have been identified as inadequate to meet pressures under normal operating conditions or fire flows, as identified in the 2017 WMP.

Cost Allocation
This program is intended to maintain the system’s performance by strengthening and replacing existing pipelines; therefore, all costs are allocated to existing customers. This program is anticipated to extend past the ten-year planning horizon. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.10 Install New Wells Program (Category 10)
Description
This program includes the following improvements: 1) replaces wells previously taken out of service due to water quality concerns and that are deemed unsuitable for rehabilitation; 2) replaces older, low producing wells that are reaching the end of their service life; 3) adds new wells to help alleviate low flow problems and/or maintain adequate system pressures for existing customers; and 4) provides additional capacity (13 new wells, resulting in an additional 16.8 mgd of firm supply capacity) to meet increasing demands for new growth, as recommended in the 2017 WMP. The cost of a well field improvement plan is also included.

Justification
Since one of the primary sources of supply for the City is groundwater, these new wells will help maintain or increase the groundwater supply. The program is expected to produce approximately one to two new wells every year, mainly as new supply sources for the water system. It should be noted that historically, the City has replaced fewer wells than scheduled. In addition, the City has actively been destroying wells that that have reached their useful life, and thus the City no longer has access to that capacity. With recent reductions in demands, this lost capacity has been to date inconsequential, but if demands increase (either by increased/rebounded water use patterns or growth, or both) additional wells will be required.

Cost Allocation
Costs for this program are anticipated to extend beyond this ten-year program. Costs are allocated to existing and future customers based on the currently identified number of wells for the existing system and the projected required number of wells for the buildout system. The current estimate for new wells that replace older existing wells is approximately 30 percent of the overall ten-year cost. The remaining portion, 70 percent of the total ten-year cost, is associated with new wells to support future demands.

The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.11 Wellhead Treatment Program (Category 11)
Description
This program provides funding for the design and construction of wellhead treatment or blending facilities for wells throughout the water service area that are currently off-line due to high contaminant levels or are at risk of exceeding mandated maximum contaminant levels.

Justification
The program rehabilitates existing groundwater wells that the City has shut down because of water quality concerns, but are not candidates for replacement, as defined in the Install New Wells Program (Category 10). This category thereby extends the useful life of wells and therefore reduces the need to construct more than one well per year in Category 10. This program includes evaluating various wellhead treatments and available treatment alternatives that will bring key wells back into production. Bringing as many of these wells back on-line will maintain the City’s groundwater production capacity. This program also includes funding for the purchase and installation of new chlorine analyzers and flush lines.

Cost Allocation
Funding for this program addresses existing system deficiencies and is wholly allocated to existing customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.12 Purchase and Install New Generators Program (Category 12) Description
This program provides funding to purchase and install generators for back-up power at various booster pump stations for tanks and well sites throughout the water system. Providing emergency power to these facilities during power interruptions or outages of the main grid is critical to maintaining reliable water service.

Justification
The back-up generators for these facilities improve supply reliability to meet existing demands. In addition, back-up generators for wells are recommended to provide for groundwater storage credit inlieu of construction of more costly storage tanks.

Cost Allocation
Generators are for existing facilities that are needed to support existing customers, and so all costs are allocated to existing customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.13 Water System Security Enhancements (Category 13)
Description
This program implements water system security improvements identified in the March 2003 Water System Vulnerability Assessment (VA), to comply with the Public Health Security and Bioterrorism Response Act of 2001. This program is ongoing, with several fencing installations already completed, and more fencing, security signage, and other security measures to be implemented at well and tank sites throughout the water distribution system. This program also includes implementing various Risk and Resilience Management Strategies (RRMSs) developed as part of the City’s Risk and Resilience Assessment (in compliance with the 2018 America’s Water Infrastructure Act [AWIA]) and includes periodic updates to the City’s Emergency Response Plan.

Justification
This program helps the City meet State and Federal requirements and implement the recommendations presented in the 2003 VA and identified as part of the City’s 2018 AWIA compliance.

Cost Allocation
Although future customers may benefit from these security enhancements, existing customers are allocated 100 percent of the category costs, since the improvements identified in the CIP are associated with existing system facilities. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.14 Groundwater Management Program (Category 14)
Description
This program provides funding to develop projects that are identified through the Integrated Regional Groundwater Management Plan (IRGMP) in the Modesto Groundwater Basin and the Groundwater Management Plan (GWMP) in the Turlock Groundwater Basin. The two GWMPs were developed with respective jurisdictions that share a common groundwater basin. These programs are needed to effectively manage the groundwater basin as a safe and sustainable water supply. This program is intended to fund groundwater monitoring wells that need to be constructed to support the groundwater planning efforts discussed above. In addition, planning and studies aimed at securing State grants are also included under this category.

Justification
The IRGMP and GWMP identify goals and objectives needed to effectively manage the groundwater basin(s) as a safe and sustainable water supply. Work through this program will be coordinated with other jurisdictions to implement the IRGMP and GWMP, along with periodic amendments and updates as necessary. Participation in this program will also allow the City to become eligible for grants that can be used on various groundwater related projects (e.g., recharge programs and aquifer storage and recovery wells).

Cost Allocation
The groundwater management program enhances the City’s groundwater supply, which benefits both existing and future customers. The cost allocation is based on the proportionate share of demands for existing and future customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.15 Urban Water Management Plan (Category 15)
Description
This program provides funding to develop UWMPs every five years. The program also provides funding for future water loss audits, conservation program implementation and potential future water supply assessments. This program will help ensure the reliability of the water supply and includes conservation programs, residential plumbing retrofits, recycled water implementations, and water system audits.

Justification
The City is required to comply with the Urban Water Management Planning Act and prepare an updated UWMP every five years. In addition, compliance with developing regulatory requirements centered around conservation will require additional conservation/consumption reporting.

Cost Allocation
This program benefits both existing and future customers because the UWMP is developed to assist decisions that affect existing system performance and future assured water supplies. The cost allocation is based on the proportionate share of demands for existing and future customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.16 Water Master Plan (Category 16)
Description
This program provides funding for the preparation of a system wide WMP and the completion of the associated environmental review (California Environmental Quality Act) work on a recurring basis. The WMP evaluates the hydraulic and operational performance of the City’s water system and addresses, among other items, future sources of supply, water quality issues, water demands, conjunctive use strategies, water system modeling updates, and capital improvements (for both existing and future customers).

Justification
The WMP allows the City to assess the impacts of future planned water system expansions, compare existing and planned supplies to existing and projected demands, and develop a revised capital improvement plan for both existing and future customers based on trends observed at the time.

Cost Allocation
This program benefits both existing and future customers since it addresses water system performance for both existing and future conditions. The cost allocation is based on the proportionate share of demands for existing and future customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.17 Water System Evaluations (Category 17)
Description
This program provides funding for the preparation of "as-needed" engineering studies and water system evaluations throughout the water service area. These studies and evaluations normally involve assessing and evaluating demands for proposed developments, supply capabilities, the potential loss of key groundwater production wells, capital deficiencies, regulatory impacts, environmental reviews, water supply assessments, hydraulic modeling support, and other water system related activities. These studies are smaller than a WMP and are budgeted annually. This program also includes funding for maintenance of the hydraulic modeling software and hydraulic model updates.

Justification
The City needs to conduct time-critical engineering studies and evaluations of the water system, on an ongoing basis. The City typically conducts these engineering evaluations and water system studies in response to proposed development projects, determining impacts of changes to proposed capital improvement projects, regulatory agency requirements, and to increase the City staff’s level of understanding of the entire water system between updates of the WMP and UWMP.

Cost Allocation
The purpose of this program is to conduct various time critical engineering studies and water system evaluations required for existing and future expansions. The cost allocation is based on the proportionate share of demands for existing and future customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.18 New Water Tanks (Category 18)
Description
This program provides funding for new water tanks including booster pump stations, generators for backup power, and other associated facilities. Only one project is included within the ten-year timeframe:
completion of the Grayson Tank 15 and associated booster pump station. Other storage tanks were recommended in the 2017 WMP to mitigate the future storage deficiency, associated with future demands. These projects, however, are not expected to be required within the next ten years, and therefore are not included in the ten-year cost.

Justification
Using the performance and design criteria from the 2017 WMP, storage tanks should provide sufficient storage to address the following three supply components:
 Operational Storage: 25 percent of the Maximum Day demand.  Fire Flow Storage: Meets the required fire flow for two simultaneous fire flow events (a multi-family residential fire event that is non-sprinklered, and an industrial fire event).  Emergency Storage: Average Day demand for one day.

Cost Allocation
The Grayson Tank will serve both existing and future customers. The cost allocation is based on the proportionate share of demands for existing and future customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.19 Water Meters Program (Category 19)
Description
This program is established to fund the purchase and installation of advanced metering infrastructure (AMI) for customers throughout the City’s service areas, as well as to provide funding to upgrade obsolete meters. Costs associated with the data handling and storage of the associated AMI data is also included in this program.

Justification
While the City has already implemented a metering program to convert from a flat water rate structure to a metered one, there is now a need to upgrade the overall program to an AMI program. An AMI program will improve metering technology to allow for enhanced demand tracking, management, and to identify areas more easily where there is apparent water loss. This upgrade will ultimately support the City in current and future water conservation and/or water use efficiency efforts and provide the City’s water customers with the ability to track and monitor their own water use.

Cost Allocation
Since future customers are required to have meters installed as new areas are developed, this program directly affects and benefits existing customers only. Therefore, 100 percent of these costs are allocated to existing customers. The five-year and ten-year cost allocation for improvements is summarized in Table 1. #19..
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4.20 New or Replacement Pumps (Category 21)
Description
This Program replaces deficient water pumps, on an as-needed basis, at wells and booster pump stations that are beyond their useful life and/or too costly to repair.

Justification
Similar to the need to replace aging pipeline infrastructure in the water system over time, it is also necessary to replace existing deficient water pumps at wells and booster pump stations. In particular, pumps may need replacement over time if pump efficiency decreases or if the pump experiences mechanical problems that cannot be remedied with routine maintenance.

Cost Allocation
The costs for this program are budgeted annually and since these improvements are primarily focused on maintaining existing system performance, costs are only allocated to existing customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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4.21 Utility Cuts Program (Category 22)
Description
This program funds pavement repairs related to utility construction activities, such as the installation of water lines, valve replacement, water connections, and leak repairs.

Justification
The City maintains this program to cover costs beyond funds included as part of the Strengthen and Replace Water System Program (Category 9).

Cost Allocation
Utility cuts are required for existing pavement repairs which will benefit existing customers; therefore, 100 percent of the costs are allocated to existing customers. Costs for this program are anticipated to extend beyond this ten-year program. The five-year and ten-year cost allocation for improvements is summarized in Table 1.
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5.0 PROJECT SCHEDULE AND COST PROJECTIONS
The proposed CIP expenditures by year are summarized in Table 2. Table 2 shows the anticipated cost per fiscal year for each of the CIP projects, and the total cost for each fiscal year. Costs shown in Table 2 are escalated 4 percent annually to the year of planned construction. #19..
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Table 2. Proposed Ten-Year Water System Capital Improvement Program Expenditures by Year(a) Category
No. Category FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 FY 2031/32 5 Year Total 10 Year Total 1 MRWTP Phase Two
Expansion $1,280,600 $1,981,500 $1,733,500 $1,268,300 $4,468,500 $4,574,500 $5,459,100 $1,718,400 $4,015,100 $1,023,500 $10,732,400 $27,523,000 2 City-Side Downstream
Improvements related
to MRWTP Expansion
$862,900 $3,111,000 $3,608,800 $388,300 $0 $0 $0 $0 $0 $0 $7,971,000 $7,971,000 3 Improvements for
South Modesto $3,221,500 $4,546,800 $2,208,800 $97,100 $0 $1,606,900 $6,490,200 $4,709,300 $4,180,400 $3,872,700 $10,074,200 $30,933,700 4 Water Quality Related
Studies $23,100 $24,000 $25,600 $27,900 $30,300 $32,900 $35,700 $38,700 $41,800 $45,100 $130,900 $325,100 5 SCADA System
Upgrades $650,000 $1,300,000 $1,300,000 $2,599,000 $2,599,000 $650,000 $65,000 $65,000 $65,000 $65,000 $8,448,000 $9,358,000 6 New Corporation Yard $0 $12,000 $311,100 $4,270,800 $4,441,600 $699,900 $72,800 $75,700 $78,800 $81,900 $9,035,500 $10,044,600 7 Existing Tank
Improvements $3,969,300 $514,600 $547,600 $1,210,100 $1,534,400 $14,000 $1,565,000 $1,612,400 $3,322,300 $1,719,400 $7,776,000 $16,009,100 8 Extend Water Mains $201,400 $658,100 $246,400 $621,200 $767,200 $699,900 $727,900 $757,000 $787,300 $818,800 $2,494,300 $6,285,200 9 Strengthen and Replace
Water System $12,613,000 $12,833,900 $15,426,600 $15,998,300 $12,187,400 $26,745,000 $23,653,600 $29,577,000 $22,513,600 $25,737,200 $69,059,200 $197,285,600 10 Install New Wells $6,770,800 $5,545,900 $4,598,000 $5,603,800 $6,467,200 $5,599,100 $6,550,900 $7,570,000 $8,660,000 $9,825,200 $28,985,700 $67,190,900 11 Wellhead Treatment $3,238,700 $2,117,900 $2,849,700 $2,976,300 $2,355,100 $2,463,300 $2,576,700 $2,695,700 $2,820,400 $2,951,300 $13,537,700 $27,045,100 12 Purchase & Install New
Generators $28,800 $329,100 $311,100 $1,100,100 $774,000 $804,900 $837,100 $870,600 $905,400 $941,600 $2,543,100 $6,902,700 13 Water System Security
Enhancements $143,900 $59,900 $62,300 $90,600 $201,900 $70,000 $72,800 $75,700 $110,300 $245,700 $558,600 $1,133,100 14 Groundwater
Management Program $69,100 $1,017,100 $597,400 $0 $471,100 $42,000 $0 $529,900 $47,300 $0 $2,154,700 $2,773,900 15 Urban Water
Management Plan $115,100 $30,000 $31,200 $32,400 $175,000 $35,000 $36,400 $37,900 $39,400 $212,900 $383,700 $745,300 16 Water Master Plan $10,904 $0 $0 $64,800 $403,800 $0 $0 $0 $78,800 $655,100 $479,504 $1,213,404 17 Water System
Evaluation $589,700 $618,100 $135,100 $146,300 $158,900 $172,200 $186,400 $202,200 $218,900 $237,500 $1,648,100 $2,665,300 18 New Water Tanks $0 $89,800 $1,306,700 $1,358,900 $1,413,300 $0 $0 $0 $0 $0 $4,168,700 $4,168,700 19 Water Meters(c) $0 $0 $13,293,000 $12,356,600 $13,102,700 $13,894,200 $14,733,900 $95,200 $107,900 $109,500 $38,752,300 $67,693,000 21 New or Replacement
Pumps $0 $0 $248,900 $258,900 $67,300 $72,800 $78,700 $84,800 $91,400 $98,300 $575,100 $1,001,100 22 Utility Cuts $172,600 $179,500 $186,700 $194,200 $201,900 $210,000 $218,400 $227,100 $236,200 $245,700 $934,900 $2,072,300 Total $33,961,404 $34,969,200 $49,028,500 $50,663,900 $51,820,600 $58,386,600 $63,360,600 $50,942,600 $48,320,300 $48,886,400 $220,443,604 $490,340,104 (a) Costs based on September 2022 San Francisco Engineering News Record (ENR) Construction Cost Index (CCI) (15083.26) and Costs are escalated by 4% annually to the year of planned construction. (b) While some Categories show zero remaining costs, there will be costs beyond the ten-year plan horizon (e.g., Categories 7, 9, 14, 15, 16, 19, etc.). (c) Updated capital costs for Water Meters provided by City staff on April 13, 2023.

N-C-418-60-20-65-E-CIP_DATABASE
City of Modesto
2022 Engineer's Report
Last Revised: 04-14-23
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CITY OF MODESTO

WATER RATE STUDY

DRAFT REPORT
April 12, 2023
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2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com
April 12, 2023

Utilities Department, City of Modesto
1010 Tenth Street, 4th Floor, Suite 4600
Modesto, CA 95354
Attention: William Wong, Director of Utilities
Re: Water Rate Study
Bartle Wells Associates is pleased to submit to the City of Modesto the attached Draft Water Rate Study. The study presents BWA’s analysis of the operating and non-operating expenses of the City’s water system and provides a five-year cash flow projection. The primary purpose of this study was to analyze the City’s water enterprise and make recommendations that would achieve financial sustainability. Another important purpose of this study was to review rates to ensure that they adhere to the State’s legal requirements.

BWA finds that the rates and charges proposed in our report reflect the cost-of-service for each customer, follow generally accepted rate design criteria, and adhere to the substantive requirements of Proposition 218. BWA believes the proposed rates are fair and reasonable to the City’s customers.

Please contact us with any future questions about this study and the recommended water rates.

Sincerely,

Douglas Dove, PE, CIPMA Erik Helgeson, MBA
Principal/ President Vice President
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Contents
1 Executive summary........................................................................................ 1

1.1 Introduction ............................................................................................................................... 1

1.2 Rate Study Objectives .................................................................................................................. 1

1.3 Cash Flow Projection Scenarios ................................................................................................... 2

1.4 Water Rate Recommendations per Scenario............................................................................... 2 2 Background, Objectives, and Legal Requirements.......................................... 4

2.1 Rate Study Objectives .................................................................................................................. 4

2.2 Rate-Study Process....................................................................................................................... 5

2.3 Constitutional Requirements for Rates........................................................................................ 5

2.3.1 Article 13D, Section 6................................................................................................................... 5

2.3.2 Article 10, Section 2 ..................................................................................................................... 6

2.4 Statute of Limitations................................................................................................................... 6 3 Projected Water Demand and Customer Characteristics................................ 7

3.1 Projected Water Demand ............................................................................................................ 7

3.2 Water Services and Equivalent Capacity...................................................................................... 7 4 Water Financial Plan ...................................................................................... 9

4.1 Water Financial Overview ............................................................................................................ 9

4.2 Key Drivers of Rate Increases....................................................................................................... 9

4.3 Financial Plan Assumptions........................................................................................................ 10

4.4 Cash Flow Projections ................................................................................................................ 10

4.5 Cash Flow Projection Scenarios ................................................................................................. 11

4.6 Cash Flow Projection for Scenario 1 - Low Capital, No Debt ..................................................... 11

4.7 Cash Flow Projection for Scenario 2 - Full Capital with New Debt ............................................ 14

4.8 Cash Flow Projection for Scenario 3 - Full Capital, No Debt ...................................................... 17

4.9 Scenario Projected Cashflow Comparison ................................................................................. 20 5 Cost-of-Service Rate Derivation ................................................................... 21

5.1 Functional Allocation.................................................................................................................. 22

5.2 Rate Derivation .......................................................................................................................... 24

5.3 Proposed Water Rates ............................................................................................................... 27 6 Regional Residential Bill Comparison ........................................................... 30 #19..
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7 Drought Rates.............................................................................................. 31 8 Conclusion and Recommendations .............................................................. 33

8.1 Conclusion ............................................................................................................................. 33

8.2 Recommendations..................................................................................................................... 33 Appendix A - Scenario 1 Water Rate Study Tables
Appendix B - Scenario 2 Water Rate Study Tables
Appendix C - Scenario 3 Water Rate Study Tables
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LIST OF TABLES
Table 1 – Proposed Scenario 1 Water Rates............................................................................................................ 2 Table 2 – Proposed Scenario 2 Water Rates............................................................................................................ 3 Table 3 – Proposed Scenario 3 Water Rates............................................................................................................ 3 Table 4 – Historic and Projected Potable Supply and Metered Demand ............................................................... 7 Table 5 – Water Services and Meter Equivalent Units............................................................................................ 8 Table 6 – Scenario 1 Cash Flow Projection Summary............................................................................................ 11 Table 7 – Scenario 1 Detailed Cash Flow Projections............................................................................................ 13 Table 8 – Scenario 2 Cash Flow Projection Summary............................................................................................ 14 Table 9 – Scenario 2 Detailed Cash Flow Projections............................................................................................ 16 Table 10 – Scenario 3 Cash Flow Projection Summary.......................................................................................... 17 Table 11 – Scenario 3 Detailed Cash Flow Projections.......................................................................................... 19 Table 12 – Scenario Projected Cashflow Comparison ........................................................................................... 20 Table 13 – Scenario 1 Functional Allocation .......................................................................................................... 23 Table 14 – Scenario 2 Functional Allocation .......................................................................................................... 23 Table 15 – Scenario 3 Functional Allocation .......................................................................................................... 23 Table 16 – Scenario 1 Rate Derivation ................................................................................................................... 24 Table 17 – Scenario 2 Rate Derivation ................................................................................................................... 25 Table 18 – Scenario 3 Rate Derivation ................................................................................................................... 26 Table 19 – Proposed Scenario 1 Water Rates........................................................................................................ 27 Table 20 – Proposed Scenario 2 Water Rates........................................................................................................ 28 Table 21 – Proposed Scenario 3 Water Rates........................................................................................................ 29 Table 22 – Proposed Scenario 1 Drought Rates..................................................................................................... 31 Table 23 – Proposed Scenario 2 Drought Rates..................................................................................................... 32 Table 24 – Proposed Scenario 3 Drought Rates..................................................................................................... 32

LIST OF FIGURES
Figure 1 – Cost-of-Service Rate Study Process......................................................................................................... 5 Figure 2 – Scenario 1 Projected Cashflow Graph................................................................................................... 12 Figure 3 – Scenario 2 Projected Cashflow Graph................................................................................................... 15 Figure 4 – Scenario 3 Projected Cashflow Graph................................................................................................... 18 Figure 5 – Residential Bill Comparison................................................................................................................... 30 #19..
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BARTLE WELLS ASSOCIATES 1
City of Modesto – Water Rate Study 2023
1 EXECUTIVE SUMMARY

1.1 Introduction
The City of Modesto provides water service to over 74,000 accounts throughout the City of Modesto, Salida, Empire, Grayson, Del Rio, and portions of Ceres (Walnut Manor) and Turlock. The City of Modesto’s water sources are groundwater and treated surface water purchased from the Modesto Irrigation District.

The revenues from the City’s water utility are primarily derived from charges for services. The City must establish rates and charges adequate to fund the cost of providing water services, which includes costs for operations and maintenance, as well as capital improvements needed to keep the City’s utility infrastructure in a safe and reliable operating condition.

The City has provided proactive financial stewardship by raising rates to keep revenues in line with the costs of providing water service. Those rate increases have enabled the City to maintain its financial health.

The City’s water utility is a financially self-supporting enterprise, where revenues are derived primarily from water service charges. As such, the City’s water rates must be set at adequate levels to fund the costs of providing service and:
• Fund ongoing operating and maintenance expenses
• Address regulatory requirements
• Fund the capital improvement projects, related debt service, and associated increased operating costs • Provide funding for water system maintenance and upgrades The prior water rate increases strengthened the financial condition of the water enterprise. However, current rates are not adequate to fund the needed improvements and meet regulatory water quality and supply requirements.

1.2 Rate Study Objectives
The City has historically adopted rate increases in order to keep revenues in line with the escalating costs of providing service. Therefore, in 2020, the City retained BWA to develop a cost-of-service based water rate study.

Key goals and objectives of this study include developing water rates that:
• Recover the costs of providing service, including operating, capital, and debt funding needs; • Are proportionate, fair, and equitable to all customers; • Are easy to understand and implement;
• Comply with the substantive requirements of the California Constitution, Article 13D, Section 6 (which was adopted by the voters as Proposition 218 in 1996) and the general mandate of Article 10, Section 2 that prohibits the wasteful use of water;
• Support the long-term operational and financial stability of the City. #19..
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BARTLE WELLS ASSOCIATES 2
City of Modesto – Water Rate Study 2023
BWA worked closely with City staff to incorporate information and input, evaluate alternatives, and develop recommendations. This report summarizes key findings and recommendations for water rates over the next five years.

1.3 Cash Flow Projection Scenarios
This report explores the financial plan and rates for three different capital scenarios which are as follows:
• Scenario 1 - Low Capital, No Debt. This scenario projects inflation adjusted capital spending to total $138 million over the next five years, of which all will be cash funded; resulting in an average cash expense of $27.6 million per year.
• Scenario 2 - Full Capital with Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years, of which $145 million will be cash funded; resulting in an average cash expense of $29 million per year. The remaining $40 million is projected to be debt financed. • Scenario 3 - Full Capital, No Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years, of which all will be cash funded; resulting in an average cash expense of $37 million per year.

1.4 Water Rate Recommendations per Scenario
The following tables show the recommended water rates for each scenario.

Table 1 – Proposed Scenario 1 Water Rates
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
3/4" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
1" $36.83 $38.56 $40.30 $42.11 $44.00 $45.98

1.5" $65.32 $68.74 $71.83 $75.06 $78.44 $81.97
2" $99.50 $104.96 $109.68 $114.62 $119.78 $125.17
3" $207.73 $219.66 $229.54 $239.87 $250.66 $261.94
4" $367.24 $388.68 $406.17 $424.45 $443.55 $463.51
6" $748.90 $793.14 $828.83 $866.13 $905.11 $945.84
8" $1,375.53 $1,457.17 $1,522.74 $1,591.26 $1,662.87 $1,737.70 10" $2,173.05 $2,302.31 $2,405.91 $2,514.18 $2,627.32 $2,745.55 12" $2,856.63 $3,026.71 $3,162.91 $3,305.24 $3,453.98 $3,609.41 #19..
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BARTLE WELLS ASSOCIATES 3
City of Modesto – Water Rate Study 2023
Table 2 – Proposed Scenario 2 Water Rates
Table 3 – Proposed Scenario 3 Water Rates
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.43 $27.62 $28.86 $30.16 $31.52
3/4" $25.44 $26.43 $27.62 $28.86 $30.16 $31.52
1" $36.83 $38.55 $40.28 $42.09 $43.98 $45.96

1.5" $65.32 $68.85 $71.95 $75.19 $78.57 $82.11
2" $99.50 $105.21 $109.94 $114.89 $120.06 $125.46
3" $207.73 $220.35 $230.27 $240.63 $251.46 $262.78
4" $367.24 $390.03 $407.58 $425.92 $445.09 $465.12
6" $748.90 $796.05 $831.87 $869.30 $908.42 $949.30
8" $1,375.53 $1,462.65 $1,528.47 $1,597.25 $1,669.13 $1,744.24 10" $2,173.05 $2,311.05 $2,415.05 $2,523.73 $2,637.30 $2,755.98 12" $2,856.63 $3,038.25 $3,174.97 $3,317.84 $3,467.14 $3,623.16 Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Volumetric Rate ($/CCF) $2.02 $2.14 $2.28 $2.43 $2.59 $2.76 Drought ($/CCF) $2.49 $2.65 $2.82 $3.00 $3.20
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
3/4" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
1" $36.83 $39.40 $41.96 $44.69 $47.59 $50.68

1.5" $65.32 $70.98 $75.59 $80.50 $85.73 $91.30
2" $99.50 $108.88 $115.96 $123.50 $131.53 $140.08
3" $207.73 $228.90 $243.78 $259.63 $276.51 $294.48
4" $367.24 $405.76 $432.13 $460.22 $490.13 $521.99
6" $748.90 $828.98 $882.86 $940.25 $1,001.37 $1,066.46
8" $1,375.53 $1,523.81 $1,622.86 $1,728.35 $1,840.69 $1,960.33 10" $2,173.05 $2,408.15 $2,564.68 $2,731.38 $2,908.92 $3,098.00 12" $2,856.63 $3,166.15 $3,371.95 $3,591.13 $3,824.55 $4,073.15 #19..
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BARTLE WELLS ASSOCIATES 4
City of Modesto – Water Rate Study 2023
2 BACKGROUND, OBJECTIVES, AND LEGAL REQUIREMENTS
The City of Modesto provides water service to over 74,000 accounts throughout the City of Modesto, Salida, Empire, Grayson, Del Rio, and portions of Ceres (Walnut Manor) and Turlock. The City sold the water system serving Hickman and Waterford to the City of Waterford in 2015. The City of Modesto’s water sources are groundwater and treated surface water purchased from the Modesto Irrigation District.

The revenues from the City’s water utility are primarily derived from charges for services. The City must establish rates and charges adequate to fund the cost of providing water services, including costs for operations and capital improvements needed to keep the City’s utility infrastructure in a safe and reliable operating condition.

The City has provided proactive financial stewardship by raising rates to keep revenues in line with the costs of providing water service. Those rate increases have enabled the City to maintain its financial health.

The City’s water utility is a financially self-supporting enterprise. Revenues are derived primarily from water service charges. As such, the City’s water rates must be set at adequate levels to fund the costs of providing service and:
• Fund ongoing operating and maintenance expenses
• Address regulatory requirements
• Fund the capital improvement projects, related debt service and associated increased operating costs • Provide funding for water system maintenance and upgrades The prior water rate increases strengthened the financial condition of the water enterprise. However, current rates are not adequate to fund the needed improvements and meet regulatory water quality and supply requirements.

2.1 Rate Study Objectives
In 2020, the City retained BWA to develop a cost-of-service based water rate study. The City has historically adopted rate increases in order to keep revenues in line with the escalating costs of providing service. Key goals and objectives of this study include developing water rates that:
• Recover the costs of providing service, including operating, capital, and debt funding needs; • Are proportionate, fair and equitable to all customers; • Are easy to understand and implement;
• Comply with the substantive requirements of the California Constitution, Article 13D, Section 6 (which was adopted by the voters as Proposition 218 in 1996) and the general mandate of Article 10, Section 2 that prohibits the wasteful use of water;
• Support the long-term operational and financial stability of the City both in normal and drought conditions.
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BARTLE WELLS ASSOCIATES 5
City of Modesto – Water Rate Study 2023

2.2 Rate-Study Process
The general process used for this cost-of-service rate study is summarized in the following diagram.

Figure 1 – Cost-of-Service Rate Study Process
Key elements of the study include:
1) Project Initiation and Data Collection – Review financial policies; collect financial and other relevant data; and review rate structures;
2) Demand Analysis – Analyze past water demands and customer characteristics to forecast future demands; 3) Long Range Financial Plans – Develop financial projections to evaluate annual revenue requirements from rates and the overall level of rate increases needed to fund the costs of providing service and support longterm financial stability; 4) Cost Allocation – Group the City’s costs in terms of the function they serve as a basis to proportionally allocate the revenue requirement from rates;
5) Cost-of-Service Rate Design – Develop rates that proportionately recover costs; and 6) Prop 218 Process – Ensure compliance with the substantive and procedural requirements of Proposition 218.

2.3 Constitutional Requirements for Rates
The water rates proposed in this report are designed to comply with two key articles of the California Constitution:

Article 13D and Article 10, as explained below.

2.3.1 Article 13D, Section 6
Proposition 218 was adopted by California voters in 1996 and added Articles 13C and 13D to the California Constitution. Article 13D, Section 6 governs property-related charges, which the California Supreme Court has ruled, includes rates imposed for water delivered through pipes connected to property. Article 13D, Section 6 establishes both a) procedural requirements for imposing or increasing property-related charges, and b) Project
Initiation
and Data
Collection
Demand
Analysis
LongRange
Financial
Plan
Cost
Allocation
Rate
Design
Prop. 218
Process
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BARTLE WELLS ASSOCIATES 6
City of Modesto – Water Rate Study 2023
substantive requirements for those charges. Article 13D requires voter approval for new or increased propertyrelated charges but exempts rates for water, wastewater, and garbage service from this voting requirement if rates are adopted by the appropriate procedure and meet the substantive requirements. This report recommends water rates designed to comply with the substantive requirements of Proposition 218.

The substantive requirements of Article 13D, section 6 require property-related charges, such as the City’s water rates, to meet the following conditions:
1) Revenues derived from the fee or charge shall not exceed the costs required to provide the propertyrelated service. 2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.
3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. 4) No fee or charge may be imposed for a service unless that service is used by, or immediately available to the property in question.
5) No fee or charge may be imposed for general governmental services, such as police or fire services, where the service is available to the public at large in substantially the same manner as it is to property owners.

2.3.2 Article 10, Section 2
Article 10, Section 2 of the California Constitution states that:

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.

2.4 Statute of Limitations
Pursuant to California Government Code 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fees. This statute of limitations applies to the water rates proposed in this rate study and is included in the Proposition 218 Notice.
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BARTLE WELLS ASSOCIATES 7
City of Modesto – Water Rate Study 2023
3 PROJECTED WATER DEMAND AND CUSTOMER CHARACTERISTICS

3.1 Projected Water Demand
Projected FY 23/24 water demand is based on the average metered demand for the last five fully recorded years.

Table 4 – Historic and Projected Potable Supply and Metered Demand Source: Actual water supply, water loss, and metered water sales provided by the City.

3.2 Water Services and Equivalent Capacity
Each connection to the City’s water system is considered one service. Some of the City's fixed costs are reasonably recovered on a per-customer basis, while others should be recovered based on the capacity required to serve each customer. The size of a customer’s meter reflects the demand they require of the water system’s capacity.

A significant percentage of the costs of any water system is related to its requirement to deliver water to any customer instantaneously at any time, up to the maximum safe flow capacity of a customer’s meter. Simply put, as the size of a customer’s water meter increases, the instantaneous demand it can place on the City’s water system increases.

Fixed charges for each meter size are based on the capacity of a meter, relative to the capacity of smallest meter size (e.g., a 3/4-inch meter), in the City’s system. In this study, the relative capacity of a meter size, referred to as a meter equivalent ratio (MEU), is calculated by dividing the capacity of a given meter size by the capacity of a 3/4” meter. The meter equivalent ratios used are proportional to the maximum safe flow of a 3/4" meter. The sum of all MEU’s reflects the total capacity of the City.

Customer Data FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Actual Actual Actual Actual Actual Projected Projected
Total Accounts (#) 73,469 73,629 73,833 74,137 74,413 74,560 74,707 Growth (%) 0.22% 0.28% 0.41% 0.37% 0.20% 0.20%
Annual metered use (CCF) per meter 278 265 277 288 279 277.0 277.0 Annual production (CCF) per account 304 295 304 315 310 305 306 Billed, Metered Consumption (CCF) 18,639,728 18,222,157 19,509,688 20,697,851 20,568,355 20,562,541 20,693,839 Total Estimated Consumption (CCF) 20,710,040 19,789,661 20,643,245 21,464,258 20,796,593 20,676,660 20,693,839 Total Water Production (CCF) 22,302,089 21,737,810 22,437,586 23,362,606 23,034,358 22,775,690 22,849,883 #19..
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BARTLE WELLS ASSOCIATES 8
City of Modesto – Water Rate Study 2023
The following table contains the counts of water services and calculations of meter equivalent units. Total meter equivalent units for each meter size are derived by multiplying the meter equivalent ratio by the number of services at each meter size.

Table 5 – Water Services and Meter Equivalent Units
Meter Size Services
Meter
Equivalent
Ratio**
Meter Equivalent
Units
Annual Meter
Equivalent Units
Unmetered 0.0 1.7 0.0 0.0
5/8" 87 1.0 87.0 1,044.0
3/4" 13,459 1.0 13,459.0 161,508.0
1" 57,153 1.7 95,255.0 1,143,060.0

1.5" 1,168 3.3 3,893.3 46,720.0
2" 2,176 5.3 11,605.3 139,264.0
3" 158 11.7 1,843.3 22,120.0
4" 289 21.0 6,069.0 72,828.0
6" 141 43.3 6,110.0 73,320.0
8" 64 80.0 5,120.0 61,440.0
10" 11 126.7 1,393.3 16,720.0
12" 1 166.7 166.7 2,000.0
Total 74,707.0 145,002.0 1,740,024.0
* Customer data as of June 2022 provided by staff
** Capacity factors based on AWWA operating capacity standards by meter size #19..
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BARTLE WELLS ASSOCIATES 9
City of Modesto – Water Rate Study 2023
4 WATER FINANCIAL PLAN

4.1 Water Financial Overview
BWA conducted an independent evaluation of water enterprise finances and concluded the previous rate increases have put the water enterprise in a sound financial position. Continual, gradual increases are projected to maintain its strong financial position where operating reserves exceed six months of operating costs and the debt service coverage ratio exceeds the target of 2.0.

The City relies almost solely on revenues from water rates to fund the costs of providing service. As such, water rates must be set at levels adequate to fund the costs of operating and maintaining the water system, fund necessary capital improvements to keep the water system in good operating condition, and meet the City’s financial policies.

4.2 Key Drivers of Rate Increases
The City is facing several manageable financial challenges that will drive the need for rate increases in upcoming years. Key drivers of future rate increases are summarized below.

Capital Improvement Funding Needs
The City takes a proactive approach to maintaining its water system, which requires ongoing repair and improvement projects. This report explores the financial plan and rates for three different capital scenarios which are described in Section 4.5.

Ongoing Operating Cost Inflation
The City faces annual cost inflation due to annual increases in a range of expenses including staffing, utilities, insurance, supplies, etc. On top of rate increases needed for capital improvements, annual rate increases are needed to keep revenues aligned with cost inflation and prevent rates from falling behind the cost of providing service. Water cost inflation has historically been higher than the Consumer Price Index (CPI) for consumer goods and services. Historically inflation has typically remained consistently around 3%, but recently inflation has reached forty-year highs with the CPI and ENR CCI exceeding 7% in 2022. It is not expected that inflation will remain at such high levels in the future and for the purposes of this rate study average annual inflation is projected to be 5%; in-line with the City’s budget inflationary projections.

Water Reserve Funds
Maintaining a prudent minimal level of fund reserves provides a financial cushion for dealing with unanticipated expenses, revenue shortfalls, and non-catastrophic emergency capital repairs. The City’s financial reserve policies include a minimum reserve target equal to 25% of its operating costs. BWA developed a financial plan designed to maintain prudent reserve levels that are in-line with water utility industry standards.

Debt Service Coverage
Most municipal debt requires that the issuer generate net operating revenues of 1.25 times the total annual debt service payment or greater. This is referred to as “debt service coverage”. To support a strong credit rating and #19..
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good financial health, the current City policy requires a debt coverage ratio of 1.5 times the annual payment or greater, and the City’s financial advisors recommend a debt coverage ratio of 2.0.

4.3 Financial Plan Assumptions
The financial projections incorporate the latest information available and a number of reasonable and slightly conservative assumptions for planning purposes. Key assumptions include:

Revenue Assumptions
• Water rate revenues are based on estimated revenues for the current fiscal year. • Rates proposed to be adopted in August 2023 will be effective on October 1, 2023, with rate adjustments planned to become effective on October 1 of each of the subsequent four years. • Water sales revenues are based on the projected volume of water sales and projected water rates. • The City is anticipating minimal growth. To be conservative and ensure revenues will be sufficient, BWA assumed 0.2% annual growth based on the lowest annual growth over the past five years. • Interest earnings are projected based on the annual beginning fund balance multiplied by the projected interest rate. The interest rate projections are based on recent and anticipated interest rates. • Discretionary “non-rate” revenues which support rate assistance programs, such as the low-income and medical disability waiver programs, were not included in projected revenues.

Expense Assumptions
• Operating and maintenance costs are primarily based on the 2022/23 budget. • Operating costs are projected to escalate at 5% per year to account for cost inflation. • Debt service projections are based on outstanding debt schedules and projected issuances of new debt. • Capital improvement costs are based on the most recent engineering cost estimates. Capital costs include a 5% annual construction cost inflation factor for the next five years.

4.4 Cash Flow Projections
Long-term cash-flow projections were developed based on assumptions and key drivers of future rate increases described above. The projections were used to determine the water utility’s annual revenue requirements and project required water rate revenue increases. The long-term cash-flow projections incorporate the latest information available from the City’s budget, annual reports, capital spending projections, and metered water demand data, as well as a number of reasonable assumptions developed with input from the City. The overall rate revenue increases shown for each of the following scenarios are designed to fund the City’s cost of providing service, maintain roughly balanced budgets, maintain healthy debt service coverage, and maintain prudent reserves. The projections indicate the need for increases for water rate revenues for each of the next five fiscal years. Actual impacts to customers’ water bills will vary based on meter size and water use, due to the outcome of the updated cost-of-service analysis.
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4.5 Cash Flow Projection Scenarios
This report explores the financial plan and rates for three different capital scenarios which are as follows:
• Scenario 1 - Low Capital, No Debt. This scenario projects inflation adjusted capital spending to total $138 million over the next five years, of which all will be cash funded; resulting in an average cash expense of $27.6 million per year.
• Scenario 2 - Full Capital with Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years, of which $145 million will be cash funded; resulting in an average cash expense of $29 million per year. The remaining $40 million is projected to be debt financed. • Scenario 3 - Full Capital, No Debt. This scenario projects inflation adjusted capital spending to total $185 million over the next five years, of which all will be cash funded; resulting in an average cash expense of $37 million per year.

4.6 Cash Flow Projection for Scenario 1 - Low Capital, No Debt In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again. Rates adopted pursuant to Proposition 218 are essentially future rate caps.

A summary of the key elements of the long-term cash-flow projections for this scenario is displayed in the following table.

Table 6 – Scenario 1 Cash Flow Projection Summary
Scenario 1 - Low
Capital, No Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Debt Funded Capital $0 $0 $0 $0 $0
Cash Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 Total Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 Ending Reserves $102,018,732 $97,794,035 $91,442,474 $83,322,765 $73,390,177 Rate Revenue
Increase 4.5% 4.5% 4.5% 4.5% 4.5%
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The following figure visually depicts the cash-flow projections with the proposed rate increases for the next five years. Projected expenses are summarized into key categories. The figure also shows the projected fund reserves at the end of each fiscal year.

Figure 2 – Scenario 1 Projected Cashflow Graph
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Detailed, long-term, cash-flow projections for this scenario are shown in the following table.

Table 7 – Scenario 1 Detailed Cash Flow Projections
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Rate Revenue Increase emand Increase 4.5%0% 4.5%0% 4.5%0% 4.5%0% 4.5%0% Beginning Reserves $110,862,007 $102,018,732 $97,794,035 $91,442,474 $83,322,765 Revenues
Rate Revenue $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 Rate Increase Revenue 3,555,990 3,723,442 3,898,778 4,082,372 4,274,611 Timing Adjustment* -592,665
Other Revenue 4,650,665 4,559,418 4,543,198 4,518,473 4,486,676 Interest on Reserves ________ ________ ________ ________ ________$443,448 $408,075 $391,176 $365,770 $333,291 Total Revenue $87,079,437 $91,434,079 $95,472,672 $99,685,989 $104,085,928 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 New Debt Service 0 0 0 0 0
Rate Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 ________ ________ ________ ________ ________ Total Expenses $95,922,711 $95,658,776 $101,824,234 $107,805,699 $114,018,516 Net Revenues -$8,843,274 -$4,224,697 -$6,351,561 -$8,119,709 -$9,932,588 Ending Reserves $102,018,732 $97,794,035 $91,442,474 $83,322,765 $73,390,177 Debt Coverage (Target 2.0) 2.40 2.52 2.61 2.69 2.79
*Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Capital Revenues
Use of Debt Proceeds
Rate Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 Total Capital Expenditures $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 #19..
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4.7 Cash Flow Projection for Scenario 2 - Full Capital with New Debt In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again. Rates adopted pursuant to Proposition 218 are essentially future rate caps.

A summary of the key elements of the long-term cash-flow projections for this scenario is displayed in the following table. This scenario utilizes debt in FY 26-27 and FY 27-28 to stabilize reserves, which allows more capital to be funded in this scenario than Scenario 1 with the same rate increases. This scenario demonstrates that 4.5% increases are sufficient under low and full capital scenarios. The impact of utilizing debt is potentially needing average annual rate increasesin years FY 28-29 through FY 32-33 of 6.4% rather than the projected average annual rate increases in Scenario 1 of 5.5%. It is important to keep in mind projections more than five years out are conservative and do not include grants and capital construction slowdowns.

Table 8 – Scenario 2 Cash Flow Projection Summary
Scenario 2 - Full Capital
with New Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Debt Funded Capital $0 $0 $0 $20,000,000 $20,000,000
Cash Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 Total Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Ending Reserves $102,018,732 $83,692,561 $66,010,273 $67,757,563 $63,478,048 Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5%
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The following figure visually depicts the cash-flow projections with the proposed rate increases for the next five years. Projected expenses are summarized into key categories. The figure also shows the projected fund reserves at the end of each fiscal year.

Figure 3 – Scenario 2 Projected Cashflow Graph
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Rate Funded Capital
Debt Service
O&M
Revenue
Reserves
City of Modesto
Projected Water Revenues & Expenses ($ Millions)
Scenario 2 - Full Capital with New Debt
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Detailed, long-term, cash-flow projections for this scenario are shown in the following table.

Table 9 – Scenario 2 Detailed Cash Flow Projections
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Rate Revenue Increase emand Increase 4.5%0% 4.5%0% 4.5%0% 4.5%0% 4.5%0% Beginning Reserves $110,862,007 $102,018,732 $83,692,561 $66,010,273 $67,757,563 Revenues
Rate Revenue $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 Rate Increase Revenue 3,555,990 3,723,442 3,898,778 4,082,372 4,274,611 Timing Adjustment* -592,665
Other Revenue 4,650,665 4,559,418 4,486,792 4,416,744 4,424,415 Interest on Reserves ________ ________ ________ ________ ________ $443,448 $408,075 $334,770 $264,041 $271,030 Total Revenue $87,079,437 $91,434,079 $95,359,861 $99,482,532 $103,961,406 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 New Debt Service 0 0 0 0 2,622,000
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 ________ ________ ________ ________ ________ Total Expenses $95,922,711 $109,760,251 $113,042,148 $97,735,242 $108,240,921 Net Revenues -$8,843,274 -$18,326,172 -$17,682,287 $1,747,289 -$4,279,515 Ending Reserves $102,018,732 $83,692,561 $66,010,273 $67,757,563 $63,478,048 Debt Coverage (Target 2.0) 2.40 2.52 2.60 2.68 2.30
*Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Capital Revenues
Use of Debt Proceeds $20,000,000 $20,000,000
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Total Capital Expenditures $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 #19..
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4.8 Cash Flow Projection for Scenario 3 - Full Capital, No Debt In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again. Rates adopted pursuant to Proposition 218 are essentially future rate caps.

A summary of the key elements of the long-term cash-flow projections for this scenario is displayed in the following table.

Table 10 – Scenario 3 Cash Flow Projection Summary
Scenario 3 - Full
Capital, No Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Debt Funded Capital $0 $0 $0 $0 $0
Cash Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Total Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Ending Reserves $103,335,766 $88,361,528 $76,015,089 $65,310,989 $53,503,665 Rate Revenue
Increase 6.5% 6.5% 6.5% 6.5% 6.5%
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The following figure visually depicts the cash-flow projections with the proposed rate increases for the next five years. Projected expenses are summarized into key categories. The figure also shows the projected fund reserves at the end of each fiscal year.

Figure 4 – Scenario 3 Projected Cashflow Graph
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Rate Funded Capital
Debt Service
O&M
Revenue
Reserves
City of Modesto
Projected Water Revenues & Expenses ($ Millions)
Scenario 3 - Full Capital, No Debt
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Detailed, long-term, cash-flow projections for this scenario are shown in the following table.

Table 11 – Scenario 3 Detailed Cash Flow Projections
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Rate Revenue Increase 6.5% 6.5% 6.5% 6.5% 6.5% emand Increase 0% 0% 0% 0% 0% Beginning Reserves $110,862,007 $103,335,766 $88,361,528 $76,015,089 $65,310,989 Revenues
Rate Revenue $79,021,999 $84,326,746 $89,987,600 $96,028,468 $102,474,859 Rate Increase Revenue 5,136,430 5,481,238 5,849,194 6,241,850 6,660,866 Timing Adjustment* -856,072
Other Revenue 4,650,665 4,564,686 4,505,468 4,456,763 4,414,629 Interest on Reserves $443,448 $413,343 $353,446 $304,060 $261,244 ________ ________ ________ ________ ________ Total Revenue $88,396,470 $94,786,013 $100,695,709 $107,031,142 $113,811,598 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 New Debt Service 0 0 0 0 0
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 ________ ________ ________ ________ ________ Total Expenses $95,922,711 $109,760,251 $113,042,148 $117,735,242 $125,618,921 Net Revenues -$7,526,241 -$14,974,238 -$12,346,439 -$10,704,100 -$11,807,324 Ending Reserves $103,335,766 $88,361,528 $76,015,089 $65,310,989 $53,503,665 Debt Coverage (Target 2.0) 2.51 2.78 3.02 3.27 3.55
*Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Capital Revenues
Use of Debt Proceeds
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Total Capital Expenditures $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 #19..
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4.9 Scenario Projected Cashflow Comparison
With lower capital spending, Scenario 1 preserves $73 million of reserves while cash funding all expenses with

4.5% annual rate revenue increases. Scenario 1 leaves the City in a position where average annual rate revenue increases of 5.5% are conservatively projected for the following rate study (FY 28-29 through FY 32-33).

In Scenario 2, the full capital spending is augmented with a debt issuance of $40 million. This allows the City to preserve $63 million of reserves with 4.5% annual rate revenue increases. Scenario 2 leaves the City in a position where average annual rate revenue increases of 6.4% are conservatively projected for the following rate study (FY 28-29 through FY 32-33).

In Scenario 3, the full capital spending is cash funded. This allows the City to preserve $54 million of reserves with

6.5% annual rate revenue increases. Scenario 3 leaves the City in a position where average annual rate revenue increases of 4.1% are conservatively projected for the following rate study (FY 28-29 through FY 32-33).

It is important to keep in mind projections more than five years out are conservative and do not include grants and capital construction slowdowns. The following table shows key financial information for all scenarios.

Table 12 – Scenario Projected Cashflow Comparison
Scenario 1 - Low Capital,
No Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Debt Funded Capital $0 $0 $0 $0 $0
Cash Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 Total Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 Ending Reserves $102,018,732 $97,794,035 $91,442,474 $83,322,765 $73,390,177 Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5%
Scenario 2 – Full Capital
with New Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Debt Funded Capital $0 $0 $0 $20,000,000 $20,000,000
Cash Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 Total Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Ending Reserves $102,018,732 $83,692,561 $66,010,273 $67,757,563 $63,478,048 Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5%
Scenario 3 - Full Capital,
No Debt FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Debt Funded Capital $0 $0 $0 $0 $0
Cash Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Total Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 Ending Reserves $103,335,766 $88,361,528 $76,015,089 $65,310,989 $53,503,665 Rate Revenue Increase 6.5% 6.5% 6.5% 6.5% 6.5%
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5 COST-OF-SERVICE RATE DERIVATION
Article XIII D, Section 6 of the California Constitution (which was adopted by the voters in 1996 as a part of Proposition 218) requires that the City adopt only rates that meet a number of substantive requirements.

Specifically:
(1) Revenues derived from the water rates cannot exceed the funds required to provide water service. (2) Revenues derived from the water rates cannot be used for any purpose other than providing water service.
(3) The amount of the water rates imposed upon any parcel or person as an incident of property ownership cannot exceed the proportional cost of the service attributable to the parcel. (4) Water rates may not be imposed unless the water service is used by, or immediately available to, the owner of the property in question.

In Modesto, each water customer is charged both a monthly fixed rate and a volumetric rate based on the quantity of water delivered by the City to the customer. This reflects that (i) some system costs are based entirely on the actual quantity of water consumed, (ii) other system costs are fixed from the point of view of the City, but are a result of design decisions that were made to accommodate all users, including high-demand users, and (iii) some costs, particularly the cost of administering the water system, would be largely the same regardless of the volume of water use.

Water utilities have employed a wide range of approaches or perspectives for allocating and recovering their costs for providing service, often through a combination of fixed and variable charges. The percentage of revenues derived from the fixed and variable charges should be proportional to each system’s expenditures and must not exceed the cost of providing service.

Many of the City’s costs are fixed costs that do not vary by the level of service provided, such as operational and staff costs, as well as costs for building and maintaining infrastructure. Some of these costs are related to the number of customers, but most of the fixed costs are related to the total capacity of the water system. Fixed costs related to system capacity can reasonably be apportioned by meter size or variable, usage-based rate recovery in recognition that both units of measure reasonably reflect customer usage driving the City to incur capacity-related costs. For example, a share of the fixed cost of salaries related to water production can reasonably be recovered from usage-based charges as these costs are incurred to provide water supply to meet customer demand or from a fixed charge based on a customer’s meter size which reflects the magnitude of water a customer can pull from the water system. Likewise, debt service payments may be fixed annual costs, but it is reasonable to recover some of these costs from usage-based rates as the costs are incurred to fund infrastructure that will improve the water delivery system.

While there is no single correct approach, BWA believes that costs should be allocated within a reasonable range that reflects both a) underlying cost causation, to the extent such causation can reasonably be determined or estimated, and b) the policy preferences of the agency in cases where a range of reasonable approaches can be justified.
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5.1 Functional Allocation
There must be a cost-based nexus between the revenue requirement from the cash flow and the proposed rates.

The nexus is created by allocating the expenses and offsetting non-rate revenues to functional components and then dividing each functional component’srevenue requirements by the allocations units most reasonably related to each function. A functional component reflects a grouping of the utility’s expenses whose magnitude is driven by the quantity of a specific unit-of-measure. For example, costs allocated to the customer functional component are driven by the number of customers served by the water enterprise.

The functional components used in this study are as follows:
• Customer- Fixed costs are recovered per customer. Fixed costs or costs related to system capacity were allocated to this category.
• Capacity- Fixed costs are recovered per customer. Fixed costs or costs related to system capacity were allocated to this category.
• All Volume- Costs reasonably recovered volumetrically were allocated to this category. Volumetric costs are recovered per unit of volume (100 cubic feet (CCF)) based on all projected demand.

Related expenses and non-rate revenues were grouped into the following allocation categories before being allocated to each functional category:
• Administration- Expenses were allocated 30% to the customer and 70% to capacity functional components because some costs are driven by the number of customers, and some are driven by the overall capacity of the system. For example, a smaller system would require less staff, leading to reduced office supply costs. • Source of Supply- expenses were allocated 10% to Capacity and 90% to All Volume to reflect that these costs are incurred to meet the volumetric needs of the City. These costs include the costs associated with wells and groundwater supply.
• Water Demand expenses consist of conservation, water quality and surface water costs. They are allocated 100% to All Volume to reflect that these costs are incurred to meet the volumetric needs of the City. • Customer Accounts costs are allocated 100% to the Customer functional component because they are fixed expenditures that relate to operational support activities, including billing, customer service, and meter reading support. These expenditures are common to all customers, regardless of the meter size serving a property or actual water use.
• Water System expenses are related to maintaining and operating the water system. These costs are allocated 50% to Capacity and 50% to All Volume because these costs are related to the overall capacity of the system which is driven by the projected volume of water sold.
• Debt Service is allocated 100% to Capacity because they are related to system capacity and are fixed annual expenses.
• Capital expenses and non-rate revenues are allocated 50% to Capacity and 50% to All Volume because these costs are related to the overall capacity of the system which is driven by the projected volume of water sold.

The following tables show a breakdown of the water utility’s expenses and offsetting revenues and how they are allocated by function. The proportional allocation is then applied to the rate revenue requirement so that the #19..
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rates are proportional to the cost of service provided. To recover the allocated revenue requirements proportionally to the service provided, a unit cost must be derived. Critical to this step is using the unit which relates to the function.

The allocation amounts are based on the last year of the proposed rates, FY 27-28, because it reflects the completed regionalization project in operation. The revenue requirements leading up to that year are increasing to fund the project.

Table 13 – Scenario 1 Functional Allocation
Table 14 – Scenario 2 Functional Allocation
Table 15 – Scenario 3 Functional Allocation
Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $0 $7,550,855 30% 70% 100%
Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $27,609,055 $330,328 $27,278,726 50% 50% 100%
Functional Allocation $ $100,599,144 $330,328 $100,268,815 $9,096,523 $38,273,859 $52,898,433 $100,268,815 Functional Allocation % 9.07% 38.17% 52.76% 100%
Revenue Requirement $7,489,824 $31,520,018 $43,568,147 $82,577,989 Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $52,060 $7,498,795 30% 70% 100% Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $28,978,922 $330,328 $28,648,594 50% 50% 100%
Functional Allocation $ $101,969,011 $382,388 $101,586,623 $9,080,905 $38,922,351 $53,583,367 $101,586,623 Functional Allocation % 8.94% 38.31% 52.75% 100%
Revenue Requirement $7,382,472 $31,635,628 $43,559,889 $82,577,989 Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $0 $7,550,855 30% 70% 100%
Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $36,978,922 $330,328 $36,648,594 50% 50% 100%
Functional Allocation $ $109,969,011 $330,328 $109,638,683 $9,096,523 $42,958,793 $57,583,367 $109,638,683 Functional Allocation % 8.30% 39.18% 52.52% 100%
Revenue Requirement $6,985,150 $32,973,272 $44,200,007 $84,158,429 #19..
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City of Modesto – Water Rate Study 2023

5.2 Rate Derivation
Monthly Fixed Service Charge
This charge applies to all active services. It recovers the Customer functional component revenue requirement on a per service basis and the Capacity functional component revenue requirement on a per MEU basis. The Customer unit cost is the same for all meter sizes and the unit costs per MEU varies by meter size. MEU ratios are based on the AWWA meter equivalent ratio for each meter size as described in Section 3.2.

Monthly Volumetric Service Charge
This charge applies to every unit of water sold. It recovers the All Volume functional component revenue requirement on a unit (CCF) basis.

The following tables show the rate derivation of the fixed and volumetric charges for each scenario.

Table 16 – Scenario 1 Rate Derivation
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $7,489,824 $31,520,018 $43,568,147
Unit Cost ($/Unit) $8.37 $18.11 $2.11
Monthly Fixed
Charge
Calculation
Capacity
Factor**
Monthly
Customer
Component
Monthly
Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $8.37 $18.11 $26.48
3/4" 1.00 $8.37 $18.11 $26.48
1" 1.67 $8.37 $30.18 $38.56

1.5" 3.33 $8.37 $60.37 $68.74
2" 5.33 $8.37 $96.59 $104.96
3" 11.67 $8.37 $211.28 $219.66
4" 21.00 $8.37 $380.31 $388.68
6" 43.33 $8.37 $784.77 $793.14
8" 80.00 $8.37 $1,448.80 $1,457.17
10" 126.67 $8.37 $2,293.93 $2,302.31
12" 166.67 $8.37 $3,018.33 $3,026.71
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City of Modesto – Water Rate Study 2023
Table 17 – Scenario 2 Rate Derivation
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $7,382,472 $31,635,628 $43,559,889
Unit Cost ($/Unit) $8.25 $18.18 $2.11
Monthly Fixed
Charge
Calculation
Capacity
Factor**
Monthly
Customer
Component
Monthly
Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $8.25 $18.18 $26.43
3/4" 1.00 $8.25 $18.18 $26.43
1" 1.67 $8.25 $30.30 $38.55

1.5" 3.33 $8.25 $60.60 $68.85
2" 5.33 $8.25 $96.96 $105.21
3" 11.67 $8.25 $212.10 $220.35
4" 21.00 $8.25 $381.78 $390.03
6" 43.33 $8.25 $787.80 $796.05
8" 80.00 $8.25 $1,454.40 $1,462.65
10" 126.67 $8.25 $2,302.80 $2,311.05
12" 166.67 $8.25 $3,030.00 $3,038.25
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City of Modesto – Water Rate Study 2023
Table 18 – Scenario 3 Rate Derivation
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $6,985,150 $32,973,272 $44,200,007
Unit Cost ($/Unit) $7.81 $18.95 $2.14
Monthly Fixed
Charge
Calculation
Capacity
Factor**
Monthly
Customer
Component
Monthly
Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $7.81 $18.95 $26.76
3/4" 1.00 $7.81 $18.95 $26.76
1" 1.67 $7.81 $31.58 $39.40

1.5" 3.33 $7.81 $63.17 $70.98
2" 5.33 $7.81 $101.07 $108.88
3" 11.67 $7.81 $221.08 $228.90
4" 21.00 $7.81 $397.95 $405.76
6" 43.33 $7.81 $821.17 $828.98
8" 80.00 $7.81 $1,516.00 $1,523.81
10" 126.67 $7.81 $2,400.33 $2,408.15
12" 166.67 $7.81 $3,158.33 $3,166.15
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City of Modesto – Water Rate Study 2023

5.3 Proposed Water Rates
The following tables show a 5-year schedule of proposed water rates for each scenario.

Table 19 – Proposed Scenario 1 Water Rates
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
3/4" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
1" $36.83 $38.56 $40.30 $42.11 $44.00 $45.98

1.5" $65.32 $68.74 $71.83 $75.06 $78.44 $81.97
2" $99.50 $104.96 $109.68 $114.62 $119.78 $125.17
3" $207.73 $219.66 $229.54 $239.87 $250.66 $261.94
4" $367.24 $388.68 $406.17 $424.45 $443.55 $463.51
6" $748.90 $793.14 $828.83 $866.13 $905.11 $945.84
8" $1,375.53 $1,457.17 $1,522.74 $1,591.26 $1,662.87 $1,737.70 10" $2,173.05 $2,302.31 $2,405.91 $2,514.18 $2,627.32 $2,745.55 12" $2,856.63 $3,026.71 $3,162.91 $3,305.24 $3,453.98 $3,609.41 #19..
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City of Modesto – Water Rate Study 2023
Table 20 – Proposed Scenario 2 Water Rates
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
3/4" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
1" $36.83 $38.56 $40.30 $42.11 $44.00 $45.98

1.5" $65.32 $68.74 $71.83 $75.06 $78.44 $81.97
2" $99.50 $104.96 $109.68 $114.62 $119.78 $125.17
3" $207.73 $219.66 $229.54 $239.87 $250.66 $261.94
4" $367.24 $388.68 $406.17 $424.45 $443.55 $463.51
6" $748.90 $793.14 $828.83 $866.13 $905.11 $945.84
8" $1,375.53 $1,457.17 $1,522.74 $1,591.26 $1,662.87 $1,737.70 10" $2,173.05 $2,302.31 $2,405.91 $2,514.18 $2,627.32 $2,745.55 12" $2,856.63 $3,026.71 $3,162.91 $3,305.24 $3,453.98 $3,609.41 #19..
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City of Modesto – Water Rate Study 2023
Table 21 – Proposed Scenario 3 Water Rates
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Volumetric Rate ($/CCF) $2.02 $2.14 $2.28 $2.43 $2.59 $2.76 Drought ($/CCF) $2.49 $2.65 $2.82 $3.00 $3.20
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
3/4" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
1" $36.83 $39.40 $41.96 $44.69 $47.59 $50.68

1.5" $65.32 $70.98 $75.59 $80.50 $85.73 $91.30
2" $99.50 $108.88 $115.96 $123.50 $131.53 $140.08
3" $207.73 $228.90 $243.78 $259.63 $276.51 $294.48
4" $367.24 $405.76 $432.13 $460.22 $490.13 $521.99
6" $748.90 $828.98 $882.86 $940.25 $1,001.37 $1,066.46
8" $1,375.53 $1,523.81 $1,622.86 $1,728.35 $1,840.69 $1,960.33 10" $2,173.05 $2,408.15 $2,564.68 $2,731.38 $2,908.92 $3,098.00 12" $2,856.63 $3,166.15 $3,371.95 $3,591.13 $3,824.55 $4,073.15 #19..
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City of Modesto – Water Rate Study 2023
6 REGIONAL RESIDENTIAL BILL COMPARISON
Figure 5 provides a residential bill survey comparing the City of Modesto’s current and proposed water bills with the bills of other local agencies. The City of Modesto bills shown in Figure 5 are the non-drought water bills. Since each agency has an individualized conservation target, it is unknown how the City of Modesto typical water use would compare. Even with the proposed rate increases under each scenario, the City of Modesto’s typical bill would remain competitive.

Figure 5 – Residential Bill Comparison
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City of Modesto – Water Rate Study 2023
7 DROUGHT RATES
The City is proposing to authorize a drought rate that could be implemented to support financial stability and help ensure adequate funding for water utility operations during periods of water shortages and reduced water sales.

As proposed, these rates would be temporary, billed based on metered water use, that would replace the City’s regular water rates during water shortage emergencies.

The drought rates are designed to enable the City to recover its costs of service and remain financially stable during periods of water shortages and reduced water sales.

Financial impacts during water shortages and periods of reduced water sales can include:
• A loss of volumetric water rate revenues due to a reduction in the volume of water sales. • Reduced variable expenses due to reduced volumes of water production and supply, such as reduced costs for water treatment and pumping.
• Additional costs for achieving water demand cutback targets, such as costs for an enhanced conservation program and water demand mitigation efforts.
• Additional costs for supplemental sources of water supply when normal-year supply is curtailed during a drought.
• Potential costs of compliance for drought-related regulations and potential cost of fines or penalties for non-compliance with State water reduction mandates during periods of severe drought.

The surcharges account for a) lost revenues due to reduced water sales, less b) estimated reduced variable expenses due to reduced water supply, divided by c) the volume of projected water sales with reduced demand.

Table 22 – Proposed Scenario 1 Drought Rates
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076

Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $ $43,568,147
Drought revenue requirement $ $43,133,576
Drought Rate $/CCF $2.45
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City of Modesto – Water Rate Study 2023
Table 23 – Proposed Scenario 2 Drought Rates
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076

Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $ $43,559,889
Drought revenue requirement $ $43,125,319
Drought Rate $/CCF $2.45
Table 24 – Proposed Scenario 3 Drought Rates
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076

Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $ $44,200,007
Drought revenue requirement $ $43,765,436
Drought Rate $/CCF $2.49
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City of Modesto – Water Rate Study 2023
8 CONCLUSION AND RECOMMENDATIONS
This water rate study report presents a comprehensive review of the City of Modesto’s water revenue requirements and rate structures. The City will need regular annual rate increases to keep up with cost inflation and be able to complete necessary capital projects while maintaining prudent reserves.

8.1 Conclusion
The City practices sound financial planning which has provided for the financial health of the water enterprise.

Historically, the City has increased rate revenue to keep up with inflationary cost increases and fund system upgrades and maintenance. The adoption of these rates reflect the City’s commitment to stewarding financially sound utilities and providing reliable, high quality water service that will benefit the community many years into the future.

8.2 Recommendations
BWA recommends that the City adopt the rates shown in this report. Rates were developed as part of a collaborative process. At minimum, BWA recommends that the City review and update its water rate study every five years and/or concurrent with Master Plan Updates. Proposition 218 allows public agencies to adopt rates over a five-year planning period. Any further rate increases must be proposed as part of a new Proposition 218 process. #19..
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APPENDIX A
Scenario 1 Water Rate Study Tables
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City of Modesto
Draft Water Rate Study Tables
April 10, 2023
Scenario 1 - Low Capital, No Debt
Draft

BARTLE WELLS ASSOCIATES
Independent Public Finance Advisors
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Table A Draft
City of Modesto
Water Rate Study
Rate Sheet
Scenario 1 - Low Capital, No Debt
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
3/4" $25.44 $26.48 $27.67 $28.92 $30.22 $31.58
1" $36.83 $38.56 $40.30 $42.11 $44.00 $45.98

1.5" $65.32 $68.74 $71.83 $75.06 $78.44 $81.97
2" $99.50 $104.96 $109.68 $114.62 $119.78 $125.17
3" $207.73 $219.66 $229.54 $239.87 $250.66 $261.94
4" $367.24 $388.68 $406.17 $424.45 $443.55 $463.51
6" $748.90 $793.14 $828.83 $866.13 $905.11 $945.84
8" $1,375.53 $1,457.17 $1,522.74 $1,591.26 $1,662.87 $1,737.70 10" $2,173.05 $2,302.31 $2,405.91 $2,514.18 $2,627.32 $2,745.55 12" $2,856.63 $3,026.71 $3,162.91 $3,305.24 $3,453.98 $3,609.41 #19..
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Table 1 Draft
City of Modesto
Water Rate Study
Projected Operating Expenses
Scenario 1 - Low Capital, No Debt
Expenses1 Inflation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected General Inflation Factor General 5.0% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% 12460 FIN Cashiering Customer Accounts General $845,352 $835,287 $877,051 $920,904 $966,949 $1,015,297 $1,060,985 $1,108,729 $1,158,622 $1,210,760 $1,265,244 12470 FIN Utilities & Collections Customer Accounts General 2,499,546 $2,411,368 $2,531,936 $2,658,533 $2,791,460 $2,931,033 $3,062,929 $3,200,761 $3,344,795 $3,495,311 $3,652,600 12475 FIN Utility Assistance Programs Administration General 1,119,827 $2,286,900 $2,401,245 $2,521,307 $2,647,373 $2,779,741 $2,904,830 $3,035,547 $3,172,147 $3,314,893 $3,464,063 41010 UPP Administration Administration General 1,167,848 $1,154,259 $1,211,972 $1,272,571 $1,336,199 $1,403,009 $1,466,144 $1,532,121 $1,601,066 $1,673,114 $1,748,405 41410 UPP Water General Administration General 410,902 $425,795 $447,085 $469,439 $492,911 $517,556 $540,847 $565,185 $590,618 $617,196 $644,970 41420 UPP Water Billing & Collections Customer Accounts General 176,311 $223,954 $235,152 $246,909 $259,255 $272,217 $284,467 $297,268 $310,645 $324,624 $339,233 42024 UTL Water Engineering Design Capital General 1,122,154 $1,119,841 $1,175,833 $1,234,625 $1,296,356 $1,361,174 $1,422,427 $1,486,436 $1,553,325 $1,623,225 $1,696,270 43010 UPP Ground Water Management Plan Source of Supply General $115,141 $61,438 $64,510 $67,735 $71,122 $74,678 $78,039 $81,551 $85,220 $89,055 $93,063 43020 UPP Water System Analysis Water System General 220,977 $191,680 $201,264 $211,327 $221,894 $232,988 $243,473 $254,429 $265,878 $277,843 $290,346 43030 UPP Urban Water Management Plan Water Demand General 46,705 $32,502 $34,127 $35,833 $37,625 $39,506 $41,284 $43,142 $45,083 $47,112 $49,232 43040 UPP Water Quality Study Water Demand General 86,457 $81,917 $86,013 $90,313 $94,829 $99,571 $104,051 $108,734 $113,627 $118,740 $124,083 43060 UPP Capital Planning Capital General 801,938 $800,160 $840,168 $882,176 $926,285 $972,599 $1,016,366 $1,062,103 $1,109,898 $1,159,843 $1,212,036 43070 UPP Water Rate Analysis Administration General 122,251 $4,905 $5,150 $5,408 $5,678 $5,962 $6,230 $6,511 $6,804 $7,110 $7,430 43080 UPP Sphere of Influence Administration General 35,962 $34,933 $36,680 $38,514 $40,439 $42,461 $44,372 $46,369 $48,455 $50,636 $52,914 45010 UPP Water Services Administration Administration General 2,192,418 $2,233,552 $2,345,230 $2,462,491 $2,585,616 $2,714,896 $2,837,067 $2,964,735 $3,098,148 $3,237,564 $3,383,255 45020 UPP Systems Maintenance Water System General 3,120,442 $3,445,734 $3,618,021 $3,798,922 $3,988,868 $4,188,311 $4,376,785 $4,573,741 $4,779,559 $4,994,639 $5,219,398 45040 UPP Construction Water System General 6,233,954 $6,893,861 $7,238,554 $7,600,482 $7,980,506 $8,379,531 $8,756,610 $9,150,657 $9,562,437 $9,992,747 $10,442,420 45050 UPP Wells & Tanks Source of Supply General 8,654,114 $8,842,192 $9,284,302 $9,748,517 $10,235,943 $10,747,740 $11,231,388 $11,736,800 $12,264,956 $12,816,879 $13,393,639 45055 UPP Water Quality Water Demand General 2,908,597 $3,081,081 $3,235,135 $3,396,892 $3,566,736 $3,745,073 $3,913,602 $4,089,714 $4,273,751 $4,466,069 $4,667,043 45060 UPP Service & Meters Customer Accounts General 2,489,378 $2,710,826 $2,846,367 $2,988,686 $3,138,120 $3,295,026 $3,443,302 $3,598,251 $3,760,172 $3,929,380 $4,106,202 45065 UPP Water Conservation Water Demand General 1,580,898 $1,914,878 $2,010,622 $2,111,153 $2,216,711 $2,327,546 $2,432,286 $2,541,739 $2,656,117 $2,775,642 $2,900,546 45070 UPP MID Surface Water T & DA Water Demand General 17,120,214 $17,135,229 $17,991,990 $18,891,590 $19,836,169 $20,827,978 $21,765,237 $22,744,673 $23,768,183 $24,837,751 $25,955,450 55110 PW - Water Services Meters Water System General -129,160 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Non-capital projects (FY23/24 is Billing Software) Administration General 684,000 $1,625,000 UTL - Water - Grant Research & Writing - 101452 Administration 150,000 UTL - Groundwater Well Strategy Plan - 101456 Source of Supply 126,125 Transfer Into Fund 4140 - Match Funding Administration General 46,723 $0 $0 $0 $0 Storm Drain Annual Transfer-out (rockwell rej) Administration General 700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $731,500 $764,418 $798,816 $834,763 JPA Building svs Annual Transfer-out Administration General 65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $67,925 $70,982 $74,176 $77,514 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $54,714,074 $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 1 Based on City's FY 22-23 budget
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Table 3 Draft
City of Modesto
Water Rate Study
Capital Improvement Costs
Scenario 1 - Low Capital, No Debt
Project Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected CIP (Current Dollars)
CIP 29,321,500 25,625,000 22,371,000 24,235,000 25,585,000 26,815,000 26,515,000 27,175,000 23,715,000 23,525,000 23,480,000 Total CIP (Current Dollars) $29,321,500 $25,625,000 $22,371,000 $24,235,000 $25,585,000 $26,815,000 $26,515,000 $27,175,000 $23,715,000 $23,525,000 $23,480,000 Total CIP (Inflated Dollars) $29,321,500 $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 $33,679,460 $36,071,095 $32,894,947 $34,099,812 $35,566,141 Annual Inflation Rate 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% #19..
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Table 2 Draft
City of Modesto
Water Rate Study
Projected Revenues
Scenario 1 - Low Capital, No Debt
Revenue Category Escalation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Growth 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% None 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Rate Revenue Growth $79,318,075 $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 $99,464,493 $105,144,910 $111,149,736 $117,497,497 $124,207,779 Revenue from Rate Increase1,2 $2,963,325 $3,723,442 $3,898,778 $4,082,372 $4,274,611 $5,470,547 $5,782,970 $6,113,235 $6,462,362 $6,831,428 Other Revenue
Refunds, Damages, and Cost Recovery/Other As All Other Growth $10,000 $10,020 $10,040 $10,060 $10,080 $10,100 $10,121 $10,141 $10,161 $10,181 $10,202 Water Fund Development Fees Capital Growth $1,220,500 $329,010 $329,668 $330,327 $330,988 $331,650 $332,313 $332,978 $333,643 $334,311 $334,979 Legal Settlement As All Other None
Rental Income As All Other None $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 Service Credits As All Other None $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 Utility Assistance Fee As All Other None $200,902
Repayment of Carpenter Road Landfill mitigation
loan - Advance 16A/B/C As All Other None $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 INTEREST As All Other None $500,000 $500,000 $408,075 $391,176 $365,770 $333,291 $293,561 $259,614 $226,879 $218,425 $217,761 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Other Revenue $5,743,037 $4,650,665 $4,559,418 $4,543,198 $4,518,473 $4,486,676 $4,447,629 $4,414,367 $4,382,319 $4,374,552 $4,374,577 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $85,061,112 $86,635,989 $91,026,004 $95,081,496 $99,320,219 $103,752,637 $109,382,669 $115,342,247 $121,645,290 $128,334,412 $135,413,784 1 Additional revenue based on recommended increase
2 Adjusted if rates adopted in the middle of fiscal year #19..
- 564 -
$25.6
$23.5
$26.7
$29.6
$32.6
$33.7
$36.1
$32.9
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 City of Modesto
Water Capital Improvements ($ millions)
Scenario 1 - Low Capital, No Debt
Source: City of Modesto 2023 CIP plus annual construction cost inflation.

Future $; includes annual
construction cost inflation.
#19..
- 565 -
Table 4 Draft
City of Modesto
Water Rate Study
Debt
Scenario 1 - Low Capital, No Debt
Debt FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Existing Debt
55140-54104 MID T & DA - 1998D (2013G) $5,155,541 $4,367,900 $0 $0 $0 $0 $0 $0 $0 $0 $0 55140-54103 MID T & DA - 2007F $4,257,700 $4,032,800 $8,409,205 $8,409,205 $8,409,206 $8,409,207 $8,409,208 $8,409,209 $8,409,210 $8,409,211 $8,409,212 4130 2008 Water Rev Lease Bond $2,164,623 $3,546,482 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 55060 CA DWR (Del Este) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4140-12183 ARRA funding CDPH $46,723 $38,237 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 Total Current Debt Service $11,624,587 $11,985,419 $12,685,819 $12,685,819 $12,685,820 $12,685,821 $12,685,822 $12,685,823 $12,685,824 $12,685,825 $12,685,826 #19..
- 566 -
Table 5
City of Modesto
Water Rate Study
Cash Flow Projections
Scenario 1 - Low Capital, No Debt
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5% 5.5% 5.5% 5.5% 5.5% 5.5% Beginning Reserves $110,862,007 $102,018,732 $97,794,035 $91,442,474 $83,322,765 $73,390,177 $64,903,403 $56,719,728 $54,606,219 $54,440,290 Revenues
Rate Revenue $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 $99,464,493 $105,144,910 $111,149,736 $117,497,497 $124,207,779 Rate Increase Revenue 3,555,990 3,723,442 3,898,778 4,082,372 4,274,611 $5,470,547 5,782,970 6,113,235 6462362.34 6,831,428 Timing Adjustment* -592,665
Other Revenue 4,650,665 4,559,418 4,543,198 4,518,473 4,486,676 $4,447,629 4,414,367 4,382,319 4,374,552 4,374,577 Interest on Reserves $443,448 $408,075 $391,176 $365,770 $333,291 $293,561 $259,614 $226,879 $218,425 $217,761 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Revenue $87,079,437 $91,434,079 $95,472,672 $99,685,989 $104,085,928 $109,676,230 $115,601,861 $121,872,169 $128,552,836 $135,631,546 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 $12,685,822 12,685,823 12,685,824 12,685,825 12,685,826 New Debt Service 0 0 0 0 0 0 0 0 0 0
Rate Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 $33,679,460 $36,071,095 $32,894,947 $34,099,812 $35,566,141 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Expenses $95,922,711 $95,658,776 $101,824,234 $107,805,699 $114,018,516 $118,163,003 $123,785,536 $123,985,678 $128,718,765 $133,872,084 Net Revenues -$8,843,274 -$4,224,697 -$6,351,561 -$8,119,709 -$9,932,588 -$8,486,773 -$8,183,676 -$2,113,509 -$165,928 $1,759,462 Ending Reserves $102,018,732 $97,794,035 $91,442,474 $83,322,765 $73,390,177 $64,903,403 $56,719,728 $54,606,219 $54,440,290 $56,199,752 Debt Coverage (Target 2.0) 2.40 2.52 2.61 2.69 2.79 2.99 3.20 3.43 3.67 3.94 *Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Capital Revenues
Use of Debt Proceeds
Rate Funded Capital $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 $33,679,460 $36,071,095 $32,894,947 $34,099,812 $35,566,141 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 $33,679,460 $36,071,095 $32,894,947 $34,099,812 $35,566,141 Total Capital Expenditures $25,625,000 $23,489,550 $26,719,088 $29,617,836 $32,593,800 $33,679,460 $36,071,095 $32,894,947 $34,099,812 $35,566,141 #19..
- 567 -
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
FY 22-
23 FY 23-
24 FY 24-
25 FY 25-
26 FY 26-
27 FY 27-
28 FY 28-
29 FY 29-
30 FY 30-
31 FY 31-
32 FY 32-
33 Rate Funded Capital
Debt Service
O&M
Revenue
Reserves
City of Modesto
Projected Water Revenues & Expenses ($ Millions)
Scenario 1 - Low Capital, No Debt
#19..
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Table 6 Draft
City of Modesto
Water Rate Study
Customer Data
Scenario 1 - Low Capital, No Debt
Customer Data FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Actual Actual Actual Actual Actual Projected Projected
Metered Customers
Meter Size # # # # # # #
5/8" 98 96 95 96 87 87 87
3/4" 10,319 10,570 11,244 11,740 12,754 13,106 13,459
1" 52,781 54,271 55,158 56,106 56,925 57,039 57,153

1.5" 1,178 1,161 1,158 1,166 1,164 1,166 1,168
2" 2,123 2,124 2,131 2,149 2,168 2,172 2,176
3" 126 132 144 150 158 158 158
4" 283 280 281 286 287 288 289
6" 138 138 142 142 141 141 141
8" 66 66 64 64 64 64 64
10" 12 12 10 11 11 11 11
12" 1 1 1 1 1 1 1
Total Metered Customers 67,125 68,851 70,428 71,911 73,760 74,233 74,707 Unmetered Customers
# # # # # # #
PR01 857 752 418 196 28 14 -
PR02 2,899 1,986 1,444 812 337 169 -
PR03 1,909 1,454 1,075 870 124 62 -
PR04 323 273 224 149 47 24 -
PR05 356 313 244 199 117 59 -
Total Unmetered Customers 6,344 4,778 3,405 2,226 653 327 0 Projected Unmetered Use
Monthly CCF per Account CCF CCF CCF CCF CCF CCF CCF
PR01 20 207,370 181,963 101,144 47,426 6,775 3,388 -
PR02 24 848,082 580,990 422,432 237,545 98,587 49,293 - PR03 31 708,675 539,766 399,071 322,969 46,032 23,016 - PR04 34 129,874 109,769 90,067 59,911 18,898 9,449 -
PR05 41 176,312 155,015 120,843 98,556 57,945 28,973 -
Total Unmetered 2,070,312 1,567,504 1,133,557 766,407 228,238 114,119 0 System Totals
Total Accounts (#) 73,469 73,629 73,833 74,137 74,413 74,560 74,707 Growth (%) 0.22% 0.28% 0.41% 0.37% 0.20% 0.20%
Annual metered use (CCF) per meter 278 265 277 288 279 277.0 277.0 Annual production (CCF) per account 304 295 304 315 310 305 306 Billed, Metered Consumption (CCF) 18,639,728 18,222,157 19,509,688 20,697,851 20,568,355 20,562,541 20,693,839 Total Estimated Consumption (CCF) 20,710,040 19,789,661 20,643,245 21,464,258 20,796,593 20,676,660 20,693,839 Total Water Production (CCF) 22,302,089 21,737,810 22,437,586 23,362,606 23,034,358 22,775,690 22,849,883 #19..
- 569 -
Table 7 Draft
City of Modesto
Water Rate Study
Meter Equivalent Units
Scenario 1 - Low Capital, No Debt
Meter Size Services
Meter
Equivalent
Ratio**
Meter Equivalent
Units
Annual Meter
Equivalent Units
5/8" 87 1.0 87.0 1,044.0
3/4" 13,459 1.0 13,459.0 161,508.0
1" 57,153 1.7 95,255.0 1,143,060.0

1.5" 1,168 3.3 3,893.3 46,720.0
2" 2,176 5.3 11,605.3 139,264.0
3" 158 11.7 1,843.3 22,120.0
4" 289 21.0 6,069.0 72,828.0
6" 141 43.3 6,110.0 73,320.0
8" 64 80.0 5,120.0 61,440.0
10" 11 126.7 1,393.3 16,720.0
12" 1 166.7 166.7 2,000.0
Total 74,707.0 145,002.0 1,740,024.0
* Customer data as of June 2022 provided by staff
** Capacity factors based on AWWA operating capacity standards by meter size #19..
- 570 -
Table 8 Draft
City of Modesto
Water Rate Study
Functional Allocation
Scenario 1 - Low Capital, No Debt
Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $0 $7,550,855 30% 70% 100%
Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $27,609,055 $330,328 $27,278,726 50% 50% 100%
Functional Allocation $ $100,599,144 $330,328 $100,268,815 $9,096,523 $38,273,859 $52,898,433 $100,268,815 Functional Allocation % 9.07% 38.17% 52.76% 100%
Revenue Requirement $7,489,824 $31,520,018 $43,568,147 $82,577,989 #19..
- 571 -
Table 9 Draft
City of Modesto
Water Rate Study
Rate Derivation
Scenario 1 - Low Capital, No Debt
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $7,489,824 $31,520,018 $43,568,147
Unit Cost ($/Unit) $8.37 $18.11 $2.11
Monthly Fixed
Charge
Calculation Capacity Factor**
Monthly
Customer
Component
Monthly Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $8.37 $18.11 $26.48
3/4" 1.00 $8.37 $18.11 $26.48
1" 1.67 $8.37 $30.18 $38.56

1.5" 3.33 $8.37 $60.37 $68.74
2" 5.33 $8.37 $96.59 $104.96
3" 11.67 $8.37 $211.28 $219.66
4" 21.00 $8.37 $380.31 $388.68
6" 43.33 $8.37 $784.77 $793.14
8" 80.00 $8.37 $1,448.80 $1,457.17
10" 126.67 $8.37 $2,293.93 $2,302.31
12" 166.67 $8.37 $3,018.33 $3,026.71
#19..
- 572 -
Table 10
City of Modesto
Water Rate Study
Drought Rate Derivation
Scenario 1 - Low Capital, No Debt
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076
Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $43,568,147
Drought revenue requirement $43,133,576
Drought rate $2.45
#19..
- 573 -

APPENDIX B
Scenario 2 Water Rate Study Tables

#19..
- 574 -
City of Modesto
Draft Water Rate Study Tables
April 10, 2023
Scenario 2 - Full Capital with New Debt
Draft

BARTLE WELLS ASSOCIATES
Independent Public Finance Advisors
#19..
- 575 -
Table A Draft
City of Modesto
Water Rate Study
Rate Sheet
Scenario 2 - Full Capital with New Debt
Monthly Volumetric
Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Non-Drought ($/CCF) $2.02 $2.11 $2.20 $2.30 $2.40 $2.51 Drought ($/CCF) $2.45 $2.56 $2.68 $2.80 $2.93
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.43 $27.62 $28.86 $30.16 $31.52
3/4" $25.44 $26.43 $27.62 $28.86 $30.16 $31.52
1" $36.83 $38.55 $40.28 $42.09 $43.98 $45.96

1.5" $65.32 $68.85 $71.95 $75.19 $78.57 $82.11
2" $99.50 $105.21 $109.94 $114.89 $120.06 $125.46
3" $207.73 $220.35 $230.27 $240.63 $251.46 $262.78
4" $367.24 $390.03 $407.58 $425.92 $445.09 $465.12
6" $748.90 $796.05 $831.87 $869.30 $908.42 $949.30
8" $1,375.53 $1,462.65 $1,528.47 $1,597.25 $1,669.13 $1,744.24 10" $2,173.05 $2,311.05 $2,415.05 $2,523.73 $2,637.30 $2,755.98 12" $2,856.63 $3,038.25 $3,174.97 $3,317.84 $3,467.14 $3,623.16 #19..
- 576 -
Table 1 Draft
City of Modesto
Water Rate Study
Projected Operating Expenses
Scenario 2 - Full Capital with New Debt
Expenses1 Inflation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected General Inflation Factor General 5.0% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% 12460 FIN Cashiering Customer Accounts General $845,352 $835,287 $877,051 $920,904 $966,949 $1,015,297 $1,060,985 $1,108,729 $1,158,622 $1,210,760 $1,265,244 12470 FIN Utilities & Collections Customer Accounts General 2,499,546 $2,411,368 $2,531,936 $2,658,533 $2,791,460 $2,931,033 $3,062,929 $3,200,761 $3,344,795 $3,495,311 $3,652,600 12475 FIN Utility Assistance Programs Administration General 1,119,827 $2,286,900 $2,401,245 $2,521,307 $2,647,373 $2,779,741 $2,904,830 $3,035,547 $3,172,147 $3,314,893 $3,464,063 41010 UPP Administration Administration General 1,167,848 $1,154,259 $1,211,972 $1,272,571 $1,336,199 $1,403,009 $1,466,144 $1,532,121 $1,601,066 $1,673,114 $1,748,405 41410 UPP Water General Administration General 410,902 $425,795 $447,085 $469,439 $492,911 $517,556 $540,847 $565,185 $590,618 $617,196 $644,970 41420 UPP Water Billing & Collections Customer Accounts General 176,311 $223,954 $235,152 $246,909 $259,255 $272,217 $284,467 $297,268 $310,645 $324,624 $339,233 42024 UTL Water Engineering Design Capital General 1,122,154 $1,119,841 $1,175,833 $1,234,625 $1,296,356 $1,361,174 $1,422,427 $1,486,436 $1,553,325 $1,623,225 $1,696,270 43010 UPP Ground Water Management Plan Source of Supply General $115,141 $61,438 $64,510 $67,735 $71,122 $74,678 $78,039 $81,551 $85,220 $89,055 $93,063 43020 UPP Water System Analysis Water System General 220,977 $191,680 $201,264 $211,327 $221,894 $232,988 $243,473 $254,429 $265,878 $277,843 $290,346 43030 UPP Urban Water Management Plan Water Demand General 46,705 $32,502 $34,127 $35,833 $37,625 $39,506 $41,284 $43,142 $45,083 $47,112 $49,232 43040 UPP Water Quality Study Water Demand General 86,457 $81,917 $86,013 $90,313 $94,829 $99,571 $104,051 $108,734 $113,627 $118,740 $124,083 43060 UPP Capital Planning Capital General 801,938 $800,160 $840,168 $882,176 $926,285 $972,599 $1,016,366 $1,062,103 $1,109,898 $1,159,843 $1,212,036 43070 UPP Water Rate Analysis Administration General 122,251 $4,905 $5,150 $5,408 $5,678 $5,962 $6,230 $6,511 $6,804 $7,110 $7,430 43080 UPP Sphere of Influence Administration General 35,962 $34,933 $36,680 $38,514 $40,439 $42,461 $44,372 $46,369 $48,455 $50,636 $52,914 45010 UPP Water Services Administration Administration General 2,192,418 $2,233,552 $2,345,230 $2,462,491 $2,585,616 $2,714,896 $2,837,067 $2,964,735 $3,098,148 $3,237,564 $3,383,255 45020 UPP Systems Maintenance Water System General 3,120,442 $3,445,734 $3,618,021 $3,798,922 $3,988,868 $4,188,311 $4,376,785 $4,573,741 $4,779,559 $4,994,639 $5,219,398 45040 UPP Construction Water System General 6,233,954 $6,893,861 $7,238,554 $7,600,482 $7,980,506 $8,379,531 $8,756,610 $9,150,657 $9,562,437 $9,992,747 $10,442,420 45050 UPP Wells & Tanks Source of Supply General 8,654,114 $8,842,192 $9,284,302 $9,748,517 $10,235,943 $10,747,740 $11,231,388 $11,736,800 $12,264,956 $12,816,879 $13,393,639 45055 UPP Water Quality Water Demand General 2,908,597 $3,081,081 $3,235,135 $3,396,892 $3,566,736 $3,745,073 $3,913,602 $4,089,714 $4,273,751 $4,466,069 $4,667,043 45060 UPP Service & Meters Customer Accounts General 2,489,378 $2,710,826 $2,846,367 $2,988,686 $3,138,120 $3,295,026 $3,443,302 $3,598,251 $3,760,172 $3,929,380 $4,106,202 45065 UPP Water Conservation Water Demand General 1,580,898 $1,914,878 $2,010,622 $2,111,153 $2,216,711 $2,327,546 $2,432,286 $2,541,739 $2,656,117 $2,775,642 $2,900,546 45070 UPP MID Surface Water T & DA Water Demand General 17,120,214 $17,135,229 $17,991,990 $18,891,590 $19,836,169 $20,827,978 $21,765,237 $22,744,673 $23,768,183 $24,837,751 $25,955,450 55110 PW - Water Services Meters General -129,160 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Non-capital projects (FY23/24 is Billing Software) Administration General 684,000 $1,625,000 UTL - Water - Grant Research & Writing - 101452 150,000 UTL - Groundwater Well Strategy Plan - 101456 126,125
Transfer Into Fund 4140 - Match Funding General 46,723 $0 $0 $0 $0 Storm Drain Annual Transfer-out (rockwell rej) Administration General 700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $731,500 $764,418 $798,816 $834,763 JPA Building svs Annual Transfer-out Administration General 65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $67,925 $70,982 $74,176 $77,514 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $54,714,074 $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 1 Based on City's FY 22-23 budget
#19..
- 577 -
Table 2 Draft
City of Modesto
Water Rate Study
Projected Revenues
Scenario 2 - Full Capital with New Debt
Revenue Category Escalation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Growth 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% None 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Rate Revenue Growth $79,318,075 $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 $99,464,493 $106,639,861 $114,332,861 $122,580,833 $130,195,555 Revenue from Rate Increase1,2 $2,963,325 $3,723,442 $3,898,778 $4,082,372 $4,274,611 $6,962,514 $7,464,790 $8,003,300 $7,354,850 $6,509,778 Other Revenue
Refunds, Damages, and Cost Recovery/Other Administration Growth $10,000 $10,020 $10,040 $10,060 $10,080 $10,100 $10,121 $10,141 $10,161 $10,181 $10,202 Water Fund Development Fees Capital Growth $1,220,500 $329,010 $329,668 $330,327 $330,988 $331,650 $332,313 $332,978 $333,643 $334,311 $334,979 Legal Settlement Administration None
Rental Income Administration None $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 Service Credits As All Other None $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 Utility Assistance Fee As All Other None $200,902
Repayment of Carpenter Road Landfill mitigation
loan - Advance 16A/B/C As All Other None $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 INTEREST As All Other None $500,000 $500,000 $408,075 $334,770 $264,041 $271,030 $253,912 $241,383 $243,338 $243,974 $241,324 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Other Revenue $5,743,037 $4,650,665 $4,559,418 $4,486,792 $4,416,744 $4,424,415 $4,407,981 $4,396,137 $4,398,778 $4,400,101 $4,398,140 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $85,061,112 $86,635,989 $91,026,004 $95,025,090 $99,218,491 $103,690,376 $110,834,988 $118,500,788 $126,734,939 $134,335,784 $141,103,473 1 Additional revenue based on recommended increase
2 Adjusted if rates adopted in the middle of fiscal year #19..
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Table 3 Draft
City of Modesto
Water Rate Study
Capital Improvement Costs
Scenario 2 - Full Capital with New Debt
Project Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected CIP (Current Dollars)
CIP 29,321,500 25,625,000 35,800,976 34,409,979 34,162,513 36,358,682 37,092,938 23,558,714 22,681,004 25,081,003 25,138,184 Total CIP (Current Dollars) $29,321,500 $25,625,000 $35,800,976 $34,409,979 $34,162,513 $36,358,682 $37,092,938 $23,558,714 $22,681,004 $25,081,003 $25,138,184 Total CIP (Inflated Dollars) $29,321,500 $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 Annual Inflation Rate 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% #19..
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$25.6
$37.6 $37.9
$39.5
$44.2
$47.1
$31.3 $31.5
$36.4
$38.1
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 City of Modesto
Water Capital Improvements ($ millions)
Scenario 2 - Full Capital with New Debt
Source: City of Modesto 2023 CIP plus annual construction cost inflation.

Future $; includes annual
construction cost inflation.
#19..
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Table 4 Draft
City of Modesto
Water Rate Study
Debt
Scenario 2 - Full Capital with New Debt
Debt FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Existing Debt
55140-54104 MID T & DA - 1998D (2013G) $5,155,541 $4,367,900 $0 $0 $0 $0 $0 $0 $0 $0 $0 55140-54103 MID T & DA - 2007F $4,257,700 $4,032,800 $8,409,205 $8,409,205 $8,409,206 $8,409,207 $8,409,208 $8,409,209 $8,409,210 $8,409,211 $8,409,212 4130 2008 Water Rev Lease Bond $2,164,623 $3,546,482 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 55060 CA DWR (Del Este) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4140-12183 ARRA funding CDPH $46,723 $38,237 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 Total Current Debt Service $11,624,587 $11,985,419 $12,685,819 $12,685,819 $12,685,820 $12,685,821 $12,685,822 $12,685,823 $12,685,824 $12,685,825 $12,685,826 Proposed Borrowing
Net Proceeds Needed $40,000,000 $25,000,000
Repayment Term (yrs) 30 30
Interest Rate 5.0% 5.0%
Month of Issue 1 1
Issuance Cost $300,000 $300,000
Total Debt Issue Size $40,300,000 $25,300,000
Prorated Debt Service Payment - Current Yr. Only $2,622,000 $1,646,000 Annual Debt Service Payment (rounded) $2,622,000 $1,646,000 Total Proposed Annual Water Debt Service $0 $0 $0 $0 $0 $2,622,000 $2,622,000 $4,268,000 $4,268,000 $4,268,000 $4,268,000 #19..
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Table 5
City of Modesto
Water Rate Study
Cash Flow Projections
Scenario 2 - Full Capital with New Debt
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Rate Revenue Increase 4.5% 4.5% 4.5% 4.5% 4.5% 7.0% 7.0% 7.0% 6.0% 5.0% Beginning Reserves $110,862,007 $102,018,732 $83,692,561 $66,010,273 $67,757,563 $63,478,048 $60,345,805 $60,834,565 $60,993,415 $60,330,961 Revenues
Rate Revenue $79,021,999 $82,743,145 $86,639,520 $90,719,375 $94,991,350 $99,464,493 $106,639,861 $114,332,861 $122,580,833 $130,195,555 Rate Increase Revenue 3,555,990 3,723,442 3,898,778 4,082,372 4,274,611 6,962,514 7,464,790 8,003,300 7,354,850 6,509,778 Timing Adjustment* -592,665
Other Revenue 4,650,665 4,559,418 4,486,792 4,416,744 4,424,415 4,407,981 4,396,137 4,398,778 4,400,101 4,398,140 Interest on Reserves $443,448 $408,075 $334,770 $264,041 $271,030 $253,912 $241,383 $243,338 $243,974 $241,324 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Revenue $87,079,437 $91,434,079 $95,359,861 $99,482,532 $103,961,406 $111,088,900 $118,742,171 $126,978,277 $134,579,758 $141,344,796 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 12,685,822 12,685,823 12,685,824 12,685,825 12,685,826 New Debt Service 0 0 0 0 2,622,000 2,622,000 4,268,000 4,268,000 4,268,000 4,268,000 Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 $27,115,599 $26,270,970 $31,460,697 $36,355,260 $38,077,861 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Expenses $95,922,711 $109,760,251 $113,042,148 $97,735,242 $108,240,921 $114,221,142 $118,253,411 $126,819,427 $135,242,212 $140,651,805 Net Revenues -$8,843,274 -$18,326,172 -$17,682,287 $1,747,289 -$4,279,515 -$3,132,242 $488,760 $158,850 -$662,454 $692,992 Ending Reserves $102,018,732 $83,692,561 $66,010,273 $67,757,563 $63,478,048 $60,345,805 $60,834,565 $60,993,415 $60,330,961 $61,023,953 Debt Coverage (Target 2.0) 2.40 2.52 2.60 2.68 2.30 2.57 2.58 2.87 3.11 3.29 *Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Capital Revenues
Use of Debt Proceeds $20,000,000 $20,000,000 $20,000,000 $5,000,000 Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $19,547,379 $24,194,205 $27,115,599 $26,270,970 $31,460,697 $36,355,260 $38,077,861 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 Total Capital Expenditures $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 #19..
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$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Rate Funded Capital
Debt Service
O&M
Revenue
Reserves
City of Modesto
Projected Water Revenues & Expenses ($ Millions)
Scenario 2 - Full Capital with New Debt
#19..
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Table 6 Draft
City of Modesto
Water Rate Study
Customer Data
Scenario 2 - Full Capital with New Debt
Customer Data FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Actual Actual Actual Actual Actual Projected Projected
Total Accounts (#) 73,469 73,629 73,833 74,137 74,413 74,560 74,707 Growth (%) 0.22% 0.28% 0.41% 0.37% 0.20% 0.20%
Annual metered use (CCF) per meter 278 265 277 288 279 277 277 Annual production (CCF) per account 298 285 303 309 298 299 299 Billed, Metered Consumption (CCF) 18,639,728 18,222,157 19,509,688 20,697,851 20,568,355 20,562,541 20,693,839 Total Estimated Consumption (CCF) 20,710,040 19,789,661 20,643,245 21,464,258 20,796,593 20,676,660 20,693,839 Total Water Production (CCF) 21,919,447 20,965,305 22,397,473 22,916,498 22,203,522 22,277,633 22,328,428 #19..
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Table 7 Draft
City of Modesto
Water Rate Study
Meter Equivalent Units
Scenario 2 - Full Capital with New Debt
Meter Size Services
Meter
Equivalent
Ratio**
Meter Equivalent
Units
Annual Meter
Equivalent Units
5/8" 87 1.0 87.0 1,044.0
3/4" 13,459 1.0 13,459.0 161,508.0
1" 57,153 1.7 95,255.0 1,143,060.0

1.5" 1,168 3.3 3,893.3 46,720.0
2" 2,176 5.3 11,605.3 139,264.0
3" 158 11.7 1,843.3 22,120.0
4" 289 21.0 6,069.0 72,828.0
6" 141 43.3 6,110.0 73,320.0
8" 64 80.0 5,120.0 61,440.0
10" 11 126.7 1,393.3 16,720.0
12" 1 166.7 166.7 2,000.0
Total 74,707.0 145,002.0 1,740,024.0
* Customer data as of June 2022 provided by staff
** Capacity factors based on AWWA operating capacity standards by meter size #19..
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Table 8 Draft
City of Modesto
Water Rate Study
Functional Allocation
Scenario 2 - Full Capital with New Debt
Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $52,060 $7,498,795 30% 70% 100% Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $28,978,922 $330,328 $28,648,594 50% 50% 100%
Functional Allocation $ $101,969,011 $382,388 $101,586,623 $9,080,905 $38,922,351 $53,583,367 $101,586,623 Functional Allocation % 8.94% 38.31% 52.75% 100%
Revenue Requirement $7,382,472 $31,635,628 $43,559,889 $82,577,989 #19..
- 586 -
Table 9 Draft
City of Modesto
Water Rate Study
Rate Derivation
Scenario 2 - Full Capital with New Debt
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $7,382,472 $31,635,628 $43,559,889
Unit Cost ($/Unit) $8.25 $18.18 $2.11
Monthly Fixed
Charge
Calculation Capacity Factor**
Monthly
Customer
Component
Monthly Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $8.25 $18.18 $26.43
3/4" 1.00 $8.25 $18.18 $26.43
1" 1.67 $8.25 $30.30 $38.55

1.5" 3.33 $8.25 $60.60 $68.85
2" 5.33 $8.25 $96.96 $105.21
3" 11.67 $8.25 $212.10 $220.35
4" 21.00 $8.25 $381.78 $390.03
6" 43.33 $8.25 $787.80 $796.05
8" 80.00 $8.25 $1,454.40 $1,462.65
10" 126.67 $8.25 $2,302.80 $2,311.05
12" 166.67 $8.25 $3,030.00 $3,038.25
#19..
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Table 10
City of Modesto
Water Rate Study
Drought Rate Derivation
Scenario 2 - Full Capital with New Debt
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076
Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $43,559,889
Drought revenue requirement $43,125,319
Drought rate $2.45
#19..
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APPENDIX C
Scenario 3 Water Rate Study Tables
#19..
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City of Modesto
Draft Water Rate Study Tables
April 10, 2023
Scenario 3 - Full Capital, No Debt
Draft

BARTLE WELLS ASSOCIATES
Independent Public Finance Advisors
#19..
- 590 -
Table A Draft
City of Modesto
Water Rate Study
Rate Sheet
Scenario 3 - Full Capital, No Debt
Monthly Volumetric Rates FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Volumetric Rate ($/CCF) $2.02 $2.14 $2.28 $2.43 $2.59 $2.76 Drought ($/CCF) $2.49 $2.65 $2.82 $3.00 $3.20
Monthly Fixed Charge FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 Existing Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
3/4" $25.44 $26.76 $28.50 $30.35 $32.32 $34.42
1" $36.83 $39.40 $41.96 $44.69 $47.59 $50.68

1.5" $65.32 $70.98 $75.59 $80.50 $85.73 $91.30
2" $99.50 $108.88 $115.96 $123.50 $131.53 $140.08
3" $207.73 $228.90 $243.78 $259.63 $276.51 $294.48
4" $367.24 $405.76 $432.13 $460.22 $490.13 $521.99
6" $748.90 $828.98 $882.86 $940.25 $1,001.37 $1,066.46
8" $1,375.53 $1,523.81 $1,622.86 $1,728.35 $1,840.69 $1,960.33 10" $2,173.05 $2,408.15 $2,564.68 $2,731.38 $2,908.92 $3,098.00 12" $2,856.63 $3,166.15 $3,371.95 $3,591.13 $3,824.55 $4,073.15 #19..
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Table 1 Draft
City of Modesto
Water Rate Study
Projected Operating Expenses
Scenario 3 - Full Capital, No Debt
Expenses1 Inflation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected General Inflation Factor General 5.0% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% 12460 FIN Cashiering Customer Accounts General $845,352 $835,287 $877,051 $920,904 $966,949 $1,015,297 $1,060,985 $1,108,729 $1,158,622 $1,210,760 $1,265,244 12470 FIN Utilities & Collections Customer Accounts General 2,499,546 $2,411,368 $2,531,936 $2,658,533 $2,791,460 $2,931,033 $3,062,929 $3,200,761 $3,344,795 $3,495,311 $3,652,600 12475 FIN Utility Assistance Programs Administration General 1,119,827 $2,286,900 $2,401,245 $2,521,307 $2,647,373 $2,779,741 $2,904,830 $3,035,547 $3,172,147 $3,314,893 $3,464,063 41010 UPP Administration Administration General 1,167,848 $1,154,259 $1,211,972 $1,272,571 $1,336,199 $1,403,009 $1,466,144 $1,532,121 $1,601,066 $1,673,114 $1,748,405 41410 UPP Water General Administration General 410,902 $425,795 $447,085 $469,439 $492,911 $517,556 $540,847 $565,185 $590,618 $617,196 $644,970 41420 UPP Water Billing & Collections Customer Accounts General 176,311 $223,954 $235,152 $246,909 $259,255 $272,217 $284,467 $297,268 $310,645 $324,624 $339,233 42024 UTL Water Engineering Design Capital General 1,122,154 $1,119,841 $1,175,833 $1,234,625 $1,296,356 $1,361,174 $1,422,427 $1,486,436 $1,553,325 $1,623,225 $1,696,270 43010 UPP Ground Water Management Plan Source of Supply General $115,141 $61,438 $64,510 $67,735 $71,122 $74,678 $78,039 $81,551 $85,220 $89,055 $93,063 43020 UPP Water System Analysis Water System General 220,977 $191,680 $201,264 $211,327 $221,894 $232,988 $243,473 $254,429 $265,878 $277,843 $290,346 43030 UPP Urban Water Management Plan Water Demand General 46,705 $32,502 $34,127 $35,833 $37,625 $39,506 $41,284 $43,142 $45,083 $47,112 $49,232 43040 UPP Water Quality Study Water Demand General 86,457 $81,917 $86,013 $90,313 $94,829 $99,571 $104,051 $108,734 $113,627 $118,740 $124,083 43060 UPP Capital Planning Capital General 801,938 $800,160 $840,168 $882,176 $926,285 $972,599 $1,016,366 $1,062,103 $1,109,898 $1,159,843 $1,212,036 43070 UPP Water Rate Analysis Administration General 122,251 $4,905 $5,150 $5,408 $5,678 $5,962 $6,230 $6,511 $6,804 $7,110 $7,430 43080 UPP Sphere of Influence Administration General 35,962 $34,933 $36,680 $38,514 $40,439 $42,461 $44,372 $46,369 $48,455 $50,636 $52,914 45010 UPP Water Services Administration Administration General 2,192,418 $2,233,552 $2,345,230 $2,462,491 $2,585,616 $2,714,896 $2,837,067 $2,964,735 $3,098,148 $3,237,564 $3,383,255 45020 UPP Systems Maintenance Water System General 3,120,442 $3,445,734 $3,618,021 $3,798,922 $3,988,868 $4,188,311 $4,376,785 $4,573,741 $4,779,559 $4,994,639 $5,219,398 45040 UPP Construction Water System General 6,233,954 $6,893,861 $7,238,554 $7,600,482 $7,980,506 $8,379,531 $8,756,610 $9,150,657 $9,562,437 $9,992,747 $10,442,420 45050 UPP Wells & Tanks Source of Supply General 8,654,114 $8,842,192 $9,284,302 $9,748,517 $10,235,943 $10,747,740 $11,231,388 $11,736,800 $12,264,956 $12,816,879 $13,393,639 45055 UPP Water Quality Water Demand General 2,908,597 $3,081,081 $3,235,135 $3,396,892 $3,566,736 $3,745,073 $3,913,602 $4,089,714 $4,273,751 $4,466,069 $4,667,043 45060 UPP Service & Meters Customer Accounts General 2,489,378 $2,710,826 $2,846,367 $2,988,686 $3,138,120 $3,295,026 $3,443,302 $3,598,251 $3,760,172 $3,929,380 $4,106,202 45065 UPP Water Conservation Water Demand General 1,580,898 $1,914,878 $2,010,622 $2,111,153 $2,216,711 $2,327,546 $2,432,286 $2,541,739 $2,656,117 $2,775,642 $2,900,546 45070 UPP MID Surface Water T & DA Water Demand General 17,120,214 $17,135,229 $17,991,990 $18,891,590 $19,836,169 $20,827,978 $21,765,237 $22,744,673 $23,768,183 $24,837,751 $25,955,450 55110 PW - Water Services Meters General -129,160 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Non-capital projects (FY23/24 is Billing Software) Administration General 684,000 $1,625,000 UTL - Water - Grant Research & Writing - 101452 150,000 UTL - Groundwater Well Strategy Plan - 101456 126,125
Transfer Into Fund 4140 - Match Funding General 46,723 $0 $0 $0 $0 Storm Drain Annual Transfer-out (rockwell rej) Administration General 700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $700,000 $731,500 $764,418 $798,816 $834,763 JPA Building svs Annual Transfer-out Administration General 65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $65,000 $67,925 $70,982 $74,176 $77,514 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Operating Expenses $54,714,074 $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 1 Based on City's FY 22-23 budget
#19..
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Table 2 Draft
City of Modesto
Water Rate Study
Projected Revenues
Scenario 3 - Full Capital, No Debt
Revenue Category Escalation FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Growth 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% None 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Interest 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% Rate Revenue Growth $79,318,075 $79,021,999 $84,326,746 $89,987,600 $96,028,468 $102,474,859 $109,353,996 $116,694,930 $121,605,453 $126,722,610 $130,785,337 Revenue from Rate Increase1,2 $4,280,358 $5,481,238 $5,849,194 $6,241,850 $6,660,866 $7,108,010 $4,667,797 $4,864,218 $3,801,678 $3,923,560 Other Revenue
Refunds, Damages, and Cost Recovery/Other As All Other Growth $10,000 $10,020 $10,040 $10,060 $10,080 $10,100 $10,121 $10,141 $10,161 $10,181 $10,202 Water Fund Development Fees Capital Growth $1,220,500 $329,010 $329,668 $330,327 $330,988 $331,650 $332,313 $332,978 $333,643 $334,311 $334,979 Legal Settlement As All Other None
Rental Income As All Other None $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 Service Credits As All Other None $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 $3,062,214 Utility Assistance Fee As All Other None $200,902
Repayment of Carpenter Road Landfill mitigation
loan - Advance 16A/B/C As All Other None $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 $707,421 INTEREST As All Other None $500,000 $500,000 $413,343 $353,446 $304,060 $261,244 $214,015 $171,795 $199,297 $233,186 $249,877 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Other Revenue $5,743,037 $4,650,665 $4,564,686 $4,505,468 $4,456,763 $4,414,629 $4,368,083 $4,326,548 $4,354,737 $4,389,313 $4,406,693 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ Total Revenue $85,061,112 $87,953,022 $94,372,670 $100,342,263 $106,727,082 $113,550,354 $120,830,089 $125,689,275 $130,824,408 $134,913,602 $139,115,590 1 Additional revenue based on recommended increase
2 Adjusted if rates adopted in the middle of fiscal year #19..
- 593 -
Table 3 Draft
City of Modesto
Water Rate Study
Capital Improvement Costs
Scenario 3 - Full Capital, No Debt
Project Description FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected CIP (Current Dollars)
Total CIP (Current Dollars) $29,321,500 $25,625,000 $35,800,976 $34,409,979 $34,162,513 $36,358,682 $37,092,938 $23,558,714 $22,681,004 $25,081,003 $25,138,184 Total CIP (Inflated Dollars) $29,321,500 $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 Annual Inflation Rate 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% 4.5% #19..
- 594 -
$25.6
$37.6 $37.9
$39.5
$44.2
$47.1
$31.3 $31.5
$36.4
$38.1
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
$50.0
FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 City of Modesto
Water Capital Improvements ($ millions)
Scenario 3 - Full Capital, No Debt
Source: City of Modesto 2023 CIP plus annual construction cost inflation.

Future $; includes annual
construction cost inflation.
#19..
- 595 -
Table 4 Draft
City of Modesto
Water Rate Study
Debt
Scenario 3 - Full Capital, No Debt
Debt FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Existing Debt
55140-54104 MID T & DA - 1998D (2013G) $5,155,541 $4,367,900 $0 $0 $0 $0 $0 $0 $0 $0 $0 55140-54103 MID T & DA - 2007F $4,257,700 $4,032,800 $8,409,205 $8,409,205 $8,409,206 $8,409,207 $8,409,208 $8,409,209 $8,409,210 $8,409,211 $8,409,212 4130 2008 Water Rev Lease Bond $2,164,623 $3,546,482 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 $4,240,014 55060 CA DWR (Del Este) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4140-12183 ARRA funding CDPH $46,723 $38,237 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 $36,600 Total Current Debt Service $11,624,587 $11,985,419 $12,685,819 $12,685,819 $12,685,820 $12,685,821 $12,685,822 $12,685,823 $12,685,824 $12,685,825 $12,685,826 #19..
- 596 -
Table 5
City of Modesto
Water Rate Study
Cash Flow Projections
Scenario 3 - Full Capital, No Debt
Projected Cashflow FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Rate Revenue Increase 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 4.0% 4.0% 3.0% 3.0% Beginning Reserves $110,862,007 $103,335,766 $88,361,528 $76,015,089 $65,310,989 $53,503,665 $42,948,626 $49,824,285 $58,296,562 $62,469,138 Revenues
Rate Revenue $79,021,999 $84,326,746 $89,987,600 $96,028,468 $102,474,859 $109,353,996 $116,694,930 $121,605,453 $126,722,610 $130,785,337 Rate Increase Revenue 5,136,430 5,481,238 5,849,194 6,241,850 6,660,866 7,108,010 4,667,797 4,864,218 3,801,678 3,923,560 Timing Adjustment* -856,072
Other Revenue 4,650,665 4,564,686 4,505,468 4,456,763 4,414,629 4,368,083 4,326,548 4,354,737 4,389,313 4,406,693 Interest on Reserves $443,448 $413,343 $353,446 $304,060 $261,244 $214,015 $171,795 $199,297 $233,186 $249,877 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Revenue $88,396,470 $94,786,013 $100,695,709 $107,031,142 $113,811,598 $121,044,104 $125,861,070 $131,023,705 $135,146,788 $139,365,466 Expenses
Operating Expenses $58,312,292 $59,483,407 $62,419,327 $65,502,043 $68,738,895 $71,797,721 $75,028,618 $78,404,906 $81,933,127 $85,620,117 Existing Debt Service 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821 12,685,822 12,685,823 12,685,824 12,685,825 12,685,826 New Debt Service 0 0 0 0 0 0 0 0 0 0
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Expenses $95,922,711 $109,760,251 $113,042,148 $117,735,242 $125,618,921 $131,599,142 $118,985,411 $122,551,427 $130,974,212 $136,383,805 Net Revenues -$7,526,241 -$14,974,238 -$12,346,439 -$10,704,100 -$11,807,324 -$10,555,039 $6,875,658 $8,472,277 $4,172,576 $2,981,662 Ending Reserves $103,335,766 $88,361,528 $76,015,089 $65,310,989 $53,503,665 $42,948,626 $49,824,285 $58,296,562 $62,469,138 $65,450,800 Debt Coverage (Target 2.0) 2.51 2.78 3.02 3.27 3.55 3.88 4.01 4.15 4.19 4.24 *Reflects October rate implementation
Capital Funding FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Capital Revenues
Use of Debt Proceeds
Rate Funded Capital $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Total Capital Revenue $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 Total Capital Expenditures $25,625,000 $37,591,025 $37,937,002 $39,547,379 $44,194,205 $47,115,599 $31,270,970 $31,460,697 $36,355,260 $38,077,861 #19..
- 597 -
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
FY 22-
23 FY 23-
24 FY 24-
25 FY 25-
26 FY 26-
27 FY 27-
28 FY 28-
29 FY 29-
30 FY 30-
31 FY 31-
32 FY 32-
33 Rate Funded Capital
Debt Service
O&M
Revenue
Reserves
City of Modesto
Projected Water Revenues & Expenses ($ Millions)
Scenario 3 - Full Capital, No Debt
#19..
- 598 -
Table 6
City of Modesto
Water Rate Study
Customer Data
Scenario 3 - Full Capital, No Debt
Customer Data FY 20-21 FY 21-22 FY 22-23 FY 23-24
Actual Actual Projected Projected
Metered Customers
Meter Size # # # #
5/8" 96 87 87 87
3/4" 11,740 12,754 13,106 13,459
1" 56,106 56,925 57,039 57,153

1.5" 1,166 1,164 1,166 1,168
2" 2,149 2,168 2,172 2,176
3" 150 158 158 158
4" 286 287 288 289
6" 142 141 141 141
8" 64 64 64 64
10" 11 11 11 11
12" 1 1 1 1
Total Metered Customers 71,911 73,760 74,233 74,707
Unmetered Customers
# # # #
PR01 196 28 14 -
PR02 812 337 169 -
PR03 870 124 62 -
PR04 149 47 24 -
PR05 199 117 59 -
Total Unmetered Customers 2,226 653 327 0
Projected Unmetered Use
Monthly CCF per Account CCF CCF CCF CCF
PR01 20 47,426 6,775 3,388 -
PR02 24 237,545 98,587 49,293 -
PR03 31 322,969 46,032 23,016 -
PR04 34 59,911 18,898 9,449 -
PR05 41 98,556 57,945 28,973 -
Total Unmetered 766,407 228,238 114,119 0
System Totals
Total Accounts (#) 74,137 74,413 74,560 74,707
Growth (%) 0.41% 0.37% 0.20% 0.20%
Annual metered use (CCF) per meter 288 279 277.0 277.0
Annual production (CCF) per account 309 298 299 299
Billed, Metered Consumption (CCF) 20,697,851 20,568,355 20,562,541 20,693,839 Total Estimated Consumption (CCF) 21,464,258 20,796,593 20,676,660 20,693,839 Total Water Production (CCF) 22,916,498 22,203,522 22,277,633 22,328,428 #19..
- 599 -
Table 7 Draft
City of Modesto
Water Rate Study
Meter Equivalent Units
Scenario 3 - Full Capital, No Debt
Meter Size Services
Meter
Equivalent
Ratio**
Meter Equivalent
Units
Annual Meter
Equivalent Units
5/8" 87 1.0 87.0 1,044.0
3/4" 13,459 1.0 13,459.0 161,508.0
1" 57,153 1.7 95,255.0 1,143,060.0

1.5" 1,168 3.3 3,893.3 46,720.0
2" 2,176 5.3 11,605.3 139,264.0
3" 158 11.7 1,843.3 22,120.0
4" 289 21.0 6,069.0 72,828.0
6" 141 43.3 6,110.0 73,320.0
8" 64 80.0 5,120.0 61,440.0
10" 11 126.7 1,393.3 16,720.0
12" 1 166.7 166.7 2,000.0
Total 74,707.0 145,002.0 1,740,024.0
* Customer data as of June 2022 provided by staff
** Capacity factors based on AWWA operating capacity standards by meter size #19..
- 600 -
Table 8 Draft
City of Modesto
Water Rate Study
Functional Allocation
Scenario 3 - Full Capital, No Debt
Functional Allocation Amount
Offsetting
Revenue
Allocation
Amount Customer Capacity All Volume Total
Administration $7,550,855 $0 $7,550,855 30% 70% 100%
Source of Supply $9,839,635 $0 $9,839,635 10% 90% 100%
Water Demand $24,584,204 $0 $24,584,204 100% 100%
Customer Accounts $6,831,266 $0 $6,831,266 100% 100%
Water System $11,638,388 $0 $11,638,388 50% 50% 100%
Debt Service $12,545,740 $0 $12,545,740 100% 100%
Capital $36,978,922 $330,328 $36,648,594 50% 50% 100%
Functional Allocation $ $109,969,011 $330,328 $109,638,683 $9,096,523 $42,958,793 $57,583,367 $109,638,683 Functional Allocation % 8.30% 39.18% 52.52% 100%
Revenue Requirement $6,985,150 $32,973,272 $44,200,007 $84,158,429 #19..
- 601 -
Table 9 Draft
City of Modesto
Water Rate Study
Rate Derivation
Scenario 3 - Full Capital, No Debt
Allocation Units Customer Capacity All Volume
Unit of Measure # EDU CCF
Allocation Units 894,714 1,740,024 20,693,839
Revenue Requirement $6,985,150 $32,973,272 $44,200,007
Unit Cost ($/Unit) $7.81 $18.95 $2.14
Monthly Fixed
Charge
Calculation Capacity Factor**
Monthly
Customer
Component
Monthly Capacity
Component
Monthly Fixed
Charge
5/8" 1.00 $7.81 $18.95 $26.76
3/4" 1.00 $7.81 $18.95 $26.76
1" 1.67 $7.81 $31.58 $39.40

1.5" 3.33 $7.81 $63.17 $70.98
2" 5.33 $7.81 $101.07 $108.88
3" 11.67 $7.81 $221.08 $228.90
4" 21.00 $7.81 $397.95 $405.76
6" 43.33 $7.81 $821.17 $828.98
8" 80.00 $7.81 $1,516.00 $1,523.81
10" 126.67 $7.81 $2,400.33 $2,408.15
12" 166.67 $7.81 $3,158.33 $3,166.15
#19..
- 602 -
Table 10
City of Modesto
Water Rate Study
Drought Rate Derivation
Scenario 3 - Full Capital, No Debt
Drought Rate Calculation Units Amount
Projected volume CCF 20,693,839
Drought reduction % 15%
Drought volume CCF 17,589,763
Volume reduction CCF 3,104,076
Variable Cost $/CCF $0.14
Variable cost reduction $ $434,571
Projected revenue requirement $ $44,200,007
Drought revenue requirement $ $43,765,436
Drought Rate $/CCF $2.49
#19..
- 603 -
Rate Increase Date
Effective date of
10/1/2021, approved on
4/6/2021; deferred to
FY22 due to COVID-19
economic impacts) No PROP 218
November 1st,
2023 January 1st, 2025
January 1st,
2026
January 1st,
2027
January 1st,
2028
Rate Increase 2.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Actual (12/13/22) Budget Projected Projected Projected Projected Projected 2022 2023 2024 2025 2026 2027 2028
No PROP 218 (deferred
from FY21) No PROP 218

REVENUES
Charges for Services 79,318,075 82,110,000 81,232,793 81,232,793 81,232,793 81,232,793 81,232,793 Misc Revenue 135,665 - - - - - -
Refunds, Damages, and Cost Recovery/ Other (4,141,774) 10,000 11,500 11,730 11,965 12,204 12,448 Water Fund Development Fees 1,194,261 1,220,500 1,244,910 1,269,808 1,295,204 1,321,108 1,347,531 Interest Income 971,868 500,000 500,000 464,655 434,746 429,978 367,618 Legal Settlement 1,005,890
Rental Income 42,787 42,000 42,000 42,840 43,697 44,571 45,462 Service credits 3,405,150 3,062,214 3,105,221 3,167,325 3,230,672 3,295,285 3,361,191 Sale of Fixed Asset 14,068 - - - - - -
Project Revenue - - - - - - -
Utility Assistance Fee 138,725 200,902 254,100 - - - -
GF Transfer Parks P&I (paid off in FY19) - - - - - - -
Misc Transfers In - - - - - - -
Repayment of Carpenter Road Landfill mitigation
loan - Advance 16A/B/C 658,001 707,421 707,421 707,421 707,421 707,421 707,421 GROSS OPERATING REVENUES 82,742,716 87,853,037 87,097,945 86,896,573 86,956,498 87,043,360 87,074,464

OPERATING EXPENSES
12460 FIN Cashiering 680,347 845,352 835,287 877,051 920,904 966,949 1,015,297 12461 FIN City Services for StanRTA 29,128 - - - - - -
12470 FIN Utilities & Collections 2,098,214 2,499,546 2,411,368 2,531,936 2,658,533 2,791,460 2,931,033 12475 FIN Utility Assistance Programs 920,434 1,119,827 2,286,900 2,401,245 2,521,307 2,647,373 2,779,741 12480 FIN Customer Service Administration - - - - - - - 41010 UPP Administration 775,145 1,167,848 1,154,259 1,211,972 1,272,571 1,336,199 1,403,009 41320 UPP Utility Billing and Collections - - - - - - - 41410 UPP Water General 314,169 410,902 425,795 447,085 469,439 492,911 517,556 41420 UPP Water Billing & Collections 184,034 176,311 223,954 235,152 246,909 259,255 272,217 42024 UTL Water Engineering Design 887,433 1,122,154 1,119,841 1,175,833 1,234,625 1,296,356 1,361,174 42026 UTL Wastewater Engineering Design - - - - - - -
42100 UPP Water PCE Litigation - - - - - - -
42200 UPP Water Zone1 Revenue - - - - - - -
43010 UPP Ground Water Management Plan 60,473 115,141 61,438 64,510 67,735 71,122 74,678 43020 UPP Water System Analysis 74,466 220,977 191,680 201,264 211,327 221,894 232,988 43030 UPP Urban Water Management Plan 21,334 46,705 32,502 34,127 35,833 37,625 39,506 43040 UPP Water Quality Study 222 86,457 81,917 86,013 90,313 94,829 99,571 43060 UPP Capital Planning 505,413 801,938 800,160 840,168 882,176 926,285 972,599 43070 UPP Water Rate Analysis 8,514 122,251 4,905 5,150 5,408 5,678 5,962 43080 UPP Sphere of Influence 52 35,962 34,933 36,680 38,514 40,439 42,461 45010 UPP Water Services Administration 1,775,059 2,192,418 2,233,552 2,345,230 2,462,491 2,585,616 2,714,896 45020 UPP Systems Maintenance 2,663,103 3,120,442 3,445,734 3,618,021 3,798,922 3,988,868 4,188,311 45040 UPP Construction 5,824,728 6,233,954 6,893,861 7,238,554 7,600,482 7,980,506 8,379,531 45050 UPP Wells & Tanks 7,959,001 8,654,114 8,842,192 9,284,302 9,748,517 10,235,943 10,747,740 45055 UPP Water Quality 2,473,750 2,908,597 3,081,081 3,235,135 3,396,892 3,566,736 3,745,073 45060 UPP Service & Meters 3,727,834 2,489,378 2,710,826 2,846,367 2,988,686 3,138,120 3,295,026 45065 UPP Water Conservation 1,427,206 1,580,898 1,914,878 2,010,622 2,111,153 2,216,711 2,327,546 45070 UPP MID Surface Water T & DA 11,597,093 17,120,214 17,135,229 17,991,990 18,891,590 19,836,169 20,827,978 Storm Drain for MID - - - - - - 0
55090 PW Water Wells and T - - - - - - -
55110 PW - Water Services Meters (129,160) - - - - - -
UPP - Well Field Phase II B Multyr- 100610 - - - - - - - UPP - Well Field Management Project - 100817 - - - - - - - UPP - Groundwater Sub-Basin Study - 100818 - - - - - - - Non-capital projects (FY23/24 is Billing Software) 2,013,764 684,000 1,625,000 UPP - Prop 1 Groundwater Uranium Study - 101011 - - - - - - UTL - TCP Litigation - 101303
UTL - Water - Grant Research & Writing - 101452 150,000 UTL - Groundwater Well Strategy Plan - 101456 126,125
SUB-TOTAL OPERATING EXPENSES 46,020,915 53,902,351 57,547,292 58,718,407 61,654,327 64,737,043 67,973,895

TRANSFERS OUT
Transfer Out $2.3M Loan to Carpenter Road Landfill - - - - - - - City of Modesto - Water Fund Proforma
#19..
- 604 -
Rate Increase Date
Effective date of
10/1/2021, approved on
4/6/2021; deferred to
FY22 due to COVID-19
economic impacts) No PROP 218
November 1st,
2023 January 1st, 2025
January 1st,
2026
January 1st,
2027
January 1st,
2028
Rate Increase 2.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Actual (12/13/22) Budget Projected Projected Projected Projected Projected 2022 2023 2024 2025 2026 2027 2028
No PROP 218 (deferred
from FY21) No PROP 218
City of Modesto - Water Fund Proforma
Transfer Out to Fund 5230 for Budget Software and
Oracle Update 5,546 - - - - - -
Transfer Out additional $900K Loan to Carpenter
Road Landfill - - - - - - -
Transfer Out additional 1.54M Loan to Carpenter
Road Landfill - - - - - - -
Transfer Out to Project 101223 for TrackIt Software
(fund 1800) 0 - - - -
Transfer Out to Project 101209 South MLK S&R
Water Mains (fund 3170) 37 - - - - - -
Transfer Out to IT (5230) for DocuSign/Hyland
software - - - - - - -
Transfer Out to Fund 5350-5390 for FMLA Reimbursement - - - - - - - Transfer Out to Water Grants - Prop 1 - GSP (101131) - - - - - - - Transfer Into Fund 4140 - Match Funding 104,034 46,723 - - - - - Transfer Into 4210 - WasterWater for Join Project
(Water and Sewer Mains 101302,101032) (342,491) - - - - - - UAL 115 Trust and OPEB Trust transfers to 5510-
EBF 191,783 - - - - - -
Storm Drain Annual Transfer-out (rockwell rej) 700,000 700,000 700,000 700,000 700,000 700,000 700,000 JPA Building svs Annual Transfer-out 65,000 65,000 65,000 65,000 65,000 65,000 65,000 TOTAL OPERATING EXPENSES 46,744,824 54,714,074 58,312,292 59,483,407 62,419,327 65,502,043 68,738,895 NET OPERATING REVENUES 35,997,892 33,138,963 28,785,653 27,413,166 24,537,172 21,541,317 18,335,569

TOTAL DEBT SERVICE
55140-54104 MID T & DA - 1998D (2013G) 5,460,520 5,155,541 4,367,900 - - - - 55140-54103 MID T & DA - 2007F 4,461,194 4,257,700 4,032,800 8,409,205 8,409,205 8,409,206 8,409,207 4130 2008 Water Rev Lease Bond 2,138,850 2,164,623 3,546,482 4,240,014 4,240,014 4,240,014 4,240,014 55060 CA DWR (Del Este) - - - - - - -
4140-12183 ARRA funding CDPH 37,343 46,723 38,237 36,600 36,600 36,600 36,600 Total Debt Service 12,097,907 11,624,587 11,985,419 12,685,819 12,685,819 12,685,820 12,685,821

DEBT SERVICE COVERAGE
(Net operating Revenues / Total Debt Service ) 2.98 2.85 2.40 2.16 1.93 1.70 1.45 Debt to Operating Revenues
Days Cash on Hand (covers only operating expense)

RETAINED EARNINGS CALCULATION
Beginning Unrestricted Retained Earnings 105,539,951 121,327,344 113,520,220 105,495,454 98,705,001 90,721,354 78,091,851 2007 Bond Collateral Refund - - - - - - -
Return of Cash Collateral - - - - - - -
Realase of Restricted Cash with Fiscal Agent - - - - - - - 1997 Bond Retired FY11 - - - - - - -
Net Change in Retained Earnings 23,899,985 21,514,376 16,800,234 14,727,347 11,851,352 8,855,497 5,649,748 PCE Litigation expenses - - - - - - -
CAFR Adjustments - - - - - - -
Pay as you go CIP (8,112,592) (29,321,500) (24,825,000) (21,517,800) (19,835,000) (21,485,000) (22,715,000) Ending Retained Earnings 121,327,344 113,520,220 105,495,454 98,705,001 90,721,354 78,091,851 61,026,599 Target Cash at 25% of Operating Costs 11,686,206 13,678,519 14,578,073 14,870,852 15,604,832 16,375,511 17,184,724 #19..
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CITY OF MODESTO

COUNCIL AGENDA REPORT
DATE OF MEETING:

June 27, 2023
Date: May 2, 2023
TO: Mayor and City Council
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Utility Billing Assistance Program Funding Update and Discount Programs for Auto-Pay and Paperless Billing Enrollment
CONTACT: Jeni Martin, Revenue Collection and Compliance Manager, [email protected], 209-571-5892
DESCRIPTION:

Consider accepting an update on available funding for the Utility Billing Assistance Program (UBAP) with an increase to the monthly discount amount; and approving two new Utility Billing discount programs for customers who enroll in Auto-Pay and Paperless Billing for their City of Modesto Utility Bill. (Funding Source: Water and Wastewater Funds) STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

Utility Billing Assistance Program Funding Update
The Utility Billing Division of the Finance Department offers an assistance program for lowincome utility customers. If a customer is enrolled in another public assistance program including CARES, CalWorks, CalFresh, General Assistance, MediCal, WIC, SSP, or SSI, and are a responsible party of the City of Modesto utility bill, they will be eligible to receive the Utility Billing Assistance discount of $35 on their monthly utility bill. Customers are able to apply online, in our office, or with Central Valley Opportunity Center by completing the application and providing proof of enrollment in one of the above programs.

Our utility customers are still recovering from the effects of the COVID-19 pandemic. Those hardest hit have been our low-income customers, many of which fall within the poverty levels of Stanislaus County with annual incomes averaging around $44,400 for a household of four. #20..
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City Council, June 27, 2023
Utility Billing Assistance Program Funding Update and
Discount Programs for Auto-Pay and Paperless Billing Enrollment

The average City of Modesto utility bill for water, sewer, and garbage was $143 per month in fiscal year 2020. The average City of Modesto utility bill now is around $163 per month, an increase of $20 per month within 2-3 years.

In December 2019, prior to the COVID-19 pandemic, there were 692 customers enrolled in our assistance program. As of December 2022, we have 3,005 customers enrolled. Within three years, 2,313 new customers have enrolled in the program. To put this into perspective, from the start of our utility assistance programs in 2007, the largest number of customers enrolled over the life of the program was 516 customers in December 2018.

The program is funded by revenues collected for miscellaneous delinquent fees and penalties which are designated for the utility assistance program and water utility-related rebate programs. Projected revenues for miscellaneous delinquent fees and penalties for fiscal year 2023 are $2,600,000. Over the last three fiscal years expenditures for the program have been approximately $736,000 per fiscal year. This leaves about $1,864,000 in available funds for the utility assistance and water utility-related rebate programs each fiscal year, allowing significant room for growth.

Discount Programs for Auto-Pay and Paperless Billing Enrollment The Utility Billing Division provides customers with optional enrollment in convenient features for their utility bill such as Auto-Pay and Paperless Billing. A customer enrolled in Auto-Pay agrees to have the balance of their utility account automatically drafted each month on the due date of their bill. The customer has the option to have the funds drafted from a checking account, savings account, or a credit card. When a customer enrolls in Paperless Billing, they agree to receive their utility bill via email rather than having a paper bill mailed to them. Utilizing the AutoPay and Paperless Billing feature provides benefit both to the City and to the customer.

When a customer is enrolled in Auto-Pay, they are relieved of the burden of coming into the office, going online, or paying their bill by phone each month. Once enrolled, the customer’s bill is automatically paid each month when the City drafts the funds from their bank account or #20..
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City Council, June 27, 2023
Utility Billing Assistance Program Funding Update and
Discount Programs for Auto-Pay and Paperless Billing Enrollment

credit card. The City benefits by receiving on-time and guaranteed payments on customer accounts enrolled in Auto-Pay. The City bills approximately 76,000 customer per month for water, sewer, garbage and storm drain. As of March 2023, there were 16,188 customers enrolled in Auto-Pay. The number of return payments from Auto-Pay for reasons such as insufficient funds is less than 1% of all enrolled customers.

When a customer is enrolled in Paperless Billing, they receive a convenient email each month for their City of Modesto utility bill. The email provides the amount due on the bill and a link to our online portal to view the details of their charges and pay the bill using electronic check or a credit card. The cost savings on printing and mailing costs is approximately $0.76 per monthly bill for customers enrolled in Paperless Billing. As of April 2023, there were 13,934 customers enrolled in Paperless Billing. This provides an annual cost savings to the City of $127,078.

Paperless Billing Enrollment* Cost per Bill Annual Cost Savings 13,934 $0.76 $127,078
*as of April 2023
DISCUSSION:

Utility Billing Assistance Program Funding Update
With the average City of Modesto utility bill being $163 per month, our current discount of $35 helps to reduce the monthly bill to $128.

As of December 2022, we have 3,005 customers enrolled in the program. We estimate this number could grow to 3,529 customers enrolled by the end of fiscal year 2023 at an annual cost of $1,482,180. This leaves approximately $1,127,820 of available funding for the program in this fiscal year, with room for growth in the number of enrolled customers and in the amount of the monthly discount.

Program Costs & Funding Fiscal Year 23
Estimated Customer Enrollment 3,529
Monthly Discount Amount $ 35
Monthly Cost $ 123,515
Annual Cost $ 1,482,180
FY Funding Available $ 2,600,000
As the cost of utility services continues to rise, an increase to the monthly discount amount from $35 per month to $45 will provide more assistance to qualified low-income customers. A discount of $45 per month is substantial enough to incentivize more customers to apply who need help. The table below provides additional detail on how an increase in enrollment and the monthly discount is sustainable with current available funding. As utility costs continue to rise, the Finance Department will continue to evaluate the discount amount to determine if available funding allows for future increases.

Program Costs & Funding Fiscal Year 2024
Estimated Customer Enrollment 4,235
Monthly Discount Amount $ 45
#20..
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City Council, June 27, 2023
Utility Billing Assistance Program Funding Update and
Discount Programs for Auto-Pay and Paperless Billing Enrollment

Monthly Cost $ 190,575
Annual Cost $ 2,286,900
FY Funding Available $ 2,600,000
Discount Programs for Auto-Pay and Paperless Billing Enrollment Based on cost saving benefits to both the customer and to the City, the Utility Billing Division is seeking to increase enrollment in Auto-Pay and Paperless Billing. One way to do this is by introducing a one-time discount of $10.00 for all customers who enroll in one of these programs.

The discount will be applied within the next two billing periods after enrollment is complete. The customer will be required to agree to keep the Auto-Pay or Paperless Billing feature active for a minimum of six months. Customers already enrolled in Auto-Pay or Paperless Billing would not be eligible for this one-time discount. If approved, the programs would begin on July 1, 2023.

The Utility Billing Division will review the programs after the first six months to determine if any changes should be applied based on enrollment results.

The discount programs would be funded with miscellaneous late charge and penalty revenues.

In Fiscal Year (FY) 23, there are $2,600,000 budgeted for projected miscellaneous late charge and penalty revenues. Of this amount, approximately $1,482,180 is expected to be utilized for the Utility Billing Assistance Program funding. This leaves $1,117,820 available for these discount programs. Based on current enrollment in each program with a robust estimated increase in enrollment of 10% in the first year, the annual cost for the discount programs would be approximately $30,000. Staff does not expect enrollment to increase more than 10% in future fiscal years but will monitor. No revenue from rates will be used to pay for the discounts.

Current Enrollment Estimated increase
(10%)
Annual Program Cost
Auto-Pay Customers 16,188 1,618 $16,188
Paperless Billing
Customers
13,934 1,393 $13,930
Total Annual Cost $30,118
The City will use all available resources, including community partnerships with local charities, school districts, non-profits, and community outreach events to advertise these programs. In addition, the programs will be highlighted in a bill insert with the utility bill, in our Utility Billing lobby, through social media, and the City’s website.

FISCAL IMPACT:

The annual estimated cost for the Utility Billing Assistance Program for fiscal year 2023 is $1,482,180 with remaining available funding of $1,117,820. The annual estimated cost for fiscal year 2024 with an increase in the customers enrolled and in the monthly discount amount from $35 per month to $45 per month is $2,286,900 with remaining available funding of $313,100.

This item is funded by the Water Fund, through revenues collected from miscellaneous delinquent fees and penalties. Revenue from rates paid by customers is not used to pay for this program.
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City Council, June 27, 2023
Utility Billing Assistance Program Funding Update and
Discount Programs for Auto-Pay and Paperless Billing Enrollment

Program Costs & Funding Fiscal Year 2024
Estimated Customer Enrollment 4,235
Monthly Discount Amount $ 45
Monthly Cost $ 190,575
Annual Cost $ 2,286,900
FY Funding Available $ 2,600,000
The annual estimated cost for Auto-Pay and Paperless Billing Enrollment discount programs for fiscal year 2024 is $30,118. This item is funded by the Water and Wastewater Funds through revenues collected from miscellaneous late charges and penalties. Revenue from rates paid by customers are not used to pay for these programs.

COMMITTEE RECOMMENDATION:

The Utility Billing Assistance Program increase was considered by the Economic Development Committee on May 1, 2023, and the Discount Programs for Auto-Pay and Paperless Billing Enrollment was considered by the Finance Committee on May 22, 2023 and both items were recommended forwarding to Council for approval.

RECOMMENDED COUNCIL ACTION:

Staff Recommendations:

Resolution approving an update on available funding for the Utility Billing Assistance Program (UBAP) with an increase to the monthly discount amount from $35 to $45.

Resolution approving two new Utility Billing discount programs for customers who enroll in AutoPay and Paperless Billing for their City of Modesto Utility Bill.

Approved by:

DeAnna Christensen, Director of Finance
Joseph P. Lopez, City Manager
Attachments:

1. Resolution for Utility Billing Assistance Program Funding Update

2. Resolution for Discount Programs for Auto-Pay and Paperless Billing Enrollment #20..
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MODESTO CITY COUNCIL
RESOLUTION NO. 2023-

RESOLUTION APPROVING AN UPDATE ON AVAILABLE FUNDING FOR THE

UTILITY BILLING ASSISTANCE PROGRAM (UBAP) WITH AN INCREASE TO THE MONTHLY DISCOUNT AMOUNT FROM $35 TO $45
WHEREAS, the Utility Billing Division of the Finance Department offers a Utility Billing Assistance discount of $35 for low-income utility customers who are enrolled in another public assistance program including CARES, CalWorks, CalFresh, General Assistance, MediCal, WIC, SSP, or SSI, and are a responsible party of the City of Modesto utility bill; and
WHEREAS, customers are able to apply online, in our office, or with Central Valley Opportunity Center by completing the application and providing proof of enrollment in one of the above programs; and
WHEREAS, the assistance program is funded by revenues collected for miscellaneous delinquent fees and penalties which are designated for the utility assistance program and water utility-related rebate programs; and
WHEREAS, revenue from rates paid by customers is not used to pay for this program; and
WHEREAS, the cost of utility services continues to rise, an increase to the monthly discount amount from $35 per month to $45 is substantial enough to incentivize more customers to apply and will provide more assistance to qualified low-income customers; and WHEREAS, an increase in enrollment and the monthly discount is sustainable with current available funding; and
WHEREAS, as utility costs continue to rise, the Finance Department will continue to evaluate the discount amount to determine if available funding allows for future increases; and WHEREAS, the annual estimated cost for the Utility Billing Assistance Program for #20..
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fiscal year 2023 is $1,482,180 with remaining available funding of $1,117,820; and WHEREAS, the annual estimated cost for fiscal year 2024 with an increase in the customers enrolled and in the monthly discount amount from $35 per month to $45 per month is $2,286,900 with remaining available funding of $313,100.

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Modesto that it hereby approves an update on available funding for the Utility Billing Assistance Program (UBAP) with an increase to the monthly discount amount from $35 to $45. #20..
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The foregoing resolution was considered at a regular meeting of the Council of the City of Modesto held on the 27th day of June 2023, by Councilmember _______________, who moved its adoption, which motion being duly seconded by Councilmember ________________, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmember:

NOES: Councilmember:

ABSENT: Councilmember:

ATTEST: _____________________________
DIANE NAYARES-PEREZ, CMC, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: ____________________________________
JOSE M. SANCHEZ, City Attorney
#20..
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MODESTO CITY COUNCIL
RESOLUTION NO. 2023-

RESOLUTION APPROVING TWO NEW UTILITY BILLING DISCOUNT

PROGRAMS FOR CUSTOMERS WHO ENROLL IN AUTO-PAY AND PAPERLESS

BILLING FOR THEIR CITY OF MODESTO UTILITY BILL
WHEREAS, the Utility Billing Division provides customers with optional enrollment in convenient features for their utility bill such as Auto-Pay and Paperless Billing; and WHEREAS, a customer enrolled in Auto-Pay agrees to have the balance of their utility account automatically drafted each month on the due date of their bill with the option to have the funds drafted from a checking account, savings account, or a credit card; and WHEREAS, when a customer enrolls in Paperless Billing, they agree to receive their utility bill via email rather than having a paper bill mailed to them; and WHEREAS, utilizing the Auto-Pay and Paperless Billing feature provides benefit both to the City and to the customer; and
WHEREAS, the annual savings to the City on printing and mailing costs for customers enrolled in Paperless Billing is $127,078; and WHEREAS, based on cost saving benefits both to the customer and to the City, the Utility Billing Division is seeking to increase enrollment in Auto-Pay and Paperless Billing by introducing a one-time discount of $10.00 for all customers who enroll in one of these programs; and
WHEREAS, the discount will be applied within the next two billing periods after enrollment is complete and the customer will be required to agree to keep the Auto-Pay or Paperless Billing feature active for a minimum of six months; and WHEREAS, the programs would begin on July 1, 2023, and the Utility Billing Division will review the programs after the first six months to determine if any changes should be applied based on enrollment results; and
#20..
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WHEREAS, customers already enrolled in Auto-Pay or Paperless Billing would not be eligible for this one-time discount; and
WHEREAS, the discount programs would be funded with miscellaneous late charge and penalty revenues with no revenue from rates used to pay for the discounts; and WHEREAS, based on current enrollment in each program with a robust estimated increase in enrollment of 10% in the first year, the annual cost for the discount programs would be approximately $30,000.

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Modesto that it hereby approves two new Utility Billing discount programs for customers who enroll in AutoPay and Paperless Billing for their City of Modesto Utility Bill. #20..
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The foregoing resolution was considered at a regular meeting of the Council of the City of Modesto held on the 27th day of June 2023, by Councilmember _______________, who moved its adoption, which motion being duly seconded by Councilmember ________________, was upon roll call carried and the resolution adopted by the following vote:

AYES: Councilmember:

NOES: Councilmember:

ABSENT: Councilmember:

ATTEST: _____________________________
DIANE NAYARES-PEREZ, CMC, City Clerk
(SEAL)
APPROVED AS TO FORM:

BY: ____________________________________
JOSE M. SANCHEZ, City Attorney
#20..
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CITY OF MODESTO

COUNCIL AGENDA REPORT
DATE OF MEETING:

June 27, 2023
Date: June 19, 2023
TO: Mayor and City Council
THROUGH: Joseph P. Lopez, City Manager
FROM: Christina Alger, Director of Human Resources
SUBJECT: Successor Memorandum of Understanding with Modesto Police Officers Association (MPOA) and Salary and Benefit Changes for Unrepresented Sworn Police Management.

CONTACT: Christina Alger, Director of Human Resources
[email protected], 209-571-5126
DESCRIPTION:

Consider approving a successor Memorandum of Understanding (MOU) between the City of Modesto and Modesto City Police Officers Association (MPOA) for a term of July 1, 2023, to June 30, 2027; granting salary changes and benefit offerings to unrepresented sworn police management; and amending the Fiscal Year 2023-24 Operating Budget. (Fund: General Fund, Traffic Safety Fund, American Rescue Plan Act Fund)
STRATEGIC PLAN ELEMENT:

This item supports the 2020-2025 Strategic Plan’s Service and Delivery Goals & Strategies - Building a High-Performing Organization by Attracting and Retaining High-Performance Employees.

BACKGROUND:

The Policing profession has become increasingly difficult in recent years. Police Officers are consistently under scrutiny regarding their ability to perform their duties and must balance the perception of the public. Police reform has been a subject of many discussions throughout the United States, exploring better ways to deliver public safety. This has led to a reduction in those interested in entering the field.

The community relies on the services provided by our first responders. Reliability and sustainability are key in delivering quality service. With the shortage of qualified candidates in the policing profession, local government agencies are competing for the same talent. This has led to difficulties filling vacancies as well as losing talent to neighboring agencies. The City must position itself to be competitive within the labor market in order to be effective in service delivery. Low staffing levels lead to long wait times for calls for service from community #21..
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City Council, June 27, 2023
Successor Memorandum of Understanding with Modesto Police Officers Association (MPOA) and Salary and Benefit Changes for Unrepresented Sworn Police Management.