August 22, 2023
Item No. SS2
2023 Water & Wastewater
Rate Study
Presentation
City Council
August 22, 2023
Presented by Mark Vukojevic, Utilities Director
Summar from May 11 and July 26tn
Finance Committee:
0 Water and wastewater is a 24/7 community service, asset, and commodity The systems operate as independent/segregated Enterprise Funds The balance between fixed and variable costs
Current and future capital improvement projects are necessary Operational & Capital costs continue to go up
- Buying water, construction, materials, equipment, insurance, conservation, regulatory compliance
Rates need to recover costs, especially with inflation
* Operations * Capital Improvements * Reserves/Emergencies Rate increases are needed to keep up with inflation
of
Maintain similar
rate structure —
(maintain simplified
customer
understanding)
P
o02
Develop a financial
plan that corrects
the structural
O.deficit; and
sufficiently funds
operations, capital
and reserves
UTILITIES DEPARTMENT 2023 Rate Studies
- I
�. moon* _
03 Move rates to
recover more fixed
business costs
SEW PORT
U � S
esc
Cq�I FO RN`P
Current Water Rates: >
• Monthly and Bimonthly Billing
• Fixed Charge and Use Charge
• Use Charge incentivizes conservation
$641month is the typical home water bill
Rate revenue: vs.
'--40 % Fixed Charges
r-60% Variable Charges
Business costs:
'--65 % Fixed Costs
35% Variable Costs
Goal: Gradually adjust revenue % to better match business costs
NEWPORT BEACH WATER DELIVERED IN ACRE FEET
19,000
18,000 O
17,000
16,000 0- O -
O
O
15,000 O
O
14,000 - O
13,000 -
12,000 -
11,000 -
10,000 -
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
UTILITIES DEPARTMENT
2023 Rate Studies
Current Revenues & Expenditures:
Water: -$1+mil Structural deficit
N$35million Revenues
-$36mil Expenses
* Water purchases
* Operations
* Capita
Escalation/Inflation Factors
>5% over next years
* Water purchases
* Contracts
* CIP, labor & materials
* Electricity & Equipment
* Insurance
$13 million
$17 million
$6 million
NEWPORT BEACH
Water System
3 02 202 6 4 2
MILES OF POTABLE Million gallons P R E S S U R E
WATER PIPELINE storage capacity R E D U C I TATIONS
269550
Service
connections
017
k 0 0 S T E R
PUMPS
UTILITIES DEPARTMENT 2023 Rate Studies
32112
iTRIBUTION
ALVES
NEWPORT BEACH
Aging Infrastructure
P.
-
-
-
A - V
Y,
00 UTILITIES DEPARTMENT jr 2023 Rote Studies 1%oor 8
NEWPORT BEACH
2019 Water Master Plan /
30-year Capital Improvements Plan
Increased capital Capital
projects: annual total:
ESCALATING 7
ANNUALLYlij? I L L I n
FACILITIES
PROJECTS
o �
0 0
Pressure reducing
stations projects
C2
UTILITIES DEPARTMENT 2023 Rate Studies
1%gor 9
Reserve Targets for Water:
Type
O&M Reserve*
Capital Reserve
Drought/
Stabilization
120 days of O&M $10.0/$11.5 Mil
75% of annual CIP
30% water use reduction
* this reserve is also an
emergency water purchase
reserve
$5.6/$6.8 Mil
$3.0/$3.3 Mil
$18.6/$21.6 Mil
Water Reserve Comparisons
With Rate Increases:
Target $18.6 M $19.3 M $20.0 M
Proposed $17.9 M
Status Quo $17.9 M
$17.6 M
$15.5 M
$18.9 M
$11.4 M
1w
$20.8 M $21.6 M
$19.8 M
$5.4 M
Estimated 2028 Rate Revenue = 48% fixed & 52% variable
$19.9 M
-$2.4 M
Proposed Water Financial Plan:
Revenues $34.8 M $38.3 M $41.7 M
$43.0 M $44.2 M
Water & Ops $30.0 M $30.7 M $32.1 M $33.4 M $34.9 M
Expenses
Infrastructure $6.2 M $7.9 M $8.3 M $8.7 M $9.1 M
Expenses
Total $36.2 M $38.6 M $40.4 M $42.1 M $44.0 M
Expenses
Ending $17.9 M $17.6 M $18.9 M $19.8 M $20.0 M
Reserves
Typical Water Customer Impacts:
monthly increase
2024 - $4.77 (previously approved rate study)
($1.87 fixed plus $2.90 variable)
2025 - $5.50 Year 2, new rate study
($4.50 fixed plus $1.00 variable)
2026 - $6.00 Year 3, new rate study
($5.00 fixed plus $1.00 variable)
2027 - $6.00 Year 4, new rate study
($5.00 fixed plus $1.00 variable)
2028 - $6.00 Year 5, new rate study
($5.00 fixed plus $1.00 variable)
Proposed Water Rates
$64/month is the typical home water bill
Monthly Fixed
Charge
5/8" Meter *
$25.22
Approved
2023
$25.22
+
Approved
2024
$27.09
$38.70
Proposed
2025
$ 31.59
= $63.92
Proposed Proposed
2026 2027
$ 36.59 $41.59
Proposed
2028
$46.59
Use Charge
$3.87
$4.16
$4.26
$4.36
$4.46
$4.56
Net Increase
(most common)
* 5/8" meters represent
$4.44
64% of
$4.77
accounts
$E.50
$L.00
$6.00
6.00 /Q0
Proposed Water Rates: :>
Monthly Fixed Approved Approved Proposed Proposed Proposed Proposed Charge 2023 2024 2025 2026 2027 2028
518" 25.22 27.09 31.59 36.59 41.59 46.59
1" 39.09 41.99 50.07 58.31 66.53 74.75
1-1/2" 73.69 79.15 96.28 112.60 128.88 145.17
2" 115.23 123.76 151.73 177.74 203.71 229.66
3" 305.61 328.23 405.88 476.34 546.65 616.92
4" 523.69 562.45 697.00 818.37 939.48 1,060.51
6" 1,112.15 1,194.45 1,482.55 1,741.30 1,999.50 2,257.50 8" 1,942.91 2,086.69 2,591.56 3,044.27 3,495.99 3,947.37 Use Charge $3.87 $4.16 $4.26 $4.36 $4.46 $4.56
Net Increase
(most common) $4.44 $4.77 $5.50 $6.00 $6.00 $6.00
Current Wastewater Rates
• Monthly and Bimonthly Billing
• Fixed Charge and Use Charge
$141month is the typical home wastewater bill
Rate revenue: vs.
--'50 % Fixed Charges
-'50% Variable Charges
Business costs:
100 % Fixed Costs
Goal: Gradually adjust revenue % to better match business costs
Current Revenues & Expenditures:
Wastewater: -$1 mil Structural deficit
-$4.7mil Revenues
-$5.7mil Expenses
* Pump Stations
* Operations
* Capital
Escalation/Inflation Fartnr-;
- S % over next yea
* Contracts
* CIP, labor
* Equipmen-
* Insurance
$5.1 mil operations
$600k CI P
Wastewater Capital needs:
200+ miles of pipelines
25,000 Laterals
21 Pump Stations
$1.1 Million Annual
Escalating Investment
Reserve Targets for Wastewater
LTYp�
O&M Reserve
90 days of O&M
$1.2/1.5 Mil
Capital Reserve 1-Year of CIP $1.1/1.3 Mil
$2.3/2.8 Mil
Wastewater Reserve Comparisons
With Rate Increases:
�Ivw Ow M
Target $2.3 M $2.4 M $2.5 M $2.7 M
Proposed $800k $200k
Status Quo $500k -$1.2 Mil
$150k
-$3.3 Mil
$800k
-$5.6 Mil
Estimated 2028 Rate Revenue = 70% fixed & 30% variable
F020
L J
$2.8 Mil
$2.1 Mil
-$8.3 Mil
Proposed Wastewater Financial Plan
Revenues
$5.0 M $5.9 M $6.7 M $7.7 M $8.7 M
Operation $5.1 M $5.4 M $5.6 M $5.9 M $6.1 M
Expenses
Infrastructure $0.7 M $1.1 M $1.1 M $1.2 M $1.3 M
Expenses
Total $5.8 M $6.5 M $6.7 M $7.1 M $7.4 M
Expenses
Ending $0.8 M $0.2 M $0.2 M $0.8 M $2.1 M
Reserves
Wastewater Typical Customer Impacts:
monthly increase
• 2024 - $2.20 Year 1, new rate study
($2.00 fixed plus $0.20 variable)
• 2025 - $2.50 Year 2, new rate study
($2.30 fixed plus $0.20 variable)
• 2026 - $3.00 Year 3, new rate study
($2.80 fixed plus $0.20 variable)
• 2027 - $3.50 Year 4, new rate study
($3.30 fixed plus $0.20 variable)
• 2028 - $3.50 Year 5, new rate study
($3.50 fixed plus $0.20 variable)
Proposed Wastewater Rates
$141month is the typical home wastewater bill
$8.55
+
$5.10
= $13.65
Monthly Fixed
Charge
Existing
Proposed
2024
Proposed
2025
Proposed
2026
Proposed
2027
Proposed
2028
Up to 1" Meter *
$8.55
$10.55
$12.85
$15.65
$18.95
$22.25
Use Charge
$0.51
$0.53
$0.55
$0.57
$0.59
$0.61
Net Increase
(mostcommon)
Up to 1" meters
$Z.20 $2.50
represent 92% of accounts
3.00 3.50
3.50 ��
Proposed Wastewater Rates:
Monthly Fixed
Charge Existing 20 202 2027 2028
518" 8.55 10.55 12.85 15.65 18.95 22.25
1" 8.55 10.55 12.85 15.65 18.95 22.25
1-1/2" 9.41 15.82 19.27 23.48 28.42 33.38
2" 12.83 21.09 25.69 31.31 37.90 44.50
3" 14.54 26.37 32.12 39.13 47.37 55.63
4" 17.11 31.64 38.54 46.96 56.85 66.76
6" 19.25 36.91 44.96 54.79 66.32 77.88
8" 21.39 42.18 51.39 62.62 75.80 89.01
Use Charge $0.51 $0.53 $0.55 $0.57 $0.59 $0.61
Net Increase
(most common) $2.20 $2.50 $3.00 $3.50 $3.50
Recommendation
Review the Water and Wastewater Rate Study Information provided • Provide Input to Staff regarding the rate structure and proposed rates • Approve in concept the proposed rate structures
Direct staff return with the final studies and setting of the public hearing
Tentative Schedule:
• August 22, 2023, City Council Study Session
• Proposed Water and Sewer Rate Studies
• September 26t", City Council Meeting
• Approve Water & Wastewater Rate Study Reports
• Set Public Hearing for Rates Change for November 14tn • Authorize Mailed Public Notice (Prop 218 Compliance)
• Public Information and Outreach
• Public notices, direct mailings, utility bill messages & inserts, community meetings, City website
• November 141", Public Hearing to amend Rates
• November 281", 2nd Reading to amend Rates
• January 1st, 2024, Implement Water and Wastewater Rate Changes