Water and Wastewater Rate Study
Agenda Item 3.A
Nadia Feeser, Administrative Services Director
Benjamin A. Fine, Public Works Director/City Engineer
Clayton Tuckfield, Tuckfield & Associates
Meeting Date: August 3, 2023
Agenda
•Background
•Why are rates changing?
•Proposed Water Rates
•Proposed Wastewater Rates
•How do the Proposed Rate Changes Impact Me?
•How do the Proposed Rates Compare to Other
Communities?
•Timeline & Next Steps
•Council Direction
2 Background
•City engaged Tuckfield & Associates to conduct a comprehensive Water and Wastewater Rate Study (Study) •Study develops appropriate rates to support water and wastewater:
•operating expenses and capital project needs,
•meet reserve requirements at or greater than target levels, and •maintain debt service coverage ratios at or greater than the minimum required •Study is developed:
•based on cost of service principles and industry methods that result in fair and equitable rates for the users, •in accordance with Proposition 218, and
•in compliance with American Water Works Association (AWWA) and Water Environment Federation (WEF) methodologies of allocating costs 3 Why are rates changing?
1.Support for the sustainable enterprise systems’
financial plans for water and wastewater, including:
•increasing operating expenses and other capital improvement projects and
•ensuring adequate reserves
•ensuring adequate debt service coverage
2.Financial support for Central Coast Blue
4 Proposed
Rate
Increases
for
Sustainable
Water and
Wastewater
System
Enterprises
5 Meet increasing operating expense for
rising benefits, electricity, chemicals, and
purchased water
Provide for new capital improvement
projects for water and wastewater
Establish and maintain reserves
Ensure debt service coverage ratios meet or
exceed requirements
Central Coast Blue
•Regional Recycled Water Project
•Sustainable Water Supply
•Protects the Santa Maria Groundwater Basin (SMGB)
•Injection wells
•Supplement groundwater supply
•Create a seawater intrusion barrier
•Enhances local supply reliability
•Protects against droughts
•Diversifies water supply
6 Central Coast Blue
•City of Pismo Beach’s share of project is 39%
•Water Enterprise Fund’s share is 33% or $4.9 million for construction •pipelines and storage of recycled water
•Wastewater Enterprise Fund’s share is 67% or $7.1 million for construction •advance treatment, recycled water pump station, and injection wells •Grants – total assumed: $2.0 M for pre-construction, $48.9 M for construction •Awarded: Proposition 1 Planning Grant $2.0 M for pre-construction •Awarded: Federal Title XVI Water Reclamation & Reuse Grant $14.1 M •Awarded: Proposition 1 Integrated Regional Water Management $1.0 M •Will apply: California State Water Recycled Water Recycling Funding Program $15.0 M •Will apply: State Proposition 1 grant Water Board $8.0 M •Will apply: Federal Title XVI Water Reclamation & Reuse Grant $10.8 M 7 Proposed Water Rates
Study: Water Rate Methodology
9 Legal Requirements
Recognize Proposition
218, recent court
decisions, legislation,
and State Water
Resources Control
Board (SWRCB)
guidelines
Methodology and Best
Practices
Follow American Water
Works Association
(AWWA) methodology
•Allocate costs to Cost
Components of
Water Supply,
Delivery, Peaking,
Meters & Services,
Customer Billing and
Collecting
Rate Design
Rate Design
•Fixed Charges
recover Meters &
Services and
Customer Costs
•Variable Charges
recover Water
Supply, Delivery, and
Peaking Costs
Water Capital Improvement Projects
Project Title Fiscal Year(s)Estimated Cost
Central Coast Blue 2023-2026 $6,938,241
New Production Well 2023-2025 $2,500,000
Advanced Metering
Infrastructure
2024-2025 $2,500,000
Bello Reservoir Roof
Replacement
2024 $1,210,000
Charles Street Reservoir
Replacement
2023-2024 $1,803,500
Bello-Price/ Highway 1
Waterline Upgrade
2027 $1,913,400
10 Water Enterprise Fund Reserves – June 30, 2022
Reserve Type Reserve
Balance
Reserve
Target
Operating Fund Reserve $6,535,077 $1,597,000
Capital Replacement Reserve $325,000 $340,000
Construction Fund Reserve $4,261,854 n/a
Expansion Fund Reserve $994,609 n/a
Emergency Reserve $480,000 $345,000
Lopez Special Water Tax Fund Reserve $791,127 $791,127
Total $13,387,667 $3,073,127
11 Current and Proposed Water Rates
Proposed
Current Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Meter Size Water Meter Fixed Charge ($ per bi-month)
5/8"$38.24 $39.38 $40.60 $41.86 $43.16 $44.50
3/4" $38.24 $39.38 $40.61 $41.87 $43.17 $44.51
1"$58.36 $63.18 $65.15 $67.17 $69.26 $71.41
1.5"$108.01 $122.44 $126.24 $130.16 $134.20 $138.37
2"$168.72 $194.00 $200.02 $206.23 $212.63 $219.23
3"$340.10 $388.61 $400.66 $413.09 $425.90 $439.11
4"$521.67 $603.08 $621.78 $641.06 $660.94 $681.43
6"$1,219.31 $1,433.71 $1,478.16 $1,523.99 $1,571.24 $1,619.95 Variable Charge ($ per HCF)
Single Family
Tier 1 - 0 to 10 units $5.58 $6.02 $6.21 $6.41 $6.61 $6.82 Tier 2 - 11 to 16 units $6.36 $6.72 $6.94 $7.16 $7.39 $7.62 Tier 3 - 17 to 32 units $7.29 $8.14 $8.39 $8.66 $8.93 $9.21 Tier 4 - Over 32 units $9.76 $11.21 $11.56 $11.92 $12.29 $12.68 Multifamily $6.48 $6.79 $7.01 $7.23 $7.46 $7.70
Mobile Home $6.58 $7.79 $8.03 $8.28 $8.54 $8.81
Commercial [1]$8.07 $7.18 $7.40 $7.63 $7.87 $8.12
Irrigation [1]$7.14 $7.24 $7.47 $7.71 $7.95 $8.20
Construction $8.23 $6.58 $6.79 $7.01 $7.23 $7.46
[1] Includes Municipal customers.12
Proposed Wastewater Rates
Study: Wastewater Rate Methodology
14 Methodology and Best
Practices
Follow Water Environment
Federation (WEF)
methodology, same as
currently used
•Allocates costs to Cost
Components of Flow, Bio-
chemical Oxygen Demand
(BOD), Suspended Solids
(SS), Capacity, and
Customer
•BOD and SS are measures
of wastewater strength
Fixed Charges
Recovers Capacity and
Customer Costs
Variable Charges
Recovers Flow, BOD, and
SS through a charge
based on water
consumption
Wastewater Capital Improvement Projects
Project Title Fiscal Year(s)Estimated Cost
Central Coast Blue 2023-2026 $14,505,490
Advanced Metering
Infrastructure
2024-2025 $2,500,000
Wastewater Maintenance
and Improvement
2023-2024 $2,083,309
Harloe Lift Station Bluff
Stabilization
2026 $1,030,000
15 Wastewater Enterprise Fund Reserves – June 30, 2022
16 Reserve Type Reserve Balance Reserve Target
Operating Fund Reserve $1,782,000 $1,782,000
Capital Replacement Reserve $1,250,000 $1,440,000
Construction Fund Reserve $11,303,528 n/a
Expansion Fund Reserve $1,594,474 n/a
Emergency Reserve $450,000 $910,000
SRF Loan Reserve $624,000 $624,000
Total $17,004,002 $4,756,000
Current and Proposed Wastewater Rates
17 Fixed Charges by Meter Size
Current Proposed
Meter Size Jan 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 inches Fixed Charge ($ per bi-month)
5/8"$31.22 $32.28 $34.21 $36.30 $38.51 $40.86
3/4" 44.95 46.23 49.00 51.99 55.16 58.53
1"72.40 74.15 78.58 83.37 88.46 93.86
1.5"141.03 143.92 152.53 161.83 171.71 182.18
2"223.38 227.66 241.26 255.98 271.59 288.16
3"442.99 450.95 477.89 507.04 537.97 570.79
4"690.04 702.15 744.10 789.49 837.65 888.75
6"$1,650.82 $1,679.05 $1,779.36 $1,887.90 $2,003.06 $2,125.25 Residential Fixed Consumption Charges
Current Proposed
Classification Jan 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Fixed Charge ($ per bi-month)
Single-family [1]$74.01 $77.27 $82.02 $87.02 $92.33 $97.96 Apartments/Multifamily [1] [2]46.72 48.78 51.78 54.94 58.29 61.85 Mobile Homes [1] [2]$32.38 $33.80 $35.88 $38.07 $40.39 $42.85
Current and Proposed Wastewater Rates
18 Variable Rates
Current Proposed
Classification Jan 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan 1, 2027 Jan 1, 2028 Variable Charge ($ per HCF)
Commercial $9.06 $9.83 $10.43 $11.07 $11.74 $12.46
Dual Residential/Restaurant 12.78 13.53 14.36 15.24 16.17 17.15 Dual Residential/Commercial 8.75 9.25 9.82 10.42 11.05 11.73 Grocery 16.22 17.76 18.86 20.01 21.23 22.53
Hotel 7.51 8.18 8.69 9.22 9.78 10.38
Hotel w/Restaurant 12.19 17.31 18.38 19.50 20.69 21.95
School w/ Cafeteria 7.47 8.27 8.78 9.32 9.88 10.49
School 4.80 5.11 5.43 5.76 6.11 6.49
Shopping Center 6.50 7.36 7.81 8.29 8.79 9.33
Shopping Center w/ Restaurant 15.76 17.31 18.38 19.50 20.69 21.95 Trailer/RV 4.06 4.37 4.64 4.92 5.22 5.54
Service Station 7.26 7.47 7.93 8.41 8.93 9.47
Restaurant / Bakery 16.33 18.63 19.78 20.99 22.27 23.63 Municipal $6.31 $6.91 $7.34 $7.79 $8.26 $8.77
[1] Residential customers are charged a fixed charge per bi-month for consumption. [2] Apartments, Multifamily, and Mobile Homes are charged by the dwelling unit.
Fiscal Impact
Water and Wastewater Enterprise Funds
•Water Enterprise Fund: Proposed rates generate $74,453 to $838,434 from FY 2024 to FY 2028 •Wastewater Enterprise Fund: Proposed rates generate $128,325 to $1,523,474 from FY 2024 to FY 2028 Revenues support:•water and wastewater system•critical capital improvement projects•Central Coast Blue project•building reserves•ensuring adequate debt service coverage ratios . 20 How do the Proposed Rate Changes Impact Me?
Number of Water Customers by Type
22 Single Family
82.0%
Multifamily
6.7%
Mobile Home
0.2%
Commercial
6.8%
Irrigation
3.3%
Construction
0.9%
Residential customers include
Single Family, Multifamily, and
Mobile Home = 89%
Non-Residential customers
include Commercial, Irrigation,
and Construction = 11%
Residential Water Customers
23 Of those residential water
meters, 92% are single family
meters.
The majority of those single-
family meters are sized at ¾”
meters consuming on average
14 HCF every two months.
Single Family
92.2%
Multifamily
7.5%
Mobile Home
0.2%
Estimated
Water Bill Bi-
Monthly
Impact for
Average
Residential
Customer
24 Estimated
Wastewater Bill
Bi-Monthly
Impact for
Average
Residential
Customer
25 Estimated Water and Wastewater Bill Bi-Monthly
Impact for Average Residential Customer
26 Average Single
Family Residential
Fee
Average Water &
Wastewater Bill
Increase ($)
Average Water &
Wastewater Bill
Increase (%)
January 2024 $11.52 4.83%
January 2025 $11.53 4.61%
January 2026 $12.13 4.64%
January 2027 $12.70 4.64%
January 2028 $13.36 4.67%
1 gallon of
Pismo Beach
water
1 gallon of
bottled water 1 gallon of milk 1 gallon of tea 1 gallon of gasoline
1 gallon of
coffee
Series1 $0.01 $1.50 $3.50 $4.00 $5.50 $27.00
$-
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
Value of 1 Gallon of Water
27 How do the Proposed Rates Compare to Other
Communities?
Water Bill Compared to Other Communities
29 Wastewater Bill Compared to Other
Communities
30 Combined Water and Wastewater Bill
Compared to Other Communities
31 Timeline & Next Steps
Proposed Timeline and Next Steps
33 15 Aug. 2023
Council Meeting for Council
consideration of amending rates
and issuing Proposition 218
notifications
21 Aug. 2023
Proposition 218 Notifications
27 Sep. 2023
Community Workshops:
•4:00pm Non-Residential Rate Structure
Workshop
•6:00pm Residential Rate Structure Workshop
17 Oct. 2023
Public Hearing: Council will
determine whether or not to
adopt a Resolution implementing
the new rates.
1 Jan. 2024
Effective Date of New Rates:
January 1, 2024. Rate payers
would see the rates on the January
and February 2024 billings.
Council Direction
Recommendation: Council Direction
•Direct staff to:
•pursue updated and increased water rates;
•pursue updated and increased wastewater rates; and
•return on August 15, 2023 with materials allowing the Council to give formal direction to proceed with necessary fee processes to implement the above water and wastewater rates
35