City of Rialto
Water and Wastewater 2023 Revenue Analysis
July 2023 Water Subcommittee Meeting
2 Agenda
• Revenue Analysis Scenarios Presented Today
• Uncertainties: Debt Service Terms and Use of RUA Reserves • Draft Results
• Discussion
• Seek Direction:
• What Revenue Analysis scenarios, if any, can be brought to other Council members
• Identify Next Steps
3 Scenarios
1. Status quo: no rate increases. No CIP .
2. Discontinue annual lease payment. No rate increases. No CIP .
3. Discontinue annual lease payment. Repayment of $30M to water and wastewater utilities. No rate increases.
4. Rate increases so that revenue stabilization is not required.
High priority capital improvements only.
5. Discuss Microgrid project.
4 Changes Since June 2023 Meeting
1. Added revenue from sale of effluent to IEUA.
• 3,500 acre-feet per year @ $275/acre-foot
2. Removed RUA lease payment from most scenarios.
3. Modified interest rate for loans reflecting uncertainty over terms and financing source.
4. Revised “high priority” list of capital improvements. • Added Rialto Habitat Nature Center Operating Costs of $150,000/year.
• Remainder of operating costs not funded by RUA.
5 Uncertainty: Debt Issuance Terms
1. Debt issuance terms
A. Likely funding sources: WIFIA and I-Bank
B. Interest rate and debt service coverage requirement might depend on whether City or RWS issues debt.
C. RWS issuance: issued “on par” with existing RWS debt.
D. City issuance: RWS’s lenders could require WIFIA and I-Bank debt to be subordinate (Concession Agreement Section 6.10(g)(ii)).
A. Subordinate debt is typically more expensive. Like a second mortgage on your house.
6 Debt financing strategy: considerations
1. As a placeholder for new debt: use 5% interest rate, 30-year term, and 1.2 coverage factor in revenue projections.
2. Debt financing strategy is outside FG Solutions’s scope of work
3. City obtain confirmation from RWS that RWS lenders would require City-obtained debt to be subordinate (Concession Agreement Section 6.10(g)(ii)).
4. City to obtain effect on WIFIA and I-Bank debt terms associated with subordinate debt.
7 Uncertainty: Use of RUA Reserves
1. RUA Cash in Bank:
• Wastewater: approximately $21.5 million.
• Water: approximately $1.6 million.
2. No City policy exists regarding minimum fund balance
3. Today’s results:
• Water: use RUA reserves for revenue stabilization if needed; do not use RUA reserves for capital.
• Wastewater: use RUA reserves for revenue stabilization if needed; minimal use of RUA reserves for capital in results shown today. 8 Capital Improvements: High Priority
Infrastructure Upgrades (red = additions since June)
Wastewater:
• Sycamore Sewer Upsize: $3M
• Acacia Sewer Upsize: $2M
• Digester 1 Activation & Digester 2 Rehab: $1.8M
• Rialto Biosolids: $21.9M Remaining
• Agua Mansa Lift Station Upgrades: $2M
• Secondary Clarifier 1 and 2 Upgrades: $0.5M
• Ayala Lift Station Upgrade and Repair: $2M
• WWTP Electrical Upgrades: $8.8M
• Rialto Habitat Nature Center: $2.95M Remaining
Water:
• Etiwanda Avenue Water Main Replacement: $6.7M
• Well 3A Arsenic Treatment: $2.2M
9 1. Status Quo: no rate increases; no CIP
Monthly bill if rate increases are applied across the board to Monthly Service Charges and Commodity Charges.
Actual rate structure alternatives considered by the City may result in different monthly bill totals. • $13.2M in unfunded water revenue stabilization in next five years Revenue Increases W + WW Unfunded Revenue End of Year RUA Effective January 1 Monthly Bill Stabilization, $M Reserve Balance, $M Water WW 16 ccf/mo Water WW Water WW
2023 $116.55
2024 0.0% 0.0% $116.55 $0.0 $0.0 $1.9 $21.5
2025 0.0% 0.0% $116.55 $1.8 $0.0 $0.1 $21.3
2026 0.0% 0.0% $116.55 $3.5 $0.0 $0.3 $21.1
2027 0.0% 0.0% $116.55 $3.8 $0.0 $0.3 $20.9
2028 0.0% 0.0% $116.55 $4.2 $0.0 $0.3 $20.4
2029 0.0% 0.0% $116.55 $4.4 $0.0 $0.3 $19.8
2030 0.0% 0.0% $116.55 $4.7 $0.0 $0.3 $18.9
2031 0.0% 0.0% $116.55 $5.0 $0.0 $0.3 $17.7
2032 0.0% 0.0% $116.55 $5.3 $0.0 $0.2 $16.2
2033 0.0% 0.0% $116.55 $5.7 $0.0 $0.2 $14.3
10 2. Discontinue lease payment; no rate increases; no CIP Monthly bill if rate increases are applied across the board to Monthly Service Charges and Commodity Charges.
Actual rate structure alternatives considered by the City may result in different monthly bill totals. • $11.4M in unfunded water revenue stabilization in next five years Revenue Increases W + WW Unfunded Revenue End of Year RUA Effective January 1 Monthly Bill Stabilization, $M Reserve Balance, $M Water WW 16 ccf/mo Water WW Water WW
2023 $116.55
2024 0.0% 0.0% $116.55 $0.0 $0.0 $1.9 $21.5
2025 0.0% 0.0% $116.55 $1.4 $0.0 $0.1 $22.9
2026 0.0% 0.0% $116.55 $3.0 $0.0 $0.2 $24.3
2027 0.0% 0.0% $116.55 $3.4 $0.0 $0.2 $25.8
2028 0.0% 0.0% $116.55 $3.7 $0.0 $0.2 $23.1
2029 0.0% 0.0% $116.55 $4.0 $0.0 $0.1 $21.5
2030 0.0% 0.0% $116.55 $4.3 $0.0 $0.1 $19.6
2031 0.0% 0.0% $116.55 $4.6 $0.0 $0.1 $17.4
2032 0.0% 0.0% $116.55 $5.0 $0.0 $0.1 $14.8
2033 0.0% 0.0% $116.55 $5.3 $0.0 $0.1 $11.9
11 3. Discontinue lease payment; repay $30M; no rate
increases
• Repayment of $5M to water utility reduces unfunded water revenue stabilization by $5M
• Ability to pay for CIP limited to use of DIF funds held in trust. • Repayment of $25M to wastewater utility provides cash to pay for wastewater capital improvements
• ~$8M in DIF funds held in trust
• $25M repaid to Wastewater Fund
• Some use of RUA reserves possible
• Potential to fund the majority of high priority wastewater CIP without debt, depending on when $25M is repaid
12 4. No outside Revenue Stabilization; high priority CIP Monthly bill if rate increases are applied across the board to Monthly Service Charges and Commodity Charges.
Actual rate structure alternatives considered by the City may result in different monthly bill totals. • Requires ongoing revenue stabilization from RUA reserves for wastewater • Funding strategy of using RUA reserves to meet trustee coverage requirement must be verified with lenders
• Does not incorporate repayment of $30M
Revenue Increases W + WW W + WW Unfunded Revenue End of Year RUA Effective January 1 Monthly Bill Monthly Bill Stabilization, $M Reserve Balance, $M Water WW 16 ccf/mo % Change Water WW Water WW
2023 $116.55
2024 11.0% 2.5% $124.08 6.5% $0.0 $0.0 $1.9 $21.5
2025 11.0% 0.0% $130.72 5.3% $0.0 $0.0 $1.6 $23.2
2026 4.0% 2.5% $134.99 3.3% $0.0 $0.0 $1.5 $25.5
2027 4.0% 0.0% $137.78 2.1% $0.0 $0.0 $1.5 $25.6
2028 4.0% 2.5% $142.31 3.3% $0.0 $0.0 $2.2 $24.6
2029 2.5% 0.0% $144.20 4.1% $0.0 $0.0 $2.9 $25.1
2030 2.5% 2.5% $147.80 3.0% $0.0 $0.0 $3.8 $26.0
2031 2.5% 0.0% $149.78 2.5% $0.0 $0.0 $5.0 $26.8
2032 2.5% 2.5% $153.52 2.1% $0.0 $0.0 $6.4 $27.8
2033 2.5% 0.0% $155.60 2.2% $0.0 $0.0 $7.9 $28.9
• Capital projects after 2029 are
not included.
• City should expect that new
capital needs will be identified
and 2029-2033 Revenue Impacts
will be larger than shown here
13 5. Effect of Microgrid Project
• Additional costs
• Debt service on additional capital funding
• O&M on microgrid equipment
• Allowance for future replacement of microgrid equipment • Savings
• Electricity at WWTP (RWS: 85% reduction)
• Gas at WWTP (RWS: 100% reduction)
• Gap: feasibility study
• Direction requested: include allowance for Microgrid in Revenue Analysis? 14 Feedback, Questions, Comments?
Thank you for your time.