Rialto Water Services, LLC P.O. Box 920 Bolinas, CA 94924 415 710-0906
August 31, 2023 Toyasha Sebbag Assistant to the City Manager, Utilities Division 150 South Palm Avenue Rialto, CA 92376 cc: Tom Crowley, Utility Director Dear Toyasha, In response to your email dated August 28, 2023, Rialto Water Services LLC (Concessionaire) has reviewed the proposed scope and changes to the capital programs for the water and wastewater utilities. First, we want to compliment the City’s efforts in moving forward with a plan to address the next generation capital needs in the water and wastewater utilities. As you are aware, the origin of the capital program originates in the annually updated 5-year Asset Management Plan. The purpose of the Asset Management Plan is to inform the Rialto Utility Authority (RUA) and City of Rialto (City) of necessary capital projects that are consistent with Section 7.1 of the Standard of Services and Wastewater Facility Performance Guarantee defined in the concession contract. Specifically, the Concessionaire shall perform the services in accordance with Prudent Industry Practices, Good Engineering Practices and applicable law. While the scope of the wastewater capital improvements outlined in your August 28, 2023 email is generally consistent with the Asset Management Plan’s capital recommendations (with the exception of the Rialto Habitat Nature Center $3MM which is in the WIFIA application, but is not part of the RWS Asset Management Plan), the water capital improvements fall short of the necessary level of investment. RWS is concerned that substandard investment in water, delaying the replacement of water lines that are more than 50 years old, and other long overdue capital projects, will result in repeated higher cost emergency repairs in order to continue serving ratepayers. In addition, there will be the higher escalated cost of future placement, which is likely to exceed today’s cost. Continuing to delay these projects places a more severe cost burden on rate payers in the future. We urge the RUA/City to reconsider its position on the scope of the water capital program investment. After carefully reviewing the changes in scope to the water and wastewater capital programs we are providing more detailed feedback and comments below.
Water Utility Capital Improvements The proposed $8.9 MM in core water capital improvements represents a 64% reduction to the $24.85 MM in capital improvements outlined in the recommended water capital plan. The magnitude of this change represents a severe reduction in capital investment. Over the last ten years, the city has consistently communicated its desire to address water leaks and aging pipeline infrastructure. The proposed level of investment is inconsistent with Prudent Industry Practices and fails to address the cities expressed desire to address aging water infrastructure. According to FG Solutions analysis, $1 per month in water utility revenue services $3.5 MM of WIFIA debt. The difference in the monthly water bill for a $8.9 MM versus $24.85 MM capital program is $4.56 a month. Noting a significant above average increase in median household income in the city over the last 10 years, this level of rate burden would seem reasonable and avoids higher future rates resulting from chronic water line repairs and the inevitable higher cost of replacing these water lines in the future. We see the immediate need, within the next 2 years, to invest $14.55 MM in water infrastructure as outlined below, with the balance of the $24.85 MM program ($10.30 MM) completed by 2028. We do not view these improvements as non-essential to the needs of the water utility. Water: $14.55 MM (next two years) with the balance of the program ($10.30 MM) completed by 2028 reflecting total investment of $24.85 MM. • Etiwanda Avenue Water Main Replacement: $6.7M • Well, 3A Arsenic Treatment: $2.2M Remaining. • Aged Water Main Replacement Merrill from Sycamore to Eucalyptus (Pavement Project): $4.4M • Pressure Relief Valves (PRVs) Zone 2 to Zone 3: $250,000 • Cedar Reservoir 2, Overhaul, and Dome Preservation: $1M Following from the above, failure to make these investments will result in more leak repairs and ultimately higher replacement costs that are not in the interest of rate payers.
Wastewater Utility Capital Improvements We are pleased to see that wastewater utility capital improvements are generally in line with the level of investment defined in the 5-year asset management plan. We want to emphasize the importance of completing a full final vetting of the microgrid project and its ability to access more than $17MM in state and federal funds, including funds toward needed, known wastewater capital projects.
Our comments on the wastewater plan are as follows: • Willow Sewer Upsizing -as stated in the WW Master Plan this project should be done in the next 5 years or sooner. • Secondary Clarifier 1 and 2 Upgrades: $0.5M - there are two at $500k each thus $1 million total.
In closing, we want to clearly express our appreciation and sensitivity towards the impact of higher levels of capital investment on rate payers. The $4.50 incremental monthly impact on the water bill implied by funding the entirety of the $24.85 MM water capital program will result in lower rates over time, when compared to fixing chronic leaking pipelines and ultimately replacing these water lines in the future. The immediate availability of WIFIA financing to fund these projects provides rate payers with a material cost advantage that lowers rates over the 35 year span of WIFIA funding. As ever, we fully support the idea of working on rate assistance for qualifying senior and low-income ratepayers for whom $4.50 additional monthly impact is a hardship. Sincerely, Peter Luchetti Megan Matson