City Council
259 N. Wilma Avenue
Ripon, CA 95366
MEMO
To: Honorable City Council
From: Kevin Werner, City Administrator
Date: 12/13/2022
Subject: Utility Rate Study - Enterprise Funds Year 3 Update RECOMMENDED ACTION:
Staff is recommending the City Council approve implementing the February 1, 2023 rate increases for the water (2%), sewer (4%) and garbage (5%) enterprise funds that were originally approved in the 2020 5-Year Rate Study.
BACKGROUND:
The City uses “enterprise funds” to account for the financial activities of the water, sewer, and garbage services provided to the residents and businesses located in Ripon. Each enterprise fund is an independent budget that operates much like a private business enterprise. Each fund collects the revenue from the utility customers to fund the operations of the utility service along with the replacement of capital items.
In accordance with Proposition 218, in 2020, the property owners within the City limits approved rate increases of the water, sewer, and garbage enterprise funds to take effect February 1st of years 2021-2025, as summarized in Table 1.
Table 1 - 2020 5-Year Rate Study Proposed Rate Increases Utility 2021 2022 2023 2024 2025
Water 2% 2% 2% 2% 2%
Sewer 4% 4% 4% 4% 4%
Garbage 5% 5% 5% 4% 4%
Total 3.5% 3.5% 3.5% 3% 3%
The City Council has directed staff to bring back each year prior to February 1st, a financial evaluation of each enterprise fund to determine if the full rate increase that was initially approved is necessary for each enterprise fund.
DISCUSSION:
The rate increase included in the 2020 5-Year Rate Study was implemented for the first two years of the 2020 5-Year Rate Study, as proposed. Tom Pavletic with Municipal Financial Services (MFS) has prepared the financial evaluation for the February 1, 2023 enterprise fund rate adjustments, which is attached. Below is a summary of the current projected financials for each of the enterprise funds evaluated as compared to the 2020 5-Year Rate Study:
Water Fund: The Water Enterprise Fund balance is projected to be $440,000 lower than what was originally projected at the end of the 5-year evaluation period, but still within the target balance. All recommended transfers to the Water Enterprise Capital Fund are projected to be made over the 5-year rate study period. Sewer Fund: The Sewer Enterprise Fund balance is projected to be $70,000 more than what was originally projected at the end of the 5-year rate study period. All recommended transfers to the Sewer Enterprise Capital Fund are projected to be made over the 5-year rate study period.
Garbage Fund: The Garbage Enterprise Fund balance is projected to be $510,000 lower than what was originally projected at the end of the 5-year evaluation period. Even though this balance is lower than the recommended target balance, this fund has no debt and sufficient funds continue to be transferred to the Garbage Enterprise Capital Fund in the event there is a mechanical breakdown of a garbage truck and an unplanned replacement is needed.
Staff is recommending the City Council approve implementing the full rate increases approved in the 2020 5-Year Rate Study for February 1, 2023. The combination of water (2%), sewer (4%) and garbage (5%) rate increases have an overall effect of a 3.5% utility rate increase on the monthly bill of an average single-family customer.
The graph below shows a single-family monthly bill with the approved 2023 rate increases included.
Figure 1 – Evaluation of Single-Family Monthly Bills
Water - residential 1-inch meter, 16 hcf per month / Sewer - residential / Garbage - residential curbside 1 black + 1 green Established in Resolution 20-55
Prior Implemented Implemented Adopted
Monthly Bill FY20 FY21 FY22 FY23 FY24 FY25
Water $47.70 $48.62 $49.54 $50.56 $51.58 $52.60
Sewer $21.50 $22.40 $23.30 $24.20 $25.20 $26.20
Garbage $35.50 $37.20 $39.00 $41.00 $42.60 $44.30
Total $104.70 $108.22 $111.84 $115.76 $119.38 $123.10
Monthly $ ∆ FY20 FY21 FY22 FY23 FY24 FY25
Water $0.80 $0.92 $0.92 $1.02 $1.02 $1.02
Sewer $0.40 $0.90 $0.90 $0.90 $1.00 $1.00
Garbage $1.70 $1.70 $1.80 $2.00 $1.60 $1.70
Total $2.90 $3.52 $3.62 $3.92 $3.62 $3.72
Monthly % ∆ FY20 FY21 FY22 FY23 FY24 FY25
Water 2% 2% 2% 2% 2% 2%
Sewer 2% 4% 4% 4% 4% 4%
Garbage 5% 5% 5% 5% 4% 4%
Total 2.8% 3.5% 3.5% 3.5% 3.0% 3.0%
$48 $49 $50 $51 $52 $53
$22 $22 $23 $24 $25 $26
$36 $37 $39 $41 $43 $44
$105 $108 $112 $116 $119 $123
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY20 FY21 FY22 FY23 FY24 FY25
Garbage
Sewer
Water
Based on
Adopted Rates
The average monthly bill projected for a single-family customer will increase from $111.84 to $115.76, a total of $3.92 a month.
City Council has also directed staff to begin tracking the regulatory expenses associated with each enterprise fund. For FY22, staff has estimated the expense associated with complying with the various regulatory requirements from the State of California and summarize those in the table below:
Table 2 – Regulatory Expense Summary
Utility FY22 Expense FY22 Single Family
Monthly Bill
% of Bill
Water $100,700 $1.30 2.6%
Sewer $117,500 $1.39 6.0%
Garbage $115,000 $2.00 5.1%
Total $333,200 $4.69 4.2%
In FY22, the average single-family customer paid an estimated $4.69 per month due to regulatory expenses. For FY23, staff is tracking these expenses and will provide an updated summary of the regulatory expenses with future annual updates.
Attachments:
1. TM_final_f1-0_2023_rate_review