Agenda packet — Roseville City Council, May 3, 2023 (part 8 of 8)

Notice to Abate Fire Hazard

Owner Name: Sample
Owner Address: 333 Sample Way
SACRAMENTO, CA 956XX

Assessor Parcel Number: 000-000-000-000
Site Address: 203 SAMPLE ST
Roseville, CA 956XX

Please check the box below depicting the current status of the property listed above.

This property has been developed.

This property has been sold.

If the property listed above has been sold, please provide the date of sale and contact information of the new owner below.

Date Sold: _______________________________________________________________

New Owner Name and Address: _____________________________________________ _____________________________________________
_____________________________________________

Return to: Roseville Fire Department
316 Vernon St, Suite 480
Roseville, CA 95678

Please remember: If applicable, all necessary work shall be completed by July 1, 2023

COUNCIL COMMUNICATION
CC #:
2686
File #:
0800-02
Title:

Water, Wastewater, and Waste Services - Proposed Utility Rate Adjustments and Municipal Code Revisions for Fiscal Year 2023-24 and Fiscal Year 2024-25 Contact:

Devin Whittington 916-774-5783 [email protected]

Meeting Date: 5/3/2023
Item #: 10.4.

RECOMMENDATION TO COUNCIL
Staff recommends that City Council:
1 .

Conduct the scheduled public hearing to receive public comment and respond to questions regarding the proposed adjustments to water, wastewater, and waste services utility rates; and
2 .

Introduce for first reading an ordinance amending Roseville Municipal Code sections pertaining to water (14.08.090, 14.08.100) and wastewater (14.16.200, 4.17.080) utility rates to implement the adjustments and add modifications for clarity and consistency as shown in Attachment A1; and
3 .

Introduce for first reading an ordinance amending Roseville Municipal Code sections pertaining to waste services (9.12.030, 9.12.070, 9.12.090, 9.17.040) utility rates to implement the adjustments and add modifications for clarity and consistency as shown in Attachment A2; and
4 .

Adopt the utility rate adjustments as presented. The proposed changes would result in the following:

Beginning July 1, 2023, the estimated monthly rate adjustment for a typical residential customer will be:
- Water: $2.10
- Wastewater: $2.86
- Waste Services: $0.00

Beginning July 1, 2023, the estimated monthly rate adjustment for a typical residential customer will be:
- Water $2.17
- Wastewater: $3.03
- Waste Services: $0.00

A typical residential customer uses an average of 1,400 cubic feet of water per month, has a flat wastewater rate, a single 90-gallon garbage container, and a single 90-gallon green waste container.

BACKGROUND
Based on City Council direction since 2005, small and incremental rate adjustments for water, wastewater, and waste services utilities are preferred over larger, longer-term adjustments. This biennial rate analysis was conducted in accordance with City Council’s directive and concludes a yearlong effort consisting of a ten-year financial planning horizon from fiscal year (FY) 2023-24 through FY2032-33. The study meets the legal requirement for setting rates that are equal to the cost of services provided. The proposed two-year rate implementation meets the financial goal of generating sufficient revenue given the current assessment of future expenses and maintaining appropriate reserve targets.

Environmental Utilities Department
The Environmental Utilities Department (EU) operates municipal water, wastewater, and waste services utilities for residential, commercial and industrial customers. City ownership of these utilities provides customers the benefit of reliable service while still having rates among the lowest in the region. High quality and environmentally sound water, wastewater, and waste services utility operations are essential for protecting public health, maintaining regulatory compliance and continued economic vitality.

Charter of the City of Roseville
The Roseville City Charter mandates that each utility be financially self-sufficient, meet its financial obligations for debt service, and provide for ongoing maintenance and operations. It also allows utility reserve funds to be set aside for the replacement, improvement, and extension of the utilities. Section 10.01 of the Charter states:
“ . . . Each city-owned utility shall be financially self-sufficient, and shall fully compensate the city general fund for all goods, services, real property and rights to use or operate on or in city-owned real property. (Amended by general municipal election on November 7, 2000.)”

The Charter further states in section 7.075:

“The Council shall annually set aside from the income of each of its revenue producing public utilities the following amounts and in the following order, to wit:

First: An amount fully sufficient for the payment of principal, interest, reserve fund and sinking fund requirements of any revenue bonds or general obligation bonds secured in whole or in part from such utility revenues, the proceeds of which bonds have been applied to the acquisition, construction or completion of such public utilities.

Second: An amount sufficient to pay or provide for the payment of maintenance and operation of such public utilities, including a reserve for maintenance and operation.” In conjunction with the City mandate to be financially self-sufficient, each utility within EU is represented by an enterprise fund to account for “business-type activities” similar to that of private industry. They do not make a profit and all expenses and revenues are accounted for completely separate from the City's General Fund. Funding for utility operations is primarily from monthly utility charges.

Utility Rate Analysis and Results
EU contracted with IB Consulting, LLC, an independent rates consultant, to conduct the rate analysis with City staff. The comprehensive rate study report is included as Attachment B. The rates analysis considered the forecasted costs of utility operations, funding rehabilitation and capital project needs, while meeting fiscal policies and does the following:

1. Complies with Proposition 218, the main components of which are:

An agency cannot collect revenue beyond what is necessary to provide service.

No charge may be imposed for a service unless that service is actually used or immediately available to the owner of the property.

Revenues derived from the charge shall not be used for any other purpose other than that for which the charge was imposed.

Fairness in apportionment of total costs of service amongst ratepayer classes to avoid subsidization within the rates.

2. Reflects EU’s adopted fiscal policies for economic reserves:

Water and wastewater: rate stabilization funds equivalent to 50 percent of operating expenses and emergency reserves equivalent to 25 percent of operating expenses.

Waste services: rate stabilization and emergency reserve funds totaling 25 percent of operating expenses.

3. Ensures EU can meet commitments made to bond investors for the water and wastewater utilities by meeting or exceeding a revenue coverage requirement of 1.2X (ratio of net revenues to expenses) as required by bond covenants. Meeting these commitments is critical to maintaining the City’s excellent bond rating.

The process to establish stable and consistent rates relies on long-term financial planning, fiscal discipline and sound fiscal policies. Even with an abundance of advance planning and fiscal discipline, each utility continues to be subject to increases in significant regulatory, operational, and rehabilitation costs which cannot be controlled locally. General cost increases for all utilities include:

Debt coverage requirements:

Water and wastewater utility net revenue calculation
fiscal policy goal of > 1.8x (the actual bond covenant requirements are lower at 1.2x).

Inflation:

In the past year inflation has hovered around eight percent, which is a 40-year high.

Cost of City services:

As an enterprise funded department, EU reimburses the
General Fund for its proportionate share for administrative and support services such as for Human Resources, Finance, and the City Attorney.

Salaries:

Labor costs are forecast based on existing negotiated labor contracts. No additional labor increases were assumed beyond the current negotiated contracts for the two-year duration of the proposed rate adjustments and current labor contracts.

Regulatory requirements:

Water, wastewater, and waste services utilities are highly regulated. On average, 20 percent of utility expenses are associated with “new” regulatory compliance, over and above the basic utility function, which is also driven largely by regulatory mandates. These “new” regulatory requirements and unfunded mandates are expensive and are generally associated with reducing carbon emissions, continued reduction of pollutants and ever-increasing data reporting requirements.

The rates analysis concluded that adjustments to water and wastewater utility rates are necessary to maintain current service levels while keeping the utilities fiscally sound. With the proposed rate adjustments, the City will maintain its position as one of the lowest overall cost and highest value utility providers in the region.

Public Outreach
Consistent with City Council’s priority to provide information to the community on a timely basis, staff conducted public outreach through a number of different venues. A summary of outreach efforts is included in this report as Attachment C.

In compliance with Proposition 218, a California law since 1996, notices were sent to all property owners on March 1, 2023. A copy of the notice is included in this report as Attachment D. The notice outlines rate details and the process for protesting the proposed rate adjustments. Protest ballots could be mailed or hand-delivered to the City Clerk on or before the public hearing date, or in person at the public hearing on May 3, 2023. At the close of the Public Hearing, the City Clerk will announce the total number of protest responses. If written protests against the proposed rate adjustments are presented by a majority of the owners of identified parcels, City Council cannot impose the adjustments.

Rehabilitation Costs
In 2003, the City Council adopted a financial policy to set aside funds for rehabilitation and replacement of aging utility infrastructure. EU has since set aside a portion of its utility revenues for infrastructure rehabilitation. Utility rehabilitation programs are based upon condition assessments of infrastructure assets and facilities based on the probability and consequence of asset failure. From this information, a prioritized rehabilitation and replacement program and a schedule of implementation is developed over a 10-to-20-year period of time. Setting aside funds as described provides the resources for the utilities to rehabilitate or replace expensive infrastructure assets, without incurring debt. This practice ultimately saves rate payers by avoiding interest costs and fees associated with bond financing.

In the period covered by the proposed rate adjustment, funds will be evaluated annually to ensure adequate rehabilitation fund balances. Rehabilitating aging pipes, equipment, solid waste containers, and other aspects of the waste services, water, and wastewater system is vital in order to maintain system reliability and regulatory compliance.

In addition to routine system maintenance and rehabilitation, over the next two years, water rehabilitation funds will pay for several projects including water distribution mains rehabilitation, corrosion protection of water mains, and replacement of program logic controllers, water facility security enhancements, water supply resiliency improvements and recoating of a 2 million gallon tank at the Water Treatment Plant, among other improvements. Rehabilitation funds in wastewater will fund a sewer collection system cured-in-place pipe rehabilitation project, as well as the City’s share of costs for the Dry Creek Wastewater Treatment Plant motor control center and switchgear replacement, the Pleasant Grove Wastewater Treatment Plant influent pump station rehabilitation, the Dry Creek Wastewater Treatment Plant primary odor control rehabilitation project, and the decommissioning of several regional wastewater lift stations.

Economic Reserves
Economic reserves are an essential part of the utilities’ operating procedures and ensure the continuation of services during revenue shortfalls, systems failures or other unforeseen circumstances. Staff recommends consistency with current fiscal policy that would, over time, achieve minimum emergency reserve levels for the water and wastewater utilities at 25 percent of annual operating expenses and 50 percent of annual operating expenses in rate stabilization funds. For waste services, the total for emergency reserves and rate stabilization funds is 25 percent of annual operating expenses in each reserve. It should be noted that a part of the recommended rate adjustments are needed in the short-term to avoid rapid declines in the target reserves in all three utilities. EU fiscal policies are included in this report as Attachment E. The policies reflect the need to supplement rate stabilization and economic reserve levels, which would:

Improve assurance of adequate available funding in the event of a future drought or other event that results in increased expenses or reduced revenues.

Protect the City’s credit rating.

Address City Council direction to preclude the need for surcharges in any future water shortage conditions.

Maintain consistency with industry standards for reserve fund target levels.

Debt Service Coverage
In addition to increased costs, the City is also obligated to meet debt service coverage related to long-term debt as part of a rate covenant made to bondholders. The current rate covenant for debt issued on water and wastewater capacity improvement projects requires a minimum debt service coverage ratio of 1.20. Although utility rates are not currently used for payment of debt service, utility revenues are used as security for repayment of debt. Connection fees (developer paid) are the primary funding source for capacity improvement projects and for the payment of debt service costs related thereto.

FISCAL IMPACT
The proposed rate adjustments will result in additional combined revenue over the next two years of approximately $4.0 million to the water utility, and $5.7 million to the wastewater utility. All EU rate revenues are received in each respective utility’ operating fund.

ENVIRONMENTAL REVIEW
Approval of the proposed utility rates is considered statutorily exempt from CEQA (State CEQA Guidelines section 15273). The project involves the modification, of rates, by a public agency for the purpose of: (1) Meeting operating expenses, including employee wage rates and benefits; (2) Purchasing or leasing supplies, equipment, or materials; (3) Meeting financial reserve needs and requirements; and (4) Obtaining funds for capital projects, necessary to maintain service within existing service areas. No further CEQA action is required.

CITY COUNCIL STRATEGIC PLAN/OVERARCHING GOALS
Goal A - Remain fiscally responsible in a changing world Goal

Support

community

engagement

and

advocacy
Goal C - Maintain a safe and healthy

community
Goal D - Enhance economic vitality
Goal E - Deliver exceptional city services
Goal F - Invest in well-planned infrastructure and growth

Respectfully Submitted,
Devin Whittington, Environmental Utilities Assistant Director Richard Plecker, Environmental Utilities Director

_____________________________
Dominick Casey, City Manager
ATTACHMENTS:

Description
Attachment A1 - Ordinance for Water and Wastewater RMC changes Attachment A2 - Ordinance for Waste RMC changes
Attachment B - Rate Study
Attachment C - Rate Outreach Summary
Attachment D - EU Prop 218 Notice
Attachment E - Financial Policies
ORDINANCE NO. ____

ORDINANCE OF THE COUNCIL OF THE CITY OF ROSEVILLE AMENDING SECTIONS

14.08.090 AND 14.08.100 OF CHAPTER 14.08, AMENDING SECTION 14.16.200 OF CHAPTER 14.16, AND AMENDING SECTION 14.17.080 OF CHAPTER 14.17, OF TITLE 14 OF THE ROSEVILLE MUNICIPAL CODE REGARDING PUBLIC UTILITIES

THE CITY OF ROSEVILLE ORDAINS:

SECTION 1. Section 14.08.090 of Chapter 14.08 of Title 14 of the Roseville Municipal Code is hereby amended to read as follows:

14.08.090 Service charges for metered service.

There shall be due and payable the following monthly charges, upon submission of the bill by the city to the owner of the property supplied with service, for all treated water measured by meters for residential, commercial, industrial and manufacturing or other purposes:

A. Monthly Quantity Rates. Effective July 1, 20231 and July 1, 20242, the monthly quantity rates on billings shall be as follows:

Effective 7/1/20231 Effective 7/1/20242
Potable water usage (per cubic foot) $0.01400159 $0.01450166 Recycled water usage (per cubic foot) $0.00840105 $0.01020107

2 B. Monthly Service Charges. Effective July 1, 20231 and July 1, 20242, the monthly service charges on billings shall be as follows:

Meter Size
(inches)
Peak Flow Rate
(gallons per minute) Effective 7/1/20231 Effective 7/1/20242 Up to 3/4 30 $28.6329.63 $29.4930.82
1 50 $44.2045.74 $45.5347.57
1-1/2 100 $83.1486.00 $85.6489.44
2 160 $129.86134.32 $133.76139.70
3 350 $277.83287.32 $286.17298.82
4 630 $495.88512.79 $510.76533.31
6 1300 $1,017.641,052.31 $1,048.171,094.41
8 2800 $2,185.762,260.20 $2,251.342,350.61
10 4200 $3,276.013,387.56 $3,374.303,523.07

C. The total amount due and payable shall be the sum of the monthly service charge plus the quantity rate. The monthly service charge is due and payable regardless of whether water has been consumed. The service charge shall be the greater of the charge based on the meter size or flow rate, with the following exceptions:

1. No service charge shall be made for fire service that has backflow prevention with detector check devices approved by the environmental utilities director.

2. No service charge shall be made for recycled water utility back-up systems that are required for reliability only and have backflow prevention and metering approved by the environmental utilities director. This exclusion does not extend to systems that are regularly 3 required as part of normal operation. The recycled water operation shall be responsible for water volumetric charges for these services and any costs associated with meter maintenance.

D. For purposes of charging for treated water measured by meters:

1. A residential account is defined as a single metered water service which serves three or less dwelling units.

2. A nonresidential account is defined as a single metered water service which serves more than three dwelling units, or serves commercial, industrial, manufacturing, irrigation or other nonresidential land uses.

E. For single-family residential services that require automatic fire protection systems pursuant to Section 16.16.120, the increased meter size will not be assessed an additional charge associated with the fire protection system requirement. Service charges shall be based on the required service size as determined by the Uniform Plumbing Code without consideration for any fire protection system required by Section 16.16.120.

SECTION 2. Section 14.08.100 of Chapter 14.08 of Title 14 of the Roseville Municipal Code is hereby amended to read as follows:

14.08.100 Flat water rates.

The following service charges shall apply to flat rate consumers that the environmental utilities director determines are not cost effective to assign metered rates. The environmental utilities director shall conduct a water use study for consumers whom he or she determines may 4 not be reasonably metered, and the director shall assign such consumers to an appropriate service rate level as set forth in this section. Water service rates for flat rate residential consumers shall be due and payable on a monthly basis according to the appropriate grouping set out in this section.

Effective July 1, 20231, and July 1, 20242, the flat rates on billings shall be as follows:

Nonmetered or Flat Service Charges Effective
7/1/20231
Effective
7/1/20242
Single-family lots under 4,900 square feet; each mobile home unit not within a park maintaining its own
distribution system and service; each dwelling unit of
duplexes, triplexes, fourplexes, unmetered apartments
and other multiple living units; other detached living
units; and offices and stores with less than peak use of 250 gallons per day
$45.2848.97 $46.6450.93
Single-family lots 4,901 to 8,900 square feet $48.7053.06 $50.1755.19 Single-family lots 8,901 to 12,000 square feet $54.7760.31 $56.4262.73 Single-family lots 12,001 to 15,000 square feet $59.9866.55 $61.7869.22 Mobile home parks, per living unit $36.90 38.01
All those single-family lots over 15,000 square feet,
created on or after July 1, 1977, shall be metered
pursuant to Section 14.08.105

SECTION 3. Section 14.16.200 of Chapter 14.16 of Title 14 of the Roseville Municipal Code is hereby amended to read as follows:

14.16.200 Monthly unit sewer service charge established.

Formatted Table
5 Except as otherwise provided in this chapter, a monthly unit sewer service charge shall be paid by each user connected to the city-owned public sewer. The monthly unit sewer service charge on billings shall be:

A. The monthly sewer charge shall be $44.8650.42 per sewer unit, effective on billings as of July 1, 20231, and $47.5653.45 per sewer unit, effective on billings as of July 1, 20242.

B. Commercial customers without a sewer meter that are not subject to a flat rate per Section 14.16.220 and are associated to their potable water usage (metered consumption) shall have a monthly per sewer unit charge (the same as in subsection A) and a quantity rate as follows:

Effective 7/1/20231 Effective 7/1/20242
Monthly per sewer unit charge $44.8650.42 $47.5653.45
Associated sewer consumption charge above
560 cubic feet of potable water usage
$0.0417 04696 per
cubic foot
$0.0443 04978 per
cubic foot

C. Commercial customers with a cubic-foot sewer meter shall have a monthly per sewer unit charge (the same as in subsection A) and a quantity rate as follows:

Effective 7/1/20231 Effective 7/1/20242
Monthly per sewer unit charge $44.8650.42 $47.5653.45
Sewer consumption charge above 560 cubic
feet
$0.0417 04696 per
cubic foot
$0.0443 04978 per
cubic foot

D. For commercial customers with a gallon sewer meter, the consumption rate will be based on the per cubic foot rate in subsection B and converted to a per gallon rate as follows:
6 Effective 7/1/20231: $0.04696417 / 7.48 = $0.00557 00628 per gallon.

Effective 7/1/20242: $0.04978443 / 7.48 = $0.00592 00665 per gallon.

Some commercial and industrial customers may require an additional surcharge per Section 14.16.220.

SECTION 4. Section 14.17.080 of Chapter 14.17 of Title 14 of the Roseville Municipal Code is hereby amended to read as follows:

14.17.080 Fees and charges—Delinquency—Disconnection or termination.

A. All fees, charges, deposits or penalties provided for in this chapter, including recycled water charges, shall be in the amount set forth in Chapter 14.08 or as established by resolution adopted by the city council, as amended from time to time.

B. Payment by a customer for recycled water service shall be due and payable as specified in Chapter 14.04 for water service. If payment is not received in accordance with Chapter 14.04, then the recycled water service may be disconnected or terminated. In the event the city disconnects or terminates recycled water service pursuant to this section, then in addition to the payment due for recycled water, the customer shall pay any and all delinquent and reconnection charges for recycled water service as specified in Chapter 14.04 for water service.

C. Price of Recycled Water. Effective July 1, 20231, the price for recycled water sold, supplied, distributed or transported to customers of the city shall be at a rate or charge equal to 60 the sum of 80 percent of the monthly service charge and 66 percent of the rate or charge 7 which the city council may establish from time to time as set forth in Chapter 14.08 for potable water and which is in effect on the date of delivery of recycled water by the city to such customer. Such charge or rate shall be the sum of the customer charge, commodity charge and adjustments as detailed in this chapter and specified in Chapter 14.08. Effective July 1, 20242, the price for recycled water will increase to 70 the sum of 90 percent of the monthly service charge and 64.5 percent of the rate or charge for potable water.

SECTION 5. This ordinance shall be effective at the expiration of thirty (30) days from the date of adoption.

SECTION 6. The City Clerk is hereby directed to cause this ordinance to be published in full at least once within fourteen (14) days after it is adopted in a newspaper of general circulation in the City, or shall within fourteen (14) days after its adoption cause this ordinance to be posted in full in at least three (3) public places in the City and enter in the Ordinance Book a certificate stating the time and place of said publication by posting.

PASSED AND ADOPTED by the Council of the City of Roseville this ___ day of _______________, 20__, by the following vote on roll call:

AYES COUNCILMEMBERS:

NOES COUNCILMEMBERS:

8 ABSENT COUNCILMEMBERS:

______________________________
MAYOR

ATTEST:

_________________________________
City Clerk
ORDINANCE NO. ____

ORDINANCE OF THE COUNCIL OF THE CITY OF ROSEVILLE AMENDING SECTIONS

9.12.030, 9.12.070, AND 9.12.090 OF CHAPTER 9.12, AND AMENDING SECTION 9.17.040 OF CHAPTER 9.17 OF TITLE 9 OF THE ROSEVILLE MUNICIPAL CODE REGARDING

WASTE COLLECTION AND REFUSE HAULING AND RECYCLING

THE CITY OF ROSEVILLE ORDAINS:

SECTION 1. Section 9.12.030 of Chapter 9.12 of Title 9 of the Roseville Municipal Code is hereby amended to read as follows:

9.12.030 Organic waste generator requirements.

A. Single-family organic waste generators shall comply with the following requirements:

1. Subscribe to and maintain organic waste collection services for all organic waste.

The city shall have the right to review the number and size of a generator’s containers to evaluate adequacy of capacity provided for each type of collection service for proper separation of materials and containment of materials. Single-family organic waste generators shall adjust service level for their collection services as requested by the city. Generators may additionally manage their organic waste by preventing or reducing their organic waste, managing organic waste on site, and/or using a community composting site pursuant to 14 CCR Section 18984.9(c).
2 2. Participate in the city’s organic waste collection service(s) by placing source separated organic waste in the container identified and designated for source separated organic waste and placing all other materials in the container identified and designated for such materials.

3. Place containers as follows:
a. Residences Having Street Frontage Only. Containers must be placed for collection at curbside in front of residence. The wheels of the container will be placed in the gutter with the handle facing the residence. Containers will be at least six feet from any obstruction such as automobiles, trailers, motor homes, fences, lampposts, portable basketball hoops, mailboxes, or other automated containers. Containers are not to block pedestrian access. b. Residences with Alley Access. Containers must be placed for collection on private property adjacent to the alley property line, with direct access from the alley. The base of the container will be placed on a stable, level surface with the handle facing the residence.

Containers will be at least six feet from any obstructions such as automobiles, trailers, motor homes, fences, portable basketball hoops, lampposts, mailboxes, or other automated containers. c. All containers must be at curbside by 6:00 a.m. on scheduled collection days, holidays included. Collection trucks will come back for containers that are put out after truck has passed a residence upon payment of an extra pick-up service charge.no later than the time as directed by the environmental utilities director or his or her designee.

B. Generators that are commercial businesses, including multifamily residential dwellings shall comply with the following requirements:
3 1. Subscribe to and maintain organic waste collection services for all organic waste.

2. Participate in the city’s organic waste collection service(s) by placing source separated organic waste in the container identified and designated for source separated organic waste and placing all other materials in the container identified and designated for such materials.

3. Supply and allow access to adequate number, size and location of collection containers with labels or colors sufficient for employees, contractors, tenants, and customers, in compliance with the city’s collection service requirements.

4. Excluding multifamily residential dwellings, commercial businesses shall provide containers for the collection of source separated organic waste and garbage in all indoor and outdoor areas where disposal containers are provided for customers, for materials generated by that business. Furthermore, the commercial businesses shall place containers in such place as shall be convenient to the city for removal of organic waste and garbage. Storage of other equipment or material will not be allowed.
4 5. Excluding multifamily residential dwellings, containers provided by commercial businesses shall have either:
a. A body or lid that conforms with the container colors provided through the collection service provided by the city, with either lids conforming to the color requirements or bodies conforming to the color requirements or both lids and bodies conforming to color requirements. A commercial business is not required to replace functional containers, including containers purchased prior to January 1, 2022, that do not comply with the requirements of this subsection prior to the end of the useful life of those containers, or prior to January 1, 2036, whichever comes first.
b. Container labels that include language or graphic images, or both, indicating the primary material accepted and the primary materials prohibited in that container, or containers with imprinted text or graphic images that indicate the primary materials accepted and primary materials prohibited in the container.

C. Generators that are commercial businesses, excluding multifamily residential dwellings shall:

1. To the extent practical through education, training, inspection, and/or other measures, prohibit employees from placing materials in a container not designated for those materials per the city’s collection service.

2. Periodically inspect all containers for contamination and inform employees if containers are contaminated and of the requirements to keep prohibited container contaminants out of those containers pursuant to the Act.
5 3. Annually provide information to employees, contractors, tenants, and customers about organic waste proper sorting and recovery requirements.

4. Nothing in this section prohibits a generator subject to these provisions from preventing or reducing waste generation or managing organic waste on site.

5. Commercial businesses that are tier one or tier two commercial edible food generators shall comply with food recovery requirements, pursuant to Section 9.12.110 of this chapter.

SECTION 2. Section 9.12.070 of Chapter 9.12 of Title 9 of the Roseville Municipal Code is hereby amended to read as follows:

9.12.070 Container requirements.

A. Residential. Place containers as follows:

1. Residences Having Street Frontage Only. Containers must be placed for collection at curbside in front of residence. The wheels of the container will be placed in the gutter with the handle facing the residence. Containers will be at least six feet from any obstruction such as automobiles, trailers, motor homes, fences, lampposts, portable basketball hoops, mailboxes, or other automated containers. Containers are not to block pedestrian access.

2. Residences with Alley Access. Containers must be placed for collection on private property adjacent to the alley property line, with direct access from the alley. The base of the container will be placed on a stable, level surface with the handle facing the residence. 6 Containers will be at least six feet from any obstructions such as automobiles, trailers, motor homes, fences, portable basketball hoops, lampposts, mailboxes, or other automated containers.

3. All containers must be at curbside by 6:00 a.m. on scheduled collection days, holidays included. Collection trucks will come back for containers that are put out after truck has passed a residence upon payment of an extra pick-up service charge.

B. Commercial placement.

Garbage receptacles at places of business shall be located in such place as shall be convenient to the city for removal of garbage. City-approved trash enclosures are to be used for refuse removal equipment only. Storage of other equipment or material will not be allowed.

C. Container Type. The environmental utilities director or his or her designee shall determine the size and specifications of all containers used for the purposes of collection under this chapter.

SECTION 3. Section 9.12.090 of Chapter 9.12 of Title 9 of the Roseville Municipal Code is hereby amended to read as follows:

9.12.090 Charges for collection.

A. Residential.

1. Each and every householder or tenant occupying any dwelling, house, or residence, shall pay to the city, or its authorized agent, a fixed minimum charge as set forth in this section 7 as a refuse rate. Such fixed minimum is based upon service of one call per week, irrespective of whether there is any refuse to remove from any premises.

2. Automated Container Service. Each premises shall be assigned city-owned containers. Containers will be serviced by automated collection. All garbage and source separated organic waste for collection must be contained within the container(s) designated for such materials with the lid closed and must fall freely from container when dumped. Each such premises shall be provided collection regularly, as determined by the environmental utilities director or his or her designee.

3. Collection services may be discontinued upon request for a period of no less than two months when a dwelling, house, or residence will be unoccupied. A service fee will be charged to the utility user for the removal of the assigned automated container(s) when service has been temporarily discontinued. This service fee will be paid at the time service is discontinued. Upon occupancy of a dwelling, house or residence, the utility user must contact the city to restart service and will be charged an associated restart fee. If the occupant of a dwelling, house, or residence does not contact the city to restart service, the city may bill back to the discontinuance of service all monthly charges.

34. For collection of additional containers beyond those covered by the fixed minimum rates established in this chapter, the collection charge shall be that identified in this section.

45. Return Trip Services.
8 a. Extra Pickup. An additional or “extra” pickup may be requested beyond the minimum service required by this chapter. Each such additional or extra pickup shall be subject to a fixed fee.
b. Out Late. Return service for containers placed out late may be requested. Each “out late” pickup shall be subject to a fixed fee.
c. Missed Pickup. A “missed” container must be reported within 48 hours of collection day or an “out late” charge shall be applied to the account.

56. Rates for Residential Collection. Effective July 1, 2021, and July 1, 2022, the residential rates on billings shall be as follows:

Residential Refuse Service Effective 7/1/2021 Effective 7/1/2022 Fixed refuse monthly charge (one trash container
and one source separated organics waste (green
waste) container as identified in Section 9.12.090
(A)(2))
$31.06 $36.05
Each additional mixed waste container $21.24 $24.65
Each additional source separated organic waste
(green waste) container
$11.28 $13.10
Additional pickup of a mixed waste container (also
“out late” fee) (also source separated organic waste
(green waste) container emptied as trash due to
contamination)
$20.30 $23.56
Additional pickup of a source separated organic
waste (green waste) container (also “out late” fee)
$14.92 $17.32
Fixed fee for the return of a confiscated source
separated organic waste container due to
contamination
$145.00 $168.27
Temporary removal of a residential service $62.08 $72.05 Move in box pick-up $109.77 $127.39
9 Residential Refuse Service Effective 7/1/2021 Effective 7/1/2022 Temporary dumpster delivery and removal (6 yards
only)
$152.19 $176.65
Restart service (per occurrence) $30.36 $35.24
Source separated organic waste contamination fee
(applied to account after third notification)
$30.36 $35.24
Residential return trip fee (applied when service is
requested but container is inaccessible)
$30.36 $35.24
Container exchange ( customer requested in excess
of 1x per 12 months)
$30.36 $35.24
Container exchange (due to misuse—melted or
damaged beyond reuse)
$90.70 $105.26

B. Commercial.

1. A landlord, property owner, property manager or management company of a commercial business that has a commercial dumpster shall pay to the city, or its authorized agent, a fixed charge as set forth by the city council as a refuse rate. Monthly charges will be applied to a single account per service. Such rates and fees are based upon a minimum service of one call per week, irrespective of whether there is any refuse to remove from any premises.

A landlord, property owner, property manager or management company with multiple tenants who must share a commercial dumpster shall be responsible for the refuse utility bill of the tenants.

The Environmental Utilities Director may at his discretion consolidate billing accounts where service costs are being split by two or more landlords, property owners, property managers or management companies.
10 2. Commercial frontloader, rearloader, roll-off, and automated container services are provided by the city.

An additional or extra pick up may be requested beyond the minimum service required by this chapter. Each such additional or extra pick up shall be subject to a fixed fee.

Temporary commercial collection must be charged to a City of Roseville customer utility account. A “garbage only” account may be requested for temporary services. See Chapter 14.04 “Utility Customer Billing, Accounting and Collections” for information about establishing a new account.

Timeframe for Temporary Customer Service. Temporary dumpsters for commercial business use must be serviced weekly and removed within a 90-day period. It is the customer’s responsibility to schedule services. If a temporary dumpster is not emptied within seven consecutive days of its delivery or last collection, the account shall be assessed a weekly rental fee per subsection (B)(5), Rates for Commercial Collection.

3. Multifamily residential dwellings will not be required to recycle food waste, but will need to provide proof to the city that other source separated organic waste such as green waste are being recycled or diverted from the landfill in an appropriate manner. The city can also provide green waste services, if necessary.

The city will collect all source separated organic waste, unless a commercial business had collection services in place before September 28, 2014, the date AB 1826 was approved. Any commercial business with a collection contract in effect before this date can continue with providers until the contract expires. Once the contract expires the commercial business will default to city collection service as provided for in this chapter. 11 4. An additional or special pickup may be requested beyond the minimum service required by this chapter. Each such additional or special pickup shall be subject to a fixed fee.

5. Rates for Commercial Collection. Effective July 1, 2021, and July 1, 2022, the commercial rates on billings shall be as follows:

Frontloader and Rearloader Commercial Services*
Effective
7/1/2021
Effective
7/1/2022
Waste service minimum monthly charge $34.83 $40.42
Automated container commercial service (per
container, where available; organic waste service not
available)-see Organics Rate Section 9.12.090 E.)
$31.06 $36.05
Streetscape and LLD containers* $8.20 $10.25 $9.5211.90 Hand pickup service* (up to three 30-gallon cans or
six bags per week, where available)
$34.83 $40.42
Frontloader and rearloader* trash dumpster per yard
charge
$12.74 $14.79
Frontloader and rearloader* trash compactor per yard
charge
$22.96 $26.65
Frontloader cardboard dumpster and compactor per
yard charge
$3.91 $4.54
Commercial bin assistance (per occurrence) $54.86 $63.67 Recyclable material contamination fee (applied after
third notification)
$30.36 $35.24
Lock delivery or replacement (per occurrence) $18.22 $21.15 Lock service – (per container, per month) $12.15 $14.10 Push/pull charges (per container, per month) $18.22 $21.15 Extra pickup charge (percentage of monthly base rate
plus return trip charge)
25% 25%
12 Frontloader and Rearloader Commercial Services*
Effective
7/1/2021
Effective
7/1/2022
Exchange bin (for dirty bin in excess of 1x per 12
months)
$91.08 $105.70
Commercial return trip fee (applied when service is
requested but container is inaccessible; also used to
calculate commercial extra pickups)
$30.36 $35.24
Emergency after-hours service fee (per service) $196.06 $227.53 Commercial standby fee (per 15 minutes when asked
by onsite customer to wait)
$72.86 $84.56
* A premium of 25% will be added to all rearloader services.

Roll-Off Commercial Open Top and Compactor
Services
Effective
7/1/2021
Effective
7/1/2022
Minimum charge per haul (base rate) without
tonnage* (all sizes and material) $379.39 $440.28
Pleasant Grove Wastewater Treatment Plant sludge-
hauling fee (per bin) $267.12 $309.99
Roll-off tonnage fees (tipping fees) Pass-through
rates apply*
Compactor cleaning service (hauling charges also
apply) $512.68 $594.96
Return trip fee (scheduled bin not ready for haul,
customer requests return later on same day – per
occurrence)
$36.43 $42.28
Roll-off relocation fee (no haul – per occurrence) $60.72 $70.47 * Tonnage charges (tipping fees) vary by material type, and are determined by the Western Placer Waste Management Authority. With city department head approval, some entities may pay tonnage charges directly to Western Placer Waste Management Authority.

Temporary Frontloader and Roll-Off Fees Effective 7/1/2021 Effective 7/1/2022 Frontloader and rearloader temporary dumpster
delivery and removal fee $75.75 $87.91
13 Frontloader and rearloader temporary dumpster
per yard fee (plus trip fee for extra pickups) $12.74 $14.79 Frontloader and rearloader temporary dumpster
rental fee per week $72.11 $83.69
Roll-off temporary dumpster hauling fee* $379.39 $440.28 Roll-off temporary dumpster rental fee per week $130.94 $151.96 * Tonnage charges (tipping fees) vary by material type, and are determined by the Western Placer Waste Management Authority. With city department head approval, some entities may pay tonnage charges directly to Western Placer Waste Management Authority.

C. Shared Compactor Rates. Shared compactor rates are applicable to the City of Roseville downtown specific plan area. Exact rates are determined on a site-specific basis based on the following criteria:

Cost per 1,000
square feet of
building area
or per
dwelling unit
Effective
7/1/2021
Cost per 1,000
square feet of
building area
or per
dwelling unit
Effective
7/1/2022

Below are the square footage rates for shared compactors. If a customer’s site-specific charge does not exceed the fixed minimum charge, they will be subject to the monthly fixed minimum charge.

Monthly
Minimum
(Fixed)
$34.83 $40.42
Tier 1: Cost per
1,000 square
feet of building
area or per
dwelling unit
$7.28 $8.45
Tier 1 includes business types that are
determined low use by the
environmental utilities director.

Typical examples of low use are retail
and office establishments and small
apartment units.

Tier 2: Cost per
1,000 square $29.34 $34.05 Tier 2 includes business types that are determined medium use by the
14 feet of building
area
environmental utilities director.

Typical examples of medium use are
relatively smaller establishments such
as bars and grills, coffee shops and
delis; selling or serving food but not
considered a full-service restaurant.

Tier 3: Cost per
1,000 square
feet of building
area
$61.98 $71.93
Tier 3 includes business types that are
determined high use by the
environmental utilities director. A
typical example of high use is full-
service restaurants, restaurant/bakeries,
and similar establishments. Full-
service restaurants are defined as
primarily dine-in establishments with
established menus, and a minimum of
two meals per day (e.g., lunch and
dinner).

D. Shared Compactor Organic Tiers. Organics tiers are applicable to some shared compactor units depending on compactor tier and usage type. Exact rates are determined on a site-specific basis based on the following criteria:

Commercial Shared Compactor Organic
Tiers Effective 7/1/2021 Effective 7/1/2022
Tier 1 $0.00 $0.00
Tier 2 $99.50 $115.47
Tier 3 $198.92 $230.85

E. Rates for Commercial Organic Waste Collection. Effective July 1, 2021 and July 1, 2022, the commercial organic waste collection rates on billings shall be as follows:
15 Organic Waste Collection Rates
Minimum Monthly
Charge (Effective
7/1/2021)
Minimum Monthly
Charge (Effective
7/1/2022)
0-2 yards $99.50 $115.47
0-4 yards $198.92 $230.85
5 yards $248.66 $288.57
6 yards $298.34 $346.22
7 yards $348.22 $404.10
8 yards $397.83 $461.68
9 yards $447.52 $519.34
10 yards $497.24 $577.04
11 yards $547.12 $634.92
12 yards $596.68 $692.44
Additional empty of organics container $74.62 $86.60
Empty of contaminated organics
container $99.50 $115.47

Effective October 1, 2023, the commercial organic waste collection rates on billings shall be as follows:

Monthly Organics Cost Effective October 1, 2023
On-Site Containers
Service
1x
Weekly
Service
2x
Weekly
Service
3x
Weekly
Service
4x
Weekly
Service
5x
Weekly
1st 65-Gallon Can $48.30 $96.60 $144.90 $193.20 $241.50 Each Additional 65-Gallon Can $24.38 $48.76 $73.14 $97.52 $121.90 1st 2-Cubic Yard Bin $114.73 $229.46 $344.19 $458.92 $573.65 Each Additional 2-Cubic Yard Bin $90.82 $181.64 $272.46 $363.28 $454.10

16 SECTION 4. Section 9.17.040 of Chapter 9.17 of Title 9 of the Roseville Municipal Code is hereby amended to read as follows:

9.17.040 Franchise term and franchise fee.

A franchise for refuse hauling shall be for a term of two years. In addition to a franchise application fee, each franchise shall be required to pay a franchise fee of six dollars and eighty- eight cents to the city for every ton of refuse collected and disposed of within the city. The franchise fee set forth in this section may be amended from time to time by resolution of the city council. The franchise fee shall be assessed based on the monthly reports required in Section 9.17.080, and shall be paid monthly by the franchiseeupon submission of the required report.

A franchise may be renewed for one or more additional periods aggregating not more than two years, upon the recommendation of the director. Any person holding a franchise for refuse hauling shall obtain, provide and continuously maintain a city business license, and shall obtain, provide and continuously maintain insurance pursuant to city insurance requirements as set forth in Section 9.17.110.

If franchise fees are not paid by the franchisee at the times required by this section, then in addition to the franchise fees, the franchisee shall pay a late payment charge in an amount equal to two percent of the franchise fee that is due, plus interest equal to one and one-half percent per month of the entire balance due until paid in full.
17 SECTION 5. This ordinance shall be effective at the expiration of thirty (30) days from the date of adoption.

PASSED AND ADOPTED by the Council of the City of Roseville this ___ day of _______________, 20__, by the following vote on roll call:

AYES COUNCILMEMBERS:

NOES COUNCILMEMBERS:

ABSENT COUNCILMEMBERS:

______________________________
MAYOR
ATTEST:

_________________________________
18 City Clerk

IB Consulting, LLC 31938 Temecula Parkway, Suite A #350 Temecula, CA. 92592 Water, Wastewater, and Recycled
Rate Study
Public Hearing
May 3, 2023

City of Roseville – Water, Wastewater, and Recycled Rate Study

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TABLE OF CONTENTS
Executive Summary ..........................................................................................................................5 Water Utility ......................................................................................................................................9 Financial Plan Overview – Water Utility ........................................................................................... 13 Proposed Financial Plan – Water Utility .......................................................................................... 22 Cost-of-Service Analysis – Water Utility .......................................................................................... 27 Rate Design – Water Utility ............................................................................................................. 32 Cost-Based Rates – Water Utility .................................................................................................... 37 Wastewater Utility ........................................................................................................................... 39 Financial Plan Overview - Wastewater Utility .................................................................................. 41 Proposed Financial Plan – Wastewater Utility ................................................................................. 47 Cost-of-Service Analysis – Wastewater Utility ................................................................................. 51 Cost-Based Rates – Wastewater Utility ........................................................................................... 53 Recycled Water .............................................................................................................................. 54 Financial Plan Overview – Recycled Utility ..................................................................................... 56 Proposed Financial Plan – Recycled Utility ..................................................................................... 61 Cost-of-Service Analysis – Recycled Utility ..................................................................................... 65 Cost-Based Rates – Recycled Utility ............................................................................................... 66

City of Roseville – Water, Wastewater, and Recycled Rate Study

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TABLES
Table 1: Proposed Water Monthly Fixed Charges .............................................................................6 Table 2: Proposed Water Variable Rates ..........................................................................................6 Table 3: Proposed Water Monthly Non-Metered Flat Charges ..........................................................6 Table 4: Proposed Wastewater Rates ...............................................................................................7 Table 5: Proposed Recycled Monthly Fixed Charges ........................................................................7 Table 6: Proposed Recycled Variable Rates .....................................................................................8 Table 7: Metered Accounts by Meter Size ....................................................................................... 10 Table 8: Non-Metered Accounts by Lot Size ................................................................................... 11 Table 9: FY 2023 Metered Fixed Charges and Variable Rates ....................................................... 12 Table 10: FY 2023 Non-Metered Flat Monthly Charges .................................................................. 12 Table 11: Water Assumptions for Forecasting Revenues ................................................................ 14 Table 12: Water Assumptions for Forecasting Expenses ................................................................ 15 Table 13: Water Calculated Rate Revenues ................................................................................... 16 Table 14: Water Projected Revenues.............................................................................................. 17 Table 15: Water Projected O&M Expenses ..................................................................................... 18 Table 16: Water Reserve Requirements and Targets ..................................................................... 19 Table 17: Water Proposed Financial Plan ....................................................................................... 23 Table 18: Water Transfers and Reserve Activity ............................................................................. 24 Table 19: FY 2024 – FY 2025 Water Revenue Requirements ......................................................... 28 Table 20: Water O&M Expense Allocation to Cost Components (%) ............................................... 30 Table 21: Water O&M Expense Allocation to Cost Components ($) ................................................ 30 Table 22: Water Other Funding to Cost Components (%) ............................................................... 31 Table 23: Water Other Funding Allocation to Cost Components ($) ................................................ 31 Table 24: FY 2024 Water Cost-of-Service Requirements by Cost Component ................................ 31 Table 25: Metered and Non-Metered Projected Water Usage ......................................................... 32 Table 26: Water Accounts and Meter Equivalents ........................................................................... 33 Table 27: FY 2024 Water Account Services Monthly Unit Rate ....................................................... 34 Table 28: FY 2024 Water Meter Capacity Monthly Unit Rate .......................................................... 35 Table 29: FY 2024 Water Conveyance Unit Rate ............................................................................ 35 Table 30: FY 2024 Non-Metered Conveyance Monthly Unit Rate ................................................... 36 Table 31: FY 2024 Water Monthly Fixed Charges ........................................................................... 37 Table 32: Proposed Water Metered Monthly Fixed Charges ........................................................... 37 Table 33: Proposed Water Variable Rates ...................................................................................... 38 Table 34: Proposed Water Non-Metered Monthly Flat Charges ...................................................... 38 Table 35: Wastewater Accounts by Customer Class ....................................................................... 40 Table 36: FY 2023 Wastewater Fixed Charges and Variable Rates ................................................ 40 Table 37: Wastewater Assumptions for Forecasting Revenues....................................................... 41 Table 38: Wastewater Assumptions for Forecasting Expenses ....................................................... 42 Table 39: Wastewater Calculated Rate Revenues .......................................................................... 43 Table 40: Wastewater Projected Revenues .................................................................................... 43 Table 41: Wastewater Projected O&M Expenses ............................................................................ 44 Table 42: Wastewater Reserve Requirements and Targets ............................................................ 45 Table 43: Wastewater Proposed Financial Plan .............................................................................. 47 Table 44: Wastewater Transfers and Reserve Activity .................................................................... 48 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 45: FY 2024 – FY 2025 Wastewater Revenue Requirements ............................................... 52 Table 46: Proposed Wastewater Fixed Charges and Variable Rates .............................................. 53 Table 47: Recycled Accounts by Meter Size ................................................................................... 54 Table 48: FY 2023 Recycled Water Fixed Charges and Variable Rate ........................................... 55 Table 49: Recycled Assumptions for Forecasting Revenues ........................................................... 56 Table 50: Recycled Assumptions for Forecasting Expenses ........................................................... 56 Table 51: Recycled Calculated Rate Revenues .............................................................................. 57 Table 52: Recycled Projected Revenues ........................................................................................ 57 Table 53: Recycled Projected O&M Expenses ................................................................................ 58 Table 54: Recycled Reserve Requirements and Targets ................................................................ 58 Table 55: Recycled Proposed Financial Plan .................................................................................. 61 Table 56: Recycled Transfers and Reserve Activity ........................................................................ 62 Table 57: FY 2024 – FY 2025 Recycled Revenue Requirements .................................................... 65 Table 58: Proposed Recycled Monthly Meter Charges ................................................................... 66 Table 59: Proposed Recycled Variable Rates ................................................................................. 67

FIGURES
Figure 1: City of Roseville Water System ..........................................................................................9 Figure 2: Water Utility Capital Improvement Plan ............................................................................ 10 Figure 3: Water Usage .................................................................................................................... 11 Figure 4: Financial Plan Key Elements............................................................................................ 13 Figure 5: Water Utility Reserves ...................................................................................................... 19 Figure 6: Water Current Operating Financial Position ..................................................................... 20 Figure 7: Water Projected Ending Reserves at Existing Rates ........................................................ 21 Figure 8: Water Proposed Operating Position ................................................................................. 25 Figure 9: Water Capital Improvement Plan with Funding Sources ................................................... 25 Figure 10: Water Proposed Ending Reserves for Operating and Rate Stabilization ........................ 26 Figure 11: Cost-of-Service Process ................................................................................................ 27 Figure 12: Water Cost Components ................................................................................................ 29 Figure 13: Water Distribution Basis and Units of Service by Cost Component ................................ 34 Figure 14: City of Roseville Wastewater System ............................................................................. 39 Figure 15: Wastewater Capital Improvement Plan .......................................................................... 39 Figure 16: Wastewater Current Operating Financial Position .......................................................... 46 Figure 17: Wastewater Projected Ending Reserves at Existing Rates ............................................. 46 Figure 18: Wastewater Proposed Operating Position ...................................................................... 49 Figure 19: Wastewater Capital Improvement Plan with Funding Sources ....................................... 49 Figure 20: Wastewater Proposed Ending Reserves ........................................................................ 50 Figure 21: Recycled Capital Improvement Plan .............................................................................. 54 Figure 22: Recycled Current Operating Financial Position .............................................................. 59 Figure 23: Recycled Projected Ending Reserves at Existing Rates ................................................. 60 Figure 24: Recycled Proposed Operating Position .......................................................................... 63 Figure 25: Recycled Capital Improvement Plan with Funding Sources............................................ 63 Figure 26: Recycled Proposed Ending Reserves ............................................................................ 64

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Executive Summary
The City of Roseville (City) reviews its utilities every two years to determine if adjustments are required to continue meeting its operational costs, system improvements, and satisfy reserve requirements. The last rate study in 2021 set rates for Fiscal Years (FY) 2022 and FY 2023. The City hired IB Consulting to conduct a comprehensive cost-of-service analysis to develop proposed rates for FY 2024 and FY 2025 (Rate Setting Period) for its water and wastewater utilities, including recycled rates. MSW Consultants was a part of the IB Consulting team and assisted with updating rates for waste services, which has been provided as a separate report from MSW.

Updating a utility’s long-term financial plan and performing a comprehensive cost-of-service analysis is a prudent business practice to ensure a utility can fully fund its revenue needs over the Rate Setting Period and beyond. As part of reviewing and updating utility rates, the first step is to conduct a thorough review of the financial health of each utility. Based on a 5-year financial plan, FY 2024 – FY 2028 (Financial Plan Period), revenues from existing rates are reviewed to determine if current revenues sufficiently cover operating expenses; capital spending and satisfy minimum reserve requirements through the Financial Plan Period.

With financial planning, it is critical to not only look at the short-term outlook but also review revenue needs beyond the Rate Setting Period. This approach ensures that the City plans for future obligations and obtains a clear understanding of each utility’s current financial position.

Water Utility
The City’s water rate structure includes a monthly fixed charge and a uniform variable rate per hundred cubic feet (CCF) to all metered customers. Non-Metered customers are charged a flat monthly rate that captures both fixed costs and variable costs based on the projected usage of non-metered accounts. The updated cost- of-service fixed revenue recovery will remain at approximately 57% of total revenue, similar to the 2021 study.

The proposed rate structure reflects an updated cost-of-service analysis that identifies which expenses are recovered through the monthly meter charges versus variable rates.

The proposed rates derived within this report includes two years of adjustments, commencing on July 1, 2023.

With the proposed rates, the utility will continue to generate positive net income above operating, fully fund its capital repair and replacement program through cash on hand and meet minimum reserve targets over the Rate Setting Period1. The recommended rates have been incorporated into a notice and mailed to each customer as part of the Proposition 218 noticing requirements. A Public Hearing is scheduled for May 3, 2023 on the proposed rates identified in Table 1, Table 2, and Table 3.

1 The Proposed financial plan assumes water usage does not fall below 25,200 acre feet for FY 2024 and 25,452 acre feet for FY 2025, and future expenses do not exceed the projected costs identified herein.

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 1: Proposed Water Monthly Fixed Charges

Table 2: Proposed Water Variable Rates

Table 3: Proposed Water Monthly Non-Metered Flat Charges

Wastewater Utility
The wastewater utility is part of this study and includes a financial plan update for proposed wastewater rates over the Rate Setting Period. The City’s existing wastewater collection rate structure consists of monthly fixed charges to all customers and Commercial flow rates. The proposed wastewater rates derived within this report are for FY 2024 and FY 2025. With the proposed rates, the utility will continue to generate positive net income above operating, generate additional funding for the reinvestment in the wastewater collection system that averages $8.5M over the Financial Plan Period, and satisfies reserve requirements through the Rate Setting Period. The recommended rates have been incorporated into the notice and mailed to each customer as part of the Proposition 218 noticing requirements. A Public Hearing is scheduled for May 3, 2023, on the proposed rates identified in Table 4.
.

Fixed Meter Charges ($/Month)Meter Size FY 2024 FY 20253/4" $29.63 $30.821" $45.74 $47.571 1/2" $86.00 $89.442" $134.32 $139.703" $287.32 $298.824" $512.79 $533.316" $1,052.31 $1,094.418" $2,260.20 $2,350.6110" $3,387.56 $3,523.07Variable Rates ($/CCF)Metered Usage Rate FY 2024 FY 2025Uniform $1.59 $1.66Non-Metered ($/Month)Flat Monthly Charges FY 2024 FY 2025Single family lots up to 4,900 s.f. $48.97 $50.93Single family lots 4,901 - 8,900 s.f. $53.06 $55.19Single family lots 8,901 - 12,000 s.f. $60.31 $62.73Single family lots 12,001 - 15,000 s.f. $66.55 $69.22 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 4: Proposed Wastewater Rates

Recycled Utility
The wastewater treatment plants also produce recycled water, and the City delivers approximately one billion gallons of recycled water annually to its recycled customers. The Recycled cost center (#74340) captures most of the operating costs for the recycled utility. In addition, a portion of the electricity costs from the Dry Creek and Pleasant Grove Wastewater Treatment plants are also included as part of the recycled utility’s operating expenses. Using this approach, annual revenue requirements for recycled can clearly be identified for determining proposed rates. Currently, recycled customers are charged a monthly fixed charge that varies by meter size and a uniform variable rate for recycled water usage. The existing recycled water fixed charges and variable rates are lower than potable water rates. One of the City’s objectives is to increase recycled fixed charges annually to eventually be equivalent to potable water fixed charges by FY 2026 and the variable rate will recover the remaining revenue requirements that reflect the total cost of providing service. For the Rate Setting Period, recycled fixed charges are set at 80% of potable water fixed charges for FY 2024 and 90% of potable water fixed charges for FY 2025. A Public Hearing is scheduled for May 3, 2023, on the proposed rates identified in Table 5 and Table 6.

Table 5: Proposed Recycled Monthly Fixed Charges

Monthly Fixed Charges ($/ Month)Customer ClassFY 2024FY 2025Residential $50.42 $53.45Commercial - Metered $50.42 $53.45Commercial - Flat $50.42 $53.45Variable Rate ($/ccf)Customer Class FY 2024 FY 2025Commercial - Metered $4.6958 $4.9776Recycled Fixed % of Potable 80.0%90.0%Fixed Meter Charges ($/Month)Meter size FY 2024 FY 20253/4" $23.71 $27.741" $36.60 $42.821 1/2" $68.80 $80.502" $107.46 $125.733" $229.86 $268.944" $410.24 $479.986" $841.85 $984.978" $1,808.16 $2,115.5510"$2,710.05$3,170.77 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 6: Proposed Recycled Variable Rates

Variable Rate ($/CCF)Recycled FY 2024 FY 2025Variable Unit Rate $1.05 $1.07 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Water Utility
Water System
The City is located east of Sacramento in Placer County, and the Environmental Utility Department (EU) serves a population of 145,000 with water service and operates a 100 Million Gallon per Day (MGD) treatment plant. The water system also includes 600 miles of transmission & distribution lines, three water tanks, and a network of groundwater wells.

Figure 1: City of Roseville Water System

The City’s capital spending will average approximately $8.4M annually over the Financial Plan Period. Figure 2 shows the City’s capital repair and replacement plan through FY 2028. 600 miles of pipeline145,000 population Water Sources:Wells and Surface Water49,417 AccountsWater System

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Figure 2: Water Utility Capital Improvement Plan

Customers
As of July 1, 2022, the City served 49,417 active accounts (49,345 metered customers and 72 non-metered customers). Table 7 provides a summary of metered accounts by meter size, and Table 8 provides a summary of non-metered accounts by lot size.

Table 7: Metered Accounts by Meter Size

Meter SizeNumber of Accounts3/4" 37,1261" 9,8041 1/2" 8522" 1,2163" 1734" 1236" 338" 1110" 7Total Metered 49,345 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 8: Non-Metered Accounts by Lot Size

Figure 3 shows historical water sales (blue bars) and projected water sales (hatched bars) in acre-feet (1 acre foot = 325,851 gallons) through the Financial Plan Period. FY 2024 water usage is projected to reflect 25,200 AF, and a 1% growth rate is assumed through FY 2026.

Figure 3: Water Usage

As previously mentioned, the existing rate structure consists of a monthly fixed meter charge and uniform variable rate to all metered customers and flat monthly charges to non-metered customers. Existing metered fixed charges and variable rates are identified in Table 9, followed by Table 10 identifying non-metered monthly flat charges.

Lot SizeNumber of AccountsSingle family lots up to 4,900 s.f. 57Single family lots 4,901 - 8,900 s.f. 13Single family lots 8,901 - 12,000 s.f. 1Single family lots 12,001 - 15,000 s.f. 1Total Non-Metered 72

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 9: FY 2023 Metered Fixed Charges and Variable Rates

Table 10: FY 2023 Non-Metered Flat Monthly Charges

Fixed Meter Charges ($/Month)Meter Size Existing3/4" $29.491" $45.531 1/2" $85.642" $133.763" $286.174" $510.766" $1,048.178" $2,251.3410" $3,374.30Variable Rates ($/CCF)Metered Usage Rate ExistingUniform $1.45Non-Metered ($/Month)Flat Monthly Charges ExistingSingle family lots up to 4,900 s.f. $46.64Single family lots 4,901 - 8,900 s.f. $50.17Single family lots 8,901 - 12,000 s.f. $56.42Single family lots 12,001 - 15,000 s.f. $61.78 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Financial Plan Overview – Water Utility

Financial Planning
Financial planning incorporates numerous considerations, including projecting revenues and forecasting expected costs using various inflationary adjustments. Utilities also need to account for changes in water demand driven by variations in weather, water availability, state mandates, growth, and economic factors. In addition, system maintenance and reinvestment, reserves, and debt compliance all influence the revenues needed in future years. Therefore, a comprehensive financial plan reviews the following:
1) Historical water sales and consumption patterns to determine an appropriate level of usage for projecting future water use.
2) Operational costs that may change over the planning period as a result of inflation as well any new expenditures incurred to meet strategic goals, state mandates, or changes in operations. 3) Multi-year system improvement needs, and scheduling based on priority. This review also considers available funding sources to complete projects such as pay-as-you-go (PAYGO), grants, loans, and debt financing.
4) Reserve funding to meet adopted reserve policies. The goal is to generate adequate cash on hand to mitigate financial risks related to operating cashflow needs, unexpected increases in expenses, shortages in system reinvestment, and mitigating potential system failures.

Figure 4 illustrates the key elements when developing a long-term financial plan.

Figure 4: Financial Plan Key Elements

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Financial Planning Assumptions
Developing a long-term financial plan requires an understanding of the utility’s financial position by evaluating existing revenue streams, ongoing expenses, how those expenses will change over time, existing debt coverage requirements, and reserve policies. With these considerations, certain assumptions are required for projecting revenues, expenses, and expected ending fund balances. Table 11 identifies assumptions used for forecasting revenues and Table 12 identifies assumptions used for forecasting increases in expenses over the Financial Plan Period, with personnel related expenses based on a Labor Forecast analysis provided by the City. In addition, the City experienced a significant increase in chemical costs and FY 2024 assumes a one-time 59% adjustment for establishing a new baseline cost. Increases for General Liability and Workers Comp are also significant, which will continue through the Financial Plan Period.

Table 11: Water Assumptions for Forecasting Revenues

Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Revenue EscalationNon-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Non-Rate Revenues 2.0% 2.0% 2.0% 2.0% 2.0%Reserve Interest 0.5% 0.5% 0.5% 0.5% 0.5%Account GrowthSingle-Family Residential 1% 1% 1% 0% 0%Commercial 1% 1% 1% 0% 0%Non-Metered 0% 0% 0% 0% 0%Customer Accounts FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Meter Size3/4" 37,126 37,497 37,872 37,872 37,8721" 9,804 9,903 10,002 10,002 10,0021 1/2" 852 860 869 869 8692" 1,216 1,228 1,240 1,240 1,2403" 173 175 177 177 1774" 123 124 125 125 1256" 33 33 33 33 338" 11 11 11 11 1110" 7 7 7 7 7Total All Meters 49,345 49,838 50,336 50,336 50,336Non-Metered Accounts FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Single family lots up to 4,900 s.f. 57 57 57 57 57Single family lots 4,901 - 8,900 s.f. 13 13 13 13 13Single family lots 8,901 - 12,000 s.f. 1 1 1 1 1Single family lots 12,001 - 15,000 s.f. 1 1 1 1 1Total Non-Metered Accounts 72 72 72 72 72Consumption by Customer Class FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Single-Family Residential 6,794,898 6,862,847 6,931,475 6,931,475 6,931,475Commercial 4,182,123 4,223,944 4,266,183 4,266,183 4,266,183Total Consumption by Customer Class (CCF) 10,977,021 11,086,791 11,197,658 11,197,658 11,197,658 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 12: Water Assumptions for Forecasting Expenses2

2 Capital Construction for FY 2024 was increased to 8% to account for recent increases due to inflation. Outer years reduce to 3.0%, reflecting the 20-year average of the 20-City Engineer’s News Record – Construction Cost Index.

Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Expenditure EscalationBenefits Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastCapitalENR - SF8.0% 3.5% 3.5% 3.5% 3.5%CPICPI - SF (BLS)3.0% 3.0% 3.0% 3.0% 3.0%Utilities 15.0% 4.0% 4.0% 4.0% 4.0%Chemicals 59.0% 3.0% 3.0% 3.0% 3.0%Indirect 9.0% 10.0% 10.0% 10.0% 10.0%IT 10.0% 10.0% 10.0% 10.0% 10.0%Facilities 5.0% 5.0% 5.0% 5.0% 5.0%Fleet 5.0% 5.0% 5.0% 5.0% 5.0%General Liability 90.0% 40.0% 40.0% 40.0% 40.0%Worker's Comp 60.0% 20.0% 20.0% 20.0% 20.0%General Costs 4.0% 4.0% 4.0% 4.0% 4.0%Non-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Pers / OPEB Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastSalaries Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastPurchased Water 5.0% 5.0% 5.0% 5.0% 5.0%Water Loss 8.7% 8.7% 8.7% 8.7% 8.7% City of Roseville – Water, Wastewater, and Recycled Rate Study

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Current Financial Position
Revenues
Based on the forecasting assumptions, revenues were calculated using existing rates (Table 9 and Table 10), multiplied by the number of accounts listed by meter size and lot size, and projected total water sales shown (Table 11). Table 13 shows the calculated rate revenues through the Financial Plan Period. Table 14 summarizes calculated rate revenues and other non-rate revenues available through the Financial Plan Period with future projections rounded to the nearest thousands. Non-rate revenues increase over the Financial Plan Period using the inflation factor in Table 11.

Table 13: Water Calculated Rate Revenues

Fixed Revenues FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Monthly Service ChargeSingle-Family Residential $17,972,358 $18,152,143 $18,333,344 $18,333,344 $18,333,344Commercial $5,693,378 $5,739,452 $5,786,554 $5,786,554 $5,786,554Total Monthly Service Charge $23,665,736 $23,891,595 $24,119,897 $24,119,897 $24,119,897Non-MeteredSingle family lots up to 4,900 s.f. $31,902 $31,902 $31,902 $31,902 $31,902Single family lots 4,901 - 8,900 s.f. $7,827 $7,827 $7,827 $7,827 $7,827Single family lots 8,901 - 12,000 s.f. $677 $677 $677 $677 $677Single family lots 12,001 - 15,000 s.f.$741 $741 $741 $741 $741Non-Metered Revenue $41,147 $41,147 $41,147 $41,147 $41,147Variable Revenues FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Single-Family Residential $9,852,602 $9,951,128 $10,050,639 $10,050,639 $10,050,639Commercial $6,064,078 $6,124,719 $6,185,965 $6,185,965 $6,185,965Total Variable Rate Revenue $15,916,680 $16,075,847 $16,236,604 $16,236,604 $16,236,604Total Rate Revenue $39,623,563 $40,008,589 $40,397,648 $40,397,648 $40,397,648 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 14: Water Projected Revenues

Revenue Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Rate RevenueService Charge $23,666,000 $23,892,000 $24,120,000 $24,120,000 $24,120,000Non-Metered Service Charge $41,000 $41,000 $41,000 $41,000 $41,000Variable / Usage Revenue $15,917,000 $16,076,000 $16,237,000 $16,237,000 $16,237,000Subtotal Rate Revenue $39,624,000 $40,009,000 $40,398,000 $40,398,000 $40,398,000RevenuesLicenses and Permits $15,000 $15,000 $15,000 $15,000 $15,000Other Fees $53,000 $53,000 $53,000 $53,000 $53,000Charges for Services $141,000 $141,000 $141,000 $141,000 $141,000Capital Contributions $1,003,000 $1,003,000 $1,003,000 $1,003,000 $1,003,000Other Revenue $94,000 $94,000 $94,000 $94,000 $94,000Subtotal Revenues $1,306,000 $1,306,000 $1,306,000 $1,306,000 $1,306,000Total Revenues $40,930,000 $41,315,000 $41,704,000 $41,704,000 $41,704,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Expenses
The FY 2023 budget was used as the utility's baseline Operational & Maintenance (O&M) expenses and adjusted in subsequent years based on the escalation factors shown in Table 12. In addition, the City recently completed an independent valuation on staffing needs throughout the City and the results were captured within a long-term labor staffing forecast (labor forecast), which were incorporated into the O&M expense projections through the Financial Plan Period. Table 15 provides projected O&M expenses with future projections rounded to the nearest thousands. Each expense category includes detailed line-item expenditures that were discussed with staff to determine the appropriate escalation factor to use for forecasting how costs will increase over time.

Table 15: Water Projected O&M Expenses

Expenditure Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesWater UBS - Admin$681,000 $747,000 $782,000 $822,000 $866,000Water UBS - Field$337,000 $373,000 $276,000 $290,000 $307,000Water UBS - Billing$499,000 $539,000 $560,000 $583,000 $608,000Water UBS - Cust Serv$383,000 $416,000 $364,000 $398,000 $418,000Water Administration$2,048,000 $2,141,000 $2,251,000 $2,385,000 $2,533,000Water Legislative and Regulatory Services$816,000 $829,000 $847,000 $867,000 $890,000Water Engineering and Hydrogeology Services$1,599,000 $1,663,000 $1,577,000 $1,615,000 $1,659,000Water Customer Service$1,083,000 $1,126,000 $1,167,000 $1,214,000 $1,270,000Water Distribution$9,425,000 $10,052,000 $10,684,000 $11,299,000 $11,946,000Cross Connection Control Program$406,000 $550,000 $699,000 $718,000 $876,000Water Treatment/Storage Plant$7,769,000 $8,099,000 $8,593,000 $8,821,000 $9,251,000Water Efficiency$2,023,000 $2,112,000 $2,373,000 $2,610,000 $2,731,000Water New Meter Purchase$450,000 $468,000 $487,000 $507,000 $527,000Water Outreach$245,000 $255,000 $265,000 $275,000 $286,000Water UEC$190,000 $221,000 $237,000 $248,000 $260,000Water EU Admin$1,280,000 $1,334,000 $1,384,000 $1,441,000 $1,506,000Water EU Tech Serv$1,885,000 $1,971,000 $2,044,000 $2,128,000 $2,226,000Water EAM Support and Maintenance$137,000 $143,000 $179,000 $186,000 $194,000Non-Classified$1,738,000 $1,902,000 $2,082,000 $2,280,000 $2,497,000Retiree Payments$568,000 $585,000 $603,000 $621,000 $640,000Transfers Out - Operating$8,000 $8,000 $9,000 $9,000 $9,000Transfers Out - Capital$1,000 $1,000 $1,000 $1,000 $1,000Transfers Out - Utility Impact Reimbursement$300,000 $312,000 $325,000 $338,000 $351,000Vehicle Additions$454,000 $298,000 $175,000 $531,000 $89,000Subtotal Operating Expenses $34,325,000 $36,145,000 $37,964,000 $40,187,000 $41,941,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Reserves
Figure 5: Water Utility Reserves

Established reserves include Operating Reserve, Rehabilitation Reserve, and Rate Stabilization Reserve.

These reserves help mitigate risks to the utility by ensuring sufficient cash is on hand for daily operations and to fund annual system improvements. In addition, these reserves help smooth rates and mitigate rate spikes due to emergencies or above-average system costs. The most recent adopted reserve policies identify the function of each reserve. Table 16 summarizes the minimum reserve requirements and the ideal funding targets of each reserve. In addition, the City has a Construction Fund for capacity fees, which pays the 2015 Certificates of Participation debt associated with advanced water metering.

Table 16: Water Reserve Requirements and Targets
Reserve Minimum Requirement Reserve Target
Operating 90 days of operating costs 180 days of operating costs Rehabilitation 1% of Asset Value -
Rate Stabilization 50% of next year’s operating expenses - The reserve balance as of July 1, 2022 equaled approximately $58.7M.

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Financial Outlook at Existing Rates
Calculating revenue using existing rates and projecting expenses helps determine the current financial health of the utility. Revenues from existing rates are sufficient to fund O&M through FY 2027, but net operating income (net cashflow before transfers) continue to reduce as operating expenses increase over time. Annual net cashflow is not sufficient to fund operating revenue requirements and system reinvestment needs while meeting minimum reserve requirements through the Financial Plan Period. Figure 6 illustrates the operating position of the utility, where O&M expenses are identified with the dashed red trendline and total revenues at existing rates are shown by the horizontal black trendline. The bars represent the amount of net operating income available for direct transfers (reimbursements and debt), capital spending and reserve funding.

Figure 6: Water Current Operating Financial Position

With the capital spending reflecting approximately $42M over the Financial Plan Period, as shown in Figure 2, reserves will be utilized to cover the remaining capital expenses to ensure necessary projects continue to move forward as scheduled. Figure 7 reflects the projected ending balances of reserves after operating and capital projects are funded. By FY 2027, reserves dip below the total minimum reserve target and continue to deplete in subsequent years.

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Figure 7: Water Projected Ending Reserves at Existing Rates

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Proposed Financial Plan – Water Utility
From the financial outlook at existing rates, a proposed financial plan can be developed to adequately fund the multi-year revenue requirements, while meeting reserve requirements. Based on funding the capital plan over the Financial Plan Period and ensuring reserves meet minimum targets, Table 17 forecasts projected revenues and expenses over the Financial Plan Period, including projected revenue adjustments outside the Rate Setting Period for FY 2026 through FY 2028. Table 18 identifies reserve and other City Department transfers, reserve activity through the Financial Plan Period, and projected FY 2024 starting reserve balances identified for each reserve.

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Table 17: Water Proposed Financial Plan

Revenue FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Service Charge $23,666,000 $23,892,000 $24,120,000 $24,120,000 $24,120,000Non-Metered Service Charge $41,000 $41,000 $41,000 $41,000 $41,000Variable / Usage Revenue $15,917,000 $16,076,000 $16,237,000 $16,237,000 $16,237,000Total Rate Revenue $39,624,000 $40,009,000 $40,398,000 $40,398,000 $40,398,000Additional Revenue (from revenue adjustments):Fiscal YearRevenue AdjustmentFY 20244.0%$1,585,000 $1,600,000 $1,616,000 $1,616,000 $1,616,000FY 20254.0%$1,664,000 $1,681,000 $1,681,000 $1,681,000FY 20264.0%$1,748,000 $1,748,000 $1,748,000FY 20274.0%$1,818,000 $1,818,000FY 20284.0%$1,890,000Total Additional Revenue $1,585,000 $3,264,000 $5,045,000 $6,863,000 $8,753,000Projected Rate Revenues $41,209,000 $43,273,000 $45,443,000 $47,261,000 $49,151,000Other RevenueLicenses and Permits $15,000 $15,000 $15,000 $15,000 $15,000Other Fees $53,000 $53,000 $53,000 $53,000 $53,000Charges for Services $141,000 $141,000 $141,000 $141,000 $141,000Capital Contributions $1,003,000 $1,003,000 $1,003,000 $1,003,000 $1,003,000Other Revenue $94,000 $94,000 $94,000 $94,000 $94,000Subtotal Other Revenue $1,306,000 $1,306,000 $1,306,000 $1,306,000 $1,306,000Total Revenues $42,515,000 $44,579,000 $46,749,000 $48,567,000 $50,457,000O&M Expenses FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesWater UBS - Admin $681,000 $747,000 $782,000 $822,000 $866,000Water UBS - Field $337,000 $373,000 $276,000 $290,000 $307,000Water UBS - Billing $499,000 $539,000 $560,000 $583,000 $608,000Water UBS - Cust Serv $383,000 $416,000 $364,000 $398,000 $418,000Water Administration $2,048,000 $2,141,000 $2,251,000 $2,385,000 $2,533,000Water Legislative and Regulatory Services $816,000 $829,000 $847,000 $867,000 $890,000Water Engineering and Hydrogeology Services $1,599,000 $1,663,000 $1,577,000 $1,615,000 $1,659,000Water Customer Service $1,083,000 $1,126,000 $1,167,000 $1,214,000 $1,270,000Water Distribution $9,425,000 $10,052,000 $10,684,000 $11,299,000 $11,946,000Cross Connection Control Program $406,000 $550,000 $699,000 $718,000 $876,000Water Treatment/Storage Plant $7,769,000 $8,099,000 $8,593,000 $8,821,000 $9,251,000Water Efficiency $2,023,000 $2,112,000 $2,373,000 $2,610,000 $2,731,000Water New Meter Purchase $450,000 $468,000 $487,000 $507,000 $527,000Water Outreach $245,000 $255,000 $265,000 $275,000 $286,000Water UEC $190,000 $221,000 $237,000 $248,000 $260,000Water EU Admin $1,280,000 $1,334,000 $1,384,000 $1,441,000 $1,506,000Water EU Tech Serv $1,885,000 $1,971,000 $2,044,000 $2,128,000 $2,226,000Water EAM Support and Maintenance $137,000 $143,000 $179,000 $186,000 $194,000Non-Classified $1,738,000 $1,902,000 $2,082,000 $2,280,000 $2,497,000Retiree Payments $568,000 $585,000 $603,000 $621,000 $640,000Transfers Out - Operating $8,000 $8,000 $9,000 $9,000 $9,000Transfers Out - Capital $1,000 $1,000 $1,000 $1,000 $1,000Transfers Out - Utility Impact Reimbursement $300,000 $312,000 $325,000 $338,000 $351,000Vehicle Additions $454,000 $298,000 $175,000 $531,000 $89,000Total Expenses $34,325,000 $36,145,000 $37,964,000 $40,187,000 $41,941,000Net Cashflow (Before Transfers) $8,190,000 $8,434,000 $8,785,000 $8,380,000 $8,516,000 Table 14Table 14Table 15
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Table 18: Water Transfers and Reserve Activity

TransfersFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating Net Income $8,190,000 $8,434,000 $8,785,000 $8,380,000 $8,516,000Transfers (to)/from Rehabilitation Fund $0 $0 $0 $0 $0Transfers (to)/from Rate Stabilization Fund $0 $0 $0 $0 $0Transfers (to)/from Water Construction Fund ($577,850) ($558,600) ($481,000) ($461,750) ($442,500)Total Water Enterprise Transfers ($577,850) ($558,600) ($481,000) ($461,750) ($442,500)Other City Dept TransfersTransfers (to) RFA Debt Service (Rent) ($357,331) ($356,223) ($354,860) ($354,860) ($354,860)Total Other City Dept Transfers ($357,331) ($356,223) ($354,860) ($354,860) ($354,860)Net Cashflow (After Transfers) $7,254,819 $7,519,177 $7,949,140 $7,563,390 $7,718,640Operating Fund (6101) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $14,613,480 $17,006,249 $17,912,009 $18,813,558 $19,914,826Transfers (Net Cashflow (After Transfers) ) $7,254,819 $7,519,177 $7,949,140 $7,563,390 $7,718,640Less:CIP - Operating ($811,800) ($530,782) $0 $0 $0Transfers (to) Rehabilitation Fund (6130) ($4,129,101) ($6,169,713) ($7,139,177) ($6,558,701) ($6,950,233)Subtotal Operating Fund (6101)$16,927,397 $17,824,932 $18,721,973 $19,818,247 $20,683,233Interest Earnings $78,852 $87,078 $91,585 $96,580 $101,495Ending Balance $17,006,249 $17,912,009 $18,813,558 $19,914,826 $20,784,728Rehabilitation Fund (6130) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $25,364,935 $17,340,013 $15,290,251 $15,959,019 $16,133,385Plus:Direct transfers to/(from) Rehabilitation Fund (6130) $0 $0 $0 $0 $0Transfers from Operating Fund (6101) $4,129,101 $6,169,713 $7,139,177 $6,558,701 $6,950,233Less:CIP - Rehabilitation ($12,260,520) ($8,300,846) ($6,548,337) ($6,464,366) ($7,240,624)Subtotal Rehabilitation Fund (6130)$17,233,517 $15,208,879 $15,881,091 $16,053,354 $15,842,995Interest Earnings$106,496 $81,372 $77,928 $80,031 $79,941Ending Balance $17,340,013 $15,290,251 $15,959,019 $16,133,385 $15,922,935Rate Stabilization Fund (6110) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $13,789,240 $13,858,186 $13,927,477 $13,997,114 $14,067,100Direct transfers to/(from) Rate Stabilization Fund (6110) $0 $0 $0 $0 $0Subtotal $13,789,240 $13,858,186 $13,927,477 $13,997,114 $14,067,100Interest Income$68,946 $69,291 $69,637 $69,986 $70,335Ending Balance $13,858,186 $13,927,477 $13,997,114 $14,067,100 $14,137,435Total Reserves - Ending Balance $48,204,448 $47,129,738 $48,769,691 $50,115,311 $50,845,099 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Figure 8 identifies the operating position based on the proposed financial plan and Figure 9 shows the capital plan with funding sources. Figure 103 identifies the ending reserve balances for reserves after direct transfers and funding capital replacement.

Figure 8: Water Proposed Operating Position

Figure 9: Water Capital Improvement Plan with Funding Sources

3 Figure 10 reflects ending total reserve balances through the Financial Plan Period, which includes projected revenue adjustments outside the Rate Setting Period for FY 2026 through FY 2028 equal to 4% per year.

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Figure 10: Water Proposed Ending Reserves for Operating and Rate Stabilization

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Cost-of-Service Analysis – Water Utility
Cost-of-Service Process
The next step in developing rates is to perform a cost-of-service analysis. It is important to understand how costs are incurred in order to determine the most appropriate way to recover these costs. The following graphic summarizes the cost-of-service process. Through this process, costs incurred are allocated to customers based on their proportional share. As a result, proposed rates are cost-based and reflect the costs incurred to provide service to customers.

Figure 11: Cost-of-Service Process

Revenue Requirements
With FY 2024 as the first year of the proposed rate schedule, revenue requirements are determined for FY 2024 and used for the cost-of-service. Revenue requirements include O&M expenses, transfers, available revenue offsets from other revenues, and reserve funding. The proposed revenue adjustments and corresponding rates accumulate the necessary funding over the Rate Setting Period to fund the scheduled capital projects and comply with minimum reserve requirements. The results of the financial plan analysis are summarized in Table 19 and represent the revenue required from rates over the Rate Setting Period (FY 2024 and FY 2025).

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Table 19: FY 2024 – FY 2025 Water Revenue Requirements

FY 2024 FY 2025Revenue Requirements Total TotalOperations and MaintenanceWater UBS - Admin $681,000 $747,000Water UBS - Field $337,000 $373,000Water UBS - Billing $499,000 $539,000Water UBS - Cust Serv $383,000 $416,000Water Administration $2,048,000 $2,141,000Water Legislative and Regulatory Services $816,000 $829,000Water Engineering and Hydrogeology Services $1,599,000 $1,663,000Water Customer Service $1,083,000 $1,126,000Water Distribution $9,425,000 $10,052,000Cross Connection Control Program $406,000 $550,000Water Treatment/Storage Plant $7,769,000 $8,099,000Water Efficiency $2,023,000 $2,112,000Water New Meter Purchase $450,000 $468,000Water Outreach $245,000 $255,000Water UEC $190,000 $221,000Water EU Admin $1,280,000 $1,334,000Water EU Tech Serv $1,885,000 $1,971,000Water EAM Support and Maintenance $137,000 $143,000Non-Classified $1,738,000 $1,902,000Retiree Payments $568,000 $585,000Transfers Out - Operating $8,000 $8,000Transfers Out - Capital $1,000 $1,000Transfers Out - Utility Impact Reimbursement $300,000 $312,000Vehicle Additions $454,000 $298,000Total Operations and Maintenance $34,325,000 $36,145,000Other FundingOther ExpensesDirect Transfers $577,850 $558,600Other Transfers Out $357,331 $356,223Total Other Expenses $935,181 $914,823Revenue OffsetsLicenses and Permits ($15,000) ($15,000)Other Fees ($53,000) ($53,000)Charges for Services ($141,000) ($141,000)Capital Contributions ($1,003,000) ($1,003,000)Other Revenue ($94,000) ($94,000)Total Revenue Offsets ($1,306,000) ($1,306,000)AdjustmentsReserve Funding $7,254,819 $7,519,177Total Adjustments $7,254,819 $7,519,177Total Other Funding $6,884,000 $7,128,000Revenue Required from Rates $41,209,000 $43,273,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Define Cost Components
The utility incurs costs to accommodate total water demand that varies throughout the year. Therefore, to determine the most appropriate way to recover the utility’s expenses, cost components are identified to allocate expenses based on how they are incurred. Through review of the revenue requirements and an understanding of the utility system, it is appropriate and reasonable to utilize the base-extra capacity methodology outlined in the American Water Works Association M1 Manual. This methodology accounts for utility systems costs as a function of meeting revenue needs based on average annual usage and total demand. The cost components shown in Figure 12 reflect the cost components used for this study.

Figure 12: Water Cost Components

Account Services – Fixed expenses that do not necessarily fluctuate based on usage nor is a function of meter size. Expenses associated with customer service, billing services, outreach, a portion of administration, and other expenses incurred based on having an account.

Meter Capacity – Expenses associated with operating and maintaining the system, planning, support services, capital, and a portion of overhead.

Conveyance – Expenses associated with operating and maintaining the distribution system, treatment costs, and capital expenses of the water system incurred to deliver water to all customers. These costs tend to vary with the volume of water sold.

Allocate Expenses to Cost Components

The analysis herein establishes cost components for developing fixed charges and variable rates. When allocating expenses to the defined costs components, it is important identify which expenses were allocated to a fixed versus a variable or split between both fixed and variable. The distribution of expenses to the cost components should be straight-forward to ensure the method of apportionment is understandable and easily correlates to how expenses are incurred.

Account
Services
Meter
Capacity Conveyance

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Table 20 summarizes the percent allocation of O&M revenue requirements to the cost components and Table 21 uses the percent allocations in Table 20 to allocate expenses in dollars to each cost component.

Table 20: Water O&M Expense Allocation to Cost Components (%)

Table 21: Water O&M Expense Allocation to Cost Components ($)

Operations and MaintenanceMethodology / Allocation BasisAccount ServicesMeter CapacityConveyance TotalWater UBS - AdminSpecific25.0% 75.0% 0.0% 100.0%Water UBS - FieldSpecific0.0% 100.0% 0.0% 100.0%Water UBS - BillingSpecific100.0% 0.0% 0.0% 100.0%Water UBS - Cust ServSpecific100.0% 0.0% 0.0% 100.0%Water AdministrationSpecific0.0% 100.0% 0.0% 100.0%Water Legislative and Regulatory ServicesSpecific0.0% 100.0% 0.0% 100.0%Water Engineering and Hydrogeology ServicesSpecific0.0% 100.0% 0.0% 100.0%Water Customer ServiceSpecific100.0% 0.0% 0.0% 100.0%Water DistributionSpecific0.0% 50.0% 50.0% 100.0%Cross Connection Control ProgramSpecific0.0% 100.0% 0.0% 100.0%Water Treatment/Storage PlantSpecific0.0% 0.0% 100.0% 100.0%Water EfficiencySpecific0.0% 0.0% 100.0% 100.0%Water New Meter PurchaseSpecific0.0% 100.0% 0.0% 100.0%Water OutreachSpecific100.0% 0.0% 0.0% 100.0%Water UECSpecific0.0% 100.0% 0.0% 100.0%Water EU AdminSpecific25.0% 75.0% 0.0% 100.0%Water EU Tech ServSpecific0.0% 100.0% 0.0% 100.0%Water EAM Support and MaintenanceSpecific0.0% 100.0% 0.0% 100.0%Non-ClassifiedSpecific0.0% 100.0% 0.0% 100.0%Retiree PaymentsSpecific0.0% 100.0% 0.0% 100.0%Transfers Out - OperatingSpecific0.0% 100.0% 0.0% 100.0%Transfers Out - CapitalSpecific0.0% 100.0% 0.0% 100.0%Transfers Out - Utility Impact ReimbursementSpecific0.0% 100.0% 0.0% 100.0%Vehicle AdditionsSpecific0.0% 100.0% 0.0% 100.0%Operations and MaintenanceMethodology / Allocation BasisAccount ServicesMeter CapacityConveyance TotalWater UBS - AdminSpecific$170,250 $510,750 $0 $681,000Water UBS - FieldSpecific$0 $337,000 $0 $337,000Water UBS - BillingSpecific$499,000 $0 $0 $499,000Water UBS - Cust ServSpecific$383,000 $0 $0 $383,000Water AdministrationSpecific$0 $2,048,000 $0 $2,048,000Water Legislative and Regulatory ServicesSpecific$0 $816,000 $0 $816,000Water Engineering and Hydrogeology ServicesSpecific$0 $1,599,000 $0 $1,599,000Water Customer ServiceSpecific$1,083,000 $0 $0 $1,083,000Water DistributionSpecific$0 $4,712,500 $4,712,500 $9,425,000Cross Connection Control ProgramSpecific$0 $406,000 $0 $406,000Water Treatment/Storage PlantSpecific$0 $0 $7,769,000 $7,769,000Water EfficiencySpecific$0 $0 $2,023,000 $2,023,000Water New Meter PurchaseSpecific$0 $450,000 $0 $450,000Water OutreachSpecific$245,000 $0 $0 $245,000Water UECSpecific$0 $190,000 $0 $190,000Water EU AdminSpecific$320,000 $960,000 $0 $1,280,000Water EU Tech ServSpecific$0 $1,885,000 $0 $1,885,000Water EAM Support and MaintenanceSpecific$0 $137,000 $0 $137,000Non-ClassifiedSpecific$0 $1,738,000 $0 $1,738,000Retiree PaymentsSpecific$0 $568,000 $0 $568,000Transfers Out - OperatingSpecific$0 $8,000 $0 $8,000Transfers Out - CapitalSpecific$0 $1,000 $0 $1,000Transfers Out - Utility Impact ReimbursementSpecific$0 $300,000 $0 $300,000Vehicle AdditionsSpecific$0 $454,000 $0 $454,000Total Allocation ($) $2,700,250 $17,120,250 $14,504,500 $34,325,000O&M Allocation (%) 7.9% 49.9% 42.3% 100.0% City of Roseville – Water, Wastewater, and Recycled Rate Study

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Other Funding includes direct transfers, revenue offsets, and reserve funding. All items under “Other Funding” were allocated to the cost components based on O&M percentages derived in Table 21 to maintain proportionality in how expenses were allocated to each cost component. Table 22 summarizes the percent allocation of Other Funding to the cost components, and Table 23 uses the percent allocations in Table 22 to allocate expenses in dollars to each cost component.

Table 22: Water Other Funding to Cost Components (%)

Table 23: Water Other Funding Allocation to Cost Components ($)

Table 24 summarizes the total revenue requirement derived in Table 19 by cost component.

Table 24: FY 2024 Water Cost-of-Service Requirements by Cost Component

Other FundingMethodology / Allocation BasisAccount ServicesMeter CapacityConveyance TotalDirect TransfersO&M Allocation7.9% 49.9% 42.3% 100.0%Other Transfers OutO&M Allocation7.9% 49.9% 42.3% 100.0%Licenses and PermitsO&M Allocation7.9% 49.9% 42.3% 100.0%Other FeesO&M Allocation7.9% 49.9% 42.3% 100.0%Charges for ServicesO&M Allocation7.9% 49.9% 42.3% 100.0%Capital ContributionsO&M Allocation7.9% 49.9% 42.3% 100.0%Other RevenueO&M Allocation7.9% 49.9% 42.3% 100.0%Reserve FundingO&M Allocation7.9% 49.9% 42.3% 100.0%Other FundingMethodology / Allocation BasisAccount ServicesMeter CapacityConveyance TotalDirect TransfersO&M Allocation$45,458 $288,214 $244,178 $577,850Other Transfers OutO&M Allocation$28,110 $178,226 $150,995 $357,331Licenses and PermitsO&M Allocation($1,180) ($7,482) ($6,338) ($15,000)Other FeesO&M Allocation($4,169) ($26,435) ($22,396) ($53,000)Charges for ServicesO&M Allocation($11,092) ($70,326) ($59,581) ($141,000)Capital ContributionsO&M Allocation($78,903) ($500,265) ($423,831) ($1,003,000)Other RevenueO&M Allocation($7,395) ($46,884) ($39,721) ($94,000)Reserve FundingO&M Allocation$570,716 $3,618,480 $3,065,623 $7,254,819Total Allocation ($) $541,545 $3,433,527 $2,908,929 $6,884,000Revenue RequirementAccount ServicesMeter Capacity Conveyance TotalOperating $2,700,250 $17,120,250 $14,504,500 $34,325,000Other Funding $541,545 $3,433,527 $2,908,929 $6,884,000COS Requirements $3,241,795 $20,553,777 $17,413,429 $41,209,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Rate Design – Water Utility
Develop Units of Service
Unit rates for each cost component are derived by spreading the corresponding revenue requirements over appropriate units of service (distribution basis). This approach provides a clear connection between costs incurred and the proportionate share attributable to each customer. When designing rates, the most critical component is to connect costs to the proposed rates, resulting in a cost-based rate structure in compliance with Proposition 218.

In the previous section, costs were summarized by expense category and allocated to cost components based on how each cost is incurred. The next step in designing rates is to allocate each cost component to customers through fixed charges and variable rates. The method of apportionment considers each customer’s share of system costs and is reflected by the units of service used to equitably distribute the cost components to each customer account. The distribution basis varies by cost component and includes total accounts, Meter Equivalents (MEs), which reflect demand placed on the system, and total water sales.

For non-metered accounts, projected water usage was estimated based on the average annual usage of metered customers (12.20 CCF) and water efficiency standards for indoor use on a gallons per capita per day (gpcd) basis. Using an indoor water use of 55 gpcd, projected indoor usage equals 5.88 CCF, which is assumed for all non-metered accounts. Projected outdoor water usage is derived by taking the difference between the average annual metered usage of 12.2 CCF and indoor usage of 5.88 CCF (result is 6.32 CCF).

The 6.32 CCF is assigned to the 4,900 square foot (s.f.) lot size and each lot size category greater than 4,900 s.f. has an increased projected outdoor water usage to account for the bigger lot sizes. Table 25 reflects the projected water usage for non-metered accounts.

In Table 26, each meter size was assigned an equivalency factor based on the flow characteristics of a 3/4” meter based on the safe maximum operating flow capacity for City meter types, as identified in the AWWA M1 Manual, 6th Edition, Table B-2. The safe maximum operating flow capacity for each meter was divided by the base meters' safe operating flow capacity of 30 gallons per minute (gpm) to determine the equivalent meter ratio. The Capacity Ratio represents the potential flow through each meter size compared to the flow through a 3/4” meter to establish parity between meter sizes. Total MEs are determined by multiplying the number of meters by the Capacity Ratio and then multiplying the result by the number of billing periods. Non- Metered are assigned a base ME of 1.0.

Table 25: Metered and Non-Metered Projected Water Usage

Customer Class AccountsSquare FootageAllocation FactorMonthly Indoor AllotmentMonthly Outdoor AllotmentMonthly Water AllotmentAnnual / Projected Usage (CCF)[A] [B] [C] = (B / 4,900) [D] [E] = C x 6.32 ccf [F] = (D + E) [G] = F x A x 12 billsMetered N/A N/A N/A N/A N/A N/A10,977,021 ccfNon-MeteredSingle family lots up to 4,900 s.f. 57 4,900 1.00 5.9 6.32 ccf 12.2 ccf8,345 ccfSingle family lots 4,901 - 8,900 s.f. 13 6,901 1.41 5.9 8.9 ccf 14.8 ccf2,306 ccfSingle family lots 8,901 - 12,000 s.f. 1 10,451 2.13 5.9 13.5 ccf 19.4 ccf232 ccfSingle family lots 12,001 - 15,000 s.f. 1 13,501 2.76 5.9 17.4 ccf 23.3 ccf280 ccfTotal Variable Units of Service 10,988,183 ccf City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 26: Water Accounts and Meter Equivalents

AWWA Capacity (gpm)AWWA Capacity RatioNumber of AccountsMeter EquivalentsAnnual Bills Annual ME's[A] [B] = (A / 30) [C] [D] = (B x C) [E] = (C x 12) [F] = (D x 12)Metered3/4" 30 1.00 37,126 37,126 445,512 445,5121" 50 1.67 9,804 16,340 117,648 196,0801 1/2" 100 3.33 852 2,840 10,224 34,0802" 160 5.33 1,216 6,485 14,592 77,8243" 350 11.67 173 2,018 2,076 24,2204" 630 21.00 123 2,583 1,476 30,9966" 1,300 43.33 33 1,430 396 17,1608" 2,800 93.33 11 1,027 132 12,32010" 4,200 140.00 7 980 84 11,760Total Metered 49,345 70,829 592,140 849,952Non-MeteredSingle family lots up to 4,900 s.f.30 1.00 57 57 684 684Single family lots 4,901 - 8,900 s.f.30 1.00 13 13 156 156Single family lots 8,901 - 12,000 s.f.30 1.00 1 1 12 12Single family lots 12,001 - 15,000 s.f.30 1.00 1 1 12 12Total Non-Metered 72 72 864 864Total Fixed Units of Service 49,417 70,901 593,004 850,816 Meter Size
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With the units of service shown in Table 25 and Table 26, the distribution basis can be identified for each cost component. Figure 13 identifies the total revenue requirements by cost component from Table 24 and the corresponding units of service.

Figure 13: Water Distribution Basis and Units of Service by Cost Component

Using the FY 2024 revenue requirements, the cost-of-service allocates expenses to customers based on the service demands that each place on the system (cost causation). This cost causation approach ensures that each customer proportionately shares in the financial obligation of the utility. For the following unit rate computations for each cost component, unit rates were rounded up to the nearest penny.

Fixed Cost Recovery
Account Services
Account Services costs are incurred by each customer regardless of the type of land use, meter size, or total amount of water used in a month. These costs should be spread equally across all accounts. This is achieved by using the distribution basis of Total Bills. Total Bills are determined by multiplying the number of accounts by 12 billing periods (Table 26). Therefore, the revenue requirement for Account Services is apportioned based on the Total Bills to determine the monthly unit cost-of-service shown in Table 27.

Table 27: FY 2024 Water Account Services Monthly Unit Rate

Account Services Component Unit RateRevenue Requirement $3,241,795÷ Annual Bills 593,004Monthly Unit Rate $5.47

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Meter Capacity
The Meter Capacity includes system-wide operations costs, capital, and a portion of reserves. The revenue requirement for Meter Capacity is apportioned based on meter size. Larger sized meters can generate a greater demand on the system from the amount of potential water flow that may pass through the meter in gpm. The revenue requirement for Meter Capacity is apportioned to meter size as represented by total MEs (Table 26) in Table 28.

Table 28: FY 2024 Water Meter Capacity Monthly Unit Rate

Variable Cost Recovery
The remaining cost component of Conveyance is recovered through a variable rate. The proposed rate structure consists of a uniform rate per CCF across all metered accounts. Non-metered accounts are allocated a proportional share of variable cost based on their projected usage shown in Table 25 and incorporated as part of the non-metered accounts’ monthly flat charges.

Conveyance
Conveyance costs are incurred based on the total volume of water produced and delivered to customers throughout the year. Therefore, the revenue requirement for Conveyance is apportioned based on projected total water usage identified in Table 25 to determine the unit cost-of-service, as shown in Table 29. The amount allocated to non-metered accounts is further apportioned to the five corresponding non-metered rate categories as shown in Table 30, based on the projected usage in Table 25.

Table 29: FY 2024 Water Conveyance Unit Rate

Meter Capacity Component Unit RateRevenue Requirement $20,553,777÷ Annual ME's 850,816Monthly Unit Rate $24.16 Projected Usage (ccf)% AllocationRevenue RequirementUnit Rate[A] [B] = A as % [C] = Rev Req x B[D] = C ÷ AMetered 10,977,021 99.9% $17,395,739$1.59Non-Metered 11,162 0.1%$17,689Further AllocatedTotal 10,988,183 100.0% $17,413,429Customer Class City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 30: FY 2024 Non-Metered Conveyance Monthly Unit Rate

Projected Usage% AllocationRevenue RequirementUnits of Service Unit Rate[A] [B] = A as % [C] = Rev Req x B [D] = Annual Bills[E] = C ÷ DSingle family lots up to 4,900 s.f. 8,345 74.8% $13,224 684$19.34Single family lots 4,901 - 8,900 s.f. 2,306 20.7% $3,654 156$23.43Single family lots 8,901 - 12,000 s.f. 232 2.1% $368 12$30.68Single family lots 12,001 - 15,000 s.f. 280 2.5% $443 12$36.92Total 11,162 100.0% $17,689 864Non-Metered City of Roseville – Water, Wastewater, and Recycled Rate Study

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Cost-Based Rates – Water Utility
Proposed Monthly Fixed Charges
The proposed monthly fixed charges for FY 2024 are shown in Table 31, reflecting the combined charges of Account Services and Meter Capacity. Meter Capacity charges increase with the size of the meter in relation to the Capacity Factors. Table 32 provides the two-year metered fixed charge schedule through FY 2025.

For FY 2025, the 4% revenue adjustment is applied across-the-board to the cost-of-service rates derived for FY 2024.

Table 31: FY 2024 Water Monthly Fixed Charges

Table 32: Proposed Water Metered Monthly Fixed Charges

Meter SizeMeter Capacity RatioAccount ServicesMeter CapacityProposed Fixed Charge[A] [B] = $5.47 [C] = $24.16 x A [D] = B + CMetered3/4" 1.00 $5.47 $24.16$29.631" 1.67 $5.47 $40.27$45.741 1/2" 3.33 $5.47 $80.53$86.002" 5.33 $5.47 $128.85$134.323" 11.67 $5.47 $281.85$287.324" 21.00 $5.47 $507.32$512.796" 43.33 $5.47 $1,046.84$1,052.318" 93.33 $5.47 $2,254.73$2,260.2010" 140.00 $5.47 $3,382.09$3,387.56Revenue Adjustments: 4.0%Fixed Meter Charges ($/Month)Meter Size FY 2024 FY 20253/4" $29.63 $30.821" $45.74 $47.571 1/2" $86.00 $89.442" $134.32 $139.703" $287.32 $298.824" $512.79 $533.316" $1,052.31 $1,094.418" $2,260.20 $2,350.6110" $3,387.56 $3,523.07 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Proposed Variable Rate
Table 33 provides the two-year variable rate schedule through FY 2025. For FY 2025, the 4% revenue adjustment is applied across-the-board to the cost-of-service rates derived for FY 2024 while accounting for increased usage from account growth.

Table 33: Proposed Water Variable Rates

Proposed Non-Metered Monthly Flat Charges
Table 34 provides the two-year non-metered flat charge schedule through FY 2025. The monthly flat charges combine the variable charges and fixed charges identified in Table 30 and Table 31 for FY 2024. For FY 2025, the 4% revenue adjustment is applied across-the-board to the cost-of-service rates derived for FY 2024.

Table 34: Proposed Water Non-Metered Monthly Flat Charges

Revenue Adjustments: 4.0%Variable Rates ($/CCF)Metered Usage Rate FY 2024 FY 2025Uniform $1.59 $1.66Revenue Adjustments: 4.0%Non-Metered ($/Month)Flat Monthly Charges FY 2024 FY 2025Single family lots up to 4,900 s.f. $48.97 $50.93Single family lots 4,901 - 8,900 s.f. $53.06 $55.19Single family lots 8,901 - 12,000 s.f. $60.31 $62.73Single family lots 12,001 - 15,000 s.f. $66.55 $69.22 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Wastewater Utility
Wastewater System
The City operates two wastewater treatment plant facilities that serve the City of Roseville, portions of Placer County, and several unincorporated communities. The two treatment plants combined can treat a total capacity of 30 MGD. The City’s wastewater collections system includes 505 miles of sewer mainlines and the plants treat approximately 4.0 MGD of effluent from City customers.

Figure 14: City of Roseville Wastewater System

The City’s capital spending will average approximately $8.5M annually through the Financial Plan Period.

Figure 15 shows the City’s capital repair and replacement plan through FY 2028.

Figure 15: Wastewater Capital Improvement Plan

505 miles of mainlines30 MGD CapacityFlow - 4.0 MGD 61,508 Sewer UnitsWastewater System

City of Roseville – Water, Wastewater, and Recycled Rate Study

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Customers
For FY 2023, the City projected a 1% growth rate, resulting in 60,327 sewer units, which includes total residential dwelling units and commercial accounts. Table 35 provides a summary of accounts and sewer units by customer class.

Table 35: Wastewater Accounts by Customer Class

The current wastewater rate structure consists of monthly fixed charges and variable rates for commercial customers for water usage over 560 cubic feet. Existing charges and rates are identified in Table 36.

Table 36: FY 2023 Wastewater Fixed Charges and Variable Rates

Sewer Monthly Service Units Sewer UnitsResidential 57,727Commercial - Metered 1,612Commercial - Flat 1,576Total Sewer Monthly Service Units 60,915Monthly Fixed Charges ($/ Month)Residential (per month) $47.56Commercial - Metered $47.56Commercial - Flat $47.56Variable Rate ($/ccf)Customer Class ExistingCommercial - Metered $4.43Customer Class Existing City of Roseville – Water, Wastewater, and Recycled Rate Study

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Financial Plan Overview - Wastewater Utility
Financial Planning Assumptions
Developing a long-term financial plan requires understanding the utility’s financial position by evaluating existing revenue streams, ongoing expenses, how those expenses will change over time, existing debt requirements, new strategic objectives, and reserve policies. With these considerations, certain assumptions are required for projecting revenues, expenses, and expected ending fund balances. Table 37 identifies assumptions used for forecasting revenues, and Table 38 identifies assumptions used for forecasting increases in expenses through the Financial Plan Period.

Table 37: Wastewater Assumptions for Forecasting Revenues

Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Revenue EscalationNon-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Non-Rate Revenues 2.0% 2.0% 2.0% 2.0% 2.0%Reserve Interest 0.5% 0.5% 0.5% 0.5% 0.5%Account GrowthResidential 1.0% 1.0% 1.0% 0.0% 0.0%Commercial - Metered 1.0% 1.0% 1.0% 0.0% 0.0%Commercial - Flat 0.0% 0.0% 0.0% 0.0% 0.0%Sewer Monthly Service Units FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Residential 58,304 58,887 59,476 59,476 59,476Commercial - Metered 1,628 1,644 1,660 1,660 1,660Commercial - Flat 1,576 1,576 1,576 1,576 1,576Total Sewer Monthly Service Units 61,508 62,107 62,712 62,712 62,712Billed Consumption by Customer Class FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Commercial - Metered 1,034,899 1,045,248 1,055,700 1,055,700 1,055,700 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Table 38: Wastewater Assumptions for Forecasting Expenses

Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Expenditure EscalationBenefits Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastCapitalENR - SF8.0% 3.5% 3.5% 3.5% 3.5%CPICPI - SF (BLS)3.0% 3.0% 3.0% 3.0% 3.0%Utilities 15.0% 4.0% 4.0% 4.0% 4.0%Chemicals 59.0% 3.0% 3.0% 3.0% 3.0%Indirect 7.0% 10.0% 10.0% 10.0% 10.0%IT 10.0% 10.0% 10.0% 10.0% 10.0%Facilities 10.0% 5.0% 5.0% 5.0% 5.0%Fleet 5.0% 5.0% 5.0% 5.0% 5.0%General Liability 90.0% 40.0% 40.0% 40.0% 40.0%Worker's Comp 60.0% 20.0% 20.0% 20.0% 20.0%General Costs 4.0% 4.0% 4.0% 4.0% 4.0%Non-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Pers / OPEB Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastSalaries Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor Forecast City of Roseville – Water, Wastewater, and Recycled Rate Study

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Current Financial Position
Revenues
Based on the forecasting assumptions, revenues were calculated using existing rates (Table 36), multiplied by the number of sewer units and projected billable water usage (Table 37). Table 39 shows the calculated revenues through the Financial Plan Period. Table 40 provides a summary of calculated rate revenues (rounded to thousands) and other non-rate revenues available through the Financial Plan Period. Non-rate revenues increase over the Financial Plan Period using the inflation factor in Table 37.

Table 39: Wastewater Calculated Rate Revenues

Table 40: Wastewater Projected Revenues

Fixed Revenues FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Monthly Service ChargeResidential $33,275,259 $33,607,989 $33,944,143 $33,944,143 $33,944,143Commercial - Metered $929,132 $938,264 $947,395 $947,395 $947,395Commercial - Flat $899,455 $899,455 $899,455 $899,455 $899,455Total Monthly Service Charge $35,103,846 $35,445,707 $35,790,993 $35,790,993 $35,790,993Variable Revenues FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Commercial - Metered $4,584,603 $4,630,449 $4,676,751 $4,676,751 $4,676,751Total Variable Rate Revenue $4,584,603 $4,630,449 $4,676,751 $4,676,751 $4,676,751Total Rate Revenue $39,688,448 $40,076,156 $40,467,744 $40,467,744 $40,467,744Revenue Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Rate RevenueMonthly Service Charge $35,104,000 $35,446,000 $35,791,000 $35,791,000 $35,791,000Variable Revenues $4,585,000 $4,630,000 $4,677,000 $4,677,000 $4,677,000Subtotal Rate Revenue $39,689,000 $40,076,000 $40,468,000 $40,468,000 $40,468,000RevenuesOther Fees $6,980,000 $6,980,000 $6,980,000 $6,980,000 $6,980,000Charges for Services $141,000 $141,000 $141,000 $141,000 $141,000Capital Contributions $40,000 $40,000 $40,000 $40,000 $40,000Other Revenue $270,000 $270,000 $270,000 $270,000 $270,000Transfers In - Operating $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000Subtotal Revenues $8,431,000 $8,431,000 $8,431,000 $8,431,000 $8,431,000Total Revenues $48,120,000 $48,507,000 $48,899,000 $48,899,000 $48,899,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Expenses
The FY 2023 budget was used as the utility's baseline expenses and adjusted in subsequent years based on the escalation factors shown in Table 38. In addition, the City recently completed an independent valuation on staffing needs throughout the City and the results were captured within a long-term labor staffing forecast (labor forecast), which were incorporated into the O&M expense projections. Table 41 provides projected O&M expenses through the Financial Plan Period (rounded to thousands). Each expense category includes detailed line-item expenditures that were discussed with staff to determine the appropriate escalation factor to use for forecasting how costs will increase over time.

Table 41: Wastewater Projected O&M Expenses

Expenditure Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesWastewater UBS - Admin $657,000 $719,000 $752,000 $788,000 $829,000Wastewater UBS - Field $328,000 $364,000 $266,000 $280,000 $297,000Wastewater UBS - Billing $524,000 $564,000 $586,000 $609,000 $635,000Wastewater UBS - Cust Serv $367,000 $399,000 $349,000 $381,000 $401,000 Wastewater Administration $2,797,000 $2,977,000 $3,346,000 $3,560,000 $3,800,000 Industrial Treatment $60,000 $194,000 $200,000 $392,000 $405,000 Environmental Treatment Lab $923,000 $1,087,000 $1,245,000 $1,276,000 $1,310,000 Dry Creek WWTP $11,295,000 $11,765,000 $12,258,000 $12,783,000 $13,370,000 Pleasant Grove WWTP $11,444,000 $11,911,000 $12,397,000 $13,141,000 $13,710,000 Wastewater Collection $7,623,000 $7,970,000 $8,441,000 $8,837,000 $9,305,000 Wastewater Maintenance $2,279,000 $2,378,000 $2,705,000 $2,899,000 $3,152,000 Wastewater Outreach $294,000 $305,000 $317,000 $330,000 $343,000 Wastewater UEC $187,000 $217,000 $234,000 $244,000 $256,000 Wastewater EU Admin $1,254,000 $1,307,000 $1,357,000 $1,413,000 $1,479,000 Wastewater EU Tech Serv $1,858,000 $1,943,000 $2,015,000 $2,099,000 $2,196,000 Wastewater EAM Support and Maintenance $135,000 $141,000 $176,000 $184,000 $193,000 Non-Classified $1,897,000 $2,087,000 $2,295,000 $2,525,000 $2,777,000 Retiree Payments $681,000 $701,000 $722,000 $744,000 $766,000Vehicle Additions $228,000 $116,000 $866,000 $109,000 $253,000Subtotal Operating Expenses $44,831,000 $47,145,000 $50,527,000 $52,594,000 $55,477,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Reserves
The wastewater utility incorporates similar reserves as the water utility. These reserves help mitigate risks to the utility by ensuring sufficient cash is on hand for daily operations and to fund annual system improvements.

In addition, these reserves help smooth rates and mitigate rate spikes due to emergencies or above-average system costs. The most recent adopted reserve policies identify each reserve's function. Table 42 summarizes the minimum reserve requirements and the ideal funding targets of each reserve.

Table 42: Wastewater Reserve Requirements and Targets
Reserve Minimum Requirement Reserve Target
Operating 90 days of operating costs 180 days of operating costs Rehabilitation 1% of Asset Value -
Rate Stabilization 50% of next year’s operating expenses - The reserve balance as of July 1, 2022 equaled approximately $65.8M.

Financial Outlook at Existing Rates
Calculating revenue using existing rates and projecting expenses helps determine the current financial health of the utility. Revenues from existing rates are sufficient to fund O&M through FY 2025; however, in FY 2026 expenses outpace revenues. Only a portion of the system needs can be funded with projected net operating income resulting in the use of reserves to cover the remaining capital costs. Figure 16 illustrates the operating position of the utility, where O&M expenses are identified with the dashed red trendline, and total revenues at existing rates are shown by the horizontal black trendline. The bars represent the amount of net operating income available. Figure 17 reflects the projected ending balances of reserves after funding operating and capital projects through the Financial Plan Period. By FY 2026, reserves are below the minimum target.

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Figure 16: Wastewater Current Operating Financial Position

Figure 17: Wastewater Projected Ending Reserves at Existing Rates

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Proposed Financial Plan – Wastewater Utility
From the financial outlook at existing rates, a proposed financial plan can be developed to adequately fund the multi-year revenue requirements, while meeting reserve requirements. Based on funding the capital plan over the Financial Plan Period and ensuring reserves meet minimum targets, Table 43 forecasts projected revenues and expenses over the Financial Plan Period, including projected revenue adjustments outside the Rate Setting Period for FY 2026 through FY 2028.

Table 43: Wastewater Proposed Financial Plan

RevenueFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Monthly Service Charge $35,104,000 $35,446,000 $35,791,000 $35,791,000 $35,791,000Variable Revenues $4,585,000 $4,630,000 $4,677,000 $4,677,000 $4,677,000Total Rate Revenue $39,689,000 $40,076,000 $40,468,000 $40,468,000 $40,468,000Additional Revenue (from revenue adjustments):Fiscal YearRevenue AdjustmentFY 20246.0%$2,381,000 $2,405,000 $2,428,000 $2,428,000 $2,428,000FY 20256.0%$2,549,000 $2,574,000 $2,574,000 $2,574,000FY 20267.0%$3,183,000 $3,183,000 $3,183,000FY 20277.0%$3,406,000 $3,406,000FY 20287.0%$3,644,000Total Additional Revenue $2,381,000 $4,954,000 $8,185,000 $11,591,000 $15,235,000Projected Rate Revenues $42,070,000 $45,030,000 $48,653,000 $52,059,000 $55,703,000Other RevenueOther Fees $6,980,000 $6,980,000 $6,980,000 $6,980,000 $6,980,000Charges for Services $141,000 $141,000 $141,000 $141,000 $141,000Capital Contributions $40,000 $40,000 $40,000 $40,000 $40,000Other Revenue $270,000 $270,000 $270,000 $270,000 $270,000Transfers In - Operating $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000Subtotal Other Revenue $8,431,000 $8,431,000 $8,431,000 $8,431,000 $8,431,000Total Revenues $50,501,000 $53,461,000 $57,084,000 $60,490,000 $64,134,000O&M ExpensesFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesWastewater UBS - Admin $657,000 $719,000 $752,000 $788,000 $829,000Wastewater UBS - Field $328,000 $364,000 $266,000 $280,000 $297,000Wastewater UBS - Billing $524,000 $564,000 $586,000 $609,000 $635,000Wastewater UBS - Cust Serv $367,000 $399,000 $349,000 $381,000 $401,000 Wastewater Administration $2,797,000 $2,977,000 $3,346,000 $3,560,000 $3,800,000 Industrial Treatment $60,000 $194,000 $200,000 $392,000 $405,000 Environmental Treatment Lab $923,000 $1,087,000 $1,245,000 $1,276,000 $1,310,000 Dry Creek WWTP $11,295,000 $11,765,000 $12,258,000 $12,783,000 $13,370,000 Pleasant Grove WWTP $11,444,000 $11,911,000 $12,397,000 $13,141,000 $13,710,000 Wastewater Collection $7,623,000 $7,970,000 $8,441,000 $8,837,000 $9,305,000 Wastewater Maintenance $2,279,000 $2,378,000 $2,705,000 $2,899,000 $3,152,000 Wastewater Outreach $294,000 $305,000 $317,000 $330,000 $343,000 Wastewater UEC $187,000 $217,000 $234,000 $244,000 $256,000 Wastewater EU Admin $1,254,000 $1,307,000 $1,357,000 $1,413,000 $1,479,000 Wastewater EU Tech Serv $1,858,000 $1,943,000 $2,015,000 $2,099,000 $2,196,000 Wastewater EAM Support and Maintenance $135,000 $141,000 $176,000 $184,000 $193,000 Non-Classified $1,897,000 $2,087,000 $2,295,000 $2,525,000 $2,777,000 Retiree Payments $681,000 $701,000 $722,000 $744,000 $766,000Vehicle Additions $228,000 $116,000 $866,000 $109,000 $253,000Total Expenses $44,831,000 $47,145,000 $50,527,000 $52,594,000 $55,477,000Net Cashflow (Before Transfers) $5,670,000 $6,316,000 $6,557,000 $7,896,000 $8,657,000 Table 40Table 40Table 41
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Table 44: Wastewater Transfers and Reserve Activity

Net CashflowFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating Net Income $5,670,000 $6,316,000 $6,557,000 $7,896,000 $8,657,000Wastewater Enterprise Direct TransfersTransfers (to)/from Rehabilitation Fund $0 $0 $0 $0 $0Transfers (to)/from Rate Stabilization Fund $0 $0 $0 $0 $0Transfers (to)/from Construction Fund $0 $0 $0 $0 $0Total Wastewater Enterprise Direct Transfers $0 $0 $0 $0 $0Other City Department TransfersTransfers (to) Utility Impact Reimbursement Fund $0 $0 $0 $0 $0Transfers (to) RFA Debt Service (Rent) ($38,756) ($38,636) ($38,488) ($38,488) ($38,488)Transfers (to)/from Recycled Operations Fund $579,600 $602,784 $626,895 $651,971 $678,050Total Other City Department Transfers $540,844 $564,148 $588,407 $613,483 $639,562Net Cashflow (After Transfers) $6,210,844 $6,880,148 $7,145,407 $8,509,483 $9,296,562Operating FundFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $18,876,578 $22,210,901 $23,363,240 $25,038,126 $26,064,204Transfers (Net Cashflow (After Transfers) ) $6,210,844 $6,880,148 $7,145,407 $8,509,483 $9,296,562Less:CIP - Operating ($135,000) $0 $0 $0 $0Transfers from/(to) Rehabilitation Fund ($2,843,983) ($5,841,460) ($5,591,223) ($7,610,842) ($8,002,246)Subtotal Operating Fund $22,108,438 $23,249,589 $24,917,425 $25,936,767 $27,358,521Interest Earnings $102,463 $113,651 $120,702 $127,437 $133,557Ending Balance $22,210,901 $23,363,240 $25,038,126 $26,064,204 $27,492,077Rehabilitation FundFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $22,877,063 $18,249,424 $15,795,529 $16,995,174 $14,516,581Plus:Direct transfers to/(from) Rehabilitation Fund $0 $0 $0 $0 $0Transfers from/(to) Operating Fund $2,843,983 $5,841,460 $5,591,223 $7,610,842 $8,002,246Less:CIP - Rehabilitation ($7,574,182) ($8,380,255) ($4,473,350) ($10,168,019) ($11,676,959)Subtotal Rehabilitation Fund $18,146,864 $15,710,629 $16,913,402 $14,437,998 $10,841,867Interest Earnings $102,560 $84,900 $81,772 $78,583 $63,396Ending Balance $18,249,424 $15,795,529 $16,995,174 $14,516,581 $10,905,264Rate Stabilization ReserveFY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $15,599,882 $15,677,881 $15,756,271 $15,835,052 $15,914,227Direct transfers to/(from) Rate Stabilization Reserve $0 $0 $0 $0 $0Subtotal $15,599,882 $15,677,881 $15,756,271 $15,835,052 $15,914,227Interest Income$77,999 $78,389 $78,781 $79,175 $79,571Ending Balance $15,677,881 $15,756,271 $15,835,052 $15,914,227 $15,993,798Total Reserves - Ending Balance $56,138,206 $54,915,040 $57,868,353 $56,495,012 $54,391,139 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Figure 18 identifies the operating position based on the proposed financial plan, and Figure 19 shows the capital plan with funding sources. Figure 20 identifies the ending reserve balance, after direct transfers to the rehabilitation fund for capital expenses.

Figure 18: Wastewater Proposed Operating Position

Figure 19: Wastewater Capital Improvement Plan with Funding Sources

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Figure 20: Wastewater Proposed Ending Reserves

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Cost-of-Service Analysis – Wastewater Utility
Cost-of-Service Process
The proposed wastewater rates derived within this report maintains the prior cost-of-service analysis. The City is currently conducting an audit on assigned Sewer Units to each parcel at the point of development and whether the Sewer Units require adjustments based on the current land use of each parcel. Therefore, proposed wastewater rates over the Rate Setting Period applies the revenue adjustments identified in Table 43 to the existing wastewater rates. An updated cost-of-service analysis will be completed during the next rate cycle once the Sewer Unit audit is completed.

Revenue Requirements
The proposed revenue requirements over the Rate Setting Period include O&M expenses, treatment plant expenses, available revenue offsets, non-rate revenues, and reserve funding. The proposed revenue adjustments and corresponding rates accumulate the necessary funding over the Rate Setting Period to fund O&M, capital projects and comply with minimum reserve requirements. The results of the financial plan analysis are summarized in Table 45 and represent the revenue required from rates over the Rate Setting Period (FY 2024 and FY 2025).

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Table 45: FY 2024 – FY 2025 Wastewater Revenue Requirements

FY 2024 FY 2025Revenue Requirements Total TotalOperations and MaintenanceWastewater UBS - Admin $657,000 $719,000Wastewater UBS - Field $328,000 $364,000Wastewater UBS - Billing $524,000 $564,000Wastewater UBS - Cust Serv $367,000 $399,000 Wastewater Administration $2,797,000 $2,977,000 Industrial Treatment $60,000 $194,000 Environmental Treatment Lab $923,000 $1,087,000 Dry Creek WWTP $11,295,000 $11,765,000 Pleasant Grove WWTP $11,444,000 $11,911,000 Wastewater Collection $7,623,000 $7,970,000 Wastewater Maintenance $2,279,000 $2,378,000 Wastewater Outreach $294,000 $305,000 Wastewater UEC $187,000 $217,000 Wastewater EU Admin $1,254,000 $1,307,000 Wastewater EU Tech Serv $1,858,000 $1,943,000 Wastewater EAM Support and Maintenance $135,000 $141,000 Non-Classified $1,897,000 $2,087,000 Retiree Payments $681,000 $701,000Vehicle Additions $228,000 $116,000Total Operations and Maintenance $44,831,000 $47,145,000Other FundingOther ExpensesDirect Transfers $0 $0Other Transfers Out ($540,844) ($564,148)Total Other Expenses ($540,844) ($564,148)Revenue OffsetsOther Fees ($6,980,000) ($6,980,000)Charges for Services ($141,000) ($141,000)Capital Contributions ($40,000) ($40,000)Other Revenue ($270,000) ($270,000)Transfers In - Operating ($1,000,000) ($1,000,000)Total ($8,431,000) ($8,431,000)AdjustmentsReserve Funding $6,210,844 $6,880,148Total Adjustments $6,210,844 $6,880,148Total Other Funding ($2,761,000) ($2,115,000)Revenue Required from Rates $42,070,000 $45,030,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Cost-Based Rates – Wastewater Utility
Proposed Charges
Table 46 provides the two-year wastewater rate schedule through FY 2025. The revenue adjustment for FY 2024 (6%) is applied to the current rates to derive proposed FY 2024 wastewater rates. Similarly, the revenue adjustment for FY 2025 (6%) is applied across-the-board to the proposed FY 2024 wastewater rates to derive FY 2025 proposed wastewater rates.

Table 46: Proposed Wastewater Fixed Charges and Variable Rates

Revenue Adjustments: 6.0% 6.0%Monthly Fixed Charges ($/ Month)Customer ClassExistingFY 2024FY 2025Residential (per month) $47.56 $50.42 $53.45Commercial - Metered $47.56 $50.42 $53.45Commercial - Flat $47.56 $50.42 $53.45Variable Rate ($/ccf)Customer Class Existing FY 2024 FY 2025Commercial - Metered $4.4300 $4.6958 $4.9776 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Recycled Water
The wastewater system produces approximately one billion gallons of recycled water annually. The City has been ramping up its reinvestment in the recycled water system that keeps up with its asset depreciation. The increase in capital spending will continue to gradually build up over the years, with $486k in FY 2024 and reaching $928k by FY 2028. Figure 21 shows the City’s capital plan through the Financial Plan Period.

Figure 21: Recycled Capital Improvement Plan

Customers
As of July 1, 2022, the City serves a total of 214 recycled accounts as shown in Table 47 by meter size.

Table 47: Recycled Accounts by Meter Size

Meter SizeNumber of Accounts3/4" 81" 221 1/2" 422" 933" 284" 116" 58" 310" 2Total 214 City of Roseville – Water, Wastewater, and Recycled Rate Study

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The current recycled rate structure consists of monthly fixed charges and a uniform variable rate. Existing meter charges and variable rate are identified in Table 48.

Table 48: FY 2023 Recycled Water Fixed Charges and Variable Rate

Fixed Meter Charges ($/Month)3/4" $20.641" $31.871 1/2" $59.952" $93.633" $200.324" $357.536" $733.728" $1,575.9410" $2,362.01Variable Rate ($/CCF)Recycled ExistingVariable Unit Rate $1.02Meter size Existing City of Roseville – Water, Wastewater, and Recycled Rate Study

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Financial Plan Overview – Recycled Utility
Financial Planning Assumptions
Similar to the other utilities, certain assumptions are required for projecting revenues, expenses, and expected ending fund balances. Table 49 identifies assumptions used for forecasting revenues. Table 50 identifies assumptions used for forecasting increases in expenses through the Financial Plan Period.

Table 49: Recycled Assumptions for Forecasting Revenues

Table 50: Recycled Assumptions for Forecasting Expenses

Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Revenue EscalationNon-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Non-Rate Revenues 2.0% 2.0% 2.0% 2.0% 2.0%Reserve Interest 0.5% 0.5% 0.5% 0.5% 0.5%Meter Size FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Recycled3/4" 8 8 8 8 81" 22 22 22 22 221 1/2" 42 42 42 42 422" 93 93 93 93 933" 28 28 28 28 284" 11 11 11 11 116" 5 5 5 5 58" 3 3 3 3 310" 2 2 2 2 2Subtotal Meter Size 214 214 214 214 214Consumption (CCF) FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Recycled 1,630,983 1,630,983 1,630,983 1,630,983 1,630,983Key Assumptions FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Expenditure EscalationBenefits Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastCapitalENR - SF8.0% 3.5% 3.5% 3.5% 3.5%CPICPI - SF (BLS)3.0% 3.0% 3.0% 3.0% 3.0%Utilities 15.0% 4.0% 4.0% 4.0% 4.0%Chemicals 59.0% 3.0% 3.0% 3.0% 3.0%Indirect 9.0% 10.0% 10.0% 10.0% 10.0%IT 10.0% 10.0% 10.0% 10.0% 10.0%Facilities 5.0% 5.0% 5.0% 5.0% 5.0%Fleet 5.0% 5.0% 5.0% 5.0% 5.0%General Liability 90.0% 40.0% 40.0% 40.0% 40.0%Worker's Comp 60.0% 20.0% 20.0% 20.0% 20.0%General Costs 4.0% 4.0% 4.0% 4.0% 4.0%Non-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%Pers / OPEB Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor ForecastSalaries Labor Forecast Labor Forecast Labor Forecast Labor Forecast Labor Forecast City of Roseville – Water, Wastewater, and Recycled Rate Study

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Current Financial Position
Revenues
Based on the forecasting assumptions, revenues were calculated using existing recycled rates (Table 48), multiplied by meters by size and recycled water usage (Table 49). Table 51 shows the calculated revenues through the Financial Plan Period. Table 52 provides a summary of calculated rate revenues and other non- rate revenues available through the Financial Plan Period (rounded to thousands). Non-rate revenues increase over the Financial Plan Period using the inflation factor in Table 49.

Table 51: Recycled Calculated Rate Revenues

Table 52: Recycled Projected Revenues

Calculated Revenue FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Monthly Service Charge Revenue $417,048 $417,048 $417,048 $417,048 $417,048Variable Revenues $1,663,603 $1,663,603 $1,663,603 $1,663,603 $1,663,603Total Rate Revenue $2,080,650 $2,080,650 $2,080,650 $2,080,650 $2,080,650Revenue Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Rate RevenueMonthly Service Charge Revenue $417,000 $417,000 $417,000 $417,000 $417,000Variable Revenues $1,664,000 $1,664,000 $1,664,000 $1,664,000 $1,664,000Subtotal Rate Revenue $2,081,000 $2,081,000 $2,081,000 $2,081,000 $2,081,000RevenuesLicenses and Permits $1,000 $1,000 $1,000 $1,000 $1,000Other Fees $4,000 $4,000 $4,000 $4,000 $4,000Capital Contributions $15,000 $15,000 $15,000 $15,000 $15,000Subtotal Revenues $20,000 $20,000 $20,000 $20,000 $20,000Total Revenues $2,101,000 $2,101,000 $2,101,000 $2,101,000 $2,101,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Expenses
The FY 2023 budget was used as the utility's baseline expenses and adjusted in subsequent years based on the escalation factors shown in Table 50. In addition, the City recently completed an independent valuation on staffing needs throughout the City and the results were captured within a long-term labor staffing forecast (labor forecast), which were incorporated into the O&M expense projections. Table 53 provides projected O&M expenses through the Financial Plan Period (rounded to thousands). Each expense category includes detailed line-item expenditures that were discussed with staff to determine the appropriate escalation factor to use for forecasting how costs will increase over time. Recycled water also pays a proportional share of electricity costs at the wastewater plants for tertiary treatment of influent.

Table 53: Recycled Projected O&M Expenses

Reserves
For financial planning, similar reserve targets for water and wastewater were used, except for the rehabilitation fund. The rehabilitation target was set at a rolling 5-year average of upcoming capital due to the increase in capital spending planned. These reserves help mitigate risks to the utility by ensuring sufficient cash is on hand for daily operations and to fund annual system improvements. These reserves help smooth rates and mitigate rate spikes due to emergencies or above-average system costs. Table 54 summarizes the recommended minimum reserve requirements and the ideal funding targets of each reserve.

Table 54: Recycled Reserve Requirements and Targets
Reserve Minimum Requirement Reserve Target
Operating 90 days of operating costs 180 days of operating costs Rehabilitation 5-year average of upcoming capital -
Rate Stabilization 25% of next year’s operating expenses 50% of next year’s operating expenses The reserve balance as of July 1, 2022 equaled approximately $600k.

Expenditure Summary FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesRecycled Water $709,000 $864,000 $891,000 $919,000 $1,128,000Allocated Electricity Costs $580,000 $603,000 $627,000 $652,000 $679,000Subtotal Operating Expenses $1,289,000 $1,467,000 $1,518,000 $1,571,000 $1,807,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Financial Outlook at Existing Rates
Calculating revenue using existing rates and projecting expenses helps determines the current financial health of the utility. Revenues from existing rates are sufficient to fund O&M through the Financial Plan Period.

However, only a portion of the system rehabilitation needs can be funded with projected net operating income resulting in the use of reserves to cover the remaining capital costs that are ramping up. By FY 2026, reserves are below the minimum requirement. Figure 22 illustrates the operating position of the utility, where O&M expenses are identified with the dashed red trendline, and total revenues at existing rates are shown by the horizontal black trendline. The bars represent the amount of net operating income available. Figure 23 reflects the projected ending balances of reserves after operating, and capital projects are funded through the Financial Plan Period.

Figure 22: Recycled Current Operating Financial Position

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Figure 23: Recycled Projected Ending Reserves at Existing Rates

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Proposed Financial Plan – Recycled Utility
From the financial outlook at existing rates, a proposed financial plan can be developed to adequately fund the multi-year revenue requirements while meeting reserve requirements. Based on funding the capital plan and ensuring reserves meet minimum targets over the Financial Plan Period, Table 55 forecasts projected revenues and expenses over the Financial Plan Period, including projected revenue adjustments outside the Rate Setting Period for FY 2026 through FY 2028.

Table 55: Recycled Proposed Financial Plan

Revenue FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Rate RevenueMonthly Service Charge Revenue $417,000 $417,000 $417,000 $417,000 $417,000Variable Revenues $1,664,000 $1,664,000 $1,664,000 $1,664,000 $1,664,000Total Rate Revenue $2,081,000 $2,081,000 $2,081,000 $2,081,000 $2,081,000Additional Revenue (from revenue adjustments):Fiscal YearRevenue AdjustmentFY 20245.0%$104,000 $104,000 $104,000 $104,000 $104,000FY 20255.0%$109,000 $109,000 $109,000 $109,000FY 20265.0%$115,000 $115,000 $115,000FY 20275.0%$120,000 $120,000FY 20285.0%$126,000Total Additional Revenue $104,000 $213,000 $328,000 $448,000 $574,000Projected Rate Revenues $2,185,000 $2,294,000 $2,409,000 $2,529,000 $2,655,000Other RevenueLicenses and Permits $1,000 $1,000 $1,000 $1,000 $1,000Other Fees $4,000 $4,000 $4,000 $4,000 $4,000Capital Contributions $15,000 $15,000 $15,000 $15,000 $15,000Subtotal Other Revenue $20,000 $20,000 $20,000 $20,000 $20,000Total Revenues $2,205,000 $2,314,000 $2,429,000 $2,549,000 $2,675,000O&M Expenses FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating ExpensesRecycled Water $709,000 $864,000 $891,000 $919,000 $1,128,000Allocated Electricity Costs $580,000 $603,000 $627,000 $652,000 $679,000Total Expenses $1,289,000 $1,467,000 $1,518,000 $1,571,000 $1,807,000Net Cashflow (Before Transfers) $916,000 $847,000 $911,000 $978,000 $868,000 Table 52Table 52Table 53
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Table 56: Recycled Transfers and Reserve Activity

Net Cashflow FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Operating Net Income $916,000 $847,000 $911,000 $978,000 $868,000Recycled Enterprise TransfersTransfers (to)/from Rehabilitation Fund $0 $0 $0 $0 $0Transfers (to)/from Rate Stabilization Fund ($379,500) $0 $0 $0 $0Total Recycled Enterprise Transfers ($379,500) $0 $0 $0 $0Net Cashflow $536,500 $847,000 $911,000 $978,000 $868,000Operating Reserve FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $541,367 $638,614 $726,857 $752,291 $778,557Transfers (Net Cashflow ) $536,500 $847,000 $911,000 $978,000 $868,000Transfers from/(to) Rehabilitiation Fund ($442,196) ($762,162) ($889,254) ($955,552) ($755,434)Subtotal Operating Reserve $635,671 $723,452 $748,603 $774,740 $891,123Interest Earnings$2,943 $3,405 $3,689 $3,818 $4,174Ending Balance $638,614 $726,857 $752,291 $778,557 $895,297Rehabilitiation Fund FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $722,281 $681,978 $833,330 $975,589 $1,098,948Plus:Direct transfers to/(from) Rehabilitiation Fund $0 $0 $0 $0 $0Transfers from/(to) Operating Reserve $442,196 $762,162 $889,254 $955,552 $755,434Less:CIP ($486,000) ($614,588) ($751,507) ($837,366) ($928,275)Subtotal Rehabilitiation Fund $678,476 $829,552 $971,078 $1,093,775 $926,107Interest Earnings$3,502 $3,779 $4,511 $5,173 $5,063Ending Balance $681,978 $833,330 $975,589 $1,098,948 $931,170Rate Stabilization Reserve FY 2024 FY 2025 FY 2026 FY 2027 FY 2028Beginning Balance $0 $380,449 $382,351 $384,263 $386,184Direct transfers to/(from) Rate Stabilization Reserve$379,500 $0 $0 $0 $0Subtotal $379,500 $380,449 $382,351 $384,263 $386,184Interest Income$949 $1,902 $1,912 $1,921 $1,931Ending Balance $380,449 $382,351 $384,263 $386,184 $388,115Total Reserves - Ending Balance $1,701,041 $1,942,539 $2,112,143 $2,263,689 $2,214,582 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Figure 24 identifies the operating position based on the proposed financial plan, and Figure 25 show the capital plan with funding sources. Figure 26 identifies the ending reserve balances.

Figure 24: Recycled Proposed Operating Position

Figure 25: Recycled Capital Improvement Plan with Funding Sources

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Figure 26: Recycled Proposed Ending Reserves

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Cost-of-Service Analysis – Recycled Utility
Cost-of-Service Process
The next step in developing recycled rates is to perform a cost-of-service analysis. Through this process, costs incurred are allocated to customers based on their proportional share. As a result, proposed rates are cost-based and reflect the costs incurred to provide service to customers.

Revenue Requirements
FY 2024 revenue requirements were used for the cost-of-service analysis. Revenue requirements include O&M expenses, electricity expenses from the treatment plants, revenue offsets, and reserve funding. The proposed revenue adjustments and corresponding rates accumulate the necessary funding over the Financial Plan Period to fund O&M, capital projects, and comply with minimum reserve requirements. The results of the financial plan analysis are summarized in Table 57 and represent the revenue required from rates over the Rate Setting Period (FY 2024 and FY 2025).

Table 57: FY 2024 – FY 2025 Recycled Revenue Requirements

FY 2024 FY 2025Revenue Requirements Total TotalOperations and MaintenanceRecycled Water $709,000 $864,000Allocated Electricity Costs $580,000 $603,000Total Operations and Maintenance $1,289,000 $1,467,000Revenue OffsetsLicenses and Permits ($1,000) ($1,000)Other Fees ($4,000) ($4,000)Capital Contributions ($15,000) ($15,000)Total Revenue Offsets ($20,000) ($20,000)AdjustmentsReserve Funding $916,000 $847,000Total Adjustments $916,000 $847,000Revenue Required from Rates $2,185,000 $2,294,000 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Cost-Based Rates – Recycled Utility
Based on City policy, recycled fixed charges are set as a percent of potable meter charges and the remaining revenue requirement identified in Table 57 are recovered through the variable rate to cover the cost of providing service. For FY 2024, recycled meter charges are set to 80% of the proposed potable meter charges and, in FY 2025, recycled meter charges are set to 90%. The City plans to increase recycled fixed charges to equal potable fixed charges by FY 2026. The amount of annual revenues generated by the meter rates for each fiscal year are determined and then used to derive variable rates for FY 2024 and FY 2025, respectively.

Fixed Cost Recovery
Table 58 derives the FY 2024 and FY 2025 recycled monthly meter charges based on 80% and 90% of potable meter charges, respectively, and calculates total revenue generated by the proposed fixed charges.

Table 58: Proposed Recycled Monthly Meter Charges

Potable Meter ChargesFY 2024 FY 20253/4" $29.63 $30.821" $45.74 $47.571 1/2" $86.00 $89.442" $134.32 $139.703" $287.32 $298.824" $512.79 $533.316" $1,052.31 $1,094.418" $2,260.20 $2,350.6110" $3,387.56 $3,523.07Recycled Fixed % of Potable 80.0% 90.0%Fixed Meter Charges ($/Month)Meter size FY 2024 FY 20253/4" $23.71 $27.741" $36.60 $42.821 1/2" $68.80 $80.502" $107.46 $125.733" $229.86 $268.944" $410.24 $479.986" $841.85 $984.978" $1,808.16 $2,115.5510" $2,710.05 $3,170.77Projected Revenue $478,570 $559,932 City of Roseville – Water, Wastewater, and Recycled Rate Study

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Variable Cost Recovery
Table 59 derives the proposed variable rates by taking the total revenue requirement identified in Table 57 and reducing the amount by total fixed revenue calculated in Table 58. The net amount is divided by total recycled water sales to determine the recycled variable rate for FY 2024 and FY 2025.

Table 59: Proposed Recycled Variable Rates

Variable Rate ($/CCF)Recycled FY 2024 FY 2025Recycled Revenue Requirement $2,185,000 $2,294,000Less: Projected Revenue from Fixed ($478,570) ($559,932)Variable Revenue Requirement $1,706,430 $1,734,068÷ Projected Recycled Usage (ccf)1,630,983 1,630,983 Variable Unit Rate $1.05 $1.07

City of Roseville
Solid Waste Rate Study

Prepared by

Solid Waste Consultants
to Local Government

April 14, 2023

City of Roseville
Solid Waste Rate Study

Table of Contents

1. EXECUTIVE SUMMARY ................................................................................................................... 1

2. BACKGROUND AND OBJECTIVES ...................................................................................................... 2

2.1 BACKGROUND .................................................................................................................. 2

2.2 OBJECTIVES ...................................................................................................................... 3

3. TASKS PERFORMED, KEY ASSUMPTIONS, AND LIMITATIONS ................................................................ 4

3.1 TASK PERFORMED ............................................................................................................. 4

3.2 KEY ASSUMPTIONS ............................................................................................................ 4

3.3 LIMITATIONS .................................................................................................................... 5

4. FINANCIAL PLAN – SOLID WASTE ENTERPRISE FUND .......................................................................... 6

4.1 OPERATING RESULTS ......................................................................................................... 6

4.2 OPERATING CASH BALANCE ................................................................................................ 8

4.3 RECOMMEND RATE ADJUSTMENTS ..................................................................................... 9

5. COST OF SERVICE – COMMERCIAL ORGANICS COLLECTION ............................................................... 10

5.1 BREAKDOWN OF REVENUE REQUIREMENT AMONG COST CATEGORIES .................................. 10

5.2 ROUTE OPERATING STATISTICS ......................................................................................... 10

6. RATE DESIGN – COMMERCIAL ORGANICS COLLECTION ..................................................................... 12

6.1 RATE DESIGN METHOD.................................................................................................... 12

6.2 RATE DESIGN APPROACH ................................................................................................. 13

6.3 CUSTOMER DISTRIBUTION ................................................................................................ 13

6.4 OPERATING STATISTICS .................................................................................................... 14

6.5 SERVICE AREA TRAVEL TIME COST ..................................................................................... 15

6.6 CONTAINER EMPTYING TIME COST .................................................................................... 15

6.7 PROCESSING FACILITY TRAVEL TIME COST .......................................................................... 17

6.8 PROCESSING FACILITY TIPPING FEE COST ............................................................................ 18

6.9 MONTHLY COST OF SERVICE – RECOMMENDED RATES ........................................................ 18

6.10 CALCULATED REVENUE REQUIREMENT ............................................................................... 19

6.11 COMPARISON BETWEEN CURRENT AND RECOMMENDED RATES ............................................ 20 Table of Tables

Table 1 - Key Assumptions .................................................................................................................. 5 Table 2 - Projected Operating Results ............................................................................................... 6 Table 3 – Operating Cash Balance...................................................................................................... 8 Table 4 - Revenue Requirement for Organic Waste Service .......................................................... 10 Table 5 - Route Operating Statistics ................................................................................................. 11 Table 6 - Revenue Requirement after Route Operating Cost Reallocation ................................... 11 Table 7 - Customer Distribution and Operational Data .................................................................. 13 Table 8 - Operational Statistics Based on Customer Distribution .................................................. 14 Table 9 - Service Area Travel Time Cost ........................................................................................... 15 Table 10 - Container Emptying Time Cost ....................................................................................... 16 Table 11 - Processing Facility Travel Time Cost ............................................................................... 17 Table 12 - Processing Facility Tipping Fee Cost ............................................................................... 18 Table 13 - Monthly Cost of Service – Recommended Rates .......................................................... 19 Table 14 - Calculated Revenue Based on Recommended Cost-based Rates ................................ 20 Table 15 - Current Rates ................................................................................................................... 20 Table 16 - Rate Decrease Amounts .................................................................................................. 21 Table 17 - Percent Difference Between Current and Recommended Rates ................................. 21

Table of Charts

Chart 1 – Projected Revenue, Expenses and Net Cash Flow ............................................................ 7 Chart 2 - Ending Cash Balance and Target Reserves ......................................................................... 8

City of Roseville 1 Solid Waste Rate Study

1. EXECUTIVE SUMMARY
The City provides its residents and businesses with a broad range of solid waste and recyclables collection services. These services include the recently established commercial organics collection service. The charges for these services are included in the City’s utility bills.

The City periodically analyzes the rates that it charges to ensure that they generate adequate revenue to cover its operating and capital costs.

In May 2021, as a result of a previous study, the City approved a two -year annual rate adjustment. The first adjustment of 15.65% became effective on July 1, 2021. The second adjustment of 16.05% became effective on July 1, 2022.

This rate study found that the current solid waste rates were adequate to cover the City’s projected operating and capital costs through fiscal 2025. However, to meet its longer term operating costs, the City’s solid waste rates will need to be increased by 4.7% on July 1, 2025, by another 4.7% on July 1, 2026, and by 5.7% on July 1, 2027. This study also found that the rates charged for commercial organics collection service should be better aligned with the cost of service.

City of Roseville 2 Solid Waste Rate Study

2. BACKGROUND AND OBJECTIVES

2.1 Background
The City provides the following types of solid waste services:

• Residential Trash Collection
• Residential Green Waste Collection
• Commercial Organic Collection
• Commercial Trash Collection
• Commercial Cardboard/Recycling Collection
• Rolloff Collection

In addition to the fee-based waste collection services it provides to its customers, the City also engages in several waste collection activities that provide an overall benefit to the community such as household hazardous waste collection, and neighborhood cleanup events.

In 2016, the State adopted SB 1383, which requires all jurisdictions to provide organics collection programs. In response to this new law, the City began providing organics collection service to commercial customers.

The revenue from the fees charged by the City, as well as its solid waste operating and capital expenditures, are recorded in the City’s solid waste enterprise fund. Each of the types of services listed above has its own cost center in the solid waste enterprise fund.

In December 2022, the City retained IB Consulting to conduct a cost of service study of the City’s water, wastewater, and solid waste rates. MSW Consultants served as subcontractor to IB Consulting to perform the solid waste portion of this rate study. The purpose of the study was to update the City’s financial plan for the solid waste enterprise fund, and to review and potentially adjust the City’s solid waste rates. In particular, the City wanted to redesign the rates for its commercial organics collection operations. This report is the result of that study.

This report outlines the study’s objectives, and the work we performed. It sets forth the City’s solid waste rate-making objectives, and lists the key assumptions on which our financial projections are based. Further, this report includes a financial plan for the solid waste enterprise fund, and includes recommended changes to the City’s commercial organic rates.

City of Roseville 3 Solid Waste Rate Study

2.2 Objectives
The objectives of this solid waste rate study are to:
• Analyze the solid waste enterprise fund’s projected revenues and expenditures, and project its total revenue requirement through fiscal 2028. • Prepare a financial plan that will enable the City to budget and plan for its operating and capital expenditures, and operating cash balance.
• Identify the nexus between the City’s organics collection cost of service and the individual rates the City charges customers for organics collection service. • Design cost-based rates for the City’s commercial organics collection service.

City of Roseville 4 Solid Waste Rate Study

3. TASKS PERFORMED, KEY ASSUMPTIONS, AND LIMIT A TIONS

3.1 Task Performed
In performing the solid waste rate study, and in developing our recommendation, we performed the following tasks:
• Gathered financial and operational information from the City including financial reports, and a download of customer information from the City’s billing system. • Updated the City’s solid waste revenue model, and built cost of service rate model for organic waste service.
• Projected the enterprise fund’s operating expenses based on certain assumptions about inflation and customer volume growth.
• Developed rate adjustment recommendations design ed to achieve the City’s objectives.
• Reviewed the model with City staff and discussed the impact on various customers.

3.2 Key Assumptions
Our analysis was based on certain assumptions. These include:
• Growth due to changes in the number of customers will be flat. • Non-rate revenue will grow at an annual rate of 2%.
• The ideal targeted reserve cash balance is equal to 180 days of operating expenses, or 50% of annual operating costs.
• The minimum targeted reserve cash balance is equal to 90 days of operating expenses, or 25% of annual operating costs.
• Expenses will grow at the annual rates shown on the following page in Table 1.

City of Roseville 5 Solid Waste Rate Study

Table 1 - Key Assumptions

3.3 Limitations
The financial projections in this report are subject to certain limitations. These projections were prepared pursuant to the assumptions described above and are based on information provided by the City. These projections were prepared for the sole use of the City for the purpose of analyzing the City’s solid waste collections rates. They are not intended to be used for any other purpose.

Moreover, these projections are based on assumptions regarding future inflation, customer account growth rates, and planned capital expenditures. There may be differences between projected and actual results because events and circumstances do not always occur as expected, and those differences may be material.

F inanc ial Inputs F Y 2024 F Y 2025 F Y 2026 F Y 2027 F Y 2028 Expenditure Escalation
Benefits 3.0% 3.0% 3.0% 3.0% 3.0%
Capital 8.0% 3.5% 3.5% 3.5% 3.5%
CPI 3.0% 3.0% 3.0% 3.0% 3.0%
Utilities 5.0% 5.0% 5.0% 5.0% 5.0%
Indirect 18.0% 10.0% 10.0% 10.0% 10.0%
IT 10.0% 10.0% 10.0% 10.0% 10.0%
Facilities 10.0% 5.0% 5.0% 5.0% 5.0%
Fleet 5.0% 5.0% 5.0% 5.0% 5.0%
General Liability 90.0% 40.0% 40.0% 40.0% 40.0%
Worker's Comp 60.0% 20.0% 20.0% 20.0% 20.0%
General Costs 4.0% 4.0% 4.0% 4.0% 4.0%
Non-Inflated 0.0% 0.0% 0.0% 0.0% 0.0%
Pers / OPEB 5.0% 5.0% 5.0% 5.0% 5.0%
Salaries 3.0% 3.0% 3.0% 3.0% 3.0%

City of Roseville 6 Solid Waste Rate Study

4. FINANCIAL PLAN – SOLID WASTE ENTERPRISE FUND
The financial plan for the solid waste enterprise fund consists of an analysis of the enterprise fund’s projected annual operating results and ending cash balances.

4.1 Operating Results
Based on the key assumptions, the solid waste enterprise fund’s projected operating results are shown below in Table 2.

Table 2 - Projected Operating Results

Desc ription F Y 2022 F Y 2023 F Y 2024 F Y 2025 F Y 2026 F Y 2027 F Y 2028 Rate Revenue
Residential Trash $18,360 $21,949 $21,949 $21,949 $21,949 $21,949 $21,949 Green Waste 113 135 135 135 135 135 135
Organic Waste 539 645 367 367 367 367 367
Commercial Trash 11,283 13,488 13,488 13,488 13,488 13,488 13,488 Commercial Cardboard / Recycling 925 1,106 1,106 1,106 1,106 1,106 1,106 Roll Off $4,031 $4,819 $4,819 $4,819 $4,819 $4,819 $4,819 Total Rate Revenue $35,251 $42,142 $41,864 $41,864 $41,864 $41,864 $41,864 New Revenue from Rate Adjustments $0 $0 $0 $0 $1,968 $4,028 $6,644 Other Revenue 0 0 0 0 0 0 0
Other Fees 87 55 55 55 55 55 55
Charges for services 6 121 121 121 121 121 121
Use of Property and Money (21) 2 2 2 2 2 2
Other Revenue $391 $2 $2 $2 $2 $2 $2
Subtotal Other Revenue $463 $180 $180 $180 $180 $180 $180 Total Revenues $35,714 $42,322 $42,044 $42,044 $44,012 $46,072 $48,688 Operating Expenses
Waste Services UBS - Admin $157 $413 $635 $696 $726 $761 $799 Waste Services UBS - Billing 357 400 485 523 544 566 590 Waste Services UBS - Customer Service 194 297 362 393 343 375 394 Street Sweeping 1,298 1,880 1,901 1,995 2,089 2,197 2,320 Waste Services Administration 1,790 3,066 3,184 3,352 3,516 3,699 3,905 Waste Services Pickup - Residential 3,506 4,815 5,067 5,430 5,837 6,450 7,056 Waste Services Pickup - Commercial 3,582 5,179 5,280 5,729 6,087 6,504 6,997 Waste Services Maintenance 821 1,190 1,186 1,245 1,302 1,370 1,450 Disposal 8,897 10,350 10,776 11,205 11,652 12,116 12,599 Recycling 460 651 899 950 1,004 1,067 1,141
Green Waste Program 2,002 3,946 4,046 4,215 4,377 4,551 4,737 Organic Waste Program 321 655 798 831 863 898 937
Waste Services Outreach 75 243 252 262 272 282 293
Waste Services Annual Rehab 0 0 13 14 14 14 15
Waste Services UEC 113 195 187 217 233 243 255
Waste Services EU Admin 641 1,057 1,251 1,304 1,353 1,409 1,474 Waste Services EU Outreach 43 0 0 0 0 0 0
Waste Services EU Tech Serv 121 320 457 477 494 514 537 Waste Services EAM Support and Maintenance 95 123 134 141 176 183 192 Pleasant Grove WWTP 0 2 0 0 0 0 0
Non-Classified 951 1,197 1,407 1,548 1,703 1,873 2,060
Retiree Payments 299 331 341 351 361 372 383
Subtotal Operating Expenses $25,724 $36,310 $38,661 $40,878 $42,946 $45,444 $48,134 Operating Net Income $9,990 $6,012 $3,383 $1,166 $1,066 $628 $554 Total Waste Services Enterprise Transfers $2,884 ($617) $0 $0 $0 $0 $0 Total Other City Dept Transfers ($445) ($445) ($543) ($543) ($542) ($542) ($542) Net Cashflow $12,429 $4,951 $2,840 $623 $524 $86 $12
in 000s

City of Roseville 7 Solid Waste Rate Study

Table 2 shows that total rate revenue is projected to increase from approximately $35.2 million in fiscal 2022 to approximately $42.1 million in fiscal 2023. This is primarily due to the

16.05% rate adjustment that was implemented on July 1, 2022.

Table 2 also shows that the rate adjustments projected to occur in July 2025, 2026, and 2027 will generate new revenue of approximately $2.0 million in fiscal 2026, $4.0 million in fiscal 2027, and $6.6 million in fiscal 2028.

Table 2 also shows that total expenses are projected to increase from $36.3 million in fiscal 2023 to approximately $48.1 million in fiscal 2028, an average increase of approximately 6.4% per year.

The amount of net cash flow is projected to decrease significantly from fiscal 2023 through fiscal 2025. This is due to projected expenses continuing to increase while rate revenues remain the same. Net cash flow is projected to remain positive through fiscal 2028. The positive net cash flow in fiscal 2026, 2027, and 2028 is due to the projected rate adjustments beginning in fiscal 2026.

Chart 1 below show the relationship between projected revenues and expenses and the resulting net cash flow.

Chart 1 – Projected Revenue, Expenses and Net Cash Flow

City of Roseville 8 Solid Waste Rate Study

4.2 Operating Cash Balance
Table 3 below shows that the operating cash balance is projected to increase from approximately $12.7 million in fiscal 2022 to approximately $20.7 million in fiscal 2028. This increase is primarily due to the positive net cash flow in fiscal years 2022, 2023 and 2024.

Table 3 shows that the ending cash balance in fiscal 2028 is projected to be approximately $20.7 million. This amount is well above the minimum target amount of approximately $11.9 million (based on 90 days of operating expenses) , and somewhat below the ideal target amount of approximately $23.7 million (based on 180 days of operating expenses).

Table 3 – Operating Cash Balance

Chart 2 below shows the relationship between the projected ending cash balance, and the minimum and ideal target balances.

Chart 2 - Ending Cash Balance and Target Reserves

Operating Fund F Y 2022 F Y 2023 F Y 2024 F Y 2025 F Y 2026 F Y 2027 F Y 2028 Beginning Balance $11,962 $12,046 $17,069 $19,156 $19,736 $20,360 $20,548 Net Cash Flow 12,429 4,951 2,840 623 524 86 12 Less:

CIP - Operating - - (45) (140) - - - Transfers from/(to) Rehabilitation Fund (11,704) - (798) - - - - Subtotal Operating Fund 12,686 16,996 19,066 19,639 20,260 20,446 20,559 Interest Earnings $62 $73 $90 $97 $100 $102 $103
Ending Balance $12,747 $17,069 $19,156 $19,736 $20,360 $20,548 $20,662 Target
Minimum $6,343 $8,953 $9,533 $10,080 $10,589 $11,205 $11,869 Ideal $12,686 $17,906 $19,066 $20,159 $21,179 $22,411 $23,737 in 000s

City of Roseville 9 Solid Waste Rate Study

4.3 Recommend Rate Adjustments
Based on the analysis of the enterprise fund’s projected operating results and projected cash balances, we recommend that the City not adjust rates for fiscal 2024 and fiscal 2025 (with the exception of the reduction in commercial organics discussed in the following section).

However, to generate positive net cash flow in fiscal 2026, 2027, and 2028, we recommend that the City plan on increasing solid waste rates across the board by 4.7% on July 1, 2025,

4.7% on July 1, 2026, and 5.7% on July 1, 2027.

City of Roseville 10 Solid Waste Rate Study

5. COST OF SERVICE – COMMERCIAL ORGANICS COLLECTION
The cost -of-service analysis determines the equ itable allocation of the total revenue requirement among the various types of cost for commercial organics collection service. The following tables show how the revenue requirement for commercial organics collection is allocated among various types of cost. These types of cost include Service Area Travel Time, Container Emptying Time, Processing Facility Travel Time, and Processing Facility Tipping Fee cost.

5.1 Breakdown of Revenue Requirement Among Cost Categories Table 4 shows the breakdown of the total revenue requirement for commercial organic waste collection service. According to the City’s financial system, the total revenue requirement in fiscal 2023 of $367,223 is comprised of $219,223 in route operating cost, and $148,000 in processing facility tipping fee cost.

Table 4 - Revenue Requirement for Organic Waste Service

5.2 Route Operating Statistics
Table 5 on the following page shows the proportionate share of a typical day that the commercial organics route spends on various tasks. The percentages in Table 5 are used further below to allocate cost categories (labor, processing costs, etc.) to the types of cost (service area travel time, etc.).

Cost Category FY 2023 Annual
Amount
% of Total Revenue
Requirement
Driver Labor $82,941 23%
Labor Burden 52,252 14%
Fuel 22,000 6%
Vehicle Maintenance 56,908 15%
Other Operating Cost 5,123 1%
Subtotal: Route Operating Cost $219,223 60%
Processing Facility Tipping Fees $148,000 40%
Total Annual Revenue Requirement $367,223 100%

City of Roseville 11 Solid Waste Rate Study

Table 5 - Route Operating Statistics

Table 6 shows how the percentages in Table 5 are used to allocate the revenue requirement to the various types of cost.

Table 6 - Revenue Requirement after Route Operating Cost Reallocation

Description Hours per Day % of Operating Time
Travel time in service area 3.75 46.9%
65 gallon dumping time 2.69 33.6%
2 yard dumping time 0.91 11.4%
Travel time to processing facility 0.65 8.1%
Total 8.00 100.0%
Cost Type Allocation Factor
Annual Amount of
Revenue
Requirement
Monthly Amount of
Revenue
Requirement
Route Operating Cost :

Service area travel time cost 46.9% $102,761 $8,563
65 gallon dumping time 33.6% 73,603 6,134
2 yard dumping time 11.4% 25,047 2,087
Processing facility site travel time cost 8.1% 17,812 1,484 Subtotal: Route Operating Cost 100.0% $219,223 $18,269
Processing Facility Cost 148,000 12,333
Total Cost: $367,223 $30,602

City of Roseville 12 Solid Waste Rate Study

6. RA TE DESIGN – COMMERCIAL ORGANICS COLLECTION
In this section, cost-based organic waste rates were designed for each level of service to achieve the revenue requirement discussed in the last section. Rates were designed by identifying the “cause-and-effect” relationship between the activities or use of resources (cost drivers), and the resulting costs incurred. As a result, the individual customer rates reflect the nexus between the cost of service and the rate charged to the customer.

6.1 Rate Design Method
Cost-based collection rates were designed by identifying the cost types associated with each of the following cost “drivers”:

• Service Area Travel Time Cost - The time to travel to the service area. It begins when the truck arrives in the service area, ends when the truck leaves for the processing facility, and excludes the time spent emptying containers. This type of cost was allocated among customers based on the number of stops. For example, a commercial customer with three pickups per week was allocated three times as much of this cost as a customer with one pickup per week.

• Container Emptying Time Cost - The time spent emptying containers. It begins when the truck arrives in front of the container(s) at a customer stop an d ends when the last container is emptied and the truck leaves for the next stop. This type of cost was allocated among customers based on the number of containers. For example, a commercial customer with two containers was allocated twice as much of this cost as a customer with one container.

• Processing Facility Travel Time Cost - The time it takes to travel to the processing facility, unload the truck, and return to the service area. This type of cost was allocated among customers based on the amount of container capacity serviced per week. This is because a customer with twice as much container capacity serviced per week causes the truck to fill up faster and travel to the processing facility more frequently, than a customer with half as much container capacity serviced per week. For example, a commercial customer with six cubic yards of capacity serviced per week was allocated twice as much of this cost as a customer with three cubic yards of capacity serviced per week.

• Processing Facility Tipping Fee Cost – The variable cost of fees per ton incurred at processing facilities. This type of cost was allocated among customers based on the amount of container capacity serviced per week (same as Processing Facility Travel Time Cost). This is because the amount of container capacity serviced per week is a reasonable measure of the relative weight of waste collected and delivered to the processing facility. For example, a

City of Roseville 13 Solid Waste Rate Study

commercial customer with six cubic yards of capacity serviced per week was allocated twice as much of this cost as a customer with three cubic yards of capacity serviced per week.

6.2 Rate Design Approach
The following tables in this section describe how the cost types from Table 6 are allocated to each level of service based on certain operating statistics. Once these cost types are allocated to each level of service, they are combined to derive the actual cost for each level of service, which are the recommended rates.

The recommended rates for each level of service are extended by the number of customers at each level of service (and multiplied by twelve months) to calculate the annual revenue requirement. Finally, the recommended rates are compared to the existing rates.

6.3 Customer Distribution
Table 7 below shows the customer distribution of commercial organics customers by level of service.

Table 7 - Customer Distribution and Operational Data

1 2 3 4 5
65 Gallon 1 79 15 0 0 0 94
65 Gallon 2 26 25 0 0 0 51
65 Gallon 3 14 17 3 0 1 35
65 Gallon 4 2 2 0 0 0 4
65 Gallon 5 0 0 0 0 0 0
65 Gallon 6 0 1 0 0 0 1
2 Cubic Yard 1 21 21 7 1 1 51
2 Cubic Yard 2 0 1 1 0 1 3
TotalNo. of Bins Pickups per Week:Bin Capacity

City of Roseville 14 Solid Waste Rate Study

6.4 Operating Statistics
Table 8 below shows the operating statistics of the City’s commercial organics collection operations. The operational statistics in Table 8 are calculated based on the customer distribution and operational data in Table 7.

Table 8 - Operational Statistics Based on Customer Distribution

1 2 3 4 5
Stops per Month:
65 Gallon 524 520 39 0 22 1,104
2 Cubic Yards 91 191 104 17 43 446
Total 1,550
Container-Lifts per Month:
65 Gallon 784 1,126 117 0 65 2,091
2 Cubic Yards 91 199 117 17 65 489
Total 2,581
Cubic-yards Collected per Month:
65 Gallon 1 110 42 0 0 0 152
2 73 140 0 0 0 213
3 59 143 38 0 21 260
4 11 22 0 0 0 34
5 0 0 0 0 0 0
6 0 17 0 0 0 17
Subtotal-65 gallon 253 364 38 0 21 676
2 Cubic Yard 1 182 364 182 35 43 805
2 0 35 52 0 87 173
Subtotal-2 yd 182 398 234 35 130 979
Total 435 762 272 35 151 1,654
Number of Containers:
65 Gallon 1 79 15 0 0 0 94
2 52 50 0 0 0 102
3 42 51 9 0 3 105
4 8 8 0 0 0 16
5 0 0 0 0 0 0
6 0 6 0 0 0 6
Subtotal of container-65 gallon181 130 9 0 3 323
2 Cubic Yard 1 21 21 7 1 1 51
2 0 2 2 0 2 6
Subtotal of container-2 yd 21 23 9 1 3 57
Total Number of Containers: 202 153 18 1 6 380
Number of Customers: 142 82 11 1 3 239
Pickups per Week: TotalOperational Statistic

City of Roseville 15 Solid Waste Rate Study

6.5 Service Area Travel Time Cost
Table 9 below calculates the Service Area Travel Time Cost. Table 9 shows that the $8,563 in monthly Service Area Travel Time in Table 6 when divided by the 1,550 stops from Table 8 is equal to $5.52 per month per stop. This amount is multiplied by the number of stops per month to determine the monthly Service Area Travel Time cost per stop. For example, a container collected once per week is collected an average of 4.33 weeks in a month. As a result, the monthly Service Area Travel Time cost for one 65-gallon container collected once per week is $23.92 ($5.52 X 4.33 weeks in a month).

Table 9 - Service Area Travel Time Cost

6.6 Container Emptying Time Cost
Table 10 on the following page calculates the Container Emptying Time Cost. Table 10 shows that the $6,134 in monthly Container Emptying Time Cost for 65-gallon containers in Table 6 when divided by the 2,091 container lifts from Table 8 is equal to $2.93 per month per lift.

Service Area Travel Time Cost
Cost of traveling in the service area and emptying the containers.

Service Area Travel Time Cost per Stop:

Monthly Service Area Travel Time Cost $8,563
Number of Stops per Month 1,550
Service Area Travel Time Cost per Stop $5.52
1 2 3 4 5
65 Gallon 1 $23.92 $47.84 $71.76 $95.68 $119.60
65 Gallon 2 $23.92 $47.84 $71.76 $95.68 $119.60
65 Gallon 3 $23.92 $47.84 $71.76 $95.68 $119.60
65 Gallon 4 $23.92 $47.84 $71.76 $95.68 $119.60
65 Gallon 5 $23.92 $47.84 $71.76 $95.68 $119.60
65 Gallon 6 $23.92 $47.84 $71.76 $95.68 $119.60
2 Cubic Yard 1 $23.92 $47.84 $71.76 $95.68 $119.60
2 Cubic Yard 2 $23.92 $47.84 $71.76 $95.68 $119.60
Formula:

The number of stops per week multiplied by the Operating Cost per Stop multiplied by 4.33 weeks.

Example (outlined above) 65gallon serviced once per week:

One stop times $5.52 times 4.33 weeks equals: $23.92
Pickups per Week:Bin Capacity No. of Bins

City of Roseville 16 Solid Waste Rate Study

This amount is multiplied by the number of lifts per month to determine the monthly Container Emptying Time cost per lift. For example, a container collected once per week is collected an average of 4.33 weeks in a month. As a result, the monthly Container Emptying Time cost for one 65-gallon container collected once per week is $12.70 ($2.93 X 4.33 weeks in a month).

Table 10 - Container Emptying Time Cost

Container Emptying Time Cost
Cost of the time taken to empty containers while on the customers property.

Container Emptying Time Cost per Lift:

Monthly Container Emptying Time
Cost:
65 Gallon Dumping Time Cost $6,134
2 Yard Dumping Time Cost $2,087
Number of Lifts per Month:
65 Gallon Container Lifts 2,091
2 Yard Container Lifts 489
Container Emptying Cost per Lift:
65 Gallon Cont. Cost per Lift $2.93
2 yard Cont. Cost per Lift $4.27
1 2 3 4 5
65 Gallon 1 $12.70 $25.40 $38.10 $50.80 $63.49
65 Gallon 2 $25.40 $50.80 $76.19 $101.59 $126.99
65 Gallon 3 $38.10 $76.19 $114.29 $152.39 $190.48
65 Gallon 4 $50.80 $101.59 $152.39 $203.18 $253.98
65 Gallon 5 $63.49 $126.99 $190.48 $253.98 $317.47
65 Gallon 6 $76.19 $152.39 $228.58 $304.77 $380.97
2 Cubic Yard 1 $18.47 $36.94 $55.41 $73.88 $92.36
2 Cubic Yard 2 $36.94 $73.88 $110.83 $147.77 $184.71
Formula:

Example (outlined above) 65gallon serviced once per week:

One lift times $2.93 times 4.33 weeks equals: $12.70
The number of lifts per week multiplied by the Container Emptying Cost per Lift multiplied by 4.33 weeks.

Pickups per Week:Bin Capacity No. of Bins

City of Roseville 17 Solid Waste Rate Study

6.7 Processing Facility Travel Time Cost
Table 11 below calculates the Processing Facility Travel Time Cost. Table 11 shows that the $1,484 in monthly Processing Facility Travel site time cost in Table 6 when divided by the 1,654 cubic yards from Table 8 is equal to $0.90 per month per cubic yard. This amount is multiplied by the number of cubic yards per month to determine the monthly Processing Facility Travel time cost per cubic yard. For example, a 65-gallon container collected once per week is equal to 0.323 cubic yards per month. As a result, the monthly Processing Facility Travel Time cost for one 65-gallon container collected once per week is $1.26 ($0.90 X .323 cubic yards X 4.33 weeks in a month).

Table 11 - Processing Facility Travel Time Cost

Processing Facility Travel Time Cost
Monthly Processing Facility Travel Time Cost: $1,484
Number of Cubic Yards Collected per Month 1,654
Processing Facility Travel Time Cost per Cubic
Yard Collected: $0.90
1 2 3 4 5
65 Gallon 1 $1.26 $2.51 $3.77 $5.02 $6.28
65 Gallon 2 $2.51 $5.02 $7.53 $10.04 $12.55
65 Gallon 3 $3.77 $7.53 $11.30 $15.06 $18.83
65 Gallon 4 $5.02 $10.04 $15.06 $20.08 $25.10
65 Gallon 5 $6.28 $12.55 $18.83 $25.10 $31.38
65 Gallon 6 $7.53 $15.06 $22.59 $30.12 $37.65
2 Cubic Yard 1 $7.77 $15.54 $23.31 $31.08 $38.86
2 Cubic Yard 2 $15.54 $31.08 $46.63 $62.17 $77.71
Formula:

Example (outlined above) 65gallon serviced once per week:

0.323 cubic yds. times $0.90 times 4.33 weeks equals: $1.26 The number of cubic yards collected per week multiplied by the Processing Facility Travel Cost per Yard multiplied by 4.33 weeks
Cost of the time it takes to travel from the service area to the processing facility, empty the load and return to the service area.

Processing Facility Travel Time Cost per Yard
Bin Capacity No. of Bins Pickups per Week:

City of Roseville 18 Solid Waste Rate Study

6.8 Processing Facility Tipping Fee Cost
Table 12 below calculates the Processing Facility Tipping Fee Cost. Table 12 shows that the $12,333 in monthly Processing Facility Tipping Fee cost in Table 6 when divided by the 1,654 cubic yards from Table 8 is equal to $7.46 per month per stop. This amount is multiplied by the number of cubic yards per month to determine the monthly Processing Facility Tipping Fee cost per cubic yard. For example, a 65-gallon container collected once per week is equal to 0.323 cubic yards per month. As a result, the monthly Processing Facility Tipping Fee cost for one 65-gallon container collected once per week is $10.43 ($7.46 X 0.323 cubic yards X

4.33 weeks in a month).

Table 12 - Processing Facility Tipping Fee Cost

6.9 Monthly Cost of Service – Recommended Rates
Table 13 on the following page calculates the recommended rates. Table 13 combines the monthly cost of service at each level of service from Table 9, Table 10, Table 11, and Table 12 Average Monthly Disposal Tip Fee Cost $12,333
Cubic Yards Collected per Month 1,654
Tip Fee per Cubic Yard $7.46
1 2 3 4 5
65 Gallon 1 $10.43 $20.86 $31.28 $41.71 $52.14
65 Gallon 2 $20.86 $41.71 $62.57 $83.43 $104.28
65 Gallon 3 $31.28 $62.57 $93.85 $125.14 $156.42
65 Gallon 4 $41.71 $83.43 $125.14 $166.85 $208.56
65 Gallon 5 $52.14 $104.28 $156.42 $208.56 $260.70
65 Gallon 6 $62.57 $125.14 $187.71 $250.28 $312.85
2 Cubic Yard 1 $64.57 $129.14 $193.71 $258.28 $322.85
2 Cubic Yard 2 $129.14 $258.28 $387.43 $516.57 $645.71
Formula:

The number of cubic yards collected per week multiplied by the Processing Facility Tipping Fee per Yard multiplied by 4.33 weeks.

Example (outlined above) 65gallon serviced once per week:

0.323 cubic yds. times $7.46 times 4.33 weeks equals: $10.43 Pickups per Week:Bin Capacity No. of Bins
Processing Facility Tipping Fee Cost per Yard:

City of Roseville 19 Solid Waste Rate Study

to arrive at the total monthly cost for each level of service. These are the recommended rates for commercial organics collection service.

Table 13 - Monthly Cost of Service – Recommended Rates

6.10 Calculated Revenue Requirement
Table 14 on the following page shows how the recommended cost-based rates in Table 13 when multiplied by the number of customers in Table 7 and multiplied by twelve months, is equal $367,206 in annual rate revenue, which is essentially equivalent to the annual revenue requirement of $367,226 from Table 6. This demonstrates that the recommended rates are designed to meet the revenue requirement for the City’s commercial organics collection program.

Monthly Cost-based Rate Schedule
Proposed Rate Schedule
1 2 3 4 5
65 Gallon 1 $48.30 $96.60 $144.90 $193.20 $241.50
65 Gallon 2 $72.68 $145.36 $218.04 $290.72 $363.40
65 Gallon 3 $97.06 $194.12 $291.18 $388.24 $485.30
65 Gallon 4 $121.44 $242.88 $364.32 $485.76 $607.20
65 Gallon 5 $145.82 $291.64 $437.46 $583.28 $729.10
65 Gallon 6 $170.20 $340.40 $510.60 $680.80 $851.00
Additional Can $24.38 $48.76 $73.14 $97.52 $121.90
2 Cubic Yard 1 $114.73 $229.46 $344.19 $458.92 $573.65
2 Cubic Yard 2 $205.55 $411.10 $616.65 $822.20 $1,027.75 Addl 2-yd bin $90.82 $181.64 $272.46 $363.28 $454.10
Formula:

Sum of Service Area Travel Cost, Container Emptying Cost, Processing Facility Travel Time Cost, and Processing Facility Tipping Fee Cost.

Example (outlined above) 65gallon serviced once per week: 65 gal *1/wk 2cy *1/wk Service Area Travel Time Cost $23.92 $23.92
Container Emptying Time Cost $12.70 $18.47
Processing Facility Travel Time Cost $1.26 $7.77
Processing Facility Tip Fee Cost $10.43 $64.57
Total $48.30 $114.73
Pickups per Week:Bin Capacity No. of Bins

City of Roseville 20 Solid Waste Rate Study

Table 14 - Calculated Revenue Based on Recommended Cost-based Rates

6.11 Comparison between Current and Recommended Rates
Table 15 below shows the current organic waste rates.

Table 15 - Current Rates

Table 16 on the following page shows the difference between the current rates and the recommended rates, and Table 17 further below on the following page shows the percent difference between the current and the recommended rates.

Monthly and Annual Revenue
Summary of Revenue Generated from each Level of Service 1 2 3 4 5
65 Gallon 1 $3,815.70 $1,449.00 $0.00 $0.00 $0.00 $5,265 $63,176 65 Gallon 2 $1,889.68 $3,634.00 $0.00 $0.00 $0.00 $5,524 $66,284 65 Gallon 3 $1,358.84 $3,300.04 $873.54 $0.00 $485.30 $6,018 $72,213 65 Gallon 4 $242.88 $485.76 $0.00 $0.00 $0.00 $729 $8,744 65 Gallon 5 $0.00 $0.00 $0.00 $0.00 $0.00 $0 $0
65 Gallon 6 $0.00 $340.40 $0.00 $0.00 $0.00 $340 $4,085 2 Cubic Yard 1 $2,409.33 $4,818.66 $2,409.33 $458.92 $573.65 $10,670 $128,039 2 Cubic Yard 2 $0.00 $411.10 $616.65 $0.00 $1,027.75 $2,056 $24,666 Total $30,601 $367,206
Pickups per Week:Bin Capacity No. of Bins Annual TotalMonthly Total
1 2 3 4 5
65 Gallons 1 $115.47 $230.85 $346.22 $461.68 $577.04
65 Gallons 2 $115.47 $230.85 $346.22 $461.68 $577.04
65 Gallons 3 $115.47 $230.85 $346.22 $461.68 $577.04
2 Cubic Yards 1 $115.47 $230.85 $346.22 $461.68 $577.04 2 Cubic Yards 2 $230.94 $461.70 $692.44 $923.36 $1,154.08 Bin Capacity No. of
Bins
Pickups per Week:

City of Roseville 21 Solid Waste Rate Study

Table 16 - Rate Decrease Amounts

Table 17 - Percent Difference Between Current and Recommended Rates Bin Capacity No. of
Bins
Pickups per Week:
1 2 3 4 5

65 Gallons 1 -58% -58% -58% -58% -58%
65 Gallons 2 -37% -37% -37% -37% -37%
65 Gallons 3 -16% -16% -16% -16% -16%

2 Cubic Yards 1 -1% -1% -1% -1% -1%
2 Cubic Yards 2 -11% -11% -11% -11% -11%

1 2 3 4 5
65 Gallons 1 ($67.17) ($134.25) ($201.32) ($268.48) ($335.54) 65 Gallons 2 ($42.79) ($85.49) ($128.18) ($170.96) ($213.64) 65 Gallons 3 ($18.41) ($36.73) ($55.04) ($73.44) ($91.74) 2 Cubic Yards 1 ($0.74) ($1.39) ($2.03) ($2.76) ($3.39) 2 Cubic Yards 2 ($25.39) ($50.60) ($75.79) ($101.16) ($126.33) Pickups per Week:Bin Capacity No. of
Bins
Environmental Utilities
Rates Adjustment for FY 2023 and 2024
Summary public outreach efforts
Spring 2023

Goal: To inform, educate and engage Environmental Utilities customers on the proposed rate adjustment.

What Who When
Internal briefings with staff and elected
official 2x2s
City Manager’s Office, City
Council, and Public Utilities
Commission

March
Information distribution to build awareness
of rate adjustment proposal, community
meeting, and ways to participate

- Social media (primarily Facebook and
NextDoor)
- Website page on rate proposal
- News stories on front web page
- City of Roseville e-newsletter
distribution

Roseville customers Early March
through late
April
Proposition 218 direct mail notice
articulating the rate adjustment proposal in
detail
All utility customers for water,
wastewater, and waste
services utilities: 47,000
accounts
Early March
Virtual and in-person listening sessions to
share details of proposal and answer
questions

Roseville customers April 11 and 13
Meeting with largest residential customer
stakeholder groups presenting proposal

Sun City

April 18
Public noticing in Gold Country Media Interested parties Mid-April

Rate proposal presentation Public Utilities Commission

April 25

###
PROPOSITION 218

NOTIFICATION TO PROPERTY OWNERS OF PUBLIC HEARING ON
PROPOSED WATER, WASTEWATER, AND WASTE SERVICES RATE INCREASES.

NOTICE IS HEREBY GIVEN that the City of Roseville will hold a public hearing on Wednesday, May 3, 2023, at 6:00 p.m. in the City Council Chambers at 31 1 Vernon Street, Roseville, California, to consider adoption of proposed adjustments to rates for the water, wastewater, and waste services utilities. Reasons for the proposed rate adjustments and instructions for protesting the rate adjustments are described in more detail below.

Customer notification of
two-year rate adjustments
Proposition 218 and Public Hearing
In 1996, California voters approved Proposition 218, which amended the state constitution relating to the passage of property-related fees. Proposition 218 requires the City to: (1) inform property owners and ratepayers that rate adjustments are being considered; (2) clearly demonstrate the basis on which the rates are calculated; and (3) hold a public hearing at least 45 days after public notification. Utility rate adjustments are subject to majority protest. Any protests must: (1) be in writing; (2) state which utility service rate adjustment(s) the identified property owner or tenant is protesting; (3) provide the location of the identified parcel (by street address or assessor’s parcel number); and (4) include the name and signature of the property owner or tenant submitting the written protest. Only one written protest will be counted per identified parcel.

Written protests may be hand-delivered or mailed to the City of Roseville City Clerk, 31 1 Vernon Street, Roseville, CA 95678, on or before the public hearing date or in person at the public hearing (specified above). To be counted, all written protests must be received before the conclusion of the public comment portion of the public hearing. Any protests submitted via e-mail or other electronic means will not be accepted as a qualified formal protest unless it is a scanned copy of a protest letter containing the signature of the author of such letter.

Please identify on the front of the envelope, whether you mail or submit in person, Attn: City Clerk – Public Hearing on Proposed Utility Rate adjustments. Pursuant to California Government Code section 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fee or charge.

The City Council will hear public comments and consider the written protests regarding the rate adjustments to the City’s water, wastewater, and waste services rates at the public hearing. Oral comments at the public hearing will not qualify as formal protests unless accompanied by a proper, written protest. Upon the conclusion of the public hearing, the City Council will consider adoption of the adjustments in utility rates as described in this notice. If a majority of the affected property owners and tenants file written protests, the proposed adjustments will not be imposed.

What do water, wastewater, and waste services rates fund? The City provides water, wastewater (sewer), and waste services (garbage, recycling, and green waste) utilities to more than 50,000 customers (residential and commercial). The City Charter requires all the City’s utilities to be financially self-sufficient. Therefore, utility revenue from the rates paid by customers does not fund general government expenses. It solely funds the operational costs of the utilities such as purchasing raw water, energy, and chemicals; rehabilitation and replacement of infrastructure; maintenance; regulatory compliance; and labor.

Proposed changes to water, wastewater, and waste services rates Utility rates are calculated based on the cost of providing services. The City hired IB Consulting, independent rate consultants, to update the City’s utility rates. Based on the findings and recommendations of the study, a rate increase is necessary to recover sufficient revenues to operate and maintain the water and wastewater due to the increasing costs of operations tied to inflationary pressures (chemical, equipment, construction and labor), necessary rehabilitation, security and water resiliency costs, as well as the requirement to maintain prudent financial reserves. The proposed rate adjustment accounts for vacancies. The only proposed rate adjustments for the waste services utility are for commercial organics collection rates.

For additional details on the cost of service and rate structuring, please call (916) 774-5300. If approved, rate adjustments would become effective on July 1, 2023, and subsequently, July 1, 2024, unless otherwise noted. The proposed rates are the maximum that may be implemented without the City providing additional notification to property owners and customers.

An example of the impact to utility bills for a typical single-family home is shown in Table 1: Proposed Rate Increases 2023-2024 - Impact on Typical Residential Customer.

Long-range utility planning helps Roseville
both now and into the future
When you turn the tap for water, flush your toilet, or pull the garbage can out for pick-up, these essential utility services started with a thoughtful plan years ago to identify system requirements and funding needs to keep those services going. A key component of maintaining service reliability is Environmental Utilities’ long-range planning. This effort ensures that the current infrastructure remains well-kept, even as we grow the system to handle future demands.

Environmental Utilities runs a major multi-million dollar capital improvement program – a compilation of infrastructure and significant maintenance projects designed to enhance, expand, and preserve the infrastructure so that you receive reliable utility services daily.

Environmental Utilities manages dozens of projects annually, including condition assessments and engineering design. Staff also constructs new facilities and rehabilitates or replaces infrastructure across all three utility services.

Staff prioritizes these projects on meeting public safety objectives, preventing extensive and costly maintenance, replacing infrastructure beyond its useful life, and refurbishing or improving utility systems to maintain reliability. This proactive approach keeps the integrity of Roseville’s utility systems high and your utility rates low.

Our rate setting process
Environmental Utilities’ rate adjustment planning is based on a 10-year horizon, looking at historical and future trends and the revenue needed to operate. We take the rate-setting process seriously, and our goal is to reduce customer impacts while also having the required capital to maintain high-quality services.

The cost of delivering utility services continues to rise, and to keep pace with these increased costs, Environmental Utilities is considering a necessary rate adjustment. We adopted a biennial schedule for rates review to account for minor adjustments under real-world conditions versus adjusting them every four or five years like other agencies, which could amount to more significant adjustments. This allows us to plan for needed revenue to ensure we are running a reliable utility service, which includes daily operations, keeping pace with changing regulations, rehabilitation of infrastructure, and other capital improvements.

Fiscal policies help reduce rate adjustment impacts
One of the ways we are reducing customer impacts is based on a reserve policy implemented by Roseville City Council in 2015. These prudent policy decisions were part of a long-term planning approach that includes both a rate stabilization fund and an economic reserve.

These funds provide a level of fiscal stewardship where a small portion of your monthly bill is collected and set aside to offset unforeseen circumstances – and protect against unanticipated shortfalls that could otherwise affect your reliable utility service. In the event of savings at the end of each fiscal year, we will place those savings back into rate stabilization funds for the future.

Impact on residential customer bills
Water – In July 2023, the approximate monthly water bill for a single-family home with typical water usage will increase by $2.10 (from $49.79 to $51.89). In July 2024, there will be an additional increase of $2.17 (from $51.89 to $54.06). These proposed water rate adjustments reflect the need to fund required water facility security enhancements, water reliability infrastructure projects to create access and delivery of existing water supplies beyond Folsom Reservoir, provide initial funding to meet state-mandated electrification requirements, and investments in maintaining and rehabilitating aging water infrastructure.

Wastewater – In July 2023, a single-family home can expect its monthly wastewater bill to increase $2.86 (from $47.56 to $50.42). The proposed July 2024 rate would increase the bill by $3.03 to $53.45. These rate adjustments reflect inflationary pressures on costs for chemicals, electricity, equipment, construction and labor. Additionally, the adjustments account for maintaining appropriate reserves for rehabilitation and replacement of aging treatment plant and collection system infrastructure.

Waste services – Previous rate adjustments and stabilizing fuel costs using compressed and renewable natural gas are sufficient to meet service delivery and regulatory requirements. Therefore, there is no proposed rate increase for the residential waste services utility (trash, recycling, and green waste services). There is a proposed restructuring of commercial organics rates that reduces costs to those customers.

Impact on commercial customer bills – Commercial water, wastewater, and waste services rates vary by type of customer and usage levels.

TABLE 1:

PROPOSED RATE ADJUSTMENTS – IMPACT ON A TYPICAL RESIDENTIAL CUSTOMER* Current
FY2022-23 bill
Estimated increase
(effective 7/1/2023)
FY2023-24
estimated bill
FY2024-25
estimated increase
(effective 7/1/2024)
FY2024-25
estimated bill
Water** $49.79 $2.10 $51.89 $2.17 $54.06
Wastewater $47.56 $2.86 $50.42 $3.03 $53.45
Waste Services $36.05 $0.00 $36.05 $0.00 $36.05
Total*** $133.40 $4.96 $138.36 $5.20 $143.56
*A typical residential customer uses 1,400 cubic feet of water per month, has a flat wastewater rate, a single 90-gallon garbage container, and a single 90-gallon green waste container. **These rates do not apply to customers receiving water utility bills from the Placer County Water Agency or the San Juan Water District. ***Rate adjustments are approximate. Actual charges may vary due to rounding.

TABLE 2:

CURRENT AND PROPOSED WATER RATES
Quantity Rate (Residential and Commercial) Current Effective 7/1/2023 Effective 7/1/2024 Potable water use (per cubic foot) $0.0145 $0.0159 $0.0166 Non-Metered or Flat Service Charge ($/month) Current Effective 7/1/2023 Effective 7/1/2024 Single family lots up to 4,900 square feet $46.64 $48.97 $50.93 Single family lots 4,901 to 8,900 square feet $50.17 $53.06 $55.19 Single family lots 8,901 to 12,000 square feet $56.42 $60.31 $62.73 Single family lots 12,001 to 15,000 square feet $61.78 $66.55 $69.22 Meter Service Charge ($/month) Current Effective 7/1/2023 Effective 7/1/2024 3/4” meter $29.49 $29.63 $30.82
1” meter $45.53 $45.74 $47.57
1 1/2” meter $85.64 $86.00 $89.44
2” meter $133.76 $134.32 $139.70
3” meter $286.17 $287.32 $298.82
4” meter $510.76 $512.79 $533.31
6” meter $1,048.17 $1,052.31 $1,094.41
8” meter $2,251.34 $2,260.20 $2,350.61
10” meter $3,374.30 $3,387.56 $3,523.07
Current bill Proposed bill *A typical residential customer uses 1,400 cubic feet of water per month /dollar.numerator49.79/dollar.numerator51.89
1,400 CU FT.

Impact /dollar.numerator2.10
/dollar.numerator43.99/dollar.numerator45.53
1,000 CU FT.

Impact /dollar.numerator1.54
/dollar.numerator58.49/dollar.numerator61.43
2,000 CU FT.

Impact /dollar.numerator2.94
/dollar.numerator72.99
/dollar.numerator77.33
3,000 CU FT.

Impact /dollar.numerator4.34
COMPARISON: 3/4” METERED CUSTOMER BILL AT DIFFERENT USAGE LEVELS TABLE 4:

PROPOSED WASTE SERVICES RATES, COMMERCIAL ORGANICS COLLECTION RATE STRUCTURE Effective 10/1/2023
On Site Containers Service 1x/week Service 2x/week Service 3x/week Service 4x/week Service 5x/week 1st 65-Gallon Can $48.30 $96.60 $144.90 $193.20 $241.50 Each Additional 65-Gallon Can $24.38 $48.76 $73.14 $97.52 $121.90 1st 2-Cubic Yard Bin $114.73 $229.46 $344.19 $458.92 $573.65 Each Additional 2-Cubic Yard Bin $90.82 $181.64 $272.46 $363.28 $454.10 TABLE 3:

CURRENT AND PROPOSED WASTEWATER RATES
Current Effective 7/1/2023 Effective 7/1/2024
Residential (per month) $47.56 $50.42 $53.45
Commercial accounts per sewer unit* $47.56 $50.42 $53.45 Commodity rate (per cubic foot)** $0.04430 $0.04696 $0.04978 Recycled Water (Per cubic foot)*** $0.0102 $0.0105 $0.0107 *The number of sewer units for each account is determined as specified in Chapter 14.16 of the Municipal Code. **Applies to water use in excess of 560 cubic feet per month for metered commercial customers. ***Recycled water customers will pay a rate charge equal to sum of 80% of the monthly service charge and 66% of the potable water quantity rates effective 7/1/2023 and a sum of 90% of the monthly service charge and 64.5% of potable water quantity rates effective 7/1/2024 (see Table 2 for Monthly Service Charge).

For more information
about water, wastewater, and waste services
utility rates, visit roseville.ca.us/eu
or call (916) 774-5300.

Financial Management Policy

April 2015

1 Table of Contents

1. Executive Summary ................................................................................................................. 2

2. Introduction .............................................................................................................................. 3

3. Purpose ...................................................................................................................................... 4

4. Defining Financial Strength and Credit Considerations ........................................................ 5 Anticipated and Unanticipated Financial Considerations ................................................. 5 Ratings as Indicators of Financial Strength ....................................................................... 5

5. Enterprise Fund Rates and Fees .............................................................................................. 6 Policy ................................................................................................................................... 6

6. Rehabilitation Funds ................................................................................................................ 7 Policy ................................................................................................................................... 7

7. Recommended Debt Service Coverage and Operating Ratio Policies ............................... 10 Policy ................................................................................................................................. 10

8. Recommended Reserve Policy .............................................................................................. 11 Policy ................................................................................................................................. 11

9. Interaction Between Coverage and Ratios, Reserves, and Rates ........................................ 14

10. Conclusion .............................................................................................................................. 15 Appendix I – Peer Water Utility Financial Management Results ................................................... 16 Appendix II – Peer Wastewater Utility Financial Management Results ........................................ 17

2 1. Executive Summary

The Roseville Environmental Utilities Department (the “ EUD” or the “Department”) manages the city’s water, wastewater and solid waste utilities (the “Utilities”). The Utilities are separately managed financial entities and as such, each faces different constraints and environments and must manage its finances accordingly. With this notion in mind, the Utilities developed this Financial Management Pol icy (the “Policy”) with the intent of giving each Utility a set of guidelines with which it can successfully and prudently manage its finances.

The Policy affirms the currently used Rehabilitation and Enterprise Fund guidelines, clarifies and adjusts targ ets for cash flows available for debt service and operating costs, and establishes targets for sizing Reserves (previously 10% of Operating Expenses).

Specifically, the Policy sets cash flow management guidelines for both the debt holding and non-debt holding enterprises and recommends reserve levels based on each Utility’s respective risk profile. To the extent t hat a Utility holds public debt, the Policy establishes Debt Service Coverage (“DSC”) targets to ensure the Utility’s ability to meet both its o perating and d ebt service obligations ; otherwise , the Policy recommends managing cash flow by targeting an Operating R atio (Operating Income divided by Operating Expenses). The Policy then sets recommends reserve levels in order to help the Utilities manag e exposure to operating risks, critical failures, and rate volatility. The Policy also provides recommended conditions for rate actions when cash flows and/or Reserves deviate from their prescribed targets.

3 2. Introduction

The Utilities are publicly-owned community asset s for the City of Roseville (“Roseville” or the “ City”) that provide safe, reliable, competitively -priced water, wastewater, solid waste, and recycled water services to all of their customers. The Utilities prepared the Policy with the intent of establishing guidelines for managing the financial profile s of each Utility.1

The Policy is divided into six sections: Purpose, Defining Financial Strength, Enterprise Fund Fees and Rates , Rehabilitation Funds, Recommended Debt Service Coverage and Operating Ratio Policies, Recommended Reserve Policies, and Interaction between Coverage and Reserves.

It is intended that to maintain relevance, the Utilities will revisit the Policy periodically if there is a material change in risk exposures or conditions.

1The Policy focuses on the Water, Wastewater, and Solid Waste Utilities as the Recycled Water Utility does not keep independent financial records but is currently part of the Wastewater Utility.

4 3. Purpose

The purpose of th is Financial Management Policy is to provide a set of guidelines for prudently managing the financial profile s of the Utilit ies. In practice, this Policy will discipline the budgeting and rate setting practices, establish guidelines to improve the financial health of each Utility over the long term, and seek to balance the need for capacity growth while maintaining competitively low rates.

Like a ll enterprises, the Utilit ies manage cash flow to cover expenditures and hold reserves to address anticipated and unanticipated funding requirements.

The Policy is based upon the understanding that the following factors are important and should serve as the relevant goals of the Policy. These goals establish that each Utility should:

1. Manage rates to avoid significant year -over-year rate adjustments.

2. Strive to maintain and invest in its respective system.

3. Maintain reserves for financial exposures .

4. Cost-effectively obtain funds to maintain and invest in its respective system.

The Policy is further intended to offer the Roseville City Council (the “ City Council ”) guiding directives to staff for decisions and recommendations related to the financial profile of each Utility.

The Policy is not prescrip tive in ter ms of how the Utilities set rates; however, there is a nexus between the rates that each Utility charges and its respective financial profile.

While t he Policy attempts to recognize the balance between each enterprise’s risk management, financial risk mana gement and rate setting, the Policy cannot resolve conflicts between competing objectives and so it instead provides guidelines for the financial management of each Utility to be considered by the City Council and staff in coordination with other considerations.

5 4. Defining Financial Strength and Credit Considerations

The Utilities’ businesses are subject to a number of significant environmental, market , and regulatory considerations on national, state , and local levels. The determination of financial strength is subjective , but it ultimately relates to the expectation that the Utilities can continue to meet their primary financial goals in the context of the macro considerations that each Utility faces.

Anticipated and Unanticipated Financial Considerations

One characteristic of financial strength is the ability to prepare for anticipated events and obligations including, but not limited to:

 Operation and maintenance expenses (O&M).
 Debt service payments.
 Exposure to weather related events su ch as droughts.  Response to existing or impending regulations .

Another characteristic of financial strength is the ability to address unanticipated considerations including, but not limited to:

 Unanticipated general reduction in customer demand .
 One or more operational events (natural disaster or other events including force majeure, etc.) that could dramatically increase cos ts or reduce resource options, the loss of one or more large customers.
 Market disruption that increases the cost of borrowed funds.  Counterparty’s inability to perform on a contract.
 Change in regulatory or environmental regulations.
 Unanticipated increase in compensation costs.

While such considerations are by nature, unanticipated, the Policy recognizes that the financial strength of each Utility is at least partially related to the ability to address such considerations should they arise.

Ratings as Indicators of Financial Strength

While credit ratings are important yardstick indicators of financial strength, the Policy is not focused on maintaining credit ratings but rather the overall financial strength of the Utilities as only some of the Utilities have or will have ratings . It is expected , however, that by following the guide lines of the Policy, the Utilities will maintain st rong credit ratings. Specifically, it is expected that the Water Utility will be able to maintain A+ category ratings and will be able to make a strong case for AA- category ratings while the Wastewater Utility will be able to support the South Placer Wast ewater Authority (“SPWA”) in maintaining AA -, or higher, category ratings. SPWA issues debt on behalf of the City of Roseville, Placer County and South Placer Municipal Utility District for regional wastewater treatment facilities to be used by these agencies.

6 5. Enterprise Fund Rates and Fees

Environmental Utilities are 100% self -sufficient. The primary revenue stream s for the Utilities are rates and fees established by the City Council. This Policy identifies the manner in which rates and fees are set a nd the extent to which they cover the cost of services provided. A revenue system that requires the identification of both the cost of the programs and the portions of the cost that will be recovered through those revenues allow the Department and its utility customers to develop a better understanding of the cost of services and to consider the appropriateness of established rates and fees.

Policy

The City will set rates and fees at levels related to cover the reasonable cost of providing services which i ncludes direct and indirect costs such as operating and maintenance, overhead, infrastructure rehabilitation, and debt service. The Department will review these rates and fees annually in the budget process and will recommend rates that are expected to pro duce revenues sufficient to fully fund the reasonable costs of providing services. Further,

 All rates and fees shall be adopted in accordance with the provisions of Prop 218 and AB1600.
 The City will examine utility rates through the cost of service proce ss every two years or as otherwise determined in an effort to avoid the rate shock that occurs when rates are evaluated less frequently .
 Revenue and expenses will be projected using conservatism .  Revenue requirements will be based on long-term planning objectives.

During the rate and fee setting process, the City will consider the rates and fees of other agencies as c omparing the City’s rates and fees to other agencies ’ provides useful background information because:

 Other agencies’ rates and fees reflec t in some ways the current “market’s” rates for similar services provided by the Utilities and can assist the City is assessing the reasonableness of proposed rate and fee changes.
 They can serve as a benchmark for how cost -effectively the Utilities are providing their services.

Rates and fee comparisons , however, should never be the sole or primary criteria used in the City’s rate and fee setting process. The City should also place under consideration:

 What level of cost recovery is the rate and /or fee intended to achieve?  What costs are considered in the computation of rates and fees?

7  Timing: When was the last time the other agencies’ fees were comprehensively evaluated?
 What level of service do the other agencies provide compared to the City’s?  Are other agencies’ rate structures significantly different than the City’s and what is each entities’ rate structure intended to achieve?

6. Rehabilitation Funds

The Utilities have established Water, Wastewater and Solid Waste Rehabilitation Funds (the “Rehabilitation Funds”. The Water and Wastewater Rehabilitation Funds administer the capital rehabilitation and replacement of existing infrastructure assets. Solid Waste Rehabilitation Funds are used for the rehabilitation and replacement of bins and cans.

Policy

Sources of Revenue

The primary source of revenue for the Rehabilitation Funds is Utility rates. City Council adopted Utility rate schedules include an amount for the rehabilitation or replacement of infrastructure assets or capital assets for each utili ty. The rates are collected in the Operations Funds and transferred to the Rehabilitation Funds.

The Wastewater Rehabilitation Fund also includes local wastewater connection fees.

These fees are collected for the specific purpose of purchasing and/or repl acing capital equipment required for the maintenance of wastewater facilities. Other sources of revenue for the Wastewater Rehabilitation Fund include:

 Interest earned on unexpended funds or reserves that will remain in the Rehabilitation Funds and be available for approved expenditures .  Any grant, loan, or other source of revenue obtained for the purpose of capital rehabilitation or replacement or infrastructure assets will be included in the Rehabilitation Fund, made available for approved expenditures, and accounted for as required by the grant, loan, or other source .

Expenditures

Rehabilitation Funds may only be used for Water and Wastewater infrastructure asset or Solid Waste capital asset capital rehabilitation or replacement expenditures. These expenditures:

 Must s erve the purpose of benefiting the existing Water , Wastewater, or Solid Waste Utility customers.
 Must be approved by City Council.

8  Must be included in the Rehabilitation Plan unless needed for unanticipated utility emergency purposes.
 May include updates necessary to comply with changes to regulatory requirements.
 Must b e n ecessary to maintain the existing level of service which may include technological advancements.
 Must not increase capacity or conduct improvements b eyond the scope des cribed above.
 May be approved to pay for the respective utilities’ debt service.  If incurred in conjunction with an outside source of revenue (i.e. grant), must be accounted for as required by the outside revenue source.

Investments

Investments must be made in accordance with City investment policies.

Fund Balances

The Rehabilitation Funds will be administered independent of each other and of any other funds within the Utilities or the City. Lending of funds to or from the Rehabilitation Funds must be a pproved by City Council, must be considered only for the benefit of the respective water, wastewater, and solid waste systems and utility funds, and only for the benefit of the respective water, wastewater, and solid waste customers. Interest will be paid at the then prevailing interest rate for city -pooled investments. Further, the majority of each Utility’s Rehabilitation Fund balances should be invested or held in “liquid” assets (e.g. cash, money market accounts, treasuries, etc.) in order to ensure th at immediate rehabilitation expenses can be met in a timely manner. Lending from the Rehabilitation funds will only be considered if they do not conflict with planned capital plan needs over the horizon of the repayment period.

Assessment of Capital Plan

The water and wastewater capital rehabilitation and replacement needs will be reevaluated periodically. Items to be considered include, but are not limited to:

 Asset lifetimes by class of asset
 Inflation rates for both operating and capital costs
 Unit costs for asset replacement
 Fund interest yield rates
 Condition, criticality, and operational usefulness of assets  Desired levels of service
 Consequences when desired levels are not met
 Risk of asset failure and level of acceptable risk of failure  Measurements of various asset attributes that indicate how well an asset performs

9 The amounts transferred from Operation Funds to Rehabilitation Funds will be adjusted as necessary to reflect changes in the rehabilitation and replacement funding requirements. The impact of such adjustments on utility rates will also be analyzed to determine if an adjustment to water, wastewater, or solid waste utility rates is necessary.

Roseville Public Utilities Commission

The Roseville Public Utilities Commission will provide recommendations on the implementation of these policies, as appropriate, consisten t with their role as an advisory body to the Roseville City Council.

Rehabilitation Fund Policy Review

The Rehabilitation Fund Policies designate a reassessment of the pol icies from time to time to determine if any changes are necessary. Any changes must be approved by the City Council.

10 7. Recommended Debt Service Coverage and Operating Ratio Policies

This Policy recommends managing funds primarily to Debt Service Coverage (“DSC”) or Operating Ratios while maintaining a focus on reserves as well in order to meet each Utility’s management goals.

Policy

A practical minimum DSC is 1.00x without reserves because at 1.00x , the Utilities are paying operating costs and debt service on a cash flow basis. There are, however, below the line cash outflows that should also be considered.

Direct Debt Service Coverage and Operating Ratio Policy

This Policy recommends the Water and Wastewater Utilities maintain DSC of 1.80x.

This level ma intains a cushion above the bond covenant requirement of 1.10x for the Wastewater Utility and 1.20x for the Water Utility . At 1.80x DSC, the Water and Wastewater Utilities can reliably use cash flow to pay for their operations including related depreciatio n expenses . The 1.80x DSC would leave adequate cash funding available to invest in general system improvements; however, significant capital improvements or additions would probably have to be financed with debt. This strikes a balance between funding capi tal through higher rates paid by current customers and funding capital through bond financing paid by future customers.

The Solid Waste Utility has historically enjoyed stable Net Operating Revenues. Due to the lack of volatility and overall lack of depre ciable assets, it is recommended that the Solid Waste Utility maintain an Operating Ratio of 1.30x. The 1.30x Operating Ratio would leave sufficient cash funding available to invest in any necessary capital improvements on a pay-go basis.

Using Reserves to Meet Coverage

The Policy recommends that the Utilities calculate DSC and Operating Ratios w ithout Reserves and without accounting for Rate Stabilization Fund draws . The use of rolling coverage in calculating DSC is very useful for legal compliance purpos es but it is not recommended for operating and financial management purposes as it may give an inaccurate depiction of financial health .

11 8. Recommended Reserve Policy

Reserves are important to the Utilities because they help to:

 Ensure cash exists for the timely payment of bills.
 Maintain the short-term and long-term financial health of each Utility.  Maintain stable rates for customers.
 Fund unanticipated cost contingencies.
 Ensure funds exist for system improvements.
 Act as a significant factor in bond ratings.
 Identify when financing should be procured.
 Identify the need for rate actions.

Policy

The most common approach to sizing Reserves is b y number of days of expenses. Water and wastewater utilities of about equivalent size to the City of Rosevi lle Water and Wastewater Utilities typically have reserves of at least 250 days. Reserves of approximately 365 Days’ Cash would be more typical for AA-/A+ category rated utilities and would be more appropriate to match the risks that the Water and Wastewat er Utilities manage. It is recommended that the Solid Waste Utility maintain Days’ Cash of approximately 90 days for the reasons described below.

Operating Risk Management

The Utilities use reserves to handle fluctuations and adjustments in every day expenses.

It is recommended that each Utility maintains approximately 90 days’ worth of Operating Expenses as one subcomponent of the Reserves. Such reserves would, amongst other things, be intended to cover timing issues with regard to payments, fluctuations in purchased water costs, and other operational issues. In consideration of these fluctuations in cost and cash requirement , 90 Days’ Cash for regular operation management is a modest first component of the recommended Reserves.

System Critical Failure

Each Utility should consider maintaining a portion of the Reserves that is for a single emergency event (e.g. treatment facility closure , conveyance disruption , etc.). In total, it is recommended that the Reserves set aside for system critical failure be equivalent to approximately 1.0 - 2.0% of the Capital Assets belonging to each respective Utility . Due to the lack of Capital Assets posses sed by the Solid Waste Utility , it is not recommended that the Solid Waste Utility keep any reserves for the event of a system critical failure.

This component of the Reserves may be forgone if it is determined that each Utility’s exposure to critical failures is adequately covered through insurance.

12 Rate Stabilization

In addition to addressing operating and maintenance issues, Reserves serve two other important purposes:

1. Reserves act as a shock absorber for ratepayers.

2. Reserves offer security to each Utility’s debt holders . If an unusual financial or operating event leaves a Utility short of cash, Reserves can be use d to avoid an immediate increase in rates to cover the shortfall .

Keeping some Reserves for rate stabilization would allow the Utilities to ensure that under virtually no circumstance would an Event of Default situation occur within a single year, and tha t the City Council would have the year to contemplate ways to prevent investors from enforcing rate actions on the Utilities’ customers.

For such reasons, it is advisable that the Water and Wastewater Utilities target Reserves sized for rate stabilization at approximately 50% of annual operating expenses or roughly 180 Days’ Cash. Because the Solid Waste Utility does not hold any debt and has historically experienced very stable net revenues, it is recommended that the Solid Waste Utility not hold any reserves for the purpose of rate stabilization .

Other Uses for Reserves

The aforementioned categories are those that most clearly merit the allocation of Reserves but are by no means the only categories of financial exposure that the Utilities could manage w ith Re serves. For instance, the Utilities have significant Pension and Other Post -Employment Benefit liabilities that could generate a cash requirement.

Further, to the extent that the Solid Waste Utility faces fees for the closure of a landfill or similar occurrence, it may be prudent to hold additional reserves for such an event. Other risk categories such as interest rate exposure are relatively small and do not need to be reserved for separately , but are real risks that could potentially be managed with Reserves.

Reserve Policy Summary

These recommendations would suggest that the following would be the appropriate Reserve levels for each Utility:

 Operating Risk Management: 90 Days’ Cash
 System Critical Failure (Water and Wastewater Only) : 1.0 - 2.0% of Capital Assets
 Rate Stabilization (Water and Wastewater only) : ~180 Days’ Cash  Total Reserves: ~270 Days’ Cash plus 1.0 - 2.0% of Capital Assets (Water and Wastewater); 90 Days’ Cash (Solid Waste)

13 While these areas of consideration were evaluated in orde r to conceptualize the appropriate size of the Reserves, each Utility intends to maintain a single Reserve without separate buckets. These Reserve allocations are neither abnormally high nor low for industry standards. Each com ponent of the Reserves is siz ed at less than the maximum possible exposure for each component because there is a recognition that it is unlikely several of the risks each Utility faces would materialize simultaneously.

Building and Drawing Upon Reserves

The Water and Wastewater Utilities are targeting Reserves of about 270 Days’ Cash plus

1.0 - 2.0% of Capital Assets while the Solid Waste Utility is targeting 90 Days’ Cash , however, there is no intention of setting rates to maintain Reserves equal to the levels prescribed above. The purpose of Reserves is to address the financial impacts of revenue and expense fluctuations and unanticipated events. Excess reserves can be used for several financial imperatives including but not limited to: financing capital improvements on a pay -go basis, paying down existing debt, or lowering rates. The general philosophy of the proposed range is that the Water and Wastewater Utilities should target 270 Days’ Cash plus 1.0 - 2.0% of Capital Assets and the Solid Waste Ut ility should target reserves of 90 Days’ Cash. Each of the Utilities should limit reserves to 130% of the respective reserve targets.

Each Utility’s Reserves would increase or decrease depending upo n many factors for a given year; however, to the extent that each Utility achieves its DSC or Operating Ratio Policy targets, Reserves would remain fairly stable. Reserves would increase or decrease under the following conditions:

 Net Revenues Available for Debt Service are higher or lower than budgeted/projected as a result of higher or low er Revenues and Expenses  Debt Service is higher or lower than budgeted/projected  Capital investment in the system from Net Revenues is higher or lower than budgeted/projected
 Debt issued for capital investment is greater or less than budgeted/projected

14 9. Interaction Between Coverage and Ratios, Reserves, and Rates

For reasons described in the sections above, the Policy prescribed specific targets for DSC and Operating Ratios and Reserves . However, the Policy anticipates that in practice there is a range of acceptable results and a balance between cash flow and reserve levels is warranted.

A rate increase should be considered by the City Council if any of the following conditions (the “Rate Increase Conditions”) are projected in the five-year forecast:

 DSC without Reserves will be less than 1.80x
 Operating Ratios (Solid Waste Only) without Reserves will be less than 1.30x  Any rate increase would be greater than six percent
 A major expenditure is expected

Rate increases indicated by the above conditions that would exceed six percent in any one year can be spread over multiple years.

No rate increase for the purpose of increasing reserves or DSC should be considered if DSC or Operating Ratios without Reserves are above their respective targeted levels and Reserves are projected to be greater than the targeted levels of 270 Days’ Cash plus 1.0 –

2.0% of Capital Assets for the Water and Wastewater Utilit ies and 90 Days’ Cash for the Solid Waste Utility.

Lastly, it is important to note that recommendations in the Policy are associated with projected financial conditions for the Fiscal Year End of future years. Actual results will vary based on weather, market condition s, etc. In addition, Reserves and cash flow may be more or less robust within a Fiscal Ye ar, relative to the Fiscal Year End but considering such fluctuations within a year would overly complicate monitoring with only marginal benefit.

15 10. Conclusion

The Policy was drafted with the intent of providing guiding directives to the Utilities’ management and staff for decisions and recommendations related to each Utility’s financial profile.

The Policy is a fairly incremental change from existing policies. Specifically, the Policy affirms the currently used Rehabilitation and Enterprise Fund guidelines , clarifies and adjusts targets for cash flows available for debt service and operating costs , and adjusts targets for sizing Reserves (previously 40% of Operating Expenses).

In its most abbreviated form , the Policy targets 1.80x DSC without Reserves for the Water and Wastewater Utilities and an Operating Ratio of 1.30 x for the Solid Waste Utility. It targets Unrestricted Reserves sized at 270 Days’ Cash plus 1.0 – 2.0% of Capital Assets for the Water and Wastewater Utilities and 90 Days’ Cash for the Sol id Waste Utility and establishes tolerable maximums. The Policy also provides recommended conditions for rate actions when cash flows and/or Reserves deviate from the targets. The table below summarizes the policy targets described above.

Summary of Policy Targets
Utility Water Wastewater Solid Waste
Debt Service Coverage or
Operating Ratio (x) 1.80 DSC 1.80 DSC 1.30
Reserves (Days’ Cash)
Operating Risk Management 90 90 90
System Critical Failure (% of
Capital Assets) 1-2% 1-2% 0%
Rate Stabilization 180 180 0
Total 270 + 1-2% of
Capital Assets
270 + 1-2% of
Capital Assets 90

The Policy is intended to be revisited and updated periodically if there are material changes in the risk exposures or conditions each Utility faces.

Finally, and per haps most importantly, t he Policy is ultimately intended to serve as a guide and it in no way restricts the ability of the City Council to review proposed rate actions, debt issuances, or other actions of substance to each Utility.

16 Appendix I – Peer Water Utility Financial Management Results

Peer Water Utility Financial Results (FY2014)
Utility City of Redding 1 City of Sacramento2 Yuba City Ratings (M/S/F) -/AA/- -/AA-/AA- -/A+/AA-
Revenues/Expenses
Operating Revenues $18,423,339 $94,382,000 $11,794,764 Operating Expenses (Excluding
Depreciation) $13,245,963 $43,215,000 $4,815,664
Net Operating Revenue $5,177,376 $51,167,000 $6,979,100 Non-Operating Revenue
(Expenses) $1,074,049 ($4,373,000) $2,468,918
Net Revenue Available for Debt
Service3 $6,515,804 $46,794,000 $5,204,350
Depreciation & Amortization $3,457,758 $16,951,000 $4,718,299 Net Revenue after Depreciation
& Amortization $2,793,667 $29,843,000 $4,729,719
Cash
Unrestricted4 $23,402,105 $71,087,000 $14,543,831
Days' Cash on Hand 645 600 1,102
Debt
Total Debt Outstanding $5,925,956 $399,134,612 $50,214,569 Annual Debt Service $1,091,335 $11,279,000 $2,915,149
Debt Service Coverage
(Operating) 5.97x 4.15x 1.79x
Debt Service Coverage 4.74x 4.54x 2.39x
1Issues debt through the Redding Joint Powers Financing Authority 2City of Sacramento reports data rounded to the nearest thousand 3If not specified, assumed to be Net Operating Revenue (Excluding Depreciation) plus Non-Operating Income 4Unrestricted Cash defined as: "Unrestricted Net Assets" Data from City of Redding, City of Sacramento, and Yuba City comprehensive annual financial reports

17 Appendix II – Peer Wa stewater Utility Financial Management Results

Peer Wastewater Utility Financial Results (FY2014)
Utility City of Redding 1 City of Stockton City of Vacaville Ratings (M/S/F) -/AA/- Ba1/-/A- -/-/-
Revenues/Expenses
Operating Revenues $22,720,092 $59,953,318 $32,219,462 Operating Expenses (Excluding
Depreciation) $12,527,074 $40,172,822 $18,603,458
Net Operating Revenue $10,193,018 $19,780,496 $13,616,004 Non-Operating Revenue
(Expenses) ($175,350) ($3,662,856) ($662,109)
Net Revenue Available for Debt
Service2 $11,645,032 $21,057,331 $12,953,895
Depreciation & Amortization $5,924,400 $11,161,304 $5,367,829 Net Revenue after Depreciation
& Amortization $4,093,268 $4,956,336 $7,586,066
Cash
Unrestricted3 $20,151,993 $38,576,321 $61,918,880
Days' Cash on Hand 587 350 1,215
Debt
Total Debt Outstanding $91,119,042 $81,270,000 $168,768,665 Annual Debt Service $8,117,463 $7,373,138 $8,557,860
Debt Service Coverage
(Operating) 1.26x 2.68x 1.59x
Debt Service Coverage 1.43x 2.86x 1.51x
1Issues debt through the Redding Joint Powers Financing Authority 2If not specified, assumed to be Net Operating Revenue (Excluding Depreciation) plus Non-Operating Income 3Unrestricted Cash defined as: "Unrestricted Net Assets" Data from City of Redding, City of Stockton, and City of Vacaville comprehensive annual financial reports

Roseville City CouncilMay 3, 2023

Roseville City Council
May 3, 2023