City of San Bruno
Water & Sewer Rate Study
Findings & Draft Recommendations
February 28, 2023
2 Presentation Overview
■ Background & Draft Recommendations
■ Regional Rate Surveys
■ Rate Study Overview
■ Financial Challenges
■ Proposed Rates
■ Issues for Council Input & Direction
■ Next Steps
Purpose: Discuss findings & draft
recommendations & receive input
3 ■ Water & sewer utilities are financially self-supporting ■ Rates are the main source of revenue and need to be set at adequate levels to support operating & capital needs ■ City cancelled rate increases scheduled for July 1, 2021 to provide rate relief during Covid
■ No rate increases implemented for an additional year
resulting in no increases for past 2 years
■ Received preliminary Council feedback on Feb-14
■ Completed draft Water & Sewer Rate Study
Background
4 1. Recommend City resume its historical practice of
gradual annual rate increases
With no increases for past 2 years, proposed rates will lag behind rate projections from the prior 2017 rate study
Draft Recommendations
January 1 January 1 January 1 January 1 January 1
2024 2025 2026 2027 2028
6% 6% 6% 6% 6%
Projected Water Rate Increases
July 1 July 1 July 1 July 1 July 1
2023 2024 2025 2026 2027
5% 5% 5% 5% 5%
Projected Sewer Rate Increases
5 2. Proposition 218 Rate Increase Process
Adopt new rates by Resolution subject to the Proposition 218 noticing & public hearing process
Sewer Rates: Move forward in upcoming months for sewer rate increases starting July 1, 2023
Water Rates: Subsequently proceed in the fall with a separate Prop 218 process for water rate increases starting Jan-1, 2024
3. Seek general direction from Council on collecting
sewer bills on the property tax rolls
Draft Recommendations
6 ■ City’s water & sewer rates are in the middle range
compared to other regional agencies in San Mateo County ■ City bills customers via a bi-monthly bill that includes water rates, sewer rates and garbage rates
Single large bill paid once every 2 months
Many other agencies bill for water or sewer only,
or collect some charges on the property tax rolls
Rates & Billing
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9 Note: Survey assumes same level of water use for all agencies for comparative purposes. Agencies in northern San Mateo County and on the Pacific Coast tend to have lower water use per home than agencies in central and southern San Mateo County.
10 ■ 10-Year Water & Sewer Financial Plans
Develop 10-year financial projections to identify future operating, capital, and debt service funding needs of the City’s water enterprise Phase in rate increases as gradually as possible to minimize the annual impact on customers
■ Rate Structure Update
Update water & sewer rate structures to ensure rates continue to:
a. Align with the cost of providing service
b. Be fair and equitable to all customers
c. Comply with the legal requirements of Proposition 218 ■ Water & sewer enterprises in good financial shape but face financial challenges that will require rate increases
Rate Study Overview
11 ■ Capital Improvement Needs of Aging Infrastructure
5-Year Water CIP = $85 million
5-Year Sewer CIP = $71 million
Historical Council priority to proactively replace aging infrastructure to support safe & reliable service
Financial Challenges
12 ■ City has made substantial progress on its long-term capital programs over past decade
Replaced 19,950 linear feet of water pipelines & service connections Replaced 33,730 linear feet of sewer pipelines & service connections Rebuilt 3 sewer pump stations
Replaced 1 water tank; moving forward with 3 more
■ In recent years, some projects were temporarily deferred resulting in temporary buildup of fund reserves
■ City has filled 6 vacancies in 2022 and increased on-call contracting capabilities
■ Capital programs are moving forward
■ Fund reserves expected to be partially drawn down in upcoming years as projects are funded
Capital Improvements
13 Water Capital Improvement Program
Average annual funding requirement = $17 million per year After 5 years, Water CIP projected at $7.5 million per year + 3% cost escalation Higher levels of funding needs over next 5 years will likely require use of debt Financial projections assume $24 million of debt issued in 2025 2022/23 2023/24 2024/25 2025/26 2026/27 5-Yr Total
Main Imprvt & Replacement Program 7,630,000 6,300,000 2,800,000 9,000,000 25,730,000 Pump Station Imprvt & Repl Program 5,900,000 950,000 950,000 7,800,000 Water Tank Imprvt & Replacement Program 0
Commodore Tank Installation 2,250,000 17,750,000 20,000,000 Cunningham Drive Tank Replacements 542,000 9,000,000 9,542,000 Princeton Tank Replacement 1,200,000 2,000,000 3,200,000 Sweeney Ridge Tank Replacement 890,000 9,500,000 10,390,000 Advanced Water Meter 504,000 504,000
Acappella Well Project 4,032,000 4,032,000
Pressure Reg Station Impvt & Repl Program 1,211,000 450,000 450,000 2,111,000 Well Rehabilitation 529,000 200,000 200,000 200,000 200,000 1,329,000 Wtr Qual Well Syst & Sweeny Rdg Tk Upgrds 600,000 600,000 Total Capital Funding 25,288,000 1,600,000 16,900,000 30,250,000 11,200,000 85,238,000 14 Sewer Capital Improvement Program
Average annual funding = $11.4 million per year (excluding WQCP Biosolids) Assumes San Bruno’s $14 million share of WQCP Biosolids is financed by debt After 5 years, City Sewer CIP projected at $7.5 million per year + 3% escalation After 5 years, share of WQCP projects est. at $2.5 million per year + 3% escalation 2022/23 2023/24 2024/25 2025/26 2026/27 5-Yr Total
SEWER COLLECTION SYSTEM
Main Improvement & Replacement Program 10,166,000 10,000,000 11,200,000 3,750,000 6,000,000 41,116,000 Pump Station Imprvt & Replacement Program 5,303,000 5,303,000 Subtotal Sewer Collection System 15,469,000 10,000,000 11,200,000 3,750,000 6,000,000 46,419,000
WATER POLLUTION CONTROL PLANT
Water Quality Control Plant Annual Imprvts 2,500,000 2,000,000 2,000,000 2,000,000 2,000,000 10,500,000 WQCP Biosolids Handling Imprvts (est) [1] 14,000,000 14,000,000 Subtotal WQCP Improvements 2,500,000 2,000,000 2,000,000 2,000,000 16,000,000 24,500,000 Total Capital Funding 17,969,000 12,000,000 13,200,000 5,750,000 22,000,000 70,919,000 1 South San Francisco anticipates financing with long-term debt. 15 ■ SFPUC Wholesale Water Rate Increases
SFPUC wholesale rates increased 16% on July 1, 2022
Additional wholesale water rate increases projected in future years ■ Keep Up with Cost Inflation
City’s utilities face ongoing inflationary cost increases Annual rate increases needed to keep up with cost inflation Financial Challenges
continued
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Actual billing impacts may vary a little based on customer class and water use due to update/realignment of rate structures
Sewer: 4.85% - 5.20% Water: 5.60% - 6.20%
Sewer rate increases on July 1 starting this year (2023) Water rate increases on January 1 (when water use is low) starting 2024 Projected Rate Increases
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22 Current January 1 January 1 January 1 January 1 January 1 Rates 2024 2025 2026 2027 2028
Overall Rate Increase % 6% 6% 6% 6% 6%
MONTHLY SERVICE CHARGES
Fixed monthly charge based on meter size.
Meter Size
3/4-inch $25.58 $27.11 $28.73 $30.45 $32.27 $34.22
1-inch 42.63 45.18 47.88 50.75 53.78 57.03 1-1/2 inch 85.27 90.37 95.77 101.50 107.57 114.07 2-inch 136.43 144.59 153.23 162.40 172.11 182.51 3-inch 255.80 271.10 287.30 304.50 322.70 342.20 4-inch 426.33 451.83 478.83 507.50 537.83 570.33 6-inch 852.67 903.67 957.67 1,015.00 1,075.67 1,140.67 8-inch 1,364.27 1,445.87 1,532.27 1,624.00 1,721.07 1,825.07 10-inch 1,961.13 2,078.43 2,202.63 2,334.50 2,474.03 2,623.53
QUANTITY CHARGES
Billed based on metered water consumption per hundred cubic feet (hcf); 1 hcf = approximately 748 gallons a) Single-Family Residential
Bi-Monthly Use
Tier 1 0 - 10 hcf $9.01 $9.57 $10.16 $10.79 $11.46 $12.18 Tier 2 11 - 20 hcf 10.78 11.42 12.09 12.80 13.56 14.36 Tier 3 > 20 hcf 14.33 15.12 15.95 16.83 17.75 18.72 - - - - - b) All Other Accounts (All Use) 10.11 10.68 11.28 11.91 12.58 13.27 Proposed Water Rates
23 Current July 1 July 1 July 1 July 1 July 1
Rates 2023 2024 2025 2026 2027
Overall Rate Increase % 5% 5% 5% 5% 5%
MONTHLY SERVICE CHARGES
Fixed monthly charge per account
Single Family Residential $32.27 $33.96 $35.74 $37.61 $39.59 $41.66 All Other Customers (Charge Based on Water Meter Size)
Meter Size
3/4-inch $32.27 $33.96 $35.74 $37.61 $39.59 $41.66
1-inch 53.78 56.60 59.57 62.69 65.98 69.43 1-1/2 inch 107.57 113.20 119.14 125.38 131.95 138.87 2-inch 172.11 181.13 190.62 200.61 211.12 222.19 3-inch 322.70 339.61 357.41 376.14 395.85 416.60 4" & Larger 537.83 566.02 595.68 626.90 659.76 694.33
QUANTITY CHARGES
Billed per hundred cubic feet (hcf); 1 hcf = approximately 748 gallons Residential (winter use) $12.37 $12.98 $13.61 $14.28 $14.97 $15.71 Commercial
C-1 Light Commercial 11.50 12.05 12.63 13.23 13.87 14.53 C-2 Medium Commercial 12.37 12.98 13.61 14.28 14.97 15.71 C-3 Heavy Commercial 17.61 18.54 19.51 20.54 21.62 22.76 C-4 Special Commercial 22.86 24.11 25.42 26.81 28.27 29.82 Governmental 12.37 12.98 13.61 14.28 14.97 15.71 Industrial
I-1 Light Industrial 12.37 12.98 13.61 14.28 14.97 15.71 Proposed Sewer Rates
24 ■ Many other regional agencies are increasing rates
Burlingame in 2nd of 3 years of 9% sewer rate increases Millbrae in 1st of 5 years of 6% sewer rate increases and in 2nd of 4 years of approx. 5% water rate increases
South San Fran in 1st of 5 years of 3% sewer rate increases Belmont planning 5 years of 5.5% sewer rate increases
Pacifica in 1st of 5 years of 3.5% sewer rate increases Coastside CWD planning 6% water rate increase
San Carlos conducting sewer rate study
Montara WSD conducting water & sewer rate study
San Mateo conducting sewer rate study
Foster City reviewing annual water & sewer rate increases ■ San Bruno’s Water & Sewer charges projected to remain in the middle range compared to other regional agencies Other Agencies Also Raising Rates
25 ■ General Pros & Cons
Removes sewer charges from combined bi-monthly utility bills County on Teeter Plan, provides City with 100% of billings Property taxes paid in two installments per year
Some bills would transition from tenant to property owner responsibility ■ California Health & Safety Code 5473
Must adopt a list of charges for all parcels for County tax rolls each year First year must mail notice to property owners & holding a public hearing ■ Many other local agencies collect sewer charges on tax rolls South San Francisco, Pacifica, San Mateo, Colma, San Carlos, Hillsborough, East Palo Alto Sanitary District, Montara Water & San Dist., West Bay Sanitary District (Menlo Park), Redwood City, Belmont ■ Can provide advance notice & implement next year
Sewer Bills on Property Tax Rolls?
26 ■ Can rates fund an assistance program for sewer lateral repairs No, based on legal review any program to help fund private later repairs would need to be funded by the City’s General Fund, not utility rates In 2014, City adopted program requiring inspection & repair of laterals at time of sale of residential property (property owners responsible) ■ Issues regarding sewer billing to property tax rolls
Requires public noticing & hearing, but not an election Agencies that bill on the property tax rolls have a range of rate structures including fixed and volumetric sewer rates
City can still provide discounted rates (e.g. on prop tax rolls) but may need to modify administrative process for tenants
■ What % of customers are delinquent on utility bills?
Roughly 6% delinquent each month
Fiscal impact = approx. $550,000 for water & $600,000 for sewer Questions from Prior Study Session
Draft Recommendations
for Council Input
1. Proposed Rate Increases for Next 5 Years
5% annual sewer rate increases starting July 1, 2023
6% annual water rate increases starting January 1, 2024
2. Proposition 218 Rate Increase Process
Adopt rates by Resolution via Prop 218 noticing & public hearing process
Sewer Rates: Move forward in upcoming months for sewer rate increases starting July 1, 2023
Water Rates: Subsequently proceed in the fall with a separate Prop 218 process for water rate increases starting Jan-1, 2024
3. Sewer Bills on Property Tax Rolls
Seeking general direction from Council
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DRAFT SCHEDULE
FEB Present draft recommendations & receive input
MAR/APR Move forward with Prop 218 process for Sewer Rates MAY/JUN Hold Public Hearing on Sewer Rate Increases
JUL New Sewer Rates become effective July 1, 2023
SEP/OCT Move forward with Prop 218 process for Water Rates NOV/DEC Hold Public Hearing on Sewer Rate Increases
JAN New Water Rates become effective January 1, 2024
Next Steps
29 Questions &
Discussion
City of San Bruno
Water & Sewer Rate Study
Findings & Draft Recommendations
February 28, 2023