Agenda, special meeting — San Bruno City Council, February 28, 2023

"The City With a Heart"
Rico E. Medina, Mayor
Tom Hamilton, Vice Mayor
Sandy Alvarez, Councilmember, District 1
Marty Medina, Councilmember, District 4
Michael Salazar, Councilmember
AGENDA
SAN BRUNO CITY COUNCIL SPECIAL MEETING
February 28, 2023
5:30 PM
Consistent with Government Code Section 54953(e), this meeting will be held both in person and virtually. City Councilmembers and members of the public may attend in person at the San Bruno Senior Center, or by teleconference, via Zoom or telephone.

The meeting will be livestreamed at youtube.com/CityofSanBruno and available on CityNet Services local Channel 1 SD | local Channel 10 HD.

IN PERSON*
MEETING LOCATION
San Bruno Senior Center
1555 Crystal Springs Road
San Bruno, CA 94066
*Please turn off all electronic
devices before the start of the
meeting to prevent disruptions*
REMOTE VIA ZOOM or TELEPHONE
Zoom Link: https://sanbrunocagov.zoom.us/j/82352781961? pwd=WlNmY2xhUFNMRVRTZS9lTzNCWVhLdz09
Phone Line: 16465588656
Webinar ID: 823 5278 1961
Webinar Password: 643293
PUBLIC COMMENT: In person attendees who want to provide public comment, will be asked to fill out a speaker card and turn it into the City Clerk. Virtual attendees can comment by using the “Raise Hand” feature in Zoom to request to speak. For dialin comments press *9 to “Raise Hand” and *6 to unmute. Public comment may also be emailed to [email protected]. Comments received via email will not be read aloud during the meeting.

ACCESSIBILITY: In compliance with the Americans with Disabilities Act, individuals requiring special accommodations or modifications to participate in this meeting should contact the City Clerk’s Office 48 hours prior to the meeting at (650) 6167061 or [email protected].
*Any disclosable public writings related to an open session item on a regular meeting agenda and distributed by the City to at least a majority of the City Council less than 72 hours prior to that meeting are available for public inspection at the City Clerk’s Office at City Hall located at 567 El Camino Real, San Bruno, California during normal business hours. In addition, the City may also post such documents on the City’s Website at sanbruno.ca.gov/AgendaCenter.

1. CALL TO ORDER

2. ROLL CALL

3. PUBLIC COMMENTS FOR ITEMS NOT ON THE AGENDA
Individuals allowed three minutes. It is the Council’s policy to refer matters raised in this forum to staff for investigation and/or action where appropriate. The Brown Act prohibits the Council from discussing or acting upon any matter not agendized pursuant to State Law.

4. STUDY SESSION
Public comment will be requested after each topic in this section a. Hold Study Session and Provide Direction Regarding the 2023 Water and Sewer Rate Study Findings and Rate Recommendations

5. ADJOURNMENT – The next Regular City Council Meeting will be held on February 28, 2023 at 7:00 p.m.

1 of 72

The meeting will be livestreamed at youtube.com/CityofSanBruno and available on CityNet Services local Channel 1 SD | local Channel 10 HD.

1. CALL TO ORDER

2. ROLL CALL

5. ADJOURNMENT – The next Regular City Council Meeting will be held on February 28, 2023 at 7:00 p.m.

2 of 72

City Council Agenda Item
Staff Report

CITY OF SAN BRUNO
DATE:February 28, 2023
TO:Honorable Mayor and Members of the City Council
FROM:Jovan D. Grogan, City Manager
PREPARED BY:Matthew Lee, P.E., Public Works Director
SUBJECT:Hold Study Session and Provide Direction Regarding the 2023 Water and Sewer Rate Study Findings and Rate Recommendations
BACKGROUND:

The Water and Wastewater Enterprise Funds account for all operational and capital expenditures needed to operate, maintain and improve these critical utility systems. The Funds operate without tax support as each is funded solely by ratepayers. The City Council last adopted a multiyear rate plan water and wastewater rates on May 23, 2017, setting rates for a five-year period through June 30, 2021. The 2017-21 rates for both the Water and Sewer enterprise Funds were based on a 10-year financial plan and adjusted the same amounts each year. The annual rate increases for both Water and Sewer were 5%.

The City Council cancelled the final year of the 5-year water and sewer rate increase schedule at the February 9, 2021 City Council Meeting.

The City entered into a professional services agreement in March 2022 with Bartle Wells Associates (“consultant”) to update the City’s water and sewer rate model to ensure revenues continue covering operational costs and necessary infrastructure improvements.

Work on the study has been ongoing since that time and, as such, staff did not propose rate increases for the current FY 2022-23 fiscal year.

The combination of the cancellation of the 2021 rate increase and the fact that staff did not propose to increase rates in FY 2022-23, has resulted in water and sewer rates remaining unchanged since July 1, 2020.

On February 14, 2023 the City Council held a study session to review the preliminary Water and Sewer Rate Study findings. City Council received a presentation from staff and the consultant. A summary of the City Council questions, and the answers provided, are included as Attachment 2. Primary questions related to the following topics:

1. Sewer Bill: move from the City’s bi-monthly bill to the County’s property tax roll

2. Delinquent Utility Customers: request for the delinquency percentage and amount

3. Lateral Repair Assistance: consider financial assistance to customers for the repair of private sewer laterals

3 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 2 of 11 ends

DISCUSSION:

After reviewing the fixed, operational, and capital improvement priorities, City staff and the consultant developed a comprehensive financial plan to adequately fund these costs over the next five years. The draft Water and Sewer Rate Study Report is provided as Attachment 1. Below is the proposed recommended five-year rate schedule for water and sewer utility rate payers.

Projected Sewer Rate Increases
July 1
2023
July 1
2024
July 1
2025
July 1
2026
July 1
2027
5% 5% 5% 5% 5%

Projected Water Rate Increases
January 1
2024
January 1
2025
January 1
2026
January 1
2027
January 1
2028
6% 6% 6% 6% 6%
The proposed rates provide necessary revenue to cover the projected operational and maintenance costs for the City’s water and sewer utilities. The proposed rates also continue the Capital Improvement Program to provide for the necessary investment in improving and replacing the City’s aging and deteriorating water and sewer infrastructure.

The proposed water rates reflect decreases in water consumption due to increased conservation, projected increases in the cost of purchased water from the San Francisco Public Utilities Commission, and continuation of the City’s policy goal for replacing the City’s mains and other infrastructure. Sewer system rates reflect decreases in water consumption, on-going treatment costs for the shared South San Francisco-San Bruno Water Quality Control Plant, costs for complying with the Regional Westside Basin Groundwater Storage and Recovery Project (GSR), and continuation of the City’s policy objective for replacing sewer mains and other infrastructure.

The rate model also reflects the pace of CIP project implementation over the past few years due to the pandemic, reduced City staffing levels, and its effects as well as anticipated future implementation.

Why Increase Rates?
Reliable and safe water service and wastewater (sewer) collection and treatment are among the most fundamental and important services delivered to our community. These services are funded solely from water and sewer rates.

The drought and State conservation requirements have impacted customer water use and utility revenues. Total customer water consumption in 2022 was down 8% from 2021 and has decreased 22% since the 2014 drought. As water use decreases, revenues decrease proportionately, while the fixed costs to maintain system infrastructure increase with inflation, including maintenance, repair, and construction costs.

4 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 3 of 11 ends

Operational costs, such as personnel costs, maintenance supplies, as well as repair equipment, are increasing at a rate higher than the regional cost of living index. Separately, the cost of purchased water from the San Francisco Public Utilities Commission (SFPUC) is projected to increase by 21% over the next 5 years. When the Westside Basin aquifer is too low, underground extraction is limited and the City receives in lieu water supplies from SFPUC until the basin is replenished. For example, in 2020, the City obtained 97% of its water supply from SFPUC. In 2021, the Westside Basin aquifer had been sufficiently recharged and agencies returned to operating their Westside Basin wells. At the end of 2022, the City obtained 69% of water supplies from groundwater, 30% from SFPUC, and 1% from the North Coast County Water District.

The proposed rates address the City Council’s commitment to rehabilitate and replace aging and deficient infrastructure. Additional work to repair and rehabilitate the infrastructure where needed is planned. The overall system condition and improvement needs have been carefully evaluated through the City’s preparation of water and wastewater infrastructure master plans. Improvements are prioritized through this analysis and the City’s work program is built around the identified priorities.

Below is a Water and Sewer CIP expenditure summary over the last five years. The higher level of Sewer expenditures reflects the City’s priorities to meet infrastructure improvements required by the 2011 Baykeeper Consent Decree (CD) and Regional Water Board’s Cease and Desist Order (CDO). The City’s compliance obligations ended in 2021. The pandemic and staffing shortages limited capital project construction during FY2021-22.

Fiscal Year Water CIP Sewer CIP
2017-18 $ 2,291,412 $ 5,086,120
2018-19 1,433,693 6,677,943 2019-20 3,698,745 7,585,130 2020-21 3,210,857 3,633,794 2021-22 468,511 1,181,922 TOTAL $ 11,103,218 $ 24,164,909

Sewer Capital Projects
Over the last five years, prioritization was given to wastewater projects to ensure compliance with the 2011 Baykeeper Consent Decree (CD) and Regional Water Board’s Cease and Desist Order (CDO). Of the projects identified in the 2017 Rate Study, 80% were completed. For those projects not yet completed, 100% was due to delays caused by an outside entity.

Water Capital Projects
The prioritization of sewer capital projects and staffing levels resulted in delays to the water capital projects. Approximately 40% of the water capital projects were prioritized and completed over the last five years. For those projects not yet completed, 78% was due to staffing challenges and 22% was due to delays caused by an outside entity (see Chart 1 below).

5 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 4 of 11 ends

Main Replacement Projects
In 2014, a workplan was developed to jointly complete water and sewer main replacements in the same location at the same time for efficiency in administrative costs and to minimize neighborhood disruptions. Over the last five years, approximately 45% of these coordinated main replacement capital projects were prioritized and completed. For those projects not yet completed, 79% was due to staffing challenges, 14% was due to the project being reprioritized, and 7% was due to delays caused by an outside entity (see Chart 2 below).

Chart 1: Water CIP - Causes for Delay

Chart 2: Water Main Replacement Projects - Causes for Delay Capital Projects – Next Steps
To directly address the backlog of projects, the City’s Public Works Department has brought on five new staff since Fall 2022. The Department also increased contracting capacity with on-call design consultants and project managers throughout the year.

Additionally, during the prior Water and Sewer Rate Study, the full project amounts were allocated in the year that the project was set to begin. Given that certain CIP projects can

6 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 5 of 11 ends

span multiple years, it did not reflect the actual cashflow needed during the various phases of the multi-year project. In future years, the City will explore planning and appropriated project funds over multiple years to reflect the actual cashflow needs of a project.

A five-year period allows for certainty for planning capital projects and reduces the significant administrative costs of more frequent rate setting.

Rate Study Highlights
Below are highlights of the Rate Study, including the current rate structure, funding needs, financial and rate projections, potential for collecting sewer rates on property tax rolls, and an upcoming schedule for further rate discussions and approval consideration:

Water and Sewer Rates
•The City’s water and sewer utilities are self-supporting enterprises that rely predominantly on revenues from water and sewer rates to fund the costs of providing service.

•The City has provided good financial stewardship via adoption of gradual annual water and sewer rate increases most years for the past 15 years. These increases have put the water and sewer enterprises on a much stronger financial footing, helped keep rates aligned with the costs of providing service and supported a significant increase in funding for capital improvement needs.

•The City last conducted water and sewer rate studies in 2017 leading to adoption of 5 years of 5% annual water and sewer rate increases effective July 1, 2017 through 2021. However, the City cancelled the final 5% water and sewer rate increases that had been scheduled to become effective July 1, 2021, and has subsequently been able to defer raising rates. Current rates have been in effect since July 1, 2020.

•San Bruno’s water and sewer rates are both currently in the middle range compared to other regional agencies in San Mateo County. The City’s combined water and sewer charges for a typical single-family home were the median, with half of other agencies either higher or lower than San Bruno, based on a survey of 19 regional agencies.

•The City bills customers via a combined bi-monthly bill that includes water rates, sewer rates, garbage rates, and cable charges. This results in a single large bill that customers pay once every two months. Additionally, residents that subscribe to the City’s cable, telephone, and internet service (CityNet) receive a separate monthly bill from the City.

•The City has received some customer complaints that its utility bills seem high compared to other agencies, but this may largely be due to the City’s billing practices compared to a number of other regional agencies that only bill for some utility

7 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 6 of 11 ends

services (e.g., only water or sewer service), bill customers every month, and/or collect sewer charges on the property tax rolls.

Capital & Operating Funding Needs
•While the City has completed a significant amount of capital improvements over the past 5 years, some projects were temporarily delayed due to staffing limitations and other factors including time needed for planning, design and permitting. These deferred costs helped enable the City to cancel its water and sewer rate increases that were scheduled to go into effect in 2021 and pass along the savings to customers via no rate increases for the past 2 years. However, the City has been proceeding with its capital program and has a number of large projects in design which will soon require funding.

•Both water and sewer enterprises are facing substantial capital improvement funding needs in upcoming years. The City currently anticipates funding roughly $85 million of water system capital improvements and roughly $54 million of wastewater system capital improvements over the next 5 years including a share of costs for improvements to the Water Quality Control Plant (WQCP). The improvements are needed to address existing deficiencies, rehab and/or replace aging infrastructure that has reached the end of its useful life, and to support safe and reliable service. In addition, the WQCP anticipates a future debt issuance to support a major upgrade to its biosolids handling process. San Bruno’s share of debt service is estimated at approximately $800,000 per year starting fiscal year 2026-27. •Water capital improvements planned for the next 5 years include the replacement of three older water tanks as well as replacement of aging water pipelines and various other improvements to wells, pressure regulating stations, and pump stations.

•Sewer capital improvements primarily consist of rehabilitation and replacement of aging sewer pipelines but also include pump station improvements and the City’s share of the capital improvement projects of the WQCP.

•Current rates do not support the projected capital funding needs over the next 5 years or projections of longer-term annual funding needs for rehabilitation and replacement of aging infrastructure.

•The water and sewer enterprises have both accrued healthy levels of fund reserves that include some excess reserves available for capital funding. A substantial amount of these fund reserves is projected to be drawn down in upcoming years to help fund the City’s water and sewer capital improvement needs while rate increases are gradually phased in.
•The City is also facing ongoing increases to its water and sewer operating expenses:
oDue to overcollection of revenues in prior years, the SFPUC accumulated fund reserves in a “balancing account” on behalf of its wholesale customers and was

8 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 7 of 11 ends

able to draw down reserves in order to defer wholesale water rate increases for 5 years. However, the balancing account was mostly depleted and SFPUC increased wholesale water rates by 16% effective July 1, 2022. oAdditional wholesale water rate increases are projected in upcoming years. oThe City is contractually responsible for paying its share of operating, maintenance and debt service expenses for the South San Francisco - San Bruno Water Quality Control Plant and effluent disposal system. Costs for wastewater treatment operations have increased in recent years, with no corresponding increases to the City’s sewer rates, and are projected to continue to gradually increase in future years.
oIn addition, the City faces ongoing cost inflation for its own operating and maintenance expenses. The City avoided some expenses in recent years due to unfilled staff positions and participation in the Groundwater Storage and Recovery Agreement with SFPUC. In addition to rate increases for capital needs and other purposes, small annual rate increases are needed over the next 5 years to support the City’s own operating expenses and keep up with cost inflation.

•The City’s prior rate increases put the water and sewer enterprises on a stronger financial footing but are not adequate to meet projected future operating and capital funding needs. Temporary deferral of some expenses enabled the City to pass along the savings to its customers by cancelling and deferring rate increases since July 1, 2021. However, staff and the consultant recommend the City Council adopt five-year sewer and water rate increases at the rates necessary to meet current operational and infrastructure needs.

Financial and Rate Projections
•The consultant developed 10-year financial projections to evaluate rate increases needed to support projected water and sewer enterprise funding needs in upcoming years. Rate increases are designed to be gradually phased in over 5 years in order to minimize the annual impact on ratepayers, with the goal of supporting balanced budgets and adequate funding for ongoing rehabilitation and replacement of aging pipelines and other water and sewer system infrastructure.

•The tables below summarize the overall level of projected water and sewer rate increases for the next 5 years. Due to minor adjustments to the City’s water and sewer rate structures designed to realign rates with the cost of service, actual billing impacts to customers may vary a little depending on customer class, meter size, and water use.

9 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 8 of 11 ends

Projected Sewer Rate Increases
July 1
2023
July 1
2024
July 1
2025
July 1
2026
July 1
2027
5% 5% 5% 5% 5%

Projected Water Rate Increases
January 1
2024
January 1
2025
January 1
2026
January 1
2027
January 1
2028
6% 6% 6% 6% 6%
•As shown on the tables above, water rate increases are proposed to become effective on January 1 of year, when water use is low, starting January 1, 2024. Sewer rate increases are proposed to become effective on July 1 at the beginning of each fiscal year starting July 1, 2023.

•Accounting for the cancellation and deferral of rate increases over the past 2 years, water and sewer rates with the proposed increases will remain below levels previously projected. For example, if the City had continued with gradual 5% rate increases each year, current rates would already be a little over 10% higher than they current are and would remain higher than projected rates in future years.

•BWA also evaluated the potential use of future debt financing to help fund the City’s elevated level of water system capital needs over the next 5 years as the City’s aging water tanks are replaced while enabling the City to phase in modest gradual rate increases. Water enterprise financial projections assume the City would first spend down a portion of its fund reserves prior to issuing debt in 2025 to fund $20 million of capital improvements, which are elevated over the first 5 years. The actual timing and amount of any future debt issuance would vary based on actual future funding needs.

Potential for Collection of Sewer Rates on Property Tax Roles •The City can consider the potential for collecting sewer service charges on the San Mateo County property tax rolls. Potential benefits include: a) removing sewer charges from the City’s combined bi-monthly utility bills, b) San Mateo County is on the Teeter Plan under which the City would typically receive 100% of sewer billings regardless of property tax payment delinquencies. Some potential considerations would include: c) sewer charges currently paid by some tenants would transition to being collected via tax bills paid by property owners, d) the County charges a small administrative fee for collecting charges on the property tax rolls. Agencies can opt to use the property tax rolls to collect charges for a subset of customers such as: a) residential customers only, or b) to collect utility bill payments from delinquent accounts.

10 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 9 of 11 ends

•Many other regional agencies collect sewer rates via the property tax rolls including South San Francisco, Pacifica, San Mateo, Colma, San Carlos, Hillsborough, East Palo Alto Sanitary District, West Bay Sanitary District (Menlo Park), Redwood City, Montara Water & Sanitary District, and others. Other regional agencies are also currently considering collecting sewer charges on the County property tax rolls.

•The collection of sewer charges on the property tax rolls is authorized by California Health and Safety Code 5473. Pursuant to the Code, agencies must annually prepare and adopt by resolution listing the charges that would be levied on each parcel prior to submission to the County for collection on the property tax rolls. Prior to authorizing collection via the property tax rolls for the first time, the City must send notice to affected property owners of the proposed change in billing method at least 45 days prior to holding a public hearing on the matter. Similar to the process for adopting water and sewer rate increases, adoption of resolution authorizing billing via the property tax rolls is not subject to a public vote but is instead subject to “majority protest” under which the City would not be able to consider adoption of the resolution if “written protests” were submitted by property owners representing more than 50% of affected parcels, with one written protest counted per parcel.

Council Input on Final Rates, Timeline, and Billing
At the February 28, 2023 City Council Meeting, staff seek final City Council input on the following major policy decisions:

1. Rates necessary to meet current operational and infrastructure needs:
•Sewer: 5% annual rates, starting July 1, 2023 through July 1, 2028 •Water: 6% annual rates, starting January 1, 2024 through January 1, 2029

2. Proposition 218 Process:
•Resolution (recommended / most time efficient)
OR
•Ordinance (Not recommended)
For the Proposition 218 rate setting process, should the City combine the Sewer and Water rate proposals together or separate and consider them individually? If they are separated, the City is required to advertise them individually, and they can be considered at the same or at different City Council meetings. Historically, they have been processed together and staff recommends continuing this approach as it is more efficient.

3. Placing Sewer Bills on the Property Tax Rolls
Staff recommends placing the sewer bills on property tax rolls. This could be transitioned with a one year transition period.

11 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 10 of 11 ends

Once the City Council provides staff with final input on these items, staff will return at a future meeting to obtain City Council direction to formally initiate the Proposition 218 rate increase process.

Next Steps
The following section presents a draft schedule for moving forward with proposed recommended five-year water and sewer rates increases.

March/April 2023 City Council Meeting: Obtain Council direction to formally initiate the Proposition 218 rate increase process. (Date to be determined.)

March/April 2023 Mail Proposition 218 Notices of proposed rate increases to property owners and customers. Notices must be deposited in the mail at least 45 days prior to the date of the Public Hearing at which the proposed rates would be considered for
adoption. (Date to be determined.)

May/June 2023 City Council Meeting: Hold the required Public Hearing, consider protests, and consider adoption of proposed water and sewer rates. Water and Sewer rate increases are not subject to a public vote but are subject to “majority protest” under which the City would not be able to consider adoption of the resolution if “written protests” were submitted by property owners representing more than 50% of affected parcels, with one written protest counted per parcel. (Date to be
determined.)

July 1, 2023 New sewer rates become effective.

January 1, 2024 New water rates become effective.

FISCAL IMPACT:

There is no fiscal impact with receiving this study session. The FY2021-22 Operating Budget approved June 22, 2021 included funding for the preparation of the Water and Sewer Rate Study.

ENVIRONMENTAL IMPACT: .

The discussion of preliminary Water and Sewer Rate Study findings does not have the potential for creation of a significant environmental impact pursuant to the California Environmental Quality Act (CEQA), and as such are exempt from further environmental consideration per CEQA Guidelines Section 15061(b)(3).

12 of 72

Honorable Mayor and Members of the City Council
February 28, 2023

Page 11 of 11 ends

RECOMMENDATION:

Receive a second presentation on preliminary Water and Sewer Rate Study findings and provide direction on rate recommendations and other related topics.

ALTERNATIVES:

None.

ATTACHMENTS:

1. Draft Water and Sewer Rate Study Report

2. Meeting Summary of City Council Study Session on February 14, 2023

13 of 72

2023 Water & Sewer Rate Study
February 2023
City of San Bruno
DRAFT

14 of 72

Bartle Wells Associates
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel: 510.653.3399
www.bartlewells.com
2023 Water & Sewer Rate Study
February 2023
Prepared by:

15 of 72

February 23, 2023
City of San Bruno
567 El Camino Real
San Bruno, CA 94066
Attn: Matthew Lee, Public Works Director
Re: 2023 Water & Sewer Rate Study
Bartle Wells Associates is pleased to submit the attached 2023 Water & Sewer Rate Study . The study develops long-term financial projections for the City’s water and sewer utilities and recommends rates designed to fund the City’s projected costs of providing water and sewer service. The proposed rates are phased in over the next five years to fund water and sewer utility operations and support adequate funding for rehabilitation and replacement of aging water and sewer system infrastructure.

After two years of no water or sewer rate increases, the report recommends the City resume its historical practice of implementing gradual annual rate increases to keep revenues aligned with projected funding needs. The report recommends a series of overall 6% annual water rate increases and 5% annual sewer rate increases in each of the next five years. Proposed rates also include some minor adjustments to the water and sewer rate structures designed to keep the City’s rates aligned with the costs of providing service.

San Bruno’s water and sewer rates are both currently in the middle range compared to other regional agencies in San Mateo County and are projected to remain in the middle range with implementation of the proposed rate increases.

I enjoyed working with the City on this assignment and appreciate the ongoing collaboration, input and assistance received from City staff. Please contact me anytime if you have questions about this report or other issues related to utility rates and finance.

BARTLE WELLS ASSOCIATES
Alex Handlers, CIPMA
Principal/Vice-President
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com

16 of 72

BARTLE WELLS ASSOCIATES
San Bruno 2023 Water & Sewer Rate Study

TABLE OF CONTENTS
1 Background, Objectives & Proposed Rates ..................................................... 1

1.1 Background ..................................................................................................................... 1

1.2 Water System Overview ................................................................................................. 1

1.3 Sewer System Overview ................................................................................................. 2

1.4 Capital Improvement Funding Needs............................................................................. 2

1.5 Policy Goals & Objectives ............................................................................................... 3

1.6 Regional Water & Sewer Rate Survey ............................................................................ 3

1.7 Proposed Water & Sewer Rates ..................................................................................... 4 2 Legal Requirements & Rate Methodology ...................................................... 7

2.1 Constitutional Rate Requirements ................................................................................. 7

2.1.1 Article 10, Section 2 ............................................................................................. 7

2.1.2 Article 13D, Section 6 ........................................................................................... 7

2.2 Rate-Setting Methodology ............................................................................................. 8 3 Water Financial Plan & Rate Derivation ....................................................... 10

3.1 Current & Historical Water Rates ................................................................................. 10

3.2 Regional Water Rate Survey ......................................................................................... 12

3.3 Financial Challenges / Key Drivers of Rate Increases ................................................... 13

3.3.1 Capital Improvements & Replacement of Aging Infrastructure ........................ 13

3.3.2 Wholesale Water Rate Increases ....................................................................... 14

3.3.3 Ongoing Operating Cost Inflation ...................................................................... 15

3.4 Outstanding Debt Service ............................................................................................. 15

3.5 Water Enterprise Financial Projections ........................................................................ 16

3.6 Projected Water Rate Increases ................................................................................... 19

3.7 Water Use ................................................................................................................... 20

3.8 Water Rate Derivation .................................................................................................. 23

3.9 Cost Recovery Allocations ............................................................................................ 23

3.10 Water Accounts & Meter Equivalents .......................................................................... 24

3.11 Fixed Monthly Service Charges .................................................................................... 25

3.12 Water Quantity Charge Derivation .............................................................................. 26

3.13 Proposed Water Rates .................................................................................................. 30

3.14 Water Rate Impacts ...................................................................................................... 31

17 of 72

BARTLE WELLS ASSOCIATES
San Bruno 2023 Water & Sewer Rate Study

4 Sewer Financial Plan & Rate Derivation ....................................................... 32

4.1 Current & Historical Sewer Rates ................................................................................. 32

4.2 Regional Sewer Rate Survey ......................................................................................... 34

4.3 Financial Challenges / Key Drivers of Rate Increases ................................................... 35

4.3.1 Capital Improvements & Replacement of Aging Infrastructure ........................ 35

4.3.2 Ongoing Operating Cost Inflation ...................................................................... 35

4.4 Outstanding Debt Service ............................................................................................. 36

4.5 Sewer Enterprise Financial Projections ........................................................................ 37

4.6 Sewer Rate Projections ................................................................................................ 40

4.7 Sewer Use ................................................................................................................... 41

4.8 Sewer Rate Derivation .................................................................................................. 42

4.9 Cost Recovery Allocations ............................................................................................ 42

4.10 Sewer Accounts & Billing Equivalents .......................................................................... 43

4.11 Fixed Monthly Service Charges .................................................................................... 44

4.12 Sewer Quantity Charge Derivation ............................................................................... 45

4.13 Proposed Sewer Rates .................................................................................................. 47

4.14 Sewer Rate Impacts ...................................................................................................... 49

18 of 72

BARTLE WELLS ASSOCIATES
San Bruno 2023 Water & Sewer Rate Study

LIST OF TABLES
Table 1 – Proposed Water Rates .................................................................................................... 5 Table 2 – Proposed Sewer Rates ..................................................................................................... 6 Table 3 – Water Rates ................................................................................................................... 10 Table 4 – Water Capital Improvement Program ........................................................................... 13 Table 5 – Outstanding Water Debt Service .................................................................................. 15 Table 6 – 10-Year Water Cash Flow Projections ........................................................................... 17 Table 7 – Projected Water Rate Increases .................................................................................... 19 Table 8 – Water Use by Class & Tier ............................................................................................. 20 Table 9 – Water Use by Month ..................................................................................................... 21 Table 10 – Sources of Water Supply by Month ............................................................................ 22 Table 11 – Cost Recovery Allocation ............................................................................................. 23 Table 12 – Fixed & Quantity Charge Revenue Recovery .............................................................. 24 Table 13 – Water Accounts & Meter Equivalents ......................................................................... 25 Table 14 – Fixed Rate Derivation January 1, 2028 ........................................................................ 25 Table 15 – Projected Fixed Services Charges January 1, 2028 ..................................................... 26 Table 16 – Projected Water Sales ................................................................................................. 28 Table 17 – Water Quantity Charge Derivation ............................................................................. 29 Table 18 – Proposed Water Rates ................................................................................................ 30 Table 19 – Water Rate Impacts ..................................................................................................... 31 Table 20 – Sewer Rates ................................................................................................................. 33 Table 21 – Sewer Capital Improvement Program ......................................................................... 35 Table 22 – Outstanding Sewer Debt Service ................................................................................. 36 Table 23 – 10-Year Sewer Cash Flow Projections ......................................................................... 38 Table 24 – Projected Sewer Rate Increases .................................................................................. 40 Table 25 – Sewer Use by Class ...................................................................................................... 41 Table 26 – Fixed & Variable Revenue Recovery ........................................................................... 42 Table 27 – Sewer Accounts & Billing Equivalents ......................................................................... 43 Table 28 – Fixed Sewer Rate Derivation ....................................................................................... 44 Table 29 – Variable Rate Recovery from Wastewater Flow & Strength....................................... 45 Table 30 – Sewer Flow & Loadings by Customer Class ................................................................. 46 Table 31 – Derivation of Unit Rates for Wastewater Flow & Strength ........................................ 46 Table 32 – Sewer Quantity Charges by Customer Class ............................................................... 47 Table 33 – Proposed Sewer Rates ................................................................................................. 48 Table 34 – Single Family Residential Sewer Rate Impacts ............................................................ 49 Table 35 – Commercial Sewer Rate Impacts ................................................................................ 50

19 of 72

BARTLE WELLS ASSOCIATES
San Bruno 2023 Water & Sewer Rate Study

LIST OF FIGURES
Figure 1 – Combined Single Family Residential Water & Sewer Rate Survey ................................ 4 Figure 2 – Single Family Residential Water Rate Survey .............................................................. 12 Figure 3 – Historical & Projected SFPUC Wholesale Water Rates ................................................ 14 Figure 4 – Water Utility Projected Revenues & Expenses ............................................................ 18 Figure 5 – Historical & Projected Water Rate Increases ............................................................... 19 Figure 5 – Single Family Water Use by Tier .................................................................................. 27 Figure 7 – Single Family Residential Sewer Rate Survey............................................................... 34 Figure 8 – Sewer Utility Projected Revenues & Expenses ............................................................ 39 Figure 9 – Historical & Projected Sewer Rate Increases ............................................................... 40

20 of 72

BARTLE WELLS ASSOCIATES 1
San Bruno 2023 Water & Sewer Rate Study
1 BACKGROUND, OBJECTIVES & PROPOSED RATES

1.1 Background
The City of San Bruno is located approximately 12 miles south of downtown San Francisco in San Mateo County, California. The City encompasses roughly 5.5 square miles and has a population of approximately 43,000. The City was incorporated in 1914 and is a General Law City. The City provides water and sewer service to residential, commercial, institutional, and light industrial accounts in and adjacent to the City.

The City’s water and sewer utilities are self-supporting enterprises that rely predominantly on revenues from water and sewer rates to fund the costs of providing service.

The City has provided good financial stewardship via adoption of gradual annual water and sewer rate increases most years for the past 20 years. These increases have put the water and sewer enterprises on a much stronger financial footing, helped keep rates aligned with the costs of providing service and supported a significant increase in funding for rehabilitation and replacement of aging water and sewer system infrastructure.

The City last conducted water and sewer rate studies in 2017 leading to adoption of 5 years of 5% annual water and sewer rate increases effective July 1, 2017 through 2021. However, the City cancelled the final 5% water and sewer rate increases that had been scheduled to become effective July 1, 2021 and has subsequently been able to defer raising rates. Current rates have been in effect since July 1, 2020.

San Bruno’s water and sewer rates are both currently in the middle range compared to other regional agencies in San Mateo County. The City’s combined water and sewer charges for a typical single family home were the median, with half of other agencies either higher or lower than San Bruno, based on a survey of 19 regional agencies. With the proposed rate increases, the City’s water and sewer bills are projected to remain in the middle range. Many other regional agencies have adopted or are anticipating rate increases in upcoming years. The City bill’s customers via a combined bi-monthly bill that includes water rates, sewer rates, and garbage rates.

1.2 Water System Overview
The City owns and operates a water system that includes 5 groundwater wells, 8 water storage tanks and pump stations, and roughly 120 miles of water main pipelines. Most of the City’s water pipelines are original metal pipes with a life expectancy of about 50 years. Many of these pipelines are 70 to 100 years old and subject to leaks and breaks. Over the past 5 years, the City has averaged about 100 water main breaks per year. The City’s aging water infrastructure requires significant rehabilitation and replacement.

The City has been proactively addressing its capital improvement needs but needs to continue its long- term programs to replace aging infrastructure.

21 of 72

BARTLE WELLS ASSOCIATES 2
San Bruno 2023 Water & Sewer Rate Study
The City’s water supply includes local groundwater production, which typically accounts for roughly 2/3rds of total supply, and wholesale water purchased from the San Francisco Public Water Commission (SFPUC), which accounts for roughly 1/3rd of water supply. A small amount of water purchased from the North Coast County Water District.

1.3 Sewer System Overview
The City owns and operates a sewer collection system that includes roughly 90 miles of sewer pipelines (comprised of approximately 2,415 pipe segments) and 6 sewer pump stations. Wastewater is conveyed to the South San Francisco - San Bruno Water Quality Control Plant (WQCP) for treatment and effluent disposal via the North Bay System Unit. The WQCP is jointly owned by San Bruno and the City of South San Francisco pursuant to a Joint Powers Agreement and is located in and operated by South San Francisco. San Bruno owns approximately 25% of the capacity in the WQCP.

Similar to the water system, the City’s aging sewer infrastructure requires significant rehabilitation and replacement. Over the past decade, the City has rehabilitated and rebuilt it sewer pump stations but needs to continue its long-term sewer mainline replacement program. To minimize impact and maximize efficiency, the City replaces both water and sewer pipelines concurrently. The City is also contractually responsible to fund its share of infrastructure improvements to the Water Quality Control Plant.

1.4 Capital Improvement Funding Needs
While the City has completed a significant amount of capital improvements over the past decade, in recent years some projects were temporarily delayed due to staffing limitations and other factors including time needed for planning, design and permitting. These deferred costs helped enable the City to cancel its water and sewer rate increases that were scheduled to go into effect in 2021 and pass along the savings to customers via no rate increases for the past 2 years. However, the City has been proceeding with its capital program and has a number of large projects in design which will soon require funding.

Both water and sewer enterprises are facing substantial capital improvement funding needs in upcoming years. The City currently anticipates funding roughly $85 million of water system capital improvements and roughly $71 million of wastewater system capital improvements over the next 5 years. The improvements are needed to address existing deficiencies, rehabilitate and/or replace aging infrastructure that has reached the end of its useful life, and support safe and reliable service.

Water capital improvements planned for the next 5 years include the replacement and seismic upgrade of 3 older water storage tanks as well as replacement of aging water pipelines and various other improvements to wells, pressure regulating stations, and pump stations. Wastewater capital improvements primarily consist of rehabilitation and replacement of aging sewer pipelines but also include pump station improvements and San Bruno’s share of capital improvements to the Water Quality Control Plant.

22 of 72

BARTLE WELLS ASSOCIATES 3
San Bruno 2023 Water & Sewer Rate Study

1.5 Policy Goals & Objectives
Key policy goals and objectives of the water and sewer rate studies include:

1. Develop water and sewer rates that:
a. recover the City’s costs of providing water and sewer service b. are fair and equitable to all customers
c. are easy to understand and implement
d. comply with the legal requirements of Proposition 218 and other California law e. provide adequate funding for capital improvement needs including near-term funding priorities and long-term rehabilitation and replacement of aging infrastructure

2. Recommend rates that maintain long-term financial sustainability of the water and sewer utilities and put the water and sewer enterprises on course for balances budgets.

3. Aim for steady, gradual annual rate increases to help minimize the annual impact on customers and mitigate the potential for larger, periodic rate spikes.

4. Maintain a prudent level of fund reserves.

1.6 Regional Water & Sewer Rate Survey
The chart on the following page compares the combined water and sewer bills for a typical single family home to those of other agencies in San Mateo County. Rates can vary widely from agency to agency due to a wide range of factors. The City’s combined water and sewer rates for a typical home are in the middle range compared to other regional agencies.

23 of 72

BARTLE WELLS ASSOCIATES 4
San Bruno 2023 Water & Sewer Rate Study
Figure 1 – Combined Single Family Residential Water & Sewer Rate Survey

1.7 Proposed Water & Sewer Rates
The tables on the following pages show schedules of proposed water and sewer rates. Consistent with the City’s historical practices, the proposed rates are phased in gradually over the next 5 years. Proposed rates account for both overall rate increases as well as some relatively minor rate structure adjustments to keep rates aligned with the cost of providing service. As proposed, water rate increases would become effective on January 1 of each year, when water is low, and sewer rate increases would continue to become effective on July 1 at the beginning of each fiscal year.

24 of 72

BARTLE WELLS ASSOCIATES 5
San Bruno 2023 Water & Sewer Rate Study
Table 1 – Proposed Water Rates

Current Water Jan-1 Jan-1 Jan-1 Jan-1 Jan-1Rates 2024 2025 2026 2027 2028Overall Rate Increase Target6% 6% 6% 6% 6%MONTHLY SERVICE CHARGESFixed monthly charge based on meter size.Meter SizeCapacity Ratio 3/4-inch1.00$25.58 $27.11 $28.73 $30.45 $32.27 $34.221-inch1.6742.63 45.18 47.88 50.75 53.78 57.03 1-1/2 inch3.3385.27 90.37 95.77 101.50 107.57 114.07 2-inch5.33136.43 144.59 153.23 162.40 172.11 182.51 3-inch10.00255.80 271.10 287.30 304.50 322.70 342.20 4-inch16.67426.33 451.83 478.83 507.50 537.83 570.33 6-inch33.33852.67 903.67 957.67 1,015.00 1,075.67 1,140.67 8-inch53.331,364.27 1,445.87 1,532.27 1,624.00 1,721.07 1,825.07 10-inch76.671,961.13 2,078.43 2,202.63 2,334.50 2,474.03 2,623.53 QUANTITY CHARGESBilled based on metered water consumption ($ per hundred cubic feet or hcf)a) Single-Family ResidentialBi-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 Water Use)All Use 10.11 $10.68 $11.28 $11.91 $12.58 $13.27Accounts served by water procured from NCCWD are also charged a Differential Cost of Supply Chargereflecting the higher cost of water procured from this source.Note: One hundred cubic feet (hcf) is equivalent to approximately 748 gallons.

Proposed Rates Effective On or AfterProposed Water Rates

25 of 72

BARTLE WELLS ASSOCIATES 6
San Bruno 2023 Water & Sewer Rate Study
Table 2 – Proposed Sewer Rates

CurrentSewer July 1 July 1 July 1 July 1 July 1Rates 2023 2024 2025 2026 2027Overall Rate Increase Target %5%5%5%5%5%MONTHLY SERVICE CHARGESFixed monthly charge per accountSingle Family Residential$32.27 $33.96 $35.74 $37.61 $39.59 $41.66All Other Customers (Charge Based on Water Meter Size)Meter Size3/4-inch $32.27 $33.96 $35.74 $37.61 $39.59 $41.661-inch 53.78 56.60 59.57 62.69 65.98 69.431-1/2 inch 107.57 113.20 119.14 125.38 131.95 138.872-inch 172.11 181.13 190.62 200.61 211.12 222.193-inch 322.70 339.61 357.41 376.14 395.85 416.604" & Larger 537.83 566.02 595.68 626.90 659.76 694.33QUANTITY CHARGESBilled per hundred cubic feet (hcf)Residential$12.37 $12.98 $13.61 $14.28 $14.97 $15.71CommercialC-1 Light Commercial 11.50 12.05 12.63 13.23 13.87 14.53C-2 Medium Commercial 12.37 12.98 13.61 14.28 14.97 15.71C-3 Heavy Commercial 17.61 18.54 19.51 20.54 21.62 22.76C-4 Special Commercial 22.86 24.11 25.42 26.81 28.27 29.82Governmental12.37 12.98 13.61 14.28 14.97 15.71IndustrialI-1 Light Industrial 12.37 12.98 13.61 14.28 14.97 15.71I-2 Industrial Flow 8.88 9.27 9.68 10.10 10.54 11.01COD per lb30.68 0.72 0.77 0.82 0.87 0.93SS per lb 1.41 1.49 1.58 1.68 1.78 1.882 Non-residential accounts are billed based on metered water use during each billing period.3 Based on South San Francisco WQCP wastewater loadings of COD 728 mg/l and BOD 358 mg/l.UPDATENote: One hundred cubic feet (hcf) is equivalent to approximately 748 gallons.

Proposed Sewer Rates Effective On or AfterProposed Sewer Rates 1 Residential accounts are billed based on average metered water use from two bi-monthly billing periods from January through April. All other accounts are billed based on total metered use.

26 of 72

BARTLE WELLS ASSOCIATES 7
San Bruno 2023 Water & Sewer Rate Study
2 LEGAL REQUIREMENTS & RATE METHODOLOGY

2.1 Constitutional Rate Requirements
The California Constitution includes two key articles that directly govern or impact the City’s water and sewer rates: Article 10 and Article 13D. The rates developed in this study were designed to comply with both of these constitutional mandates as well as various provisions of the California law that support and add further guidance for implementing these constitutional requirements. In accordance with the constitutional provisions, the proposed rates are designed to a) recover the City’s cost of providing water and sewer service, b) equitably recover revenues in proportion to the cost for serving each customer, and c) promote conservation and discourage waste.

2.1.1 Article 10, Section 2
Article 10, Section 2 of the California Constitution was established by voter-approval in 1976 and requires public agencies to maximize the beneficial use of water, prevent waste, and encourage conservation.

Section 2 states that:

It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.

2.1.2 Article 13D, Section 6
Proposition 218 was adopted by California voters in 1996 and added Articles 13C and 13D to the California Constitution. Article 13D, Section 6 governs property-related charges, which the California Supreme Court subsequently ruled includes ongoing utility service charges such as water, sewer, and garbage rates.

Article 13D, Section 6 establishes a) procedural requirements for imposing or increasing property-related charges, and b) substantive requirements for those charges. Article 13D also requires voter approval for new or increased property-related charges but exempts rate increases for water, sewer, and garbage services from requiring voter approval as these rates support essential services.

27 of 72

BARTLE WELLS ASSOCIATES 8
San Bruno 2023 Water & Sewer Rate Study
The substantive requirements of Article 13D, Section 6 require the City’s water and sewer rates to meet the following conditions:
1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service.
2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.
3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. 4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. 5) No fee or charge may be imposed for general governmental services, such as police or fire services, where the service is available to the public at large in substantially the same manner as it is to property owners.

A number of court decisions over past 20 years have added some legal clarification regarding these substantive rate requirements. The water and sewer rates derived in this report are based on cost-of- service methodologies that are designed to equitably recover costs from water and sewer customers and comply with all legal requirements.

2.2 Rate-Setting Methodology
The rates developed in this report use a cost-of-service methodology to establish an equitable system of fixed and variable service charges designed to recover costs of providing service. The general methodology used in this study is summarized on the diagram on the following page.

28 of 72

BARTLE WELLS ASSOCIATES 9
San Bruno 2023 Water & Sewer Rate Study

Revenue RequirementsDetermine future funding requirements from ratesCost AllocationEquitably apportion costs to rate componentsRate DesignDevelop rates that recover revenues in proportion to the cost of providing serviceIdentify near-term & long-term operating and capital funding needsEvaluate financing alternatives for capital improvementsEstablish fund reserve targets for financial planningDevelop financial projections and evaluate financial scenariosDetermine future annual revenue requirements for rate setting Allocate costs for fixed and variable rate recoveryIdentify accounts by customer class and/or meter sizeCalculate fixed charges based on system demand per customer class and/or meter sizeAnalyze historical usage data and project future water & sewer demandAllocate costs assigned for usage-based rate recovery to water rate tiers & sewer use classes Review existing water and sewer rate structuresApply unit costs of service to characteristics of each customer classDevelop fixed charges that recover costs in proportion to meter size or customer typeDevelop volumetric rates that recover costs apportioned to each tier or sewer strength classPhase in rate increases over time, to the extent possible, to help minimize annual impacts Cost of Service Rate-Setting Methodology

29 of 72

BARTLE WELLS ASSOCIATES 10
San Bruno 2023 Water & Sewer Rate Study
3 WATER FINANCIAL PLAN & RATE DERIVATION

3.1 Current & Historical Water Rates
The City has provided strong financial stewardship by gradually raising water rates most years over the past 20 years to keep rates in line with escalating costs of providing water service. Table 3 shows a recent history of the City’s water rates. The City bills customers bi-monthly (once every 2 months) via a combined utility bill.

Table 3 – Water Rates

July 1 July 1 July 1 July 1 July 1 July 1 2016 2017 2018 2019 2020 2021 Rate Increase %5% 5% 5% 5% 5% MONTHLY SERVICE CHARGESCurrently CancelledFixed monthly charge based on meter size.in effectMeter Size3/4-inch $21.13 $22.10 $23.20 $24.36 $25.58 $26.861-inch 35.22 36.83 38.67 40.60 42.63 44.761-1/2 inch 70.43 73.67 77.33 81.20 85.27 89.532-inch 112.69 117.87 123.73 129.92 136.43 143.253-inch 211.30 221.00 232.00 243.60 255.80 268.594-inch 352.17 368.33 386.67 406.00 426.33 447.656-inch 704.33 736.67 773.33 812.00 852.67 895.308-inch 1,126.93 1,178.67 1,237.33 1,299.20 1,364.27 1,432.4710-inch 1,619.97 1,694.33 1,778.67 1,867.60 1,961.13 2,059.18QUANTITY CHARGESBilled based on metered water consumption ($ per hundred cubic feet or hcf)a) Single-Family ResidentialBi-Monthly Use Tier 1 0 - 10 hcf $7.36 $7.78 $8.17 $8.58 $9.01 $9.46 Tier 2 11 - 20 hcf 8.83 9.31 9.78 10.27 10.78 11.32 Tier 3 > 20 hcf 11.78 12.38 13.00 13.65 14.33 15.05b) All Other Accounts (All Water Use)8.32 8.73 9.17 9.63 10.11 10.62

30 of 72

BARTLE WELLS ASSOCIATES 11
San Bruno 2023 Water & Sewer Rate Study
The City’s water rates include two components:
 Fixed Monthly Service Charges that vary based on meter size. These charges are levied independent of water use and recover a portion of the City’s fixed costs for providing service. The City incurs a substantial amount of costs ensuring that water is available at all times to meet customer needs on demand. The fixed Monthly Service Charges varies by meter size, with larger meters paying higher charges based on each meter’s capacity and associated demand placed on the water system.  Volumetric Water Quantity Charges billed based on metered water use. Single family residential customers are billed according to a 3-tiered inclining rate structure with water first billed in Tier 1 and subsequently billed in higher tiers as water use increases each billing period. All other customers including commercial, institutional and multi-family accounts are billed a uniform rate for all water use. Water Quantity Charges are billed per hundred cubic feet (hcf), with 1 hcf equal to approximately 748 gallons of water. Hence, City’s current quantity charges range from approximately 1.20 cents to

1.92 cents per gallon.

31 of 72

BARTLE WELLS ASSOCIATES 12
San Bruno 2023 Water & Sewer Rate Study

3.2 Regional Water Rate Survey
The following chart compares the City’s current water rates to those of other regional agencies for a typical single family home using 6 hundred cubic feet of water per month. This level of use equates to approximately 150 gallons per day. The City’s water rates are currently in the middle range compared to other regional agencies in San Mateo County and are projected to remain in the middle range as many other agencies have adopted or are anticipating rate increases in upcoming years.

Figure 2 – Single Family Residential Water Rate Survey

Note: The 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.

32 of 72

BARTLE WELLS ASSOCIATES 13
San Bruno 2023 Water & Sewer Rate Study

3.3 Financial Challenges / Key Drivers of Rate Increases Going forward, the City’s water enterprise is facing a number of financial challenges that will require the City to resume its historical practice of implementing gradual annual water rates over the next 5 years.

Key drivers of future rate increases are summarized as follows.

3.3.1 Capital Improvements & Replacement of Aging Infrastructure The City’s water system includes many facilities that are reaching the end of their useful lives. Most of the City’s water pipelines are original metal pipes with a life expectancy of about 50 years. Many of these pipelines are 70 to 100 years old and subject to leaks and breaks. Over the past 5 years, the City has averaged about 100 water main breaks per year. As shown the table below, the City anticipates funding approximately $85 million of water system capital improvement projects over the next 5 years. Water capital improvements planned for the next 5 years include the replacement of 3 older water tanks as well as replacement of aging water pipelines and various other improvements to wells, pressure regulating stations, and pump stations. The improvements are needed to address existing deficiencies, rehabilitate and/or replace aging infrastructure that has reached the end of its useful life, and support safe and reliable water service.

Table 4 – Water Capital Improvement Program

2023/24 2024/25 2025/26 2026/27 5-Yr TotalPrior Approp Est. Carryover New Fundi ng TotalFunding SourcesWater Fund 28,181,000 14,619,000 10,354,000 24,973,000 1,600,000 16,900,000 30,250,000 11,200,000 84,923,000SFPUC 315,000 315,000 315,000 315,000 Total Funding Sources 28,496,000 14,934,000 10,354,000 25,288,000 1,600,000 16,900,000 30,250,000 11,200,000 85,238,000Water Capital Improvement Program Budget Appropriations [1]Main Improvement & Replacement Program 10,650,000 6,730,000 900,000 7,630,000 6,300,000 2,800,000 9,000,000 25,730,000Pump Station Improvement & Replacement 2,273,000 1,350,000 4,550,000 5,900,000 950,000 950,000 7,800,000Water Tank Improvement & Replacement Commodore Tank Installation 1,500,000 1,500,000 750,000 2,250,000 17,750,000 20,000,000 Cunningham Drive Tank Replacements 1,437,000 542,000 542,000 9,000,000 9,542,000 Princeton Tank Replacement 500,000 500,000 700,000 1,200,000 2,000,000 3,200,000 Sweeney Ridge Tank Replacement 1,094,000 890,000 890,000 9,500,000 10,390,000Advanced Water Meter 6,017,000 504,000 504,000 504,000Acappella Well Project 2,348,000 1,032,000 3,000,000 4,032,000 4,032,000Pressure Reg Station Impvt & Replacement 1,600,000 1,557,000 (346,000) 1,211,000 450,000 450,000 2,111,000Well Rehabilitation 1,077,000 329,000 200,000 529,000 200,000 200,000 200,000 200,000 1,329,000Wtr Qual Well Syst Upgrades & Sweeny Rdg Tank Chlorine0 600,000 600,000 600,000 Total Capital Funding 28,496,000 14,934,000 10,354,000 25,288,000 1,600,000 16,900,000 30,250,000 11,200,000 85,238,000Estimated Annual Water Capital Improvement Expenditures [2] Average Annual Expenditures 17,048,000 17,048,000 17,048,000 17,048,000 17,048,000 85,240,0001 Source: City of San Bruno Revised 5-Year Water Capital Program (Updated 11.4.22 & 1.23.23); budget appropriation required for project contract awards.2 Source: Assumes average annual expenditures over the 5-year period. 2022/23

33 of 72

BARTLE WELLS ASSOCIATES 14
San Bruno 2023 Water & Sewer Rate Study

3.3.2 Wholesale Water Rate Increases
The San Francisco Public Utility Commission (SFPUC) is in the process of completing a roughly $5 billion capital program of seismic upgrades and reliability enhancements to its aging Hetch-Hetchy regional water system that provides water supply to many Bay Area communities. To help fund these improvements and ensure adequate revenue recovery over a period of declining water sales, the SFPUC has substantially increased it wholesale water rates since 2010. After 2016, the SFPUC was temporarily able to defer wholesale rate increases due to an overcollection of revenues that resulted in a buildup of fund reserves in a Balancing Account that has been drawn down over the past 5 years. The Balancing Account is now mostly depleted and the SFPUC began resuming annual wholesale rate increases with a 16% increase effective July 1, 2022 and additional rate increases projected in future years. The following chart shows historical and projected SFPUC wholesale water rates. The chart shows both the underlying SFPUC wholesale rate as well as the additional BAWSCA bond surcharge that wholesale agencies pay.

Figure 3 – Historical & Projected SFPUC Wholesale Water Rates

34 of 72

BARTLE WELLS ASSOCIATES 15
San Bruno 2023 Water & Sewer Rate Study

3.3.3 Ongoing Operating Cost Inflation
In addition, the City faces ongoing cost inflation for its own operating and maintenance expenses. Water and sewer cost inflation has historically been significantly higher than the Consumer Price Index (CPI) for consumer goods and services. The City avoided some expenses in recent years due to unfilled staff positions and participation in the Groundwater Storage and Recovery Agreement with SFPUC, but these cost savings were only temporary. In addition to rate increases for capital needs and other purposes, gradual annual rate increases are needed each year to support the City’s own operating expenses and keep up with cost inflation.

3.4 Outstanding Debt Service
The following table shows debt service repayment schedule by fiscal year for the City’s water enterprise, which includes one outstanding debt obligation, the 2017 Water Revenue Bonds.

Table 5 – Outstanding Water Debt Service
Fiscal Year 2017 WaterEnding Revenue Bonds2023 $683,6502024 684,0502025 681,5502026 683,5502027 684,8002028 685,3002029 685,0502030 684,0502031 682,3002032 684,8002033 681,3002034 682,0502035 684,9002036 682,3002037 684,4002038 681,6002039 683,2002040 684,0002041 684,0002042 683,2002043 681,6002044 684,2002045 685,8002046 681,4002047 681,200Rate Covenant: 1.25x debt service coverage requirementOptional Redemption starting July 1, 2027

35 of 72

BARTLE WELLS ASSOCIATES 16
San Bruno 2023 Water & Sewer Rate Study

3.5 Water Enterprise Financial Projections
Bartle Wells Associates developed 10-year water enterprise cash flow projections to identify future funding needs and evaluate water rate increases. The table on the following page shows 10-year water enterprise cash flow projections. The projections incorporate the latest information available as well as a number of reasonable and slightly conservative assumptions. Key assumptions include:
 Operating and maintenance costs are based on the 2022/23 budget and escalate at the annual rate of 4% to account for future cost inflation.
 Growth from new development and/or redevelopment is conservatively projected at the equivalent of 20 new single family homes per year for financial planning purposes.  Water sales are projected to remain constant at the same level experienced in the prior fiscal year.  SFPUC wholesale water rates are based on the latest SFPUC projections.  The projections assume the current fiscal year 2022/23 is a Recovery/Take year under the Groundwater Storage & Recovery (GSR) Agreement but do not assume any GSR designations in future years.
 Capital improvement costs are based on the City’s latest 5-Year Capital Improvement Program with future capital costs projected at $7.5 million per year with 3% annual cost escalation.  In recent years, the water enterprise has accrued a healthy levels of fund reserves that includes some excess reserves available for capital projects that were deferred in recent years but are scheduled for completion over the next few years. The projections assume approximately $32 million of these fund reserves will be drawn down over the next few years to help fund water system capital needs while rate increases are gradually phased in.
 The financial projections include a projected debt issuance in 2025 to generate $24 million to help fund the elevated levels of capital improvement funding needs over the next 5 years while enabling the City to implement gradual rate increases. The actual amount and timing of this potential future debt issue may vary based on the financing needs at the time debt is issued. Debt service is estimated based on a 4.5% average interest rate and assumes a 30-year repayment term.  For financial planning purposes, the financial projections assume a minimum fund reserve target equal to 50% of annual operating, maintenance and debt service costs, plus $5 million for emergency capital reserves. Maintaining a prudent minimal level of fund reserves provides a financial cushion for dealing with unanticipated expenses, revenue shortfalls, and non-catastrophic emergency capital repairs. The fund reserve target will escalate over time as the City’s expenses gradually increase.  The table also calculates annual debt service coverage based on a) total revenues less operating and maintenance expenses, divided by b) annual debt service.

36 of 72

BARTLE WELLS ASSOCIATES 17
San Bruno 2023 Water & Sewer Rate Study
Table 6 - 10-Year Water Cash Flow Projections

2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32Effective Date of Rate Increases Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1Overall Rate Adjustment0.0% 6% 6% 6% 6% 6% 5% 5% 4% 4%Growth (3/4" Meter Equivalents) 20 20 20 20 20 20 20 20 20 20Annual % Change in Water Sales -2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Total Water Sales (hcf) 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000 1,281,000Plus 10% Unaccounted Water 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000 1,409,000Groundwater Production (hcf) 900,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000 900,000SFPUC Water Supply (hcf) 509,000 509,000 509,000 509,000 509,000 509,000 509,000 509,000 509,000 509,000GSR Credit hcf (3,915 AF, 1,705,000 hcf)(509,000)- - - - - - - - - SFPUC Rate per hcf $4.75 $5.20 $5.30 $5.40 $5.50 $5.60 $5.70 $5.80 $5.90 $6.00Interest Earnings Rate 1.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%City Cost Escalation 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%Beginning Fund Balances$49,842,000 $41,012,000 $29,781,000 $18,918,000 $19,470,000 $20,253,000 $19,211,000 $18,625,000 $18,434,000 $18,565,000REVENUESWater Service Charges 4,288,000 4,417,000 4,678,000 4,954,000 5,248,000 5,559,000 5,862,000 6,154,000 6,431,000 6,690,000Water Quantity Charges 11,858,00012,196,00012,928,00013,704,00014,526,00015,397,00016,246,00017,058,00017,828,00018,541,000 Subtotal Rate Revenues 16,146,000 16,613,000 17,606,000 18,658,000 19,774,000 20,956,000 22,108,000 23,212,000 24,259,000 25,231,000Investment Income 748,000 820,000 596,000 378,000 389,000 405,000 384,000 373,000 369,000 371,000Connection/Mtr Inst/Capacity Fees 100,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000Other/Miscellaneous 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000______________________________________________________________________________________________________________Total Revenues17,014,000 17,613,000 18,382,000 19,216,000 20,343,000 21,541,000 22,672,000 23,765,000 24,808,000 25,782,000Projected Debt Proceeds12,000,000 12,000,000EXPENSESOperating & MaintenanceSalaries & Benefits 3,050,000 3,172,000 3,299,000 3,431,000 3,568,000 3,711,000 3,859,000 4,013,000 4,174,000 4,341,000Less Capitalized Project Staffing(500,000) (500,000) (500,000) (500,000) (500,000) (375,000) (386,000) (398,000) (410,000) (422,000)Supplies & Materials 1,914,000 1,991,000 2,071,000 2,154,000 2,240,000 2,330,000 2,423,000 2,520,000 2,621,000 2,726,000Utilities 570,000 593,000 617,000 642,000 668,000 695,000 723,000 752,000 782,000 813,000SFPUC/NCCWD Wholesale Water 2,418,000 2,647,000 2,698,000 2,749,000 2,800,000 2,850,000 2,901,000 2,952,000 3,003,000 3,054,000SFPUC GSR Credits (3,915 AF)(2,418,000)000000000SFPUC Meter Charges 153,000 159,000 165,000 172,000 179,000 186,000 193,000 201,000 209,000 217,000BAWSCA Bond Surcharge 165,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000Internal/Intergovt Charges 2,760,000 2,870,000 2,985,000 3,104,000 3,228,000 3,357,000 3,491,000 3,631,000 3,776,000 3,927,000______________________________________________________________________________________________________________ Subtotal 8,112,000 11,112,000 11,515,000 11,932,000 12,363,000 12,934,000 13,384,000 13,851,000 14,335,000 14,836,000Debt Service2017 Water Revenue Bonds 684,000 684,000 682,000 684,000 685,000 685,000 685,000 684,000 682,000 685,000Projected 2025 Bonds (4.5% 30-Yr)0001,000,0001,464,0001,464,0001,464,0001,464,0001,464,0001,464,000______________________________________________________________________________________________________________ Subtotal 684,000 684,000 682,000 1,684,000 2,149,000 2,149,000 2,149,000 2,148,000 2,146,000 2,149,000As s umes total 5-year capita l expenditures are s pread evenl y over the fi rs t 5 years Future capital expenditures are projected at $7.5 mill ion per year with 3% cos t es cala tionCapital Improvements17,048,000 17,048,000 17,048,000 17,048,000 17,048,000 7,500,000 7,725,000 7,957,000 8,196,000 8,442,000Total Expenses25,844,000 28,844,000 29,245,000 30,664,000 31,560,000 22,583,000 23,258,000 23,956,000 24,677,000 25,427,000Revenues Less Expenses(8,830,000) (11,231,000) (10,863,000) 552,000 783,000 (1,042,000) (586,000) (191,000) 131,000 355,000Ending Fund Balances41,012,000 29,781,000 18,918,000 19,470,000 20,253,000 19,211,000 18,625,000 18,434,000 18,565,000 18,920,000Min Rsrv Target: 50% O&M&D + $5M CIP9,400,00010,900,00011,100,00011,810,00012,260,00012,540,00012,770,00013,000,00013,240,00013,490,000Debt Service Coverage 13.01 9.50 10.07 4.33 3.71 4.01 4.32 4.62 4.88 5.09Note: The projections assume 2022/23 is a Recovery/Take Year under the Groundwater Storage & Recovery (GSR) Agreement, but do not assume any GSR designations for future years.

San Bruno Water Cash Flow ProjectionsProjected 2025 Bonds (tbd)

37 of 72

BARTLE WELLS ASSOCIATES 18
San Bruno 2023 Water & Sewer Rate Study
The following chart graphically shows a 10-year breakdown of projected water enterprise revenues and expenses. The proposed rate increases are designed to put the City on a long-term path toward supporting balanced budgets while providing adequate funding for ongoing rehabilitation and replacement of aging water system infrastructure to support safe and reliable service. As shown on the chart, the projections account for an elevated level of capital funding over the next 5 years which will require an approximately $32 million drawdown of fund reserves and potential subsequent issuance of debt in 2025. Longer-term capital needs are projected to be funded on a pay-as-you-go basis.

Figure 4 – Water Utility Projected Revenues & Expenses

38 of 72

BARTLE WELLS ASSOCIATES 19
San Bruno 2023 Water & Sewer Rate Study

3.6 Projected Water Rate Increases
The cash flow projections indicate the need to raise rates by 6% each year for the next 5 years in order to meet the water utility’s projected operating and capital funding needs. These projected rate increases follow a period of no rate increases over the past 2 years as shown below. With the proposed rates, the average annual water rate increase since 2016 equates to approximately 4.3%

Table 7 – Projected Water Rate Increases

Figure 5 – Historical & Projected Water Rate Increases

The 6% water rate increases represent the overall level of annual rate increases proposed. Actual impacts to customers’ monthly water bills may vary a little based on meter size and water use due to minor modifications to the rate structure designed to keep water rates aligned with the cost of providing service.

July 1 July 1 January 1 January 1 January 1 January 1 January 12021 2022 2024 2025 2026 2027 20285% 0% 0% 6% 6% 6% 6% 6%Projected Water Rate Increases

39 of 72

BARTLE WELLS ASSOCIATES 20
San Bruno 2023 Water & Sewer Rate Study

3.7 Water Use
The following table shows a 3-year history of water use including a breakdown of bi-monthly use by customer class and tier. Water use can vary from year to year due to many factors such as weather and conservation efforts. Although the City’s water was relatively consistent over the past few years, it was roughly 6% lower in the past fiscal year 2021/22 than it had been in the prior two years.

Table 8 – Water Use by Class & Tier

The tables on the following pages show a breakdown of monthly water use and sources of supply since fiscal year 2017/18.

Bi-Monthly Period Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/Jun Total % of Ttl2019/20 Water Use (hcf)Single Family ResidentialTier 1 80,782 81,262 79,325 75,940 76,832 80,759 474,900 36.0%Tier 2 30,324 32,382 27,636 21,331 21,942 30,689 164,304 12.4%Tier 3 9,18011,5048,1965,2974,7668,45647,3993.6%Subtotal 120,286 125,148 115,157 102,568 103,540 119,904 686,603 52.0%Multi-Family Res 65,628 62,797 58,349 55,421 54,608 58,394 355,197 26.9%Commercial/Other 58,01061,99850,72536,62935,40036,258279,02021.1%Total 243,924 249,943 224,231 194,618 193,548 214,556 1,320,820 100.0%2020/21 Water Use (hcf)Single Family ResidentialTier 1 83,196 83,489 81,204 77,104 75,823 79,654 480,470 36.2%Tier 2 37,264 37,332 30,916 23,923 21,240 28,208 178,883 13.5%Tier 3 13,80714,42210,1206,9056,0558,16859,4774.5%Subtotal 134,267 135,243 122,240 107,932 103,118 116,030 718,830 54.1%Multi-Family Res 64,705 64,345 61,194 57,009 54,279 58,768 360,300 27.1%Commercial/Other 51,91846,20241,21726,88635,67447,202249,09918.8%Total 250,890 245,790 224,651 191,827 193,071 222,000 1,328,229 100.0%2021/22 Water Use (hcf)Single Family ResidentialTier 1 80,047 79,364 75,757 73,990 74,239 75,992 459,389 37.1%Tier 2 29,550 28,295 21,455 19,480 19,191 22,227 140,198 11.3%Tier 3 10,0669,9476,0436,3475,7826,95345,1383.6%Subtotal 119,663 117,606 103,255 99,817 99,212 105,172 644,725 52.0%Multi-Family Res 57,095 55,823 54,100 52,405 51,446 54,348 325,217 26.2%Commercial/Other 53,04855,49334,68435,85343,46646,806269,35021.7%Total 229,806 228,922 192,039 188,075 194,124 206,326 1,239,292 100.0%Source: Based on detailed utility billing data files, excludes City water use which is billed separately.

40 of 72

BARTLE WELLS ASSOCIATES 21
San Bruno 2023 Water & Sewer Rate Study
Table 9 – Water Use by Month

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May JunTotal (hcf)Ttl (AF) % of Ttl2017/18 Water Use (hcf)Residential 98,929 84,385 105,093 82,391 98,284 74,142 88,842 71,291 85,285 68,624 85,930 76,210 1,019,406 2,340 75.0%Commercial 27,776 30,657 30,668 26,609 24,779 17,467 16,300 17,972 17,100 16,051 20,681 25,619 271,679 624 20.0%City 9,395 9,857 10,193 8,627 5,787 1,989 1,462 1,958 1,861 2,278 5,082 9,033 67,522 155 5.0%________________________________________________________________________________________________________________________ Total 136,100 124,899 145,954 117,627 128,850 93,598 106,604 91,221 104,246 86,953 111,693 110,862 1,358,607 3,119 100.0%2018/19 Water Use (hcf)Residential 99,235 83,302 108,893 81,401 107,093 74,114 96,641 69,252 82,283 65,068 90,124 75,180 1,032,586 2,370 75.1%Commercial 26,792 27,975 29,575 26,397 22,340 19,005 15,114 16,228 16,541 18,965 23,859 27,192 269,983 620 19.6%City 10,455 12,030 9,621 8,496 6,467 2,753 1,300 2,206 4,901 1,830 5,690 6,433 72,182 166 5.3%________________________________________________________________________________________________________________________ Total 136,482 123,307 148,089 116,294 135,900 95,872 113,055 87,686 103,725 85,863 119,673 108,805 1,374,751 3,156 100.0%2019/20 Water Use (hcf)Residential 104,044 82,122 105,703 82,444 99,083 74,819 86,683 69,158 86,527 72,266 99,115 79,921 1,041,885 2,392 74.5%Commercial 25,820 29,117 31,174 27,895 27,219 20,221 16,385 18,247 8,851 26,180 16,201 19,345 266,655 612 19.1%City 9,721 11,705 11,645 10,375 9,644 5,438 3,168 3,703 4,331 5,831 5,300 9,451 90,312 207 6.5%________________________________________________________________________________________________________________________ Total 139,585 122,944 148,522 120,714 135,946 100,478 106,236 91,108 99,709 104,277 120,616 108,717 1,398,852 3,211 100.0%2020/21 Water Use (hcf)Residential 108,328 88,279 113,474 85,834 106,905 76,531 93,931 70,930 88,345 69,007 97,563 77,828 1,076,955 2,472 77.2%Commercial 23,179 25,626 22,382 21,042 21,441 16,602 13,273 12,950 14,605 19,118 21,564 23,818 235,600 541 16.9%City 12,279 13,084 9,574 7,521 7,544 3,835 3,021 3,193 2,539 5,093 7,324 7,907 82,914 190 5.9%________________________________________________________________________________________________________________________ Total 143,786 126,989 145,430 114,397 135,890 96,968 110,225 87,073 105,489 93,218 126,451 109,553 1,395,469 3,204 100.0%2021/22 Water Use (hcf)Residential 99,080 77,895 97,460 76,264 90,525 66,937 84,523 67,597 84,441 66,277 88,813 71,236 971,048 2,229 74.3%Commercial 26,237 27,172 26,813 26,114 16,330 17,680 16,246 19,162 19,766 20,740 20,296 23,226 259,782 596 19.9%City 9,587 8,452 9,797 8,310 3,327 3,362 2,616 4,340 5,693 6,429 6,808 8,162 76,883 176 5.9%________________________________________________________________________________________________________________________ Total 134,904 113,519 134,070 110,688 110,182 87,979 103,385 91,099 109,900 93,446 115,917 102,624 1,307,713 3,002 100.0%2022/23 Water Use (hcf)Residential 94,289 74,070 97,618 70,837 88,780 68,015 493,609 1,133 73.7%Commercial 24,753 25,427 26,369 23,052 21,271 16,979 137,851 316 20.6%City 7,795 8,335 8,707 5,842 4,371 3,031 38,081 87 5.7%________________________________________________________________________________________________________________________ Total 126,837 107,832 132,694 99,731 114,422 88,025 - - - - - - 669,541 1,537 100.0%Source: Based on monthly water use data provided by the City of San Bruno.

41 of 72

BARTLE WELLS ASSOCIATES 22
San Bruno 2023 Water & Sewer Rate Study
Table 10 – Sources of Water Supply by Month

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May JunTotal (hcf)Ttl (AF) % of Ttl2017/18 Water Supply (hcf)Wells 12,930 13,080 13,036 13,253 11,747 13,486 8,840 14,262 13,061 14,323 13,494 13,829 155,341 357 10.4%SFPUC 113,342 135,352 130,261 109,369 97,616 105,668 91,871 87,626 93,886 92,934 122,593 129,285 1,309,803 3,007 88.0%NCCWD 2,043 2,044 2,029 2,028 1,977 1,976 1,860 1,859 1,836 1,836 1,961 1,962 23,411 54 1.6%________________________________________________________________________________________________________________________ Total 128,315 150,476 145,326 124,650 111,340 121,130 102,571 103,747 108,783 109,093 138,048 145,076 1,488,555 3,417 100.0%2018/19 Water Supply (hcf)Wells 12,768 4,124 14,166 6,508 13,484 14,709 6,853 13,580 14,364 15,582 13,649 9,825 139,612 321 9.6%SFPUC 119,235 136,866 119,224 97,586 104,661 99,365 94,911 86,332 94,926 102,297 113,596 129,565 1,298,564 2,981 89.1%NCCWD 2,057 2,056 3,888 1,638 1,638 1,071 1,071 975 975 946 946 1,234 18,495 42 1.3%________________________________________________________________________________________________________________________ Total 134,060 143,046 137,278 105,732 119,783 115,145 102,835 100,887 110,265 118,825 128,191 140,624 1,456,671 3,344 100.0%2019/20 Water Supply (hcf)Wells 1,227 14,456 11,484 7,453 10,864 - 13,174 13,809 14,703 1,282 12,824 9,030 110,306 253 7.2%SFPUC 131,267 137,064 122,585 115,869 108,311 120,738 83,960 105,336 107,464 106,008 125,419 136,511 1,400,532 3,215 91.9%NCCWD 1,234 1,502 1,503 873 874 885 885 946 947 1,163 1,164 1,172 13,148 30 0.9%________________________________________________________________________________________________________________________ Total 133,728 153,022 135,572 124,195 120,049 121,623 98,019 120,091 123,114 108,453 139,407 146,713 1,523,986 3,499 100.0%2020/21 Water Supply (hcf)Wells 14,349 12,423 14,479 14,520 14,105 13,412 14,091 17,765 15,635 5,342 10,500 18,783 165,404 380 11.0%SFPUC 128,986 135,657 110,866 109,817 109,187 99,794 82,640 94,325 105,412 118,954 122,494 110,268 1,328,400 3,050 88.2%NCCWD 1,172 1,172 1,172 1,176 1,175 841 841 1,043 1,044 1,043 1,044 1,050 12,773 29 0.8%________________________________________________________________________________________________________________________ Total 144,507 149,252 126,517 125,513 124,467 114,047 97,572 113,133 122,091 125,339 134,038 130,101 1,506,577 3,459 100.0%2021/22 Water Supply (hcf)Wells 69,697 78,147 73,858 65,865 76,177 82,308 79,135 80,041 96,250 76,332 93,581 90,099 961,490 2,207 64.9%SFPUC 68,454 60,969 62,029 53,223 35,552 29,115 27,064 26,805 33,345 27,250 41,465 41,949 507,220 1,164 34.3%NCCWD 1,051 957 957 978 978 1,043 1,044 972 972 975 976 1,137 12,040 28 0.8%________________________________________________________________________________________________________________________ Total 139,202 140,073 136,844 120,066 112,707 112,466 107,243 107,818 130,567 104,557 136,022 133,185 1,480,750 3,399 100.0%2022/23 Water Supply (hcf)Wells 90,682 81,262 88,581 90,282 72,254 69,615 492,676 1,131 66.4%SFPUC 46,952 53,782 35,958 33,412 35,594 38,392 244,090 560 32.9%NCCWD 1,137 1,110 1,109 1,136 1,135 5,627 13 0.8%________________________________________________________________________________________________________________________ Total 138,771 136,154 125,648 124,830 108,983 108,007 - - - - - - 742,393 1,704 100.0%Source: Based on monthly water use data provided by the City of San Bruno.

42 of 72

BARTLE WELLS ASSOCIATES 23
San Bruno 2023 Water & Sewer Rate Study

3.8 Water Rate Derivation
The following sections develop rates projected to become effective on January 1, 2028 in fiscal year 2027/28, the fifth and final year of the proposed rate increases. Rates in intervening years are phased in from current levels to the proposed levels calculated for 2027/28.

3.9 Cost Recovery Allocations
The following table allocates costs for recovery from the City’s fixed and quantity charges. Based on the allocations, fixed monthly charges are designed to recover a little under 26% of total rate revenues and water quantity charges will recover roughly 74% of total rate revenues. These allocation percentages are consistent with the City’s current rate structure. The table also further allocated costs be recovered from Quantity Charges associated with Base Costs vs. Extra Capacity. Base Costs represent expenses associated with providing system capacity and water service under base, wet weather months with the lowest levels of water use and account for most of the costs to be recovered from Quantity Charges. Extra Capacity costs are expenses related to providing system capacity and water service to meet peak demands in excess of base use and are conservatively allocated at a little less than 5.7% of total costs.

Table 11 – Cost Recovery Allocation

Projected Expenses Fixed Fixed 2027/28 Charges Base CostsExtra CapacityCharges Base CostsExtra CapacityEXPENSESOperating & MaintenanceSalaries & Benefits $3,711,000 25.0% 70.0% 5.0% $927,750 $2,597,700 $185,550Less Capitalized Project Staffing (375,000) 25.0% 70.0% 5.0% (93,750) (262,500) (18,750)Supplies & Services/Equipment 2,330,000 25.0% 70.0% 5.0% 582,500 1,631,000 116,500Utilities 695,000 0.0% 100.0% 0.0% 0 695,000 0SFPUC/NCCWD Wholesale Water (net) 2,850,000 0.0% 100.0% 0.0% 0 2,850,000 0SFPUC Meter Charges 186,000 25.0% 75.0% 0.0% 46,500 139,500 0BAWSCA Bond Surcharge 180,000 0.0% 100.0% 0.0% 0 180,000 0Internal/Intergovt Charges 3,357,000 35.0% 65.0% 0.0% 1,174,950 2,182,050 0_______________________________________________________________ Subtotal12,934,00020.4%77.4%2.2%2,637,95010,012,750283,300Debt Service 2,149,00033.0%57.0%10.0%709,1701,224,930214,900Capital Improvements (Pay-Go)7,500,00033.0%57.0%10.0%2,475,0004,275,000750,000Total Expenses22,583,000 25.8% 68.7% 5.5% 5,822,120 15,512,680 1,248,200NET FUNDING REQUIRED FROM WATER RATESTotal Expenses 22,583,000 25.8% 68.7% 5.5% 5,822,120 15,512,680 1,248,200Less Funding Sources Other Than Rates (585,000) 25.8% 74.2% 0.0% (150,819) (434,181) 0_______________________________________________________________Net Total 21,998,000 25.78% 68.54% 5.67% 5,671,301 15,078,499 1,248,200 Cost Recovery %Cost Recovery $Quantity ChargesQuantity Charges

43 of 72

BARTLE WELLS ASSOCIATES 24
San Bruno 2023 Water & Sewer Rate Study
The following table uses the percentage cost allocations derived on Table 11 to allocate the amount of total targeted water rates revenues for recovery from the City’s fixed and quantity charges in order to derive rates for January 1, 2028, the final year of the proposed 5-year rate increase period.

Table 12 – Fixed & Quantity Charge Revenue Recovery

3.10 Water Accounts & Meter Equivalents
The table on the following page shows the number of accounts by meter size along the relative capacity of each meter size compared to that of the base 3/4-inch meter, based on meter capacity standards developed by the American Water Works Association. For example, a 3-inch meter has roughly the same capacity as ten 3/4-inch meters and generates the same demand as ten 3/4-inch meters. The table calculated the total number of 3/4-inch meter equivalents served by the City.

TARGET WATER RATE REVENUESAnnualized Rate Revenues with Jan-1, 2028 Rate Increase $22,016,000RATE RECOVERY ALLOCATIONSFixed Service ChargesAllocation % 25.78%Allocation $ $5,675,942Water Quantity ChargesBase Rate RecoveryAllocation % 68.54%Allocation $ $15,090,837Extra Capacity Rate RecoveryAllocation % 5.67%Allocation $ $1,249,221

44 of 72

BARTLE WELLS ASSOCIATES 25
San Bruno 2023 Water & Sewer Rate Study
Table 13 – Water Accounts & Meter Equivalents

3.11 Fixed Monthly Service Charges
The following table derives the fixed charge for the base 3/4-inch meter effective January 1, 2028 by dividing the targeted level of revenues allocated for fixed rate recovery by the projected number of 3/4- inch meter equivalents, resulting in a fixed monthly charge of $34.22 per meter equivalent.

Table 14 – Fixed Rate Derivation January 1, 2028

Meter Meter Number AWWA Meter 3/4" MeterCode Size of Accts Capacity Ratio EquivalentsWT01 3/4" 10,573 1.00 10,573 WT02 1" 351 1.67 585 WT03 1-1/2" 210 3.33 700 WT04 2" 307 5.33 1,637 WT05 3" 16 10.00 160 WT06 4" 2 16.67 33 WT07 6" 1 33.33 33 WT08 8" 1 53.33 53 WT09 10" - 76.67 - ______________Total 11,460 13,722 _______________Source: Estimated active accounts as of January 2023.Fixed ChargeMeter Size Jan-1, 2028Fixed Rate Recovery $$5,675,942Meter EquivalentsCurrent Meter Equivalents 13,722 Plus Growth through 2027/28 100Total 13,822 Fixed Service Charge per Meter EquivalentAnnual Charge$410.65Monthly Charge $34.22

45 of 72

BARTLE WELLS ASSOCIATES 26
San Bruno 2023 Water & Sewer Rate Study
The following table calculates the fixed charges for all meter sizes by multiplying the charge for the base 3/4-inch meter by the meter capacity ratio for each meter size, resulting in fixed charges that are proportional to meter capacity.

Table 15 – Projected Fixed Services Charges January 1, 2028

3.12 Water Quantity Charge Derivation
The tables in this section derive water quantity charges for January 1, 2028. The charts on the following page show a breakdown of single family water use by tier per each bi-monthly billing cycle over the past 3 fiscal years. The orange dotted line on the charts shows the level of water use under base, wet weather months with the lowest levels of water use each year which are largely reflective of indoor water demand.

Water use over this level represents peak demands in excess of base use. As shown, a small portion of water use in Tier2 and a large portion of water use in Tier 3 exceed base usage levels.

Fixed ChargeJan-1, 2028Fixed Monthly Service Charge per Meter Equivalent$34.22Fixed Monthly Service ChargesSingle Family Up to 1", 1.5"? $34.22Meter MeterSizeCapacity Ratio3/4" 1.00 $34.221" 1.67 57.031.5" 3.33 114.072" 5.33 182.513" 10.00 342.204" 16.67 570.336" 33.33 1,140.678" 53.33 1,825.0710" 76.67 2,623.53

46 of 72

BARTLE WELLS ASSOCIATES 27
San Bruno 2023 Water & Sewer Rate Study
Figure 6 – Single Family Water Use by Tier

80,78281,26279,32575,94076,83280,75930,32432,38227,63621,33121,94230,6899,18011,5048,1965,2974,7668,456120,286125,148115,157102,568103,540119,904020,00040,00060,00080,000100,000120,000140,000160,000Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/JunTier 1Tier 2Tier 32019/20 Single Family Residential Water Use by Tier (hcf)Base SFR Use(Avg Use from Jan-Apr) 83,19683,48981,20477,10475,82379,65437,26437,33230,91623,92321,24028,20813,80714,42210,1206,9056,0558,168134,267135,243122,240107,932103,118116,030020,00040,00060,00080,000100,000120,000140,000160,000Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/JunTier 1Tier 2Tier 32020/21 Single Family Residential Water Use by Tier (hcf)Base SFR Use (Avg Use from Jan-Apr) 80,78281,26279,32575,94076,83280,75930,32432,38227,63621,33121,94230,6899,18011,5048,1965,2974,7668,456120,286125,148115,157102,568103,540119,904020,00040,00060,00080,000100,000120,000140,000160,000Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/JunTier 1Tier 2Tier 32021/22 Single Family Residential Water Use by Tier (hcf)Base SFR Use(Avg Use from Jan-Apr)

47 of 72

BARTLE WELLS ASSOCIATES 28
San Bruno 2023 Water & Sewer Rate Study
The following table shows a 5-year projection of water sales by rate class. The projections are based on water sales from the prior fiscal year 2021/22 and assume no change in use.

Table 16 – Projected Water Sales

Water Quantity Charges are derived based on a Base vs. Extra Capacity approach:
 Base costs are defined as expenses associated with providing system capacity and water service under base, wet weather months with the lowest levels of water use. These costs benefit all water use on a proportionate basis and are recovered equally from each unit of water sold. Base costs account for most of the City’s costs of service.
 Extra Capacity costs are defined as expenses related to providing and maintaining system capacity and water service to meet peak demands in excess of base use. These costs are allocable to higher levels of water use. Water system facilities must generally be oversized to meet peak demands, which require additional system capacity similar to the need for additional lanes on a highway to meet peak rush hour demands even though fewer lanes would otherwise be adequate for non-rush hour traffic. The City also incurs some costs that should be recovered more from higher levels of use, such as costs related to the City’s water conservation program.

Base Year2021/22 2023/24 2024/25 2025/26 2026/27 2027/28Annual Change in Water Sales 0% 0% 0% 0% 0%Single Family Residential UseTierMonthly UseTier 1 0 - 10 hcf 459,389 459,400 459,400 459,400 459,400 459,400Tier 2 11 - 20 hcf 140,198 140,200 140,200 140,200 140,200 140,200Tier 3 >20 hcf 45,13845,10045,10045,10045,10045,100Subtotal 644,725 644,700 644,700 644,700 644,700 644,700All Other Billed Use594,567 594,600 594,600 594,600 594,600 594,600Total1,239,292 1,239,300 1,239,300 1,239,300 1,239,300 1,239,300Change % 0.0% 0.0% 0.0% 0.0% 0.0%Projected Water Use (hcf)

48 of 72

BARTLE WELLS ASSOCIATES 29
San Bruno 2023 Water & Sewer Rate Study
The following table derives Water Quantity Charges effective January 1, 2028 by dividing a) the costs allocated for recovery from each rate tier by b) the projected volume of water sales in each tier.  Base costs attributable equally to all water use are allocated on a pro-rata basis to water use in all rate classes.
 Extra Capacity costs related to meeting demands in excess of base use are allocated more toward higher tiers in recognition that these costs are incurred due to higher levels of water use. Costs related to peak demands are attributed to 20% of Tier 2 water use, and 60% of Tier 3 water use based on analysis of historical water use. For example, 60% of Tier 3 water use throughout the year is in excess of base levels of use and is corresponding allocated a share of Extra Capacity costs. These costs are amortized over total annual Tier 3 use resulting in Tier 3 rates that recover the allocated costs over the course of the years. No costs related to Extra Capacity are designated for recovery from Tier 1.
 The rates for each customer class and tier are based on the combined Base and Extra Capacity costs assigned to each tier, divided by the volume of water projected to be sold in each tier.

Table 17 – Water Quantity Charge Derivation

AllTier 1 Tier 2 Tier 3 Other0 - 10 hcf 11 - 20 hcf >20 hcf CustomersWater Use (hcf)459,400 140,200 45,100 594,600A) Base Cost Allocation % of Total Use 37.1% 11.3% 3.6% 48.0%B) Extra Capacity Cost Allocation % of Water in Class/Tier for Peak Cost Recovery 0.0% 20.0% 60.0% 10.0% Volume of Water for Peak Cost Recovery 0 28,040 27,060 59,460 % of Total Water for Peak Cost Recovery 0.0% 24.5% 23.6% 51.9%VARIABLE RATE COST RECOVERYBase $15,090,837 $5,594,070 $1,707,202 $549,178 $7,240,387Extra Capacity 1,249,2210305,763295,076648,383 Total 16,340,058 5,594,070 2,012,965 844,255 7,888,769Water Use (hcf) 459,400 140,200 45,100 594,600Quantity Charge ComponentsBase $12.18 $12.18 $12.18 $12.18Extra Capacity 0.002.186.541.09 Total Charge per hcf 12.18 14.36 18.72 13.27 Single Family Residential

49 of 72

BARTLE WELLS ASSOCIATES 30
San Bruno 2023 Water & Sewer Rate Study

3.13 Proposed Water Rates
The table on the following page shows a 5-year schedule of proposed water rates incorporating a) the overall level of required rate increases needed to fund the costs of providing service, b) the updated cost allocations that apportion costs to the various components of City’s water rate structure. Proposed water rates are scheduled to become effective on January 1 of each year, when water use is low. The rates shown for each year are projected to gradually increase by the same percentage each year from current rates to the rates derived for January 1, 2028.

Table 18 – Proposed Water Rates

Proposed Rates Effective On or AfterProposed Water Rates

50 of 72

BARTLE WELLS ASSOCIATES 31
San Bruno 2023 Water & Sewer Rate Study

3.14 Water Rate Impacts
The following table shows the impacts of the proposed water rates single family residential and non- residential customers with a range of water use. As previously noted, while the rates reflect overall 6% annual rate increases, the impacts vary a little based on meter size and water use due to the minor modifications to the rate structure.

Table 19 – Water Rate Impacts

CurrentUse (hcf) Rates 2024 2025 2026 2027 2028Overall Rate Increase Target6% 6% 6% 6% 6%Single Family Residential, 3/4" Meter (Bi-Monthly Billing)Bi-Monthly UseLow 6 hcfBi-Monthly Bill$105.22 $111.64 $118.42 $125.64 $133.30 $141.52Monthly Equivalent52.61 55.82 59.21 62.82 66.65 70.76Monthly Increase3.21 3.39 3.61 3.83 4.11% Increase6.1% 6.1% 6.1% 6.1% 6.2%Median 10 hcfBi-Monthly Bill$141.26 $149.92 $159.06 $168.80 $179.14 $190.24Monthly Equivalent70.63 74.96 79.53 84.40 89.57 95.12Monthly Increase4.33 4.57 4.87 5.17 5.55% Increase6.1% 6.1% 6.1% 6.1% 6.2%Average 12 hcfBi-Monthly Bill$162.82 $172.76 $183.24 $194.40 $206.26 $218.96Monthly Equivalent81.41 86.38 91.62 97.20 103.13 109.48Monthly Increase4.97 5.24 5.58 5.93 6.35% Increase6.1% 6.1% 6.1% 6.1% 6.2%Mod-High 20 hcfBi-Monthly Bill$249.06 $264.12 $279.96 $296.80 $314.74 $333.84Monthly Equivalent124.53 132.06 139.98 148.40 157.37 166.92Monthly Increase7.53 7.92 8.42 8.97 9.55% Increase6.0% 6.0% 6.0% 6.0% 6.1%Commercial/Multi-Family (Monthly Billing)Monthly Use3/4" Meter 10 hcfMonthly Bill$126.68 $133.91 $141.53 $149.55 $158.07 $166.92Monthly Increase7.23 7.62 8.02 8.52 8.85% Increase5.7% 5.7% 5.7% 5.7% 5.6%1" Meter 25 hcfMonthly Bill$295.38 $312.18 $329.88 $348.50 $368.28 $388.78Monthly Increase16.80 17.70 18.62 19.78 20.50% Increase5.7% 5.7% 5.6% 5.7% 5.6%2" Meter 100 hcfMonthly Bill$1,147.43 $1,212.59 $1,281.23 $1,353.40 $1,430.11 $1,509.51Monthly Increase65.16 68.64 72.17 76.71 79.40% Increase5.7% 5.7% 5.6% 5.7% 5.6%4" Meter 200 hcfMonthly Bill$2,448.33 $2,587.83 $2,734.83 $2,889.50 $3,053.83 $3,224.33Monthly Increase139.50 147.00 154.67 164.33 170.50% Increase5.7% 5.7% 5.7% 5.7% 5.6% Charges with Proposed Rated Effective Jan-1

51 of 72

BARTLE WELLS ASSOCIATES 32
San Bruno 2023 Water & Sewer Rate Study
4 SEWER FINANCIAL PLAN & RATE DERIVATION

4.1 Current & Historical Sewer Rates
The City has provided good financial stewardship by gradually raising sewer rates most years over the past 20 years to keep rates in line with escalating costs of providing water service. The table on the following page shows a recent history of the City’s sewer rates. The City bills customers bi-monthly (once every 2 months) via a combined utility bill.

The City’s sewer rates include two components:
 A fixed Monthly Service Charge that varies based on meter size. These fixed charges are levied independent of usage and recover a portion of the City’s fixed costs for providing service. The City incurs a substantial amount of costs ensuring that sewer system capacity is available at all times to meet customer needs on demand. The fixed Monthly Service Charge varies by meter size, with larger meters paying higher charges based on the increased capacity needs and demand placed on the sewer system.
 Volumetric Sewer Quantity Charges billed based on metered water use. Residential accounts are billed based on average winter water use from two billing periods between December and April.

Residential use during this period excludes most outdoor irrigation and is a better reflection of residential wastewater discharge. All other customers are billed based on water used each billing period. Sewer Quantity Charges are billed per hundred cubic feet (hcf), with 1 hcf equal to approximately 748 gallons of water. Hence, the City’s current Residential Quantity Charges equate to approximately 1.43 cents per gallon of wastewater discharge.

52 of 72

BARTLE WELLS ASSOCIATES 33
San Bruno 2023 Water & Sewer Rate Study
Table 20 – Sewer Rates
2017 2018 2019 2020 2021
Rate Increase % 5% 5% 5% 5% 5%
MONTHLY SERVICE CHARGES Currently Cancelled
Fixed monthly charge per account in effect
Single Family Residential $27.88 $29.27 $30.73 $32.27 $33.88 All Other Customers (Charge Based on Water Meter Size)
Meter Size
3/4-inch $27.88 $29.27 $30.73 $32.27 $33.88
1-inch 46.47 48.78 51.22 53.78 56.47
1-1/2 inch 92.93 97.57 102.43 107.57 112.93
2-inch 148.69 156.11 163.89 172.11 180.69
3-inch 278.80 292.70 307.30 322.70 338.80
4" & Larger 464.67 487.83 512.17 537.83 564.67

QUANTITY CHARGES
Billed per hundred cubic feet (hcf)
Residential $10.69 $11.22 $11.78 $12.37 $12.99
Commercial
C-1 Light Commercial 9.93 10.43 10.95 11.50 12.08
C-2 Medium Commercial 10.69 11.22 11.78 12.37 12.99 C-3 Heavy Commercial 15.21 15.97 16.77 17.61 18.49 C-4 Special Commercial 19.74 20.73 21.77 22.86 24.00 Governmental 10.69 11.22 11.78 12.37 12.99
Industrial
I-1 Light Industrial 10.69 11.22 11.78 12.37 12.99 I-2 Industrial Flow 7.68 8.06 8.46 8.88 9.32
COD per lb 0.59 0.62 0.65 0.68 0.71
SS per lb 1.22 1.28 1.34 1.41 1.48
Note: 1 hcf = 100 cubic feet or approximately 748 gallons.

Sewer Rates Effective July 1
Residential Quantity Charges are billed based on average metered water use from two bi-monthly billing periods during wet weather months between either Nov-Mar or Dec-Apr.

Non-Residential Quantity Charges are billed based on metered water use during each billing period.

53 of 72

BARTLE WELLS ASSOCIATES 34
San Bruno 2023 Water & Sewer Rate Study

4.2 Regional Sewer Rate Survey
The chart below compares the City’s current sewer service charges to those of other regional agencies for a typical single family home with 5 hundred cubic feet of monthly winter water use. This level of use equates to almost 125 gallons per day. Roughly half of the agencies have 100% fixed residential wastewater charges that do not vary based on volume of wastewater discharge, and the other half (including San Bruno) have rates that include a volumetric component based on metered water use during the wet winter months, a period of minimal outdoor irrigation . The City’s sewer rates are currently in the-middle range compared to other regional agencies and are expected to remain in the middle range as many other regional agencies have already adopted or are anticipating rate increases in upcoming years.

Figure 7 – Single Family Residential Sewer Rate Survey

54 of 72

BARTLE WELLS ASSOCIATES 35
San Bruno 2023 Water & Sewer Rate Study

4.3 Financial Challenges / Key Drivers of Rate Increases Going forward, the City’s sewer enterprise is facing a number of financial challenges that will require the City to resume its historical practice of implementing gradual annual sewer rates over the next 5 years.

Key drivers of future rate increases are summarized as follows.

4.3.1 Capital Improvements & Replacement of Aging Infrastructure Many of the City’s sewer collection system pipelines are at or approaching the end of their useful lives and in need of replacement. The City anticipates funding approximately $71 million of wastewater system capital improvement projects over the next 5 years as shown on the following table. This total includes roughly $46 million of improvements to the City’s sewer collection system – mostly consisting of sewer pipeline replacements – and about $25 million for the City’s share of upgrades to the Water Quality Control Plant, which include an estimated $14 million for the City’s share of a biosolids handling improvement project that South San Francisco anticipates financing via debt.

Table 21 – Sewer Capital Improvement Program

4.3.2 Ongoing Operating Cost Inflation
The City is contractually responsible for paying its share of operating, maintenance and debt service expenses for the Water Quality Control Plant and effluent disposal system. Costs for wastewater treatment operations have increased in recent years with no corresponding increases to the City’s sewer rates, and are projected to continue to gradually increase in future years. 2023/24 2024/25 2025/26 2026/27 5-Yr Total
Prior Approp Es t. Carryover New Funding Total
Funding Sources
Wastewater Fund 36,796,000 15,169,000 5,300,000 17,969,000 12,000,000 13,200,000 5,750,000 22,000,000 70,919,000 Wastewater Capital Improvement Projects
Main Improvement & Replacement Program 13,360,000 8,466,000 1,700,000 10,166,000 10,000,000 11,200,000 3,750,000 6,000,000 41,116,000 Pump Station Improvement & Replacement 10,760,000 5,203,000 100,000 5,303,000 5,303,000 Subtotal Sewer Collection System 24,120,000 13,669,000 1,800,000 15,469,000 10,000,000 11,200,000 3,750,000 6,000,000 46,419,000 Water Quality Control Plant Ongoing Upgrades 12,676,000 1,500,000 1,000,000 2,500,000 2,000,000 2,000,000 2,000,000 2,000,000 10,500,000 WQCP Biosolids Handling Improvements (est) [1] 14,000,000 14,000,000 Total Capital Funding 36,796,000 15,169,000 2,800,000 17,969,000 12,000,000 13,200,000 5,750,000 22,000,000 70,919,000 Estimated Annual Wastewater Capital Expenditures (Excludes Debt-Financing for WQCP Biosolids Improvements) Sewer Collection System Upgrades [2] 9,284,000 9,284,000 9,284,000 9,284,000 9,284,000 46,420,000 Water Quality Control Plant Upgrades 2,500,000 2,000,000 2,000,000 2,000,000 2,000,000 10,500,000 Average Annual Expenditures 11,784,000 11,284,000 11,284,000 11,284,000 11,284,000 56,920,000 Source: City of San Bruno Revised 5-Year Wastewater Capital Program (Updated 11.4.22); budget appropriation required for project contract awards. 1 South San Francisco anticipates financing a biosolids handling improvement project with long-term debt, with a portion allocated to San Bruno 2 Source: Assumes average annual expenditures over the 5-year period for City sewer collection system upgrades. 2022/23

55 of 72

BARTLE WELLS ASSOCIATES 36
San Bruno 2023 Water & Sewer Rate Study
In addition, the City faces ongoing cost inflation for its own operating and maintenance expenses. Water and sewer cost inflation has historically been significantly higher than the Consumer Price Index (CPI) for consumer goods and services. In addition to rate increases for capital needs, annual rate increases are needed over the next 5 years to support the City’s operating expenses and keep up with cost inflation.

4.4 Outstanding Debt Service
The following table shows a schedule of outstanding sewer enterprise debt by fiscal year. Debt includes a) two outstanding series of wastewater revenue bonds issued by the City and directly secured by the net revenues of the City’s sewer enterprise, and b) the City’s allocated share of three State Revolving Fund (SRF) Loans obtained by South San Francisco for the Water Quality Control Plant.

Table 22 – Outstanding Sewer Debt Service

FiscalYear2013 Wastewater2017 Wastewater1999 SRF Loan2007 SRF Loan2018 SRF LoanEnding Revenue Revenue C-06-4614-111 C-06-4728-110June 30 Bonds Bonds 18.01% 32.70% 26.92% Total2023 $542,600 $1,442,850 $589,551 $458,471 - $3,033,4722024 544,475 1,439,450 - 458,471 796,976 3,239,3722025 541,225 1,438,200 - 458,471 796,976 3,234,8722026 547,225 1,440,700 - 458,471 796,976 3,243,3722027 546,975 1,441,700 - 458,471 796,976 3,244,1222028 544,975 1,441,200 - - 796,976 2,783,1512029 546,825 1,439,200 - - 796,976 2,783,0012030 547,275 1,440,700 - - 796,976 2,784,9512031 540,675 1,440,450 - - 796,976 2,778,1012032 543,400 1,438,450 - - 796,976 2,778,8262033 - 1,439,700 - - 796,976 2,236,6762034 - 1,438,950 - - 796,976 2,235,9262035 - 1,438,300 - - 796,976 2,235,2762036 - 1,441,900 - - 796,976 2,238,8762037 - 1,439,600 - - 796,976 2,236,5762038 - 1,442,200 - - 796,976 2,239,1762039 - 1,438,200 - - 796,976 2,235,1762040 - 1,437,800 - - 796,976 2,234,7762041 - 1,440,800 - - 796,976 2,237,7762042 - 1,442,000 - - 796,976 2,238,9762043 - 1,441,400 - - 796,976 2,238,3762044 - 1,439,000 - - - 1,439,0002045 - 1,439,800 - - - 1,439,8002046 - 1,438,600 - - - 1,438,6002047 - 1,440,400 - - - 1,440,400 San Bruno Debt Obligations1San Bruno Share of WQCP Debt Obligations2

56 of 72

BARTLE WELLS ASSOCIATES 37
San Bruno 2023 Water & Sewer Rate Study

4.5 Sewer Enterprise Financial Projections
Bartle Wells Associates developed 10-year sewer enterprise cash flow projections to identify future funding needs and evaluate sewer rate increases. The table on the following page shows 10-year sewer enterprise cash flow projections. The projections incorporate the latest information available as well as a number of reasonable and slightly conservative assumptions. Key assumptions include:
 Operating and maintenance costs are based on the 2022/23 budget and escalate at the annual rate of 4% to account for future cost inflation.
 Growth from new development and/or redevelopment is conservatively projected at the equivalent of 20 new single family homes per year for financial planning purposes.  Billed sewer use is projected to remain constant at the same level as the prior fiscal year 2021/22.  Capital improvement costs are based on the City’s latest 5-Year Capital Improvement Program with capital costs in subsequent years projected at $10 million per year – including $7.5 million annually for City sewer collection system improvements and $2.5 million annually for the City’s share of WQCP improvements – with 3% annual cost escalation.
 In recent years, the sewer enterprise has accrued a healthy levels of fund reserves that includes some excess reserves available for capital projects that were deferred in recent years but are scheduled for completion over the next few years. The projections assume approximately $21 million of these fund reserves will be drawn down in upcoming years to fund sewer system capital needs while rate increases are gradually phased in.
 The financial projections include $800,000 of new debt service starting fiscal year 2026/27 for the City’s share of debt service for an anticipated biosolids handling improvement project at the WQCP that the South San Francisco anticipates financing via debt. The actual amount and timing of this potential future debt issue may vary based on the actual project cost and timing. Debt service is estimated assuming South San Francisco obtains a loan from the Clean Water State Revolving Fund (SRF) Loan program or the Water Infrastructure and Financing Innovation Act (WIFIA) financing program with an 3.75% average interest rate and a 30-year repayment term.  For financial planning purposes, the financial projections assume a minimum fund reserve target equal to 50% of annual operating, maintenance and debt service costs, plus $5 million for emergency capital reserves. Maintaining a prudent minimal level of fund reserves provides a financial cushion for dealing with unanticipated expenses, revenue shortfalls, and non-catastrophic emergency capital repairs. The fund reserve target will escalate over time as the City’s expenses gradually increase.  The table also calculates annual debt service coverage on the City’s wastewater debt as well as total debt including the City’s share of WQCP debt issued by South San Francisco. Debt service coverage is calculated based on a) total revenues less operating and maintenance expenses, divided by b) annual debt service.

57 of 72

BARTLE WELLS ASSOCIATES 38
San Bruno 2023 Water & Sewer Rate Study
Table 23 - 10-Year Sewer Cash Flow Projections

2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32Effective Date of Rate Increases July 1 July 1 July 1 July 1 July 1 July 1 July 1 July 1 July 1Overall Rate Adjustment0% 5% 5% 5% 5% 5% 5% 5% 5% 4%Growth (3/4" Meter Equivalents) 20 20 20 20 20 20 20 20 20Annual % Change in Billed Sewer Use0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Interest Earnings Rate 1.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%WQCP Cost Escalation 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%City Cost Escalation 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%Beginning Unrestricted Fund Rsrvs$47,280,000 $42,137,000 $37,891,000 $34,115,000 $30,838,000 $27,314,000 $26,117,000 $25,287,000 $24,861,000 $24,888,000REVENUESSewer Rate Revenues 19,100,000 20,055,000 21,058,000 22,111,000 23,217,000 24,378,000 25,597,000 26,877,000 28,221,000 29,350,000Connection & Capacity Fees 100,000 132,000 132,000 132,000 132,000 132,000 132,000 132,000 132,000 132,000Investment Income 600,000 843,000 758,000 682,000 617,000 546,000 522,000 506,000 497,000 498,000Other/Miscellaneous 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000______________________________________________________________________________________________________________Total Revenues19,820,000 21,050,000 21,968,000 22,945,000 23,986,000 25,076,000 26,271,000 27,535,000 28,870,000 30,000,000EXPENSESOperating & MaintenanceSalaries & Benefits 2,586,000 2,689,000 2,797,000 2,909,000 3,025,000 3,146,000 3,272,000 3,403,000 3,539,000 3,681,000Less Capitalized Project Staffing(500,000) (500,000) (500,000) (500,000) (500,000) (500,000) (500,000) (500,000) (500,000) (500,000)Supplies & Services 1,295,000 1,347,000 1,401,000 1,457,000 1,515,000 1,576,000 1,639,000 1,705,000 1,773,000 1,844,000Wastewater Treatment SSF 3,957,000 4,115,000 4,280,000 4,451,000 4,629,000 4,814,000 5,007,000 5,207,000 5,415,000 5,632,000Internal Charges 2,811,000 2,923,000 3,040,000 3,162,000 3,288,000 3,420,000 3,557,000 3,699,000 3,847,000 4,001,000Vehicle & Equip Replacement 0 200,000 208,000 216,000 225,000 234,000 243,000 253,000 263,000 274,000______________________________________________________________________________________________________________ Subtotal 10,149,000 10,774,000 11,226,000 11,695,000 12,182,000 12,690,000 13,218,000 13,767,000 14,337,000 14,932,000Debt Service2013 Wastewater Bonds 542,000 544,000 541,000 547,000 547,000 545,000 547,000 547,000 541,000 543,0002017 Wastewater Bonds 1,440,000 1,439,000 1,438,000 1,441,000 1,442,000 1,441,000 1,439,000 1,441,000 1,440,000 1,438,000Share of WQCP Debt, Subordinate1,048,0001,255,0001,255,0001,255,0001,255,000797,000797,000797,000797,000797,000Share of New WQCP Debt, Projected0000800,000800,000800,000800,000800,000800,000______________________________________________________________________________________________________________ Subtotal All Debt 3,030,000 3,238,000 3,234,000 3,243,000 4,044,000 3,583,000 3,583,000 3,585,000 3,578,000 3,578,000Other Non-OperatingAs s umes tota l 5-yea r capital expenditures are s prea d evenly over the fi rs t 5 yea rs Future ca pital expenditures a re projected at $10 mill ion per yea r with 3% cos t es cala tionCity Sewer System Capital Projects 9,284,000 9,284,000 9,284,000 9,284,000 9,284,000 7,500,000 7,725,000 7,957,000 8,196,000 8,442,000City Share of WPCP Capital Projects 2,500,000 2,000,000 2,000,000 2,000,000 2,000,000 2,500,000 2,575,000 2,652,000 2,732,000 2,814,000______________________________________________________________________________________________________________ Subtotal 11,784,000 11,284,000 11,284,000 11,284,000 11,284,000 10,000,000 10,300,000 10,609,000 10,928,000 11,256,000Total Expenses24,963,000 25,296,000 25,744,000 26,222,000 27,510,000 26,273,000 27,101,000 27,961,000 28,843,000 29,766,000Revenues Less Expenses(5,143,000) (4,246,000) (3,776,000) (3,277,000) (3,524,000) (1,197,000) (830,000) (426,000) 27,000 234,000Ending Unrestricted Fund Balances42,137,000 37,891,000 34,115,000 30,838,000 27,314,000 26,117,000 25,287,000 24,861,000 24,888,000 25,122,000Min Rsrv Target: 50% O&M&D + $5M11,590,00012,010,00012,230,00012,470,00013,110,00013,140,00013,400,00013,680,00013,960,00014,260,000Debt Service Coverage On Parity Debt (Min>1.25)4.885.185.435.665.936.246.576.937.347.61 On Total Debt Incl Subord SSF Debt Pymts3.19 3.17 3.32 3.47 2.92 3.46 3.64 3.84 4.06 4.21 San Bruno Sewer Cash Flow Projections

58 of 72

BARTLE WELLS ASSOCIATES 39
San Bruno 2023 Water & Sewer Rate Study
The following chart graphically shows a 10-year breakdown of projected sewer enterprise revenues and expenses. The proposed rate increases are designed to put the City on a long-term path toward supporting balanced budgets while providing adequate funding for ongoing rehabilitation and replacement of aging sewer system infrastructure to support safe and reliable service. As shown on the chart, the projections assume the City draws down approximately $21 million of fund reserves to help fund projected capital improvements while rates are being phased in.

Figure 8 – Sewer Utility Projected Revenues & Expenses

59 of 72

BARTLE WELLS ASSOCIATES 40
San Bruno 2023 Water & Sewer Rate Study

4.6 Sewer Rate Projections
The cash flow projections indicate the need to raise sewer rates by 5.0% each year for the next 5 years in order to support the sewer utility’s projected operating and capital funding needs. These projected rate increases follow a period of no rate increases over the past 2 years as shown below. With the proposed rates, the average annual sewer rate increase since 2016 equates to approximately 4.3%.

Table 24 – Projected Sewer Rate Increases

Figure 9 – Historical & Projected Sewer Rate Increases

The 5% sewer rate increases represent the overall level of annual rate increases proposed. Actual impacts to customers’ monthly water bills may vary a little based on customer class and billed usage due to minor modifications to the rate structure designed to keep sewer rates aligned with the cost of providing service.

July 1 July 1 July 1 July 1 July 1 July 1 July 12021 2022 2023 2024 2025 2026 20275% 0% 0% 5% 5% 5% 5% 5%Projected Sewer Rate Increases

60 of 72

BARTLE WELLS ASSOCIATES 41
San Bruno 2023 Water & Sewer Rate Study

4.7 Sewer Use
The table below shows a history of sewer use by customer class per bi-monthly billing period.

Table 25 – Sewer Use by Class
Bi-Monthly Period Jul/Aug Sep/Oct Nov/Dec Jan/Feb Mar/Apr May/Jun Total % of Ttl2019/20 Sewer Use (hcf)RESIDENTIALBased on prior year winter water useSEWR1 151,990 151,670 153,270 151,514 151,980 151,424 911,848 77.7%SEWR1L 4,9285,5165,6405,8005,7085,84433,4362.8%Subtotal 156,918 157,186 158,910 157,314 157,688 157,268 945,284 80.6%COMMERCIAL/OTHERC-1 Light Comm 2,269 2,689 2,418 2,175 2,087 1,789 13,427 1.1%C-2 Medium Comm 18,253 20,759 17,189 14,164 11,496 9,905 91,766 7.8%C-3 Heavy Comm 13,785 14,098 13,481 12,580 8,024 5,976 67,944 5.8%C-4 Special Comm 16 16 15 14 15 14 90 0.0%Governmental 11,533 13,627 11,648 3,658 4,463 7,816 52,745 4.5%Industrial Light 2171712515472526102,0480.2%Subtotal 46,073 51,360 45,002 33,138 26,337 26,110 228,020 19.4%Total 202,991 208,546 203,912 190,452 184,025 183,378 1,173,304 100.0%2020/21 Sewer Use (hcf)RESIDENTIALBased on prior year winter water useSEWR1 157,130 156,214 155,940 156,076 156,598 156,450 938,408 80.0%SEWR1L 5,5966,1326,3306,4106,5386,61837,6243.2%Subtotal 162,726 162,346 162,270 162,486 163,136 163,068 976,032 83.2%COMMERCIAL/OTHERC-1 Light Comm 1,700 1,901 2,005 1,974 2,076 2,341 11,997 1.0%C-2 Medium Comm 12,596 11,722 11,881 10,306 13,431 14,497 74,433 6.3%C-3 Heavy Comm 8,761 8,693 9,051 7,388 8,893 10,244 53,030 4.5%C-4 Special Comm 25 21 16 18 20 19 119 0.0%Governmental 12,014 9,621 5,235 2,967 4,235 7,019 41,091 3.5%Industrial Light 3433333333464003212,0760.2%Subtotal 35,439 32,291 28,521 22,999 29,055 34,441 182,746 15.6%Total 198,165 194,637 190,791 185,485 192,191 197,509 1,158,778 98.8%2021/22 Sewer Use (hcf)RESIDENTIALBased on prior year winter water useSEWR1 158,022 158,924 158,792 158,632 158,212 158,032 950,614 81.0%SEWR1L 6,7105,6485,8385,7805,9365,96035,8723.1%Subtotal 164,732 164,572 164,630 164,412 164,148 163,992 986,486 84.1%COMMERCIAL/OTHERC-1 Light Comm 2,215 2,104 2,111 2,313 2,264 2,020 13,027 1.1%C-2 Medium Comm 15,623 15,249 11,798 12,466 11,638 12,761 79,535 6.8%C-3 Heavy Comm 10,967 11,961 10,464 10,554 10,894 11,101 65,941 5.6%C-4 Special Comm 18 18 13 16 17 18 100 0.0%Governmental 7,062 6,147 2,895 3,229 4,392 5,214 28,939 2.5%Industrial Light 3323593763543563932,1700.2%Subtotal 36,217 35,838 27,657 28,932 29,561 31,507 189,712 16.2%Total 200,949 200,410 192,287 193,344 193,709 195,499 1,176,198 100.2%Source: Based on detailed utility billing data files, may include some non-billed usage.

61 of 72

BARTLE WELLS ASSOCIATES 42
San Bruno 2023 Water & Sewer Rate Study

4.8 Sewer Rate Derivation
The following sections develop rates projected to become effective on July 1, 2027 at the start of fiscal year 2027/28, the fifth and final year of the proposed rate increases. Rates in intervening years are phased in from current levels to the proposed levels calculated for 2027/28.

4.9 Cost Recovery Allocations
The following table allocates costs for recovery from the City’s fixed and quantity charges. Based on the allocations, fixed monthly charges are designed to recover a little under 24%% of total rate revenues and water quantity charges will recover roughly 76% of total rate revenues. These allocation percentages are consistent with the City’s current rate structure.

Table 26 – Fixed & Variable Revenue Recovery

ProjectedEXPENSES 2027/28 Exps Fixed Variable Fixed Variable Operating & MaintenanceSalaries & Benefits$3,146,00030%70%$943,800$2,202,200Less Capitalized Project Staffing(500,000)30%70%(150,000)(350,000)Supplies & Services 1,576,000 30% 70% 472,800 1,103,200Wastewater Treatment SSF 4,814,000 0% 100% 0 4,814,000Internal Charges 3,420,000 30% 70% 1,026,000 2,394,000Vehicle & Equip Replacement 234,000 30% 70% 70,200 163,800______________ ____ ____________________ Subtotal 12,690,000 19% 81% 2,362,800 10,327,200Debt Service2013 Wastewater Bonds 545,000 30% 70% 163,500 381,5002017 Wastewater Bonds 1,441,000 30% 70% 432,300 1,008,700Share of WQCP Debt, Subordi nate797,000 30% 70% 239,100 557,900Share of New WQCP Debt, Projected800,000 30% 70% 240,000 560,000______________ ____ ____________________ Subtotal 3,583,000 30% 70% 1,074,900 2,508,100Other Non-OperatingExcluding Debt-Funded ProjectsCity Sewer System Capital Projects7,500,000 30% 70% 2,250,000 5,250,000City Share of WPCP Capital Projects2,500,000 30% 70% 750,000 1,750,000______________ ____ ____________________ Subtotal 10,000,000 30% 70% 3,000,000 7,000,000Total26,273,000 24.5% 75.5% 6,437,700 19,835,300Less Revenue Offsets(698,000) 50% 50% (349,000) (349,000)Net Revenue Recovery %25,575,000 23.8% 76.2% 6,088,700 19,486,300 Cost Allocation %Cost Allocation $

62 of 72

BARTLE WELLS ASSOCIATES 43
San Bruno 2023 Water & Sewer Rate Study

4.10 Sewer Accounts & Billing Equivalents
The following table shows the number of sewer accounts by customer class and meter size along with the associated number of fixed rate billing equivalents. Single family residential accounts billed a uniform fixed charge per home and are assigned a capacity ratio of 1.00. Commercial sewer accounts pay fixed charges based on meter size. The table calculated the number of fixed rate billing equivalents for commercial accounts based on standard American Water Works Association meter capacity ratios. For example, a 3-inch meter has roughly the same capacity as ten 3/4-inch meters and is correspondingly assigned 10 fixed rate billing equivalents.

Table 27 – Sewer Accounts & Billing Equivalents

Meter Meter Number Meter Fixed RateCode Size of Accts Capacity Ratio EquivalentsSingle Family ResidentialAll SFR 9621 1.00 9,621 All Other AccountsWT01 3/4" 620 1.00 620 WT02 1" 116 1.67 193 WT03 1-1/2" 54 3.33 180 WT04 2" 152 5.33 811 WT05 3" 5 10.00 50 WT06 4" & Larger 2 16.67 33 ______________Subtotal 949 1,887 Total 10,570 11,508 _______________Source: Estimated active accounts as of January 2023.

63 of 72

BARTLE WELLS ASSOCIATES 44
San Bruno 2023 Water & Sewer Rate Study

4.11 Fixed Monthly Service Charges
The following table derives the fixed charge per single family home or billing equivalent by dividing the targeted level of revenues allocated for fixed rate recovery by the total projected number fixed rate billing equivalents, resulting in a fixed monthly sewer charge of $41.66 per home or commercial meter equivalent.

Table 28 – Fixed Sewer Rate Derivation

Allocation to Fixed Rate RecoveryTotal Target Rate Revenues 2027/28 $24,378,000Fixed Rate Recovery % 23.8%Fixed Rate Recovery $ $5,803,727Sewer Fixed Rate EquivalentsCurrent Fixed Rate Equivalents 11,508 Plus Projected Growth Through 2027/28 100Total Sewer Fixed Rate Equivalents11,608 Charge per Fixed Rate Equivalent Annual Charge $499.96 Monthly Charge 41.66

64 of 72

BARTLE WELLS ASSOCIATES 45
San Bruno 2023 Water & Sewer Rate Study

4.12 Sewer Quantity Charge Derivation
The tables in this section derive sewer quantity charges for each customer class effective for fiscal year 2027/28. The following table allocates variable costs for recovery based on wastewater flow and strength.

Wastewater strength is measured by a) Biological Oxygen Demand (BOD) and b) Suspended Solids (SS).

Overall, 68.4% of variable rate costs are allocated for recovery based on the volume of wastewater flow and 31.6% of variable rate costs are allocated for recovery based on wastewater strength.

Table 29 – Variable Rate Recovery from Wastewater Flow & Strength

VariableEXPENSES Cost RecoveryFlowBODSSFlowBODSSOperating & MaintenanceSalaries & Benefits$2,202,20080%10.0%10.0%$1,761,760$220,220$220,220Less Capitalized Project Staffing(350,000) 80% 10.0% 10.0% (280,000) (35,000) (35,000)Supplies & Services 1,103,200 80% 10.0% 10.0% 882,560 110,320 110,320Wastewater Treatment SSF 4,814,000 50% 25.0% 25.0% 2,407,000 1,203,500 1,203,500Internal Charges 2,394,000 80% 10.0% 10.0% 1,915,200 239,400 239,400Vehicle & Equip Replacement 163,800 80% 10.0% 10.0% 131,040 16,380 16,380____________ ____ ____ ________________________ Subtotal 10,327,200 66.0% 17.0% 17.0% 6,817,560 1,754,820 1,754,820Debt Service2013 Wastewater Bonds 381,500 80% 10.0% 10.0% 305,200 38,150 38,1502017 Wastewater Bonds 1,008,700 80% 10.0% 10.0% 806,960 100,870 100,870Share of WQCP Debt, Subordina te557,90050%25.0%25.0%278,950139,475139,475Share of New WQCP Debt, Projected560,00050%25.0%25.0%280,000140,000140,000____________ ____ ____ ________________________ Subtotal 2,508,100 66.6% 16.7% 16.7% 1,671,110 418,495 418,495Other Non-OperatingExcluding Debt-Funded ProjectsCity Sewer System Capital Projects 5,250,000 80% 10.0% 10.0% 4,200,000 525,000 525,000City Share of WPCP Capital Projects 1,750,000 50% 25.0% 25.0% 875,000 437,500 437,500____________ ____ ____ ________________________ Subtotal 7,000,000 72.5% 13.8% 13.8% 5,075,000 962,500 962,500Total19,835,300 68.4% 15.8% 15.8% 13,563,670 3,135,815 3,135,815 Variable Cost Recovery %Variable Cost Recovery $

65 of 72

BARTLE WELLS ASSOCIATES 46
San Bruno 2023 Water & Sewer Rate Study
The table below shows an estimate of projected sewer flow and wastewater strength loadings by customer class. The table also shows the relative wastewater strength factor for each customer class relative to residential wastewater strength based on the cost recovery percentages for wastewater flow and strength shown on the prior table.

Table 30 – Sewer Flow & Loadings by Customer Class

The next table derives unit rates for wastewater flow and strength by dividing the costs allocated to flow, BOD and SS by each of these parameters total estimated wastewater loadings resulting unit rates for flow, BOD and SS that can be applied to the wastewater characteristics of each customer class.

Table 31 – Derivation of Unit Rates for Wastewater Flow & Strength

WastewaterFlow StrengthBasis (hcf) (MG) BOD SS BOD SS FactorRes Single Family ResWinter Use1642,000480.2200200801,054801,0541.00Res Multi-Family ResWinter Use1328,000245.4200200409,261409,2611.00C-1 Light Commercial Annual Use 13,000 9.7 150 150 12,166 12,166 0.93C-2 Medium Commercial Annual Use 78,000 58.3 200 200 97,324 97,324 1.00C-3 Heavy Commercial Annual Use 65,000 48.6 500 500 202,759 202,759 1.45C-4 Special Commercial Annual Use 100 0.1 800 800 499 499 1.90G Governmental Annual Use 26,000 19.4 200 200 32,441 32,441 1.00I-1 Light Industrial Annual Use 2,000 1.5 200 200 2,495 2,495 1.00Total 1,154,100 863.3 216 216 1,558,000 1,558,000WastewaterWastewaterStrength (mg/l)Loadings (lbs)EstimatedWastewater Flow Allocation to Variable Rate RecoveryTotal Target Rate Revenues 2027/28 $24,378,000Variable Charge Recovery % 76.2%Variable Charge Recovery $ $18,574,273Allocation to Flow, BOD, SSFlowBODSSCost Allocation % 68.38% 15.81% 15.81%Cost Allocation $ $12,701,000 $2,936,000 $2,936,000Total Annual Loadings 1,154,100 1,558,000 1,558,000Units hcf lbs lbsUnit Costs $11.01 $1.88 $1.88per hcf per lb per lb

66 of 72

BARTLE WELLS ASSOCIATES 47
San Bruno 2023 Water & Sewer Rate Study
The following table calculates sewer quantity charges for each customer class for July 1, 2027 based the unit rates derived in the prior table and the wastewater strength associated with each customer class. All classes pay the same amount for wastewater flow, however customer classes with higher-strength wastewater pay more for costs associated with wastewater strength.

Table 32 – Sewer Quantity Charges by Customer Class

4.13 Proposed Sewer Rates
The table on the following page shows a 5-year schedule of proposed sewer rates incorporating a) the overall level of required rate increases needed to fund the costs of providing service, b) the updated cost allocations that apportion costs to the various components of City’s sewer rate structure. Proposed sewer rates are scheduled to become effective July 1 at the beginning of each fiscal year. The rates shown for each year are projected to gradually increase by the same percentage each year from current rates to the rates derived for July 1, 2027.

Total Flow BOD SS Rate Customer Class BOD SS $11.01 $1.88 $1.88 per hcf Res Residential 200 200 $11.01 $2.35 $2.35 $15.71C-1 Light Commercial 150 150 11.01 1.76 1.76 14.53C-2 Medium Commercial 200 200 11.01 2.35 2.35 15.71C-3 Heavy Commercial 500 500 11.01 5.88 5.88 22.76C-4 Special Commercial 800 800 11.01 9.41 9.41 29.82G Governmental 200 200 11.01 2.35 2.35 15.71I-1 Light Industrial 200 200 11.01 2.35 2.35 15.71WastewaterUnit Rates ($ per hcf or lb)Strength (mg/l)

67 of 72

BARTLE WELLS ASSOCIATES 48
San Bruno 2023 Water & Sewer Rate Study
Table 33 – Proposed Sewer Rates

68 of 72

BARTLE WELLS ASSOCIATES 49
San Bruno 2023 Water & Sewer Rate Study

4.14 Sewer Rate Impacts
The following tables show the impacts of the proposed sewer rates on a range of single family residential and commercial customers.

Table 34 – Single Family Residential Sewer Rate Impacts

% of Bills Currentat or Sewer July 1 July 1 July 1 July 1 July 1Below Charges 2023 2024 2025 2026 2027Overall Sewer Rate Increase5.0% 5.0% 5.0% 5.0% 5.0%Single Family Residential, 3/4" Meter (Bi-Monthly Billing)Bi-Monthly UseLow 6 hcf25%Bi-Monthly Bill$138.76 $145.77 $153.14 $160.89 $169.02 $177.57(3 hcf / month)Monthly Equivalent69.38 72.89 76.57 80.44 84.51 88.78Monthly Increase3.51 3.68 3.87 4.07 4.27% Increase5.1% 5.1% 5.1% 5.1% 5.1%Typical 10 hcf50%Bi-Monthly Bill$188.24 $197.68 $207.59 $217.99 $228.92 $240.40(5 hcf / month)Monthly Equivalent94.12 98.84 103.79 109.00 114.46 120.20Monthly Increase4.72 4.95 5.20 5.46 5.74% Increase5.0% 5.0% 5.0% 5.0% 5.0%Mod-High 16 hcf80%Bi-Monthly Bill$262.46 $275.53 $289.25 $303.65 $318.77 $334.64(8 hcf / month)Monthly Equivalent131.23 137.76 144.62 151.82 159.39 167.32Monthly Increase6.53 6.86 7.20 7.56 7.94% Increase5.0% 5.0% 5.0% 5.0% 5.0%High 24 hcf90%Bi-Monthly Bill$361.42 $379.33 $398.13 $417.86 $438.57 $460.31(12 hcf / month)Monthly Equivalent180.71 189.67 199.06 208.93 219.29 230.15Monthly Increase8.96 9.40 9.87 10.35 10.87% Increase5.0% 5.0% 5.0% 5.0% 5.0% Projected Charges with Rates Effective

69 of 72

BARTLE WELLS ASSOCIATES 50
San Bruno 2023 Water & Sewer Rate Study
Table 35 – Commercial Sewer Rate Impacts

Monthly CurrentBillable Sewer July 1 July 1 July 1 July 1 July 1Use (hcf) Charges 2023 2024 2025 2026 2027Overall Sewer Rate Increase5.0% 5.0% 5.0% 5.0% 5.0%Commercial Low Strength C-13/4" Meter 10 hcfMonthly Bill$147.27 $154.47 $162.03 $169.95 $178.26 $186.98Monthly Increase7.20 7.55 7.92 8.31 8.72% Increase4.9% 4.9% 4.9% 4.9% 4.9%Commercial Medium Strength C-23/4" Meter 10 hcfMonthly Bill$155.97 $163.71 $171.84 $180.38 $189.34 $198.74Monthly Increase7.74 8.13 8.53 8.96 9.40% Increase5.0% 5.0% 5.0% 5.0% 5.0%1" Meter 25 hcfMonthly Bill$363.03 $380.98 $399.83 $419.60 $440.35 $462.12Monthly Increase17.95 18.84 19.77 20.76 21.77% Increase4.9% 4.9% 4.9% 4.9% 4.9%1-1/2" Meter50 hcfMonthly Bill$726.07 $761.97 $799.66 $839.20 $880.70 $924.26Monthly Increase35.90 37.69 39.54 41.50 43.56% Increase4.9% 4.9% 4.9% 4.9% 4.9%2" Meter 100 hcfMonthly Bill$1,409.11 $1,478.66 $1,551.65 $1,628.24 $1,708.62 $1,792.97Monthly Increase69.55 72.99 76.59 80.37 84.35% Increase4.9% 4.9% 4.9% 4.9% 4.9%4" Meter 200 hcfMonthly Bill$3,011.83 $3,161.09 $3,317.74 $3,482.17 $3,654.75 $3,835.89Monthly Increase149.26 156.65 164.43 172.59 181.13% Increase5.0% 5.0% 5.0% 5.0% 5.0%Commercial High Strength C-33/4" Meter 10 hcfMonthly Bill$208.37 $219.34 $230.88 $243.03 $255.82 $269.28Monthly Increase10.97 11.54 12.15 12.79 13.46% Increase5.3% 5.3% 5.3% 5.3% 5.3%1" Meter 25 hcfMonthly Bill$494.03 $520.04 $547.41 $576.22 $606.56 $638.48Monthly Increase26.01 27.38 28.81 30.33 31.92% Increase5.3% 5.3% 5.3% 5.3% 5.3%2" Meter 100 hcfMonthly Bill$1,933.11 $2,034.87 $2,141.98 $2,254.74 $2,373.43 $2,498.37Monthly Increase101.76 107.11 112.76 118.69 124.94% Increase5.3% 5.3% 5.3% 5.3% 5.3% Projected Charges with Rates Effective

70 of 72

Attachment 2

Summary of City Council Study Session on February 14, 2023 At the February 14, 2023 City Council meeting, staff and the City consultant presented the findings and preliminary water and sewer rate recommendations.

At the meeting, councilmembers raised the following questions and topics:
•Councilmember: Asked if the Rate Study could consider costs of creating a program to provide some money to assist with repairs of residents’ private upper and lower sewer laterals.

Staff Response: Staff indicated that it would look into the matter. After research through the City Attorney’s office, it was determined that any program which pays for private sewer lateral repairs must be funded from the general fund, and not from sewer utility funds. One customer’s service charges cannot pay for or subsidize services that benefit another customer.

This opinion comes from the California State Constitution, specifically from Proposition 218, Article XIIID, Section 6(b)(3), which reads: “The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.”
The City Council previously adopted an Ordinance at the April 8, 2014 City Council Meeting, regulating the inspection, repair, and replacement of private sewer laterals at the time of sale of a residential property. Since 2014, the property owners have been responsible for upper and lower sewer lateral inspections and repairs.

To assist property owners with lateral maintenance, the City previously partnered with the National League of Cities’ (NLC) service line warranty program, and initially administered by the insurance company Service Line Warranties of America (SLWA). The official partnership between SLWA and the City has ended. Residents can still utilize the National League of Cities service line warranty program or any other private program of their choosing. The program’s website is: www.slwofa.com, and they can also be reached by telephone at 1- 855-535-7141.
•Councilmember: Asked about the proposal to bill sewer service to customers through the County tax roll instead of from the City’s current bi-monthly billing.

Would moving to this process require a public vote?
Staff Response: The State’s Health and Safety code allows agencies to adjust the rates for water, sewer, and garbage through a Proposition 218 process.

These rates can be adjusted through a City Council vote. A public vote is not required. Stormwater fees still require a public vote. A Proposition 218 process still provides for a public majority protest process of more than 50% of the public.

71 of 72

Attachment 2 – Summary of City Council Study Session, February 14, 2023 February 28, 2023

Page 2 of 2 ends

1 4
4 2
•Councilmember: Expressed mixed opinions on moving sewer service billing to the County property tax roll. Recognizes that many neighboring agencies have sewer service on their property tax. The councilmember also asked staff about regional customer feedback on moving the billing to the property tax.

Staff Response: The advantages are that customers see a lower combined bi- monthly bill. There is a transition process for property owners. The total bill will remain unchanged in either billing scenario. The current bi-monthly bill is sent to the property resident. By transferring the sewer bill on to the property tax roll, the property owner will then receive the sewer bill instead of the property resident.

Some cities have received pushback from landlords, including Redwood City.

But agencies have the ability to transition the property tax billing process. For example, the City could allow for a 12 month or more transition date to allow landlords time to update their leasing agreements. The City of Millbrae is currently considering a similar year lead time before moving sewer billing to the property tax. There is some belief that moving billing to the property tax is more equitable, but there is no right or wrong approach. Each options has its advantages and disadvantages.
•Councilmember: Asked if staff know the percent of customers that are delinquent on their sewer bills.

Staff Response: From the City’s Finance Department billing information, approximately 6% of both water and sewer accounts are delinquent each month.

The fiscal impact is approximately $550,000 for water and $600,000 for sewer. •Councilmember: Regarding moving sewer service to the property tax, they wanted to know if there were any billing differences with agencies that have fixed versus variable user rates.

Staff Response: Sewer rates are based on the one-time winter use of the previous year and the annual bill is spread evenly throughout the year. This is the same approach used by agencies with fixed and variable rate plans. San Bruno’s current bi-monthly billing uses this approach. Some agencies consider moving billing to the tax rolls for residents only and leave commercial properties with bi-monthly billing because their usage can vary greatly from month to month. •Councilmember: Asked staff for confirmation if anyone approved for reduced rates will see those rates continue if the City moves billing to the property tax roll.

Staff Response: Yes, the reduced rates will transfer. This occurs in other cities as well. For example, the City of San Carlos bills customers though the property tax roll, and their discount rate program continues as it did before with direct billing.

72 of 72

San Bruno City CouncilFebruary 28, 2023

San Bruno City Council
February 28, 2023