City of San
Clemente
Wastewater Rate Study – Results
Feb 28, 2023
ATTACHMENT 1
2 Agenda
• Introduction and background• Financial plan• Wastewater Rates• Customer Bill impacts• Next steps 3 Background
4 What is a Rate Study?
A financial planning process to set rates that considers:
Fairness
& Equity
Community
Values
Promotes
Utility Financial
Viability
Cover Ops
and
Maintenance
Cover
Infrastructure
Investment
Legally
Defensible
Why would the City do a wastewater rate study?
• Rates must keep up with costs to operate the City’s wastewater system
• The City’s wastewater utility (Enterprise Fund) is not like other government services (Police, Fire, Parks) that are funded by tax dollars from the General Fund • The wastewater enterprise is funded by customer rate revenue › It’s a non-profit business
• By law (Proposition 218), rates must be based on the cost to serve water 5 Why are we proposing wastewater rate
increases?
6 • Last Wastewater study completed in 2013, last rate increase implemented in 2016
• Inflation since 2016 = 24.7% or 3.2% per year1• Wastewater flows decreased by 24% from 2011 to 2016 (before SMWD flows) › City has a volumetric rate component which needs to be adjusted to reflect the lower flows
• City’s full CIP is $21.9M from FY 2023 to FY 2027 but we propose rate adjustment to only fund $15.8M
• FY 2018 O&M Budget = $7.5M, FY 2023 O&M Budget = $8.2M (1.7% per year)• City Wastewater reserves have decreased drastically and now stand at $5M (beginning FY 2023), 2022 LTFP Fiscal Policy recommendation was $15 million 1www.in2013dollars.com
Historic Wastewater Rate Adjustments
9.00%8.00%7.00%6.00%5.00%4.00%3.00%2.00%1.00%0.00%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Percent Change
Year
7 No rate changes in last 6 years
8 Financial Plan
Financial Plan
• Projects revenue and expenses to assess if revenue is sufficient to fund operations (expenses)
• If not, we increase revenue to fund anticipated wastewater collection and treatment costs:
› O&M – chemicals, labor, parts, supplies› Capital – large projects › Reserves – O&M and capital reserves 9 City Wastewater Assets
• City’s wastewater collection system is comprised of 180 miles of pipelines and 12 wastewater pump stations to convey wastewater within the City’s service area • The City owns and operates a 7 million gallon per day wastewater treatment plant to treat wastewater prior to either being further treated for reuse as recycled water or for disposal to the Pacific Ocean through the City’s Land Outfall and regional Ocean Outfall 10 Wastewater revenue fund O&M Expenses
Expense Item FY 2023 FY 2024 FY 2025 FY 2026 FY 2027Administration $1,560,470 $1,651,378 $1,726,334 $1,776,335 $1,827,890Wastewater Collection $2,364,463 $2,481,822 $2,585,569 $2,667,428 $2,752,100Wastewater Treatment $4,263,395 $4,477,586 $4,658,951 $4,789,684 $4,924,629Subtotal - Operating Expenditures $8,188,328 $8,610,786 $8,970,854 $9,233,447 $9,504,619Percent Difference 5.2% 4.2% 2.9% 2.9% 11 Wastewater revenue funds your reserves
12 Wastewater reserve targets:
› Operating reserve = 12% of operating expenses ($1M)
– An operating reserve of 60 days (16%) is more common ($1.3M) › Capital reserve = 2% of asset value
Projected reserves without revenue
increases
13 Proposed revenue adjustments
Option 1 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
14 Jan Jan Jan Jan
Revenue adjustment 7.0% 7.0% 7.0% 7.0% 6.0%Option 2 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Jan Jan Jan Jan
Revenue adjustment 9.5% 6.0% 5.0% 5.0% 4.5%
Projected reserve balances with revenue
adjustments (Option 1 and 2 produce similar reserve balances) 15 Current & Proposed
16 Rates
Wastewater Customer Composition
17 Single-Family
81%
Multi-Family
13%
Commercial
6%
Customer Type
1" meter
96%
1.5" meter
1%
2" meter
3%
3" - 6"
meter
0%
Meter Size
Current Rates
18 Meter Size Rateup to 1" $23.821.5" $78.602" $126.623" $262.024" $404.926" $793.18 Monthly Service Charges
Fixed Volumetric
Strength is measured by biochemical oxygen demand and total suspended solids. Higher strength wastewater is more costly to treat than low strength wastewater.
Customer Class RateResidentialSingle-Family Residential $1.44Multi-Family Residential $1.44CommercialLow Strength $1.97Medium Strength $2.58Medium-High Strength $4.57High Strength $6.38Mixed Use $2.61 1hcf = Hundred cubic feet = 748 gallons
Commodity Rates ($/hcf1)
Proposed Changes to Rates and Assumed
Sewer Flow
1. Changing the ratios used to calculate
the Monthly Service Charges a. City collects a large portion of its revenue (about 57%) through the fixed monthly service charge b. Adjust service charges so that they
are proportional to AWWA hydraulic capacity factors
c. Explains why larger meter (mostly
MFR and commercial) bills go down, others go up
19 Meter Size Current Ratio
AWWA Hydraulic
Capacity Ratio
up to 1" 1.00 1.001.5" 3.30 2.002" 5.32 3.203" 11.00 7.004" 17.00 12.606" 33.30 26.00 Proposed
Charge - Current
Ratio
Proposed Charge -
AWWA
up to 1" $23.84 $25.571.5" $75.31 $49.68
2" $120.42 $78.623" $247.62 $170.234" $381.87 $305.256" $746.63 $628.32 Proposed Changes to Rates and Assumed
Sewer Flow (cont’d)
1. Change the estimated sewer flow from each customer class a. Current wastewater rates are based on historic estimated sewer flows – but flows have decreased
b. Wastewater flows are not metered; one way to estimate yearly flow is to annualize water flows during winter months; assumes most of that flow goes into the sewer system; can calculate a return to sewer factor (RTS) c. RTS factors are multiplied by water use to estimate sewer use d. We truth checked our estimated sewer flows by comparing them to actual wastewater treatment plant flow
20 Proposed Change to Estimated Billed
Flows
• Proposed billed flows are estimated to match the actual plant flow• Calculated using the return to sewer factor x flow show 21 Customer Class Current Billed Flow Proposed Billed Flow = RTS % X flow = RTS % X flow
Single Family Residential 90% X (Oct through Mar flow, annualized) 75% X (lowest two month flows)Multi-Family Residential 90% of current month 85% X current monthLow Strength 90% X current month 80% X current monthMedium Strength 90% X current month 85% X current monthMedium-High Strength 90% X current month 85% X current monthHigh Strength 90% X current month 85% X current monthMixed Use 90% X current month 85% X current month Proposed Rates
Meter Size Option 1 Option 2up to 1" $25.57 $26.151.5" $49.68 $50.782" $78.62 $80.353" $170.23 $173.974" $305.25 $311.936" $628.32 $642.05Customer Class Option 1 Option 2ResidentialSingle Family Residential $2.97 $3.05Multi-Family Residential $2.97 $3.04CommercialLow Strength $1.25 $1.28Medium Strength $2.67 $2.73Medium-High Strength $4.17 $4.27High Strength $7.00 $7.17Mixed Use $2.50 $2.56 FY 2023 Proposed Monthly
Service Charges
FY 2023 Proposed Commodity Rates
($/hcf)
22 Average Single Family Residential (SFR)
Bill Impact
• 1” meters are 99.8% of SFR meters• Single family bill impact will vary with use• Average current billed sewer use = (90% x annualized Oct thru Mar flow) § 9 hcf
• Revised billed sewer use
§ 5 hcf (75% of lowest two months)
Proposed bill is comprised of meter charge and volumetric charge 23 Option Meter Size Current Bill Proposed Bill Dollar Difference 1 1" $36.78 $40.44 $3.662 1" $36.78 $41.38 $4.60
Average Multi-family Residential Bill
Impacts for a duplex (1”) and 12 apartment complex (2”) • 1” MFR meters are 92% of MFR customers; average sewer use = 8 hcf, average of 2 apartments for a 1” meter
• 2” MFR meters are 4% of MFR customers; average sewer use = 48 hcf, average of 12 apartments for a 2” meter
24 Option Meter Size Current Bill Proposed Bill
Dollar
Difference Per Apartment
1 1" $35.90 $45.58 $9.68 $4.842 1" $35.90 $46.65 $10.75 $5.381 2" $199.37 $199.14 ($0.24) ($0.02)2 2" $199.37 $203.83 $4.46 $0.37 Average Bill Impacts By Strength & Meter Size
• Assumes average
water/sewer use for each class/meter size
• 1” and 2” commercial
customers are 87% of all commercial customers
• Commercial customer bills
are going down because the fixed charge is now proportional to revised AWWA hydraulic capacity factors 25 Customer Class Current Bill Proposed Bill
Dollar
Difference
Meter Size
1" Low $37.74 $33.42 ($4.32)1" Medium $67.74 $68.43 $0.691" Med-High $93.28 $85.36 ($7.92)1" High $186.13 $193.67 $7.541" Mixed Use $41.01 $41.12 $0.11 Customer Class Current Bill Proposed Bill
Dollar
Difference
Meter Size
2" Low $179.87 $108.63 ($71.23)2" Medium $248.64 $197.68 ($50.96)2" Med-High $406.08 $319.16 ($86.92)2" High $588.46 $556.90 ($31.56)2" Mixed Use $158.92 $107.82 ($51.10) Option 1Option 2
Option 1: Five -Year Rates
26 Meter Size - All Customer Classes FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 1-Jan-24 1-Jan-25 1-Jan-26 1-Jan-27
up to 1" $25.57 $27.36 $29.28 $31.33 $33.21
1.5" $49.68 $53.16 $56.88 $60.86 $64.52
2" $78.62 $84.12 $90.01 $96.31 $102.093" $170.23 $182.15 $194.90 $208.54 $221.054" $305.25 $326.61 $349.48 $373.94 $396.386" $628.32 $672.30 $719.36 $769.72 $815.90 Volumetric Rate($/ hcf) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 1-Jan-24 1-Jan-25 1-Jan-26 1-Jan-27
Residential
Single Family Residential $2.97 $3.18 $3.40 $3.64 $3.86Multi-Family Residential $2.97 $3.18 $3.40 $3.64 $3.86 Non-Residential
Low Strength (Includes Schools) $1.25 $1.34 $1.43 $1.53 $1.62Medium Strength $2.67 $2.85 $3.05 $3.27 $3.46Medium-High Strength $4.17 $4.46 $4.77 $5.10 $5.41High Strength $7.00 $7.49 $8.01 $8.57 $9.08Mixed Use (Comm & Residential) $2.50 $2.67 $2.86 $3.06 $3.25 Option 2: Five -Year Rates
27 Meter Size - All Customer Classes FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 1-Jan-24 1-Jan-25 1-Jan-26 1-Jan-27
up to 1" $26.15 $27.72 $29.10 $30.56 $31.93
1.5" $50.78 $53.83 $56.52 $59.35 $62.02
2" $80.35 $85.17 $89.43 $93.90 $98.123" $173.97 $184.40 $193.62 $203.31 $212.454" $311.93 $330.64 $347.18 $364.54 $380.946" $642.05 $680.58 $714.61 $750.34 $784.10 Volumetric Rate($/ hcf) FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 1-Jan-24 1-Jan-25 1-Jan-26 1-Jan-27
Residential
Single Family Residential $3.05 $3.23 $3.39 $3.56 $3.72Multi-Family Residential $3.04 $3.23 $3.39 $3.56 $3.72 Non-Residential
Low Strength (Includes Schools) $1.28 $1.36 $1.42 $1.50 $1.56Medium Strength $2.73 $2.90 $3.04 $3.19 $3.34Medium-High Strength $4.27 $4.52 $4.75 $4.99 $5.21High Strength $7.17 $7.60 $7.98 $8.38 $8.75Mixed Use (Comm & Residential) $2.56 $2.71 $2.85 $2.99 $3.13 Neighboring Sewer Bill
Based on Single Family average = 7 units of Winter Season Water Use Rank Agency Service Charges
(Monthly Fixed)
Commodity Charge
(Monthly Variable)
Average Monthly Wastewater Bill
1 Irvine Ranch* n/a $25.50 varies on average of lowest
three months Water Use
$25.50
2 Moulton Niguel* $20.10 $5.36 per capita $36.16 3 Trabuco Canyon* $39.56 n/a $39.56 4-1 San Clemente
(Proposed Option 1)
$25.57 $2.97 per 75% of lowest two-month
water use
$40.44
4-2 San Clemente
(Proposed Option 2)
$26.15 $3.05 per 75% of lowest two-month
water use
$41.38
5 El Toro* $41.76 n/a $41.76 6 Santa Margarita* $32.21 $1.12 per unit of current period Water Use (Max 9 units)
$42.29
7 Santa Margarita
(San Juan Serv Area)
$25.56 $2.52 per unit of current period
water use
$48.24
8 Oceanside $26.84 $34.63 varies on Average Winter
Quarter Water Use
$61.47
9 Laguna Beach $71.57 n/a $71.57
10 South Coast $74.94 n/a $74.94 28 * Water district receives property tax Next Steps
• Approve the rate structure and authorize the completion of the Cost-of Service Study
• Council directs staff to proceed with public hearing notice• Public hearing planned for JuO\th 29 30
End of
Presentation