CITY OF SAN LEANDRO
WASTEWATER
RATE STUDY
DRAFT REPORT
January 16, 2025
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com
January 16, 2025
City of San Leandro
835 East 14th Street
San Leandro, CA 94577
Attention: Hayes Morehouse, Water Pollution Control Manager Re: Draft Wastewater Rate Study
Bartle Wells Associates is pleased to submit to the City of San Leandro (City) the attached Draft Wastewater Rate Study. The study presents BWA’s analysis of the operating and non-operating expenses of the City’s wastewater funds and provides five-year cash flow projections and recommended rates. The primary purpose of this study was to analyze the City’s wastewater enterprise and make recommendations that would achieve its financial sustainability.
BWA finds that the rates and charges proposed in our report reflect the cost-of-service for each customer, follow generally accepted rate design criteria, and adhere to the substantive requirements of Proposition 218. BWA believes the proposed rates are fair and reasonable to the City’s customers.
We enjoyed working with the City on this rate study and appreciate the assistance of Hayes, Ramya and other City staff members throughout the project. Please contact us with any future questions about this study and the rate recommendations.
BARTLE WELLS ASSOCIATES
Contents
1 Executive Summary .......................................................................................1
1.1 Introduction…............................................................................................................................... 1
1.2 Rate Study Objectives .................................................................................................................. 1
1.3 Current and Proposed Wastewater Rates ................................................................................... 1 2 Background, Objectives, and Legal Requirements..........................................3
2.1 Rate Study Objectives .................................................................................................................. 3
2.2 Rate-Study Process....................................................................................................................... 4
2.3 Constitutional Requirements for Rates........................................................................................ 4
2.3.1 Article 13D, Section 6................................................................................................................... 4
2.4 Statute of Limitations................................................................................................................... 5 3 Wastewater Financial Plan.............................................................................6
3.1 Wastewater Financial Overview .................................................................................................. 6
3.2 Key Drivers of Rate Increases....................................................................................................... 6
3.3 Financial Plan Assumptions.......................................................................................................... 7
3.4 Cash Flow Projections.................................................................................................................. 8 4 Wastewater Cost of Service Analysis and Rate Derivation ...........................11
4.1 Customer Summary.................................................................................................................... 12
4.2 Commercial Customers Strength Classifications........................................................................ 12
4.3 Flows and Loadings.................................................................................................................... 13
4.4 Functional Allocation ................................................................................................................. 15
4.5 Flow and Strength Revenue Requirement by Class................................................................... 17
4.6 Rate Derivation .......................................................................................................................... 19
4.7 Proposed Wastewater Rates...................................................................................................... 20
4.8 Bill Impacts….. ............................................................................................................................ 21
4.9 Regional Wastewater Rate Survey............................................................................................. 22 Appendix A - Wastewater Rate Study Tables
LIST OF TABLES
Table 1 – Current and Proposed Wastewater Rates..................................................................................................2 Table 2 – Detailed Cash Flow Projections................................................................................................................ 10 Table 3 – Customer Summary ................................................................................................................................. 12 Table 4 – Strength Classifications............................................................................................................................ 13 Table 5 – Wastewater Flows ................................................................................................................................... 14 Table 6 – Wastewater Loadings .............................................................................................................................. 15 Table 7 – Functional Cost Allocation ....................................................................................................................... 16 Table 8 – Functional Cost Allocation Revenue Requirement.................................................................................. 17 Table 9 –Revenue Requirement by Class ................................................................................................................ 18 Table 10 – Rate Derivation ...................................................................................................................................... 19 Table 11 – Proposed Wastewater Rates ................................................................................................................. 20 Table 12 – Residential Bill Impacts.......................................................................................................................... 21
LIST OF FIGURES
Figure 1 – Cost-of-Service Rate Study Process...........................................................................................................4 Figure 2 – Sewer Capital Improvements ....................................................................................................................6 Figure 3 – Projected Cashflow Graph.........................................................................................................................9 Figure 4 – WW Cost of Service Analysis and Rate Derivation Process.................................................................... 11 Figure 5 – Residential Wastewater Rate Survey (Average Monthly Residential Water Use 6 CCF)........................ 22 BARTLE WELLS ASSOCIATES 1 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
1 EXECUTIVE SUMMARY
1.1 Introduction
The City retained Bartle Wells Associates to develop a long-term financial plan and 5-year rate recommendations for the wastewater enterprise.
The revenues from the City’s wastewater enterprise are primarily derived from charges for services. The City must establish rates and charges adequate to fund the cost of providing services, which include costs for operations and maintenance, as well as capital improvements needed to keep the City’s utility infrastructure in a safe and reliable operating condition.
The City has provided proactive financial stewardship by raising rates to keep revenues in line with the costs of providing wastewater service. Those rate increases have enabled the City to maintain its financial health. The prior rate increases strengthened the financial condition of the wastewater enterprise. However, current rates are not adequate to fund the necessary improvements.
1.2 Rate Study Objectives
Key goals and objectives of this study include developing rates that:
• Recover the costs of providing service, including operating, capital, and debt funding needs; • Are proportionate, fair, and equitable to all customers; • Are easy to understand and implement;
• Comply with the substantive requirements of the California Constitution, Article 13D, Section 6 (which was adopted by the voters as Proposition 218 in 1996) and the general mandate of Article 10, Section 2 that prohibits the wasteful use of water;
• Support the long-term operational and financial stability of the City.
BWA worked closely with City staff to incorporate information and input, evaluate alternatives, and develop recommendations. This report summarizes key findings and recommendations for wastewater rates over the next five years.
1.3 Current and Proposed Wastewater Rates
The following table shows the current and proposed wastewater rates.
BARTLE WELLS ASSOCIATES 2 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 1 – Current and Proposed Wastewater Rates
Current
Proposed Rates FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Classification A (Residential) - Fixed Monthly Rate per Unit Single Family $53.20 $57.12 $62.26 $67.86 $73.97 $80.63 Multi Family 37.40 42.19 45.99 50.13 54.64 59.56
Accessory Dwelling 37.40 42.19 45.99 50.13 54.64 59.56
Classification B (Commercial & Institutional) - Volumetric Rates per Hundred Cubic Feet (hcf) of Water Use Low Strength $4.91 $5.42 $5.91 $6.44 $7.02 $7.65
Medium Strength 5.51 6.17 6.73 7.34 8.00 8.72
High Strength 10.03-12.47 11.41 12.44 13.56 14.78 16.11 Classification C (Industrial & Other Large Users) - Volumetric Rates Volume, per million gallons of
water use $4,766 $5,305 $5,782 $6,302 $6,869 $7,487
BOD (Biochemical Oxygen
Demand), per thousand pounds 659 736 802 874 953 1,039
SS (Suspended Solids), per
thousand pounds 1,142 1,263 1,377 1,501 1,636 1,783
Classification B & C - Monthly Fixed Rate per Connection Class B & C Connections $9.65 $10.71 $11.67 $12.72 $13.86 $15.11 Proposed
BARTLE WELLS ASSOCIATES 3 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
2 BACKGROUND, OBJECTIVES, AND LEGAL REQUIREMENTS
The City of San Leandro owns and operates a sewage treatment facility on 12 acres of land known as the Water Pollution Control Plant (WPCP). The WPCP was originally constructed in 1938, and several expansions and modifications have occurred since then, most recently in 2015. The WPCP is designed to treat 7.6 MGD (average dry weather flow) from residential and commercial properties and discharges the effluent into the San Francisco Bay via the East Bay Discharge Authority (EBDA) discharge facility located immediately south of the City.
The City of San Leandro encompasses approximately 15.5 square miles, serving the residents of Alameda County.
It is bordered by unincorporated communities such as San Lorenzo, Ashland, and Cherryland, as well as portions of Castro Valley. San Leandro is situated along the eastern shore of the San Francisco Bay, about 13 miles south of Oakland and 30 miles north of San Jose.
Rates were last increased in 2024. Based on a survey of regional wastewater agencies, the City’s rates fall in the middle range within the region.
The City’s wastewater utility is a financially self-supporting enterprise. Revenues are derived primarily from rate.
As such, the City’s wastewater rates must be set at adequate levels to fund the costs of providing service and:
• Fund ongoing operating and maintenance expenses
• Address regulatory requirements
• Fund the capital improvement projects, related debt service and associated increased operating costs • Provide funding for system maintenance and upgrades
The prior wastewater rate increases strengthened the financial condition of the enterprise. However, current rates are not adequate to fund the necessary improvements and operating costs.
2.1 Rate Study Objectives
In 2024, the City retained BWA to develop a cost-of-service based rate study. The City has historically adopted rate increases in order to keep revenues in line with the escalating costs of providing service. Key goals and objectives of this study include developing rates that:
• Recover the costs of providing service, including operating, capital, and debt funding needs; • Are proportionate, fair and equitable to all customers; • Are easy to understand and implement;
• Comply with the substantive requirements of the California Constitution, Article 13D, Section 6 (which was adopted by the voters as Proposition 218 in 1996) and the general mandate of Article 10, Section 2 that prohibits the wasteful use of water;
• Support the long-term operational and financial stability of the City.
BARTLE WELLS ASSOCIATES 4 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
2.2 Rate-Study Process
The general process used for this cost-of-service rate study is summarized in the following diagram.
Figure 1 – Cost-of-Service Rate Study Process
Key elements of the study include:
1) Project Initiation and Data Collection – Review financial policies; collect financial and other relevant data; and review rate structures;
2) Demand Analysis – Analyze past customer demands and customer characteristics to forecast future demands; 3) Financial Plans – Develop financial projections to evaluate annual revenue requirements from rates and the overall level of rate increases needed to fund the costs of providing service and support long-term financial stability;
4) Cost Allocation – Group the City’s costs in terms of the function they serve as a basis to proportionally allocate the revenue requirement from rates;
5) Cost-of-Service Rate Design – Develop rates that proportionately recover costs; and 6) Prop 218 Process – Ensure compliance with the substantive and procedural requirements of Proposition 218.
2.3 Constitutional Requirements for Rates
The wastewater rates proposed in this report are designed to comply with two key articles of the California Constitution: Article 13D and Article 10, as explained below.
2.3.1 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 has Project
Initiation
and Data
Collection
Demand
Analysis
Financial
Plan
Cost
Allocation
Rate
Design
Prop. 218
Process
BARTLE WELLS ASSOCIATES 5 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
ruled, includes rates imposed for water delivered through pipes connected to property. Article 13D, Section 6 establishes both a) procedural requirements for imposing or increasing property-related charges, and b) substantive requirements for those charges. Article 13D requires voter approval for new or increased propertyrelated charges but exempts rates for water, wastewater, and garbage service from this voting requirement if rates are adopted by the appropriate procedure and meet the substantive requirements. This report recommends water rates designed to comply with the substantive requirements of Proposition 218.
The substantive requirements of Article 13D, section 6 requires property-related charges, such as the City’s water and wastewater rates, to meet the following conditions:
1) Revenues derived from the fee or charge shall not exceed the costs required to provide the propertyrelated 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 used by, or immediately available to 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.
2.4 Statute of Limitations
Pursuant to California Government Code 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fees. This statute of limitations applies to the wastewater rates proposed in this rate study and is included in the Proposition 218 Notice.
BARTLE WELLS ASSOCIATES 6 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
3 WASTEWATER FINANCIAL PLAN
3.1 Wastewater Financial Overview
BWA conducted an independent evaluation of wastewater enterprise finances and concluded the previous rate increases have put the wastewater enterprise in a sound financial position. However, due to aging infrastructure, the City will need to fund a significant number of capital projects. As such, rate increases are projected to be necessary to maintain the City’s financial standing.
The City relies almost entirely on revenues from wastewater rates to fund the costs of providing wastewater service. As such, wastewater rates must be set at levels adequate to fund the costs of operating and maintaining the wastewater system, fund necessary capital improvements to keep the wastewater system in good operating condition.
3.2 Key Drivers of Rate Increases
The City is facing several manageable financial challenges that will drive the need for rate increases in upcoming years. Key drivers of future rate increases are summarized below.
Capital Improvement Funding Needs
The City takes a proactive approach to maintaining its wastewater treatment plant and collection system, which requires ongoing repair and improvement projects. Accounting for construction cost inflation, the City anticipates funding approximately $55 million of capital improvement projects over the next 5 years. The City’s detailed capital improvement costs are shown in Appendix A. The following figure visually depicts the capital improvement costs over the next five years.
Figure 2 – Sewer Capital Improvements
$10.4
$15.9
$14.6
$8.2
$10.1
$6.1
$0.0
$3.0
$6.0
$9.0
$12.0
$15.0
$18.0
FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 City of San Leandro
Sewer Capital Improvements ($ millions)
Future $; includes annual
construction cost inflation.
BARTLE WELLS ASSOCIATES 7 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Ongoing Operating Cost Inflation
The City faces annual cost inflation due to annual increases in a range of expenses including sewage collection, sewage treatment, engineering, and administration, etc. On top of rate increases needed for capital improvements, annual rate increases are needed to keep revenues aligned with cost inflation and prevent rates from falling behind the cost of providing service. Wastewater cost inflation has historically been higher than the Consumer Price Index (CPI) for consumer goods and services. Historically inflation has typically remained consistently around 3%, but recently inflation has reached forty-year highs with the CPI and ENR CCI exceeding 7% in 2022. It is not expected that inflation will remain at such high levels in the future. For the purposes of this rate study, inflation is projected to be 8% in the first year due to anticipated rising costs, and 3.5% for the remaining four years, in line with the City’s budget inflationary projections.
Wastewater Reserve Funds
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. This rate study has set dedicated financial reserves at one year of the City’s annual sewer revenues. BWA developed a financial plan designed to maintain prudent reserve levels that are in-line with industry standards.
The City has indicated that discharge standards seem likely to increase, which is why the City has created a project to address the nutrients going into the bay. To see to this need, this rate study set aside $2 million per year from the reserve balance to go toward the City’s Nutrient Optimization project.
Debt Service
The City is currently making debt service payments on two different loans. The City received a State Revolving Fund (SRF) loan of $43 million in 2015 and a Bank of America loan of $7.6 million in 2021 to replace the aging collection system infrastructure. The debt service ends in FY 2034/35 for the SRF loan and in FY 2035/36 for the Bank of America loan.
The debt covenants on the outstanding wastewater debt require that the City generate net operating revenues of at least 1.30 times its total annual debt service payments. This is referred to as “debt service coverage.”
3.3 Financial Plan Assumptions
The financial projections incorporate the latest information available and several reasonable and slightly conservative assumptions for planning purposes. Key assumptions include:
Revenue Assumptions
• Wastewater rate revenues are based on estimated revenues for the current fiscal year. • Rates proposed will be effective on July 1, 2025, with rate adjustments planned to become effective on July 1 of each of the subsequent four years.
• BWA assumed 0.8% growth for residential users, in line with the Plan Bay Area 2050 growth estimate.
BARTLE WELLS ASSOCIATES 8 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
• Interest earnings are projected based on the annual beginning fund balance multiplied by the projected interest rate (2%). The interest rate projections are based on recent and anticipated interest rates.
Expense Assumptions
• Operating and maintenance costs are primarily based on the 2024/25 budget. • Operating costs are projected to escalate at 8% for the first year and 3.5% per year for the remaining four years to account for cost inflation.
• Debt service projections are based on outstanding debt schedules and projected issuances of new debt. • Capital improvement costs are based on the most recent engineering cost estimates. Capital costs include a
3.5% annual construction cost inflation factor for the next five years.
3.4 Cash Flow Projections
Cash-flow projections were developed based on assumptions and key drivers of future rate increases described above. The projections were used to determine the wastewater utility’s annual revenue requirements and project required wastewater rate revenue increases. The cash-flow projections incorporate the latest information available from the City’s budget, annual reports, capital spending projections, metered water demand data, as well as a number of reasonable assumptions developed with input from the City. The overall rate revenue increases shown for each of the following scenarios are designed to fund the City’s cost of providing service, maintain roughly balanced budgets, maintain healthy debt service coverage, and maintain prudent reserves. The proposed rate increase in the first year is lower than the remaining years to mitigate the impacts from rate structure adjustments. The projections indicate the need for increases for wastewater rate revenues for each of the next five fiscal years. Actual impacts to customers’ wastewater bills will vary based on strength category and water use, due to the outcome of the updated cost-of-service analysis and change in rate structure.
In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again. Rates adopted pursuant to Proposition 218 are essentially future rate caps.
The following figure visually depicts the cash-flow projections with the proposed rate increases for the next five years. Projected expenses are summarized into key categories. The figure also shows the projected fund reserves at the end of each fiscal year.
BARTLE WELLS ASSOCIATES 9 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Figure 3 – Projected Cashflow Graph
$0
$10
$20
$30
$40
$50
FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Sewer Enterprise Cashflow ($ millions)
O&M
Debt Service
Rate Funded Capital
Revenue
Ending Reserves
BARTLE WELLS ASSOCIATES 10 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Detailed, long-term, cash-flow projections for this scenario are shown in the following table.
Table 2 – Detailed Cash Flow Projections
Operating Fund FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Revenue Escalation
Rate Revenue Increase 8.0% 9.0% 9.0% 9.0% 9.0%
Revenues
Sewer Rate Revenue
Total Sewer Rate Revenue $18,640,428 $20,227,293 $22,152,822 $24,262,021 $26,572,445 $29,103,328 Non-Rate Revenue
Connection Fees 273,000 273,000 273,000 273,000 273,000 273,000 Interest Income (2%) 446,331 627,992 538,032 369,221 355,855 340,797 Sampling Service Charges 224,822 224,822 224,822 224,822 224,822 224,822 Pretreatment Lab/Permit Fees 389,000 396,780 404,716 412,810 421,066 429,487 Reimbursements 338,602 365,690 378,489 391,736 405,447 419,637 Other Revenues 59,554 7,990 7,990 7,990 7,990 7,990
Loan Disbursement 3,372,000 - - - - -
Grants - 6,700,000 - - - -
Total Revenues 23,743,735 28,823,566 23,979,870 25,941,599 28,260,624 30,799,062 Expenses
Operating Expenses
General Inflation 8.00% 3.50% 3.50% 3.50% 3.50%
Collections 1,619,907 1,749,499 1,810,732 1,874,108 1,939,701 2,007,591 Operations 10,486,961 11,325,918 11,722,325 12,132,607 12,557,248 12,996,752 Pretreatment 548,520 592,402 613,136 634,596 656,806 679,795 Lift Stations 132,300 142,884 147,885 153,061 158,418 163,963 Total Operating Expenses 12,787,688 13,810,703 14,294,078 14,794,371 15,312,174 15,848,100 Non-Operating Expenses
Debt Service 3,572,169 3,572,169 3,572,169 3,572,169 3,572,169 3,572,169 CIP 10,425,200 15,938,690 14,554,198 8,243,317 10,129,186 6,094,018 Total Non-Operating Expenses 13,997,369 19,510,859 18,126,368 11,815,487 13,701,355 9,666,188 Total Expenses 26,785,058 33,321,562 32,420,446 26,609,858 29,013,529 25,514,288 Net Revenues (3,041,322) (4,497,996) (8,440,576) (668,259) (752,904) 5,284,774 Reserves
Total Beginning Balance 34,440,923 31,399,601 26,901,605 18,461,029 17,792,770 17,039,866 Nutrient Optimization Balance - - 2,000,000 4,000,000 6,000,000 8,000,000 Other Cash and Investments 34,440,923 31,399,601 24,901,605 14,461,029 11,792,770 9,039,866 Total Ending Reserve Balance 31,399,601 26,901,605 18,461,029 17,792,770 17,039,866 22,324,640 Nutrient Optimization Balance - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 Other Cash and Investments 31,399,601 24,901,605 14,461,029 11,792,770 9,039,866 12,324,640 Reserve Target (1 Yr O&M) 12,787,688 13,810,703 14,294,078 14,794,371 15,312,174 15,848,100 Target Met? Yes Yes Yes Yes Yes Yes
Debt Coverage Ratio (Min. 1.30) 1.90 2.11 2.49 2.89 3.39 3.95 BARTLE WELLS ASSOCIATES 11 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4 WASTEWATER COST OF SERVICE ANALYSIS AND RATE DERIVATION BWA derived updated wastewater rates that account for both a) the overall rate increases identified in the financial projections, and b) the proposed rate structure modifications. The proposed rates are designed to equitably apportion and recover costsfrom the City’s customer base. The basic methodology used to develop new rates includes the following steps:
Figure 4 – WW Cost of Service Analysis and Rate Derivation Process Derive Unit Rates for Wastewater Capacity, Flow & Strength Divide costs allocated for recovery from flow and strength by total loadings for each functional component to derive unit rates for customer service, flow, BOD, and TSS.
Non-Residential Rate Derivation
Divide the revenue requirements for each
customer class by the projected units to
determine rates for each class.
Allocate Flow & Strength Costs to Customer Classes
Multiply unit rates by the wastewater flow and loadings of each customer class to determine the revenue
requirement of each class.
Estimate Wastewater Flow & Strength Loadings
The wastewater flow, BOD, and TSS concentrations for each class were multiplied by the billing units.
Allocate Cost to Functional Component
Each cost was allocated to function:
customer service, flow, BOD, and TSS.
BARTLE WELLS ASSOCIATES 12 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4.1 Customer Summary
The table below summarizes the City’s historical and current customer characteristics, including customer count for residential users, water consumption for commercial users, and strength for significant industrial users.
Table 3 – Customer Summary
4.2 Commercial Customers Strength Classifications
To align the City’s rates with industry norms, BWA recommended implementing a rate structure where commercial customers are charged by their strength classifications. Current commercial categories were recategorized under either low, medium, or high strength. Table 5 displays the reclassification of commercial customers.
Customer Classification Strength FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Residential Growth Rate 0.80% 0.80% 0.80% 0.80% 0.80%
Classification A (Residential) - unit
Single Family 14,189 14,197 14,191 14,305 14,419 14,534 14,651 14,768 Multi Family / Accessory Dwelling 4,267 4,370 4,398 4,433 4,469 4,504 4,540 4,577 Classification B (Commercial & Institutional) - hcf
Auto Services Medium 15,553 14,614 16,103 16,103 16,103 16,103 16,103 16,103 Bakery, Wholesale High 687 984 4,445 4,445 4,445 4,445 4,445 4,445 Laundries Medium 19,612 22,320 22,261 22,261 22,261 22,261 22,261 22,261 Markets/Foods High 22,857 21,995 21,119 21,119 21,119 21,119 21,119 21,119 Mixed Use Medium 3,816 4,229 4,535 4,535 4,535 4,535 4,535 4,535 Restaurants High 36,487 35,890 34,027 34,027 34,027 34,027 34,027 34,027 All Other Medium 306,908 306,536 313,170 313,170 313,170 313,170 313,170 313,170 Schools Low 19,896 16,094 23,104 23,104 23,104 23,104 23,104 23,104 Connection (annual #) 7,845 7,761 7,631 7,631 7,631 7,631 7,631 7,631 Classification C (Industrial & Other Large Users)
Each Connection (annual #) 108 108 108 108 108 108 108 108 Volume, per million gallons 202 202 202 202 202 202 202 202 BOD (Biochemical Oxygen
Demand), per thousand pounds 3,844,392 3,844,392 3,844,392 3,844,392 3,844,392 3,844,392 3,844,392 3,844,392 SS (Suspended Solids), per
thousand pounds 881,093 881,093 881,093 881,093 881,093 881,093 881,093 881,093 BARTLE WELLS ASSOCIATES 13 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 4 – Strength Classifications
4.3 Flows and Loadings
The following tables estimate the flows and loadings of each customer class based on the following information:
• Residential flows per unit are based on the average household size in the City of San Leandro and the median water use in California.
• Residential wastewater strength concentrations are based on estimates previously published by the State Water Resources Control Board (SWRCB). Residential wastewater strength concentrations have increased over the past decade as the volume of wastewater flow has decreased due to transition to low-flow toilets, water-efficient appliances, and other water conservation and efficiency measures. • Commercial wastewater flows are estimated based on projected water use and the estimated flow returning to the sewer system. Wastewater strength assignments for commercial customer classes are largely based on strength estimates previously published by the SWRCB. o Commercial customers were classified between low, medium, and high strength.
The resulting flow and strength projections for each class are shown in the following tables and provide the basis for allocating costs and deriving equitable wastewater rates for each customer class.
Strength Classifications into Low, Medium/Domestic, and High Strength Dischargers Low Strength Schools
Medium/Commercial/ Residential - All
Domestic Strength Auto Services
Laundries
Mixed Use
All Other
High Strength Bakery, Wholesale
Markets/Foods
Restaurants
Note: Wastewater users who have Fats, Oils, and Grease (FOG) waste will be put into the High Strength user category.
BARTLE WELLS ASSOCIATES 14 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 5 – Wastewater Flows
EDUs1 HCF MG5 GPD6
(hcf per EDU) (hcf) 3 (%)
Classification A (Residential)
Single Family 14,191 6.02 1,024,792 100% 1,024,792 767 2,100,268 Multi Family / ADU 4,398 5.33 281,117 100% 281,117 210 576,138 Total Residential 18,589 1,305,910 977 2,676,406
Classification B (Commercial & Institutional)
Low 23,104 80% 18,483 14 37,881
Medium 356,069 80% 284,855 213 583,799
High 59,591 80% 47,673 36 97,703
Classification C (Industrial & Other Large Users)
Industrial 269,629 100% 269,629 202 552,593
Total Non-Residential 620,640 464 1,271,976
Total 1,926,550 1,441 3,948,382
1 "EDU" stands for equivalent dwelling unit.
2 Residential flow is based on the City's census data.
3 "HCF" stands for hundred cubic feet.
4 Flow factor based on estimated flow returning to sewer. 5 "MG" stands for 1,000,000 gallons.
6 "GPD" stands for gallons per day.
Est. Mo Flow2
Projected Water
Use
Flow
Factor4
Projected Wastewater Flow
BARTLE WELLS ASSOCIATES 15 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 6 – Wastewater Loadings
4.4 Functional Allocation
The next step in the cost of service analysis is to assign wastewater system costs in each allocation category for revenue recovery via the functional cost components of customer service, flow, BOD (biochemical oxygen demand), and TSS (total suspended solids). While there is no single correct approach for cost allocation, BWA believes that costs should be allocated within a reasonable range that reflects both a) underlying cost causation, to the extent such causation can reasonably be determined or estimated, and b) the policy preferences of the agency in cases where a range of reasonable approaches can be justified. This process is intended to proportionately allocate costs to each functional component to determine the revenue requirement for each component. The allocations to each functional component were based on input from City staff.
The functional cost components are described as follows:
• Customer Service reflects costs associated with administration and serving the City’s customers. • Flow reflects costs associated with the volume of wastewater collected and treated. • BOD reflects costs associated with treating BOD.
• TSS reflects costs associated with treating TSS.
EDUs1 BOD1 TSS2 BOD TSS Annual Bills
(mg/l) (mg/l) (lbs) (lbs) (#)
Classification A (Residential)
Single Family 14,191 300 300 1,919,598 1,919,598 170,292 Multi Family / ADU 4,398 300 300 526,577 526,577 5,472
Total Residential 18,589 2,446,176 2,446,176 175,764
Classification B (Commercial & Institutional)
Low 225 225 25,966 25,966 240
Medium 300 300 533,579 533,579 13,440
High 825 825 245,571 245,571 1,582
Classification C (Industrial & Other Large Users)
Industrial 3,844,392 881,093 108
Total Non-Residential 4,649,508 1,686,210 15,370
Total 7,095,684 4,132,386 191,134
1 "BOD" stands for biochemical oxygen demand.
2 "TSS" stands for total suspended solids.
3 State Water Resource Control Board (SWRCB) Guidelines for Wastewater Agencies.
Strength (mg/l) 3 Loadings (lbs)
BARTLE WELLS ASSOCIATES 16 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Collections and Lift Station costs are driven by the volume of flow and are thus allocated 100% to the flow function.
Operations and Other Revenues are allocated 20% to customer service, 20% to flow, and the remainder to treatment to generally reflect the cost components contained in that budget category. Pretreatment costs are driven by the amount of discharge strength and is allocated evenly between BOD and TSS. Capital related items including debt service, cash-funded capital spending, use of reserves, connection fees, interest income, and loan disbursements are allocated 50% to flow, and 25% to each BOD and TSS to reflect a blend of both collection system and treatment costs.
The following tables show a breakdown of the wastewater utility’s expenses, how they are allocated between the flows and loadings, and the revenue requirement for flow, BOD and TSS.
Table 7 – Functional Cost Allocation
Budget Line Items FY 2024/25 Budget Customer Service Flow BOD TSS Operating Costs
Collections $1,619,907 100%
Operations 10,486,961 20% 20% 30% 30%
Pretreatment 548,520 50% 50%
Lift Stations 132,300 100%
Non-Operating Costs
Debt Service 3,572,169 50% 25% 25%
Cash-Funded Capital Spending 10,425,200 50% 25% 25%
Sources
Use of Reserves (3,041,322) 50% 25% 25%
Connection Fees (273,000) 50% 25% 25%
Interest Income (2%) (446,331) 50% 25% 25%
Other Revenues (1,011,977) 20% 20% 30% 30%
Loan Disbursement (3,372,000) 50% 25% 25%
Total: $18,640,428
BARTLE WELLS ASSOCIATES 17 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 8 – Functional Cost Allocation Revenue Requirement
4.5 Flow and Strength Revenue Requirement by Class
The table below calculates the unit rates per unit of flow, BOD, and TSS, as well as a unit customer cost. The wastewater rate revenue requirements from the prior table for each functional component are divided by the units related to each function. Revenue requirements for each customer class are then calculated by multiplying the unit rates for customer costs, flow, BOD and TSS from the volume of wastewater flow and loadings and annual bills associated with each class.
Budget Line Items FY 2024/25 Budget Customer Service Flow BOD TSS Operating Costs
Collections $1,619,907 $1,619,907
Operations 10,486,961 2,097,392 2,097,392 3,146,088 3,146,088 Pretreatment 548,520 274,260 274,260
Lift Stations 132,300 132,300
Non-Operating Costs
Debt Service 3,572,169 1,786,085 893,042 893,042
Cash-Funded Capital Spending 10,425,200 5,212,600 2,606,300 2,606,300 Sources
Use of Reserves (3,041,322) (1,520,661) (760,331) (760,331) Connection Fees (273,000) (136,500) (68,250) (68,250)
Interest Income (2%) (446,331) (223,165) (111,583) (111,583) Other Revenues (1,011,977) (202,395) (202,395) (303,593) (303,593) Loan Disbursement (3,372,000) (1,686,000) (843,000) (843,000) Total: $18,640,428 $1,894,997 $7,079,562 $4,832,934 $4,832,934 BARTLE WELLS ASSOCIATES 18 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
Table 9 –Revenue Requirement by Class
Allocation Units Flow BOD TSS Customer Cost
(hcf) (lbs) (lbs) (customers)
Demand Units 1,926,550 7,095,684 4,132,386 191,134
Revenue Requirement $7,079,562 $4,832,934 $4,832,934 $1,894,997 Unit Rate $3.67 $0.68 $1.17 $9.91
Class Flow BOD TSS
Customer
Accounts
Revenue
Requirement
(hcf) (lbs) (lbs) (#) ($)
Classification A (Residential)
Single Family 1,024,792 1,919,598 1,919,598 170,292 $9,006,677 Multi Family / Accessory Dwelling 281,117 526,577 526,577 5,472 2,061,787 Classification B (Commercial & Institutional)
Low Strength 18,483 25,966 25,966 115,975
Medium Strength 284,855 533,579 533,579 2,034,228
High Strength 47,673 245,571 245,571 629,648
Classification C (Industrial & Other Large Users)
Flow 269,629 990,816
BOD 3,844,392 2,618,450
TSS 881,093 1,030,462
All Non-Residential Connections 15,370 152,386
BARTLE WELLS ASSOCIATES 19 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4.6 Rate Derivation
Rates are derived by dividing the total amount of costs designated rate recovery per customer class by the total number of fixed billing units for such customer class.
Table 10 – Rate Derivation
Class
Revenue
Requirement Units Units
Reallocated
FY 2024/25 Rate
($) ($ per unit)
Classification A (Residential)
Single Family $9,006,677 14, 191 Customers $52.89
Multi Family / Accessory Dwelling 2,061,787 4,398 Customers $39.07 Classification B (Commercial & Institutional)
Low Strength 115,975 23,104 hcf $5.02
Medium Strength 2,034,228 356,069 hcf $5.71
High Strength 629,648 59,591 hcf $10.57
Classification C (Industrial & Other Large Users)
Flow (per million gallons) 990,816 269,629 hcf $4,912
BOD (per thousand pounds) 2,618,450 3,844,392 lbs $681
TSS (per thousand pounds) 1,030,462 881,093 lbs $1,170
Per Non-Residential Connection 152,386 $9.91
BARTLE WELLS ASSOCIATES 20 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4.7 Proposed Wastewater Rates
The following table shows a 5-year schedule of proposed wastewater rates. The first rate increase will be effective on July 1, 2025. The rates are designed to recover the City’s costs of providing wastewater service while achieving roughly balanced budgets in upcoming years.
Table 11 – Proposed Wastewater Rates
Current
Proposed Rates FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Classification A (Residential) - Fixed Monthly Rate per Unit Single Family $53.20 $57.12 $62.26 $67.86 $73.97 $80.63 Multi Family 37.40 42.19 45.99 50.13 54.64 59.56
Accessory Dwelling 37.40 42.19 45.99 50.13 54.64 59.56
Classification B (Commercial & Institutional) - Volumetric Rates per Hundred Cubic Feet (hcf) of Water Use Low Strength $4.91 $5.42 $5.91 $6.44 $7.02 $7.65
Medium Strength 5.51 6.17 6.73 7.34 8.00 8.72
High Strength 10.03-12.47 11.41 12.44 13.56 14.78 16.11 Classification C (Industrial & Other Large Users) - Volumetric Rates Volume, per million gallons of
water use $4,766 $5,305 $5,782 $6,302 $6,869 $7,487
BOD (Biochemical Oxygen
Demand), per thousand pounds 659 736 802 874 953 1,039
SS (Suspended Solids), per
thousand pounds 1,142 1,263 1,377 1,501 1,636 1,783
Classification B & C - Monthly Fixed Rate per Connection Class B & C Connections $9.65 $10.71 $11.67 $12.72 $13.86 $15.11 Proposed
BARTLE WELLS ASSOCIATES 21 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4.8 Bill Impacts
The following table presents the monthly bill impacts for residential customers under existing rates and the proposed rates.
Table 12 – Residential Bill Impacts
Current
FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Monthly Residential ($/month)
Single Family $53.20 $57.12 $62.26 $67.86 $73.97 $80.63 $ Increase 3.92 5.14 5.60 6.11 6.66
Multi Family / Accessory Dwelling Each Unit $37.40 $42.19 $45.99 $50.13 $54.64 $59.56 $ Increase 4.79 3.80 4.14 4.51 4.92
Proposed
BARTLE WELLS ASSOCIATES 22 | P a g e
City of San Leandro Draft 2024 Wastewater Rate Study
4.9 Regional Wastewater Rate Survey
The following charts compare the wastewater monthly bills for a typical single-family home to those of other regional agencies.
Figure 5 – Residential Wastewater Rate Survey (Average Monthly Residential Water Use 6 CCF) $35.26
$43.02 $44.19 $45.89 $46.59
$50.97 $53.20
$57.12
$65.50
$70.03 $71.65
$77.12
$80.58
$87.46
$92.53
$61.41
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Oro Loma
SD
Dublin San
Ramon SD
City of
Hayward
Castro
Valley SD
City of
Emeryville
Union SD City of San
Leandro
(Existing)
City of San
Leandro
(Proposed)
City of
Alameda
Stege SD City of
Livermore
City of
Berkeley
City of
Oakland
City of
Albany
City of
Piedmont
Agency Charges EBMUD Charge Average Charge
APPENDIX A
Wastewater Rate Study Tables
Appendix A
City of San Leandro
Revenues and Expenses
Cost Escalation FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 General Inflation 8.00% 3.50% 3.50% 3.50% 3.50%
Interest 2.00% 2.00% 2.00% 2.00% 2.00%
Permit Fees 2.00% 2.00% 2.00% 2.00% 2.00%
Non-Rate Revenues Cost Escalation FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Connection Fees $273,000 $273,000 $273,000 $273,000 $273,000 $273,000 Interest Income (2%) Interest 446,331 627,992 538,032 369,221 355,855 340,797 Pretreatment Lab/Permit Fees Permit Fees 389,000 396,780 404,716 412,810 421,066 429,487 Reimbursements General Inflation 338,602 365,690 378,489 391,736 405,447 419,637 Other Revenues 59,554 7,990 7,990 7,990 7,990 7,990
Loan Disbursement 3,372,000 - - - - -
Grants - 6,700,000 - - - -
Total Non-Rate Revenues 5,103,308 8,596,273 1,827,048 1,679,578 1,688,180 1,695,733 Operating Expenses Cost Escalation FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Collections General Inflation 1,619,907 1,749,499 1,810,732 1,874,108 1,939,701 2,007,591 Operations General Inflation 10,486,961 11,325,918 11,722,325 12,132,607 12,557,248 12,996,752 Pretreatment General Inflation 548,520 592,402 613,136 634,596 656,806 679,795 Lift Stations General Inflation 132,300 142,884 147,885 153,061 158,418 163,963 Total Operating Expenses 12,787,688 13,810,703 14,294,078 14,794,371 15,312,174 15,848,100 Appendix A
City of San Leandro
Capital Improvement Costs
Description FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Capital Costs (Current Dollars)
Nutrient Alternatives Analysis $100,000
Sidestream Alternatives Analysis 60,000
Nature Based Nutrient Treatment Wetland 500,000 4,520,000 4,500,000 Sidestream Implementation 2,500,000
Concrete Renewal 350,000 300,000 100,000 100,000 100,000 100,000 Influent Pipeline Inspections 40,000 30,000
Demo Old FFR 50,000 2,250,000
Blower Swing Unit 600,000
Aeration Basin Piping and Concrete Rehabilitation 350,000 Effluent Pump Station Rehabilitation Pre-design 75,000
Effluent Pump Station Rehabilitation Design 250,000
Effluent Pump Station Rehabilitation Construction 2,600,000 Hypo Tanks and Piping
Storage Building Rehabilitation 500,000
Roediger Rotating Drum Thickener Replacement 650,000
Polymer System Replacements 100,000 100,000
Belt Press Replacement 1,400,000
Belt Press Standby Unit 140,000
Solar Biosolids Dryer 2,000,000
Digester No. 1 and 2 Cleaning 150,000
Digester No. 1 Assessment 30,000
Digester No. 1 Cover Rehabilitation 340,000
Digester No. 1 and 2 Piping Replacement 800,000
Digester No. 2 Assessment 30,000
Digester No. 2 Cover Rehabilitation 340,000
Description FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Digester No. 3 Assessment 30,000
Energy Efficiency and Resiliency Project 3,372,000
Digester No. 4 Cover Rehabilitation 80,000
Boiler Predesign and Permit Coordination 30,000
Boiler Replacement 180,000
Boiler Room Valve Replacements 110,000
Beneficial Biogas Reuse 65,000
Valley Service Area Reconnection 50,000
Broadmore Area Sewer Pipe Rehabilitation - 1,300,000
Westbay Easement Pipe Rehabilitation 165,200
Davis St San Sewer Manhole & Pipe Rehab 2,500,000
SS Replacement 200,000 890,000 2,024,800 2,190,000 2,190,000 2,190,000 Bermuda and Neptune Drainage Area Flow Modeling 60,000
Wet Weather Flow Monitoring 60,000 60,000
Cathodic Protection 50,000
Merced SS Lift Station 1,117,000
Packaged Lift Station Feasibility Review 15,000
General Renewal and Replacement 420,000 435,000 470,000 510,000 470,000 450,000 Plant Painting 150,000 150,000
Electrical Maintenance Building Rehabilitation 90,000
Sea Rise Adaptation Study 75,000
CIP Program Management 200,000 200,000 200,000 200,000 200,000 200,000 Budgeted Contingency (10%) 1,053,200 1,502,700 1,331,500 765,000 717,000 521,000 Plant Electrical Breaker Maintenance and Replacements 75,000 75,000 75,000 75,000 75,000 75,000 SCADA and Plant Network 50,000 50,000 50,000 50,000 50,000 50,000 Roof Maintentance/Reroof 35,000 20,000 80,000 20,000 20,000 VFD Replacements - Plant 60,000 60,000 60,000 60,000 60,000 60,000 Instrumentation Replacements 30,000 30,000 30,000 30,000 30,000 30,000 Plant Paving Maintenance 30,000 30,000 30,000 30,000 30,000 30,000 Gate and Valve Replacement 50,000 50,000 50,000 50,000 50,000 50,000 Description FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 Budgeted Projected Projected Projected Projected Projected Solar Drying Bed Maintenance 20,000 20,000 20,000 20,000 20,000 20,000 Plant Security 25,000 25,000 25,000 25,000 25,000 25,000 Treatment Wetland Maintenance 30,000 30,000 30,000 30,000 FFR Ongoing Pump Renewal 40,000 40,000 40,000
Hypo Feed Pump - Ongoing Repair/Replacements 20,000 20,000 20,000 Chlorine Analyzers Maintenance 20,000 20,000 20,000 20,000 20,000 20,000 Influent Pump Rebuild 40,000 40,000 40,000
Plant Renewal and Replacement 420,000 435,000 470,000 510,000 470,000 450,000 Total CIP (Current Dollars) 10,425,200 15,399,700 13,586,500 7,435,000 8,827,000 5,131,000 Capital Costs (Inflated Dollars)
Projected Annual Inflation Rate 3.50% 3.50% 3.50% 3.50% 3.50% Total CIP (Inflated Dollars) 10,425,200 15,938,690 14,554,198 8,243,317 10,129,186 6,094,018