Staff Presentation
Water and Sewer Rates
Regular Meeting of City Council
October 17, 2023, 5:30 p.m.
Agenda
Staff Presentation
-Division Overview
-Rate Setting Process
-Proposed Rates
Public Hearing Council Action
Division Overview –
Water Resources
• ≈19,913 Customers
• Personnel
• 36 operations field staff
• Spvrs, Operators, MWs
• 12 admin/technical staff
• Eng, IT, Reg Comp
• 1 water resources manager
Division Overview – Water Resources
• Water Production
• Sources: Groundwater, State
Water Project
• 12 MGD average production
(Peak 20 MGD)
• Water System Components
• Blending & Disinfection Facility
• Water wells
• State Water Project infrastructure
• Storage reservoirs
• Water Distribution
• 330+ miles of pipe
• 23,220+ water meters
• 3,600+ fire hydrants
• Sewer Collection
• 250+ miles of pipe
• 4,245+ manholes
• 1 lift station
• Wastewater Treatment
• Average flow 7.5 MGD
• Permitted Capacity 8 MGD
Rate Setting Process
PROPOSITION 218
Council Action
Majority Protest
Provision
Notice
Requirements
Rate Design
Cost of Service
Revenue
Requirement
COST-BASED RATES
Uses prudent financial
planning criteria
Reviews a specific
time period
Analyzed on a
“stand-alone basis”
Utilizes “cash basis”
methodology
Revenue Requirements
PROJECTS
EXPENSES
Revenue
Requirement
Summary -
Water
• Rate (revenue) adjustments necessary
• Reflects need to prudently fund annual O&M expenses
• Water supply and reliability
• Infrastructure costs
• Adequately fund annual infrastructure renewal and
replacement - SWP
• Meet ending reserve targets
• Maintain strong reserve levels
• Meet operating cashflow needs and fund capital
improvements
• Recruiting and retaining trained, certified staff
• Technology for improved operations, meet user
expectations
• Revenue impacts due to water conservation, declining
per capita usage
Revenue
Requirements
Summary -
Wastewater
• Rate (revenue) adjustments necessary
• Reflects need to prudently fund annual O&M
expenses
• Adequately fund annual infrastructure renewal
and replacement
• Wastewater treatment system upgrade
requirements
• Regulatory requirements and improvements
• Meet ending reserve targets
• Maintain strong reserve levels to mitigate risk
related to fund capital improvements, long-
term debt issuance, etc.
• Debt service coverage ratio 1.20%
• Recruiting and retaining trained, certified staff
• Technology for improved operations, meet user
expectations
Prop 218
Requirements
• For property-related rates and fees
• Requires a cost-basis for establishing rates:
Reasonable
Proportional
Cost-based
• Requires public notification and protest
process
Cost of Service Study
What is it
Analysis to
proportionally
distribute the
revenue
requirement to the
customer classes of
service of each
utility
Why we do it
Generally accepted
as “fair and
equitable”
Avoids subsidies
Revenues reflect
costs
Meets the
proportionality
requirements of
Proposition 218
Objectives
Determine if
subsidies exist
Develop average
unit costs
Cost of Service Study Results –
Water
• Cost differences exist for the water cost of service
• Need to reflect recent legal decisions
• Calculation of rates - fixed charge and variable tiered rate
• Proposed rates based on unit costs as developed in
the cost-of-service analysis
• Meets the requirement of Proposition 218
Rate Design Basis - Water
Moving from three customer
classes to a single class of service
Reflects recent customer usage data (Mobile
Home)
Reflects changes in operations to serve
specific customers (Well Water)
Fixed charge by meter size
All customer charged the same meter rate by
meter size
Based on cost-of-service unit costs
Variable charge varies by
consumption
All customers charged same for tiered water
use
Based on cost-of-service consumption costs
Proposed Rates - Water
Cost of Service Study Results -
Wastewater
• Cost differences exist for the wastewater
cost of service
• Need to reflect recent legal decisions
• Calculation of rates - fixed charge and variable
rate
• Proposed rates based on unit costs as
developed in the cost-of-service analysis
• Meets the requirement of Proposition 218
Rate Design Basis - Wastewater
Maintained customer classes
Single Family Residential, Motel,
Hotel, Rest Home, & Commercial;
and Heavy User
Combined non-single family
residential customer classes
Apartments (2 or <), Apartments (3+),
& Mobile Home = Multi-Family
Reflect recent customer usage
data
Proposed Rates – Wastewater (Sewer)
Proposed Rates – Wastewater (Sewer)
Regional Comparison –
Water/Sewer (Combined)
2022
2026
Summary and Next Steps
2019-2023: Cost of Service Study conducted
August 2023: Prop 218 Notices mailed
September 27, 2023: Public Workshop held
October 17, 2023: Public Hearing, Council Action
Public Hearing Procedure
1. Provide number of written protests
2. Requirements for majority protest (>9,958)
3. Open Public Hearing (opportunity to comment)
4. Final call for protests
5. Close comment period
6. Determine whether majority protest exists
1. Provide # of final valid written protests
2. Re-state requirements for majority protest
7. If no majority protest, City Council MAY adopt
proposed rates
Staff Recommendation
Receive a Staff Presentation regarding proposed rates; Conduct a Public Hearing;
Determine whether a majority protest exists;
Introduce an Ordinance for a first reading continue for a second reading and adoption at the next regular
meeting of the City Council, approving water and
sewer rates effective each January 1 from 2024
through 2027.