Item 7A. Five-Year
Water and Wastewater
Rate Study
3/25/2025
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Five-Year Water and Wastewater Rate Study
Santa Monica
Water &
Wastewater
Services
Investing in a
Sustainable
and Climate
Resilient
Community
Water and
Wastewater
Rate Study
Council
Input
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Providing Safe, Sustainable Water Supply to the Community 93,000+ Residents
2,700+ Commercial Customers
Drinking Water and
Fire Protection
Groundwater (local)
Surface Water (MWD)
Sewer Collection and
Recycled Water
9 Million Gallons
High Quality Drinking Water Daily
14 Million Gallons
Wastewater Captured and Delivered for Treatment
Up to 1.5 Million Gallons
Recycled Water Per Day
4 Water Storage Reservoirs
Totaling 40 Million Gallons
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Factors Impacting Water and Wastewater Funds
Covid-19 Pandemic
• Decline in Water Use from Commercial
Sector and Multi-Family Residential
• Transfer of Unrestricted Settlement
Funds to General Fund = $40 million
Climate Instability
• Severe Drought (2021-2023),
Followed by Extreme Wet Winter
• Now Shifting to Dry Winter
(2024/2025) and Likely Drought
Conditions
Market Volatility
• Increasing general inflation (4-9%) and
water industry inflation (5-16%) rates
• Driving up material, construction, and
treatment costs
Decreasing Revenue to
Cover Fixed Costs
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Market Volatility
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2017 2018 2019 2020 2021 2022 2023 2024
CPI (CA)
CCCI
HWI
Avg CPI = 1.9%
Avg CCCI = 2.8%
Avg HWI = 4.2%
Avg CPI = 5.0%
Avg CCCI = 8.6%
Avg HWI = 10.4%
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Declining Revenue Impacts Operations
24% 23% 22% 13% 10% 8%
Capital
Improvement
Projects
Labor Operations Local Water
Production
Environmental
Programs
Imported
Water
Approximately
70% of Operation
Costs are Fixed
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Fund Revenue Forecast vs. Actuals
• Net Revenue Shortfall of $26.8M in the
Past Five Years (FY20/21 – FY24/25)
• Revenue Shortfall was Offset
Through Grants ($10M) and Water
Revenue Bond ($78M) to Fund Water
Self-Sufficiency Projects
• Deferred ~$15M (50% of the
Budget Over 5 years) in Water Main
Replacement Projects
$20
$25
$30
$35
$40
$45
$50
$55
$60
FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Revenue (in $ Millions)
Revenue Forecast Actuals
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Wastewater Fund Revenue Forecast vs. Actuals
• Net Revenue Shortfall of $16.3M in the
Past Five Years (FY20/21 – FY24/25)
• Revenue Shortfall was Offset
Through Grants ($15.3M) and State
Revolving Fund Loan ($55M) to Fund
Water Self-Sufficiency Projects as
Well as Deferring Wastewater Main
Replacement Projects
• FY22/23 Revenues Met Target Due
to $4M Principal Forgiveness From
the State Revolving Fund Loan
$10
$15
$20
$25
$30
FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Revenue (in $ Millions)
Budget Forecast Actuals
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Invested in Water Supply Sustainability and Resiliency
Award Winning
Sustainable Water
Infrastructure Project
(Produces up to 1,500 AFY
of Purified Water or 10% of
the City’s Water Supply)
Production Efficiency
Enhancement
@ Arcadia WTP
(Increases Overall Efficiency
from 80 to 90%, Adding up to
1,200 AFY of Drinking Water)
Olympic
Well Field
Restoration
(Restores 3,200 AFY of
Local Groundwater)
Advanced
Metering
Infrastructure
(Save up to 5% of the
City’s Water Supply by
Reducing Water Leaks)
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Goals of FY 25/26 – FY 29/30 Five-Year Water
and Wastewater Rate Study
• Investing in our Water/Wastewater Infrastructure
• Maintain High-Quality and Reliable Water and Wastewater Services • Investing in Reliability and Resiliency
• Cost of Service Analysis to Ensure Self-Sustaining Enterprise Funds Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
What Happens If Rates Are NOT Adjusted?
$.0 Mil
$10.0 Mil
$20.0 Mil
$30.0 Mil
$40.0 Mil
$50.0 Mil
$60.0 Mil
$70.0 Mil
$80.0 Mil
2026 2027 2028 2029 2030
Cash Funded Capital Expenses
Debt Service
O&M Expenses
Revenues under Existing Rates
• Revenues could only sustain
operation costs
• Reducing or eliminating
routine CIP budget would
increase operation cost (e.g.,
increase service outages
resulting in purchasing more
imported water)
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Proposed Wastewater Rate Adjustment
• Proposed Five-Year Rate Increase of 7%, 7%, 7%, 6%, and 6% • Keep Pace with Inflation for Day-to-day Operations
• Maintain Routine CIP Projects to Prevent Costly Service Interruptions • Rehabilitate Key Infrastructure:
• Moss Avenue Pump Station (100% Reimbursed by City of Los Angeles) • Santa Monica Urban Runoff Recycling Facility (50% Cost Share with City of Los Angeles) Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
WATER FUND – INVESTING IN RESILIENCY
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
City of Santa Monica’s Water Distribution System
• The City’s Reservoirs Total
Approx. 40 Million Gallons
• The Reservoirs Ensure Sufficient
Supply and Pressure is Available
to Meet Peak Hours and Max
Day Water Demands
• Provides Over 24 Hours of Fire
Fighting Supply
• City’s Reservoirs Range From
60-70 Years Old to 100 Years Old
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Reservoir Rehabilitation
Key Safety Element Goals:
• Seismically Resilient
• Resilient Water Storage
• Peak Load Water Supply
• Emergency Water
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Reservoir Rehabilitation
• Seismic/Structural Upgrades
• Electrical System Upgrades
• Hydraulic and Water Quality Improvements
• Security and Reliability Improvements
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Adjustment Options
Water Rate
Options
Fund Routine
Operations
Rehabilitate Reservoirs and
Replace Water Ops Center
Capital Improvement Program
All Projects Funded With Efficiencies
1
2
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option
• Maintain 100% Funding Routine CIP Projects and Replace Aging Infrastructure
• Keep Pace with Inflation for Day-to-Day Operations
• Rehabilitate Reservoirs and Replace Water Operations
Center/Water Quality Lab
• Emergency Preparedness
• Resilient Water Storage
• Reliable Operations and Water Delivery
• Ability to Meet Peak Water Demands in the City
• Proposed Five-Year Rate Increase of 20%, 16%, 9%, 9%, and 6% • Increases in Year 1 and 2 are to Replenish Reserves and Raise Matching Funds to Rehabilitate Reservoirs
1 Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option
Financing Strategy to Rehabilitate Reservoirs and
Replace Water Operations Center/Water Quality Lab
1 $64M
$33M
$33M
$130M Program:
• Rehabilitate
Reservoirs
• Replace Water
Operations
Center/Water
Quality
• Enhance Water
Resiliency
• Completed over
10 years
US EPA WIFIA LOAN
Federal Grants for
Water Resiliency
Cash Contribution/
Matching from City’s
Water Fund
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option
Financing Strategy to Rehabilitate Reservoirs and Replace Water Operations Center/Water Quality Lab
1 $64M
$33M
$33M
$130M Program:
• Rehabilitate
Reservoirs
• Replace Water
Operations
Center/Water
Quality
• Enhance Water
Resiliency
• Completed over
10 years
US EPA WIFIA LOAN
Federal Grants for
Water Resiliency
Cash Contribution/
Matching from City’s
Water Fund
If Unsuccessful with Outside Funding Assistance:
• Raised $33M to Rehabilitate Riviera
Reservoir in the Rate Cycle
• Sufficient Revenue to Replace one
Reservoir per 5-year Rate Cycle
• Need to defer replacement of water
operations center and WQ lab
• Completed in ~20 years
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option – Rate Structure Update
Tier
Proposed
Bi-Monthly
(FY25/26)
Capacity Fee $50.06
(20% Fee)
$ 37.25
(15% Fee)
Tier 1 0-10 HCF $67.80
($6.78/HCF)
$73.5
($7.35/HCF)
Tier 2 11-18 HCF $63.12
($7.89/HCF)
$67.76
($8.47/HCF)
Tier 3 19+ HCF $49.44
($12.36/HCF)
$51.72
($12.93/HCF)
Avg Water Bill $230.42 $230.23
• Increase in Fixed Capacity Fee to 20% and
Help Stabilize Cost Recovery for Fixed
Operation Costs
• Majority of the Customers Will Not See a
Difference on Their Bills
• For single-Family Homes, Customers Using
<8 HCF bi-Monthly May See a Noticeable
Difference (~$10).
1 Typical avg SFR uses 22 Hundred Cubic Feet (or 16,500 gallons) every 2 months Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Commodity Prices
Municipal Drinking Water
$0.008/gallon (Current Tier 1)
$0.009/gallon (New Tier 1 FY25/26)
Water Fill Stations/Stores
$0.40 - $1.00/gallon
Bottled/Can Water
$1.00 - $10.00/gallon
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option
• Maintain 75% Funding of Routine CIP Projects
and Replace Aging Infrastructure
• Reduce annual water main replacement budget
• Defer expansion of recycled water system
• Keep Pace with Inflation for Day-to-day
Operations
• Proposed Five-Year Rate Increase of
11%, 9%, 7%, 6%, and 5%
• Risk of System Failure by Deferring Reservoir
Rehabilitation and Replacement of Water
Operations Center/Water Quality Lab
2 Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Water Rate Option
• Risk of Deferring Reservoir Rehabilitation
and Replace Water Operations
Center/Water Quality Lab
• Increase Failure of Reservoirs Due to Age
or Seismic Event
• Inability to Provide Sufficient Water
Supplies in Emergencies (e.g., Wildfires)
• Inability to Provide Reliable Water Delivery
to Meet Peak Day Demands
• May Lose Entire Local Water Supply and
Monitoring Capabilities
• Risk of Non-Compliance with Regulatory
Requirements
2 Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Rate Options
Current
Bi-Monthly Bill
FY24/25
Proposed Rate
Adjustments
(Bi-Monthly Bill)
FY 25/26
Water Rate Option 1 20%
Single Family Residential $ 190 $ 230
Multi Family Residential $ 406 $ 505
Commercial $ 698 $ 884
Water Rate Option 2 11%
Single Family Residential $ 190 $ 211
Multi Family Residential $ 406 $ 450
Commercial $ 698 $ 813
Water Rate Option
• Financial Plan in Place to Rehabilitate Reservoirs
• Maintain Reliable and Resilient Water Storage and Distribution Water Rate Option
• Defer Reservoir Rehabilitation to the Future
and Risk Potential Failure in a Seismic Event
• Average Difference Over Option 1:
• SFR = $6.00/month
• MFR = $1.90/unit/month
• Commercial = $24/month
1 2
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Bills (Single Family Residential)
$115 $123
$167
$186 $190 $189
$211
$268
$308
$372
$229
$-
$50
$100
$150
$200
$250
$300
$350
$400
Torrance El Segundo Glendale Burbank Santa
Monica
Long Beach Pasadena Culver City LADWP Beverly
Hills
Typical Bi-monthly Water Bill
Current Rates Proposed 7/1/2025
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Bills (Multi Family Residential)
$266 $267
$318 $322 $340
$406
$506
$592
$644 $650
$505
$-
$100
$200
$300
$400
$500
$600
$700
Torrance El Segundo Glendale Burbank Long Beach Santa
Monica
Pasadena Beverly
Hills
Culver City LADWP
Typical Bi-monthly Water Bill
Current Rates Proposed 7/1/25
One hundred cubic feet (HCF) of water = 748 gallons.
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Bills (Typical Commercial)
$472 $498 $519
$576 $589
$640
$822
$702
$961
$1,230
$884
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
Burbank El Segundo Torrance Glendale Long Beach Pasadena Beverly Hills
Santa
Monica
LADWP Culver City
Typical Bi-monthly Water Bill
Avg Commercial Proposed 7/1/25
One hundred cubic feet (HCF) of water = 748 gallons.
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Comparison of Water Bills (Commercial - Retail)
$46
$59 $64
$81
$105 $107 $109
$83
$134
$284
$111
$-
$50
$100
$150
$200
$250
$300
Torrance LADWP Burbank El Segundo Beverly
Hills
Long Beach Glendale Santa
Monica
Pasadena Culver City
Typical Bi-monthly Water Bill
Small Commercial Proposed 7/1/25
One hundred cubic feet (HCF) of water = 748 gallons.
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Advanced Water Metering (AMI) Infrastructure
24% 23% 22% 13% 10% 8%
Capital
Improvement
Projects
Labor
• Customers Can Access Their Water
Usage Information in Real Time
• Help Customers Budget Their Utility Bill
Leak detected
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Low Income Assistance Program
• Qualifies Under Southern California Gas or
Southern California Edison Low-Income
Assistance Program
• https://www.sce.com/residential/assistance/care-fera
• Maintain Existing Program Funding
• Approximately 300 Customers Receive Assistance
• Discount of $1/HCF on Tier 1 Water
(~$114k per year subsidy from General Fund)
• Discount of $1/HCF on Wastewater Rate
(~$40-50k per Year Subsidy From General Fund)
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Update Recycled Water Rate Structure
• No Fixed Fee and Lower Volumetric Charge Than Potable Water to Incentivize Recycled Water Use
• Recycled Water Rate Has Not Been Updated for Over 10 Years FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30
Commodity Charges
All Customers ($/hcf)
Uniform Rate $5.21 $6.04 $6.59 $7.18 $7.61
Recycled Water Rate Schedule Proposed Rates
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Rate Study Next Steps
Public
Engagement
September
2024
March 25,
2025
April 11,
2025
March 17,
2025
June 10,
2025
Council Study
Session
Rate Study
Report + Prop
218 Notice
Sustainability
Commission
Council Rate
Adoption Hearing
July 1,
2025
New Rates
in Effect
Study
Kick-Off
• Neighborhood Groups
• General Public Meetings in May
• Downtown Santa Monica + Chamber of Commerce
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
Council Input on Key Rate Study Components
Water Rate
Options
Maintain Low
Income
Assistance
Program
• Water Rate Option 1 – Fund Reservoir Rehabilitation and Fund 100% CIP Budget • Water Rate Option 2 – Defer Reservoir Rehabilitation and Fund 75% CIP Budget Maintain
Drought Rate
Structure
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025
THANK YOU…
Item 7-A
March 25, 2025
Item 7-A
March 25, 2025