Water and Wastewater Rate Study
Santa Rosa Water – BPU Budget Subcommittee
November 6, 2024
Agenda
1) Project Objectives and General Rate Setting
2) Water Financial Plan
3) Water Rate Recommendations
4) Wastewater Financial Plan
5) Wastewater Recommendations
6) Value of Water Campaign
7) Next Steps
2 Project Objectives and
General Rate Setting
3 4
Rate Setting Objectives
Legal compliance
Financial sufficiency and sustainability
Minimize rate increases
Public understanding
Affordability
Water conservation
5 Legal Requirements
for Setting Water Rates In California
Proposition 218 (Article XIIID, Section 6 of California Constitution) • Revenues shall not exceed funds required to provide service; nor used for another purpose
• Amount shall not exceed the proportional cost of the service attributable to the parcel
• Service must be actually used or immediately available • Approval process includes 45-day notice, public hearing, and written majority protest. Does not require a voting process (unlike taxes).
Rate Study Overview
Compare the revenues of the water, wastewater,
and regional utilities to their expenses in multi-year financial plans to determine the overall level of
annual rate adjustments
Proportionately allocate revenue requirements
between the various customer classes based on
service and demand requirements
Design water and wastewater rates to recover
the revenue requirement from each customer
class and meet other rate setting objectives
Revenue Requirements
Cost-of-Service
Rate Design
6 Fund/Reserve Structure and Cash Flows
7 Operating Fund
includes…
Operating Reserve
Catastrophic Reserve
Undesignated Reserve
CIP Appropriations
Operations and
Maintenance
Debt Service
Capital Projects
User Rate Revenue
Other Revenue,
including grants and loans
Project Highlights
8 1. Capital appropriation goals have been set based on recommendations from most recent Infrastructure Report Card
2. Water and wastewater cost of service analyses (COSA) have been updated (with no changes to basic rate structure)
… except for minor change to eliminate special classification for residential accounts with no outdoor water usage
3. Recommend re-instating the automatic pass-through of Sonoma Water rate changes
Water Utility
9 10
Primary Model Inputs
Fund and reserve balances as of June 30, 2023
FY 2024/25 budgeted revenues and expenses
Existing debt service schedules
• Plus estimates for FY2025/26 Regional bond issue
FY 2023/24 utility billing data
11 Primary Model Assumptions
Annual inflation factors:
Salary costs at 9%, 4% and then 3.5% thereafter
Benefit costs at 3.6%, 1.6% and then 2% thereafter
Utilities & chemicals at 4.5% per year
General and construction at 3.0% per year
Sonoma Water inflation not predicted (see pass-through) Interest earnings on reserve balances at 1.44% per year Growth in new connections at 0.96% per year
Stable water demand
Water Revenue
FY2024/25 Budget
12 Rate Revenue $50,985,000
Non-Rate Revenue
Private Fireline Revenue $700,000
Interest Earnings $1,284,000
Other Non-Rate Revenue $151,000
Fees and Charges $1,957,000
Demand Fees $2,000,000
Total: $57,077,000
Water Operating and Debt Expenses
FY2024/25 Budget
13 * Does not include capital spending
*
Salaries and Benefits $8,226,000
Maintenance and Services $4,996,000
Water Purchase $19,724,000
Utilities and Chemicals $1,400,000
Administrative Allocation $5,751,000
Utility Billing Services $2,419,000
O&M Projects $125,000
Debt Service $1,665,582
Utility Underground Impact Fund Transfer $2,229,075
Total Budget: $46,535,657
Salaries and Benefits
17.7%
Maintenance and
Services
10.7%
Water Purchase
42.4%
Utilities and Chemicals
3.0%
Administrative
Allocation
12.4%
Utility Billing Services
5.2%
O&M Projects
0.3%
Debt Service
3.6%
Utility Underground Impact
Fund Transfer
4.8%
14 Water Reserve Targets
Strong financial practices/policies are in the interest of rate payers by protecting Santa Rosa Water against unforeseen circumstances and contributing towards a strong credit rating.
Current policies :
Operating Reserve: For changes in operating costs or disruption in revenue. Target = 15% O&M costs (current target approximately: $6 million)
Catastrophic Reserve: Ensures timely response to natural disasters and/or other emergencies. Target = $5.75 million
Current Total Target = $11.7 million
15 Water Capital Appropriations
Goal: Increase annual capital appropriations* from current levels (average $13.8 million per year) to $34 million per year by FY2034/35.
* Commensurate increases to capital spending will be required
Water
Financial Forecast & Proposed Rate Revenue Increases
16 Non Rate Revenue
Operating Expenses
Debt Service
Existing Rate Revenue
Cash Capital
Additional Rate Revenue
Debt Service
* Debt Coverage Ratio measures whether the Santa Rosa Water can afford its debt obligations. Minimum levels are 1.2 and target levels are 1.5.
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 Water Rate Revenue Increases: 8.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Debt Coverage Ratio: 8.02 5.45 6.09 6.33 6.57 6.05 6.23 6.60 6.19 43.53 48.85 Capital Spending: $9.5M $15.5M $16.0M $16.5M $18.0M $20.0M $23.0M $26.0M $28.0M $31.0M $34.0M Proposed Forecast
$0M
$20M
$40M
$60M
$80M
$100M
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 $0M
$20M
$40M Ending Fund Balance Target Reserve Levels Minimum Reserve Levels 17 Water Cost Allocation Principles
Customer costs
Assigned to each customer on an equal basis
Capacity costs
Assigned to each customer based on meter size
Commodity costs
Assigned to each customer based on usage
• Tiered water usage rates based on differential water
supply and water conservation costs
Water
Fixed vs Variable Revenue
18 Fixed Revenue
(26.8%)
Usage Revenue
(73.2%)
Water Usage Rate Calculations
19 Water Conservation Costs
Water Supply Costs
General Costs
Recommended
FY 2025/26
Water Rate
Schedule
20 * This schedule no longer includes special rate for single family or duplex accounts with no outdoor usage Current July 2025
Water Usage Rates ($/TGAL) $ %
Single Family Residential & Duplex
Tier 1 Use up to Sewer Cap 1 $6.61 $7.09 $0.48 7.3%
Tier 2 Above Sewer Cap $7.49 $8.31 $0.82 10.9%
Multi-Family, Commercial, Industrial, and Institutional All water use $6.98 $7.54 $0.56 8.0%
Irrigation (potable water) 2
Tier 1 Use up to 125% of water budget $6.72 $7.21 $0.49 7.3% Tier 2 Over 125% of water budget $8.32 $9.25 $0.93 11.2% Irrigation (recycled water) 3
Tier 1 Use up to 125% of water budget $6.38 $6.85 $0.47 7.4% Tier 2 Over 125% of water budget $8.32 $9.25 $0.93 11.2% Monthly Service Charges (Potable Water)
5/8" meter $15.55 $16.00 $0.45 2.9%
1" meter $34.90 $37.15 $2.25 6.4%
1 1/2" meter $67.15 $72.40 $5.25 7.8%
2" meter $105.87 $114.70 $8.83 8.3%
3" meter $196.18 $213.40 $17.22 8.8%
4" meter $325.22 $354.40 $29.18 9.0%
6" meter $647.80 $706.90 $59.10 9.1%
Monthly Service Charges (Recycled Water)
5/8" meter $13.99 $14.40 $0.41 2.9%
1" meter $31.41 $33.44 $2.03 6.5%
1 1/2" meter $60.43 $65.16 $4.73 7.8%
2" meter $95.28 $103.23 $7.95 8.3%
3" meter $176.57 $192.06 $15.49 8.8%
4" meter $292.70 $318.96 $26.26 9.0%
6" meter $583.02 $636.21 $53.19 9.1%
Private Fire Line Service (Fixed Monthly Fee)
2" meter $32.00 $32.96 $0.96 3.0%
4" meter $32.00 $32.96 $0.96 3.0%
6" meter $41.00 $42.23 $1.23 3.0%
Notes:
Change
1 The Sewer Cap is calculated for each customer based on the average monthly water use during November through March.
2 The landscape water budget varies for each customer each month and is determined using the site's square footage for the types of plants and the evapotranspiration rate for the billing period.
Proposed SCWA Pass-Through Provision
21 • All Usage Rates increase based on the proposed schedule… • … however, a portion of the Usage Rates will be adjusted based on actual changes in wholesale water costs
• Adjustments occur each July, following Sonoma Water rate action (with 30-day notice provided to customers)
Example Calculation of SCWA Pass-Through Provision
22 Santa Rosa Water Rate Increase
Proposed 2027 Change: 7.00% Example Change: 2.0%
Current
Rates
Rates with
Baseline
Adjustment
% SCWA
Water Cost 2
SCWA Adjustment
(relative to Baseline
Adjustment)
Final Usage
Rates Change
Water Usage Rates ($/TGAL)
Single Family
Tier 1 $7.09 $7.59 54.8% -$0.19 $7.39 4.2%
Tier 2 $8.31 $8.89 53.7% -$0.22 $8.67 4.3%
Commercial/Industrial/Multifamily
All Water Use $7.54 $8.07 54.4% -$0.21 $7.86 4.2%
Irrigation (potable)
Tier 1 $7.21 $7.71 55.9% -$0.20 $7.51 4.2%
Tier 2 $9.25 $9.90 48.2% -$0.22 $9.67 4.5%
Irrigation (recycled)
Tier 1 $6.85 $7.33 55.9% -$0.19 $7.14 4.2%
Tier 2 $9.25 $9.90 48.2% -$0.22 $9.67 4.5%
(No change to service charges due to changes in SCWA costs) Notes:
1 Rates charged by SCWA for water from the Santa Rosa Aqueduct. Rates for the upcoming fiscal year are typically adopted in April of each year.
2 Percentage of the current water usage rate that is attributable to SCWA water purchase costs. These percentages are updated with each cost of service study update.
SCWA Santa Rosa Aqueduct 1
Comparison to Other Local Agencies – Water Charges
for single family homes with ¾” meter and 7,000 gallons of water usage 23 Wastewater Utility
24 Local Wastewater Revenue
FY2024/25 Budget
25 Rate Revenue $73,460,000
Non-Rate Revenue
Fees & Charges $1,229,000
Miscellaneous $135,000
Interest Earnings $450,000
Intergovernmental $995,583
Demand Fees $3,950,000
Total: $80,219,583
Local Wastewater Operating and Debt Expenses
FY2024/25 Budget
26 * Does not include capital spending
*
Salaries and Benefits $3,888,000
Maintenance and Services $3,014,000
Utilities and Chemicals $91,000
Administrative Allocation $4,890,000
Utility Billing Services $2,233,000
O&M Projects $65,000
Utility Impact Transfer Out $2,715,000
Local Wastewater Debt Service $4,330,000
Regional O&M $39,670,000
Subregional Debt Service $16,174,000
Total Budget: $77,070,000
27 Local Wastewater Reserve Targets
Strong financial practices/policies are in the interest of rate payers by protecting the Santa Rosa Water against unforeseen circumstances and contributing towards a strong credit rating.
Current Local WW Policies :
Operating Reserve: For changes in operating costs or disruption in revenue. Target = 15% O&M costs (current target approximately $2.1 million)
Catastrophic Reserve: Ensures timely response to natural disasters and/or other emergencies. Target = $6.8 million
Rate Stabilization Reserve: Ensures ability to meet debt obligations. Target = $1.0 million Current Total Local Target = $9.9 million
28 Local Wastewater Capital Appropriations
Goal: Increase annual capital appropriations* from current levels (average $14.2 million per year) to $42 million per year by 2034/35.
* Commensurate increases to capital spending will be required
29 Regional Capital Appropriations
Goal: Increase annual cash-funding by $1 million per year from current levels (about $11 million per year) to $21 million per year by FY2034/35.
New $35M debt issue
Previous $75M debt issue
Local Wastewater
Financial Forecast & Proposed Rate Revenue Increases
30 Non Rate Revenue
Reg. Operating & Capital
Debt Service
Existing Rate Revenue
Local Cash Capital
Additional Rate Revenue
Debt Service (Local & Reg.)
* Debt Coverage Ratio measures whether Santa Rosa Water can afford its debt obligations. Minimum levels are 1.2 and target level s are 1.5.
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 Wastewater Rate Increases: 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 4.0% Combined Debt Coverage Ratio: 4.67 5.01 5.52 5.70 5.97 6.57 6.81 3.64 4.55 na na Local WW CIP: $3.3M $14.3M $14.7M $15.1M $18.0M $21.0M $25.0M $29.0M $34.0M $37.0M $42.0M Recommended Projected
$0M
$20M
$40M
$60M
$80M
$100M
$120M
$140M
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 $0M
$20M
$40M
$60M Ending Fund Balance Target Reserve Levels Minimum Reserve Levels Local Operating Exp.
31 Wastewater Cost Allocation Principles
Customer costs
Assigned to each customer on an equal basis
Capacity costs
Assigned to each customer based on meter size
Wastewater treatment costs
Assigned to sewer usage rates based on flow and strength Wastewater
Fixed vs Variable Revenue
32 Fixed Revenue
(30.4%)
Usage Revenue
(69.6%)
Recommended
FY 2025/26
Wastewater
Rate
Schedule
33 Current July 2025
Wastewater Usage Rates ($/TGAL) 1
$ %
Single Family and Multi-Family 2 $16.04 $16.69 $0.65 4.1% Commercial, Industrial, and Institutional
Low Strength $13.18 $13.83 $0.65 4.9%
Standard Strength $16.04 $16.69 $0.65 4.1%
Medium Strength $17.88 $18.51 $0.63 3.5%
High Strength $22.30 $22.92 $0.62 2.8%
Monthly Service Charges
Single Family $27.65 $29.92 $2.27 8.2%
Multi-Family, Commercial, Industrial, Institutional
5/8" & 3/4" meters $27.65 $29.92 $2.27 8.2%
1" meter $63.83 $70.16 $6.33 9.9%
1 1/2" meter $124.12 $137.24 $13.12 10.6%
2" meter $196.47 $217.72 $21.25 10.8%
3" meter $365.28 $405.53 $40.25 11.0%
4" meter $606.46 $673.82 $67.36 11.1%
6" meter $1,209.38 $1,344.55 $135.17 11.2%
Notes:
Change
2 Multifamily accounts include duplex, and triplex accounts. 1 Wastewater usage charge applies to the estimated wastewater generated. For single-family residential accounts and multi-family accounts that don't have a separate irrigation meter for landscaping the esimated wastewater is based on the lower of current water use or the Sewer Cap.
The Sewer Cap is calculated for these residential accounts based on the average water use from complete billing periods within the months of November through March. For all accounts with separate irrigation meters (whether multifamily or non-residential) the wastewater generated is based on actual monthly water usage.
Comparison to Other Local Agencies – Sewer Charges
for single family homes with 4,500 gallons of winter water usage 34 Comparison to Other Local Agencies – Combined
for single family homes with ¾” meter, 7,000 gallons of water usage and 4,500 gallons of winter water usage
35 36
FY 2025/26 Bill Impact Analysis
Meter Wtr. Use WW Use Bills With Current Water/WW Rates Change in Total Bill Size (TGAL) (TGAL) Water Wastewater Total Water Wastewater Total $ % Single Family Residential
Low Water Use 5/8" 4 4 $41.99 $91.81 $133.80 $44.36 $96.68 $141.04 $7.24 5.4% Median Water Use 5/8" 7 4.5 $64.02 $99.83 $163.85 $68.68 $105.03 $173.71 $9.86 6.0% High Water Use 5/8" 12 6 $100.15 $123.89 $224.04 $108.40 $130.06 $238.46 $14.42 6.4% Very High Water Use 5/8" 20 7 $159.19 $139.93 $299.12 $173.66 $146.75 $320.41 $21.29 7.1% Duplex 5/8" 8 6 $70.19 $123.89 $194.08 $75.16 $130.06 $205.22 $11.14 5.7% Small Apartment (4 DUs) 1" 15 12 $139.60 $256.31 $395.91 $150.25 $270.44 $420.69 $24.78 6.3% Large Apartment (24 DUs) 2" 80 80 $664.27 $1,479.67 $2,143.94 $717.90 $1,552.92 $2,270.82 $126.88 5.9% Very Lrg. Apart. (100 DUs) 4" 320 320 $2,558.82 $5,739.26 $8,298.08 $2,767.20 $6,014.62 $8,781.82 $483.74 5.8% Small Retail 5/8" 6 6 $57.43 $106.73 $164.16 $61.24 $112.90 $174.14 $9.98 6.1% Large Retail 2" 80 80 $664.27 $1,250.87 $1,915.14 $717.90 $1,324.12 $2,042.02 $126.88 6.6% Office Building 1 1/2" 40 40 $346.35 $651.32 $997.67 $374.00 $690.44 $1,064.44 $66.77 6.7% Car Wash 2" 60 60 $524.67 $987.27 $1,511.94 $567.10 $1,047.52 $1,614.62 $102.68 6.8% Mixed Comm. w/ Food 1" 35 35 $279.20 $844.33 $1,123.53 $301.05 $872.36 $1,173.41 $49.88 4.4% Hotel w/ Restaurant 3" 200 200 $1,592.18 $4,825.28 $6,417.46 $1,721.40 $4,989.53 $6,710.93 $293.47 4.6% Restaurant 1 1/2" 50 50 $416.15 $1,239.12 $1,655.27 $449.40 $1,283.24 $1,732.64 $77.37 4.7% Supermarket 2" 160 160 $1,222.67 $3,057.27 $4,279.94 $1,321.10 $3,179.32 $4,500.42 $220.48 5.2% Mortuary 1" 20 20 $174.50 $509.83 $684.33 $187.95 $528.56 $716.51 $32.18 4.7% Small Winery 1" 10 10 $104.70 $286.83 $391.53 $112.55 $299.36 $411.91 $20.38 5.2% Sm. Irrig. (Wtr Budg.=18 tg) 1" 20 18 $172.50 (na) $172.50 $185.43 (na) $185.43 $12.93 7.5% Lrg. Irrig. (Wtr. Budg.=250 tg) 4" 300 250 $2,421.22 (na) $2,421.22 $2,517.40 (na) $2,517.40 $96.18 4.0% Bills With Proposed Water/WW Rates
37 Debt Service Details
Existing Debt Service
Water utility = $1.6 million per year, increasing to $4.4 million by 2033 and then dropping off Wastewater utility = $4.3 million then dropping off in 2034 Subregional system = $21.6 million total… with $16.2 million being Santa Rosa’s portion Proposed 2026 Subregional Debt (new money)
$35 million in proceeds
Initial estimated annual debt service = $1.9 million per year (Santa Rosa’s portion) Summary of Recommended
Water/Wastewater Rate Adjustments
38 Basline Water Rate
Adjustments 2
Wastewater Rates
Adjustment
Change in a Typical Single
Family Utility Bill 3
July 2025 1 8.0% 5.0% 6.0%
July 2026 7.0% 5.0% 5.8%
July 2027 7.0% 5.0% 5.8%
July 2028 7.0% 5.0% 5.8%
July 2029 7.0% 5.0% 5.8%
3 Typical single family bill includes a 5/8" water meter, 7,000 gallons of monthly water use, and 4,500 gallons of wastewater.
2 The final adjustment to Water rates will be dictated by the pass-through of Sonoma Water wholesale water costs.
1 While the overall rate revenue adjustment for FY 2025/26 are reflected in the table above, actual changes to individual customers' utility bills may vary in FY 2025/26 due to adjustments to the rate structure.
39 Value of Water Campaign
Key Message:
• Investing Now to Secure Our
Water Future
Outreach Plan:
• Two phase multi-media
campaign
• May – Nov. 2024: Value of
Water Service and the Need
to Invest
• Dec. – July 2025: Proposed
Water Rates, Prop 218
Noticing, and Adopted Rate
Schedule
40 Value of Water Campaign
Using the power of digital
advertising and partnerships to
boost engagement.
• srcity.org/ValueOfWater
• City Connections eNewsletter
• QuenchCA Campaign
• Water Bill Messaging
• Digital, Print, and Radio
• Social Media
Facebook.com/SRWater
@SantaRosaWater
41 Value of Water Campaign
Digital Campaign
using Google Ads for
Sept. 30-Oct. 27
• 228K Impressions
• 5.17K Clicks to
srcity.org/ValueOfWater
Social Media Campaign
May – Oct. 2024
• 95K Impressions
• 3.14 K Engagement/Link Clicks
Rate Setting Tentative Schedule
42 Draft report and presentation to BPU in Study Session – November 21 BPU rate recommendation consideration – December 5
Presentation to City Council in Study Session – January 7 Prop. 218 notifications mailing - TBD
Public Hearing – March 2025
Recommendation
Santa Rosa Water Staff recommends that the
Board of Public Utilities Budget Subcommittee
recommend the proposed water and
wastewater rate increases and rate schedule
to the Board of Public Utilities
Questions?