City of
Sebastopol
Water and Wastewater Rate Study
Public Hearing
June 18, 2024
The Rate Study
Process
04 Rate Setting Framework
Identify financial goals, pricing objectives and
alternative rate structures for evaluation
01 02
03 05
Financial Plan
Evaluate operating and capital costs; conduct cash
flow and scenario analysis
Rate Design
Conduct COS and evaluate rate alternatives; conduct
rate calculations and customer impact analyses
Study Documentation
Provide documentation and study report;
Review of rates by legal counsel
Rate Adoption
Send notice to customers
and host a public hearing
Single Family Residential Customer
Combined Utility Bill*
* Comparison reflects an average single-family customer using 9 Units (kgal) per billing period of water and a winter average of 6 Units (kgal) per billing period.
BILL
If approved, rate adjustments would go into effect July 1, 2024
BILL ACCOUNT NUMBER
90934698087236
$228.48 $303.60
Current Combined Bill
Proposed Combined Bill
+ $1.23 per day
4 Financial Stability
The City must meet water and wastewater system
financial obligations from its own rate revenues; the
utility enterprises should be sustainable over time
Affordability of Service and Conservation
Allow customers to have more control over their bill
and an incentive to conserve
Fairness of Rates
Fairness in rates between existing customers based on
their use of the systems
4 Key Policy Objectives
5 City Council Direction and Policy Objectives
Financial Stability
Maintaining approximately 50% fixed cost revenue
recovery provides the City with stable revenues
Affordability of Service and Conservation
Proposed three-tier water use rate alternative for
Single Family Residential customers and maintain a
variable wastewater rate component
Fairness of Rates
Class-based water rates and wastewater fixed charges differentiated by wastewater flow patterns at each meter size
6 Starting Point: Enterprise Funds in Deficit
FY 2023-24 Water Wastewater
Revenue $2,417,972 $3,107,820
Expenses
Operations & Maintenance Expenses -$2,720,000 -$3,868,640 Debt Service -$380,704 -$178,656
Cash-Funded Capital -$530,000 -$542,000
Net Cashflow -$1,212,732 -$1,481,476
July 1, 2023 Beginning Cash Balance $1,225,855 $392,668 FY 2023-24 Net Cashflow -$1,212,732 -$1,481,476
June 30, 2024 Projected Ending Cash Balance $13,123 -$1,088,808 Immediate, Large Rate Increases are Required
• Reserves were drawn down in past to
keep rates low, City’s reserve policy is
not being met
• Current rate revenue does not even
meet Operating needs (O&M + Debt
Service costs)
• Large increases are needed to meet
capital spending and City’s minimum
reserve policies
• Water minimum reserve must be met
before debt funding can be obtained
for needed Well #4 repairs
• Wastewater needs to be able to repay
General Fund borrowing
• Systems need investment now to save
money on more costly, emergency
repairs later
7 Proposed Water and Wastewater
Enterprise Revenue Increases
8 Fiscal
Year
Water
Enterprise
Revenue
Increase
Wastewater
Enterprise
Revenue
Increase
FY 2024-25 37.0% 50.0%
FY 2025-26 4.0% 11.0%
FY 2026-27 4.0% 9.0%
FY 2027-28 3.5% 9.0%
FY 2028-29 3.5% 9.0%
• Water: Allows for external borrowing
for Well #4 replacement project
• Wastewater: Allows for repayment of
$1.1M in borrowing from the General
Fund over five years
9 Proposed Rates
Proposed Single Family Residential
Water Use Rate Structure Modifications
10 Current FY 2023-24 Rate
Water Use Charges ($/kgal)
Uniform Rate (All Units) $4.52
FY 2024-25 Rate
Water Use Charges ($/kgal)
Tier 1 (0-7 kgal) $5.01
Tier 2 (8-16 kgal) $6.39
Tier 3 (>16 kgal) $8.87
Tiered rates are by far the most common rate structure in California because they improve affordability for those with low to average use and allow customers to manage their bills through wise water use. 11 Single Family Example Water Bill Calculation –
Average Water Use
$35.07
$12.78
7 kgal
Tier 3: $8.87 x 0
Tier 1: $5.01 x 7
Tier 2: $6.39 x 2
16 kgal
Consumption: $ 47.85
5/8”x3/4” Service Charge: $ 67.68
Water Charges: $115.53
$40.68
All: $4.52 x 9
Consumption: $ 40.68
5/8”x3/4” Service Charge: $ 49.33
Water Charges: $ 90.01
Current Rates Proposed FY 2024-25
Five-Year Schedule of Water Rates
Rate Schedule - Fixed Bi-Monthly
Meter Size Current 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 5/8"x3/4" & 3/4" $49.33 $67.68 $70.39 $73.21 $75.78 $78.44 1" $82.41 $111.95 $116.43 $121.09 $125.33 $129.72
1.5" $164.13 $222.59 $231.50 $240.76 $249.19 $257.92
2" $262.77 $355.37 $369.59 $384.38 $397.84 $411.77
3" $575.37 $775.82 $806.86 $839.14 $868.51 $898.91
4" $821.78 $1,395.46 $1,451.28 $1,509.34 $1,562.17 $1,616.85 Rate Schedule – Water Use ($/kgal)
Customer Class Current 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 Residential
Tier 1: 0 - 7 kgal $4.52 $5.01 $5.22 $5.43 $5.63 $5.83
Tier 2: 8 - 16 kgal $4.52 $6.39 $6.65 $6.92 $7.17 $7.43 Tier 3: > 16 kgal $4.52 $8.87 $9.23 $9.60 $9.94 $10.29
Commercial $4.52 $5.51 $5.74 $5.97 $6.18 $6.40
Irrigation $4.52 $9.92 $10.32 $10.74 $11.12 $11.51
Five-Year Schedule of Wastewater Rates
Fixed Bi-Monthly Charge
Meter Size Current 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 5/8x3/4" & 3/4" $76.61 $95.25 $105.73 $115.25 $125.63 $136.94 1" $127.97 $258.35 $286.77 $312.58 $340.72 $371.39
1.5" $254.86 $657.20 $729.50 $795.16 $866.73 $944.74
2" $408.03 $841.02 $933.54 $1,017.56 $1,109.15 $1,208.98 3" $893.44 $2,093.81 $2,324.13 $2,533.31 $2,761.31 $3,009.83 4" $1,276.06 $6,307.17 $7,000.96 $7,631.05 $8,317.85 $9,066.46 Volumetric Rate, $/kgal
Current 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028
All Customer Classes $10.31 $15.47 $17.18 $18.73 $20.42 $22.26 Single Family Combined Bill, FY 2024-25
14 $90.01 $115.53
$138.47
$188.07
$228.48
$303.60
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
Current FY2024-25
Combined Bi-monthly Bill, Typical Single Family,
5/8x3/4" (water = 9 kgal, sewer = 6 kgal)
Water Wastewater
Single Family Residential customers are more than 75% of the City’s revenue base.
Tiered water use and updated wastewater rates provides fairness and moderates impacts of necessary large, immediate revenue increases to these customers. 15 Nearby Utility Comparison –
Combined Water and Wastewater Service
Agency Water (1) Wastewater (2) Total Monthly Bill
(FY 2024-25)
Rohnert Park(3) $55.28 $51.62 $106.90
Windsor(3) $29.93 $78.91 $108.84
Sebastopol (Current) $45.01 $69.24 $114.24
Santa Rosa $46.62 $75.77 $122.39
Petaluma $51.05 $79.26 $130.31
Cloverdale $79.18 $57.06 $136.24
Cotati $50.10 $90.54 $140.64
Sebastopol Proposed $57.77 $94.04 $151.80
Healdsburg $82.28 $110.33 $192.61
St. Helena $115.27 $134.49 $249.76
Calistoga $161.08 $132.80 $293.88
1) Average water use of 4,500 gallons per month
2) Average winter water use of 3,000 gallons per month
3) Rohnert Park and Windsor are currently conducting rate studies NOTE: Sebastopol bills are bi-monthly,
but some other agencies bill monthly.
Double bills for comparison.
Key Points on Proposed Utility Rates
16 Proposed three-tier water use rate alternative for Single Family Residential Customers improves affordability at low-to average use and provides a conservation price signal Maintaining approximately 50% fixed cost revenue recovery provides the City with revenue stability.
Wastewater fixed charges are differentiated by wastewater flow patterns at each meter size to improve fairness and better align with how costs are incurred between wastewater users Tiered water use rates, along with updated wastewater rates, moderates impacts to Single Family Residential customers with combined utility service (Greater than 75% of the customer base) Public Hearing
Procedure
17 • Open Public Hearing
• Public comment
• Call for additional written protests
• Close Public Hearing
• Council deliberation
18 Possible Council Actions
By Motion, close the public hearing and receive a verbal report from the Protest Officer on the status of recorded written protests; and
By Motion, consider adoption of the Resolution; or
Do not approve the proposed rates and provide
alternative direction to staff.
19 Questions?