PUBLIC HEARING ON PROPOSED
WASTEWATER RATE ADJUSTMENTS
Municipal Utilities Department
Agenda Item No. 16.5
November 12, 2024
Wastewater Rate Study
Today’s Actions
Provide overview of the Cost-of-Service analysis and Rate Study preparation
Summarize Proposition 218 requirements
Hold public hearing (today)
Hear public comments and receive written protests
Review / count protests
Council may adopt rates if no majority protest (50% + 1) Provide an adequate level of rate revenue to operate and maintain the City’s wastewater utility
Develop cost-based and proportional wastewater rates
Meet requirements of Proposition 218
Reflect prudent financial planning criteria
Prudent rate funding of capital
Meet target reserve balances
Developed using generally accepted methodologies
tailored to the City’s system and customer groups
Water Environment Federation Manual of Practice #27
3 Purpose of a Rate Study
3 Prop. 218 – California constitutional amendment to protect taxpayers
Limits how taxes, fees and charges can be created
Prop. 218 is not prescriptive in defining a “cost-based” rate Fees shall not exceed the reasonable cost of providing the service Fees shall not exceed the proportional cost of providing service Cost of service analysis results are the foundation of the proposed rates
Nexus between cost to provide service and rates charged 4 Proposition 218 – Establishing Cost Based Rates
4 Rate Design
Design rates for each class of service to reflect the prior two analyses, along with rate design goals and objectives
Cost of Service
Proportionally distribute the revenue requirement between the various customer classes of service
Revenue Requirement
Compares the revenue of the utility to the expenses to
evaluate the level of overall rates
5 Developing Cost-Based Wastewater Rates
5 Revenues independently calculated by customer group O&M expenses based on FY 2023-24 and FY 2024-25 budgets Capital Funding Plan based on current CIP
Annual debt service
Existing debt service is levelized
No new debt
Target annual rate funding of capital
Increases from $15 million in FY 2023-24 to $19.5 million in FY 2028-29
Reserve minimums
Target: 6 months of O&M expenses
6 Wastewater Revenue Requirement - Key Assumptions
6 Capital Improvement Plan
7 Capital Summary
Annual R&R
Complete RWCF
Upgrades
Sewer Line
Replacements
14-Mile Slough
Westside Interceptor
7 Revenue Requirement
8 $0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 Revenue Requirement ($000s)
All Other O&M Expenses Treatment Expenses Collection Expenses Rate Funded Capital Net Debt Service Proposed Revenue
Present Revenue
8 Proposed rate revenue adjustments are necessary to
prudently fund the utility
Fund essential capital improvement projects
Maintain strong, legally required, debt service coverage ratios Reflect inflationary increases in annual O&M expenses Overall revenue adjustment may not reflect individual bill impacts developed in the cost of service and rate design analyses Revenue Requirement Summary
9 FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Average SF Customer Bill $55.68 $57.91 $60.22 $62.63 $65.14 $67.74 Annual Monthly Change -- $2.23 $2.32 $2.41 $2.51 $2.61
Cumulative Bill Difference -- $2.23 $4.54 $6.95 $9.46 $12.06 System Average Rate Adj. -- 4.0% 4.0% 4.0% 4.0% 4.0%
9 Provides the basis to meet Proposition 218 requirements Proportional distribution of costs between customer classes Customer classes of service were reviewed
Rates were adjusted based on cost-of-service results
Revenue requirement distributed proportionally to the
customer classes based on:
Volume – average annual flow
Strength – CBOD and SS
Customer – number of customers
Cost of service average unit costs provide basis for proposed rate designs
Cost of Service Assumptions
1010
Cost of Service – Results Summary
11 * Cost of service results are implemented in Year 1 only * Cost of service provides
the basis for the
proposed rates
Majority of customer
classes are within a
reasonable range
Exception is high
strength and industrial
customers
Reflects changes in
customer characteristics
11 Residential
Flat fixed charge
• Different charge for each subcategory
Non-Residential
Flat fixed charge with volumetric charge ($/CCF)
• Different volumetric charge for each subcategory
Industrial
Administration / Stand-by Charge
• Flow ($/MG), BOD ($/1,000 lbs.), and SS ($/1,000 lbs.) O&M Charge
• Flow ($/MG), BOD ($/1,000 lbs.), and SS ($/1,000 lbs.) Rate Design – Current Rates
12 * Non-City Customers have ≈ 10% discount on the fixed charge per agreement * 12 Comparative Wastewater Rate Survey
13 13
Adopt the Draft Wastewater Rate Study, dated August 2024, as prepared by HDR Engineering, Inc.
Approve the Wastewater Utility rate adjustments as
identified in the Study if less than a majority of the affected record owners or affected sewer utility customers directly responsible for the payment of sewer service charges have submitted written protests.
Authorize the City Manager to take appropriate and
necessary actions to carry out the purpose and intent of the Resolution.
Recommended Actions
1414
QUESTIONS?
Present and Proposed Residential Rates
1616
Monthly Fixed Charge FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Single Family & Condo
City Customer $55.68 $57.36 $59.65 $62.04 $64.52 $67.10 Non-City Customer 50.77 52.30 54.39 56.57 58.83 61.18
Multi-Family
City Customer $52.45 $52.86 $54.97 $57.17 $59.46 $61.84 Non-City Customer 47.05 47.42 49.32 51.29 53.34 55.47
Apartments
City Customer $47.57 $47.57 $49.47 $51.45 $53.51 $55.65 Non-City Customer 41.75 41.75 43.42 45.16 46.97 48.85
Present and Proposed Non-Residential Rates
1717
FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Base Charge
City Customer $26.83 $26.91 $27.99 $29.11 $30.27 $31.48 Non-City Customer 23.56 23.63 24.58 25.56 26.58 27.64
Consumption Charge
Com / Inst - Low Strength $2.22 $2.40 $2.50 $2.60 $2.70 $2.81 Com / Inst – Medium Strength 2.70 2.75 2.86 2.97 3.09 3.21 Com / Inst - High Strength 4.54 4.42 4.60 4.78 4.97 5.17 Schools ($ / ADA) 1.30 1.29 1.34 1.39 1.45 1.51
Present and Proposed Industrial Rates
1818
FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Admin / Stand-by Charges
Base Charge $26.83 $26.91 $27.99 $29.11 $30.27 $31.48
Flow 864.80 945.76 983.59 1,022.93 1,063.85 1,106.40
BOD 140.13 153.25 159.38 165.76 172.39 179.29
SS 102.88 112.51 117.01 121.69 126.56 131.62
O&M (Consumption) Charges
Flow $748.52 $818.59 $851.33 $885.38 $920.80 $957.63
BOD 52.14 57.02 59.30 61.67 64.14 66.71
SS 83.45 91.26 94.91 98.71 102.66 106.77