1 City of Victorville
Overview of Sewer &
Solid Waste Rate Study
August 8, 2023
2 Overview of a Rate Study
3 Rate Study Purpose & Methodology
Why Prepare a Rate Study?
1. Required to comply with Prop 218
2. Typically prepared every 5 years
3. They demonstrate the fairness & equity of customer rates General Rate Study Methodology:
4 Rate Study Methodology – Financial Plan
What are “Net Revenue Requirements”?
The Financial Plan estimates the costs to be recovered from customer rates:
These costs should also include funding for adequate levels of reserves.
O&M Costs
+ Debt Service
+ Capital Costs
- Non-Rate Revenues*
Net Revenue Requirements
* licenses, fines, application fees, etc.
5 Rate Study Methodology – Cost of Service
How Are SEWER Costs Assigned to Customers?
Sewer Costs are typically allocated to customers based on:
1. Flow-Related Costs (the amount of effluent generated)
2. Effluent Strength-Related Costs
• Biochemical Oxygen Demand (BOD/COD)
• Total Suspended Solids (TSS)
3. Customer Costs
What are Customer Classes? – Customers with similar
characteristics (effluent strength, volume, system demands, etc.) are grouped into classes.
(Note: Costs, rates and Prop 218 requirements are focused on Classes, not individual customers or properties)
6 Rate Study Methodology – Cost of Service
How Are SOLID WASTE Costs Assigned to Customers?
Solid Waste Costs are typically allocated by:
1. Disposal Costs (the tonnage disposed)
2. Collection Costs (type of container and no. of pickups/week)
3. Regulatory and Administrative Fees (City, State AB 939, etc.)
4. SB 1383 Costs (food-waste recycling, composting, record keeping, education, etc.)
5. Other Costs (Franchise Fee, Pavement Impact, Street Sweeping costs) Cost Allocations – Costs are then allocated to each customer class based on their proportional share of the above criteria.
7 Rate Study Methodology – Rate Design
What are Rate Design Objectives?
• Rates are proportional to cost of service (i.e., the cost to serve each customer or customer class)
• The San Juan Capistrano court decision (2015) mandated that rates “demonstrate the cost basis” in order to comply with Prop 218 o Primarily related to tiered water rates
o Basic principles apply to all rates
• Equitable & non-discriminating
• Ease of administration and understanding
• Provide revenue stability
8 Solid Waste Rate Study Results
9 Solid Waste Rate Study Results
Annual Expenditures
Proposed: Add Street Sweeping to Solid Waste Rates
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Uses of Solid Waste Funds
SW-Hauling Charges 12,572,400$ 15,209,718$ 15,818,107$ 16,450,831$ 17,108,864$ 17,793,219$ SW-Disposal Charges 4,787,000$ 4,519,400$ 4,700,176$ 4,888,183$ 5,083,710$ 5,287,059$ Source Reduction and Recycling 2,366,807$ 2,461,310$ 2,559,762$ 2,662,153$ 2,768,639$ 2,879,385$ Customer Service 967,521$ 1,008,908$ 1,049,264$ 1,091,235$ 1,134,884$ 1,180,280$ Add'l SB 1383 Organics Program Costs -$ -$ 581,700$ 611,000$ 642,000$ 674,000$ Street Sweeping -$ 568,148$ 754,361$ 1,096,300$ 1,167,600$ 1,243,500$ Pavement Impact 506,000$ 206,000$ 506,000$ 506,000$ 506,000$ 506,000$ All Other Operating Costs 2,153,708$ 2,516,651$ 2,909,077$ 3,005,200$ 3,105,168$ 3,275,399$ Total Operating Expenses 23,353,437$ 26,284,135$ 28,372,447$ 29,804,902$ 31,010,866$ 32,332,841$ Summary of Sources and Uses of Funds and
Net Revenue Requirements
Projected
A Pavement Impact Fee (PIF) was added in the last Rate Study to cover some of the costs of the impact of refuse trucks on pavement. The rate was set at a level intended to cover the cost of the City’s Maintenance of Effort (MOE) ($506,000/per) for streets that is required by the state to be funded from the General Fund. This amount is much less than needed to address the full impacts/damage to streets. As a result of more refuse accounts and tonnage over the past 5 years, the Solid Waste Fund has collected an additional $300K, which is being used in the first year to reduce the PIF fee/rate significantly. Thereafter, the fee/rate is being set at an amount necessary to fund the City’s MOE. 10 Solid Waste Rate Study Results
$23.4 mil.
$23.3 mil.
$25.4 mil.
$26.8 mil. $28.0 mil.
$29.3 mil.
$0 mil.
$5 mil.
$10 mil.
$15 mil.
$20 mil.
$25 mil.
$30 mil.
$35 mil.
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Total Obligations
Fiscal Year Ending June 30
Solid Waste Revenue Requirements vs.
Revenue Under Existing and Recommended Rate Increases
Net Revenue Requirements
Solid Waste Funding w/ Current Rates
Solid Waste Funding w/ Proposed Rates
11 Solid Waste Rate Study Results
Solid Waste Reserve Fund Levels:
$4.7 mil.
$5.3 mil. $5.5 mil. $5.4 mil. $5.3 mil.
$5.0 mil.
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Ending Reserves ($ mil.)
Fiscal Year Ending June 30
Ending Solid Waste Reserve Fund Balances vs.
Recommended Reserve Targets
Ending Balance - Unrestricted Reserves
Recom. Min. Target - Unrestricted Reserves
Target Reserve Levels:
• City is establishing a solid waste capital reserve fund, which was not part of the last rate study, to address the aging MRF, equipment and other capital assets • Reserve targets:
• O&M Reserve: 90-Days of operating costs, excluding “Hauling Costs” (contracted services) and tipping fees, which are not direct operating risks. • Capital and MRF R&R Reserve: 40% of Net Assets of $3.8 M – reflects capital reserve, SB 1383 new program and equipment risks
12 Solid Waste Rate Study Results
Proposed Rate Increases over the next 5 years:
Effective Rate Increases (sum of all rate components)
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Single Family Residential 39.5% 8.2% 6.1% 4.5% 4.5%
Multi-Family Residential 39.5% 8.2% 6.1% 4.5% 4.5%
Commercial Can 11.2% 7.1% 5.7% 4.2% 4.2%
Commercial Bin (3.0 CY Bin, 1 Pickup/week) 7.1% 3.4% 4.1% 4.1% 4.1% Commercial Compactor Bin (1.5 CY, 1 Pickup/week) -3.0% 4.6% 3.7% 3.7% 3.7% Commercial Recycling (3 CY Bin, 1 Pickup/week) 11.6%* 7.5% 6.1% 6.5% 7.1% Roll-offs (10 CY Roll-Off, 1 Pickup/week) 10.7% 5.4% 6.7% 6.8% 6.8% *Note: Commercial Recycling goes up by more than other rates due to the addition of Admin. and AB 939 Fees.
Customer Class Projected Solid Waste Rates (Partial List) Note on Rate Increases in Year 1 vs. Years 2-5:
• Year 1 (called the “Test Year”) reflects the changes in the cost-of-service for each customer class, which are different for each class.
• Years 2-5 assume the rates have been “trued-up” to the cost of service in Year 1 and, therefore, Years 2-5 reflect changes from inflation factors specific to each customer class. 13 Solid Waste Rate Study Results
Current and Projected Street Sweeping Program Costs
Projected Street
Sweeping Rates
14 Solid Waste Rate Study Results
Current vs. Proposed Rate Schedule
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Single- and Multi-Family and Comm. Carts
95 gal Solid Waste, 65-gal Recycle, 65-gal Organics $30.77 $42.92 $46.44 $49.25 $51.49 $53.83 65 gal Solid Waste, 65-gal Recycle, 65-gal Organics N/A $40.04 $43.23 $45.95 $48.09 $50.32 35 gal Solid Waste, 65-gal Recycle, 65-gal Organics $25.50 $37.58 $40.94 $43.59 $45.66 $47.82 Additional 95-gallon Trash Container $14.05 $13.93 $14.55 $15.19 $15.87 $16.58 Additional 65-gallon Recycling Container* $1.81 $1.99 $2.08 $2.19 $2.30 $2.41 Additional 65-gallon Organics Container* N/A $13.93 $14.55 $15.19 $15.87 $16.58 Hardship Rate** $24.78 $39.05 $42.38 $44.99 $47.01 $49.12 Hardship & Small Can Rate** $21.17 $33.71 $36.88 $39.33 $41.18 $43.12 Resid. using trash bin: 65-gal Recycle Cart-Required N/A $15.12 $15.88 $16.67 $17.50 $18.38 Resid. using trash bin: 65-gal Organics Cart-Required N/A $20.46 $21.82 $22.79 $23.81 $24.87 Commercial Cans
95 gal Solid Waste, 65 gal recycling $38.95 $43.30 $46.36 $48.98 $51.03 $53.17 Additional 95-gallon Trash Container $11.30 $15.24 $15.90 $16.47 $17.06 $17.69 Additional 65-gallon Recycling Container N/A $15.12 $15.88 $16.67 $17.50 $18.38 Miscellaneous Charges:*** (Per Occurance)
Late Set Out/Return Trip-Trash, Recycle, Organics $20.21 $18.04 $18.67 $20.00 $20.00 $20.70 Contaminated Recycle/Organics, Empty as Trash $21.56 $19.84 $20.53 $22.00 $22.00 $22.77 Change size/number of carts (in excess of once/year) $33.68 $34.86 $36.08 $38.65 $38.65 $40.00 * The first additional recycling can is free; this charge applies to more than 2 recycling cans. ** Only if granted by the City; applies only to single-family accounts. *** Applies to both resdiential and commercial can service.
SOLID WASTE RATE SCHEDULE Proposed Monthly RatesCurrent Rates
15 Solid Waste Rate Study Results
Current vs. Proposed Residential Curbside Pickup Rate:
Pavement Impact Fee $0.75 $0.29 ($0.46)
Organics Program $0.00 $0.90 $0.90 $0.90
Organics Collection $0.00 $4.20 $4.20 $4.20
AB 939 Fee $1.01 $0.94 ($0.07)
Street Sweeping (NEW) $0.00 $0.83 $0.83
Franchise Fee $2.28 $3.12 $0.84
Admin $3.40 $5.18 $1.78 $0.27
Disposal $5.03 $7.82 $2.79 $2.00
Collection $18.30 $19.64 $1.34
Total $30.77 $42.92 $12.15 $7.37
Change in
SFR Rate
SB 1383
Costs
Solid Waste Residential
F ees (95-G al. Cart) F Y'22/23 F Y'23/24
16 Solid Waste Rate Study Results
Current vs. Proposed Rate Schedule
Most Common Commercial Bins:
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Bin Size (CY) Pick ups/week
1.5 1 $68.25 $73.16 $77.10 $80.27 $83.58 $87.03
2 1 $90.39 $96.87 $100.17 $104.27 $108.54 $113.00
3 1 $134.05 $143.62 $148.49 $154.54 $160.85 $167.44
3 2 $258.15 $276.26 $285.44 $296.97 $308.99 $321.53
3 3 $382.24 $408.90 $422.40 $439.40 $457.13 $475.62
Proposed Monthly RatesSOLID WASTE RATE SCHEDULE
Commercial Bins (Cont.)
Current
Rates
17 Solid Waste Rate Study Results
Customer Bill Comparisons – Single Family
$30.77 $30.77 $30.77 $30.77 $30.77
$42.92
$46.44
$49.25
$51.49 $53.83
$0
$10
$20
$30
$40
$50
$60
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Proposed Monthly Rates
Monthly Bill
Current 95 gal Solid Waste, 60 gal recycling
Proposed 95 gal Solid Waste, 60 gal recycling
Single-Family Residential Bill Comparison - Current vs.
Projected Through FY 2027/28
18 Solid Waste Rate Study Results
Customer Bill Comparisons – Commercial 3 CY Bin/ 1X/week $134.05 $134.05 $134.05 $134.05 $134.05
$143.62 $148.49 $154.54 $160.85 $167.44
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Proposed Monthly Rates
Monthly Bill
Current 3.0 yd Bin 1 PU/WK
Proposed 3.0 yd Bin 1 PU/WK
Commercial Bin Bill Comparison - Current vs. Projected
Through FY 2027/28
19 Sewer Rate Study Results
20 Sewer Rate Study Objectives
• Ensuring sewer rates will be able to cover all operating and maintenance costs, including treatment costs.
• Ensuring sufficient funding for essential Capital Improvement Projects. • Maintaining appropriate reserve funds.
• Complying with legal requirements of Prop 218.
Purpose of a Sewer Rate Study:
21 Financial Plan Objectives
• Meeting Net Revenue Requirements (FY 2023/24 through FY 2027/28):
• O&M costs escalate from $28.8 M to $31.1 million
• Total expenditures are $37.2 M annually
• Building and Maintaining Reserve Funds:
• Reserves by the end of FY 2027/28 = $14.0 M
• The Operating Reserve - 90 days of operating expenses ($7.8 M for FY 2027/28) o The Capital Rehab. & Replacement Reserve – 3 percent of assets ($1.8 M for FY 2027/28), o Recommended target is approximately $5 M (per City Engineer’s request) to address risks of unanticipated project costs and cost inflation). May be reduced later if not needed. o Funding Capital Improvement Projects:
o City staff identified roughly $30.0 M for FY 2023/24 through 2027/28. o With the recommended rate increases, these expenditures can be accomplished while maintaining reserves to the minimum recommended target.
22 Summary of Sewer Revenue Requirements
23 Rate Increases and CIP Program Costs
Proposed Rate Increases
CIP Program Costs
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Projected Annual Rate Revenue Increase 5.00% 5.00% 5.00% 3.00% 3.00% Cumulative Increase from Annual Revenue Increases 5.00% 10.25% 15.76% 19.24% 22.81% RATE REVENUE REQUIREMENTS SUMMARY 5-Year Adopted Rate Period
24 Sewer Rate Study Results
Graphical Picture
of Sewer
Financial Plan:
25 Reserve Fund Levels
Sewer Reserves
Under Proposed
Sewer Rates &
Financial Plan:
26 Functionalization and Classification
Sewer Costs were Organized into Categories (or Classifications):
• Flow Costs (“Volume”)
• Strength Based Costs (“BOD”, “TSS”)
• Process Treatment Costs
• VVWRA Treatment Costs
• Customer Related Costs
VVWRA costs are expected to increase, but that inflation is not included in proposed rates (VVWRA is not able to project future cost increases at this time). If VVWRA costs increase, they will be collected through a “pass-through” rate adjustment 27 Classification Categories & Allocations
Categories
of Costs:
Revenue
Requirement
Allocations
to Customer
Classes:
28 Recommended Sewer Rates
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Residential Customers 1
Monthly Fixed Service Charge, per Dwelling Unit:
Single-Family Residential 51.89$ 59.62$ 62.60$ 65.73$ 69.01$ 72.46$ Multi-Family Residential 38.09$ 31.32$ 32.89$ 34.53$ 36.26$ 38.07$ Commercial Customers
Monthly Fixed Service Charge, per Account: 51.89$ 59.62$ 62.60$ 65.73$ 69.01$ 72.46$ Volumetric Charge, per hcf 2 4.41 4.54$ 4.77$ 5.01$ 5.26$ 5.52$ Industrial Customers 3
Monthly Fixed Service Charge, per Account: 51.89$ 59.62$ 62.60$ 65.73$ 69.01$ 72.46$ Volumetric Charge, per hcf 2 4.41 4.54 4.77 5.01 5.26 5.52 BOD Charge, per lb - 2.10$ 2.21$ 2.32$ 2.43$ 2.55$ TSS Charge, per lb - 2.03$ 2.14$ 2.24$ 2.35$ 2.47$ User-Specific Rates
Federal Corrections Complex (FCC)
Monthly Fixed Charge Per EDU 4 52.22$ 64.32$ 67.54$ 70.92$ 74.46$ 78.18$ BOD Charge, per lb 5 2.19$ 2.10$ 2.21$ 2.32$ 2.43$ 2.55$ TSS Charge, per lb 5 2.20$ 2.03$ 2.14$ 2.24$ 2.35$ 2.47$ Kuerig Dr. Pepper (KDP) 6
Monthly Min Charge (excluding capital recovery) 7 162,500$ 162,500$ 162,500$ 162,500$ 162,500$ 162,500$ Monthly Fixed Charge (Ion Exchange Service) 8 10,200$ 10,200$ 10,200$ 10,200$ 10,200$ 10,200$ Volumetric Charge, per 1,000 gal 6 0.37$ 0.37$ 0.37$ 0.37$ 0.37$ 0.37$ COD Charge, per lb 6 0.13$ 0.13$ 0.13$ 0.13$ 0.13$ 0.13$ FDS Charge, per lb 9 2.91$ 2.99$ 3.07$ 3.15$ 3.24$ 3.32$ BOD Charge, per lb 10 N/A - - - - -
TSS Charge, per lb 10 N/A - - - - -
Sewer Rate Schedule Recommended Sewer RatesCurrent
Rates
29 Percentages Rate Increases
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Residential Customers 1
Monthly Fixed Service Charge, per Dwelling Unit:
Single-Family Residential 14.9% 5.0% 5.0% 3.0% 3.0%
Multi-Family Residential -17.7% 5.0% 5.0% 3.0% 3.0%
Commercial Customers
Monthly Fixed Service Charge, per Account: 14.9% 5.0% 5.0% 3.0% 3.0% Volumetric Charge, per hcf 2 2.9% 5.0% 5.0% 3.0% 3.0%
Industrial Customers 3
Monthly Fixed Service Charge, per Account: 14.9% 5.0% 5.0% 3.0% 3.0% Volumetric Charge, per hcf 2 2.9% 5.0% 5.0% 3.0% 3.0%
BOD Charge, per lb N/A 5.0% 5.0% 3.0% 3.0%
TSS Charge, per lb -$ 5.0% 5.0% 3.0% 3.0% User-Specific Rates
Federal Corrections Complex (FCC)
Monthly Fixed Charge Per EDU 4 23.3% 5.0% 5.0% 3.0% 3.0% BOD Charge, per lb 5 -3.9% 5.0% 5.0% 3.0% 3.0%
TSS Charge, per lb 5 -7.4% 5.0% 5.0% 3.0% 3.0%
Kuerig Dr. Pepper (KDP) 6
Monthly Min Charge (excluding capital recovery) 7 0.0% 0.0% 0.0% 0.0% 0.0% Monthly Fixed Charge (Ion Exchange Service) 8 0.0% 0.0% 0.0% 0.0% 0.0% Volumetric Charge, per 1,000 gal 6 0.0% 0.0% 0.0% 0.0% 0.0% COD Charge, per lb 6 0.0% 0.0% 0.0% 0.0% 0.0%
FDS Charge, per lb 9 2.7% 2.7% 2.7% 2.7% 2.7%
BOD Charge, per lb 10 - - - - -
TSS Charge, per lb 10 - - - - -
Sewer Rate Schedule Recommended Sewer Rates
30 SFR vs. MFR Rates Comparison
For Single Family and Multi-Family Residential customers, rates are fixed based on the number of dwelling units per account.
Average volumes estimated for Multi-Family customers (per dwelling unit) is approximately 50% of Single Family volume based on average winter water use, Multi-Family rates have been adjusted to properly show this difference in the impact to the sewer system.
31 Customer Bill Comparisons
32 Customer Bill Comparisons
33 Questions & Discussion