City of Eureka
City of Eureka Water and Sewer Rate Study City Council Meeting February 7, 2017 Presented by Brian Gerving, Director of Public Works Greg Clumpner, Director, NBS Carmen Narayanan, Consultant, NBS
City of Eureka – Water and Sewer Rate Study
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Overview of Presentation Overview of Rate Study Tasks and Methodology Action Items & Next Steps Water Rate Study and Results Study Recommendations Results: Financial Plan & Rate Increases Rate Design Alternatives & Proposed Rates
Sewer Rate Study and Results Study Recommendations Results: Financial Plan & Rate Increases Rate Design Alternatives & Proposed Rates
City of Eureka – Water and Sewer Rate Study
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Overview of Rate Study Tasks Key Components in a Rate Study:
1
FINANCIAL PLAN / REVENUE REQUIREMENTS
Step 1: Compares current sources and uses of funds and determines the revenue needed from rates and projected rate adjustments.
2
COST-OF-SERVICE ANALYSIS
Step 2: Allocates revenue requirements to the customer classes in a “fair and equitable" manner that complies with Prop 218.
3
RATE DESIGN
Step 3: Considers what rate structure alternatives will best meet the City’s need to collect rate revenue from each customer class.
Other Notes:
Some Costs will be Identified as “Pass-Through” Costs Purchased Water Costs
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Action Items for City Council Members Provide Approval for the Following: Water: Annual Rate Increases Pass-Through Water Charges Revised Rate Structure Sewer: Choose Financial Plan Scenario with Annual Rate Increases Revised Rate Structure City of Eureka – Water and Sewer Rate Study
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Next Steps 1. Direct Staff to Issue Proposition 218 Notices 2. Conduct Proposition 218 Process Mail Prop. 218 Notices Conduct Public Hearing Adopt New Rates
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Water Rate Study
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Water Rate Study Recommendations Recommended Adjustments to Water Rate Structure: 1. Maintain Inside / Outside Rates. 2. Maintain Current Fixed / Variable Allocation: Approximately 67% of revenue is from fixed charges. Remaining 33% of revenue from volumetric charges. 3. Maintain Uniform Volumetric Rate for all customers ($/hcf). 4. Expand Customer Classes: Fixed Service Charged by Meter Size & Inside/Outside Single Family Residential Multi Family Residential Non-Residential City of Eureka – Water and Sewer Rate Study
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Financial Plan – Water Utility
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Cash Reserves – Water Utility Recommended Reserve Targets: 1.Operating Reserve – 6 Months of O&M Expenses 2.Reserve for Replacements - equal to 6% of Net Assets
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Annual Rate Increases – Water Utility
5 Year Rate Setting Period
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Cost of Service Analysis - Water Number of Accounts by Customer Class (9,950) Residential Outside 0.3%
Net Revenue Requirements by Customer Class ($5.09M) Residential Outside 1.2%
Multi-Family 7.8%
Multi-Family 10.6% Residential City 48.9%
Residential City 80.4%
Commercial 11.5% Commercial 39.3% Residential - City
Residential - Outside
Multi-Family
Commercial
Residential - City
Residential - Outside
Multi-Family
Commercial
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Water Rate Alternatives Selected Rate Design
Option D
Selected Rate Alternative
Alternative #3
Customer Class Description
All Customer Classes have Separate Fixed Charges Fixed vs. Variable
67% Fixed / 33% Variable Current Revenue Allocation
Reasons for Selecting This Rate Alternative: 1. Best mix of both cost-of-service and the current rate structure. 2. Customer Bill Impacts were Most Reasonable of the Alternatives considered (least rate-shock to some customers) 3. Most compliant with Recent Prop 218-Related Court Cases City of Eureka – Water and Sewer Rate Study
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Proposed Water Rates – SFR & MFR Proposed Rates (67% Fixed / 33% Variable) Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Single Family Residential Fixed Service Charges: 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 Multi Family Residential Fixed Service Charges: 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 3 inch $284.43 4 inch $464.81 6 inch $927.78 8 inch $1,470.53 Volumetric Charges for All Water Consumed $2.06 Uniform Rate (per hcf) - Inside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
$25.15 $25.15 $60.02 $187.85 $373.79
$26.35 $26.35 $62.87 $196.77 $391.54
$27.60 $27.60 $65.85 $206.12 $410.14
$28.91 $28.91 $68.98 $215.91 $429.62
$30.28 $30.28 $72.26 $226.16 $450.03
$33.10 $33.10 $79.88 $157.85 $251.42 $500.92 $781.61 $1,561.32 $2,496.97
$34.67 $34.67 $83.67 $165.35 $263.36 $524.71 $818.74 $1,635.48 $2,615.57
$36.32 $36.32 $87.65 $173.20 $275.87 $549.64 $857.63 $1,713.17 $2,739.81
$38.04 $38.04 $91.81 $181.43 $288.97 $575.75 $898.37 $1,794.54 $2,869.95
$39.85 $39.85 $96.17 $190.05 $302.70 $603.09 $941.04 $1,879.78 $3,006.27
$2.15
$2.25
$2.36
$2.47
$2.59
FY 2020/21 4.75%
FY 2021/22 4.75%
There may be additional pass-through charges added to volumetric consumption. Additional charges will be determined on an annual basis.
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Proposed Water Rates - Commercial Proposed Rates (67% Fixed / 33% Variable) Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Non-Residential Fixed Service Charges: Com mercial 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 3 inch $284.43 4 inch $464.81 6 inch $927.78 8 inch $1,470.53 Volumetric Charges for All Water Consumed $2.06 Uniform Rate (per hcf) - Inside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
$47.38 $47.38 $115.60 $229.29 $365.71 $729.51 $1,138.79 $2,275.67 $3,639.92
$49.64 $49.64 $121.09 $240.18 $383.08 $764.16 $1,192.88 $2,383.76 $3,812.82
$51.99 $51.99 $126.84 $251.58 $401.28 $800.46 $1,249.54 $2,496.99 $3,993.92
$54.46 $54.46 $132.87 $263.54 $420.34 $838.48 $1,308.90 $2,615.60 $4,183.64
$57.05 $57.05 $139.18 $276.05 $440.31 $878.31 $1,371.07 $2,739.84 $4,382.36
$2.15
$2.25
$2.36
$2.47
$2.59
FY 2020/21 4.75%
FY 2021/22 4.75%
There may be additional pass-through charges added to volumetric consumption. Additional charges will be determined on an annual basis. City of Eureka – Water and Sewer Rate Study
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Sewer Rate Study
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Sewer Rate Study Recommendations Recommended Adjustments to Sewer Rates: 1. Choose Financial Plan Scenario with Recommended Rate Adjustments – To maintain positive financial position and ensure a sufficient and stable funding source. Full Funding Rate Increases Sinking Fund, Alternative #1 ($2M/year: 68% City, 32% HCSD) Sinking Fund, Alternative #2 ($1.3M/year : 68% City, 32% HCSD) 2. Maintain Existing Customer Classifications 3. Maintain Rate Structure Monthly fixed service charge is $/account/month (Exception: Multi Family billed per $/HEU/month) Includes 2 units in fixed service charge Proposed rate structure now includes monthly account charge ($/account/month) HEU: Housing Equivalent Unit City of Eureka – Water and Sewer Rate Study
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Financial Plan – Sewer Utility
Alternative #2 is Preferred
Increase Rates Annually to: 1. Meet Revenue Requirements 2. Fund Capital R&R & Improvement
Higher Initial Rate Increases – Driven by Need to Build Reserves
3. Maintain Appropriate Reserve Funds
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Cash Reserves - Sewer Utility Recommended Reserve Targets: 1.Operating Reserve – 6 Months of O&M Expenses 2.Reserve for Replacementsequal to 6% of Net Assets Financial Plan: Sinking Fund, Alternative #2
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Cost of Service Analysis - Sewer Net Revenue Requirements by Customer Class ($7.3M)
Number of Accounts by Customer Class (9,800)
SINGLE FAMILY 45.1% SINGLE FAMILY 77.8% COMMERCIAL HEAVY 14.1%
COMMERCIAL MEDIUM 4.2%
COMMERCIAL HEAVY 1.2%
MULTI FAMILY 18.3% COMMERCIAL LIGHT 18.3%
SINGLE FAMILY COMMERCIAL LIGHT COMMERCIAL HEAVY
MULTI FAMILY COMMERCIAL MEDIUM
COMMERCIAL MEDIUM 0.3%
MULTI FAMILY 10.3% COMMERCIAL LIGHT 10.4%
SINGLE FAMILY COMMERCIAL LIGHT COMMERCIAL HEAVY
MULTI FAMILY COMMERCIAL MEDIUM
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Proposed Sewer Rates
Sewer Rate Schedule Projected Increase in Rate Revenue per Financial Plan: Monthly Fixed Service Charges * Monthly Account Charge (applies to all customer classes) Single Family Residential Multi-Family Residential (per dwelling unit) Commercial Light Commercial Medium Commercial Heavy Volumetric Charge ($/hcf) ** Single Family Residential Multi-Family Residential Commercial Light Commercial Medium Commercial Heavy
Current Rates
FY 2017/18 29.00%
Recommended Monthly Fixed Sewer Rates FY 2018/19 FY 2019/20 FY 2020/21 29.00% 23.00% 7.00%
FY 2021/22 5.00%
-$11.54 $11.54 $11.54 $14.04 $16.55
$1.61 $13.69 $10.95 $13.69 $13.69 $13.69
$2.08 $17.66 $14.12 $17.66 $17.66 $17.66
$2.56 $21.72 $17.37 $21.72 $21.72 $21.72
$2.74 $23.24 $18.59 $23.24 $23.24 $23.24
$2.88 $24.40 $19.52 $24.40 $24.40 $24.40
$5.07 $5.07 $5.07 $6.33 $7.58
$5.15 $5.15 $5.33 $7.72 $11.35
$6.64 $6.64 $6.87 $9.95 $14.65
$8.17 $8.17 $8.46 $12.24 $18.01
$8.74 $8.74 $9.05 $13.10 $19.27
$9.18 $9.18 $9.50 $13.75 $20.24
* Current Rates are charged by HEU for Multi-Family only. ** One Unit is equal to one HCF (Hundred Cubic Feet) or 748 gallons. Tw o units are included in the Base Charge.
Financial Plan: Sinking Fund, Alternative #2
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Water & Sewer Bill Comparisons
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SRF Bill Comparison – Water & Sewer
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Comm. Bill Comparison – Water & Sewer
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Water Bill Comparisons – Single-Family
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Sewer Bill Comparison – Single-Family
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Water Bill Comparisons – Light Comm.
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Sewer Bill Comparison – Light Comm.
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Regional Rate Comparisons
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Regional Rate Bill Comparison
3
4
5
2 1
Financial Plan: Sinking Fund, Alternative #2 City of Eureka – Water and Sewer Rate Study
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Large Commercial Rate Comparisons
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Bill Comparison – Water & Sewer
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Bill Comparison – Water & Sewer
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Bill Comparison – Water & Sewer
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QUESTIONS and COMMENTS
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Proposed Water Rates – Outside City Proposed Rates (67% Fixed / 33% Variable) There may be additional passthrough charges added to volumetric consumption. Additional charges will be determined on an annual basis.
Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Outside SFR Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 Outside MFR Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 3 inch $426.65 4 inch $697.22 6 inch $1,391.67 8 inch $2,205.80 Outside Non-Residential Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 3 inch $426.65 4 inch $697.22 6 inch $1,391.67 8 inch $2,205.80 Volumetric Charges for All Water Consumed $3.09 Uniform Rate (per hcf) - Outside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
FY 2020/21 4.75%
FY 2021/22 4.75%
$37.73 $37.73 $90.02 $281.77 $560.68
$39.52 $39.52 $94.30 $295.16 $587.31
$41.40 $41.40 $98.78 $309.18 $615.21
$43.36 $43.36 $103.47 $323.86 $644.43
$45.42 $45.42 $108.39 $339.24 $675.04
$49.65 $49.65 $119.82 $236.78 $377.12 $751.38 $1,172.42 $2,341.98 $3,745.45
$52.01 $52.01 $125.51 $248.02 $395.04 $787.07 $1,228.11 $2,453.22 $3,923.36
$54.48 $54.48 $131.47 $259.80 $413.80 $824.46 $1,286.45 $2,569.75 $4,109.72
$57.06 $57.06 $137.72 $272.14 $433.46 $863.62 $1,347.55 $2,691.81 $4,304.93
$59.77 $59.77 $144.26 $285.07 $454.05 $904.64 $1,411.56 $2,819.68 $4,509.41
$71.08 $71.08 $173.40 $343.93 $548.57 $1,094.27 $1,708.18 $3,413.50 $5,459.88
$74.45 $74.45 $181.63 $360.26 $574.62 $1,146.25 $1,789.32 $3,575.64 $5,719.22
$77.99 $77.99 $190.26 $377.38 $601.92 $1,200.69 $1,874.31 $3,745.48 $5,990.89
$81.69 $81.69 $199.30 $395.30 $630.51 $1,257.73 $1,963.34 $3,923.39 $6,275.45
$85.58 $85.58 $208.76 $414.08 $660.46 $1,317.47 $2,056.60 $4,109.75 $6,573.54
$3.23
$3.38
$3.54
$3.71
$3.88
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Financial Plan – Water Utility
Summary of Sources and Uses of Funds and Net Revenue Requirements Sources of Water Funds Rate Revenue Under Prevailing Rates Non-Rate Revenues Interest Earnings Total Sources of Funds Uses of Water Funds Water Supply & Distribution Expenses Debt Service Rate-Funded Capital Expenses Total Use of Funds Surplus (Deficiency) before Rate Increase Additional Revenue from Rate Increases (1) Surplus (Deficiency) after Rate Increase Projected Annual Rate Increase Cumulative Rate Increases Net Revenue Requirement (2)
Budget FY 2016/17
Projected FY 2017/18
FY 2018/19
FY 2019/20
FY 2020/21
FY 2021/22
$
7,091,600 $ 133,750 45,125
7,606,000 $ 296,500 29,163
7,606,000 $ 296,500 37,340
7,606,000 $ 296,500 55,894
7,606,000 $ 296,500 73,691
7,606,000 296,500 98,558
$
7,270,475 $
7,931,663 $
7,939,840 $
7,958,394 $
7,976,191 $
8,001,058
$
6,623,057 $ 1,766,547 -
6,596,874 $ 1,406,381 -
6,654,871 $ 1,409,586 -
6,820,387 $ 1,399,416 -
6,973,654 $ 1,405,713 -
7,127,186 1,879,720 -
8,003,255 (71,593) 344,375 272,782 4.75% 4.75% 7,321,593
8,064,458 (124,618) 705,108 580,490 4.75% 9.73% 7,374,618
8,219,802 (261,409) 1,082,975 821,567 4.75% 14.94% 7,511,409
8,379,366 (403,176) 1,478,792 1,075,616 4.75% 20.40% 7,653,176
$ 8,389,604 $ (1,119,129) $ (1,119,129) 0.00% 0.00% $ 7,868,614
$ $ $
$
$ $ $
$
$ $ $
$
$ $ $
$
$ 9,006,905 $ (1,005,847) 1,893,409 $ 887,562 4.75% 26.12% $ 8,255,847
1. Assumes new rates are implem ented July 1, 2017. 2. Total Use of Funds less non-rate revenues and interest earnings. This is the annual amount needed from water rates.
Annual Deficiency in Rate Revenue is Not Sustainable
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Water Consumption Assumption
Development of the BASE CAPACITY Allocation Factor
Customer Class Residential - City Residential - Outside Multi-Family Commercial Total Unbilled Water Consumption (2)
FY 2015/16 Volume (hcf) (1) 566,756 12,427 142,444 443,134 1,164,761 20,909
Estimated FY % Adjustment for 2016/17 Volume Conservation Adjusted for Conservation 0% 566,756 0% 12,427 0% 142,444 0% 443,134 0% 1,164,761 0% 20,909
Percent of Total Volume 48.7% 1.1% 12.2% 38.0% 100% 1.8%
1. Consumption data is based on the City of Eureka's billing data. 2. Represents w ater that is not billed, but is metered; reported in billing data.
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Number of Water Customers Number of Water Meters: Number of Meters by Class and Size Residential Residential - Outside Multi-Family Commercial Total
FY 2015/16 5/8" 7,778 25 580 694 9,077
1" 187 1 118 178 484
1.5 " 19 1 53 72 145
2"
3"
7 1 28 165 201
4" -
6" -
1 17 18
8" -
1 1 8 10
Total Meters -
5 5
1 1
7,991 30 780 1,140 9,941
Total % of Meters 80.4% 0.3% 7.8% 11.5% 100.0%
Number of Equivalent Water Meters: Number of Equivalent Meters by Class and Size Residential Residential - Outside Multi-Family Commercial Total
FY 2015/16 5/8" 7,778 25 580 694 9,077
1" 468 3 295 445 1,210
1.5 " 95 5 265 360 725
2" 56 8 224 1,320 1,608
3" 16 272 288
4"
6"
25 25 200 250
250 250
Total Meters
8" 80 80
8,397 82 1,389 3,621 13,488
Total % of Equivalent Meters 62.3% 0.6% 10.3% 26.8% 100.0%
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Single Family Residential Consumption
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Financial Plan - Sewer (cont.) Financial Plan: Sinking Fund, Alternative #2
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Financial Plan - Sewer Financial Plan: Sinking Fund, Alternative #2
Five-Year Financial Projection: Summary of Sources and Uses of Funds and Net Revenue Requirements Sources of Wastewater Funds Rate Revenue Under Prevailing Rates Non-Rate Revenues Total Sources of Funds Uses of Wastewater Funds Operating Expenses Debt Service Rate-Funded Capital Expenses Total Use of Funds Surplus (Deficiency) before Rate Increase Additional Revenue from Rate Increases (1) Surplus (Deficiency) after Rate Increase Projected Annual Rate Increase Cumulative Rate Increases Net Revenue Requirement (2)
Projected
Budget FY 2016/17
FY 2017/18
FY 2018/19
FY 2019/20
FY 2020/21
FY 2021/22
$
6,750,000 204,256
$
6,750,000 182,715
$
6,790,700 $ 179,100
6,839,200 $ 179,100
6,885,100 $ 183,341
6,931,600 208,779
$
6,954,256
$
6,932,715
$
6,969,800 $
7,018,300 $
7,068,441 $
7,140,379
$
6,298,417 $ 1,296,997 -
6,328,392 $ 1,389,364 1,546,484
6,570,859 $ 1,389,357 2,066,663
6,858,717 $ 1,386,539 2,057,331
7,128,978 $ 1,390,376 2,023,134
7,403,436 1,392,589 4,186,741
$ $
7,595,414 (641,157) (641,157) 0.00% 0.00% 6,291,157
$
$
$ $ $
$
9,264,239 (2,331,525) 1,638,500 (693,025) 29.00% 29.00% 7,981,525
$ $ $
$
10,026,879 (3,057,079) 3,752,165 695,086 29.00% 66.41% 8,707,079
$ 10,302,587 $ 10,542,488 $ 12,982,765 $ (3,284,287) $ (3,474,047) $ (5,842,387) 5,914,663 6,724,189 7,342,899 $ 2,630,376 $ 3,250,143 $ 1,500,512 23.00% 7.00% 5.00% 104.68% 119.01% 129.96% $ 8,934,287 $ 9,124,047 $ 11,492,387
1. Assumes new rates are implemented July 1, 2017. 2. Total Use of Funds less non-rate revenues. This is the annual amount needed from wastewater rates.
Annual Deficiency in Rate Revenue is Not Sustainable City of Eureka – Water and Sewer Rate Study
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Number of Sewer Customers Number of Sewer Accounts & Housing Equivalents Units: Customer Class SINGLE FAMILY MULTIPLE COMMERCIAL LIGHT COMMERCIAL MEDIUM COMMERCIAL HEAVY Grand Total:
Number of Accounts (1) 7,636 1,007 1,020 32 117 9,812
Percent of Total 77.82% 10.26% 10.40% 0.33% 1.19% 100.00%
Number of Housing Percent of Total Equivalent Units (HEUs) (1) 7,642 59.40% 4,009 31.16% 1,066 8.29% 32 0.25% 117 0.91% 12,866 100.00%
1. Customer Accounts and HEUs based on June 2016 billing data.
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Sewer Bill Comparison – Single-Family
Financial Plan: Sinking Fund, Alternative #2 City of Eureka – Water and Sewer Rate Study
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Rate Design: Fixed vs. Variable %’s
Fixed 33%
This Promotes Revenue INSTABILITY Variable 33% Fixed 67%
Variable 67% This Promotes Revenue STABILITY
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Inflation Factors Cost Type
Inflation Factor
Customer Growth
0.0%
General Cost Inflation
3.0%
Labor Cost Inflation
4.4%
Water Purchases*
0.0%
Energy
5.0%
Chemicals
5.0%
Fuel
3.0% *Pass-Through for Additional Future Purchased Water Costs City of Eureka – Water and Sewer Rate Study
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Hydraulic Capacity Meter Size
Capacity Standard Meters
Equivalency to 5/8 inch meter
5/8 Inch
20 gpm
1.00
3/4 Inch
30 gpm
1.50
1 Inch
50 gpm
2.50
1.5 Inch
100 gpm
5.00
2 Inch
160 gpm
8.00
3 Inch
320 gpm
16.00
4 Inch
500 gpm
25.00
6 Inch
1,000 gpm
50.00 City of Eureka – Water and Sewer Rate Study
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City of Eureka – Water and Sewer Rate Study
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Overview of Presentation Overview of Rate Study Tasks and Methodology Action Items & Next Steps Water Rate Study and Results Study Recommendations Results: Financial Plan & Rate Increases Rate Design Alternatives & Proposed Rates
Sewer Rate Study and Results Study Recommendations Results: Financial Plan & Rate Increases Rate Design Alternatives & Proposed Rates
City of Eureka – Water and Sewer Rate Study
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Overview of Rate Study Tasks Key Components in a Rate Study:
1
FINANCIAL PLAN / REVENUE REQUIREMENTS
Step 1: Compares current sources and uses of funds and determines the revenue needed from rates and projected rate adjustments.
2
COST-OF-SERVICE ANALYSIS
Step 2: Allocates revenue requirements to the customer classes in a “fair and equitable" manner that complies with Prop 218.
3
RATE DESIGN
Step 3: Considers what rate structure alternatives will best meet the City’s need to collect rate revenue from each customer class.
Other Notes:
Some Costs will be Identified as “Pass-Through” Costs Purchased Water Costs
City of Eureka – Water and Sewer Rate Study
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Action Items for City Council Members Provide Approval for the Following: Water: Annual Rate Increases Pass-Through Water Charges Revised Rate Structure Sewer: Choose Financial Plan Scenario with Annual Rate Increases Revised Rate Structure City of Eureka – Water and Sewer Rate Study
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Next Steps 1. Direct Staff to Issue Proposition 218 Notices 2. Conduct Proposition 218 Process Mail Prop. 218 Notices Conduct Public Hearing Adopt New Rates
City of Eureka – Water and Sewer Rate Study
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Water Rate Study
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Water Rate Study Recommendations Recommended Adjustments to Water Rate Structure: 1. Maintain Inside / Outside Rates. 2. Maintain Current Fixed / Variable Allocation: Approximately 67% of revenue is from fixed charges. Remaining 33% of revenue from volumetric charges. 3. Maintain Uniform Volumetric Rate for all customers ($/hcf). 4. Expand Customer Classes: Fixed Service Charged by Meter Size & Inside/Outside Single Family Residential Multi Family Residential Non-Residential City of Eureka – Water and Sewer Rate Study
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Financial Plan – Water Utility
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Cash Reserves – Water Utility Recommended Reserve Targets: 1.Operating Reserve – 6 Months of O&M Expenses 2.Reserve for Replacements - equal to 6% of Net Assets
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Annual Rate Increases – Water Utility
5 Year Rate Setting Period
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Cost of Service Analysis - Water Number of Accounts by Customer Class (9,950) Residential Outside 0.3%
Net Revenue Requirements by Customer Class ($5.09M) Residential Outside 1.2%
Multi-Family 7.8%
Multi-Family 10.6% Residential City 48.9%
Residential City 80.4%
Commercial 11.5% Commercial 39.3% Residential - City
Residential - Outside
Multi-Family
Commercial
Residential - City
Residential - Outside
Multi-Family
Commercial
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Water Rate Alternatives Selected Rate Design
Option D
Selected Rate Alternative
Alternative #3
Customer Class Description
All Customer Classes have Separate Fixed Charges Fixed vs. Variable
67% Fixed / 33% Variable Current Revenue Allocation
Reasons for Selecting This Rate Alternative: 1. Best mix of both cost-of-service and the current rate structure. 2. Customer Bill Impacts were Most Reasonable of the Alternatives considered (least rate-shock to some customers) 3. Most compliant with Recent Prop 218-Related Court Cases City of Eureka – Water and Sewer Rate Study
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Proposed Water Rates – SFR & MFR Proposed Rates (67% Fixed / 33% Variable) Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Single Family Residential Fixed Service Charges: 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 Multi Family Residential Fixed Service Charges: 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 3 inch $284.43 4 inch $464.81 6 inch $927.78 8 inch $1,470.53 Volumetric Charges for All Water Consumed $2.06 Uniform Rate (per hcf) - Inside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
$25.15 $25.15 $60.02 $187.85 $373.79
$26.35 $26.35 $62.87 $196.77 $391.54
$27.60 $27.60 $65.85 $206.12 $410.14
$28.91 $28.91 $68.98 $215.91 $429.62
$30.28 $30.28 $72.26 $226.16 $450.03
$33.10 $33.10 $79.88 $157.85 $251.42 $500.92 $781.61 $1,561.32 $2,496.97
$34.67 $34.67 $83.67 $165.35 $263.36 $524.71 $818.74 $1,635.48 $2,615.57
$36.32 $36.32 $87.65 $173.20 $275.87 $549.64 $857.63 $1,713.17 $2,739.81
$38.04 $38.04 $91.81 $181.43 $288.97 $575.75 $898.37 $1,794.54 $2,869.95
$39.85 $39.85 $96.17 $190.05 $302.70 $603.09 $941.04 $1,879.78 $3,006.27
$2.15
$2.25
$2.36
$2.47
$2.59
FY 2020/21 4.75%
FY 2021/22 4.75%
There may be additional pass-through charges added to volumetric consumption. Additional charges will be determined on an annual basis.
City of Eureka – Water and Sewer Rate Study
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Proposed Water Rates - Commercial Proposed Rates (67% Fixed / 33% Variable) Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Non-Residential Fixed Service Charges: Com mercial 5/8 inch $35.10 3/4 inch $35.10 1 inch $56.73 1 1/2 inch $92.80 2 inch $130.48 3 inch $284.43 4 inch $464.81 6 inch $927.78 8 inch $1,470.53 Volumetric Charges for All Water Consumed $2.06 Uniform Rate (per hcf) - Inside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
$47.38 $47.38 $115.60 $229.29 $365.71 $729.51 $1,138.79 $2,275.67 $3,639.92
$49.64 $49.64 $121.09 $240.18 $383.08 $764.16 $1,192.88 $2,383.76 $3,812.82
$51.99 $51.99 $126.84 $251.58 $401.28 $800.46 $1,249.54 $2,496.99 $3,993.92
$54.46 $54.46 $132.87 $263.54 $420.34 $838.48 $1,308.90 $2,615.60 $4,183.64
$57.05 $57.05 $139.18 $276.05 $440.31 $878.31 $1,371.07 $2,739.84 $4,382.36
$2.15
$2.25
$2.36
$2.47
$2.59
FY 2020/21 4.75%
FY 2021/22 4.75%
There may be additional pass-through charges added to volumetric consumption. Additional charges will be determined on an annual basis. City of Eureka – Water and Sewer Rate Study
14
Sewer Rate Study
City of Eureka – Water and Sewer Rate Study
15
Sewer Rate Study Recommendations Recommended Adjustments to Sewer Rates: 1. Choose Financial Plan Scenario with Recommended Rate Adjustments – To maintain positive financial position and ensure a sufficient and stable funding source. Full Funding Rate Increases Sinking Fund, Alternative #1 ($2M/year: 68% City, 32% HCSD) Sinking Fund, Alternative #2 ($1.3M/year : 68% City, 32% HCSD) 2. Maintain Existing Customer Classifications 3. Maintain Rate Structure Monthly fixed service charge is $/account/month (Exception: Multi Family billed per $/HEU/month) Includes 2 units in fixed service charge Proposed rate structure now includes monthly account charge ($/account/month) HEU: Housing Equivalent Unit City of Eureka – Water and Sewer Rate Study
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Financial Plan – Sewer Utility
Alternative #2 is Preferred
Increase Rates Annually to: 1. Meet Revenue Requirements 2. Fund Capital R&R & Improvement
Higher Initial Rate Increases – Driven by Need to Build Reserves
3. Maintain Appropriate Reserve Funds
City of Eureka – Water and Sewer Rate Study
17
Cash Reserves - Sewer Utility Recommended Reserve Targets: 1.Operating Reserve – 6 Months of O&M Expenses 2.Reserve for Replacementsequal to 6% of Net Assets Financial Plan: Sinking Fund, Alternative #2
City of Eureka – Water and Sewer Rate Study
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Cost of Service Analysis - Sewer Net Revenue Requirements by Customer Class ($7.3M)
Number of Accounts by Customer Class (9,800)
SINGLE FAMILY 45.1% SINGLE FAMILY 77.8% COMMERCIAL HEAVY 14.1%
COMMERCIAL MEDIUM 4.2%
COMMERCIAL HEAVY 1.2%
MULTI FAMILY 18.3% COMMERCIAL LIGHT 18.3%
SINGLE FAMILY COMMERCIAL LIGHT COMMERCIAL HEAVY
MULTI FAMILY COMMERCIAL MEDIUM
COMMERCIAL MEDIUM 0.3%
MULTI FAMILY 10.3% COMMERCIAL LIGHT 10.4%
SINGLE FAMILY COMMERCIAL LIGHT COMMERCIAL HEAVY
MULTI FAMILY COMMERCIAL MEDIUM
City of Eureka – Water and Sewer Rate Study
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Proposed Sewer Rates
Sewer Rate Schedule Projected Increase in Rate Revenue per Financial Plan: Monthly Fixed Service Charges * Monthly Account Charge (applies to all customer classes) Single Family Residential Multi-Family Residential (per dwelling unit) Commercial Light Commercial Medium Commercial Heavy Volumetric Charge ($/hcf) ** Single Family Residential Multi-Family Residential Commercial Light Commercial Medium Commercial Heavy
Current Rates
FY 2017/18 29.00%
Recommended Monthly Fixed Sewer Rates FY 2018/19 FY 2019/20 FY 2020/21 29.00% 23.00% 7.00%
FY 2021/22 5.00%
-$11.54 $11.54 $11.54 $14.04 $16.55
$1.61 $13.69 $10.95 $13.69 $13.69 $13.69
$2.08 $17.66 $14.12 $17.66 $17.66 $17.66
$2.56 $21.72 $17.37 $21.72 $21.72 $21.72
$2.74 $23.24 $18.59 $23.24 $23.24 $23.24
$2.88 $24.40 $19.52 $24.40 $24.40 $24.40
$5.07 $5.07 $5.07 $6.33 $7.58
$5.15 $5.15 $5.33 $7.72 $11.35
$6.64 $6.64 $6.87 $9.95 $14.65
$8.17 $8.17 $8.46 $12.24 $18.01
$8.74 $8.74 $9.05 $13.10 $19.27
$9.18 $9.18 $9.50 $13.75 $20.24
* Current Rates are charged by HEU for Multi-Family only. ** One Unit is equal to one HCF (Hundred Cubic Feet) or 748 gallons. Tw o units are included in the Base Charge.
Financial Plan: Sinking Fund, Alternative #2
City of Eureka – Water and Sewer Rate Study
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Water & Sewer Bill Comparisons
City of Eureka – Water and Sewer Rate Study
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SRF Bill Comparison – Water & Sewer
City of Eureka – Water and Sewer Rate Study
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Comm. Bill Comparison – Water & Sewer
City of Eureka – Water and Sewer Rate Study
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Water Bill Comparisons – Single-Family
City of Eureka – Water and Sewer Rate Study
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Sewer Bill Comparison – Single-Family
City of Eureka – Water and Sewer Rate Study
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Water Bill Comparisons – Light Comm.
City of Eureka – Water and Sewer Rate Study
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Sewer Bill Comparison – Light Comm.
City of Eureka – Water and Sewer Rate Study
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Regional Rate Comparisons
City of Eureka – Water and Sewer Rate Study
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Regional Rate Bill Comparison
3
4
5
2 1
Financial Plan: Sinking Fund, Alternative #2 City of Eureka – Water and Sewer Rate Study
29
Large Commercial Rate Comparisons
City of Eureka – Water and Sewer Rate Study
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Bill Comparison – Water & Sewer
City of Eureka – Water and Sewer Rate Study
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Bill Comparison – Water & Sewer
City of Eureka – Water and Sewer Rate Study
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Bill Comparison – Water & Sewer
City of Eureka – Water and Sewer Rate Study
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QUESTIONS and COMMENTS
City of Eureka – Water and Sewer Rate Study
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Proposed Water Rates – Outside City Proposed Rates (67% Fixed / 33% Variable) There may be additional passthrough charges added to volumetric consumption. Additional charges will be determined on an annual basis.
Current Rates Projected Increase in Rate Revenue per Financial Plan: Fixed Service Charge Monthly Fixed Service Charges: Outside SFR Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 Outside MFR Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 3 inch $426.65 4 inch $697.22 6 inch $1,391.67 8 inch $2,205.80 Outside Non-Residential Fixed Service Charges: 5/8 inch $52.65 3/4 inch $52.65 1 inch $85.10 1 1/2 inch $139.20 2 inch $195.72 3 inch $426.65 4 inch $697.22 6 inch $1,391.67 8 inch $2,205.80 Volumetric Charges for All Water Consumed $3.09 Uniform Rate (per hcf) - Outside Water Rate Schedule
FY 2017/18 4.75%
FY 2018/19 4.75%
Proposed Rates FY 2019/20 4.75%
FY 2020/21 4.75%
FY 2021/22 4.75%
$37.73 $37.73 $90.02 $281.77 $560.68
$39.52 $39.52 $94.30 $295.16 $587.31
$41.40 $41.40 $98.78 $309.18 $615.21
$43.36 $43.36 $103.47 $323.86 $644.43
$45.42 $45.42 $108.39 $339.24 $675.04
$49.65 $49.65 $119.82 $236.78 $377.12 $751.38 $1,172.42 $2,341.98 $3,745.45
$52.01 $52.01 $125.51 $248.02 $395.04 $787.07 $1,228.11 $2,453.22 $3,923.36
$54.48 $54.48 $131.47 $259.80 $413.80 $824.46 $1,286.45 $2,569.75 $4,109.72
$57.06 $57.06 $137.72 $272.14 $433.46 $863.62 $1,347.55 $2,691.81 $4,304.93
$59.77 $59.77 $144.26 $285.07 $454.05 $904.64 $1,411.56 $2,819.68 $4,509.41
$71.08 $71.08 $173.40 $343.93 $548.57 $1,094.27 $1,708.18 $3,413.50 $5,459.88
$74.45 $74.45 $181.63 $360.26 $574.62 $1,146.25 $1,789.32 $3,575.64 $5,719.22
$77.99 $77.99 $190.26 $377.38 $601.92 $1,200.69 $1,874.31 $3,745.48 $5,990.89
$81.69 $81.69 $199.30 $395.30 $630.51 $1,257.73 $1,963.34 $3,923.39 $6,275.45
$85.58 $85.58 $208.76 $414.08 $660.46 $1,317.47 $2,056.60 $4,109.75 $6,573.54
$3.23
$3.38
$3.54
$3.71
$3.88
City of Eureka – Water and Sewer Rate Study
35
Financial Plan – Water Utility
Summary of Sources and Uses of Funds and Net Revenue Requirements Sources of Water Funds Rate Revenue Under Prevailing Rates Non-Rate Revenues Interest Earnings Total Sources of Funds Uses of Water Funds Water Supply & Distribution Expenses Debt Service Rate-Funded Capital Expenses Total Use of Funds Surplus (Deficiency) before Rate Increase Additional Revenue from Rate Increases (1) Surplus (Deficiency) after Rate Increase Projected Annual Rate Increase Cumulative Rate Increases Net Revenue Requirement (2)
Budget FY 2016/17
Projected FY 2017/18
FY 2018/19
FY 2019/20
FY 2020/21
FY 2021/22
$
7,091,600 $ 133,750 45,125
7,606,000 $ 296,500 29,163
7,606,000 $ 296,500 37,340
7,606,000 $ 296,500 55,894
7,606,000 $ 296,500 73,691
7,606,000 296,500 98,558
$
7,270,475 $
7,931,663 $
7,939,840 $
7,958,394 $
7,976,191 $
8,001,058
$
6,623,057 $ 1,766,547 -
6,596,874 $ 1,406,381 -
6,654,871 $ 1,409,586 -
6,820,387 $ 1,399,416 -
6,973,654 $ 1,405,713 -
7,127,186 1,879,720 -
8,003,255 (71,593) 344,375 272,782 4.75% 4.75% 7,321,593
8,064,458 (124,618) 705,108 580,490 4.75% 9.73% 7,374,618
8,219,802 (261,409) 1,082,975 821,567 4.75% 14.94% 7,511,409
8,379,366 (403,176) 1,478,792 1,075,616 4.75% 20.40% 7,653,176
$ 8,389,604 $ (1,119,129) $ (1,119,129) 0.00% 0.00% $ 7,868,614
$ $ $
$
$ $ $
$
$ $ $
$
$ $ $
$
$ 9,006,905 $ (1,005,847) 1,893,409 $ 887,562 4.75% 26.12% $ 8,255,847
1. Assumes new rates are implem ented July 1, 2017. 2. Total Use of Funds less non-rate revenues and interest earnings. This is the annual amount needed from water rates.
Annual Deficiency in Rate Revenue is Not Sustainable
City of Eureka – Water and Sewer Rate Study
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Water Consumption Assumption
Development of the BASE CAPACITY Allocation Factor
Customer Class Residential - City Residential - Outside Multi-Family Commercial Total Unbilled Water Consumption (2)
FY 2015/16 Volume (hcf) (1) 566,756 12,427 142,444 443,134 1,164,761 20,909
Estimated FY % Adjustment for 2016/17 Volume Conservation Adjusted for Conservation 0% 566,756 0% 12,427 0% 142,444 0% 443,134 0% 1,164,761 0% 20,909
Percent of Total Volume 48.7% 1.1% 12.2% 38.0% 100% 1.8%
1. Consumption data is based on the City of Eureka's billing data. 2. Represents w ater that is not billed, but is metered; reported in billing data.
City of Eureka – Water and Sewer Rate Study
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Number of Water Customers Number of Water Meters: Number of Meters by Class and Size Residential Residential - Outside Multi-Family Commercial Total
FY 2015/16 5/8" 7,778 25 580 694 9,077
1" 187 1 118 178 484
1.5 " 19 1 53 72 145
2"
3"
7 1 28 165 201
4" -
6" -
1 17 18
8" -
1 1 8 10
Total Meters -
5 5
1 1
7,991 30 780 1,140 9,941
Total % of Meters 80.4% 0.3% 7.8% 11.5% 100.0%
Number of Equivalent Water Meters: Number of Equivalent Meters by Class and Size Residential Residential - Outside Multi-Family Commercial Total
FY 2015/16 5/8" 7,778 25 580 694 9,077
1" 468 3 295 445 1,210
1.5 " 95 5 265 360 725
2" 56 8 224 1,320 1,608
3" 16 272 288
4"
6"
25 25 200 250
250 250
Total Meters
8" 80 80
8,397 82 1,389 3,621 13,488
Total % of Equivalent Meters 62.3% 0.6% 10.3% 26.8% 100.0%
City of Eureka – Water and Sewer Rate Study
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Single Family Residential Consumption
City of Eureka – Water and Sewer Rate Study
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Financial Plan - Sewer (cont.) Financial Plan: Sinking Fund, Alternative #2
City of Eureka – Water and Sewer Rate Study
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Financial Plan - Sewer Financial Plan: Sinking Fund, Alternative #2
Five-Year Financial Projection: Summary of Sources and Uses of Funds and Net Revenue Requirements Sources of Wastewater Funds Rate Revenue Under Prevailing Rates Non-Rate Revenues Total Sources of Funds Uses of Wastewater Funds Operating Expenses Debt Service Rate-Funded Capital Expenses Total Use of Funds Surplus (Deficiency) before Rate Increase Additional Revenue from Rate Increases (1) Surplus (Deficiency) after Rate Increase Projected Annual Rate Increase Cumulative Rate Increases Net Revenue Requirement (2)
Projected
Budget FY 2016/17
FY 2017/18
FY 2018/19
FY 2019/20
FY 2020/21
FY 2021/22
$
6,750,000 204,256
$
6,750,000 182,715
$
6,790,700 $ 179,100
6,839,200 $ 179,100
6,885,100 $ 183,341
6,931,600 208,779
$
6,954,256
$
6,932,715
$
6,969,800 $
7,018,300 $
7,068,441 $
7,140,379
$
6,298,417 $ 1,296,997 -
6,328,392 $ 1,389,364 1,546,484
6,570,859 $ 1,389,357 2,066,663
6,858,717 $ 1,386,539 2,057,331
7,128,978 $ 1,390,376 2,023,134
7,403,436 1,392,589 4,186,741
$ $
7,595,414 (641,157) (641,157) 0.00% 0.00% 6,291,157
$
$
$ $ $
$
9,264,239 (2,331,525) 1,638,500 (693,025) 29.00% 29.00% 7,981,525
$ $ $
$
10,026,879 (3,057,079) 3,752,165 695,086 29.00% 66.41% 8,707,079
$ 10,302,587 $ 10,542,488 $ 12,982,765 $ (3,284,287) $ (3,474,047) $ (5,842,387) 5,914,663 6,724,189 7,342,899 $ 2,630,376 $ 3,250,143 $ 1,500,512 23.00% 7.00% 5.00% 104.68% 119.01% 129.96% $ 8,934,287 $ 9,124,047 $ 11,492,387
1. Assumes new rates are implemented July 1, 2017. 2. Total Use of Funds less non-rate revenues. This is the annual amount needed from wastewater rates.
Annual Deficiency in Rate Revenue is Not Sustainable City of Eureka – Water and Sewer Rate Study
41
Number of Sewer Customers Number of Sewer Accounts & Housing Equivalents Units: Customer Class SINGLE FAMILY MULTIPLE COMMERCIAL LIGHT COMMERCIAL MEDIUM COMMERCIAL HEAVY Grand Total:
Number of Accounts (1) 7,636 1,007 1,020 32 117 9,812
Percent of Total 77.82% 10.26% 10.40% 0.33% 1.19% 100.00%
Number of Housing Percent of Total Equivalent Units (HEUs) (1) 7,642 59.40% 4,009 31.16% 1,066 8.29% 32 0.25% 117 0.91% 12,866 100.00%
1. Customer Accounts and HEUs based on June 2016 billing data.
City of Eureka – Water and Sewer Rate Study
42
Sewer Bill Comparison – Single-Family
Financial Plan: Sinking Fund, Alternative #2 City of Eureka – Water and Sewer Rate Study
43
Rate Design: Fixed vs. Variable %’s
Fixed 33%
This Promotes Revenue INSTABILITY Variable 33% Fixed 67%
Variable 67% This Promotes Revenue STABILITY
City of Eureka – Water and Sewer Rate Study
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Inflation Factors Cost Type
Inflation Factor
Customer Growth
0.0%
General Cost Inflation
3.0%
Labor Cost Inflation
4.4%
Water Purchases*
0.0%
Energy
5.0%
Chemicals
5.0%
Fuel
3.0% *Pass-Through for Additional Future Purchased Water Costs City of Eureka – Water and Sewer Rate Study
45
Hydraulic Capacity Meter Size
Capacity Standard Meters
Equivalency to 5/8 inch meter
5/8 Inch
20 gpm
1.00
3/4 Inch
30 gpm
1.50
1 Inch
50 gpm
2.50
1.5 Inch
100 gpm
5.00
2 Inch
160 gpm
8.00
3 Inch
320 gpm
16.00
4 Inch
500 gpm
25.00
6 Inch
1,000 gpm
50.00 City of Eureka – Water and Sewer Rate Study
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