Loading...
Item 5.1 - Visual slideshow presented by Staff at MeetingWATER AND WASTEWATER RATE STUDY AND PUBLIC WORKSHOP OCTOBER 15, 2019 •Rate setting overview •Water •Residential rate structure options (rate design) •Recommended changes (cost of service) •Proposed rates (financial plan) •Wastewater •Residential rate structure and collection options (rate design) •Recommended changes (cost of service) •Proposed rates (financial plan) Agenda Rate Setting Overview •Consultant: Raftelis Financial Consultants •Objectives: •Comply with Proposition 218 and other statutes •Update data on current customer usage demands •Ensure sufficient funding for operations •Provide different rate design options 2020 Rate Setting Framework Rate Structure Sustainability & Resiliency Conservation Affordability And Equity Legality and Administration Water Rate Design Options, Cost of Service, and Financial Plan •City potable rate •Same as non-residential rate •Recycled water rate •Was 90% of non-residential commodity rate •Now based on cost of service •Two -year rate cycle •Adopt rates for calendar year 2020 and 2021 Water Rate Structure: Rate Design Water Rate Structure: Residential Rate Design Options Option Residential Tiers Fixed (%)Variable (%) 2a 3 17%83% 2b 3 20%80% 2c 3 25%75% Option Residential Tiers Fixed (%)Variable (%) 3a 4 17%83% 3b 4 20%80% 3c 4 25%75% Option Residential Tiers Fixed (%)Variable (%) 1a 2 17%83% 1b 2 20%80% 1c 2 25%75% Water Rate Design: Fixed/Variable Water Rate Design: Option 1a Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 199 94%98% 2 >199 6%2% Avg. usage:37 units Fixed:17% Avg. summer usage:56 units Variable:83% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 2-tier | 17%/83% F/V Water Rate Design: Option 1a Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $255.99 $267.83 Change ($)15.39 11.84 Change (%)6.4%4.6% Water Rate Design: Option 1b Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 199 94%98% 2 >199 6%2% Avg. usage:37 units Fixed:20% Avg. summer usage:56 units Variable:80% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 2-tier | 20%/80% F/V Water Rate Design: Option 1b Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $256.82 $268.66 Change ($)16.22 11.84 Change (%)6.7%4.6% Water Rate Design: Option 1c Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 199 94%98% 2 >199 6%2% Avg. usage:37 units Fixed:25% Avg. summer usage:56 units Variable:75% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 2-tier | 25%/75% F/V Water Rate Design: Option 1c Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $258.34 $270.06 Change ($)17.74 11.72 Change (%)7.4%4.5% Option Pros Cons Opt. 1a: Two -tier structure with a 17/83 fixed/variable ratio •Consistent with current rate structure •Most users experience a uniform rate •Provides good revenue stability •Less affordable for low volume customers •Doesn’t send a strong conservation signal Opt. 1b: Two -tier structure with a 20/80 fixed/variable ratio •Consistent with current rate structure •Most users experience a uniform rate •Provides greater revenue stability •Less affordable for low volume customers •Doesn’t send a strong conservation signal Opt. 1c: Two -tier structure with a 25/75 fixed/variable ratio •Consistent with current rate structure •Most users experience a uniform rate •Provides greater revenue stability •Least affordable for low volume customers •Doesn’t send a strong conservation signal Water Rate Design: Option 1 Pros/Cons Water Rate Design: Option 2a Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 >56 29%16% Avg. usage:37 units Fixed:17% Avg. summer usage:56 units Variable:83% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 3-tier | 17%/83% F/V Water Rate Design: Option 2a Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $236.74 $247.61 Change ($)($3.86)10.87 Change (%)(1.6%)4.5% Water Rate Design: Option 2b Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 >56 29%16% Avg. usage:37 units Fixed:20% Avg. summer usage:56 units Variable:80% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 3-tier | 20%/80% F/V Water Rate Design: Option 2b Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $240.14 $251.18 Change ($)($0.46)11.04 Change (%)(0.2%)4.6% Water Rate Design: Option 2c Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 >56 29%16% Avg. usage:37 units Fixed:25% Avg. summer usage:56 units Variable:75% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 3-tier | 25%/75% F/V Water Rate Design: Option 2c Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $245.46 $256.78 Change ($)$4.86 11.32 Change (%)2.0%4.6% Option Pros Cons Opt. 2a: Three-tier structure with a 17/83 fixed/variable ratio •Mirrors essential water use, average use, and high volume •More affordable for low volume users •Stronger conservation signal •Lesser revenue stability •Could lead to demand hardening Opt. 2b: Three-tier structure with a 20/80 fixed/variable ratio •Mirrors essential water use, average use, and high volume •Moderate revenue stability •Stronger conservation signal •Less affordable for low volume users •Could lead to demand hardening Opt. 2c: Three-tier structure with a 25/85 fixed/variable ratio •Mirrors essential water use, average use, and high volume •Good revenue stability •Stronger conservation signal •Least affordable for low volume users •Could lead to demand hardening Water Rate Design: Option 2 Pros/Cons Water Rate Design: Option 3a Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 150 20%13% 4 >150 9%3% Avg. usage:37 units Fixed:17% Avg. summer usage:56 units Variable:83% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 4-tier | 17%/83% F/V Water Rate Design: Option 3a Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $237.62 $248.66 Change ($)($2.98)11.04 Change (%)(1.2%)4.6% Water Rate Design: Option 3b Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 150 20%13% 4 >150 9%3% Avg. usage:37 units Fixed:20% Avg. summer usage:56 units Variable:80% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 4-tier | 20%/80% F/V Water Rate Design: Option 3b Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $240.65 $251.69 Change ($)$0.05 11.04 Change (%)0.0%4.5% Water Rate Design: Option 3c Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 150 20%13% 4 >150 9%3% Avg. usage:37 units Fixed:25% Avg. summer usage:56 units Variable:75% 1.Average single-family household •Bi-monthly consumption: 37 units •Meter Size: ¾” 2.Tier Structure: •Current: 2-tier | 16%/84% F/V •Proposed: 4-tier | 25%/75% F/V Water Rate Design: Option 3c Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $240.60 $245.97 $257.29 Change ($)$5.37 11.32 Change (%)2.2%4.6% Option Pros Cons Opt. 3a: Four-tier structure with a 17/83 fixed/variable ratio •Mirrors essential water use, average use, high volume, and very high volume •More affordable for low volume users •Strongest conservation signal •Least revenue stability •Could lead to demand hardening Opt. 3b: Four-tier structure with a 20/80 fixed/variable ratio •Mirrors essential water use, average use, high volume, and very high volume •Moderate revenue stability •Strongest conservation signal •Less affordable for low volume users •Could lead to demand hardening Opt. 3c: Four-tier structure with a 25/75 fixed/variable ratio •Mirrors essential water use, average use, high volume, and very high volume •Moderate revenue stability •Strongest conservation signal •Least affordable for low volume users •Could lead to demand hardening Water Rate Design: Option 3 Pros/Cons Option Pros Cons Opt. 1: two -tier structure with various fixed/variable options •Consistent with current rate structure •Most users experience a uniform rate •Provides good to greater revenue stability •Less to least affordable for low volume customers •Doesn’t send a strong conservation signal Opt. 2: three-tier structure with various fixed/variable options •Mirrors essential water use, average use, and high volume •Good revenue stability •More affordable for low volume users •Stronger conservation signal •Could lead to demand hardening Opt. 3: four-tier structure with various fixed/variable options •Mirrors essential water use, average use, high volume, and very high volume •Moderate revenue stability •More affordable for low volume users •Strongest conservation signal •Could lead to demand hardening Water Rate Design: Option Summary Pros/Cons Water Rate Structure: Cost of Service •Target operating fund balances •Minimum reserve: 90 days of operating expenses •Target reserve: 180 days of operating expenses •Target capital fund balances •Minimum reserve: 10% of net capital assets Water Financial Plan: Policies Water Financial Plan Water Financial Plan: Rate Comparison Wastewater Rate Design Options, Cost of Service, and Financial Plan •Government & Membership Organization rate •Two -year rate cycle •Adopt rates for calendar year 2020 and 2021 Wastewater Rate Structure: Rate Design •Option 1: •Fixed residential rate •Option 2a: •Fixed + variable residential rate with 20/80 fixed/variable ratio •Option 2b: •Fixed + variable residential rate with 25/75 fixed/variable ratio •Option 2c: •Fixed + variable residential rate with 30/70 fixed/variable ratio Wastewater Rate Structure: Rate Design Options •Fixed residential rate Wastewater Rate Design: Option 1 Wastewater Rate Design: Option 1 Impacts Option Pros Cons Opt. 1: Fixed residential rate •Simple rate structure, all residential customers pay the same charge •Simple to administer and update •Does not account for the variation in wastewater flow of customers •Less affordable for low volume customers Wastewater Rate Design: Option 1 Pros/Cons •Fixed + variable residential rate •Mirrors existing rate structure •Fixed component •Variable component •85% of lowest winter water bill for the property averaged over 3 years •Capped at 24 ccf Wastewater Rate Design: Option 2 Wastewater Rate Design: Option 2 Wastewater Rate Design: Option 2a Impacts Item Amount Fixed:20% Variable:80% Avg. winter wastewater generation:15 units 1.Average single-family household •Bi-monthly winter wastewater generation: 15 units 2.Tier Structure: •Current: 7-tier | 20%/80% F/V •Proposed: Variable + Fixed | 24 unit variable cap | 20%/80% F/V Wastewater Rate Design: Option 2a Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $99.79 $92.76 $98.68 Change ($)($7.03)5.92 Change (%)(7.0%)6.3% Wastewater Rate Design: Option 2b Impacts Item Amount Fixed:25% Variable:75% Avg. winter wastewater generation:15 units 1.Average single-family household •Bi-monthly winter wastewater generation: 15 units 2.Tier Structure: •Current: 7-tier | 20%/80% F/V •Proposed: Variable + Fixed | 24 unit variable cap | 25%/75% F/V Wastewater Rate Design: Option 2b Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $99.79 $92.54 $98.44 Change ($)($7.25)5.90 Change (%)(7.2%)6.3% Wastewater Rate Design: Option 2c Impacts Item Amount Fixed:30% Variable:70% Avg. winter wastewater generation:15 units 1.Average single-family household •Bi-monthly winter wastewater generation: 15 units 2.Tier Structure: •Current: 7-tier | 20%/80% F/V •Proposed: Variable + Fixed | 24 unit variable cap | 30%/70% F/V Wastewater Rate Design: Option 2c Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $99.79 $92.33 $98.21 Change ($)($7.46)5.88 Change (%)(7.4%)6.3% Wastewater Rate Design: Option 2a, 2b, & 2c Option Pros Cons Opt. 2a: Fixed + variable residential rate with a 20/80 fixed/variable ratio •Bills based on wastewater generation while also accounting for the fixed costs •Good revenue stability •Bill is constant throughout the year once the wastewater flow is established –easy for customer to understand •Need to track winter water use to estimate wastewater flow Opt. 2b: Fixed + variable residential rate with a 25/75 fixed/variable ratio •Bills based on wastewater generation while also accounting for the fixed costs •Greater revenue stability •Bill is constant throughout the year once the wastewater flow is established –easy for customer to understand •Need to track winter water use to estimate wastewater flow Opt. 2c: Fixed + variable residential rate with a 30/70 fixed/variable ratio •Bills based on wastewater generation while also accounting for the fixed costs •Greatest revenue stability •Bill is constant throughout the year once the wastewater flow is established –easy for customer to understand •Need to track winter water use to estimate wastewater flow Wastewater Rate Design: Option 2 Pros/Cons Option Pros Cons Opt. 1: Fixed residential rate •Simple rate structure, all residential customers pay the same charge •Simple to administer and update •Does not account for the variation in wastewater flow of customers •Less affordable for low volume customers Opt. 2: Fixed + variable residential rate with various fixed/variable ratio options •Bills based on wastewater generation while also accounting for the fixed costs •Greater revenue stability •Bill is constant throughout the year once the wastewater flow is established –easy for customer to understand •Need to track winter water use to estimate wastewater flow Wastewater Rate Design: Option Summary Pros/Cons Wastewater Collection Method •Collect residential charges via property tax roll •Represents 77% of total revenue •Due to County by Aug. 10 •Cash flow: two primary installments •Installment 1 due date: Dec. 10 •Installment 2 due date: Apr. 10 Option Pros Cons Opt. 3: Collect residential via property tax rolls •Reduces bi-monthly bills to customers •Less bad debt as property owners will pay their property taxes •Involves some additional costs in billing •Requires larger reserve levels due to cashflow timing •There may be a perception that we are not totally transparent – why collect on tax roll when City already bills on water bill Wastewater Collection Method: Pros/Cons Wastewater Rate Structure: Cost of Service •Target operating fund balances •Minimum reserve: 90 days of operating expenses •Target reserve: 180 days of operating expenses •Target capital fund balances •Minimum reserve: 5 year average CIP Wastewater Financial Plan: Policies Wastewater Financial Plan Wastewater Financial Plan: Rate Comparison Workshop 1: Presentation of options Oct. 15, 2019 Workshop 2: Presentation of options Nov. 19, 2019 Set Public Hearing Jan. 7, 2020 Mail 218 Notice By Jan. 17, 2020 Public Hearing Mar. 3, 2020 Schedule Year 1: Rates Effective Mar. 4, 2020 Year 2: Rates Effective Jan. 1, 2021 Set Public Hearing Sept. 7, 2021 Mail 218 Notice By Sept. 17, 2021 Public Hearing Nov. 2, 2021 Year 1: Rates Effective Jan. 1, 2022 Year 2: Rates Effective Jan. 1, 2023First Two-Year Rate PeriodSecond Two-Year Rate Period Discussion