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Item 4 - Visual slideshow presented by Staff at MeetingPUBLIC HEARING FOR NEW RATE STRUCTURES AND PROPOSED TWO -YEAR WATER, RECYCLED WATER, AND WASTEWATER RATES AND APPROVAL/APPROPRIATION OF ONE-TIME SALARY RANGE ADJUSTMENTS MARCH 3, 2020 •Water •Rate drivers •Proposed revenue increases •Wastewater •Rate drivers •Proposed revenue increases •Timeline •Community Outreach •Recommendations Agenda •Rate drivers •Imported water costs •Represents 60% of operating costs •SDCWA untreated water rate increased 4.8% •Rate funded capital •Over $100M in infrastructure •Currently proposed at ~$2.4M/year for the next 5 years •Proposed increases •March 2020: 4.5% •January 2021: 4.5% Water Rate Drivers and Proposed Increases 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: 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 Financial Plan: Rate Comparison $144 $185 $221 $222 $228 $232 $233 $238 $240 $241 $251 $261 $262 $274 $281 $284 $288 $295 $301 $314 $315 $339 $0 $50 $100 $150 $200 $250 $300 $350 $400 Bi-monthly Bill ($)Bi-Monthly Bill Comparison for a 3/4" meter at 37 units bi-monthly Average = $258 * As of Sept. 2019*Average excludes City of Poway proposed charges. •Rate drivers •Treatment costs •Represents 44% of operating costs •San Diego Pure Water program: Poway’s share est. at $4M/year for the next 5 years •Rate funded capital •Over $100M in infrastructure •Currently proposed at ~$1M/year for the next 5 years •Proposed increases •March 2020: 6.3% •January 2021: 6.3% Wastewater Rate Drivers and Proposed Increases 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: Example Bill Current Proposed (Mar. 2020)Proposed (Jan. 2021) Residential1,2 $99.79 $92.24 $98.05 Change ($)($7.55)$5.81 Change (%)(7.6%)6.3% Wastewater Financial Plan: Rate Comparison $47 $56 $57 $78 $85 $92 $100 $104 $110 $111 $112 $113 $126 $132 $133 $150 $158 $162 $166 $176 $184 $197 $206 $264 $0 $50 $100 $150 $200 $250 $300 Bi-monthly Bill ($)Bi-Monthly Bill Comparison for 15 units of Wastewater Flow Average = $132 * As of Sept. 2019*Average excludes City of Poway proposed charges. •Workshops •Website •Poway Today e -newsletter •Social media •Bill estimator tool •Person-to-person Community Outreach Workshop 1: Presentation of options Oct. 15, 2019 Workshop 2: Presentation of options Nov. 19, 2019 Set Public Hearing Jan. 7, 2020 Mail 218 Notice By Jan. 17, 2020 Public Hearing Mar. 3, 2020 Schedule Year 1: Rates Effective Mar. 3, 2020 Year 2: Rates Effective Jan. 1, 2021 Set Public Hearing Sept. 7, 2021 Mail 218 Notice By Sept. 17, 2021 Public Hearing Nov. 2, 2021 Year 1: Rates Effective Jan. 1, 2022 Year 2: Rates Effective Jan. 1, 2023First Two-Year Rate PeriodSecond Two-Year Rate Period •Open the public hearing, hear testimony and accept all written protests •Close the public hearing •Adopt the resolutions Recommendations Water Financial Plan Water Capital Projections Water Rate Impacts Tier Tier Breakpoint (Units)% of Water Use % of Bills 1 20 42%49% 2 56 29%35% 3 >56 29%16% Avg. usage:37 units Fixed:20% Avg. summer usage:56 units Variable:80% Wastewater Financial Plan Wastewater Capital Projections Wastewater Rate Impacts Item Amount Fixed:30% Variable:70% Avg. winter wastewater generation:15 units Water Rate Design: Fixed/Variable •Minimum reserve: 90 days of operating expenses •Target reserve (Workshop 1): 180 days of operating expenses •Target reserve (Workshop 2): 120 days of operating expenses Target Operating Fund Balances •Fixed + variable residential rate •85% of lowest winter water bill for the property averaged over 3 years •Capped at 24 ccf Wastewater Rate Design: Option 2 Wastewater Rate Design: Option 2 •Minimum reserve: 90 days of operating expenses •Target reserve (Workshop 1): 180 days of operating expenses •Target reserve (Workshop 2): 120 days of operating expenses Target Operating Fund Balances Units Current ($)Proposed ($)Difference ($)Difference (%) 1 50.88 31.00 (19.88)(39.1%) 2 50.88 35.38 (15.50)(30.5%) 3 50.88 39.75 (11.13)(21.9%) 4 50.88 44.12 (6.76)(13.3%) 5 50.88 48.50 (2.38)(4.7%) 6 73.46 52.87 (20.59)(28.0%) 7 73.46 57.25 (16.21)(22.1%) 8 73.46 61.62 (11.84)(16.1%) 9 73.46 66.00 (7.46)(10.2%) 10 73.46 70.37 (3.09)(4.2%) 11 73.46 74.74 1.28 1.7% 12 73.46 79.12 5.66 7.7% 13 99.79 83.49 (16.30)(16.3%) 14 99.79 87.87 (11.92)(11.9%) 15 99.79 92.24 (7.55)(7.6%) 16 99.79 96.62 (3.17)(3.2%) 17 99.79 100.99 1.20 1.2% 18 99.79 105.37 5.58 5.6% 19 99.79 109.74 9.95 10.0% 20 107.33 114.11 6.78 6.3% 21 107.33 118.49 11.16 10.4% 22 107.33 122.86 15.53 14.5% 23 107.33 127.25 19.91 18.5% 24 107.33 131.61 24.28 22.6% Wastewater: Option 2c (F/V 30%/70%) Water Opt. 2c (25%/75%) & Wastewater Opt. 2c (30%/70%) •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 Structure: Cost of Service Wastewater Rate Design: Option 2a, 2b, & 2c •167 unique downloads as of Nov. 19 Bill Estimator Wastewater Rate Structure: Cost of Service Tier Statistics Water Supply Chain Water Facts Reserves Fixed/Variable Ratio Lower Fixed | Higher Variable •Customer has more control over their bill •Increased revenue volatility for the city •Increased rate volatility for residents •Impacted by State regulations and mandates Higher Fixed | Lower Variable •Customer has less control over their bill •Better aligns revenue type to expense type •Decreased revenue volatility for the city •Decreased rate volatility for residents •Less impacted by State regulations and mandates Versus Rate Structure Sustainability & Resiliency Conservation Affordability and Equity Legality and Administration Steps in Conducting a Rate Study Cost of Service & Rate Design •Cost allocations •Rate design •Rate calculations •Customer impact analysis Financial Plan •O&M evaluation •CIP evaluation & financing options •Cash flow analysis for financial sustainability & resiliency Rate Setting Framework •Pricing objectives •Financial goals & policies Final Rate Adoption •Report •Prop 218 notice •Public hearing Rate Setting Process: Objectives Rate Structure Sustainability & Resiliency Conservation Affordability and Equity Legality and Administration Long Range Financial Plan Policies Revenues Expenses Rate Setting Process: Financial Plan Rate Setting Process: Cost of Service •Revenue Requirement Functionalize •Supply •Treatment •Distribution Allocate •Base •Extra Capacity •Customer •Conservation Distribute •Residential •Non-residential •Irrigation Cost of Service by Customer Class Revenue Requirement Supply Base/Delivery Costs Conservation Extra Capacity Meter Maintenance Customer Service Rate Setting Process: Cost of Service (Allocation) Variable Rate ($/ccf) Fixed Charge by Meter Size Customer Classes (Residential, Non- residential, Irrigation, etc.) Supply (Use or Accounts) Base/Delivery Costs (Use: Same for All Classes) Conservation (Distributed to High Vol.) Extra Capacity (Peaking Factors/Meter Cap Ratios) Meter Maintenance (Meter Size) Customer Service (# of Bills) Rate Setting Process: Cost of Service (Distribution) •Cost of Service •Article XIIIC and XIIID of California Constitution •Proposition 218 (1996) •Proposition 26 (2010) •Pass -through provisions •California Government Code 53756 (2009) Legal Environment