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HomeMy WebLinkAboutSept 14th City Council Meeting- Set Public Hearing Date - Final City WebsiteCity of Seal Beach Water and Wastewater Rate Study Set Public Hearing Date September 14, 2020 Terms You Will Hear •Cost of Service – Utility’s cost to provide water service to each customer class based on demands they place on utility •Customer Class – Residential, Commercial, City, and Irrigation •Fixed Charge – Amount charged by meter size. Does not vary by water use •hcf – Common billing unit used to charge for water in California. hcf = 100 cubic feet = 748 gallons •Meter Size – Meters track water usage at the property. Size determined by its supply line. Most residential meters are ¾” •Rate – Amount charged per unit of water •Rate Structure – Rates and charges applied to various customer classes •Rate Study – Process of determining proposed future water rates •Tiered Rate Structure – Pricing water so that cost per unit increases as consumption increases •Uniform Rate Structure – Charging same amount per unit of water used, regardless of how much water is used •Volumetric Rate – Amount charged per unit of water use. Measured in hcf by City. 1.A Quick Preview of Bill Impacts for SFR (87% of customers) 2.Rate Study Background 3.Water System •Water Financial Plan •Proposed Water Rate Changes and Rates •Water Bill Impacts 4.Wastewater System •Wastewater Financial Plan •Proposed Wastewater Changes and Rates •Wastewater Bill Impacts 5.How Total Water and Sewer Customer Bills are Affected - combined Water and Wastewater Bill Impacts 6.Next Steps 3 Agenda This Photo by Unknown Author is licensed under CC BY-NC Combined Water and Sewer, Single Family Residential (SFR), ¾” Meter •Average SFR customer bill will go down •>80% of SFR combined Water & Sewer Bills will stay the same or go down •Due to a decrease in sewer bills 4 Bi-Monthly Water Use (hcf) Total Proposed Charge Total Current Charge Difference ($) Approximate % of 3/4" SFR Customers 5 $87.18 $103.11 -$15.93 17% 10 $103.84 $116.72 -$12.87 16% 15 $122.84 $130.32 -$7.47 19% 20 $138.78 $143.92 -$5.14 17% 25 $157.36 $157.52 -$0.16 11% 81% of customers 5 Rate Study Background Why Water Rate Changes Are Needed 6 •Last water rate increase - beginning of FY2014 •City’s costs to provide water service are rising •Fund critical water infrastructure repair and replacement capital costs projects ›City plans to invest an average of $3.28 million per year, over the next 5 years, starting in FY 2021 ›Total cost of the planned five year CIP is $16.4 million ›Issuance of a $12 million bond will be required •Implement rate structure changes to increase fairness and equity in accordance with Prop 218 requirements Water, Sewer, and Trash vs CPI 7 Across the country Water, Wastewater and Trash rates are rising faster than normal goods/services. Source: https://data.bls.gov/timeseries/CUSR0000SEHG 8 $579 $701 $744 $794 $847 $890 $923 $942 $979 $1,050 $1,078 $1,104 $1,137 $1,182 $1,240 $249 $249 $253 $266 $273 $294 $322 $402 $445 $462 $487 $502 $534 $574 $615 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 MWD $/AF OCWD $/AF Water Supply Costs (Acre-Feet) Water Supply Cost Increase $1.1 $1.9 0.0 0.5 1.0 1.5 2.0 FY14 FY20Millions Water Purchase Cost Increase Water Purchase Cost Based on 3350 AF Annual Demand 10 Water Enterprise Financial Health What Is Funded By The Water Rates You Pay •Water utility is entirely funded by water rates from utility bills sent to customers •City’s water utility is an enterprise fund—it does not receive money from taxes •Customer water rates (utility bill) fund all the operating costs and the infrastructure investments for the city’s water system Water Financial Health Without Revenue Changes 12 Proposed Revenue Increases 1.Developed by projecting revenue and expenses and assessing if revenue was sufficient to cover costs 2.Costs include O&M, capital, debt and reserve planning 3.Assumes $12M debt issuance to fund capital in FY 2023 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025 Jan 1, 2021 July 1, 2021 July 1, 2022 July 1, 2023 July 1, 2024 14.0%12.0%8.0%8.0%8.0% 13 Proposed Cash Reserve Policies •City has no formal reserve policies for the Water Enterprise •Purpose of reserves are to: ›cover short-term operating costs ›Award construction contracts ›Mitigate financial risk of potential asset failure ›Enhance credit rating (future debt issues) •Recommended reserve policy ›Operating reserve target: 90 days of operating cash on hand ›Capital reserve target: 1 year of annual average CIP 14 Water Financial Plan with Revenue Increase 15 -300% -150% 0% 150% 300% 450% 600% -10% -5% 0% 5% 10% 15% 20% FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025 Revenue Adjustments & Debt Coverage Revenue Adjustments Debt Coverage Coverage Alert Required Coverage -$5 $0 $5 $10 $15 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsOperating Financial Plan Operating Expenses Rate Funded Capital Debt Net Cashflow Current Revenue Proposed Revenue $0 $1 $2 $3 $4 $5 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsCapital Funding Sources Debt Funded Rates/Reserves Funded Total CIP $0 $1 $2 $3 $4 $5 $6 $7 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsAll Reserves Total Reserve Balance O&M and Capital Reserve Target Minimum Operating Reserve West OCB Loan does not have a debt covenant. 16 Water Rate Changes Current Rate Structure hcf = 100 cubic feet = 748 gallons 17 Water Capital Fund Fixed Charge Residential Bi-monthly (Includes Multi-family Accounts)Leisure World All Meter Sizes $ / hcf Capital Fund Fixed Charge 5/8" - 3/4"$37.86 Tier 1 0 - 26 hcf $2.23 12"$788.86 1"$47.89 Tier 2 26+ hcf $2.88 1 1/2"$72.97 Tier 1 0 - 45,490 hcf $2.23 2"$103.06 Commercial Bi-monthly Commercial Bi-monthly Tier 2 45,490 + hcf $2.88 3"$183.32 5/8 - 3/4"4" 4"$273.60 Tier 1 0 - 26 hcf $2.25 Tier 1 0 - 686 hcf $2.25 City Volumetric Rate 6"$524.39 Tier 2 27+ hcf $2.81 Tier 2 687+ hcf $2.81 All Water Use $2.42 8"$825.34 1"6" 10"$1,176.45 Tier 1 0 - 43 hcf $2.25 Tier 1 0 - 1,941 hcf $2.25 12"$1,577.72 Tier 2 44+ hcf $2.81 Tier 2 1,942+ hcf $2.81 1 1/2"8" Tier 1 0 - 88 hcf $2.25 Tier 1 0 - 4,951 hcf $2.25 Tier 2 89+ hcf $2.81 Tier 2 4,952+ hcf $2.81 2"10" Tier 1 0 -205 hcf $2.25 Tier 1 0 - 7,117 hcf $2.25 Tier 2 206+ hcf $2.81 Tier 2 7,118+ hcf $2.81 3"12" Tier 1 0 -420 hcf $2.25 Tier 1 0 - 45,490 hcf $2.23 Tier 2 421+ hcf $2.81 Tier 2 45,491+ hcf $2.88 Proposed Water Rate Structure Why the Proposed Changes? •Traditional rate setting groups customers by class (SFR, MFR, Commercial, Irrigation, etc.) instead of meter size ›Based on water use behavior (peak summer use) ›e.g., 1” commercial customer vs 1” irrigation customer •State Water Conservation Policies (SB 606 and AB 1668) will require each water provider to calculate water budget by June 2022. ›Possible fine for purveyors that do not meet budget by 2027. ›Smaller SFR Tier 1 (17 hcf instead of 26 hcf) will incentivize conservation to make sure Seal Beach stays within its budget. •Fixed charges are being calculated in proportion to American Water Works Association hydraulic capacity factors – the industry standard for setting fixed charges. Thus, the fixed charge increase for larger meters. 18 Proposed Water Rate Structure (Cont.) •Single Family Residential (SFR) ›change to the tier widths - better aligns with average water use ›Tier 1 = average yearly water use for SFR account (17 hcf). This is average indoor and outdoor water use for the average home. •New Multi-Family Residential (MFR) class with tiers by dwelling unit . ›Quadplex would get 4 x 17 = 68 units in Tier 1. ›This is more equitable for large MFR customers. •Commercial ›Uniform Rate; commercial customers generally have much lower irrigation needs. •Irrigation ›Uniform Rate; created because this class has the highest peak summer water use •City ›Uniform Rate 19 Proposed Water Rate Structure 20 Meter Size Bi-monthly Fixed Charge Single Family Residential Bi-Monthly 5/8"$37.37 All Meter Sizes $/hcf 3/4"$37.37 Tier 1 0 - 17 hcf $2.63 1"$55.56 Tier 2 18+ hcf $2.78 1.5"$107.63 2"$162.76 Multi-family (Tiers are per dwelling unit) 3"$289.49 All Meter Sizes $/hcf 4"$481.69 Tier 1 0 - 17 hcf $2.63 6"$948.41 Tier 2 18+ hcf $2.76 8"$1,516.96 10"$2,171.28 All Meter Sizes $/hcf 6" - Leisure World (Monthly)$474.20 Commercial $2.64 Irrigation $2.70 City $2.67 Leisure World - Same as Multi-family Fixed Charges Volumetric Charges Commercial, Irrigation and City have uniform volumetric rates. Two new customer classes: Multi-Family Residential & Irrigation Single Family, Multi- Family, and Leisure World have tiered volumetric rates. 21 Water Bill Impacts Single Family Residential Bill Impacts 22 •Most large bill impacts are likely not SFR customers but MFR customers (classification errors) Bi-monthly SFR Water Bill Impact No. of Customers $120 6 $70 2 $60 - $50 21 $40 11 $30 - $20 1,054 $10 1,568 $5 1,413 -$50 1 Total Customers 4,076 Multi-Family Residential Bill Impacts, All Meters 23 •The large impacts shown at the top are for a large apartment complex which will see large sewer decreases to offset the overall bi-monthly bill impacts Bi-monbthly MFR Water Bill Impact No. of Customers $500 5 $250 8 $100 17 $50 13 $40 11 $30 3 $20 78 $10 85 $5.0 38 $0.0 2 Total Customers 260 Commercial Bill Impacts, All Customers 24 •Uniform volumetric rate Bi-monthly Commerical Water Bill Impact No. of Customers $1,600 2 $1,000 4 $500 7 $200 34 $100 18 $75 28 $50 21 $25 10 $20 41 $10 27 $5.0 50 $0 20 -$25.0 1 -$35.0 0 Total Customers 263 Monthly LW Water Cost Per Apartment •Leisure World has the same rate as Multi-family Customers Billing Units (HCF) Used Current Cost /Month Current Cost/Apt Proposed Cost /Month Proposed Cost /Apt Change Per Apt Per Month Monthly Min HCF 19,486 $ 44,243 $ 6.70 $ 51,722 $ 7.83 $ 1.13 Monthly Average HCF 39,198 $ 88,199 $ 13.35 $ 103,564 $ 15.67 $ 2.33 Monthly Max HCF 53,302 $ 124,730 $ 18.88 $ 140,695 $ 21.29 $ 2.42 6608 Residential Apartments 26 Wastewater Enterprise Financial Health Current Wastewater Rate Background •Last Sewer Rate increase was in 2005 •Implemented a series of fixed fee increases (aka capital charge) over 10 years ending in 2016 ›Primary goal was to raise revenue to repair the failing sewer infrastructure •$3.3 million Sewer Revenue Bond issued in 2011 to fund sewer capital projects •Sewer has healthy CIP reserves 27 Wastewater Financial Health Without Revenue Changes 28 Proposed Revenue Decrease •Sewer enterprise has ample reserves for a one-time revenue decrease •City reaches its reserve targets within 5 years 29 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025 Jan 1, 2021 July 1, 2021 July 1, 2022 July 1, 2023 July 1, 2024 -25%0%0%0%0% Wastewater Financial Plan with Revenue Decrease 30 -200% -150% -100% -50% 0% 50% 100% 150% 200% 250% 300% -30% -10% 10% 30% 50% FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025 Revenue Adjustments & Debt Coverage Revenue Adjustments Debt Coverage Required Coverage Coverage Alert -$4 -$2 $0 $2 $4 $6 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsOperating Financial Plan Operating Expenses Rate Funded Capital Debt Net Cashflow Current Revenue Proposed Revenue $0 $2 $4 $6 $8 $10 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsAll Reserves Total Reserve Balance Minimum Operating Reserve O&M and Capital Reserve Target $0 $1 $1 $2 $2 $3 $3 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025MillionsCapital Funding Sources Debt Funded Rates/Reserves Funded Total CIP 31 Wastewater Rate Changes Current Bi-monthly Sewer Rate Structure •How Sewer Customers are billed: •Residential, Commercial, and City Sewer Service Charge is currently 22% of (Water Service Charge + Water Capital Charge) + Sewer Capital Charge •75% of current sewer revenue ($2M of $2.7M) is collected by the Sewer Capital Charge •The larger a customer’s meter, the more they pay 32 Residential Capital Charge 5/8"$43.32 3/4"$43.32 1"$59.88 1.5"$110.26 2"$173.46 3"$1,228.60 4"$2,055.54 Commerical Capital Charge 5/8"$47.26 3/4"$47.26 1"$102.38 1.5"$133.88 2"$535.54 3"$1,480.62 4"$2,669.84 6"$3,772.42 8"$7,875.62 10"$7,875.62 Why Are Wastewater Rate Structure Changes Needed? •The proposed rate structure is more equitable: •does not charge in proportion to meter size, but charges in proportion to estimated sewer flow. ›e.g., a park with 2” meter may only have a small bathroom; the rest of water use is for irrigation and does not go into the sewer. •Industry moving away from meter size as estimate of potential sewer use. 33 Proposed Sewer Rate Structure 34 •Residential (SFR) sewer flow = minimum water use during the year (minimum billing cycle) •Total SFR Sewer Charge = Flat Charge + lowest billing cycle use (hcf) x $ Volumetric Rate ($/ hcf) •SFR sewer use has a minimum and cap (4 hcf and a 24 hcf cap, bi-monthly) •All other customers sewer bills vary every billing cycle = Bi-monthly fixed charge + Sewer Rate ($ / hcf) x water use x return to sewer (RTS) factor. •RTS = 100% for MFR, 90% for Commercial and 50% for City. Customer Class Proposed Bi-Monthly Fixed Charge Proposed Bi- monthly Billing & Customer Service Charge Proposed Bi- Monthly Volumetric Charge ($/hcf) Single Family $31.98 $1.17 Multi-family $0.81 $3.83 Commercial $0.81 $3.83 City $0.81 $3.83 Leisure World Calculation •Leisure World currently does not pay sewer charge •It discharges sewage through a City-owned pipe connected to the Orange County Sanitation District. •Rate based on the cost to maintain/replace the pipe and LW’s proportionate share of sewer flow: ›capital cost of the sewer pipe ($1M) serving Leisure World divided by 80 years (i.e., the expected life) plus yearly O&M ›Pipe cost is prorated for Leisure World’s contribution to sewer flow (95%) •Leisure World’s fixed monthly sewer charge: ›$79.17 for O&M (95% of $1,000) ›$1,019.25 for capital maintenance/replacement of sewer pipe (95% of $1M / 80 yrs) ›TOTAL: $1,098.42 per month 35 Navy Sewer Calcs Sewer—charged monthly •Navy: ›uses a length of pipe that is 5.4% of the total collection system › contributes 15.2% of the total flow in that pipe •Annual capital cost x 5.4% x 15.2% = $10,812 •Annual O&M cost x 5.4% x 15.2% = $808 •TOTAL annual sewer charge = $10,812 + $808 = $11,620 37 Wastewater Customer Bill Impacts Sewer Single Family Residential (SFR), All Customers 38 SFR Bi-monthly Sewer Bill Impact No. of Customers $5.0 3 $2.5 9 $0 118 -$5 502 -$10 1,126 -$15 1,781 -$25 489 -$50 36 -$100 11 -$200 0 Total Customers 4,075 Multi Family Residential (MFR), All Customers 39 Bi-monthly MFR Sewer Bill Impact No of Customers $650 4 $250 14 $100 11 $75 17 $50 28 $25 62 $0 17 -$5 25 -$15 23 -$25 32 -$50 14 -$100 8 -$250 1 -$500 2 -$1,200 2 Total Customers 260 Commercial, All Customers 40 Bi-monthly Commerical Sewer Bill Impact No. of Customers $1,650 3 $1,000 2 $750 7 $500 10 $250 15 $100 10 $50 10 $25 10 $0 176 -$500 11 -$1,000 3 -$2,000 6 -$4,000 0 Total Customers 263 41 Estimated Combined Water and Wastewater Bill Impacts Combined Water and Sewer, Single Family Residential (SFR), ¾” Meter •Average SFR customer bill will go down •>81% of SFR combined Water & Sewer Bills will stay the same or go down due to a decrease in sewer bills. 42 Bi-Monthly Water Use (hcf) Total Proposed Charge Total Current Charge Difference ($) Approximate % of 3/4" SFR Customers 5 $87.18 $103.11 -$15.93 17% 10 $103.84 $116.72 -$12.87 16% 15 $122.84 $130.32 -$7.47 19% 20 $138.78 $143.92 -$5.14 17% 25 $157.36 $157.52 -$0.16 11% 81% of customers Combined Water and Sewer, Multi-family Residential (MFR), Fourplex, 1” Meter 43 •Shows a typical 4-plex which is most common for a 1” meter •Bill impacts will depend on how much water each customer uses Bi-Monthly Water Use (hcf) Total Proposed Charge Total Current Charge Difference ($) Approximate % of 1" MFR Customers 16 $140.56 $161.84 -$21.28 30% 20 $162.56 $172.72 -$10.15 9% 25 $191.03 $186.32 $4.70 13% 30 $215.66 $203.10 $12.56 10% 35 $244.12 $220.66 $23.46 10% 73% of customers Combined Water and Sewer, Commercial, 1” Meter •1” is the most common commercial meter size •Bill impact depends on water use 44 Bi-Monthly Water Use (hcf) Total Proposed Charge Total Current Charge Difference ($) Approximate % of 1" Commercial Customers 8 $105.07 $182.77 -$77.70 33% 12 $129.42 $193.75 -$64.33 11% 16 $153.76 $204.73 -$50.96 7% 25 $208.55 $229.43 -$20.88 11% 35 $269.42 $256.88 $12.54 12% Next Steps •Set Public Hearing date for Nov 23rd •City to mail Proposition 218 Public Hearing (early October) •Complete Rate Study Report (early October) 46 End of Presentation Questions?