HomeMy WebLinkAboutStudy Session Presentation - Water and Wastewater part 2Photo courtesy of Ken Lund (Flickr)City of Seal BeachWater and Wastewater Rate StudyCity Council Study Session IIApril 28, 2025City of Seal BeachWater and Wastewater Rate StudyCity Council Study Session IIApril 28, 2025
Raftelis Water and Wastewater Financial Plan Project TeamGina DePinto, APRCommunications35 years experienceFormer PIO in county, city, special district agencies, including OCWDgdepinto@raftelis.comNick KennedyAnalyst2+ years experienceWater and wastewater cost of service and rate design modeling across southern CAnkennedy@raftelis.com28+ years experience16 years helping southern CA agencies with financial plans and ratessgagnon@raftelis.comSteve Gagnon, PE (AZ)Project Manager
Agenda•Introduction and Recap of Study Session Iheld March 10, documents posted atutilityratestudy.sealbeachca.gov•Why are we discussing revenue increases?•Infrastructure Needs•Financial Plan and Rate Options
Revenue must be used to cover the costs for which the charge was imposedThe charge must be for a service that is actually used or immediately availableThe fee may not exceed the proportional cost to serve the parcelProposition 218 Requirements –Paraphrased Cannot collect more than what you needMust send a written notice to customers no less than 45 days before a public hearing
Background1.Study commenced June 2023 and was postponed2.Since then:a.City implemented final water rate increases from the last rate study on Jan 1, 2025b.City obtained an OCWD loan for $4.4M loan for the Lampson Well Treatment Systemc.City revised cost estimates for CIP projects – inflation has increased project costsd.City created two capital scenarios for water and sewer. Scenario 2 pushes out capital projects, to lower rate increases3.California Regulatory Updatesa.AB 2257 – Exhaustion of administrative remediesb.AB 755 – Top 10% of usersc.SB 323 – 120-day statue of limitations
6Why are rate increases needed?
Why are we discussing the need for rate increases?7Water and Sewer Utilities are not covering expenses Inflation: reached highest rate since 1981Rain: FY 2023 and 2024 were very “wet” years = decreased revenue Wholesale Water Costs: Increased OCWD water wholesale costs (partly due to PFAS), MWDOC –Import water wholesalerAging Infrastructure / Deferred MaintenanceSewer: Not meeting required debt coverage ratio, charges were reduced 25% in the last studyWHY?https://www.vcstar.com/story/news/local/2024/06/24/rising-costs-for-ventura-water-facility-prompt-rate-discussion/74175436007/As Ventura Water project costs rise, city weighs rate increasesThe updated price has ballooned to an estimated $672.2 million,a staff report shows, up by more than $115 million since the council discussed the project in November. November's projection, at $556.9 million, already marked$182 millionsince 2022, when the estimate stood at $374.4 million…"Costs prior to 2023 were engineering estimates that were lower than what we experienced with inflation," said Gina Dorrington, general manager for Ventura Water, in an email. "As the projects advanced through design, cost estimates were refined based on actual price quotes and inflationary factors." the estimate stood at $374.4 million.As Ventura Water project costs rise, city weighs rate increasesThe updated price has ballooned to an estimated $672.2 million,a staff report shows, up by more than $115 million since the council discussed the project in November. November's projection, at $556.9 million, already marked$182 millionsince 2022, when the estimate stood at $374.4 million…"Costs prior to 2023 were engineering estimates that were lower than what we experienced with inflation," said Gina Dorrington, general manager for Ventura Water, in an email. "As the projects advanced through design, cost estimates were refined based on actual price quotes and inflationary factors." the estimate stood at $374.4 million.
Why are we discussing the need for rate increases?8Water and Sewer Utilities are not covering expenses Inflation: reached highest rate since 1981Rain: FY 2023 and 2024 were very “wet” years = decreased revenue Wholesale Water Costs: Increased OCWD water wholesale costs (partly due to PFAS), MWDOC –Import water wholesalerAging Infrastructure / Deferred MaintenanceSewer: Not meeting required debt coverage ratio, charges were reduced 25% in the last studyWHY?FY 2024FY 2021Item1,202,0001,409,000Volume Sold (hcf)$600kApproximate Lost Revenue
Why are we discussing the need for rate increases?9Water and Sewer Utilities are not covering expenses Inflation: reached highest rate since 1981Rain: FY 2023 and 2024 were very “wet” years = decreased revenue Wholesale Water Costs: Increased OCWD water wholesale costs (due to PFAS), MWDOC – Import water wholesalerAging Infrastructure / Deferred MaintenanceSewer: Not meeting required debt coverage ratio, charges were reduced 25% in the last studyWHY?FY 2026FY 2025FY 2024FY 2023FY 2022FY 2021Item$711$688$624$558$509$487OCWD Rate ($ / AF)3.3%10.3%11.8%9.6%4.5%% Incr.$1,528$1,395$1,256$1,143$1,104$1,078MWDOC($ / AF)11.1%3.9%5.8%3.5%2.4%% Incr.
Why are we discussing the need for rate increases?10Water and Sewer Utilities are not covering expenses Inflation: reached highest rate since 1981Rain: FY 2023 and 2024 were very “wet” years = decreased revenue Wholesale Water Costs: Increased OCWD water wholesale costs (partly due to PFAS), MWDOC –Import water wholesalerAging Infrastructure / Deferred MaintenanceSewer: Not meeting required debt coverage ratio, charges were reduced 25% in the last studyWHY?FY 2030FY 2029FY 2028FY 2027FY 2026Item$5.1MLampson Well$3M$3M$2MBeverly Manor PS$2.5MLCWA Watermain Lining$4MBolsa Chica Well Rehab$0.5M$0.5M$0.5M$0.5M$0.5MInfra. Replacement & Compliance ProgPartial Listing of Capital Projects
Why are we discussing the need for rate increases?11Water and Sewer Utilities are not covering expenses Inflation: reached highest rate since 1981Rain: FY 2023 and 2024 were very “wet” years = decreased revenue Wholesale Water Costs: Increased OCWD water wholesale costs (partly due to PFAS), MWDOC –Import water wholesalerAging Infrastructure / Deferred MaintenanceSewer: Not meeting required debt coverage ratio, charges were reduced 25% in the last studyWHY?Sewer has three loans for ½ million in annual debt service:1.2011 Bond Re-funding2.State Revolving Agreement 108383.State Revolving Agreement 108424.Debt coverage = 1.20 means City must set rates so that yearly cashflow = 1.2 x $500k = $600kotherwise it is breaching bond covenants
12WaterCapital Projects
13Water Infrastructure
PhaseLampson Well Treatment SystemAboutPurpose & BenefitsProject TimelineFinancialsConstraintsTreatment system to remove nuisance odor, allowing increased pumping capacity. May need to import water at double the cost of groundwater if not producing at capacity.•Construction: FY 2025-2027•Design is completed•$4.5 M•OCWD Producers Loan•It must be fully operational before the rehabilitation of the Bolsa Chica Well, which currently supplies the majority of the City's waterLampson Well, the City’s newest built in 2011, produces a nuisance odor caused by naturally occurring H2S.
LCWA Water Main LiningAboutPurpose & BenefitsProject TimelineProject will reline the transmission line to provide water to southerly part of City to provide the necessary fire flow.Transmission line crossing Los Cerritos Wetlands/Hellman Ranch that has experienced several recent breaks. PhaseFinancialsConstraints•Construction: FY 2025-2026•Design is complete•Coastal Development Permit complete•$2.5M Construction Value•Anticipated SRF funding•Environmentally sensitive habitat•Must be constructed with wetlands restoration –Fall 2025
Water Scenario 1 - Recommended CIP16TotalFY 2030FY 2029FY 2028FY 2027FY 2026FY 2025WATER - SCENARIO 1 - RECOMMENDED CIP$431,300 $0 $0 $0 $0 $0 $431,300 Encumbered Rollover Projects$2,500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $0 O-WT-1 Water Infrast. Replacement & Compliance Program$1,800,000 $0 $0 $0 $1,500,000 $300,000 $0 WT2701 Navy Reservoir Rehabilitation$250,000 $50,000 $50,000 $50,000 $50,000 $50,000 $0 WT1801 SCADA Improvement Upgrade Project $4,000,000 $0 $0 $0 $4,000,000 $0 $0 WT1603 Bolsa Chica Water Well Rehabilitation$2,150,000 $0 $0 $2,000,000 $150,000 $0 $0 WT2401 Seal Way Sewer/Water Upgrade$6,000,000 $0 $3,000,000 $3,000,000 $0 $0 $0 WTXXXX Leisure World Well Reestablishment$2,000,000 $0 $0 $2,000,000 $0 $0 $0 SS1902 6th Street Alley Water/Sewer Replacement$3,300,000 $3,000,000 $300,000 $0 $0 $0 $0 WT1704 Lampson Ave Trans Main Repl. (to Seal Bch Blvd)$2,200,000 $2,000,000 $200,000 $0 $0 $0 $0 WT2102 College Park East Waterline Improvements$200,000 $200,000 $0 $0 $0 $0 $0 WT2301 College Park West Water System Improvements$24,831,300 $5,750,000 $4,050,000 $7,550,000 $6,200,000 $850,000 $431,300 Subtotal$5,072,863 $0 $0 $0 $0 $5,072,863 $0 WT1902 Lampson Well Treatment System$8,000,000 $0 $3,000,000 $3,000,000 $2,000,000 $0 $0 WT0904 Beverly Manor Water Pump Station Rehabilitation$2,500,000 $0 $0 $0 $0 $2,500,000 $0 WT2103 LCWA Watermain Lining$15,572,863 $0 $3,000,000 $3,000,000 $2,000,000 $7,572,863 $0 Subtotal - SRF and OCWD Loan Projects$4,040,000 $0 $0 $2,000,000 $2,000,000 $40,000 $0 WT2001 Advanced Metering Infrastructure$44,444,163 $5,750,000 $7,050,000 $12,550,000 $10,200,000 $8,462,863 $431,300 Total$44,444,163 FY 2025 to FY 2030 Year CIP
Water Scenario 2 – Modified CIP (Absolute Minimum Required Projects)17TotalFY 2030FY 2029FY 2028FY 2027FY 2026FY 2025WATER - SCENARIO 2$431,300 $0 $0 $0 $0 $0 $431,300 FYE 2024 Rollover Projects into FY 2025$5,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $0 O-WT-1 Water Infrast. Replacement & Compliance Program$1,800,000 $0 $0 $0 $1,500,000 $300,000 $0 WT2701 Navy Reservoir Rehabilitation$250,000 $50,000 $50,000 $50,000 $50,000 $50,000 $0 WT1801 SCADA Improvement Upgrade Project $4,000,000 $2,000,000 $2,000,000 $0 $0 $0 $0 WT1603 Bolsa Chica Water Well Rehabilitation$3,000,000 $3,000,000 $0 $0 $0 $0 $0 WTXXXX Leisure World Well Reestablishment$14,481,300 $6,050,000 $3,050,000 $1,050,000 $2,550,000 $1,350,000 $431,300 Subtotal$5,072,863 $0 $0 $0 $0 $5,072,863 $0 WT1902 Lampson Well Treatment System$8,000,000 $0 $3,000,000 $3,000,000 $2,000,000 $0 $0 WT0904 Beverly Manor Water Pump Station Rehabilitation$2,500,000 $0 $0 $0 $0 $2,500,000 $0 WT2103 LCWA Watermain Lining$15,572,863 $0 $3,000,000 $3,000,000 $2,000,000 $7,572,863 $0 Subtotal - SRF and OCWD Loan Projects$4,040,000 $0 $0 $2,000,000 $2,000,000 $40,000 $0 WT2001 Advanced Metering Infrastructure$34,094,163 $6,050,000 $6,050,000 $6,050,000 $6,550,000 $8,962,863 $431,300 Total$34,094,163 FY 2025 to FY 2030 Year CIP
18Water Financial Plan
Water Financial Outlook WithoutRevenue Increases (or bond issuances)•Does not include needed capital projects19FY 2024 FY 2025 FY 2026 FY 2027Projected Total Revenue $6,488,889 $6,909,669 $7,049,657 $7,049,899Personnel $2,017,372 $1,551,794 $1,675,937 $1,810,012Maintenance and Operations $1,632,896 $2,250,908 $2,376,601 $2,465,225Water Purchase Costs $2,562,447 $3,074,071 $3,230,820 $3,410,563Subtotal Expenses $6,212,715 $6,876,772 $7,283,358 $7,685,799Debt Service $103,850 $117,000 $0 $0Cashflow $172,323($84,103) ($233,701) ($635,900)
Water Financial Plan ScenariosScenario 2Scenario 1December 2023FY 2026 $2,037,371FY 2027 $1,359,418 FY 2028 $833,776 FY 2029 $787,919 FY 2030 $722,634 Total $5,741,118 FY 2026 $2,669,658 FY 2027 $2,229,867 FY 2028 $596,247 FY 2029 $626,059 FY 2030 $657,362 Total $6,779,195 FY 2024 $2,044,567 FY 2025 $2,060,056 FY 2026 $1,751,047 FY 2027 $1,446,159 FY 2028 $1,349,749 Total $8,651,577 Revenue Adjustments5-Year Increase$34M Pushes out projects$44M Higher Due to Two Years of InflationDoes more projects sooner$38MCIP$19M Market Debt$9.5M SRF Loan$4.4M OCWD Loan$25M Market Debt$9.5M SRF Loan$4.4M OCWD Loan$22M Market Debt$11M SRF LoanGrants/Loans/Market Debt20Revenue adjustments show increased revenue above prior year revenueDecember 2023 Revenue adjustments show if they were in place for a full year
Water Financial Plan ScenariosScenario 2Scenario 1December 2023FY 2026 29%FY 2027 15%FY 2028 8%FY 2029 7%FY 2030 6%Total CAGR 81.7%FY 2026 38%FY 2027 23%FY 2028 5%FY 2029 5%FY 2030 5%Total CAGR 96.5%FY 2024 33%FY 2025 25%FY 2026 17%FY 2027 12%FY 2028 10%Total CAGR 139.6%Revenue Adjustments5-Year Increase$34M Pushes out projects$44M Higher Due to Two Years of InflationDoes more projects sooner$38MCIP$19M Market Debt$9.5M SRF Loan$4.4M OCWD Loan$25M Market Debt$9.5M SRF Loan$4.4M OCWD Loan$22M Market Debt$11M SRF LoanGrants/Loans/Market Debt21Revenue adjustments show increased revenue above prior year revenue
Water Utilities Need Reserves!•Utilities need to plan for reserves›Enterprise reserves are nearly depleted•City’s reserve targets are:›Operating reserve = 25% of expenses›Capital reserve = 25% of average future 5-year capital expenses•Ranges from about $2 to $3.5 M22
Water Scenario 1- Debt Coverage and Reserves23•Plans for reserves after the rate study
Water Scenario 2- Debt Coverage and Reserves24•Plans for reserves after the rate study
25
Bi-monthly Fixed Charge & Leisure World Assumptions (Scenario 1 Shown for Illustrative Purposes)•Certain costs centers: Meter Maintenance and Capacity are allocated to customers classes based on the number and size of meters•Prior assumption: Leisure World (LW) needed the equivalent of one 6” meter•Revised to 2 – 12” meters•LW would no longer be charged for their 4 private fire accounts•LW bi-monthly fixed charge = $14,916 equates to a $2.26 increase per dwelling unit 261/1/2025Fixed Charges with LWFixed Charges with LWScenario 1 DifferenceScenario 2 DifferenceMeter SizeCurrent 1 - 6" Meter 2 - 12" Meters $ $5/8'' $52.38 $72.28 $70.68($1.60) ($1.50)3/4'' $52.38 $72.28 $70.68($1.60) ($1.50)1" $77.92 $107.53 $104.87($2.66) ($2.49)1.5" $150.93 $208.28 $202.85($5.43) ($5.08)2" $228.33 $315.10 $306.50($8.59) ($8.03)3" $406.25 $560.63 $544.72($15.91) ($14.87)4" $675.94 $932.80 $906.18($26.62) ($24.88)6" $1,331.01 $1,836.79 $1,783.70($53.10) ($49.64)8" $2,128.92 $2,937.91 $2,852.83($85.08) ($79.53)10" $3,047.29 $4,205.26 $4,083.10($122.16) ($114.19)12" NA NA $7,458.19NA NA2" Aquatic Park $344.58 $475.52 $476.01 $0.49 $0.45Aquatic Park includes a capital surcharge due to under sea pipelinesScenario 1
Water Proposed Bi-Monthly 5-Year fixed Charges (assumes 2 -12” meter for LW)27Scenario 1 Scenario 2FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030Water 1/1/20258/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Bi-monthly Fixed ChargesAll Customers5/8'' $52.38 $70.68 $86.94 $91.29 $95.85 $100.643/4'' $52.38 $70.68 $86.94 $91.29 $95.85 $100.641" $77.92 $104.87 $128.99 $135.44 $142.21 $149.321.5" $150.93 $202.85 $249.51 $261.99 $275.09 $288.842" $228.33 $306.50 $377.00 $395.85 $415.64 $436.423" $406.25 $544.72 $670.00 $703.50 $738.68 $775.614" $675.94 $906.18 $1,114.60 $1,170.33 $1,228.84 $1,290.286" $1,331.01 $1,783.70 $2,193.95 $2,303.64 $2,418.82 $2,539.778" $2,128.92 $2,852.83 $3,508.98 $3,684.43 $3,868.65 $4,062.0810" $3,047.29 $4,083.10 $5,022.21 $5,273.32 $5,536.99 $5,813.8412" Leisure World $1,331.01 $7,458.19 $9,173.58 $9,632.26 $10,113.87 $10,619.562" Aquatic Park $344.58 $476.01 $585.49 $614.76 $645.50 $677.78Private Fire Charges4" $54.42 $75.10 $92.37 $96.99 $101.84 $106.936" $158.07 $218.14 $268.31 $281.72 $295.81 $310.608" $336.86 $464.87 $571.79 $600.38 $630.39 $661.9110" $605.79 $835.99 $1,028.27 $1,079.68 $1,133.67 $1,190.3512" NA $1,350.35 $1,660.94 $1,743.98 $1,831.18 $1,922.74FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030Water 1/1/20258/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Bi-monthly Fixed ChargesAll Customers5/8'' $52.38 $66.07 $75.98 $82.06 $87.81 $93.083/4'' $52.38 $66.07 $75.98 $82.06 $87.81 $93.081" $77.92 $98.03 $112.73 $121.75 $130.28 $138.091.5" $150.93 $189.62 $218.07 $235.51 $252.00 $267.122" $228.33 $286.51 $329.49 $355.85 $380.76 $403.603" $406.25 $509.19 $585.57 $632.42 $676.69 $717.294" $675.94 $847.08 $974.14 $1,052.07 $1,125.72 $1,193.266" $1,331.01 $1,667.37 $1,917.47 $2,070.87 $2,215.83 $2,348.788" $2,128.92 $2,666.78 $3,066.79 $3,312.14 $3,543.98 $3,756.6210" $3,047.29 $3,816.81 $4,389.33 $4,740.48 $5,072.31 $5,376.6512" Leisure World $1,331.01 $6,971.79 $8,017.56 $8,658.96 $9,265.09 $9,821.002" Aquatic Park $344.58 $444.96 $511.71 $552.64 $591.33 $626.81Private Fire Charges4" $54.42 $70.20 $80.73 $87.19 $93.29 $98.896" $158.07 $203.91 $234.50 $253.26 $270.98 $287.248" $336.86 $434.55 $499.73 $539.71 $577.49 $612.1410" $605.79 $781.47 $898.69 $970.58 $1,038.53 $1,100.8412" NA $1,262.29 $1,451.63 $1,567.76 $1,677.51 $1,778.16
Water Proposed Volumetric Rates ($ / hcf)28Scenario 1 Scenario 2FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 1/1/20258/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Volumetric Rates ($ /hcf)ResidentialTier 1$3.77 $4.86 $5.59 $6.04 $6.46 $6.85Tier 2$3.99 $5.15 $5.92 $6.39 $6.84 $7.25Multi-Family Residential & Leisure WorldTier 1$3.77 $4.86 $5.59 $6.04 $6.46 $6.85Tier 2$3.94 $5.08 $5.84 $6.31 $6.75 $7.16Commercial$3.77 $4.86 $5.59 $6.04 $6.46 $6.85Irrigation$3.86 $4.98 $5.73 $6.18 $6.62 $7.01City$3.82 $4.93 $5.67 $6.12 $6.55 $6.94Aquatic Park$4.27 $5.51 $6.33 $6.84 $7.32 $7.76FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 1/1/20258/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Volumetric Rates ($ /hcf)ResidentialTier 1$3.77 $5.20 $6.40 $6.72 $7.06 $7.41Tier 2$3.99 $5.51 $6.77 $7.11 $7.47 $7.84Multi-Family Residential & Leisure WorldTier 1$3.77 $5.20 $6.40 $6.72 $7.06 $7.41Tier 2$3.94 $5.44 $6.69 $7.02 $7.37 $7.74Commercial$3.77 $5.20 $6.40 $6.72 $7.06 $7.41Irrigation$3.86 $5.33 $6.55 $6.88 $7.22 $7.58City$3.82 $5.27 $6.48 $6.81 $7.15 $7.51Aquatic Park$4.27 $5.89 $7.25 $7.61 $7.99 $8.39
29Sewer Capital Projects
30Sewer Infrastructure
Sunset Aquatic Park Pump StationAboutPurpose & BenefitsProject TimelineProject will provide additional capacity and pump station upgrades. Overflows from this system would go directly into the Anaheim Bay and City would be fined.Due to previous force main failures, current flow is diverted to 2 - 2” mains across the Bolsa Chica Channel. PhaseFinancials•Construction: FY 2027-29•Planned•$2.7 M construction value•Sunset Aquatic Park Equity FundConstraints•Force mains are undersized and frequently have blockages•Coordination with Huntington Beach to receive wastewater
Sewer Scenario 1 – Recommended CIP32TotalFY 2030FY 2029FY 2028FY 2027FY 2026FY 2025SEWER - SCENARIO 1$3,645,000 $0 $0 $0 $0 $0 $3,645,000 FYE 2023 Encumbered Rollover Projects$2,500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $0 O-SS-2 Sewer Mainline Improvement Program$2,700,000 $0 $0 $0 $2,500,000 $200,000 $0 SS2303 Sunset Aquatic Park & Forcemain Upgrade$2,150,000 $0 $0 $2,000,000 $150,000 $0 $0 WT2401 Seal Way Sewer/Water Upgrade$250,000 $50,000 $50,000 $50,000 $50,000 $50,000 $0 WT1801 SCADA Improvement Upgrade Project$2,600,000 $0 $0 $2,600,000 $0 $0 $0 SS1902 6th Street Alley Water/Sewer Replacement$200,000 $200,000 $0 $0 $0 $0 $0 SSXXXX Adolfo Lopez Pump Station & Forcemain Upgrade$1,700,000 $0 $1,500,000 $200,000 $0 $0 $0 SS2204 Boeing Pump Station & Forcemain Upgrade$3,300,000 $3,000,000 $300,000 $0 $0 $0 $0 SSXXXX Pump Station 35 Upgrades - Phase 2$150,000 $150,000 $0 $0 $0 $0 $0 SSXXXX 1st Street Pump Station & Forcemain Upgrade$19,195,000 $3,900,000 $2,350,000 $5,350,000 $3,200,000 $750,000 $3,645,000 Total$19,195,000 FY 2025 to FY 2030 CIP
Sewer Scenario 2 – Modified CIP33TotalFY 2030FY 2029FY 2028FY 2027FY 2026FY 2025SEWER - SCENARIO 2 $3,645,000 $0 $0 $0 $0 $0 $3,645,000 FYE 2024 Projects rolled over into FYE 2025$3,750,000 $750,000 $750,000 $750,000 $750,000$750,000 $0 O-SS-2 Sewer Mainline Improvement Program$2,700,000 $0 $0 $0 $2,500,000$200,000 $0 SS2303 Sunset Aquatic Park & Forcemain Upgrade$250,000 $50,000 $50,000 $50,000 $50,000$50,000 $0 WT1801 SCADA Improvement Upgrade Project$1,700,000 $0 $1,500,000 $200,000 $0 $0 $0 SS2204 Boeing PS & Forcemain Upgrade$3,300,000 $3,000,000 $300,000 $0 $0 $0 $0 SSXXXX PS#35 Upgrades - Phase 2$200,000 $200,000 $0 $0 $0 $0 $0 SSXXXX Adolfo Lopez PS & Forcemain Upgrade$150,000 $150,000 $0 $0 $0 $0 $0 SSXXXX 1st Street PS & Forcemain Upgrade$15,695,000 $4,150,000 $2,600,000 $1,000,000 $3,300,000$1,000,000 $3,645,000 Total$15,695,000 FY 2025 to FY 2030 CIP
34Sewer Financial Plan
Sewer Financial Outlook WithoutRevenue Increases •Bond Covenants require the City to set rates so that net cashflow is about $600k (positive)•Revenue is decreasing due to lower interest earned in cash balances•Does not include capital projects35FY 2024 FY 2025 FY 2026 FY 2027Projected Total Revenue $2,625,899 $2,589,328 $2,489,078 $2,450,759Personnel $1,451,291 $1,319,707 $1,425,284 $1,539,306Maintenance and Operations $758,140 $1,146,858 $1,204,201 $1,240,327Subtotal Expenses $2,209,430 $2,466,565 $2,629,484 $2,779,633Debt Service $545,583 $545,623 $545,183 $544,263Cashflow($129,114) ($422,860) ($685,590) ($873,137)
Sewer Financial Plan ScenariosScenario 2Scenario 1Dec 2023FY 2026 $801,492 FY 2027 $631,764 FY 2028 $341,153 FY 2029 $330,539 FY 2030 $312,359 Total $2,417,306 FY 2026 $801,492 FY 2027 $663,352 FY 2028 $535,104 FY 2029 $566,446 FY 2030 $196,949 Total $2,763,343 FY 2024 $774,657 FY 2025 $717,111 FY 2026 $703,964 FY 2027 $573,175 FY 2028 $348,755 Total $3,304,247 Revenue Adjustments5-Year Increase$15.7M • Pushes out projects$19.2M • Higher due to two years of inflation• Does more projects sooner, compared to scenario 2$16MCIP (today’s $)$15 M Market Debt$14 M Market Debt$14 M Market DebtDebt3634% is needed in the 1styear to meet debt covenants!Revenue adjustments show increased revenue above prior year revenueDecember 2023 revenue adjustments show if they were in place for a full year
Sewer Financial Plan ScenariosScenario 2Scenario 1Dec 2023FY 2026 34%FY 2027 20%FY 2028 9%FY 2029 8%FY 2030 7%Total CAGR 102.5%FY 2026 34%FY 2027 21%FY 2028 14%FY 2029 13%FY 2030 4%Total CAGR 117.2% FY 2024 35%FY 2025 24%FY 2026 19%FY 2027 13%FY 2028 7%Total CAGR 140.9%Revenue Adjustments5-Year Increase$15.7M • Pushes out projects$19.2M • Higher due to two years of inflation• Does more projects sooner, compared to scenario 2$16MCIP (today’s $)$15 M Market Debt$14 M Market Debt$14 M Market DebtDebt3734% is needed in the 1styear to meet debt covenants!Revenue adjustments show increased revenue above prior year revenue
Sewer Utilities Need Reserves!•City’s reserve targets are:›Operating reserve = 25% of expenses›Capital reserve = 25% of average future 5-year capital expenses•Ranges from about $1 to $1.5 M38
Sewer Scenario 1- Debt Coverage and Reserves39•Need 34% increase to meet debt coverage in FY 2026!
Sewer Scenario 2- Debt Coverage and Reserves40•Need 34% increase in FY 2026 to meet debt coverage
Sewer Proposed Bi-Monthly 5-Year Rates & Charges41Scenario 1FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030Fixed ChargeCurrent 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Single-Family ResidentialFixed Charge $48.04 $64.37 $77.89 $88.80 $100.34 $104.35Customers with a Fixed Charge and Volumetric RateCurrent 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Multi-Family ResidentialFixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65Volumetric Rate ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69Commercial and CityFixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65Volumetric Rate ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69Leisure WorldFixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65Flat Rate $2,198.06 $2,945.40 $3,563.93 $4,062.89 $4,591.06 $4,774.70NavySewer Meter Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65Sewer Meter Volumetric ($/hcf) $0.24 $0.32 $0.39 $0.44 $0.50 $0.52Aquatic ParkFixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65Volumetric Charge ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69Sewer Service Equity Charge $997.50 $1,336.65 $1,617.35 $1,843.78 $2,083.47 $2,166.80Sewer Capital Equity Charge $1,322.00 $1,771.48 $2,143.49 $2,443.58 $2,761.24 $2,871.69
42Scenario 2Sewer Proposed Bi-Monthly 5-Year Rates & ChargesFYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030Fixed ChargeCurrent 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Single-Family ResidentialFixed Charge $48.04 $64.37 $77.25 $84.20 $90.94 $97.30Customers with a Fixed Charge and Volumetric RateCurrent 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029Multi-Family ResidentialFixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47Volumetric Rate ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10Commercial and CityFixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47Volumetric Rate ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10Leisure WorldFixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47Flat Rate $2,198.06 $2,945.40 $3,534.48 $3,852.58 $4,160.79 $4,452.05NavySewer Meter Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47Sewer Meter Volumetric ($/hcf) $0.24 $0.32 $0.39 $0.42 $0.45 $0.49Aquatic ParkFixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47Volumetric Charge ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10Sewer Service Equity Charge $997.50 $1,336.65 $1,603.98 $1,748.34 $1,888.21 $2,020.38Sewer Capital Equity Charge $1,322.00 $1,771.48 $2,125.78 $2,317.10 $2,502.46 $2,677.64
43Bi-Monthly Customer Bill Impacts
First Year Combined Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 144
First Year Combined Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 245
Multi-Year Combined Residential Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 146
Multi-Year Combined Residential Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 247
Leisure World - First Year Combined Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 148
Leisure World - First Year Combined Water & Sewer Bill Impacts (Bi-Monthly) – Scenario 249
Summary•Inflation, decreased revenue, wholesale water agency rate hikes and aging infrastructure all contribute to the current state of the water and sewer utilities•Proposed revenue increases will restore the utilities’ financial health allowing the City to: ›Continue to deliver safe, reliable water and sewer services›Maintain infrastructure›Maintain good credit standing and be able to issue debt (especially wastewater)•These services receive no tax revenue. The funds we collect for these services are used to operate and reinvest in your water and sewer systems. 50
51Communications& Outreach
Public Information52•Rate Study Website•FAQs, Press Releases, Video•City Social Media Posts•Notice of City Council Meetings and links to Materials•Next Council Mtg: May 12•Upcoming Community Informational Open Houses in May-JuneUtilityRateStudy.sealbeachca.gov(562) 342-7389utilityrates@sealbeachca.gov
53End of Presentation