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Home My WebLink AboutCC AG PKT 2009-12-14 #TAGENDA STAFF REPORT DATE: December 14, 2009 TO: Honorable Mayor and City Council THRU: David Carmany, City Manager FROM: Vince Mastrosimone, Director of Public Works SUBJECT: RECEIVE 2009 WATER RATE STUDY AND SET PUBLIC HEARING SUMMARY OF REQUEST: It is respectfully requested that the City Council receive the 2009 Water Rate Study and adopt Resolution No. 5955 setting a Public Hearing for February 8, 2010 at 7:00p.m BACKGROUND: The last water rate study and water fees and charges were adopted on August 11, 2003. That study provided for annual water rate increases through FY 08 -09. Since that time, much has changed in the water industry. Currently, Southern California is in a drought. This affects the amount of water available from the aquifer for the City to pump and increases the amount of water to be purchased through Municipal Water District of Orange County (MWDOC). Court decisions affect the amount of water available for import from the Bay Delta. These factors have significantly increased the cost of imported water to the City. Subsequent to adoption of this rate schedule, courts have ruled that portions of Proposition 218 apply to water rates. While it is not required to have a mail ballot vote for rate increases, the City must hold a protest hearing not less than 45 days after mail notification of the proposed rates. If the majority of water consumers protest the proposed rates, they may not be adopted. The proposed rates impose fees and charges in an equitable manner across customer classes. The study methodology is based on recommendations from the American Water Works Association, the professional organization for Water Works Professionals. Agenda Item T Page 2 The average residential consumer in Seal Beach uses about 20 ccf (hundred cubic feet) bi- monthly. The table below shows the effect on consumers: Meter 5/8" & 3/4" FY FY FY FY FY FY 08/09 09/10 10/11 11/12 12/13 13/14 $ 35.12 $ 34.03 $ 32.68 $ 34.26 $ 36.03 $ 37.86 Commodity Block 1 Rates (per hcfl: (1 to 26 hcf bi- monthly) Bi Monthly Consumption Change from Previous Year FINANCIAL IMPACT: $ 2.02 $ 2.00 $ 1.92 $ 2.02 $ 2.12 $ 2.23 20 $ 75.52 $ '74.09 $ 71.14 $ 74.60 $ 78.45 $ 82.42 -2% -4% 5% 5% 5% Adoption of the proposed rate structure will allow the City water utility to operate efficiently with the lowest rates possible to water customers. Water rates do not impact the General Fund. RECOMMENDATION: It is respectfully recommended that the City Council receive the Water Rate Study Analysis dated December 2, 2009 and adopt Resolution No. 5955 setting a Public Hearing for February 8, 2010 at 7:00p.m SUB MI 4 4TE nce Mastrosimone Director of Public Works NOTED AND APPROVED: David Carmany City Manager Attachments: A. Resolution No. 5955 B. 2009 Water Rate Study RESOLUTION NUMBER 5955 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL BEACH, CALIFORNIA SETTING A PUBLIC HEARING RELATING TO WATER RATES FOR FEBRUARY 8, 2010 AT 7:00 P.M. THE CITY COUNCIL OF THE CITY OF SEAL BEACH DOES HEREBY RESOLVE: Section 1. The City Council hereby sets a Public Hearing relating to proposed changes to water rates for February 8, 2010 at 7:00p. m. Section 2. The Council hereby authorizes the City Manager to notify the public as required by law. PASSED, APPROVED AND ADOPTED by the City Council of the City of Seal Beach, at a regular meeting held on the 14th day of December , 2009 by the following vote: AYES: Council Members NOES: Council Members ABSENT: Council Members ABSTAIN: Council Members Mayor ATTEST: City Clerk STATE OF CALIFORNIA } COUNTY OF ORANGE } SS CITY OF SEAL BEACH } I, Linda Devine, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution Number 5955 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 14th day of December , 2009. City Clerk CITY OF SEAL BEACH WA TER RATE STUDY ANALYSIS FINAL REPORT PREPARED FOR: � � r '• .. Ems, PREPARED BY: r W 1 LL Financial Services Oakland Office 1700 Broadway 6 Floor Oakland, CA 94612 Tel: (510) 832 -0899 Fax: (510) 832 -0898 Corporate Office 27368 Via Industria Suite 110 Temecula, CA 92590 Tel: (800) 755 -MUNI (6864) Fax: (909) 587 -3510 Other Regional Offices Lancaster, CA Memphis, TN Orlando, FL Phoenix, AZ Sacramento, CA Seattle, WA www.willdan.com • i • Table Contents .............................................................................................. ...............:............... i ExecutiveSummary ......................................................................................... ............................... I 1. Revenue Requirements Analysis ................................................................. ............................... 2 Historical and Budgeted Revenues and Expenses ................................... ............................... 2 Financial Planning Analysis .................................................................... ............................... 4 WaterCost Analysis ................................................................................ ............................... 4 Capital Improvement Costs ..................................................................... ............................... 5 RevenueAnalysis .................................................................................... ............................... 7 Operating Expense Projections ........................................................... ............................... 7 Capital Improvement Costs ................................................................. ............................... 7 DebtService ........................................................................................ ............................... 7 ReserveFunds ..................................................................................... ............................... 7 WaterRevenue Requirements ................................................................. ............................... 7 2 . Cost of Service Analysis ............................................................................ ............................... 11 FireService Costs .................................................................................. ............................... 14 RateDesign ............................................................................................ ............................... 14 Conclusion ..................................................................................................... ............................... 21 Executive Summary Included in this study are the findings of the water enterprise water cost analysis estimated revenue requirement analysis, functional costs of service analysis, water rate calculations, along with a brief description of the assumptions used in the calculations. The study examines the City financials for fiscal years 2008/09 through 2017/18 (the study period). The estimated annual system revenues to be generated from proposed rate increases are derived from a comparison of total system revenues and costs, both operating and capital, during this 10 -year projection period. City activities included in our analysis were gathered from the City's operating adopted budget (FY 2009/2010) and audited financial statements from FY 2005/06, FY 2006/07 & FY 2007/08. Base year income and expense data for both systems were obtained for fiscal year 2009/10 using the annual budget document. It is our hope that this financial plan will be utilized by the City to project likely future financial conditions for the City and provide guidance in annual budgetary decision making processes. For the purposes of this study, we have included in our analysis fiscal years 2009/10 through 2013/14. We chose to highlight the first five fiscal years only because the nature of water costs in today's environment is highly volatile and difficult to predict in the out years. We believe a five -year analysis for the study is more reasonable. -O/WI I.LDAN I City of Seal Beach Water Rate Analysis 1. Revenue Requirements Analysis The next few sections of this study describe our Revenue Requirements Analysis. Historical and Budgeted Revenues and Expenses Base year income and expense data for the water enterprise fund were obtained for fiscal year 2008/2009 using the water enterprise adopted budget for that year and audited financial statements from fiscal years 2006 through 2008. The historic financial results and projected budgets of the water enterprise are shown in Table 1. Table 1. Historical Revenues and Expenditures - Fund 017 Historical Trial Balance Account FY FY FY Number Description 2005/06 2 0 0 6/07 2007/08 Operating Revenues 017 - 000 -34000 Water Revenue w/o rate increase 017- 000 -35000 Residential Water w/o rate increase 017 - 000 -35010 Multi Residential Water w/o rate increase 017 - 000 -35020 Commercial Water w/o rate increase 017 - 000 -30960 Miscellaneous Revenue 017 - 000 -35500 Water Turn On Fee 017 - 000 -35510 Late Charge 017 - 000 -35520 Door Tag Fee 017- 000 -35530 Water Meters 017 - 000 -35540 New Customer Fee 017 - 000 -35590 Fire Service Total Operating Revenues Non - Operating Revenues 017 - 000 -30420 Interest on Investments - Operations 017 - 000 -30940 Sale of Surplus Property - Operations 017 - 000 -30423 Unrealized Gain /Loss on Invest - Operations 017 - 000 -36000 Gain /Loss on sale of asset - Operations Total Non - Operating Revenues Total Operating Revenues $ 2,740,284 $ 2,508,409 $ 2,866,812 1,294,350 1,430,450 1,329, 530 62,566 63,998 62,655 300 600 505 6,826 7,080 5,418 19,432 37,419 33,183 50 690 450 3,995 4,216 2,822 33.024 39.756 49.898 $ 4,160,828 $ 4,092,618 $ 4,351,274 $ 69,574 $ 170,425 $ 211,812 19,660 11,370 $ 69,574 $ 190,085 $ 223,182 $ 4,230,402 $ 4,282, $ 4,574,4 Sources: Seal Beach General Ledger Summary Trial Balance for Water Operations dated 10/15/2008; Willdan Financial Services WI LLDAN I Firsancul5erc,ces I City of Seal Beach Water Rate Analysis 2 Table 1. Historical Revenues and Expenditures -Fund 017 Continued Net Income (Loss) $ 1,198,219 $ 1,053,327 $ 1,271,396 Sources: Seal Beach General Ledger Summary Trial Balance for Water Operations dated 1011512008; W illdan Financial Services *"WI LL DAN I r fid'IG1.]i SeR•.CCS I City of Seal Beach Water Rate Analysis 3 _ Historical Trial Balance Account FY FY FY Number Description 2005/06 2006/07 2007/08 Operating Expenditures 017 - 900 -40001 Full -time Salaries $ 588,475 $ 639,839 $ 662,939 017 - 900 -40002 Temporary Special Pay - - - 017- 900 -40003 Overtime 20,143 44,201 51,898 017 - 900 -40004 Part -time 27,327 27,787 31,752 017 - 900 -40008 Auto Allowance Engineering - - - 017- 900 -40009 Cell Phone Allowance - - - 017- 900 -40010 Deferred Comp - Cafeteria - - 3,391 017 - 900 -40011 Deferred Compensation 8,687 11,489 11,635 017 - 900 -40012 Pers Retirement 76,909 87,131 91,073 017 - 900 -40013 Pars Retirement 362 360 429 017 - 900 -40014 Medical Insurance 69,840 83,464 93,014 017 - 900 -40015 Dental Insurance 4,614 - 37 017 - 900 -40017 Medicare 6,225 7,795 8,588 017 - 900 -40018 Life and Disability 7,928 - 9,219 017 - 900 -40020 Uniform Pay - - - 017- 900 -40022 Flexible Spending - Cafeteria - 9,054 19 017 - 900 -40025 Pars Admin Expense 301 309 359 017 - 900 -40030 Unemployment 760 - - 017- 900 -40100 Office Supplies 27,027 27,161 25,545 017 - 900 -40300 Membership and Dues 602 633 704 017 - 900 -40400 Training and Meetings 4,534 3,926 4,629 017 - 900 -40500 Bldg /grounds Materials - - - 017- 900 -40700 Equipment/materials 87,874 97,450 100,178 017 - 900 -40800 Special Departmental 34,798 33,956 38,194 017 - 900 -40900 Depreciation 150,934 88,475 61,155 017 - 900 -41000 Telephone 7,124 7,296 7,764 017 - 900 -41010 Gas 102,726 86,732 103,904 017 - 900 -41020 Electricity 99,899 131,648 107,283 017 - 900 -42000 Rent/lease Equip - - - 017- 900 -43000 Auto Allowance 536 540 - 017- 900 -44000 Contract Prof. Svcs 95,787 181,629 168,815 017 - 900 -44050 Water Overhead 318,148 324,500 324,500 017 - 900 -45000 Intergovernmental Water Purchases 1,280,730 1,326,424 1,388,641 017 - 900 -47888 Debt Service - - - 017- 900 -47999 Interest Payments 9,156 7,576 7,145 017 - 900 -48000 Building Imp. - - - 017- 900 -48050 Machinery And Equip - - - 017- 900 -48075 Vehicles 737 - 250 017 - 900 -49710 Legal Services - Water - - , Total Operating Expenditures $ 3,032,183 $ 3,229,376 $ 3,303,059 Net Income (Loss) $ 1,198,219 $ 1,053,327 $ 1,271,396 Sources: Seal Beach General Ledger Summary Trial Balance for Water Operations dated 1011512008; W illdan Financial Services *"WI LL DAN I r fid'IG1.]i SeR•.CCS I City of Seal Beach Water Rate Analysis 3 _ Financial Planning Analysis The financial model addresses both operating and non - operating revenues and costs over the next five fiscal years beginning in FY 2009/10. The fiscal year 2009/10 budget figures were used as the base year and inflated based on appropriate measures as determined by the City's experience and our industry research and experience. Table 2 presents the assumed escalation factors and other assumptions utilized to project water system revenues and expenses over the study planning period. These assumptions will be centrally located within the final rate model to allow City staff the ability to easily update the model in the future as conditions and assumptions change. Please note that we assume no customer growth over the study period. Because the City is fairly developed, and will likely result in a 0.00% increase in annual account growth and resulting rate revenues. Table 2. Water Rate Analysis Assumptions FY FY FY FY FY Description 2009/10 2010/11 2011/12 2012/13 2013/14 Projected Growth Rate 0.000% 0.000% 0.000% 0.000% 0.000% Water Sales (af) 4,200 4,200 4.200 4,200 4,200 BPP %' 62% 62% 62% 62% 62% Annual MWDOC Water Cost/AF 2 S 709.00 $ 878.00 $ 921.00 $ 966.00 $ 1,013.00 Annual OCWD Replenishment Assessment/AF 3 $ 249.00 $ 261.45 $ 274.52 $ 288.25 $ 302.66 MWDOC Retail Meter Connection Fee $ 31,719 $ 33,305 $ 34,970 $ 36,719 $ 38,555 Number of Meters ° 5,116 5,116 5,116 5.116 5,116 Cost/Meter 5 S 6.20 $ 6.51 $ 6.84 $ 7.18 $ 7.54 MWDOC Capacity Charge $ 35,536 $ 37,313 $ 39,178 $ 41,137 $ 43,194 MWDOC RTS 5 $ 22,833 $ 23,974 $ 25,173 $ 26,432 $ 27,753 Expenditure Growth Rate 5.00% 5.00% 5.00% 5.00% 5.00% CCI 4.46% 4.46% 4.46% 4.46% 4.46% 1. Source for BPP% is OCWD e-mail to City on 2/27/09. 2. Each fiscal year projection of average of respective calendar years 2009 and 2010. These rates reflect MWD staff Option 2 rates (allocation scenario). 3. Per OCWD a -mails on 2/27/09 and 3/3/09, FY 09/10 RA is $249/af and to project annual increases of 5 %. 4. Source for number of meters: City Staff. 5. Source for Cost per Meter and Cost per CFS: MWDOC; Increase both by 5 %. 6. Seal Beach share of Total MWDOC Sales. 7. Source is ENR Cost Indexes in LOS ANGELES (1978- 2009). Sources: City of Seal Beach; FY 20081 Annual Budget; MWDOC; OCWD; Engineering News Record; Willdan Financial Services. Water Cost Analysis Table 3 illustrates the analysis used to project the City's water cost over the next five years. Table 3 shows the water cost projections using MWDOC rates that reflect MWD staff Option 2 (allocation scenario) provided by the City. In today's environment, water purchased from the wholesale market requires significantly increasing costs. Therefore, we believe a large projected WI IL L Services City I Fina City of Seal Beach Water Rate Analysis 4 annual increase in water costs is a conservative means to plan the future rate schedule for the City. The assessment for untreated replenishment water per acre foot via OCWD was projected using a rate of five percent (5 %). Table 3. Projected Water Cost Calculation Description FY 2009/10 FY 2010/11 FY 2011112 FY 2012/13 FY 2013/14 Total Import Water ( MWDOC) in acre feet 1,596 1,596 1,596 1,596 1,596 Average MWDOC Treated Full Service Water Rate ($ /AF) 709.00 878.00 921.00 966.00 1,013.00 Subtotal Import Water Cost $ 1,131,564 $ 1,401,26a $ 1,469,916 $ 1,541,736 $ 1,616,748 MWDOC Retail Meter Connection Fee $ 31,719 $ 33,305 $ 34,970 $ 36,719 $ 38,555 MWDOC Capacity Charge 35,536 37,313 39,178 41,137 43,194 MWDOC RTS" 22,833 23,974 25,173 26,432 27,753 Subtotal Impart Meter, Capacity 8 RTS Cast $ 90,088 $ 94,592 $ 99,322 $ 104,288 $ 109,502 Total Import Water Cost $ 1,221,652 $ 1,495,880 $ 1,569,238 $ 1,646,024 $ 1,726,250 Total Groundwater in acre feet P 2,604 2,604 2,604 2,604 2,604 OCW D Replenishment Rate (RA) ($ /AF) 249.00 261.45 27452 288.25 302.66 Total Groundwater Replenishment Cost $ 648,396 $ 680,816 $ 714,657 $ 750,599 $ 788,129 Total Groundwater and Import Water Costs $ 1,870,048 $ 2,176,696 $ 2,284,094 $ 2,396,623 $ 2,514,380 1. Each fiscal year projection of average of respective calendar years 2009 and 2010. These rates reflect MW D staff Option 2 rates (allocation scenario). 2 Reflects 62% BPP. 3 Increased annually at five percent (5 %). Sources: City of Seal Beach: MWDOC; OCWD Capital Improvement Costs The City maintains an inventory of Water System Capital Improvement Projects (CIP) for the funding of annual water - related capital projects. The values used in this analysis are based on cost estimates provided by City staff. Table 4 presents the water - related CIP over the five -year planning period (note that it is assumed that all CIP costs are not driven by growth demands and will be funded on a "pay -as- you -go basis ". WILLDAN Financial Son cos I City of Seal Beach Water Rate Analysis 5 Table 4-• City of Seal Beach Water Capital Expenditures Approved Carryover Approved Approved Approved Approved Approved 2008 -2009 2009 -2010 2010 -2011 2011 -2012 2012 -2013 2013 -2014 Budget Budget Budget Budget Budget Budget 5 -year total Water System WT0902 Water System Infrastructure Repairs Water Capital Fund $ 1,150,000 $ 400,000 $ 400,000 $ 400,000 $ 400,000 $ 400,000 $ 3,150,000 Total $ 1,150,000 $ 400,000 $ 400,000 $ 400,000 $ 400,000 $ 400,000 $ 3,150,000 WT0903 New Water Well - College Park East Water Capital Fund $ 2,000,000 $ 2,000,000 Total $ 2,000,000 $ 2,000,000 WT0904 Water Station Rehab. - Beverly Manor Water Capital Fund $ 1,500,000 $ 1,200,000 $ 2,700,000 Total $ 1,500,000 $ 1,200,000 $ 2,700,000 WT1202 Water Well Rehab. - Bolsa Chica Well Water Capital Fund $ 600,000 $ 600,000 Total $ 600,000 $ 600,000 WT0905 Water System Master Plan Update Water Capital Fund $ 100,000 $ 100,000 Total $ 100,000 $ 100,000 WT0901 New 18" Water Line on OC Flood Control Water Capital Fund $ 500,000 $ 500,000 Total $ 500,000 $ 500,000 WT1201 Main line Replacement Hellman Ranch Permits Water Capital Fund $ 10,000 $ 500,000 $ 510,000 Total $ 10,000 $ 500,000 $ 510,000 GRAND TOTAL $ 2,650,000 $ 4,100,000 $ 500,000 $ 410,000 $ 1,500,000 $ 400,000 $ 9,560,000 :: WI LLDAN Financial Services I City of Sea/ Beach Water Rate Ana /ysis 6 Revenue Analysis Our evaluation of future revenue required to meet the Water Fund's expenses include the four areas of: operating expenses, capital improvement costs, requirements for debt service, and the maintenance of reserve fund balances. The following sections discuss the impact of these four factors on the water enterprise required revenue. Operating Expense Projections For the purpose of determining annual revenue needed to set future water rates, we used a projection period of five years. During this period (FY 2009/2010 through FY 2013/2014), costs are assumed to increase and customer accounts are assumed to stay level. Therefore, the study assumes a customer growth rate of zero percent (0.00 %). In reviewing the historical expenditure data, we have found that costs have not increased in a readily identifiable manner, therefore we recommend using an expenditure and personnel growth rate of five percent (5 %) to project the future costs of the system. Capital Improvement Costs As discussed above, Table 4 presents the CIP over the five -year planning period. Debt Service The water enterprise currently is making payments on a Economic Development Administration Loan in the amount of $288,000. The water enterprise is making payments in the amount of $17,074 annually. When an Agency is considering incurring additional debt, debt service coverage ratios are established and must be met through adequate revenue streams. The range of typical ratios is one hundred fifteen percent (115 %) to one hundred thirty —five percent (135 %), depending on the credit quality of the issuer. Reserve Funds According to the Audited Financial Statements as of June 30, 2008, the Water Enterprise Fund #017 had a reserve fund balance of $5,657,066. We recommend that the City adopt a policy of maintaining a designated balance in the operating fund of three months (90 days) of operating expenses in order to satisfy expense obligations as cash flow fluctuates during the year. Water Revenue Requirements Table 5 depicts the annual revenue requirements of the water enterprise for each year of the study period. Fiscal Year 2009/2010 is used as the base year for the study. The study assumes a customer growth rate of zero percent (0.00 %) and an expenditure and personnel growth rate of five percent (5 %) to project the future costs of the system. The Desired Operating Reserve Fund Balance is set at ninety (90) days or twenty-five percent (25 %) of O &M expenses. The beginning operating fund balance for fiscal year 2009/2010 is estimated at $5,657,066 (line 118). W I LLDAN Fi .ancal semces City of Seal Beach Water Rate Analysis 7 Table 5 includes annual revenues projected to decreased by thirty -five percent (35 %) for the remaining five months of fiscal year 2009/2010; followed by an increase of twenty -six and a quarter percent (26.25 %) in fiscal year 2010/2011; followed by a projected revenue increase of four and eight tenths percent (4.80 %) in fiscal year 2011/2012; followed by a revenue increase of five and one tenth percent (5.10 %) in fiscal year 2012/2013; finally in fiscal year 2013/2014 system revenues will be increased by five percent (5 %). These projected decrease and increase will allow the City to meet projected department expenditures, the projected operating and non - operating expenses, and fund balances based on the revenues generated from rate and fee adjustments. Row 11 of this table shows the revenue generated using current rates and fees; a zero percent (0.0 %) population growth rate was used in the projection of these rates and fees. These rates and fees produce enough revenue to maintain a healthy operating fund balance. The section below the current revenues (rows 6 through 13) incorporates the revenue generated by the proposed revenue decrease and increases. As the table illustrates, water service charge revenue is sufficient to maintain a positive cumulative fund balance throughout the study period. Total Operating Expenses are shown in row 64. Net Income is found in row 95 with the Operating Fund Balance detailed near the bottom of the table in row 103. A line for Desired Operating Fund Balance (row 101) is also included in the table. This shows the minimum amount of funds the City would like to maintain in its operating fund, to address annual cash flow requirements that may arise for the department. W I LLDAN I Financial Services I City of Seal Beach Water Rate Analysis 8 Table 5. City of Seal Beach Water Revenue Requirements Analysis - Operations Description FY 2009/10 FY 2010111 FY 2011/12 FY 2012113 FY 2013114 1 Operating Revenue - 13 Year Increase Months Effective 2 Water Revenue w/o rate increase $ 2,866,812 $ 2,866,812 $ 2,866,812 $ 2,866,812 $ 2,866,812 3 Residential Water w/o rate increase 1,329,530 1,329,530 1,329,530 1,329,530 1,329,530 4 Multi Residential Water w/o rate increase - 35.00% - - - (1,974,290) 5 Commercial Water w/o rate increase 62,655 62,655 62,655 62,655 62,655 6 Total Operating Revenue $ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997 7 Capital Revenue 8 Water Capital Charge w/o rate increase 1,381,833 1,381,833 1,381,833 1,381,833 1,381,833 9 Fire Service Charge 10 Total Capital Revenue E 1,381,833 $ 1,381,833 E 1,381,833 $ 1,381,833 $ 1,381,833 11 Total Revenue $ 5,640,830 $ 5,640,830 $ 5,640,830 $ 5,640,830 $ 5,640,830 12 Additional Revenue Required 26 Operating Expenses 27 Full -time Salaries Revenue 767,435 $ 805,806 $ 846,097 $ 888,402 28 Temporary Special Pay - 13 Year Increase Months Effective 29 Overtime 57,217 60,078 63,082 14 2008/09 0.00% 0 35,006 36,757 38,595 40,524 42,551 15 2009/10 - 35.00% 5 (822,621) (1,974,290) (1,974,290) (1,974,290) (1,974,290) 16 2010/11 2625% 12 - 962,467 962,467 962,467 962,467 17 2011/12 4.80% 12 12,827 - 222,192 222,192 222,192 18 2012/13 5.10% 12 110,700 116,235 - 247,411 247,411 19 2013114 5.00% 12 575 37 Medical Insurance 102,548 107,675 254,930 20 2014115 5.25% 12 1,628 1,710 1,795 1,885 1,979 21 2015/16 6.00% 12 10,438 10,960 11,508 40 Life and Disability 10,164 22 2016117 4.75% 12 12,354 41 Uniform Pay - - - 23 2017/18 4.85% 12 3,176 3,334 3,501 3,676 3,860 24 Total Additional Operating Revenue 395 (822,621) (1,011,824) (789,632) (542,220) (287,290) 25 Total Required Revenue 293 $ 4,818,209 $ 4,629,006 $ 4,851,198 $ 5,098,609 $ 5,353,540 26 Operating Expenses 27 Full -time Salaries $ 730,890 $ 767,435 $ 805,806 $ 846,097 $ 888,402 28 Temporary Special Pay - 29 Overtime 57,217 60,078 63,082 66,236 69,548 30 Part-time 35,006 36,757 38,595 40,524 42,551 31 Auto Allowance Engineering - - - - - 32 Cell Phone Allowance - - - - - 33 Deferred Comp - Cafeteria 3,739 3,926 4,122 4,328 4,545 34 Deferred Compensation 12,827 13,468 14,142 14,849 15,591 35 Pers Retirement 100,408 105,428 110,700 116,235 122,047 36 Pars Retirement 473 497 522 548 575 37 Medical Insurance 102,548 107,675 113,059 118,712 124,648 38 Dental Insurance 1,628 1,710 1,795 1,885 1,979 39 Medicare 9,468 9,941 10,438 10,960 11,508 40 Life and Disability 10,164 10,672 11,206 11,766 12,354 41 Uniform Pay - - - - 42 Flexible Spending - Cafeteria 3,176 3,334 3,501 3,676 3,860 43 Pars Admin Expense 395 415 436 458 481 44 Unemployment 266 279 293 308 323 45 Office Supplies 27,907 29,302 30,767 32,305 33,921 46 Membership and Dues 776 815 855 898 943 47 Training and Meetings 4,581 4,810 5,051 5,303 5,568 48 Bldg /grounds Materials - - - - - 49 Equipment/materials 110,446 115,968 121,767 127,855 134,248 50 Special Departmental 42,109 44,214 46,425 48,746 51,184 51 Depreciation 105,197 110,457 115,980 121,779 127,868 52 Telephone 8,560 8,988 9,438 9,909 10,405 53 Gas 114,554 120,281 126,295 132,610 139,241 54 Electricity 118,279 124,193 130,403 136,923 143,769 55 RentAsass Equip - - 56 Auto Allowance 377 395 415 436 458 57 Contract Prof. Svcs 156,181 163,990 172,189 180,798 189,838 58 Water Overhead 357,761 375,649 394,432 414,153 434,861 59 Intergovernmental Water Purchases 1,870,048 2,176,696 2,284,094 2,396,623 2,514,380 60 Building Imp. - - 61 Machinery And Equip - - - - 62 Vehicles 345 363 381 400 420 63 Legal Services - Water 64 Total Operating Expenses $ 3,985,326 $ 4,397,739 $ 4,616,189 $ 4,845,323 $ 5,085,514 VVILLDAN Financial SerAcas I City of Seal Beach Water Rate Analysis 9 _ Table 5. City of Seal Beach Water Revenue Requirements Analysis - Ope FY FY FY FY FY Description 2009/10 2010/11 2011/12 2012/13 2013114 65 Capital Expenses 66 Contract Professional Services $ 120,620 $ 120,620 $ 120,620 $ 120,620 $ 120,620 67 Depreciation 357,703 357,703 357,703 357,703 357,703 68 Total Capital Expenses $ 478,322 $ 478,322 $ 478,322 $ 478,322 $ 478,322 69 Net Operating Income (Loss) $ 354,560 $ (247,055) $ (243,313) $ (225,036) $ (210,296) 70 Debt Service $ 47,533 $ 58,212 $ 59,179 $ 60,193 $ 54,596 71 Debt Service $ 17,074 $ 17,074 $ 17,074 $ 17,074 $ 17,074 72 Total Debt Service $ 17,074 17,074 17,074 17,074 17,074 73 Debt Coverage Ratio 39.61 1.58 1.69 1.77 1.65 74 Non -Rate Revenue 11,050 11,050 11,050 11,050 11,050 75 Miscellaneous Revenue 505 505 505 505 505 76 Water Turn On Fee $ 5,418 5,418 5,418 5,418 5,418 77 Late Charge $ 33,183 33,183 33,183 33,183 33,183 78 Door Tag Fee 450 450 450 450 450 79 Water Meters $ 2,822 2,822 2,822 2,822 2,822 80 New Customer Fee 680,545 . 33,129 34,502 32,477 81 Fire Service $ 49,898 49,898 49,898 49,898 49,898 82 Total Non -Rate Revenue 92,277 92,277 92,277 92,277 92,277 83 Non - Operating Revenue - Operations 84 Interest on Investments - Operations $ 37,190 $ 47,868 $ 48,835 $ 49,850 $ 44,254 85 Unrealized Gain /Loss on Invest - Operations 10,343 10,343 10,343 10,343 10,343 86 Sale of Surplus Property - Operations _ - 87 Gain/Loss on sale of asset - Operations 88 Total Non - Operating Revenue - Ops $ 47,533 $ 58,212 $ 59,179 $ 60,193 $ 54,596 89 Non - Operating Revenue - Capital 90 Interest on Investments - Capital $ 176,102 $ 107,102 $ 93,452 $ 64,802 $ 42,903 91 Interest on Investments - Repair & Replacement 16,097 26,828 37,559 48,290 59,021 92 UnrealizedGain/LossonInvest - Capital 11,050 11,050 11,050 11,050 11,050 93 Sale of Surplus Property - Capital 94 Total Non - Operating Revenue - Cap $ 203,248 $ 144,980 $ 142,061 $ 124,142 $ 112,973 95 Net Income (Loss) $ 680,545 $ 31,339 $ 33,129 $ 34,502 $ 32,477 96 O &M Fund Information 97 Beginning Operating Fund Balance $ 899,401 $ 1,579,945 $ 1,611,284 $ 1,644,413 $ 1,678,915 98 Deposit (Withdrawals) 680,545 31,339 33,129 34,502 32,477 99 Sub Total O &M Fund $ 1,579,945 $ 1,611,284 $ 1,644,413 $ 1,678,915 $ 1,711,392 100 Reserve Balance Percent of O &M 25% 25% 25% 25% 25% 101 Desired Operating Reserve Balance $ 996,332 $ 1,099,435 $ 1,154,047 $ 1,211,331 $ 1,271,379 102 Excess (Deficit) O &M / Excess to CIP Fund 440,014 103 Ending O &M Fund Balance $ 1,579,945 $ 1,611,284 $ 1,644,413 $ 1,678,915 $ 1,271,379 104 Capital Improvement Projects 105 Capital Projects Fund Balance $ 7,920,079 $ 3,820,079 $ 3,320,079 $ 2,910,079 $ 1.850,093 106 CIP Costs (4,100,000) (500,000) (410,000) (1,500,000) (400,000) 107 Total Capital Improvement Projects funded by R &R fund $ $ $ - $ $ - 108 Repair & Replacement Reserve Fund 109 Beginning R &R Fund Balance $ 357,703 $ 715,406 $ 1,073,108 $ 1,430,811 $ 1,788,514 110 (Withdrawals for CIP Projects) - - - - - 111 Deposit (Depreciation) 357,703 357,703 357,703 357,703 357,703 112 Ending Repair & Replacement Reserve Fund $ 715,406 $ 1,073,108 $ 1,430,811 $ 1,788,514 $ 2,146,217 113 Capital Projects Fund 114 Beginning CIP Fund Balance $ 7,920,079 $ 3,820,079 $ 3,320,079 $ 2,910,079 $ 1,410,079 115 (Withdrawals for CIP Projects) (4,100,000) (500,000) (410,000) (1,500,000) (400,000) 116 Deposits excess O &M Funds 440,014 117 Ending Capital Projects Fund $ 3,820,079 $ 3,320,079 $ 2,910,079 $ 1,410,079 $ 1,450,093 Sources: City of Seal Beach; W ilidan Financial Services /Filial Services W I l.LfeAN City of Seal Beach Water Rate Analysis to 2. Cost of Service Analysis A cost of service analysis converts enterprise - related costs incurred by user classes for which rates can be developed. The cost of service study for City of Seal Beach is performed in three basic steps. The first step is called functionalization. Functional ization categorizes cost data in terms of functions performed by a water utility system. The function's identified in this study include operating expenses, debt service, and capital projects. The second step classifies operating and non - operating expenses of the water facilities to the cost components of volume (base use), extra- capacity, customer billing /administration, and meters & services. This approach is referred to as the base -extra capacity method and is recommended by the American Water Works Association as an appropriate means of equitably allocating costs to customer classes. The cost components are defined as follows: • Volume, or Base Costs: Volume or base costs vary with the consumption of water by users over a specified period of time and relates to the average annual rates of water demand by system users. • Extra - Capacity Costs: Capacity costs vary with the demand, or the rate of flow, of water used by user classes of service in excess of average demand, otherwise known as peak demand. • Customer Costs: Customer costs vary with the number of customers, or the addition of customers, served by a water system. These costs are typically fixed utility expenses, regardless of customer consumption. • Meters & Services: Costs that are related to the water meters such as maintenance, repair, installation and meter reading. Table 6 presents the peaking factors for each of these customer classes. The final step in the functionalization process involves classifying each expense by a certain factor such as base costs, average day /maximum day demand peaking factors and fixed customer costs. Table 7 presents the allocation of each expense component (operations, debt service and capital projects) based on its functional category of base, extra - capacity, customer, or meter & services costs. Table 6. Customer Peaking Factors Customer Class Mean Usage Max Usage Peak Factor Residential 554,226 755,622 1.36 Commercial 1,063,652 1,505,771 1.42 City 112,603 139,104 1.24 1. Customer class peaking factors were determined by taking the ratio of each customer class' average month consumption to the customer's peak month consumption. W 11117AN I Financ•al Sen�es City of Seal Beach Water Rate Analysis » Table 7. Classification of Water Costs by Function Description 10 Yr Avg Rev. Req. Commodity Costs B Max D ay Customer Costs Customer B Meters 8 Service Basis of Clas sification OPERATING EXPENSES Full -time Salanes $ 875,529 $ 291,843 $ - S 291,843 $ 291,843 33% Base/Billing/Meters Temporary Special Pay - - - - 33% Base/BillinglMeters Overtime 68,540 22,847 - 22,847 22,847 33% BassfBilling/Meters Part-time 41,934 13,978 - 13,978 13,978 33% Base/Silling/Meters Auto Allowance Engrneenng - - - - - 33% Base/BillinglMeters Cell Phone Allowance - - - - 33% BaadBlllinglMeters Deferred Comp - Cafeteria 4,479 1,493 - 1,493 1,493 33% Base/Billing /Metere Deferred Compensation 15,366 5,122 - 5,122 5,122 33% Base/Billing/Meters Pers Retirement 120,278 40,093 - 40,093 40,093 33 %BasdBiling /Meters Pars Retirement 567 189 - 169 189 33 % Base/Billing /Meters Medical Insurance 122,842 40,947 - 40,947 40,947 33% Base/Billing/Meters Dental Insurance - 1,950 650 - 650 650 33 %Base/Billing /Metem Medicare 11,342 3,781 - 3,781 3,781 33 %BasdBtlling /Meters Life and Disability 12,175 4,058 - 4,058 4,058 33% Base/Billing/Meters Uniform Pal' - - - - 33% Base/Billing/Meters Flexible Spending• Cafeteria 3,804 1,268 - 1,268 1,268 33% Base/Billing/Meters Pars Admin Expense 474 158 - 158 158 33% Base/Billing/Meters Unemployment 319 106 106 106 33% Base/BillirglMeters Office Supplies 33,429 - - 33,429 - 100% Customer Billing Membership and Dues 929 310 - 310 310 33% Base/BilhrglMeters Training and Meetings 5,488 1,829 - 1,829 1,829 33% SasefB6linglMeters Bldg/grounds Materials - - 33% BaseBillrng/Metem Equipmentimatenals 132,302 44,101 - 44,101 44,101 33% Base/Billing/Meters Special Departmental 50,442 16,814 - 16,814 16,814 33% BassfBillinglMeters Deprecialon 126,015 31.504 31,504 31,504 31,504 25% a=ss Telephone 10,254 - - 10,254 - 100% Customer Billing Gas 137,223 72.220 65.004 - - Avg/Max Day Electricity 141,686 74,569 67,118 - - Avg/Max Day Renblesse Equip - - - - - 33% Base/Billing/Meters Auto Allowance 451 150 - 150 150 33% Base/Billing/Meters Contract Prof Svcs 187,088 62,363 62,363 62.363 33% Base/Bllling/Metem Water Overhead 428,560 142,853 - 142,853 142.853 33% Base/Billing/Meters Intergovernmental Water Purchases 2,418,415 2,418,415 - - - 100 %Base Building Imp. - - - - - 33% Base/Billing/Meters Machinery And Equip - - - - Avg /Max Day Vehicles 414 138 - 138 138 33% BaselSilling/Meters Legal Servies - Water - - - 33% Base/Billing/Meters Total Operation Expenses $ 4,952,296 $ 3,291,798 $ 163,625 $ 770,278 S 726,595 CAPITAL EXPENSES Contract Professional Services Depreciation Total Capital Expenses DEBT SERVICE Debt Service Total Debt Service CAPITAL IMPROVEMENT COSTS CIP Costs Total CIP Costs TOTAL COST ALLOCATION ALLOCATION PERCENTAGES LESS: NONRATE REVENUES Miscellaneous Revenue Water Turn On Fee Late Charge Door Tag Fee Water Meters New Customer Fee Fire Service Interest on Investments - Operations Unrealind Gain/Loss on Invest- Operabor Sale of Surplus Property - Operations Gain/Loss on sale of asset - Operations Interest on Investments - Capital Unrealized Gain/Loss on Invest - Capital Sale of Surplus Property- Capital Total Non Rate Revenues $ 120,620 S 40,207 S S 40,207 S 40,207 33 %Base /BLIIIng /Meters 357.703 89.426 89,426 89.426 89.426 25% across S 476,322 $ 129,632 $ 89,426 $ 129,632 $ 129,632 $ 17.074 8 8 - S 17,074 $ 8,986 $ 8,088 $ - S 5 1.357.529 714,459 643,070 - - $ 1,357,529 $ 714,459 $ 643,070 S - $ - $ 6,805,222 $ 4,144,876 $ 904,209 $ 899,910 S 856,227 100.0% 60.9% 13.3% 13.2% 12.6% $ 505 $ 308 5 67 3 67 S 64 5,418 3,300 720 717 682 33,183 20,211 4,409 4,388 4,175 450 274 60 60 57 2,822 1,719 375 373 355 49,898 30,392 6,630 6,598 6,278 77,595 47,261 10,310 10,261 9,763 10,343 6,300 1,374 1,368 1,301 100,764 61,372 13,388 13,325 12,678 11,050 6,730 1,468 1,461 1,390 $ 292,028 S 177,866 $ 38,802 $ 36,617 $ 36,743 TOTAL AVERAGE REVENUE REOUIREMEN' $ 6,513,193 $ 3,967,009 S 865,407 $ 861,293 $ $19,484 FUNCTIONALI7ATION FACTOR 100.0% 60.9% 13.3% 13.2% 12.6% AvgIMax Day AvglMax Day As % of Total Cost Allocation As % of Total cost Allocation As % of Total cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total Cost Allocation As % of Total coal Allocation Sources City of Seal Beach, WFS Using the water demand factor and functionalization analyses, we allocated the system revenue requirements to each proposed customer class by base, extra capacity, customer and meter categories. Table 8 presents this data and the results. Each customer class' share of water system needs are appropriately identified and become the basis for the final step of rate design. We utilize M/ W111DAN Financial Sr rvrcOS I City of Seal Beach Water Rate Analysis 12 the factors to allocate costs between the Residential and All Other Classes, particularly for the consumption - related costs. Table 9 presents breakdown of the Block 2 penalty water costs that are allocated to each customer class. Due to the recent water shortages in Southern California, Metropolitan Water District (MWD) has determined the amount of water to be allocated to each agency. If an agency exceeds its allocation from MWD, it will charge a penalty of $1,889 per acre foot for the amount over the Agency's allocation. Table 8. Allocation of Water Costs to Customer Classes Total Max Customer Meters 8: Revenue Customer Class Base Day Billing Services Requirement Residential 1,290,013 276,859 577,364 549,337 2,693,572 City 105,530 20,522 5,323 5,065 136,439 Commercial 1,503,166 334,975 46,663 44,398 1,929,203 Total $ 2,898,708 $ 632,356 $ 629,350 $ 598,800 $ 4,759,214 Percentage Totals Residential 27.11% 5.82% 12.13% 11.54% 56.60% City 2.22% 0.43% 0.11% 0.11% 2.87% Commercial 31.58 7.04 0.98 0.93 40.54 Total 60.91% 13.29% 13.22% 12.58% 100.00% Sources: City of Seal Beach, WFS Table 9. Penalty Water Cost Calculation FY FY FY FY FY 2009/10 2010/11 2011/12 2012/13 2013/14 Acre feet of Allocation Exceed Allcoation by five percent Total Acre Feet Over Allocation Penalty Cost per Acre Foot Total Penalty Water Cost Customer Class Residential Commercial City Total Penalty Water Costs 4,200 4,200 4,200 4,200 4,200 5.00% 5.00% 5.00% 5.00% 5.00% 210 210 210 210 210 $ 1,889 $ 1,889 $ 1,889 $ 1,889 $ 1,889 $ 396,690 $ 396,690 $ 396,690 $ 396,690 $ 396,690 FY FY FY FY FY 2009/10 2010111 2011/12 2012/13 2013/14 $ 173,329 $ 173,329 $ 173,329 $ 173,329 $ 173,329 207,523 207,523 207,523 207,523 207,523 15,838 15,838 15,838 15,838 15,838 $ 396,690 $ 396,690 $ 396,690 $ 396,690 $ 396,690 Sources: City of Seal Beach, WFS. VVI lt_(7AN I Fmnncwl Services I City of Sea/ Beach Water Rate Ana /ysis 13 Fire Service Costs Due to the absence of actual fire service costs, various assumptions were made to arrive at annual fire service costs. It is our recommendation that the City begin tracking costs associated to fire service. We recommend reevaluating the Monthly Fire Service Standby Fees once the City has tracked these costs for a specified period of time. To determine annual fire service costs, we used the current number of meters by size of connection and multiplied by the current monthly fire service standby fees. Table 10 presents calculation of the Projected Annual Fire Service Costs. Table 10. Projected Fire Service Cost Calculation Projected Number in Current Monthly Annual Fire Charge per Size of connection, in. Service Charge Service Costs equivalent 1 1 $ - 2 1 - 4 18 47.50 10,260.00 6 14 71.25 11,970.00 8 16 95.00 18,240.00 10 13 118.75 18,525.00 12 0 142.50 0 Totals $ 58,995.00 $ 18.90 Sources: City of Seal Beach, Willdan Financial Services. Rate Design Rate design is the final step in the Cost of Service analysis. Following the functionalization of water utility expenditures to the classification factors, these expenditures are further distributed to customer classes by the appropriate allocation factors. The result is a meter charge calculation and customer charge to distribute the proportionate fixed costs of running the City's water system to each meter size category as well as commodity or consumption -based rate for each customer class (Residential and All Other Classes). Based on the allocated customer - related costs and the number of meter equivalents within the City, a meter charge was identified for each customer's meter size on their property. We used AWWA meter equivalency factors to calculate the meter charge for each size of meter (these were utilized in the last rate analysis). Table 11 presents the number of projected equivalent meters for the City. The lack of growth in the number of equivalent meters is based on the zero percent (0.00 %) customer growth rate. The meter count is based upon the average number of equivalent meters per billing period during FY 2008. Table 12 presents the number of projected equivalent fire service connections by size of connection for the City. Table 13 presents the projected annual water consumption by customer class for the water utility. The projected annual water consumption remains level throughout the study period due to a zero percent (0.00 %) customer growth rate. Table 14 presents the proposed bi- monthly meter charges by meter size per account for the City. Table 15 presents the proposed monthly fire service standby fees by size of connection. W I cal D Servces AN arc�al Fin City of Seal Beach Water Rate Analysis 14 _ Tables 16, 17, 18, and 19 present the commodity or consumption -based rate design by customer class. This analysis factors the base and extra capacity costs of water service to each customer class and divides the data into the water consumption figures for each class. The result is a variable rate per unit of water consumed by each customer. Table 17 presents estimated residential bi- monthly water bills in comparison to current bi- monthly water bills. Table 11. Meters and Equivalent Meters by Customer Class Number of Meters by Size Description 518" & 314" 1" 1.5" 2" 3" 4" 6" 8" 10" 12" Total Flow per Meter Size (gpm) 30 50 100 160 320 500 1000 1600 2300 3100 Equivalent Meter Factor 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 76.67 103.33 Active Meters 4,117 660 111 189 15 16 6 1 1 5,116 Equivalent Meters 4,117 1,100 370 1,008 160 267 200 53 103 7,378 Sources: City of Seal Beach Table 12. Fire Service Equivalent Connections Size of connection, in. Number in Service Demand Factor Eqivalent Connections 1 1 1.00 1 2 1 4.00 4 4 18 16.00 288 6 14 36.00 504 8 16 64.00 1,024 10 13 100.00 1,300 12 0 144.00 0 Totals 63 3 ' Demand factors based on nominal size of connection raised to the 2.00 power. The demand factors are based on AW WA standards for allocating service costs to public and private fire accounts. Sources: City of Seal Beach; American Water Works Association (AW WA) IW I L.LDAN City of Seal Beach Water Rate Analysis 15 Table 13. Total Water System Consumption by Customer Class Projected Water Consumption (hcf) Description Base Year (2008) FY 09/10 FY 10/11 FY 11/12 FY 12/13 FY 13/14 Residential 782,299 782,299 782,299 782,299 782,299 782,299 City 63,996 63,996 63,996 63,996 63,996 63,996 Commercial 911,561 911,561 911,561 911,561 911,561 911,561 Total Water Consumption 1,757,856 1,757,856 1,757,856 1,757,856 1,757,856 1,757,856 741.89 712.40 Percent of Total Water Consumption 785.60 Residential 44.5% 44.5% 44.5% 44.5% 44.5% 44.5% City 3.6% 3.6% 3.6% 3.6% 3.6% 3.6% Commercial 51.9% 51.9% 51.9% 51.9% 51.9% 51.9% Total 100% 100% 100% 100% 100% 100% Sources: City of Seal Beach. Table 14. Meter Charge Calculation (All Customer Classes except Fire Service) FY 2009 -10 FY 2010 -11 FY 2011 -12 FY 2012 -13 FY 2013 -14 Total Meters & Services Costs $ 598,800 $ 574,995 $ 602,951 $ 634,080 $ 666,155 Number of Equivalent Meters 7,378 7,378 7,378 7,378 7,378 Bi- Monthly Cost per 5/8" & 3/4" Meter $ 13.53 $ 12.99 $ 13.62 $ 14.32 $ 15.05 Total Customer Billing Costs $ 629,350 $ 604,330 $ 633,712 $ 666,430 $ 700,141 Number of Accounts 5,116 5,116 5,116 5,116 5,116 Bi- Monthly Cost per 5/8" & 3/4" Meter $ 20.50 $ 19.69 $ 20.64 $ 21.71 $ 22.81 BI- MONTHLY METER CHARGE Meter Size Equivalent Meter Factor 5/8" & 3/4" 1.00 1" 1.67 1.5" 3.33 2 5.33 3 10.67 4" 16.67 6" 33.33 8" 53.33 10" 76.67 12" 103.33 34.03 32.68 34.26 36.03 37.86 43.05 41.33 43.34 45.58 47.89 65.59 62.98 66.04 69.45 72.97 92.64 88.96 93.28 98.10 103.06 164.78 158.23 165.92 174.49 183.32 245.94 236.16 247.64 260.43 273.60 471.37 452.63 474.64 499.14 524.39 741.89 712.40 747.04 785.60 825.34 1,057.50 1,015.46 1,064.83 1,119.81 1,176.45 1,418.20 1,361.82 1,428.03 1,501.76 1,577.72 Sources: City of Seal Beach, Willdan Financial Service wl LI.DAN I Finanaal Sarvices I City of Seal Beach Water Rate Analysis 16 Table 15. Fire Service Standby Fees Calculation FY 2009 -10 FY 2010 -11 FY 2011 -12 FY 2012 -13 FY 2013 -14 Total Annual Fire Service Costs $ 58,995.00 $ 58,995.00 $ 58,995.00 $ 58,995.00 $ 58,995.00 Number of Equivalent Connections 3,121 3,121 3,121 3,121 3,121 Charge per equivalent $ 18.90 $ 18.90 $ 18.90 $ 18.90 $ 18.90 Meter Size Demand Factor FY 2010/11 Standby Fees - Minimum Monthly Charge FY 2012/13 1" 1.00 1.58 1.58 1.58 1.58 1.58 2" 4.00 6.30 6.30 6.30 6.30 6.30 4" 16.00 25.20 25.20 25.20 25.20 25.20 6 36.00 56.71 56.71 56.71 56.71 56.7,1 8 64.00 100.81 100.81 100.81 100.81 100.81 10" 100.00 157.52 157.52 157.52 157.52 157.52 12" 144.00 226.83 226.83 226.83 226.83 226.83 ' Demand factors based on nominal size of connection raised to the 2.00 power. The demand factors are based on AW WA standards for allocating service costs to public and private fire accounts. Sources: City of Seal Beach, Willdan Financial Services Table 16. Residential 131-monthly Increasing Block Consumption Rate Calculation Description FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14 Residential Water Costs $ 1,566,872 $ 1,504,581 $ 1,577,733 $ 1,659,188 $ 1,743,118 rtesicenuai consumption tncrl 782,299 782,299 782,299 782,299 782,299 Residential Base Rate ($ /hcf) $ 2.00 $ 1.92 $ 2.02 $ 2.12 $ 2.23 Residential Share of Penalty Water Costs $ 176,539 $ 176,539 $ 176,539 $ 176,539 $ 176,539 Residential Consumption Above Avg Usage (hcf) 273,805 273,805 273,805 273,805 273,805 Additional Amount per hcf for Conservation $ 0.64 $ 0.64 $ 0.64 $ 0.64 $ 0.64 Block 1 Rates (per hcf): (1 to 26 hcf bi- monthly) $ 2.00 $ 1.92 $ 2.02 $ 2.12 $ 2.23 Block 2 Rates (per hcf): (27 hcf and above bi- monthly) $ 2.65 $ 2.57 $ 2.66 $ 2.77 $ 2.87 Source: City of Seal Beach; Willdan Financial Services Table 17. Commercial 131-monthly Increasing Block Consumption Rate Calculation FY FY FY FY FY Description 2009/10 2010/11 2011/12 2012/13 2013114 Commercial Water Costs Commercial Consumption (hcf) Commecial Base Rate ($/hcf) $ 1,838,141 $ 1,765,066 $ 1,850,883 $ 1,946,440 $ 2,044,901 911,561 911,561 911,561 911,561 911,561 $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Commercial Share of Penalty Water Costs Commercial Consumption Above Avg Usage (hcf) Additional Amount per hcf for Conservation Block 1 Rates (per hcf): See Table Below Block 2 Rates (per hcf): See Table Below $ 205,709 $ 205,709 $ 205,709 $ 205,709 $ 205,709 364,624 364,624 364,624 364,624 364,624 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 0.56 $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 Source: City of Seal Beach; Willdan Financial Services vnal LI_I7AN I Financail Services City of Seal Beach Water Rate Analysis » Table 18. Commercial Bi- monthly Increasing Block Consumption Rate Summary 1. Allotment based an AW WA Flow Ratios. Source: City of Seal Beach; Willdan Financial Services Table 19. Consumption Rate - City and All Other Classes FY FY FY FY FY FY FY Description 2011/12 2009/10 2013/14 2010/11 2011112 2012113 2013114 5/8" . 3/4" Meters City Water Costs including Penalty Water Costs $ 140,493 $ 135,482 $ 141,367 $ 147,919 $ 154,671 Block 1 Rate per ccf (0 -26 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (27+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 1" Meters Black 1 Rate per ccf (0-43 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (44+ ccf) $ 2.58 $' 2.50 $ 2.59 $ 2.70 $ 2.81 1 1/2" Meters Block 1 Rate per ccf (0 -88 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (89+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 2" Meters Block 1 Rate per ccf (0 -205 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (206+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 3" Meters' Block 1 Rate per ccf (0-420 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (421+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 4" Meters Block 1 Rate per ccf (0 -686 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (687+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 6" Meters Block 1 Rate per ccf (0 -1941 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (1942+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 8" Meters Block 1 Rate per ccf (0 -4951 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (4952+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 10" Meters ' Block 1 Rate per ccf (0 -7117 ccf) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (7118+ ccf) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 12" Meters Block 1 Rate per ccf (0 -40500 ccf per month) $ 2.02 $ 1.94 $ 2.03 $ 2.14 $ 2.24 Block 2 Rate per ccf (40501+ ccf per month) $ 2.58 $ 2.50 $ 2.59 $ 2.70 $ 2.81 1. Allotment based an AW WA Flow Ratios. Source: City of Seal Beach; Willdan Financial Services Table 19. Consumption Rate - City and All Other Classes Rate (per hcf) $ 2.20 $ 2.12 $ 2.21 $ 2.31 $ 2.42 Source: City of Seal Beach; Willdan Financial Services wl I.LDAN FIOt1 L Scrv"s I City of Seal Beach Water Rate Analysis is _ FY FY FY FY FY Description 2009/10 2010/11 2011/12 2012/13 2013/14 City Water Costs including Penalty Water Costs $ 140,493 $ 135,482 $ 141,367 $ 147,919 $ 154,671 City Consumption (hcf) 63,996 63,996 63,996 63,996 63,996 Base Rate ($ /hcf) $ 2.20 $ 2.12 $ 2.21 $ 2.31 $ 2.42 Rate (per hcf) $ 2.20 $ 2.12 $ 2.21 $ 2.31 $ 2.42 Source: City of Seal Beach; Willdan Financial Services wl I.LDAN FIOt1 L Scrv"s I City of Seal Beach Water Rate Analysis is _ Examples of the estimated bi- monthly residential water bills in comparison to current water bills are provided below. We have provided examples of residential water bills at various usages in Table 20. Table 21 presents sample Leisure World water bill comparisons at various usages. Table 20. Estimated Bi- Monthly Residential Water Bill at Various Usages 2009 Proposed Block 1 Consumption Rate per hcf (0 -26 hcf) $ 2.00 2009 Proposed Block 2 Consumption Rate per hcf (27+ hcf) $ 2.65 Proposed Proposed Current Current Rates Proposed Block 1 Block 2 Total Amount of Bi- Monthly Consumption Total Current Bi- Monthly Consumption Consumption Proposed Increase/ Meter Size Consumption Meter Rates Charge Fee Meter Charge Charge Charge Charge (Decrease) 518" or 3/4" 20 $ 35.12 $ 40.40 $ 75.52 $ 34.03 $ 40.06 $ - $ 74.09 $ (1.43) 5/8" or 3/4" 26 $ 35.12 $ 46.13 $ 81.25 $ 34.03 $ 52.08 $ - $ 86.10 $ 4.85 5/8" or 3/4" 40 $ 35.12 $ 84.49 $ 119.61 $ 34.03 $ 52.08 $ 37.07 $ 123.17 $ 3.57 (') Approximately 80% of the total number of system accounts are 5/8" or 3/4 ". Source: City of Seal Beach; Willdan Financial Services Table 21. Estimated Monthly Leisure World Water Bill at Various Usages 2009 Proposed Block 1 Consumption Rate per hcf (0 -40500 ccf) $ 2.02 2009 Proposed Block 2 Consumption Rate per hcf (40501+ ccf) $ 2.58 Proposed Proposed Current Current Rates Proposed Block 1 Block 2 Total Amount of Monthly Meter Consumption Total Current Monthly Meter Consumption Consumption Proposed Increase/ Month Meter Size Consumption Rates Charge Fee Charge Charge Charge Charge (Decrease) Jun -08 12" 60,835 $ 2,528.95 $ 177,029.85 $ 179,558.80 $ 709.10 $ 81,667.30 $ 52,477.39 $134,853.79 $ (44,705.01) Jul -08 12" 48,520 $ 2,528.95 $ 123,726.00 $ 126,254.95 $ 709.10 $ 81,667.30 $ 20,696.76 $103,073.16 $ (23,181.79) Aug -08 12" 51,259 $ 2,528.95 $ 140,867.46 $ 140,867.46 $ 709.10 $ 81,667.30 $ 27,765.15 $109,432.44 $ (31,435.02) Source: City of Seal Beach; Willdan Financial Services W I LLDAN I Financial Services City of Seal Beach Water Rate Analysis 19 Table 22 presents a summary of the revenues and expenses from operations for the next five fiscal years. Table 22 indicates total rate revenue is not projected to increase from the Proposed Rates. Table 22. City of Seal Beach Water Operations Summary FY FY FY FY FY Description 2009/10 2010/11 2011112 2012/13 2013/14 REVENUE Total Rate Revenue Total Non - Operating Revenue - Cap Total Non - Operating Revenue - Ops Total Non -Rate Revenue Total Revenue EXPENSES Total Operating Expenses Total Capital Expenses Total Debt Service Total Expenses Net Income (Loss) $ 4,818,209 $ 4,629,006 $ 4,851,198 $ 5,098,609 $ 5,353,540 203,248 144,980 142,061 124,142 112,973 47,533 58,212 59,179 60,193 54,598 92,277 92,277 92,277 92,277 92,277 $ 5,161,267 $ 4,924,474 $ 5,144,714 $ 5,375,221 $ 5,613,387 $ 3,985,326 $ 4,397,739 $ 4,616,189 $ 4,845,323 $ 5,085,514 478,322 478,322 478,322 478,322 478,322 17,074 17,074 17,074 17,074 17,074 $ 4,480,723 $ 4,893,135 $ 5,111,585 $ 5,340,719 $ 5,580,910 $ 680,545 $ 31,339 $ 33,129 $ 34,502 $ 32,477 Sources: City of Seal Beach; Willdan Financial Services N WILL IL ci I. 6e I7A I Fin City of Seal Beach Water Rate Analysis 20 Conclusion The proposed water fee schedule is based on the City projected revenue requirements over the next five fiscal years. The City contracted with Willdan Financial Services, a Professional Consulting /Engineering firm to prepare a Water Rate Analysis which included the development of a Proposition 218 compliant utility rate structure and model. The existing fee structure while financially viable no longer matches the utility's cost of service and it does not match the Prop. 218 compliant rates proposed in the study and thus are less defensible. The Proposed Rate structure is a result of allocating the Water Utility Budget costs based on standards approved by the American Water Works Association (AWWA). These standards are founded in cost of service based principles. The proposed rates are fair and equitable to all customer classes. The proposed rates are not projected to increase rate revenues for the City, but are simply a reallocation of the existing rate revenue. Through the Cost of Service Analysis, residential is now placing a greater burden on the Water Utility than in previous years. As a result, in the proposed rate structure the residential customers will provide a greater percentage of the total rate revenues than in years past. Willdan recommends that the City adopt the proposed rate structures to ensure that the water system maintains a stable cash flow stream in order to provide for ongoing costs and allow for funding of reserves for unscheduled expenses, while being more in line with Proposition 218. W Services AN I Finxncul City of Seal Beach Water Rate Analysis 21 ncul Se