HomeMy WebLinkAboutCC AG PKT 2010-03-22 #PAGENDA STAFF REPORT
DATE: March 22, 2010
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Terrence Belanger, Interim Director of Public Works
SUBJECT: 2010 WATER RATE ADJUSTMENT
SUMMARY OF REQUEST:
The City Council is asked to conduct a public hearing on the City's proposed
water rates and upon closing of the public hearing, adopt Resolution No. 5967 if
the City Council does not receive written protests against the proposed rates
from a majority of property owners of the parcels upon which the rates are to be
imposed.
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 the 2003 rate schedule, courts 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 the property owners
of the parcels upon which the proposed rates are to be imposed protest such
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 P
Page 2
Assuming the average residential consumer in Seal Beach uses about 26 ccf
(hundred cubic feet) bi- monthly, such average residential consumer is currently
Paying the following rates:
Meter
5/8" and 3/4" $35.12
Commodity
Block 1 rates (per hcf: (1 to 26 hcf bi -): $2.02
Bi Monthly: $87.64
Monthly Average $43.82
Effective July 1, 2010, such customer will pay (Table 16 page 17)•
Meter
5/8" and 3/4"
Commodity
Block 1 rates (per hcf:
Bi Monthly:
Monthly Average
$32.68
(1 to 26 hcf bi -) $1.93
$82.68
$41.34
Such reduction represents a 4.66% savings. In future years, the amount will
increase. Please refer to the resolution to see all of the proposed rates.
The average monthly water consumption in Leisure World, in calendar year
2009, was 34,528 ccf. The average Leisure World customer (6,608 total) is
currently paving monthly the following rates:
Meter: 12" $ .38
Commodity
Block 1 Rates (1 to 40,000 ccf) $ 2.55
Monthly Average $13.70
Effective July 1, 2010, such customer will pay (Table 17 page 17)•
Meter: 12" $ .10
Commodity
Block 1 Rates (1 to 45,491 ccf) $ 1.93
Monthly Average $10.18
The proposed rate reduction represents a 24.31 % savings. In future years, the
amount will increase. Please refer to the resolution, for all the rates.
Page 3
FINANCIAL IMPACT:
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 recommended the City Council conduct a public hearing on the proposed
water rates and upon closing of the public hearing, adopt Resolution No. 5967 if
the majority of property owners of the parcels upon which the rates are to be
imposed do not protest.
SUBMITTED BY:
ot
errence Belanger
Interim Director of Public rks
NOTED AND APPROVED:
G9-
David Carmai y
City Manager
Attachments:
A. Resolution No. 5967
B. 2009 Water Rate Study
RESOLUTION NUMBER 5967
A RESOLUTION OF THE SEAL BEACH CITY COUNCIL
ADJUSTING WATER RATES
WHEREAS, The City of Seal Beach ( "City") maintains a municipal water system
for the furnishing of water to water users in the City and has previously adopted
water rates per Resolution 5159 dated August 11, 2003 for the sale and
distribution of water;
WHEREAS, It has always been the policy of the City Council that the City's
water utility be self- supporting from charges made by the City for water furnished
to customers and all services rendered in connection therewith;
WHEREAS, The cost of operating and maintaining the City's municipal water
system has steadily increased in recent years;
WHEREAS, The Municipal Water District of Orange County and the Orange
County Water District, having the sole authority to set rates for water purchases,
replenishment assessments, and associated fees for the importation of water and
pumping of groundwater respectively, delivers water to the City and passes
through increases in the cost of providing such water to the City;
WHEREAS, Seal Beach Municipal Code §9.35.020 provides for the
establishment of water rates by City Council resolution;
WHEREAS, On December 21, 2009, the City mailed notice of the proposed rate
adjustment to each water user, explaining the total amount of the proposed rate
adjustment, the amount each water user would pay, the duration of the
payments, the reason for the adjustment in rates, and the basis upon which the
rate adjustment was calculated. The notice also provided information regarding
the public hearing on the proposed rate adjustment as well as instructions for
providing written protests regarding the proposed rate adjustment; and
WHEREAS, The City Council held a public hearing regarding the proposed
water rate adjustment on February 8, 2010, the City Council received public
testimony and considered all objections and protests to the proposed charges.
The item was continued to March 8, 2010 and was continued again to March 22,
2010. Having received no written protests from a majority of owners of the
parcels upon which the charges are proposed for imposition, the City Council
therefore declares its intent to adopt the proposed rate adjustment.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SEAL BEACH
DOES HEREBY RESOLVE, DECLARE, DETERMINE AND ORDER AS
FOLLOWS:
That the following water rates are hereby established and fixed as specified in
the following schedule and in accordance with provisions on the following pages:
(Intentionally Left Blank)
Resolution Number 5967
Table 15. Fire Service Standby Fees Calculation
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
Number of Equivalent Connections 3,121 3,121 3,121 3,121
Charge per equivalent $ 1890 $ 1890 $ 1890 $ 1890
Meter Size
Demand Factor
S t and by F - Mini Monthly Cha rge
176,539 $
1'
1.00
158 158 158
158
2
400
630 630 630
630
4'
1600
2520 2520 2520
25.20
6
3600
5671 56.71 5871
56.71
a.
64W
10081 10081 10081
10081
10
10000
15752 15752 15752
15752
12'
144 00
22683 22683 22683
22683
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 publlo and private fire accounts
Sources City of Seal Beach, Willdan Financial Services
Table 16. Residential 131-monthly Increasing Block Consumption Rate Calculation
FY FY FY FY
Description 2010}11 2011112 20121`113 2013114
Residential Water Costs
nesioammi L onsumpnon (not)
Residential Base Rate ($/hot)
$ 1,507,568 $ 1,580,855 $ 1,662,482 $ 1,746,579
782.299 782.299 782.299 782.299
$ 193 $ 202 $ 213 $ 223
Residential Share of Penalty Water Costs $
176,539 $
176,539 $
176,539 $
176,539
Residential Consumption Above Avg Usage (hat)
273.805
273,805
273.805
273.805
Additional Amount per hd for Conservation $
064 $
064 $
064 $
064
Block 1 Rates (per hd): (1 to 26 hd bi- monthly) $
1.93 $
2.02 $
2.13 $
2.2$
Block 2 Rates (per hd): (27 hd and above bl- monthly) $
2.57 $
2.67 $
2.77 $
2.88
Source City of Seal Beach, Willdan Financial Services
Table 17. Leisure World BI-monthly Increasing Block Consumption Rate Calculation
FY FY FY FY
Description 2010/11 2011/12 20121`13 2013114
Leisure World Water Costs
$
997,858 $
1,046,373
$ 1,100,395 $
1,156,059
Leisure World Consumption (hc)
517.803
517.803
517.803
517.803
Leisure World Base Rate ($/hcQ
$
193 $
202
$ 213 $
223
Leisure World Share of Penalty Water Casts
$
118,851 $
116,851
$ 116,851 $
116,851
Leisure World Consumption Above Avg Usage (hef)
181.231
181.231
181.231
181.231
Additional Amount per hcf for Conservation
$
064 $
064
$ 064 $
064
Block 1 Rates (per hot): (1 to 45,490 hd monthly)
$
1.93 $
2.02
$ 2.13 $
223
Block 2 Rates (par hd): (45,491 and above monthly)
$
2.57 $
2.67
$ 2.77 $
2.99
Source City of Seal Beach, Willdan Financial Services
Table 18. Commercial 01-monthly Increasing Block Consumption Rate Calculation
FY FY FY FY
Description 2010/11 2011/12 2012113 2013/14
Commercial Water Costs
Commercial Consumption (hcf)
Commecial Base Rate ($ftQ
$ 763,999 $ 801,145 $ 842,506 $ 885,125
393.758 393.758 393.758 393.758
$ 1.94 $ 2.03 $ 214 $ 225
Commercial Share of Penalty Water Costs
Commercial Consumption Above Avg Usage (hcQ
Additional Amount per he for Conservation
Block 1 Rates (per hd): Sae Table Below
Block 2 Rates (per hd): See Table Below
$ 88,858 $ 88,858 $ 88,868 $ 88,858
157,503 157.503 157.503 157.503
$ 056 $ 056 $ 056 $ 0.56
$ 1.94 $ 2.03 $ 2.14 $ 225
$ 2.50 S 2.60 S 2.70 S 2.61
Source City of Seal Beach, Willdan Financial Services
Resolution Number 5967
Table 19. Commercial Bi- m onthly Increasing Block Consumption Rate Summary
1 Allotment based an AW W A Flow Ratios
Source City of Seal Beach; Wdldan Financial Services
a
Ta ble 20. Consumption Rate - City and All Other Classes
FY
FY
FY
FY
FY
Description
2011/12
2010/11
2011/12
2012/13
2013114
WS" - 3/4" Meters
$ 148,164 $
164,928
City Consumpdon (hcf)
63,996
63.996
Block 1 Rate per ccf (0-26 ccf)
$
194 $
203
$ 2.14 $
2.25
Block 2 Rate per ocf (27+ ccf)
$
250 $
260
$ 270 $
281
1" Meters
Block 1 Rate per ocf (0-43 ccf)
$
194 $
2.03
$ 214 $
2.25
Block 2 Rate per ccf (44+ ccf)
$
250 $
260
$ 270 $
281
1112" Meters
Black 1 Rate per ccf (0 -88 ccf)
$
1 94 $
203
$ 214 $
225
Block 2 Rate per ccf (89+ c d)
$
250 $
260
$ 2.70 $
2.81
2" Meters
Block 1 Rate per ccf (0 -205 ccf)
$
194 $
203
$ 214 $
225
Black 2 Rate per ccf (208+ ccf)
$
250 $
260
$ 270 $
281
`
3" Meters'
Block 1 Rate per ccf (0-420 ccf)
$
194 $
203
$ 214 $
225
Block 2 Rate per ccf (421 +ccf)
$
250 $
250
$ 270 $
281
4" Meters
Block 1 Rate per ccf (0 -686 ccf)
$
1 94 $
203
$ 214 $
225
Block 2 Rate per ccf (887+ ocf)
$
250 $
260
$ 2.70 $
281
8" Meters
Block 1 Rate per ccf (0 -1941 ccf)
$
194 $
203
$ 2.14 $
225
Block 2 Rate per ccf (1942+ ccf)
$
250 $
280
$ 270 $
281
a' Meters
Block 1 Rate per ccf (0 -4951 ccf)
$
194 $
203
$ 214 $
2.25
Block 2 Rate per ccf (4952+ ccf)
$
250 $
260
$ 270 $
2.81
10" Meters '
Block 1 Rate per ccf (0 -7117 ccf)
$
194 $
203
$ 214 $
225
Block 2 Rate per ccf (7118+ ccf)
$
250 $
2.60
$ 2.70 $
281
12' Meters '
Block 1 Rate per ccf (0 -45490 cof)
$
194 $
203
$ 214 $
225
Block 2 Rate per ccf (45490+ ocf)
$
250 $
260
$ 270 $
281
1 Allotment based an AW W A Flow Ratios
Source City of Seal Beach; Wdldan Financial Services
a
Ta ble 20. Consumption Rate - City and All Other Classes
All provisions of Resolution No. 5967 shall remain in effect except as modified
herein.
BE IT FURTHER RESOLVED that the respective water rates set forth above
shall become effective on July 1st of each respective fiscal year.
(Intentionally Left Blank)
87296 0001
FY
FY
FY
FY
Description
2010/11
2011/12
2012113
2013/14
City Water Costs including Penalty Water Costs
$ 135,703
$ 141,599
$ 148,164 $
164,928
City Consumpdon (hcf)
63,996
63.996
63.996
63.996
Base Rate ($/hcf)
$ 212
$ 221
$ 2.32 $
242
Rata (per hcf)
$ 2.12
$ 2.21
$ 2.32 $
2A2
Source City of Seal Beach, Willdan Financial Services
All provisions of Resolution No. 5967 shall remain in effect except as modified
herein.
BE IT FURTHER RESOLVED that the respective water rates set forth above
shall become effective on July 1st of each respective fiscal year.
(Intentionally Left Blank)
87296 0001
Resolution Number 5967
PASSED, APPROVED and ADOPTED by the City Council of the City of Seal
Beach at a regular meeting held on the 22nd day of March , 2010
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 3
t, Linda Devine, City Clerk of the City of Seal Beach, do hereby certify that the
foregoing resolution is the original copy of Resolution Number 5967 on file in
the office of the City Clerk, passed, approved, and adopted by the City Council at
a regular meeting held on the 22nd day of March , 2010.
City Clerk
CITY OF SEAL BEACH
WATER RATE STUDY ANALYSIS
FINAL REPORT
MARCH 15, 2010
PREPARED FOR:
CITY OF SEAL BEACH
PREPARED BY:
WILLDAN
Financial Services
Oakland Office
1700 Broadway
6 th 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
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Memphis, TN
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Seattle, WA
www.willdan.com
Table of Contents
Table Contents .............................................................................................. ............................... i
ExecutiveSummary ......................................................................................... ............................... I
1 . Revenue Requirements Analysis ................................................................. ............................... 2
Historical and Budgeted Revenues and Expenses ................................... ...............................
2
FinancialPlanning Analysis .................................................................... ...............................
4
WaterCost Analysis ................................................................................ ...............................
4
Capital Improvement Costs ..................................................................... ...............................
5
RevenueAnalysis .................................................................................... ...............................
7
Operating Expense Projections ........................................................... ...............................
7
Capital Improvement Costs ................................................................. ...............................
7
DebtService ........................................................................................ ...............................
7
ReserveFunds ..................................................................................... ...............................
7
Water Revenue Requirements ................................................................. ...............................
7
2 . Cost of Service Analysis ............................................................................ ...............................
11
FireService Costs .................................................................................. ...............................
14
RateDesign ............................................................................................ ...............................
14
Conclusion ..................................................................................................... ...............................
22
Executive Su mmary
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.
WILLDAN
�„ Flno L IDAN I City of Seal Beach Water Rate Analysis
1. Revenue Re quirements 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 2005106 2006107 2 0071 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
s 11,370
$ 69,574
$ 190,085
$ 223,182
$ 4,230
$ 4,282,703
$ 4,574,456
Sources: Seal Beach General Ledger Summary Trial Balance for Water Operations dated 10/15/2008; Willdan Financial Services
W I LLDAN I
�YIAIIGI,7� RlMCCS City of Seal Beach Water Rate Analysis 2
;�,,,
Table L Historical Revenues and Expenditures -Fund 017 Continued
Sources: Seal Beach General Ledger Summary Trial Balance for Water Operations dated 10/15/2008, Willdan Financial Services
WILLDAN
-'N Firuuxmi Services I City of Seal Beach Water Rate Analysis 3
Historical Trial Balance
Account
FY
FY
FY
Number
Description
2
200
20
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
Pars 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 Admm 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 10/15/2008, Willdan Financial Services
WILLDAN
-'N Firuuxmi Services 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
Description
FY
2 009/10
FY
2010/11
FY
2011112
FY
2012
FY
2 013/14
Projected Growth Rate
0000%
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
$
709.00
$ 87800
$ 921.00
$ 966.00
$ 1,013.00
Annual OCWD Replenishment Assessment/AF 3
$
24900
$ 26145
$ 27452
$ 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 6
$
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 6
$
22,833
$ 23,974
$ 25,173
$ 26,432
$ 27,753
Expenditure Growth Rate
5.00%
5.00%
500%
500%
5.00%
CCI 7
446%
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 protection 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 $249/af and to project annual increases of 5 %.
4. Source for number of meters: City Staff.
5. Source for Cost per Meter and Cost per CFS. MWDOC; Increase both by 5 %.
6. Seal Beach share of Total MWDOC Sales.
7. Source is ENR Cost Indexes in LOS ANGELES (1978- 2009).
Sources: City of Sea Beach; FY 2006/09 Annual Budget MWDOC; OCWD, Engineering News Record; Willdan Financial Services.
Water Cost Analysis
Table 3 illustrates the analysis used to project the City's water cost over the next five years.
Table 3 shows the water cost projections using MWDOC rates that reflect MWD staff Option 2
(allocation scenario) provided by the City. In today's environment, water purchased from the
wholesale market requires significantly increasing costs. Therefore, we believe a large projected
i � -- WILLDAN
P ,1 semcm i City of Seal Beach Water Rate Analysis 4
annual increase in water costs is a conservative means to plan the future rate schedule for the
City. The assessment for untreated replenishment water per acre foot via OCWD was projected
using a rate of five percent (5 %).
Table 3. Projected Water Cost Calculation
Capital Improvement Costs
The City maintains an inventory of Water System Capital Improvement Projects (CIP) for the
funding of annual water - related capital projects. The values used in this analysis are based on
cost estimates provided by City staff.
Table 4 presents the water - related CIP over the five -year planning period (note that it is assumed
that all CIP costs are not driven by growth demands and will be funded on a, - pay-as-you-go
basis ".
W I ci LDAN I
FinaFinancial Ser vices City of Seal Beach Water Rate Analysis 5
FY
FY
FY
FY
FY
Description
2009/10
2010111
2011112
2012113
2013/14
Total Import Water ( MWDOC) in acre feet
1,596
1,596
1,596
1,596
1,596
Average MWDOC Treated Full Service Water Rate ($/AF)
709.00
878.00
921.00
96600
1,01300
Subtotal Import Water Cost
$ 1,131,564 $
1,401,288 $
1,469,916 $
1,541,736
$ 1,616,748
MWDOC Retail Meter Connection Fee
$ 31,719 $
33,305 $
34,970 $
36,719
$ 36,555
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 Import Meter, Capacity 8 RTS Cost
$ 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'
2,604
2,604
2,604
2,604
2,604
OCWD Replenishment Rate (RA) ($ /AF) 3
249.00
26145
27452
28825
30266
Total Groundwater Replenishment Cost
$ 648,396 $
680,816 $
714,857 $
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 rotes (allocation scenano)
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 ".
W I ci LDAN I
FinaFinancial Ser vices 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
V WILLDAN
Financial 4ei,mes I City of Seal Beach Water Rate Analysis
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, 2009, the Water Enterprise Fund
#017 had a reserve fund balance of $10,091,504. We recommend that the City 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 $10,091,504.
�WILLDAN
�inwcoJ Semces � City of Seal Beach Water Rate Analysis 7
Cost of service water rates should reflect the cost of operating and maintaining the water
enterprise. In order to achieve this desired outcome the City is proposing the following actions be
taken. As shown in Table 5, annual revenues will be 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 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 %). This revenue decrease and the projected
revenue increases will allow the City to have adequate rate and fee revenues to meet projected
capital expenditures, projected operating and non - operating expenses, and fund balances.
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 City of Sea/ Beach Water Rate Analysis 8
N Find samcm
Table 5. City of Seal Beach Water Revenue Requirements Analysis - OperatYons
FY FY FY FY FY
Description 2009/10 2010/11 2011112 2012113 2013/14
1 Operating Revenue
2 Water Revenue w/o rate increase
3 Residential Water w/o rate increase
4 Multi Residential Water w/o rate increase
5 Commercial Water w/o rate increase
6 Total Operating Revenue
7 Capital Revenue
8 Water Capital Charge w/o rate increase
9 Fire Service Charge
10 Total Capital Revenue
11 Total Revenue
12 Additional Revenue Required
Months Effective
0
5
12
12
12
12
12
12
12
12
$ 2,866,812 $ 2,886,812 $ 2,866,812 $ 2,866,812 $ 2,866,812
1,329,530 1,329,530 1,329,530 1,329,530 1,329,530
62,655 62,655 62,655 62,655 62,655
$ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997
1,381,833
Revenue
13 Year
Increase
14 2008/09
000%
15 2009/10
-3500%
16 2010/11
2625%
17 2011/12
480%
18 2012/13
510%
19 2013/14
500%
20 2014115
525%
21 2015116
600%
22 2016/17
4.75%
23 2017/18
485%
Months Effective
0
5
12
12
12
12
12
12
12
12
$ 2,866,812 $ 2,886,812 $ 2,866,812 $ 2,866,812 $ 2,866,812
1,329,530 1,329,530 1,329,530 1,329,530 1,329,530
62,655 62,655 62,655 62,655 62,655
$ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997 $ 4,258,997
1,381,833
1,381,833
1,381,833
1,381,833
1,381,833
$ 1,381,833 $
1,381,833
$ 1,381,833 $
1,381,833 $
1,381,833
$ 5,640,830 $
5,640,830
$ 5,640,830 $
5,640,830 $
040,830
(1,974,290) (1,974,290)
(1,974,290)
(1,974,290)
962,467 962,467
962,467
962,467
- 222,192
222,192
222,192
31
247,411
247,411
Cell Phone Allowance
-
254,930
(1,011,824) (789,632)
(542,220)
35
(287,290)
24 Total Additional Operating Revenue
25 Total Required Revenue
26 Operating Expenses
27
Full -time Salaries
28
Temporary Special Pay
29
Overtime
30
Part-time
31
Auto Allowance Engineering
32
Cell Phone Allowance
33
Deferred Comp - Cafeteria
34
Deferred Compensation
35
Pars Retirement
36
Pars Retirement
37
Medical Insurance
38
Dental Insurance
39
Medicare
40
Life and Disability
41
Uniform Pay
42
Flexible Spending - Cafeteria
43
Pars Admin Expense
44
Unemployment
45
Office Supplies
46
Membership and Dues
47
Training and Meetings
48
Bldg /grounds Materials
49
Equipment/materials
50
Special Departmental
51
Depreciation
52
Telephone
53
Gas
54
Electricity
55
Rent/lease Equip
56
Auto Allowance
57
Contract Prof. Svcs
58
Water Overhead
59
Intergovernmental Water Purchases
60
Building Imp.
61
Machinery And Equip
62
Vehicles
63
Legal Services - Water
64 Total Operating Expenses
$ 5,640,830 $ 4,629,006 $ 4,851,198 $ 5,098,609 $ 5,353,540
$ 730,890
$ 767,435
$ 805,806 $
846,097
$ 888,402
57,217
60,078
63,082
66,236
69,548
35,006
36,757
38,595
40,524
42,551
3,739
3,926
4,122
4,328
4,545
12,827
13,468
14,142
14,849
15,591
100,408
105,428
110,700
116,235
122,047
473
497
522
548
575
102,548
107,675
113,059
118,712
124,648
1,628
1.710
1.795
1,885
1,979
9,468
9,941
10,438
10,960
11,508
10,164
10,672
11,206
11,766
12,354
3,176
3,334
3,501
3,676
3,860
395
415
436
458
481
266
279
293
_
308
323
27,907
29,302
30,767
3 ?,305
33,921
776
815
855
898
943
4,581
4,810
5,051
5,303
5,568
110,446
115,968
121,767
127,855
134,248
42,109
44,214
46,425
48,746
51,184
105,197
110,457
115,980
121,779
127,868
8,560
8,988
9,438
9,909
10,405
114,554
120,281
126,295
132,610
139,241
118,279
124,193
130,403
136,923
143,769
377
395
415
436
458
156,181
163,990
172,189
180,798
189,838
357,761
375,849
394,432
414,153
434,861
1,870,048
2,176,696
2,284,094
2,396,623
2,514,380
345 363 381 400 420
$ 3,985,326 T 4,397,739 $ 4,616,189 $ 4,845,323 $ 5,085,514
WE WILLDAN
Finanaal Services I City of Seal Beach Water Rate Analysis 9
Table S. City o f Seal Beach Dater Revenue Requir An - Op
FY FY FY FY FY
Description 2009110 2010/11 2011/12 2012/13 2013114
65 Capital Expenses
66 Contract Professional Services
67 Depreciation
68 Total Capital Expenses
69 Net Operating Income (Loss)
70 Debt Service
71 Debt Service
72 Total Debt Service
73 Debt Coverage Ratio
74 Non -Rate Revenue
75 Miscellaneous Revenue
76 Water Turn On Fee
77 Late Charge
78 Door Tag Fee
79 Water Meters
80 New Customer Fee
81 Fire Service
82 Total Non -Rate Revenue
83 Non -Operating Revenue - Operations
84 Interest on Investments - Operations
85 Unrealized Gain/Loss on Invest - Operations
86 Sale of Surplus Property - Operations
87 Gain/Loss on sale of asset - Operations
88 Total Non - Operating Revenue - Ops
89 Non -Operating Revenue - Capital
90 Interest on Investments - Capital
91 Interest on Investments - Repair & Replacement
92 Unrealized Gain/Loss on Invest - Capital
93 Sale of Surplus Property - Capital
94 Total Non-Operating Revenue - Cap
$ 120,620 $
120,620 $
120.620 $
120,620 $
120,620
357,703
357,703
357,703
357.703
357,703
$ 478,322 $
478,322 $
478,322 $
478,322 $
478,322
$ 1,177,181 $
(247,055) $
(243,313) $
(225,036) $
(210,296)
$ 17.074 $
17.074 $
17,074 $
17.074 $
17,074
17,074
17,074
17,074
17,074
17,074
89.72
7.96
6.26
8.54
6.63
505
505
505
505
505
5,418
5,418
5,418
5,418
5,418
33.183
33,183
33,163
33,183
33.183
450
450
450
450
450
2,822
2,822
2,822
2,822
2,822
49,898
49,898
49,898
49,898
49.898
92,277
92,277
92,277
92,277
92,277
$ 166,318 $
31,994 $
36,280 $
40,714 $
40,554
10,343
10,343
10,343
10,343
10,343
$ 176,661 $
42,338 $
46,623 $
51,058 $
50,898
$ 159,470 $
311,440 $
297,790 $
269,140 $
245,329
(63,403)
(52,672)
(41,941)
(31,210)
(20,479)
11,050
11,050
11,050
11,050
11,050
$ 107,116 $
269,817 $
266,898 $
248,979 $
235,899
95 Not Income (Loss) $ 1,536,161 $ 140,303 $ 145,411 $ 150,204 $ 151,703
96 O &M Fund Information
97
Beginning Operating Fund Balance
$
10,091,504
$ 996,332
$ 1,136,634
$ 1,282,046 $
1,432,250
98
Deposit (Withdrawals)
1,536,161
140,303
145,411
150,204
151,703
99
Sub Total O &M Fund
$
11,627,665
$ 1,136,634
$ 1,262,046
$ 1,432,250 $
1,583,953
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
10,631,333
312,574
103
Ending O &M Fund Balance
$
996,332
$ 1,136,634
$ 1,262,046
$ 1,432,250 $
1,271,379
104
Capital Improvement Projects
105
Capital Projects Fund Balance
$
10,631,333
$ 10,631,333
$ 10,131,333
$ 9,721,333 $
8,533,907
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
$
(2,292,297)
$ (1,934,594)
$ (1,576,892)
$ (1,219,189) $
(861,486)
110
(Withdrawals for CIP Projects)
-
-
-
-
111
Deposit (Depreciation)
357.703
357,703
357.703
357.703
357,703
112
Ending Repair & Replacement Reserve Fund
$
(1,934,594)
$ (1,576,892)
$ (1,219,169)
$ (661,466) $
(503,783)
113
Capital Projects Fund
114
Beginning CIP Fund Balance
$
$ 10,631,333
$ 10,131,333
$ 9,721,333 $
8,221,333
115
(Withdrawals for CIP Projects)
(500,000)
(410,000)
(1,500,000)
(400,000)
116
Deposits excess O &M Funds
10.631,333
312,574
117
Ending Capital Projects Fund
$
10,631,333
$ 10,131,333
$ 9,721,333
$ 8,221,333 $
8,133,907
Sources City of Seal Beach, Willdan Financial Services
WI LLDAN I
Financial Servx:os City of Seal Beach Water Rate Analysis 10
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. Functionalization categorizes cost data in terms of
functions performed by a water utility system. The functions 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. Tal;le 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
Leisure World
45,487
62,016 1.36
City
112,603
139,104 1.24
t Customer class peaking factors were determined by taking the ratio of each customer
class' average month consumption to the customers peak month consumption
m"'( A(
I• . M Financml Serace9
City of Seal Beach Water Rate Analysis y
Table 7. Classification of Water Costs by Function
Description
10 Yr Avg Rev.
Req.
Commodity Costs
Base Max Day
Customer Costs
Customer Billing
Motors &
Services
Basis of Classification
OPERATING EXPENSES
69.428 89.428
69.426
89.426
S 476,322
S 129,632
Full -time Salaries
$ 875,529 5
291,843 $
-
S 291,843 S
291,843
33% BaseBillingfMaters
Temporary Special Pay
-
-
-
-
-
33% Base/BIIIIng/Merem
overture
68,540
22,847
-
22,847
22,647
33% Base/BNmglMeters
Part-time
41,934
13,978
-
13,978
13,978
33% BassiBiNnglMeters
Auto Allcitiance Engineenng
-
-
-
-
-
33% BaseBiging/Matem
Call Phone Allowance
-
-
-
-
33% Base/Billing/Metem
Deferred Comp - Cafetena
4,479
1,493
-
1,493
1,493
33% Base/Billing/Metere
Deferred Compensation
15,366
5,122
33,183
5.122
5,122
33% Base/BNingliMetere
Pars Retirement
120,278
40,093
-
40,093
40,093
33% Sase/BiNnglMetere
Pan Retirement
567
189
-
189
189
33% Base/Bilhng/Molers
Medical Insurance
122,842
40,947
-
40,947
40,947
33% Base/Billing/Meters
Dental Insurance
1,950
650
-
650
660
33% BasaBi0ing/Metom
Medicare
11,342
3,781
-
3,787
3,781
33% BassBilling/Metere
Lila and Disability
12,175
4,058
-
4,058
4,058
33 %BaseBObng /Meters
Uniform Pay
-
-
-
-
-
33% Base/Billnng/Metem
Flexible Spending - Cafeteria
3,604
1,268
-
1,268
1,268
33% Base/Billing/Meters
Pam Admin Expense
474
158
-
156
168
33% Base/B.IhnglMeters
Unemployment
319
106
-
106
106
33% Base/Billing/Meters
Office Supplies
33,429
-
33,429
-
100% Customer Billing
Membership and Dues
929
310
-
310
310
33% Base/Billing/Meters
Training and Meetings
5,488
1,829
-
1,1129
1,829
33% BaselBdlinglMetem
Bldg /grounds Materials
-
-
-
-
33% BaselBilling/Meters
Equipment/matenals
132,302
44,101
-
44,101
44,101
33% Base/Billingimatem
Special Departmental
50,442
16,814
-
16,814
16,614
33% BaseBilhng/Meters
Depreciation
126,015
31,504
31,504
31,504
31,504
25 % across
Telephone
10,254
-
-
10,254
-
100% Customer Billing
Gas
137,223
72,220
65,004
-
-
AvgfMax Day
Electricity
141,686
74,569
67,118
-
-
AvWMax Day
Rentilesse Equip
-
-
-
-
33% BaseBiling/Metem
Auto Allowance
451
150
-
150
150
33% Base/Billing/Meters
Contract Prof Svcs
187,088
62,363
-
62,363
62,363
33% Base/BillinglMeten
Water Overhead
428,560
142,853
-
142,853
142,853
33% BasaBillingfMeters
Intergovernmental Water Purchases
2,418,415
2.418,415
-
-
-
100% Base
Building Imp
-
-
-
-
-
33% Base/Biling/Meters
Machinery And Equip
-
-
-
-
-
AvglMax Day
Vehicles
414
138
-
138
138
33% BasaB101nglMeters
Legal Services- Water
-
33% BaseBilling/Meters
Total Operation Expenses
S 4,952,296 $
3,291,798 $
163,625
$ 770,278 $
726,595
CAPITAL EXPENSES
Contract Professional Serinces
Depreciation
Total Capital Expenses
DEBT SERVICE
Debt Seneca
Total Debt Service
CAPITAL IMPROVEMENT COSTS
CIP Cash
Total CIP Costs
TOTAL COST ALLOCATION
ALLOCATION PERCENTAGES
LESS: NONRATE REVENUES
Miscellaneous Revenue
Water Turn On Fee
Late Charge
Door Tag Fee
Water Melee
New Customer Fee
Fire Service
Interest on Investments - Operations
Unrealized GauilLoss on Invest - Operator
Sale of Surplus Properly - Operations
Gain/Loss an sale of asset - Operations
Interest an Investments - Capital
Unrealized GairdLoss on Invest - Capital
Sale of Surplus Property - Capital
Total Non Rate Revenues
S 120,620 $
40,207 8
.
$
40,207 $
40,207
357.703
69.428 89.428
69.426
89.426
S 476,322
S 129,632
5 89,426
$
129,632
S 129,832
S 17.074
8,986
8,088
-
-
S 17,074
$ 8,986
$ 8,088
$
S 1.357.529
714,459
843,070
-
-
5 1,357,529 S
714.459 5
643,070
S
- 5
-
$ 6
$ 4,144,876
S 904,209
$
699,910
S 6511
100.0%
60.9%
133%
13.2%
12.8%
$ 505 $
306 S
67
S
67 $
64
5,418
3,300
720
717
682
33,183
20,211
4,409
4,386
4,175
450
274
60
60
57
2,922
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
1,358
1,301
100,764
61,372
13,388
13,325
12,678
11,050
6,730
1,468
1,461
1,390
S 292,028
S 177,866
S 36,602
S
38,617
$ 36,743
33% BaseStlling/Metem
25% some
AyglMax Day
Avg/Max Day
As % of Total Cost Allocation
As % of Total Cost Allocabon
As % of Total Cost Allocatwn
As % of Total Cost Allocation
As % of Total Cost Allocation
'As % of Total Cost Allocabon
As % of Total Cost Allocation
As % of Total Cost Allocation
As % of Total Cost Allocation
As % of Total Cost Allocation
As % of Total Cost At
As % of Total Cost Allocation
As % of Total Cost Albeabon
As % of Total Cost Allocabon
TOTAL AVERAGE REVENUE REOUIREMEN' $ 6.513,193 $ 3,967,009 $ 855,407 S 661.293 S 819,484
FUNCTIONALIZATION FACTOR 100.0% 00.9% 13.3% 13.2% 126%
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
"
W I LLDAN
Financed Services I City of Seal Beach Water Rate Analysis 12
a
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
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
Customer Class
Base
Max
Day
Customer
Billing
Meters &
Services
Total
Revenue
Requirement
Residential
1,238,728
268,840
554,427
527,514
2,589,510
City
101,334
19,927
5,112
4,863
131,236
Commercial
623,494
140,505
44,570
42,407
850,977
Leisure World
819,913
177,945
221
210
998,288
Total
2,783,470 $
607,217
$ 604,330 $
574,995
$ 4,570,011
Percentage Totals
Residential
27.11%
5.88%
12.13%
11.54%
56.66%
City
2.22%
044%
011%
0.11%
2.87%
Commercial
1364%
3.07%
0.98%
0.93%
18.62%
Leisure World
17.94%
am
0.00%
0.00%
21.84%
Total
60.91%
13.29%
13.22%
12.58%
100.00%
Sources City of Seal Beach, WFS.
Table 9. Penalty Water Cost Calculation
Customer Class FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14
Residential
$ 176,539 $
FY 2010/11
FY 2011112
FY 2012/13
FY 2013/14
Acre feet of Allocation
$
4,200 $
4,200
$ 4,200
$ 4,200
Exceed Allcoation by five percent
88,858.17
5.00%
5.00%
5.00%
5.00%
Total Acre Feet Over Allocation
116,851
210.00
210.00
210M
210.00
Penalty Cost per Acre Foot
$
1,889 $
1,889
$ 1,889
$ 1,889
Total Penalty Water Cost
$
396,690 $
396,690
$ 396,690
$ 396,690
Customer Class FY 2010/11 FY 2011/12 FY 2012/13 FY 2013/14
Residential
$ 176,539 $
176,539 $
176,539 $
176,539
City
14,442
14,442
14,442
14,442
Commercial
88,858.17
88,858.17
88,858.17
88,858.17
Leisure World
$ 116,851 $
116,851 $
116,851 $
116,851
Total Penalty Water Costs
$ 396,690 $
396,690 $
396,690 $
396,690
Sources• City of Seal Beach, WFS.
WILLDAN
1 Financial Semcm I City of Seal Beach Water Rate Analysis 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
14250
0
Totals
$ 58,995.00 $ 18.90
Sources. City of Seal Beach, Willdan Finanaal Sennees.
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 LLDAN I City of Seal Beach Water Rate Analysis 14
A. _ FinancW Serwoes
Tables 16, 17, 18, 19, and 20 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 20 presents estimated
residential bi- monthly water bills in comparison to current bi- monthly water bills.
Table 11. Meters and Equ ivalent Meters by Customer Class
Sources City of Seal Beach
Table 1 2. Fire Service Equivalent Connections
Size of
connection,
in.
Number in
Service
Demand
Factor
Number of Meters by Size
1
1
1.00
1
Description
5/8" & 3/4"
1"
1.5"
2"
3"
4"
6"
W.
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
1067
16.67
3333
53.33
76.67 10333
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 1 2. Fire Service Equivalent Connections
Size of
connection,
in.
Number in
Service
Demand
Factor
Egivalent
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
3,121
' Demand factors based on nominal size of connection raised to the 2.00
power. The demand factors are based on AWWA standards for allocating
service costs to public and private fire accounts.
Sources* City of Seal Beach, American Water Works Association (AW WA)
-WI LLDAN
Pmanciol Sc cos I 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
393,758
393,758
393,758
393,758
393,758
393,758
Leisure World
517,803
517,803
517,803
517,803
517,803
517,803
Total Water Consumption
1,757,856
1,757,856
1,757,856
1,757,856
1,757,856
1,757,856
BI-Monthly Cost per 5/8" & 3/4" Meter
$
Percent of Total Water Consumption
$ 1969
Residential
44.5%
44.5%
44.5%
44.5%
44.5%
44.5%
City
3.6%
3.6%
3.6%
36%
3.6%
3.6%
Commercial
22.4%
22.4%
224%
22.4%
22.4%
22.4%
Leisure World
29.5%
29.5%
295%
29.5%
29.5%
29.5%
Total
100%
100%
100%
100%
100%
100%
Sources: City of Seal Beach.
1,501.76
1,57772
Table 14. Bi- Monthly Meter Charge Calculation (All Customer Classes exceat Fire Service
1 The 12" meter size is currently billed on a monthly basis at one -half the amount stated above.
Sources. City of Seal Beach, Wdidan Financial Service
P; xW WI LLDAN I City of Seal Beach Water Rate Analysis 16
� Flna Serwccs
Equivalent
FY 2009 -10
FY 2010 -11
FY 2011 -12
FY 2012 -13
FY 2013 -14
Total Meters & Services Costs
$
702,302
$ 574,995
$ 602,951
$ 634,080
$ 666,155
Number of Equivalent Meters
1.00
7,378
7,378
7,378
7,378
7,378
Bi- Monthly Cost per 5/8" & 3/4" Meter
$
1586
$ 12.99
$ 13.62
$ 14.32
$ 1505
Total Customer Billing Costs
$
738,132
$ 604,330
$ 633,712
$ 666,430
$ 700,141
Number of Accounts
5.33
5,116
5,116
5,116
5,116
5,116
BI-Monthly Cost per 5/8" & 3/4" Meter
$
2405
$ 1969
$ 20.64
$ 2171
$ 22.81
BI- M ONTHLY METER CHARG
16.67
288.45
23616
24764
260.43
273.60
1 The 12" meter size is currently billed on a monthly basis at one -half the amount stated above.
Sources. City of Seal Beach, Wdidan Financial Service
P; xW WI LLDAN I City of Seal Beach Water Rate Analysis 16
� Flna Serwccs
Equivalent
Meter Size
Meter Factor
5/8" & 3/4"
1.00
3991
3268
34.26
3603
37.86
1"
167
5049
4133
4334
4558
4789
1.5"
333
7693
6298
6604
69.45
7297
2
5.33
108.65
8896
93.28
98.10
103.06
3
10.67
193.26
158.23
165.92
17449
183.32
4
16.67
288.45
23616
24764
260.43
273.60
6"
33.33
552.85
452.63
47464
49914- '
524.39
8
5333
87013
71240
747.04
78560
82534
10"
7667
1,24029
1,015.46
1,064.83
1,119.81
1,176.45
12 "
103.33
1,66333
1,361.82
1,428.03
1,501.76
1,57772
1 The 12" meter size is currently billed on a monthly basis at one -half the amount stated above.
Sources. City of Seal Beach, Wdidan Financial Service
P; xW WI LLDAN I City of Seal Beach Water Rate Analysis 16
� Flna Serwccs
Table 15. Fire Service Standby Fees Calculation
FY 2009 -1 0 FY 2010 -11 FY 2011 -12 FY 2012 - 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 $ 1890
Meter Size
Demand Factor
$ 176,539
Standby Fees - Minimum Monthly Charge
$ 176,539
1
1.00
1.58
1.58 1.58 1.58
1.58
2
4.00
6.30
6.30 6.30 630
6.30
4
16.00
25.20
25.20 25.20 25.20
2520
6
36.00
56.71
56.71 56.71 56.71
56.71
8"
64.00
100.81
100.81 100.81 100.81
100.81
10"
100.00
15752
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 fin: accounts.
Sources City of Seal Beach, Willdan Financial Services
Table 16. Residential Bi- monthly Increasing Block Consumption Rate Calculation
FY FY FY FY
Description 2010/11 2011/12 2012113 2013/14
Residential Water Costs
Kesiaentiai L onsumption tnct/
Residential Base Rate ($/hcf)
$ 1,507,568 $ 1,580,865 $ 1,662,482 $ 1,746,579
782,299 782,299 782,299 782,299
$ 1.93 $ 202 $ 2.13 $ 2.23
Residential Share of Penalty Water Costs
$ 176,539
$ 176,539
$ 176,539
$ 176,539
Residential Consumption Above Avg Usage (hcf)
273,805
273,805
273,805
273,805
Additional Amount per hcf for Conservation
$ 0.64
$ 0.64
$ 0.64
$ 0.64
Block 1 Rates (per hcf): (1 to 26 hcf bi- monthly)
$ 1.93
$ 2.02
$ 2.13
$ 2.23
Block 2 Rates (per hcf): (27 hcf and above bi- monthly)
$ 2.57
$ 2.67
$ 2.77
$ 2.88
Source City of Seal Beach; Wdlden Financial Services
Table 17. Leisure World Bi- monthly Increasing Block Consumption Rate Calculation
FY FY FY FY
Description 2010/11 2011112 2012/13 2013114
Leisure World Water Costs
Leisure World Consumption (hcf)
Leisure World Base Rate ($/hcf)
$ 997,858 $ 1,046,373 $ 1,100,395 $ 1,156,059
517,803 517,803 517,803 517,803
$ 1.93 $ 2.02 $ 2.13 $ 2.23
Leisure World Share of Penalty Water Costs
Leisure World Consumption Above Avg Usage (hcf)
Additional Amount per hcf for Conservation
Block 1 Rates (per hcf): (1 to 45,490 hcf monthly)
Block 2 Rates (per hcf): (45,491 and above monthly)
$ 116,851 $ 116,851 $ 116,851 $ 116,851
181,231 181,231 181.231 181,231
$ 0.64 $ 0.64 $ 0.64 $ 0.64
$ 1.93 $ 2.02 $ 2.13 $ 2.23
$ 2.57 $ 2.67 $ 2.77 $ 2.88
Source City of Seal Beach; Wdldan Financial Services
"' WILLDAN
1- ; i Futaneld Sernces 1 City of Seal Beach Water Rate Analysis 17
Table 18. Commercial Bi- monthly Increasing Block Consumption Rate Calculation
Commercial Share of Penalty Water Costs
FY
FY
FY
FY
Description
2010/11
2011/12
2012/13
2013/14
Commercial Water Costs
$ 763,999 $
801,145 $
842,506
$ 885,125
Commercial Consumption (hcf)
393,758
393,758
393,758
393,758
Commecial Base Rate ($ /hcf)
$ 1.94 $
2.03 $
214
$ 225
Commercial Share of Penalty Water Costs
$
88,858
$ 88,858
$ 88,858
$ 88,858
Commercial Consumption Above Avg Usage (hcf)
157,503
157,503
157,503
157,503
Additional Amount per hcf for Conservation
$
0.56
$ 0.56
$ 0.56
$ 0.56
Block 1 Rates (per hcf): See Table Below
$
1.94
$ 2.03
$ 2.14
$ 2.25
Block 2 Rates (per hcf : See Table Below
$
2.50
$ 2.60
$ 2.70
$ 2.81
Source City of Seal Beach; Wdldan Financial Services
.
�WILLDAN
,, Fwancol Semces i City of Seal Beach Water Rate Analysis 18
Table 19. Commercial Bi- monthly In creasing Block Consumption Rate Summary
1 Allotment based on AW WA Flow Ratios
FY
FY
FY
FY
Description
2010/11
Table 20. Consumption Rate - City and All Other Classes
2011/12
2012/13
FY FY
2013114
5/8" - 3/4" Meters
Description
2010/11 2011/12
2012/13
2013/14
Block 1 Rate per ccf (0-26 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (27+ ccf)
$
2.50
$
2.60
$
2.70
$
2.81
1" Meters
Block 1 Rate per ccf (0 -43 ccf)
$
1.94
$
2.03
$
214
$
2.25
Block 2 Rate per ccf (44+ ccf)
$
2.50
$
2.60
$
2.70
$
2.81
11/2" Meters
Block 1 Rate per ccf (0 -88 ccf)
$
1.94
$
2.03
$
2.14
$
225
Block 2 Rate per ccf (89+ ccf)
$
2.50
$
2.60
$
2.70
$
281
2" Meters
Block 1 Rate per ccf (0-205 ccf)
$
1.94
$
2.03
$
214
$
2.25
Block 2 Rate per ccf (206+ ccf)
$
2.50
$
2.60
$
2.70
$
281
3" Meters'
Block 1 Rate per ccf (0-420 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (421+ ccf)
$
2.50
$
2.60
$
2.70
$
2.81
4" Meters
Block 1 Rate per ccf (0 -686 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (687+ ccf)
$
2.50
$
260
$
2.70
$
2.81
6" Meters
Block 1 Rate per ccf (0 -1941 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (1942+ ccf)
$
2.50
$
2.60
$
270
$
2.81
8" Meters
Block 1 Rate per ccf (0 -4951 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (4952+ ccf)
$
2.50
$
2.60
$
2.70
$
2.81
10" Meters'
Block 1 Rate per ccf (0 -7117 ccf)
$
1.94
$
2.03
$
2.14
$
2.25
Block 2 Rate per ccf (7118+ ccf)
$
2.50
$
2.60
$
2.70
$
2.81
12" Meters '
Block 1 Rate per ccf (0 -45490 ccf)
$
1.94
$
2.03
$
2.14
$
225
Block 2 Rate per ccf (45490+ ccf)
$
2.50
$
2.60
$
270
$
2.81
1 Allotment based on AW WA Flow Ratios
Source City of Seal Beach; W dldan Financial Services
Table 20. Consumption Rate - City and All Other Classes
FY FY
FY
FY
Description
2010/11 2011/12
2012/13
2013/14
City Water Costs including Penalty Water Costs
$ 135,703 $ 141,599
$ 148,164
$ 154,928
City Consumption (hcf)
63,996 63,996
63,996
63,996
Base Rate ($/hcf)
$ 2.12 $ 221
$ 2.32
$ 2.42
Rate (per hcf) $ 2.12 $ 2.21 $ 2.32 $ 2.42
Source* City of Seal Beach; W dlden Financial Services
WILLDAN I
Plnancu services City of Seal Beach Water Rate Analysis >y
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 21. Table 22 presents sample Leisure World water bill comparisons at various usages.
Table 21. Estimated Bi- Monthly Residential Water Bill at Various Usages
2010 Proposed Block 1 Consumption Rate per hcf
2010 Proposed Block 2 Consumption Rate per hcf
(0 -26 hcf) $ 1.93
(27+ hcf) $ 2.57
Proposed Proposed
Current Proposed Block 1 Block 2 Total
BI-Monthly BI-Monthly Current Rates Total Current Bi- Monthly Consumption Consumption Proposed Increase/
Meter Size Consumption Meter Rates Consumption Charge Charge Meter Charge Charge Charge Charge (Decrease)
5/8" or 3/4" 20 $ 35.12 $ 40.40 $ 75.52 $ 32.68 $ 38.54 $ $ 71.22 $ (4.30)
5/8' or 3/4" 30 $ 3512 $ 83.70 $ 118.82 $ 3268 $ 5781 $ - $ 9049 $ (28.33)
5/8" or 3/4" t'i 40 $ 35.12 $ 111.60 $ 146.72 $ 32.68 $ 50.10 $ 36.01 $ 118.79 $ (27.93)
(') Approximately 80% of the total number of system accounts are 5/8" or 3/4'.
Source City of Seal Beach; Willdan Financial Services
Table 22. Estimated Monthly Leisure World Water Bill at Various Usages
2010 Proposed Block 1 Consumption Rate per hcf (0 -45480 co $ 1.93
2010 Proposed Block 2 Consumption Rate per hcf (45481+ ccf) $ 2.57
Proposed Proposed
Current Rates Proposed Block 1 Block 2 Total
Amount of Current Consumption Total Current Monthly Meter Consumption Consumption Proposed Increase/
Meter Size Consumption Monthly Meter Rates Charge Fee Charge Charge Charge Charge (Decrease)
12" 48,520 $ 2,528.95 $ 123,726.00 $ 126,254 95 $ 680.91 $ 87,663.75 $ 7,792.74 $ 96,137.40 $ (30,117.55)
12" 51,259 $ 2,528.95 $ 140,86746 $ 140,867.46 $ 680.91 $ 87,663.75 $ 14,837.07 $ 102,500.82 $ (38,366.64)
Source: City of Seal Beach; Willdan Financial Services
' WILLDAN
I City of Seal Beach Water Rate Analysis 20
Table 23 presents a summary of the revenues and expenses from operations for the next five fiscal years. Table 23 indicates total rate revenue is
not projected to increase from the Proposed Rates.
Table 23. City ofSeal Beach Water Operations Summ
FY FY FY FY FY
Description 2009110 2010/11 2011/12 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, Wdldan Financial Services
WILLUAN
City of Seal Beach Water Rate Analysis 21
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 rate structure no longer reflects the demands each customer class places, on the
utility and thus may not be Proposition 218 compliant. 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. The rate
structures comply with all applicable provisions with Proposition 218.
�WILLDAN
Financial SeNlcm � City of Seal Beach Water Rate Analysis 22