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Home My WebLink About13 Potential Water Rate Study and ProcessAgendaItem#13FRUcKEEDOER1,PublicUtilityDistrictWORKSHOPTo:BoardofDirectorsFrom:ReginaWiseDate:October16,2019Subject:DiscussionofaPotentialWaterRateStudyandProposition218Process1.WHYTHISMATTERISBEFORETHEBOARDThepurposeofthisWorkshopistoreviewapotentialupdatetotheDistrictswaterratestudyandtheprocessforadoptingnewwaterratesincompliancewithCaliforniaProposition218.2.HISTORYTheDistrictlastreviewedwatercostofserviceandrateshiringHDREngineeringInc.in2015.TheDistrictconductedaProposition218processandadoptedrateincreasesof:6%inFY16;5%inFY17;andthenamaximum3%annualincreaseforFYi8thruFY20.Theserateincreaseswereestablishedtospecificallyaddressagingandundersizedinfrastructureinanefforttocontinuetoreducewaterlossesinadditiontomanagingallotherrisingoperatingcosts.Onekeyconsiderationwasthatcashandreserveswouldnotfallbelow$5millionwiththeWaterUtility’sreservegoalbeing$8millionatthattime.3.NEWINFORMATIONSince2015,therecontinuestobeupwardpressureontheDistrict’srevenuerequirementsincludingthefollowing:.TheDistrict’songoingcommitmenttodecreasewaterlossrequireson-goinginvestmentincapitalimprovementfunds;.TheDistrict’songoingneedtohardenthewatersystemreliabilitywiththeinstallationofadditionalemergencypowersupplygeneratorsatgroundwaterwellandpumpfacilities.Generatorsarecriticalforthewinterstormperiodsbutnowalsoinpreparationforpotentialpoweroutagesduringtimesofwildfiredangerwhichcouldoccurduringhighdemandperiods;.Therearesignificant-andyettobedetermined-unfundedStatemandatesregardingwaterconservationtobeimplementedstartingin2022withimpactsonresidentialwateruse,outdoorwateruse,andlossesintheDistrictwaterdistributionsystem;and.Lastly,generalrepair,replacement,andoperatingcostscontinuetoriseataratethatexceedsthatofinflationaryexpectations. TheDistrict,perthetenyearFinancialMasterPlanthatwaspresentedinaWorkshopwiththeBoardonOctober2,2019,willbeunabletomeettheBoard’scurrentcashandreservegoalswhenconsideringtheabovecost-driversandbasedoncurrentrateincreaseprojections.Basedontheabove,staffisrecommendingaWaterRateStudy.InordertogetthegreatestvaluesfromtheWaterRateStudy,staffisalsoproposingtoestablishaformalCapitalImprovementPlan.Thisplanwouldaddresstheanticipatedreplacementneedsofthewatersystemrelatedtoagingoftheinfrastructureandconsideringthefouritemsnotedabove.StaffispreparingaRequestforProposalwithplanstobringtotheBoardaconsiderationofcontractawardforaconsultantattheDecember4,2019meeting.Overallcompilationisexpectedtotakeaboutfourtofivemonths.InconjunctionwiththeCapitalImprovementPlan,staffrecommendsengagingHDREngineeringtoconducttheWaterRatesStudyduetotheirexistingknowledgeoftheDistrict,andexpertise.ThecurrenttimingforBoardapprovalofanHDREngineeringcontractwouldbeQi,FY20.TheWaterRatesStudyisexpectedtotakeaboutthreetofourmonthstocomplete.IftheBoarddecidestomoveforwardwithwaterratechanges,theDistrictthenwouldhavetocomplywithCalifornia’sProposition218;alsoknownasthe“RighttoVoteonTaxesAct.”ThetimingofratechangesperProp218areasfollows:.TheDistrictmustmailanoticetoallratepayersoftheproposedchangeinrates;.APublicHearingmustbeheldatleast45daysafterthemailingofthenotices;.Proposedchangeinratesisconsideredrejectedifwrittenprotestsarereceivedfromamajorityoftheaffectedpropertyowners;andifnotrejected.Ratescanbecomeeffective30daysafterthePublicHearingandadoptionofanOrdinance.Theoverallproposedprojecttimelinewouldbeasfollows:.December2019toApril2020-CapitalImprovementPlanUpdate;.March2019toJuly2020-WaterRatesStudy;and.July15,2020BoardMeeting-WorkshoptoreviewWaterRatesStudyIftheBoardweretodecidetowanttoproceedwithachangeinwaterrates,aproposedtimelinewouldbeasfollows:.August5,2020BoardMeeting-ConsiderationtoapprovewaterratechangessubjecttoaPublicHearing;.August14,2020(onorbefore)-MailnoticestocustomersandparcelownersofproposedratesandofthePublicHearing;.AdvertiseinlocalnewspaperofproposedratesandofthePublicHearing;.October7,2020BoardMeeting-HoldaPublicHearingregardingproposedwaterrates;.October7,2020BoardMeeting-ConsiderationtoadoptanOrdinanceforthenewwaterrates;and .NewrateswouldbeeffectivethefirstbillprintedafterJanuary1,2021.4.FISCALIMPACTThereisnodirectfiscalimpactassociatedwiththisWorkshop.Thisitemisintendedtobeinformativeinregardstowhatitwouldtaketoimplementchangestowaterrates.5.RECOMMENDATIONReceivethisreportandprovidedirectiontostaff./Z&ReginaWiseMichaelD.HolleyFinance&AccountingManagerGeneralManager