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Action Item # 12 June 3, 2015 Water RatesRegarding Establishment of New Set a Hearing Date 2016 through 2020 and Water Rates for Approve the Notice of Proposed
Water Rates 2016 through 2020 2 2015 onlyIn 2013, Board adopted 3% annual increases for 2014 and •2.5% from 2018 through 2023–3.0% from 2014 through 2017–assumptionsHDR recommended raising
rates annually based on 2013 •Review water rates–Review cost of service–2013 District contracted HDR Engineering•Background / History and Set a Public Hearing Date
Water Rates 2016 through 2020 3 the public hearing and adoption of an ordinanceIf not rejected, the rates can become effective 30 days after –protests are received from the majority
of the affected ownersProposed change in rates is considered rejected if written –mailing of the noticesDistrict must hold a public hearing at least 45 days after the –notice to property
owners of the proposed change in ratesmail a maymail a notice to all rate payers and mustDistrict –Rate adjustments may be adopted five years in advance–Rates must be based on actual
cost of service–Proposition 218 requirements•Background / History and Set a Public Hearing Date
New Information and Set a Public Hearing DateWater Rates 2016 through 2020 4 6% in 2016, 5% in 2017, and 3% in 2018, 2019, and 2020–staff to proceed with “Scenario 1”May 20, 2015 staff
presented rate study and Board directed •and propose ratesDistrict contracted with HDR to update the water rate study •Requires District to absorb the costs of compliance–Reduce consumption
by 28% from 2013–State unfunded mandate–Reduce District’s unaccounted for water–Approximately $600,000 annually in addition to current levels–Accelerated pipeline replacement needed
–Upward pressure on rates•
Summary of the 2013 Financial Plan
Key Assumptions term debt was assumed-–current CIP with accelerated pipeline replacementCapital plan was developed based on the District’s •% annually2.9approximately Operating and Maintenance
costs increased •(flat) thereafterConsumption was reduced by 18% for 2015 and 0% –Customer growth estimated at 1% annually–escalated similarly to expensesRate revenues were calculated
at present rates and •the test periodEscalation factors were used to project the budget over –2024-Test period for the review was 2015 –Starting point for the study was the 2015 budget•
Summary of the Financial Plan 4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%0.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%5.0%6.0%0.0%Annual Rate Adjustments$4,397 $4,397 $4,100 $3,305 $3,213 $2,768 $2,525
$2,659 $3,022 $2,653 $4,397 $4,397 $4,100 $3,305 $3,213 $2,868 $3,037 $2,952 $3,022 $2,653 Annual Capital ($000s)2024202320222021202020192018201720162015
Capital Improvement Plan
Projected Ending Reserve Balances
Financial Plan Review: 3.0%3.0%3.0%5.0%6.0%20202019201820172016 Rate PlanProposed Focus for rates is on the next 5 years (Prop. 218)•meet Board target reserve levels in year 10With either
proposed rate transition plan, reserve levels •($5 million)Reserve levels are projected to reach minimum fund levels •Rate adjustments are necessary to fund the utility•Conclusions
and Recommendations
Rate Design Key Assumptions to recover the pumping electric costsIncreased the pump zone charges to transition –Developed rates for both rate transition plans–Adjusted rates “across
the board”•Maintained current rate structure•Provided accelerated pipeline replacement•year period-Developed rates for a 5•
Legal Requirements differential between Tier 1 and Tier 2Analysis provides the rational of the tier pricing and •customersDeveloping an allocation by tier for residential •Reviewing
the cost of providing water service•San Juan Capistrano decision•
Proposed Residential Rates 0.97 0.94 0.92 0.89 0.85 0.80 8,000 + Gallons$0.78 $0.76 $0.73 $0.71 $0.68 $0.64 Gallons8,000-0 Consumption Charge83.09 80.67 78.32 76.04 72.42 68.32 1"69.66
67.64 65.67 63.75 60.72 57.28 3/4"$69.66 $67.64 $65.67 $63.75 $60.72 $57.28 5/8" x 3/4"ChargeMeter 20202019201820172016Present
Residential Bill Comparison 10,000 gallons in summer*Bill comparison assumes 3/4“ meter and 4,000 gallons in winter and $77.84 $75.57 $73.37 $71.23 $67.84 $64.00 Summer$72.78 $70.66
$68.60 $66.60 $63.43 $59.84 Winter 20202019201820172016Present Monthly Residential Bill*Proposed Average
Proposed Commercial Rates$1.91 $1.85 $1.80 $1.75 $1.66 $1.57 Gal)All Consumption ($/1,000Consumption Charge83.09 80.67 78.32 76.04 72.42 68.32 1"$69.66 $67.64 $65.67 $63.75 $60.72 $57.28
3/4"ChargeMeter 20202019201820172016Present
Proposed Zone Charges 3.60 3.30 3.00 2.70 2.40 2.10 Zone 73.00 2.75 2.50 2.25 2.00 1.75 Zone 62.40 2.20 2.00 1.80 1.60 1.40 Zone 51.80 1.65 1.50 1.35 1.20 1.05 Zone 41.20 1.10 1.00 0.90
0.80 0.70 Zone 30.60 0.55 0.50 0.45 0.40 0.35 Zone 2$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Zone 1 20202019201820172016Present
Summary of the Water Rate Study Maintain minimum reserve targets–conservation–replacementsFund operating and accelerated pipeline –year period-next 5Rate adjustments are necessary over
the •
New Information and Set a Public Hearing DateWater Rates 2016 through 2020 18 of each year st Rates would be effective the first bill printed after January 1–ordinance for the new water
ratesAugust 19, 2015 hold a public hearing and adopt an –proposed rates and public hearing July and August 2015 advertise in local newspaper the –public hearingJune 30, 2015 or before,
mail notices of proposed rates and –hearing (tonight)June 3, 2015 approve water rate increase subject to public –Proposed schedule if Board adopts new rates•
Fiscal Impact and Set a Public Hearing DateWater Rates 2016 through 2020 19$640,000In 2016, the District’s revenue would increase about •increase about $3.70In 2016, a typical monthly
residential water bill would •may affect the District’s spending for the next five yearsThis action item is part of the overall Prop 218 process that •
Recommendation and Set a Public Hearing DateWater Rates 2016 through 2020 20 input related to the proposed ratesSet a public hearing date on August 19, 2015 to receive •through 2020
Approve the notice of proposed water rates for 2016 •
Summary of the Financial Plan replacement programThree years with reduced accelerated pipeline •Level rate adjustments–Scenario 2 •replacement programOnly one year with reduced accelerated
pipeline •Initial year larger rate increases–Scenario 1 •:Differences•4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%0.0%Scenario 23.0%3.0%3.0%3.0%3.0%3.0%3.0%5.0%6.0%0.0%Scenario 1 Annual Rate
Adjustments$4,397 $4,397 $4,100 $3,305 $3,213 $2,768 $2,525 $2,659 $3,022 $2,653 Scenario 2$4,397 $4,397 $4,100 $3,305 $3,213 $2,868 $3,037 $2,952 $3,022 $2,653 Scenario 1 Annual Capital
($000s)2024202320222021202020192018201720162015 Scenarios
Changes since the 2013 Study Additional costs for staffing and customer outreach•Results in reduced consumption based revenues and expenses•projections for 2015 to meet conservation
goalAdditional 18% reduction in consumption was built into –Achieved a reduction of 10% in 2014–Need reduce consumption by 28% from 2013 –State mandated conservation•term debt-No new
long•Program is funded through rates–Helps reduce overall production•Driven by need to reduce unaccounted for water–Increased pipeline replacement capital funding needs–Accelerated
pipeline replacement•