SR-20080422-3A~~~
~;tYof City Council Report
Santa Monica
City Council Meeting: April 22, 2008
Agenda Item:
To: Mayor and- City Council
From: Joan Akins, Acting Director of Environmental and Public Works
Management
Carol Swindell, Director of Finance
Subject: Presentation on Water and Wastewater Rate Studies and Discussion of
Proposed Rate Changes
Recommended Action
Following discussion with Council and direction to staff, staff will return to Council for
formal adoption of water and wastewater rate changes and to commence the required
public notice period
Executive Summary
This report presents the findings and analyses of recently completed financial and rate
studies prepared for both the Water and Wastewater funds. This report explains the
current water and wastewater rate structures, describes the main cost factors that are
responsible for projected revenue shortfalls in the two funds, and discusses .five-year
rate adjustment options that will generate sufficient rate revenues to pay for projected
operating ahd capital costs. The need for the proposed adjustments in the rates has
been a subject of discussion with Council since May; 2005. The report also proposes a
conservation-focused rate structure for both water and wastewater rates. This
proposed change in rate structure increases the financial incentives for more efficient
water use by adoption of a rate approach where customers will be charged based only
on the amount of water they use. The cost impacts of the proposed rate adjustments
and rate restructuring on various types of customers within each customer group is
presented, as is a comparison of the proposed Santa Monica rates with various other
comparison cities in the region. The comparison shows that the proposed Santa Monica.
rates compare favorably with these other cities.
1
Discussion
Background
Existing Water Rates
The City provides water service to three customer types: single-family, multi-family and
non-residential. The current water rate structure was adopted in 1996 to provide equity
between customer types and among customers within a class. There were no rate
changes in 1997 or 1998. In 1999, a resolution to annually increase rates by the actual
Consumer Price Index (CPI) increase was adopted and has been implemented with each
annual budget. An exception occurred in fiscal year 2005/2006, when Council approved a
6.0% increase in lieu of the annual CPI increase (CPI was 3.8% that year).
The existing water rate is structured so that every single family, multi-family and non-
residential customer pays a bi-monthly service charge based on size of the water meter.
The rates do not differ by customer class (single family residential, multi-family residential,
commercial, etc.). Customers are also charged a commodity, or usage rate based on the
quantity of water actually used in each two-month billing period. There are three levels, or
tiers, of the commodity rate, the purpose of which is to provide financial incentives for
water conservation. As an example, for single family customers, Tier 1 rates are charged
on the first 13 hundred cubic feet (HCF: each HCF represents 748 gallons of usage). Tier
2 rates are charged for usage from 14 to 126 HCF, and Tier 3 rates are charged on any
usage above 127 HCF, which very few customers reach.
Existing Wastewater Rates
Established pursuant to a 1996 rate study, the existing wastewater rate structure
comprises a fixed service charge plus a commodity charge. The rate structure has
remained unchanged since 1996; however; an annual CPI-based rate increase. has
been in effect since 2001.
The fixed service charge component is assessed to each customer account based on
water meter size, and the commodity charges are based on estimated wastewater flows
2
during the bi-monthly billing period. A discharge factor is applied to the metered water
consumption to represent the portion of water usage returned to the wastewater system.
The discharge factors range from 51 % for single family residential accounts, to 95% for
multi-family residential accounts with more than 4 units. All non-residential customers
are .assigned a discharge factor of 89%. Commodity charges for non-residential
customers vary depending on sewage strength (as represented by biochemical oxygen
demand and suspended solids) for each class.
Previous Council Actions
In a City Council study session on May 17, 2005, staff presented information addressing
the status of the fund balances for the Water and Wastewater funds: Specifically,
expenditures in both of these funds were outpacing revenues. Options were. provided in
the study session to balance expenditures and revenues. The information was received
and filed, with a staff commitment to return with updated information.
A .subsequent report to Council on June 21, 2005, provided additional information
regarding expenditures and revenues for the Water fund and presented additiona( options
for bringing expenditures and revenues into balance. Staff indicated in the June 21, 2005
report that consideration of wastewater rate adjustments could be deferred until FY 2006-
2007 or FY 2007-2008 depending on actual costs and revenues during the ensuing
period.
Council direction to staff received on June 21, 2005 included:
• Implement a 6% increase to water rates for FY 2005-2006 that would balance
revenues and expenditures for one year only
• Conduct a water rate study to finalize the additional rate increase amounts required
to balance the fund, including examining a restructuring of the tiered system to
provide a conservation incentive to reward customers who voluntarily conserve
water
• Utilize a cost of service approach in any new rate design
3
Review practices and procedures to assess efficiencies throughout the operational
functions of the Division.
Concurrent with the commissioning of a water rate study, staff also commissioned a
wastewater rate study to review the revenue requirements necessary to meet required
wastewater operating and capital expenditures as well as existing debt service obligations
In a study session with Council on May 8, 2007, staff presented various options for both
water and wastewater rate and structure modifications. A five year plan was presented
for each, with water rate increase recommendations by staff comprising an 11% annual
rate increase for water, and a wastewater rate increase plan of 30%, 25%, 20%, 10%, and
0%. Structural modifications to the existing water and wastewater rate structures were
also suggested. Council was informed that additional information was pending at the time
and that staff would return with updated information, and likely lower rate increase options
at a later date.
Water Rate Study
A water rate study was conducted for the city by The Reed Group, Inc. (Attachment A)
Among the objectives of the study were to present a strategy for meeting the utility's
financial obligations for the five year planning period (FY 2007-2008 through FY 2011-
2012) and to assess .changes to the rate structure in keeping with the city's
sustainability goals to encourage water conservation.
The study confirmed that the cost of operating and maintaining the water system and
replacing and upgrading existing facilities exceeed current and projected revenues. The
study also noted that the current practice of applying an inflation-only (CPI) rate
increase annually would result in all reserve funds being depleted by FY 2010-2011.
4
Exhibit I summarizes the major categories of cost within the water utility based on the
FY 07-08 budget. The two largest cost categories are Metropolitan Water District water
purchase costs and labor costs. Both cost categories have exceeded the pace of
general inflation. Furthermore, the third largest category of cost (capital improvement
projects) should not be correlated to general inflation, but to the long-term replacement
needs of the water system which greatly exceed the ongoing inflation rate, particularly
due to construction cost increases in recent years. The 15 percent shown for capital
improvement projects in Exhibit I represent current planned annual replacement activity
only. Amore in-depth examination of long-term water infrastructure upgrade and
replacement CIP needs is planned to be completed during FY 2008-2009. Water Fund
costs also include funding for programs to increase water efficiency and water re-use by
residents, businesses and institutions within Santa Monica. The. analysis confirms that
rate increases above the CPI factor are necessary to balance revenues and expenses;
and to maintain adequate reserve fund balances over the five year planning period.
Exhibit I
Water System Costs, Capital and Operating,. by Category
FY 2007/2008 Total Costs = $17.3 Million
30%
25%
20%
15%
10%
5%
0%
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5
Financial Strategy Options -Water
As an enterprise fund, the City's water utility is expected to be financially self sufficient.
Revenues must match annual expenditures; otherwise subsidies from other funds are
required. Additionally, the city maintains target levels for reserve funds as follows:
• Operating Reserve to meet unforeseen operating expense cash flow needs
($1.3 million target level = 10% of O&M),
• Rate Stabilization Reserve to provide a buffer in the event of a drought or other
water supply emergency circumstance which might have adverse affects on
revenues ($1.0 million target level),
• Capital Reserve to provide a buffer for the variability of capital program expenses
($1.275 million target level).
As further discussed below, target reserve levels have since been revised.
With the goal of maintaining financial reserves at acceptable levels throughout the
planning period, four rate options were initially developed as alternates to the baseline
scenario of continuing with inflation only increases. These options were presented at
the May 8, 2007 Council study session, summarized in Table 1, and included below.
• Baseline -apply an annual inflation-only (CPI) rate increase; reserve funds
are exhausted and fund balance goes negative in FY 2008-2009.
• Option 1 -apply annual increases in water rates to cover all financial
obligations and maintain all reserves at or above target levels each year of
the planning period.
• Option 2 -utilize the $1 .0 million rate stabilization reserve to offset a portion
of required rate increases and provide additional time to correct the financial
imbalance. The rate stabilization reserve will be reestablished to the
minimum target level by the end of the planning period. Use of the rate
stabilization reserve in this manner is consistent with its intended purpose.
• Option 3 -utilize the $1.0 million rate stabilization reserve and a portion of the
$1.275 million capital reserve to offset required rate increases, providing
6
additional time to correct the financial imbalance. The rate stabilization
reserve and the capital reserve are restored to minimum target levels by the
end of the planning period. Use of the capital reserve may limit flexibility in
accomplishing capital program objectives during this period; however, the
size of the present capital program contributes to the projected deficit so the
use of the capital reserve would be consistent with its intended purpose.
• Option 4 -equalize annual rate increases; rate increases will be consistent
across the planning period. All reserves will be reestablished to target levels
at the end of the planning period. This option also utilizes the rate
stabilization and capital reserves, but to a lesser extent than Option 3 thereby
providing additional financial flexibility to respond to unanticipated
occurrences during the next five years.
TABLE 1 -- WATER RATE INCREASE OPTIONS
Water Rate Increases
Use of Reserves Jul. 2008 Jul. 2009 Jul. 2010 Jul. 2011 Jul. 2012
Rates increased by CPI only;
Neeative Fund balance by
Baseline FY 10 1 3.2% 2.5% 2.8% 2.6% 2.4%
Maintain minimum target
Oprionl reserves throughout planning 15.0% 9.0% 9.0% 9.0% 6.0%
period.
Utilize rate stabilization reserve to
Option 2 defer needed rate increases, re- 13.0% 9.0% 9.0% 11.0 % 11.0
establish minimum target reserve
by end of planning period. -
Utilize rate stabilization and
capital reserves to defer needed
Option 3 rate increases, re-establish 10.0 % 10.0 % 11.0 % 13.0% 13.0
minimum target reserves by end -
of~ tannin eriod.
Implement uniform rate increases
(of 11%) per year. Rate
Option 4 stabilizaflon and capital reserves 11.0% 11.0 % 11.0% 11.0 % 11.0
are used, but are fully replenished
b endbf tannin eriod.
Note: All increases include CPI
7
Option 4 had been recommended as the preferred alternative at the May 8, 2007 Study
Session. Subsequently, in light of revised financial information and a review of industry
standards regarding reserve level targets, the water rate consultant was requested to
revise the previously recommended option to address a revised planning horizon and
revised reserve fund levels. The revised reserve levels include the following:
• An operating reserve of 25% of the water utility operating budget, exclusive of the
capital improvement program and transfers to other funds (increase from 10%)
• A capital reserve of 50% of annual capital program expenditures (change from a
flat $1,275,000)
• A rate stabilization reserve of $1,000,000 (no change)
In addition, in March 2008, the Metropolitan Water District (MWD), from which Santa
Monica purchases approximately 85% of its water, approved a 14% increase in treated
water delivery rates effective January 1, 2009. This increase was higher than that
which had been incorporated into earlier versions of the rate study. The MWD increase
is necessary for MWD in order to purchase additional water supplies in response to a
30% reduction in State Water Project deliveries to Southern California due to court-
ordered pumping restrictions in the Sacramento-San Joaquin Delta compounded by the
effects of a long term drought impacting the Colorado River.
Two additional options were developed for water rate adjustments. In option 5, the
revised reserve levels were incorporated, along with the recent information concerning
the increase in MWD water rates. Option 5a is similar to Option 5, with the added
consideration of a one time cash infusion of $2.5 million into reserves. This is a one
time cash supplement, and not an ongoing demand. The resulting Options 5 and 5a are
detailed in Table 2
8
Table 2 -Water Rate Increase Options 5 and 5a 1'I
Use of Reserves July
2008 July
2009 July
2010 July
2011 July
2012
Implement updated
reserve level targets;
Rate stabilization and
Option 5 capital reserves are 11.5% 10.5% 10.5% 10.5% 9.0%
used, but aze fully
replenished by the end
of the planning period
Same as option 5
above, but with one-
Option Sa time $2.5 million cash 9.5% 9.5% 9.5% 9.0% 9.0%
infusion to reserves in
the fast year. (2)
(1) All Increases Include GF'I
(2) $2.5 million from MTBE settlement
It should be noted that the percentage increases presented in Tables 1 and 2 address
the increases necessary to meet revenue requirements even if the existing rate
structure is maintained. The rate study has also taken into account the city's
sustainability goals and ongoing water conservation efforts. Additionally, all increases
indicated in Tables 1 and 2 for FY 2008/2009 are inclusive of the planned CPI increase
of 3.7% for FY 08/09.. As detailed in the following section, however, a structural
modification to the rates is also proposed.
Rate Structure Modifications
The proposed rate restructuring eliminates the bi-monthly fixed service charge so that
the water bill will be entirely based on actual water usage, thereby improving the water
conservation incentive at all levels. For residential customers, the existing three tier
structure is replaced with a four tier structure. For non-residential customers, a uniform
commodity rate is established, applicable to nearly all water use. A second tier for non
residential customers applies at the high end of consumption, in order to provide a
strong disincentive for excessive water use.
9
The proposed rate structure:
• Improves the water conservation incentive. A customer can directly reduce their
water bill amount by reducing water consumption.
• Continues to protect the affordability of basic levels of water use, even as water
rates increase
• Reflects the cost of providing water service to each group of customers
• Maintains rate equity between customer classes and among customers within a
class
Suggested Option and Rate Impacts.
The options presented in Table 1 (not including the baseline) were prepared in advance
of reserve fund level enhancements and before considering the impacts of the MWD
rate increase in March 2008. When the impacts of the enhanced funding levels and the
MWD increases are included, the rate impacts are as indicated in Table 2. Staff
believes that options 5 and 5a present the lowest level of rate increases taken over the
5 year planning period, depending on whether or not reserve funds are initially
augmented in the first year by $2.5 million.
As indicated in Table 3, options 5 and 5a in combination with the revised commodity-
only rate structure, result in a variation of water charge impacts within each customer
group. Rather than a uniform increase to all customers, the actual percentage increase
will be less for lower consumption users and more for higher consumption users. This
is true for the first year only, due to the change in rate structure. In subsequent years,
all customer classes will see the same percentage increase in .charges. Table 3a
demonstrates this uniform percentage increase for all customer classes in the following
year.
10
Table 3
Proposed Water Rates, FY 2008/2009
Option 5, Option
Bi-monthly Current v,,/ 5a, w/
meter water use, Rates & proposed Proposed
Customer size HCF Structure~'~ Structure Structure
$ change,
change~2~ notes
-$0.48, annual
Single family,
average use 5/8" 35 $75.37 $74.89 $73.88 -.64% average
- -$0.93
Multi-family, , g DUs @
average use 11/2" 80 $181.97 $181.04 $178.61 -0.51% tOHCF/DU
+$6.70 annual
Non-residential, ,
average use 1" 37 $80.19 $86.89 $85.72 +g.36% average
+$108.39 annual
Non-residential, ,
average use 2" 193 $344.86. $453.25 $447.16 +31.43% average
+$374.54 annual
Non-residential, ,
average use 4" 709 $1,290.50 $1665.04 $1642.67 +29.02% average
(1) 08/09 current structure with CPI-only rate increase
(2) $ change, % change from current to option 5
Table 3a
Proposed Water Rates, FY 2009/2010
Bi-monthly FY08/09 rate,
meter water use, from $ change,
Customer size HCF Table 3 FY 09/10 % change notes
$7.$6 annual
Single family, ,
average use 5/8" 35 $74.89 $82.75 10.5% average
$19.01
Multi-family, . , g DUs @
average use 1 1/2" 80 $181.04 $200.05 10.5% tOHCF/DU
$9.12, annual
Non-residential,
average use 1" 37 $86.89 $96.01 10.5% average
$47.59, annual
Non-residential,
average use 2" 193 $453.25 $500.84 10.5% average
$174.83, annual
Non-residential,
average use 4" 709 $1665.04 $1839.87 10.5% average
11
Water rate comparison with neighboring communities
Table 4 summarizes bi-monthly water bills under the City of Santa Monica's proposed
water rates and the current water rates of several neighboring communities. The bill
comparison is based on a 3/" water meter and 35 HCF of bi-monthly water usage. The
proposed bi-monthly rate of $74.89 or $73.88 compares favorably the current average
rate of the other communities surveyed. It should be noted that some of the other
communities are considering rate increases in the near future.
Table 4
Comparison of Current Single Family Water Bills
Bi-Monthly Water
Billst'i Effective Date
City of Beverly Hills $125.66 July 2008 proposed
Golden State Water (Culver City) $119.30 January 2008
City of Los Angeles DWP $98.22 Nov -Apr July 2008 proposed
$103.40 May -Oct July 2008 proposed
City of Glendale $93.77 July 2007
City of Santa Monica $74.89~2~ $73.88~'~ July 2008 proposed
City of Pasadena $73.19 Oct -Mar July 2007
$77.21 Apr -Sep July 2007
City of Burbank $71.61. July 2007
c4~
Notes:
~'~ Assumes 3/4" meter and 35 HCF used during atwo-month period
cz~ Option 5, without cash infusion
is~ Option 5a, with cash infusion
i4~ Excludes Santa Monica from the
average
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MTBE Treatment Protect
In late 2006, the City entered into a settlement agreement with three major oil
companies that resulted in the payment of $131,000,000 to the City to pay for all current
and future costs associated with the design, construction and operation of a treatment
facility to clean MTBE from drinking water at the City's Charnock well field. These funds
are also being used to pay for all City replacement water costs resulting from the
contamination as well as for groundwater monitoring, testing and other costs associated
with the project. It is expected that all of these funds will need to be expended over the
next several years to successfully complete the Charnock MTBE cleanup.
Wastewater Rate Study
The city provides wastewater service through operation and maintenance of an
extensive wastewater collection system. Wastewater treatment services are provided
by contract agreement with the City of Los Angeles. Santa Monica is one of 28
subscribing agencies to Los Angeles, receiving wastewater treatment services at Los
Angeles' Hyperion Treatment plant. Under the terms of the agreement with Los
Angeles, Santa Monica pays a proportionate share. of the operations and maintenance
expenses, as well as capital charges, of the Hyperion treatment and collection system.
Raftelis Financial Consultants, Inc. was retained by the city to conduct a wastewater
rate study (Attachment B). Among the objectives of the study were to review the
revenue requirements of providing wastewater service, provide alternative financial
plans to address costs during the five year planning period, and evaluate alternative
rate structures considering the city's sustainability goals and to seek consistency in the
rate structure with the proposed revised water rate structure design.
The study confirmed that the cost exceed current and projected revenues. The study
also noted that the current practice of applying an inflation-only (CPI) rate increase
annually would result in all reserve funds being depleted by FY 2009-2010
13
Exhibit 2 summarizes the major categories of cost within the water utility based on the
FY 07-08 budget. Capital and operating expenditures for the Hyperion system are
beyond the scope of the city's control since they are stipulated in an agreement
between the City of Los Angeles and a number of Hyperion contract agencies, including
Santa Monica. These costs represent more than one-half of the city's total Wastewater
budget. Another 15% of the. budget is related to debt service payments for a capital
bond that was issued a number of years ago to pay for previous Hyperion capital costs.
Santa Monica's local capital improvement program has remained modest, comprising
limited main replacements, fleet improvements, street repairs, and technology
improvements. Since the 1994 Northridge Earthquake, a significant portion of the city's
wastewater collectioh system was repaired and/or replaced with the aid of FEMA
financing. Wastewater Fund costs also include funding of water efficiency and
wastewater reduction efforts aimed at various categories of Santa Monica customers.
In recent years, with only a CPI increase in rates being applied and with continually
rising capital costs from Los Angeles, available reserves have been applied as a short
term response to plug the gap between revenues and expenditures. As outlined in the
wastewater rate study, wastewater system expenses including collection system O&M
and capital, debt coverage on an existing capital bond and other expenses have
outpaced the revenue derived principally from wastewater service charges collected on
a bi-monthly basis from the city's customers. Accordingly, the wastewater rate study
addresses options to reestablish acceptable reserve levels, maintain compliance with
minimum debt coverage requirements, and meet customer equity objectives.
14
Exhibit 2
Summary of Wastewater System Costs, Operating and Capital, by Category (FY 07-08)
FY2007/2008 Total Costs = $19.0 Million
Financial Strategy Options -Wastewater
As an enterprise fund, the City's wastewater utility is expected to be financially self
sufficient. Revenues must match annual expenditures; otherwise subsidies from other
funds are required. Additionally, the city maintains target levels for reserve funds as
follows:
• Operating Reserve to meet unforeseen operating expense cash flow -needs
($1.4 million target level = 10% of O&M),
• Rate Stabilization Reserve to provide a buffer in the event of a drought or other
water supply emergency circumstance which might have adverse affects on
revenues ($2.0 million target level),
• Capital Reserve to provide a buffer for the variability of capital program expenses
($2.08 million target level).
As further discussed below, target reserve levels have since been revised.
15
With the goal of maintaining financial reserves at acceptable levels throughout the
planning period, the study identified three alternate approaches to meeting revenue
requirements as alternates to the baseline scenario of continuing with inflation only
increases. These options were presented at the May 8, 2007 Council study session,
summarized below.
• Full Capital Funding Debt Scenario -projected capital expenditures are funded
through two bond issues: a $17.7 million FY 2008-2009, and a $22.0 million bond
issue in FY 2010-2011
• Intermediate Capital Funding Debt Scenario -projected capital expenditures for
FY 2008-2009 and FY 2009-2010 are funded through a $17.7 million bond issue
in FY 2008-2009, while rate adjustments and available cash are utilized to fund
remaining capital expenditures during the final two years of the planning period.
"Pay as You Go" Funding Scenario - no debt will be issued during the planning
period and all capital expenditures over the next five years will be funded through
wastewater rate adjustments and available cash.
The rate increases, as presented May 8, 2007 resulting from each of the financing
alternatives are indicated in Table 5.
Table 5
Wastewater Rate Increases for Alternate Financing Scenarios*
FY FY FY FY FY FY FY FY FY FY
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Option Full Capital
1 Funding Debt 13% 10% 9% 8% 5% 35% 6% 6% 4% 2%
Scenario
Option Intermediate
2 Capital Funding 17% 17% 17% 16% 16% 4% 0% 0% 0% 0%
Debt Scenario
Option Pay as You Go
30% 25% 20% 10% 0% 0% 0% 0% 0% 0%
3 Funding
* Rate increases identified for FY 2013 to FY 2017 are based on assumed O&M and capital charges from the City of
Los Angeles since official estimates from Los Angeles are only available through FY 2012. In those years where a
0% increases is indicated it is estimated that a CPI only rate increase will be sufficient
16
Due to the fact that Santa Monica's Hyperion capital payment obligations are not
expected to diminish significantly after the next five years neither of the debt funding
rate scenarios is recommended by staff as the subsequent rate increases required in
years six through ten and beyond would be higher than would be required with the "pay
as you go" approach. Staff recommended on May 8, 2007 to go with the pay as you go.
Subsequently, in light of revised financial information and a review of industry standards
regarding reserve level targets, the wastewater rate consultant was requested to revise
the previously recommended option to address a revised planning horizon and revised
reserve fund levels. The revised reserve levels include the following:
• An operating reserve of 25% of the wastewater utility operating budget, exclusive
of the capital improvement program and transfers to other funds (increase from.
10%)
• A capital reserve of 50% of annual capital program expenditures except Hyperion
Capital Payment which has a 16.7% reserve level (change from a flat
$2,079,100)
• A rate stabilization reserve of $2,000,000 (no change)
Two additional options were developed for wastewater rate adjustments. The revised
reserve levels were incorporated. Option 4a is similar to Option 4, with the added
consideration of a one time cash infusion of $3.0 million into reserves. This is a one
time cash supplement, and not an ongoing demand. The resulting Options 4 and 4a are
detailed in Table 6.
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Table 6
Wastewater Rate Increases for Alternate Financing Scenarios*
FY
2008 FY
2009 FY
2010 FY
2011 FY
2012 FY
2013 FY
2014 FY
2015 FY
2016 FY
2017
Option 4 Pay as You Go
18% 18% 15% 8% 5% 3% 3% 3% 3% 3%
Funding
Option Pay as You Go
4a Funding with one
15% 15% 15% 9% 9% 4% 3% 3% 3% 3%
time $3.OM
cash infusion
Rate increases identified for FY 2013 to FY 2017 are based on assumed O&M and capital charges from
the City of Los Angeles since official estimates from Los Angeles are only available through FY 2012.
Rate Structure Modifications
After consideration of alternate rate structures for wastewater charges, a modified rate
structure is proposed which is consistent with the proposed modifications to the water
rate structure. In the proposed structure, the bi-monthly service charge is eliminated
and 100% of the revenue requirements are recovered through the commodity rates
determined for various residential and non-residential customer classes. This structure
is consistent with the City's sustainability objectives, arid is also consistent with the
regulatory requirement of the California State Water Quality Control Board to base rates
on quantity and strength of wastewater discharges.
Recommended Option and Rate Impacts
Although Table 6 presents information over a ten year period, the rate adjustments presented
herein for consideration and subsequent adoption are for the five year period through fiscal year
2012/2013. Nevertheless, review of the rate projections over a 10 year period as indicated in
Table 6 provides a better overview of the implications of the two options. As such, the rate
increase projections presented in this report represent maximum increases. Accordingly, staff
believes that the PayGo options (options 4 and 4a) present the preferred alternative. These
options, combined with the proposed commodity-only based rate structure, result in the
projected wastewater charges presented in Table 7. Rather than a uniform increase to all
customers, the actual percentage increase varies among customer classes. This is true
18
for the first year only, due to the change in rate structure. In subsequent years, all
customer classes will see the same percentage increase in charges. Table 7a
demonstrates this uniform percentage increase for all customer classes in the following
year.
Table 7
Proposed Wastewater Rates, FY2008-2009
Bi-
monthly Current Option 4, Option 4a,
water Bi- w/ w/
Discharge use, monthly proposed proposed
Customer factor HCF charoe structure structure chanaei'~ Notes
+$9.74,
Single family, annual
average use 51% 36 $44.24 $53.98 $52:69 +22.02%
avers e
+$37.78,
MWti-Family, 8 DUs @ 10
average use 95% 80 $185.66 $223.44 $218.12 +20.35% HCF/DU
Non-
-$1.01, General
residential, commercial
average use 89% 37 $89.26 $88.25 $85.95 -1.13% ,
1" meter
Non-
residential,
+$49.33, medium
moderate strength
2"
use 89% 193 $503.77 $553.10 $539.36 +g,7g% ,
meter
Non-
+$15.46,
residential, high strength,
nign use 89% 709 $2,571.68 $2587.14 $2530.35 +0.62% 4" meter
(1) $ change, % change from current to option 4
19
Table 7a
Proposed Wastewater Rates, FY2009-2010
Bi-
monthly FY08/09
water rate, from $ change,
Discharge use, % change
Customer factor HCF Table 7 FY 09/10 Notes
$9'72'
single family, annual
average use 51% 36 $53.98 $63.70 18%
average
$40.22,
Multi-Family, 8 DUs @ 10
average use 95% 80 $223.44 $263.66 18% HCF/DU
Non-
$15.89, General
residential, commercial
average use 89% 37 $88.25 $104.14 18% ,
1" meter
Non-
residential,
$99.56, medium
moderate strength, 2"
use 89% 193 $553.10 $652.66 18% meter
Non-
$465.69, high
residential, strength
4"
nigh use 89% 709 $2587.14 $3052.83 18% ,
meter
Wastewater rate comparison with neighboring communities
Table 8 Summarizes bi-monthly wastewater charges for a single family residence under
the City of Santa Monica's proposed wastewater rates and the current wastewater rates
of several neighboring communities. The bill comparison' is based on a 3/" water meter
and 35 HCF. of bi-monthly water usage. The proposed bi-monthly rate of either $53.98
or $52.69 compares favorably with the average rate of the other communities surveyed.
It should be noted that some of the other communities are considering rate increases in
the near future.
20
Table 8
Comparison of Current Single Family Wastewater Bills
Bi-Monthly Wastewater
Billst'i
Effective Date
City of Beverly Hills $125.66 July 2008 proposed
Culver City $122.71 January 2008
City of Los Angeles $54.90 July 2007
City of Santa Monica $53.98~2~ $52.69~'~ July 2008 proposed
City of Glendale $39.52 July 2007
City of Burbank $35.96 July 2007
Average of Cities Surveyed ~4~ $75.75
Notes:
I'~ Assumes 3/4" meter and 36 HCF used during atwo-month period
cz> Option 4 without cash infusion
c3> Option 4a with cash infusion
~4~ Excludes Santa Monica from the
average
Efficiency and Service Improvements
Water and Wastewater operations are conducted so as to provide public services as
efficiently as possible. Since the 1996 rate increases, staff additions have been very
modest. No new positions have been added in water treatment, distribution, or O&M
functions even though growth in the city continues to add new customers and accounts. In
wastewater operations, four positions have been added to address .environmental .and
sustainability objectives including enhanced catch basin maintenance, and O&M for the
city's Santa Monica Urban Runoff Recycling Facility (SMURRF). The SMURRF operating
costs are reimbursed 50% by the City of Los Angeles.
21
In an era of rapidly advancing technology, many of the improvements to operational
practices address information technology and customer service improvements.
Implementation of a geographically based (GIS) mapping and information system
to better manage the water storage and distribution system
• Implementation of an automated maintenance management system to better
track hours and costs of work by City Water and Wastewater staff
Commencement of a pilot program to study the electronic reading of water
meters that could potentially save significant staff time (currently underway)
Redesign of the utility bill to provide customers with detailed information about
their water use and rates
• Addition of new bill payment options for customers such as payment via the
Internet, telephone payments, direct debit, recurring credit card payments, and a
drop-off box located at City Hall
Opening Water operations and administrative offices to service customers five
days per week every week
Performing water sample collection and analysis in-house with staff Water
Chemists to expedite testing and control costs
^ Establishment of an expanded water contamination prevention or "cross-
connection" control program to better guarantee the safety and security of City
water supplies
The USEPA required annual Water Quality Report that is mailed to 55,832 Santa
22
Monica residents and businesses uses the same formatting and artwork each
year and the photos are taken by City employees to reduce production costs
Nexus Study
In September, 2007, the City hired HF&H Consultants, LLC to prepare a nexus study,
which analyzed the cost of environmental programs that were charged to other funds to
ensure that the City sets new fees in compliance with Proposition 218, which requires
that the costs charged be related to the cost of delivering service to properties. The
study was completed in December, .2007, and resulted in a reallocation of the
environmental programs costs, .reducing the charges to the Wastewater and Water
funds by $539,000 and $32,000, respectively. The reallocation also increased the
amount charged to the General and/or other funds by $286,000.
Implementation Schedule
Staff will return at the next meeting with the final rate adoption recommendation.
Following council approval; Proposition 218 requirements dictate a public notice of
proposed changes to rates be made to all property owners in the affected area. A 45
day notice/ response period will be in effect from the date of approval of new rates (with
a few days allowance for mailing). Absent a majority protest, City Council may then
approve the final adoption of the rates at a public hearing. In this time frame, final
Council adoption of rates can be made at a meeting in July, with rates most likely
effective August 1, 2008. It should be noted that delaying action on rates beyond this
time frame will result in adverse impacts on the financial forecasts and rates.
Financial Impact & Budget Impact
The budget and financial impact will be contingent upon Council Direction. Impacts will
be reflected ih the rates adoption staff report.
Summary
Without an adjustment to water and wastewater rates, reserve funds are depleted and
23
fund balances become negative in FY2009/ 2010 for the water fund and FY 2010/2011
for the wastewater fund. Ongoing CIP-only increases are not sufficient to balance
revenues and expenses, or to maintain adequate reserve balances over the planning
period. After review and analysis of several alternatives, staff recommendations for
water and wastewater rate adjustments focus on two alternatives presented for each
enterprise fund. For the Water fund, existing reserves are used and fully replenished by
the end of the planning period. A similar scenario with a one time cash infusion of $2.5
million provides slightly lower rate increases. These options and the resulting billing
impacts are detailed in Tables 2, 3, and 4. For the Wastewater fund, a Pay as you Go
option is presented which avoids the .cost and ongoing expense of debt issuance. A
similar scenario with a onetime cash infusion of $3:0 million yields slightly lower rate
increases. These options and the resulting billing impacts are presented in Tables 6, 7,
and 8. For both, a change of structure is proposed to a commodity-only rate structure to
promote water efficiency and conservation.
24
Prepared by: Gil Borboa, P.E., Water Resources Manager
Approved:
Forwarded to Council:
,-:
j
,,,.
Joan kins, Acting Director EPWM . L o Ewell
ty anager
Approved:
r
~~~ ~G~~
Carol Swindell, Director of Finance
Attachments: A -Water Rate Study
B -Wastewater Rate Study
C -Nexus Study
25
ATTACHMENT A
Apri18, 2008
Gil Borboa
City of Santa Monica
1212 Fifth Street
Santa Monica, CA 90401
Subject: Summary of Water Rate Alternatives for FY OS-09 through FY 12-13
Dear Mr. Borboa,
As you know, The Reed Group, Inc. has worked with the City of Santa Monica s Utilities
Division on water and wastewater issues since 1996. In recent years, we have assisted the City
with identifying, evaluating, and recommended financial strategies .and rate structure
alternatives for the City'swater utility. In particular, we have performed water rate studies to:
(1) to present a strategy for meeting the water utility's projected revenue needs consistent with
the Cit}7s five-year financial forecasts, and (2) to develop recommendations regarding
alternative water rate structured.
Over the past year, the Cit~s Finance Department and the Utilities Division have reviewed and
revised financial reserve policies for the water and wastewater utilities and updated the five-
year financial forecast to cover the period from FY 08-09 through FY 12-13. hz recent months,
The Reed Group, Inc. has worked with staff to update water rate recommendations based on
the latest financial forecast and reserve policies, and with the previously proposed water rate
structure changes.
This letter summarizes recommendations developed in consultation with City staff for
gradually increasing water rates over the next five years to meet the water utility's revenue
needs and implementing proposed water rate structure changes. Two financial strategies are
presented for the City Council's consideration. Both strategies include implementing rate
structure changes in FY 08-09. The water rate structure changes are intended to: (1) improve
the water conservation incentive embodied in the water rate structure, (2) help maintain the
affordability of basic water usage for residential customers, and (3) reflect the cost of providing
r Major work products in recent years have included the City of Santa Monica Water Rate Study Final
Report, June 2005 and the Cih~ of Santa Monica 2007 Water Rate Study, March 2007.
3053 Freeport Boulevard #158 • Sacramento, CA 95818-4346 • (916) 444-9622 • www.TheReedGroup.org
CrJ
GIL BORBOA
APRIL 8, 2008
PAGE2
service to each group of customers and thereby maintain equity between customer. classes and
among customers within a class.
Summary of Recommendations
Current (FY 07-08) water rate and other water utility revenues are about $2.0 million less than
annual operating and maintenance costs and planned annual capital program expenditures.
While the Utilities Division has taken steps to control costs, this financial deficit has persisted
because annual inflation-based rate increases have been insufficient to close the gap between
revenues and expenses. Recent water rate studies have focused on developing a financial
strategy for closing this gap. While water rates will need to be increased at a rate higher than
inflation, the proposed strategies involve gradually adjusting the rates to required levels over a
five-year period.
The City has also determined that it is prudent to change its financial reserve policies for the
water utility. Revised financial reserve policies include the following:
• Increase the operating reserve to 25 percent of the water utility operating budget,
exclusive of the capital improvement program and transfers to other funds (increase
from 10 percent)
• Increase the capital reserve to 50 percent of average annual capital program
expenditures{increase from a flat $1,275,000)
• Maintain a rate stabilization reserve of $1,000,000 (no change).
The City recently received new information on Metropolitan Water District's (MWD) water
rates for 2009. The cost of water purchases is the water utility's largest single cost item, and the
information from MWD affects the water utility~s financial forecast. The financial plan and rate
model has been updated to reflect these changes. and. proposes rate adjustments to cover
estimate operating, maintenance, and capital program costs through FY 12-13.
The estimated overall level of water rate increases needed to cover costs and meet reserve
policy requirements by the end of the five-year plaru~ing period are summarized below as
Option 1: Under Option 1 the water utility would utilize a portion of the rate stabilization
reserve during the five-year planning period. All target reserve levels would be re-established
by the end of the planning period.
Oytion 1 Oution 2
July 2008 11.0% 9.5%
July 2009 10.5% 9.5%
Ju1y2010 10.5% 9.5%
July 2011 10.0% 9.0%
July2o12 10.0% 9.o°i
GIL BORBOA
AnIULS, 2008
PACB3
A second option (Option 2) has been developed in consultation with City staff. If the City is
willing to provide the water utility with cone-time cash infusion of $2.5 million, then it is
estimated that the water utility could maintain minirnum target reserves and have slightly
lower water rates during the planning period.
Proposed rate schedules under Option 1 and Option 2, respectively, are shown in Exhibits 1
and 2. The rate schedules reflect the previously recommended changes to the water rate
structure. The proposed water rate structure eliminates bi-monthly service charges such that all
water rate revenue is obtained through water usage charges, thereby creating a stronger water
conservation incentive and giving customers more opportunity to save money through
lowering their water usage.
Exhibit 1
City of Santa Monica -Water Utility
Proposed Water Rates Schedules -OPTION 1
Tier Alloc.
Commodi Rates ($/HCFJ 5 July 2008 July 2009 July 2010 July 2011 July 2012 (HCF/2-mos.)
Single Family (2) 1st Tier $ 1.65 $ 1.82 $ 2.01 $ 2.21 $ 2.43 0.14 HCF
2nd Tier $ 2.47 $ 2.73 $ 3.01 $ 3.32 $ 3.65 15-40 HCF
3rd Tier $ 3.70 $ 4.09 $ 4.52 $ 4.97 $ 5.47 a1-1a8 HCF
4th Tier $ 5.78 $ 6.39 $ 7.06 $ 7.76 $ 8.54 149+ HCF
Multi-Family (3) .1st Tier $ 1.65 $ 1.82 $ 2.01 $ 2.21 $ 2.43 0-4 HCF/DU
2nd Tier $ 2.47 $ 2.73 $ 3.01 $ 3.32 $ 3.65 5-s HCF/DU
3rd Tier $ 3.70 $ 4.09 $ 4.52 $ 4.97 $ 5.47 10-2o HCF/DU
4th Tier $ 5.78 $ 6.39 $ 7.06 $ 7.76 $ 8.54 21+HCF/DU
Non-Residential (4) 1st Tier $ 2.35 $ 2.60 $ 2.87 $ 3.15 $ 3.47 Varies (see below)
2nd Tier $ 5.78 $ 6.39 $ 7.06 $ 7.76 $ 8.54
Recyded Water Unif. Rate $ 2.22 $ 2.45 $ 2.71 $ _ 2.98 $ 3.28 All Water Use
Non-Residential Tier Allocations (HCF/2-mos.)
Meter Size 1st Tier 2ntl Tier Meter Size 1st Tier 2nd Tier
Up to 1" 0-210 HCF 221+ HCF 3" 0-1,700 HCF 1 ,701+ HCF
1 1/2" 0-465 HCF 465+ HCF 4" 0. 2,550 HCF 2,551+ HCF
2" 0-870 HCF 871+ HCF 6" 6larger 0.5,280 HCF 5,281+ HCF
Private Fire Service Charges ($/2-mos.)
Meter Size July 2008 July 2009 July 2010 July 2011 - Juty 2012
2" $ 62.67 $ 69.25 $ 76.52 $ 84.17 $ 92.59
3" $ 711.63 $ 123.35 $ 136.31 $ 149.94 $ 164.93
4" $ 181.60 $ 200.fi6 $ 221.73 $ 243.91 $ 2fi8.30
6" $ 356.48 $ 393.91 $ 435.27 $ 478.79 $ 526.67
8" $ 566.37 $ 625.83 $ 691.55 $ 760.70 $ 836.77
10" $ 811.23 $ 896.41 $ 990.54 $ 1,089.59 $ 1,198.55
Notes:
(1) Rate restructuring occurs in July 2008. Subsequem rate increases are to meet revenue neetls.
(2) Includes single family homes and tluplexes.
(3) Includes multi-famiN complexes wiN 3 or more units, inclutling individually metered complexes.
(4) Includes commercial, industrial, institutional, and irzigation accounts.
(5) 1HCF=700 wbic feet=748 gallons
\, GIL BORBOA
APRIL 8, 2008
PAGE4
F~rhibit 2
City of Santa Monip •- Water Utility
Pro osed Water Rates Schedules -With $3.5 Million Cash Infusion in FY 07-08 --OPTION 2
Tier Attoc.
Commodi Rates ($/fICFJ (5) July 2008 July 2009 July 2010 July 2011 July 2012 (HCF/2-mos.)
Single Family (2) 1st Tier $ 1.62 $ 1.78 $ 1.95 $ 2.12 $ 2.31. 0-14 HCF
2nd Tier $ 2.44 $ 2.67 $ 2.92 $ 3.18 $ 3.47 15-40 HCF
3rdTier $ 3.65 $ 4.00 $ 4.38 $ 4.77 $ 5.20 41-148 HCF
4th Tier $ 5.70 $ 6.24 $ 6.83 $ 7.45 $ 8.12 149+ HCF
Multi-Family (3) 1st Tier $ 1.62 $ 1.78 $ 1.95 $ 2.12 $ 2.31 0-4 HCF/DU
2nd Tier $ 2.44 $ 2.67 $ 2.92 $ 3.18 $ 3.47 5-s HCF/DU
3rd Tier $ 3.65 $ - 4.00 $ 4.38 $ 4.77 $ 5.20 70-20 HCF/DU
4th Tier $ 5.70 $ 6.24 $ 6.83 $ 7.45 $ 8.12 21+ HCF/DU
Non-Residential (4) 1st Tier $ 2.32 $ 2.54 $ 2.78 $ 3.03 $ 3.30 Varies (see below)
2nd Tier $ 5.70 $ 6.24 $ 6.83 $ 7.45 $. 8.12
Recyded Water Unif. Rate $ 2.19 $ 2.40 $ 2.63 $ 2.86 $ 3.12 All Water Use
Non-Residential Tier Allocations (HCF/2-mos.)
Meter Size 1st Tier 2ntl Tier Meter Size 151 Tier 2nd Tier
Up to 1" 0-210 HCF 221+ HCF 3" 0-1,700 HCF 1,701+ HCF
7 1/2" 0-465 HCF 465+ HCF 4" 0- 2,550 HCF 2 ,551+ HCF
2" 0-870 HCF 871+ HCF 6" & Larger 0- 5,280 HCF 5 ,281+ HCF
Private Fire Service Charges (Y/2-mos.)
Meter Size July 2008 July 2009 July 2070 July 2011 July 2012
2" $ 61.82 $ 67.70 $ 74.13 $ - 80.80 $ 88.07
3" $ 110.12 $ 120.59 $ 732.04 $ 743.93 $ 156.88
4" $ 779.14 $ 196.16 $ 214.80 $ 234.13 $ 255.20
6" $ 351.66 $ 385.07 $ 421.65 $ 459.60 $ 500.96
8" $ 558.71 $ 611.79 $ fi69.91 $ 730.20 $ 795.92
10" $ 800.27 $ 876.30 $ 959.54 $ 1,045.90 $ 1,140.03
rvoces:
(1) Rate restructuring occurs in July 2008. Subsequent rate increases are to meet revenue needs.
(2) Includes single family homes and duplexes.
(3) Includes multi-family complexes with 3 or more units, including individually metered complexes.
(4) Includes mmmemial, industrial, insfi[u[ional, antl irrigation accounts.
(5) 1 HCF = 100 cubic feet = 748 gallons
Exhibits 3 and 4 summarize how various customers may be affected by the new rates for July
2008 under Option 1 and Option 2, respectively. The change to any individual customer s water
bill will be a function of customer class, meter size, and water usage. Under the proposed rate
restructuring, low-volume residential customers may see a slight reduction in bi-monthly water
bills, and average-volume residential customers may see smaller increases than without a rate
structure change. High- and very high-volume residential customers would see larger increases
in water bills.
As shown in Exhibits 3 and 4, the difference between Option 1 and Option 2 for the average
single family water users is about $1.01 per month (with lower water bills under Option 2). By
FY 12-13, the average single family water bill would be about $5.39 per month (4.9 percent)
lower under Option 2.
GIL BORBOA
APRIL 8, 2008
PACS5
Exhibit 3
City of Santa Monica -- Water Utility
Comparison of Typical Water Bills Under Current and Pro osed Rate Structures --OPTION 1
Bi-MOnthly Water Bills
Bi-Monthly FY 07-08 FY O8-09
Meter Water Water Current Proposed
Customer Size Use HCF Rates Structure Structure Usa a Notes
Single Family Low Use 5/8" 21 $ 41.18 $ 45.71 $ 40.32 W nter median
Average Use 5/8" 35 $ 72.82 $ 80.83 $ 74.89 Annual average
High Use 5/8" 54 $ 115.76 $ 128.49 $ 139.08 Summer 75th percentile
V Hi hUSe 5/8" 78 $ 170.00 $ 188.70 $ 227.95 Summer 90th rcentile
Multi-Family Low Use 1 t/2" 64 $ 139.62 $ 154.98 $ 131.67 8 DUs @ 8 HCF/DU
Average Use 1 U2" 80 $ 175.78 $ 195.12 $ 181.04 8 DUs @ 10 HCF/DU
High Use 1 1/2" 104 $ 230.02 $ 255.32 $ 269.92 8 DUs @ 13 HCF/DU
Very High Use 1 1/2" 136 $ 302.34 $ 335.60 $ 388.42 8 DUs @ 17 HCF/DU
Non-Residential Low Use 1" 15 $ 35.74 $ 39.67 $ 35.23 Winter median
Average Use 1" 37 $ 77.48 $ 86.00 $ 86.89 Annual average
High Use 1" 52 $ 111.38 $ 123.63 $ 122.12 Summer 75th percentile
Very High Use 1" 94 $ 206.30 $ 228.99 $ 220.75 Summer 90th percentile
Non-Residential Low Use 2" 76 $ 127.14 $ 141.13 $ 178.48 Winter median
Average Use 2" 193 $ 333.04 $ 369.67 $ 453.25 Annual average
High Use 2" - 287 $ 545.48 $ 605.48 $ 674.00 Summer 75th percentile
Very Hi h Use 2" 570 $ 1,185.06 $ 1,315.42 $ 1,338.61 Summer 90th percentile
Non-Residential Low Use 4" 34T $ 486.37 $ 539.80 $ 814.91 Winter median
Average Use 4" 709 $ 1,247.24 $ 1,384.44 $ 1,665.04 Annual average
High Use 4" 1,008 $ 1,922.98 $ 2,134.51 $ 2,367.23 Summer 75th percentile
Very High Use 4" 1,653 $ 3,380.68 $ 3,752.55 $ 3,881.97 Summer 90th percentile
Notes:
(1) Overall average rate increases for July 2008 is 11.0 percent.
Exhibit 4
City of Santa Monica -Water Utility
Comparison of Typical Water Bills Under Current and Proposed Rate Structures --OPTION 2
Bi-Monthly Water Bills
Bi-Monthly FY 07-08 FY 08-09
Meter Water Water Current Proposed
Customer Size Use HC Rates Structure Structure Usa a Notes
Single Family Low Use 5/8" 21 $ 41.18 $ 45.09 $ .39.78 Winter median
Average Use - 5!8" 35 $ 72.82 $ 79.74 $ 73.88 Annual average
High Use 5/8" 54 $ 115.76 $ 126.76 $ 137.21 Summer 75th percentile
Very High Use 518" 78 $ 170.00 $ 186.15 $ 224.89 Summer 90th percentile
Multi-Family Low Use t 1/2" 64 $ [39.62 $ 152.88 $ 129.90 8 DUs @ 8 HCF/DU
Average Use t 1/2" 80 $ 175.78 $ 192.48 $ 178.61 8 DUs @ 70 HCF/DU
High Use 1 112" 104 $ 230.02 $ 251.87 $ 266.30 8 DUs @ 13 HCF/DU
Ve Hi h Use 1 1/2" 136 $ 302.34 $ 331.06 $ 383.21 8 DUs 17 HCF/DU
Non-Residential Low Use 1" 15 $ 35.74 $ 39.14 $ 34.75 Winter median
Averege Use 1" 37 $ 77.48 $ 84.84 $ 85.72 Annual average
High Use 1" 52 $ 111.38 $ 121.96 $ 120.48 Summer 75th percentile
Ve Hi h Use t" 94 $ 206.30 $ 225.90 $ 217.79 Summer 90th rcentile
Non-Residential Low Use 2" 76 $ 727.14 $ [39.22 $ 176.08 Winter median
Average Use 2" 193 $ 333.04 $ 364.68 $ 447.16 Annual average
High Use 2" 287 $ 545.48 $ 597.30 $ 664.95 Summer 75th percentile
Very High Use 2" 570 $ 1,185.06 $ 1,297.64 $ 7,320.63 Summer 90th percentile
Nan-Residential Low Use 4" 347 $ 486.31 $ 532.51 $ 803.96 Winter median
Average USe 4" 709 $ 1,247.24 $ 1,365.73 $ 1,642.67 Annual average
High Use 4" 1,008 $ 1,922.98 $ 2,105.66 $ 2,335.42 Summer 75th percentile
Very High Use 4" 1,653 $ 3,380.68 $ 3,701.84 $ 3,829.81 Summer 90th percentile
Notes:
(1) Overall average rate increases for July 2008 is 9.5 percent.
<~,>
GIL BORBOA
APRIL 8, 2008
PAGE6
Exhibits 5 and 6 summarize the financial plans for the water utility during the plazuling period
under Option 1 and Option 2, respectively. Under Option 1, reserve target levels are
maintained throughout the planning period, with the exception of the Rate Stabilization
Reserve. About one-third of the Rate Stabilization Reserve is used during the planning period,
and then replenished by the end of the planning period. Using the Rate Stabilization Reserve in
this way makes it possible to smooth required rate increases over the planning period. This
planned use of the Rate Stabilization Reserve is consistent with its purpose. Without it, water
rate increases would need to be higher in initial years of the planning period. Under Option 1;
at the end of the planning period water utility revenues would exceed annual expenses and
transfers by about $600,000, and smaller rate increases may be possible beyond FY 12-132.
Water Rate Increase -.>
Beginningof-Year Bolan ce
Revenu es and Transfers In
Water Sales
Interest Earnings
Water Capital Facilities Fees
Other Water Revenues
Non-Dept. Transfers In
Balance Sheet Transters In
Total Revenues antl Transfers In
Expentlitures and Transfers Ouf
Salaries antl Wages
Supplies antl Expenses
MWD Water Casts (net of reimbJ
Capital Outlay
Transfers Out to Other Funds
Capital Improv. ProjeCs
Total Expentlitures
End-o)--Year Ba/once
Operating Reserve (25% of O&M)
Rate Stabilization Reserve
Capital Reserve (50% of DIP)
Uncommittetl Balance
ExtimM1S
City of Santa Mon ica -- Water U [ili ty
Wa[er U tilit y Five-Y~r Financial Plan (t ) - OPTION 1
FY 06-07 FY 07-OB FY 08.09 FY 09-70 FY t0-71 FY 71-t2 FY 12-73
3.4% N.0% 70.5% 10-5% 70.0% 10.0°6
$ 77,703,757 $ 10,904,875 $ 8,84],8]2 $ 7,537,174 $ 6,596,478 $ 6,059,]36 $ 6,037,072
$. 72,945,325 $ 13,120,000 $ 14,350,000 $ t5,540,OW $ 76,860,000 $ 78,200,000 $ 19,640,000
$ 660,000 $ 440,000 $ 380,000 $ 340,000 $ 304,000 $ 313,000 $ 3C0,000
$ zso,ooo $ 2ao.oao $ 299,9ao $ 200,009 $ zao.DOO $ 200,000 $ zoD.oao
$ 1,606,fi35 $ 7,506,882 $ 1,530,856 $ 1,543,250 $ 1,566,534 $ 1,590,]26 $ 7,630,494
$ 500,000 $ 223,478 $ 233,630 $ 242,975 $ 252,694 $ 262,802 $ 269,372
$ 75,961,960 $ 15,490,360 $ 16,694,486 $ 17,888,225 $ 79,783,228 $ 20,566,528 $ 22,048,866
$ 4,993,593 $ 5,132,317 $ 5,367,665 $ 5,630,52] $ 5,893,035 $ 6,177,160 $ 6,294,583
$ 4,213,825 $ 3,824,193 $ 3,990,002 $ 4,727,678 $ 4,274,457 $ 4,425,341 $ 4,513,848
$ 3,944,939 $ 4,254,270 $ 4,521,058 $ 4,873,148 $ 5,248,878 $ 5,649,314 $ 6,785,999
$ 57,871 $ 62,600 $ 62,600 $ 62,600 $ 62,fi00 $ 62,600 $ 63,852
$ 1,774,400 $ 7,501,425 $ 1,486,825 $ 7,546,763 $ 1,607,846 $ 1,671,973 $ 1,705,472
$ 10,1ffi,215 $ 2,772,564 $ 2,577,034 $ 2,566,604 $ 2,633,278 $ 2,614,804 $ 2,667,100
$ 1,320,423 $ 3,318,344 $ 3,485,337 $ 3,673,488 $ 3,Sfi9,726 $ 4,077,104 $ 4,264,571
$ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 873,401 $ 646,566 $ 1,000,000
$ 1,275,000 $ 1,386,282 $ 1,288,577 $ 1,283,402 $ 1,316,609 $ 1,307,402 $ 1,333,550
$ 4,9,452 $ 3,143,246 $ 1,7fi3,325 $ 639,588 $ - $ - $ 51,023
Basetl on'Water FOrecazt FY07-t2 (uptlate)"eAantletl though FV 12-13. Beginning balance for FV O]-W inueasetl by $2.4 million per email from
A. Morales on 2 /1412 0 0 8. MW D water purchase costs uptlatetl basetl on calalalions by J. Higbees on 3/11/2gea.
Under Option 2 (Exhibit 6), a cash infusion of $2.5 million in FY 07-08 would provide sufficient
funds to maintain all reserves above minimum target levels for the entire planning period.
Lower water rates would also be possible and the uncommitted fund balance would be
2 The additional revenue is needed in order to bring the rate stabilization reserve back to the $1 million
target level.
~,
GIL BORBOA
APRIL 8, 2008
PACE7
gradually lowered during the five-year planning period. In FY 12-13, water rate revenues
under Option 2 would be about five. percent lower than under Option 1, and water utility
revenues would be about $300,000 less than estimated expenses and transfers. As a result,
modest rate increases may need to continue beyond FY 12-13 until utility revenues fully cover
expenses and transfers. It is recommended that the City continue to monitor the water utilit~s
financial condition on an annual basis, as a number of factors could change and actual results
could differ from any forecast.
Ezhibit 6
CiTy of Santa Monica -- Water UtiliTy
', Water Rate Increase ->
Beginning-of-Y~r Ba/once
Revenues antl Transfers In
Water Sales
Interest Earnings
Water Capital Facilities Fees
Other Water Revenues
Non-Dept. TansFers in
Balance Sheet Transfers In
Total Revenues antl Transters In
Expenditures antl Tansfers Out
Salaries and Wages
Supplies and Expenses
MW D Water Costs (net of reimb J
Capital Outlay
Transfers Ou[ to Other Funds
Capital lmprov. Projects
Total Expenditures
Entl-of-Year Balance
Operating Reserve (25% of O&M)
Rate Stabilization Reserve
Capital Reserve (50°h of OIP)
Uncommitted Balance
wafer Uim
FY 06.07 ry rive-sear rmancmi non (~) - V r nyn a
FY 07-OB FY08.09 FY 09-70
FY 10-0t
FV 71-72
FY t2-73
3-4% 9.5% 9.5% 9.5% 9.0% 9.0%
$ 17,703,757 $ 10,904,875 $ 17,347,872 $ 9,961,174 $ 8,781,478 $ 7,809,736 $ 7,125,072
$ 72,945,325 $ 13,120,000 $ 74,760,000 $ 15,190,000 $ 16,330,000 $ 77,470,000 $ 78,690,000
$ fi~,000 $ 440,000 $ 494,000 $ 457,000 $ 3%,000 $ 387,000 $ 340,000
$ 250,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000
$ t,fi0G,635 $ 1,506,882 $ 1,530,856 $ 1,543,2W $ 7,566,534 $ 7,590,726 $ 7,630,494
$ 500,000 $ 223,478 $ 233,630 $ 242,975 $ 252,694 $ 262,802 $ 269,372
$ - $ 2,500.000 $ - $ - $ - $ - $ -
$ 15,961,960 $ 17,990,360 $ 16,618,486 § 17,627,225 $ 78,748,228 $ 19,910,528 $ 21,729,866
$ 4,993,593 $ 5,132,317 $ 5,367,6fi5 $ 5,fi30,527 $ 5,893,0% $ 6,771,760 $ 6,294,563
$ 4,213,825 $ 3,824,193 $ 3,990,002 $ 4,127,678 $ 4,274,457 $ 4,425,341 $ 4,513,848
$ 3,944,939 $ 4,254,270 $ 4,521,058 $ 4,873,148 $ 5,248,816 $ 5,649,314 $ 6,185,999
$ 51,871 $ 62,fi00 $ 62,600 $ 62,fi00 $ 62,fi00 $ ~ 62,600 § fi3,852
$ 1,774,400 $ 1,501,425 $ 1,486,825 $ 1,546,163 $ 1,607;848 $ 1,671,973 $ 1,705,412
$ 10,782,215 $ 2,772,564 $ 2,577,034 $ 2,566,804 $ 2,633,218 $ 2,614,804 $ 2,667,100
$ 1,320,423 $ 3,318,344 $ 3,465,331 $ 3,673,488 $ 3,869,726 $ 4,077,104 $ 4,264,577
$ 1,000,000 $ 1,000,000 $ 7,000,000 $ 1,000,000 $ 1,OOD,000 $ 7,000,000 $ 7,000,000
$ 1,275,000 $ 1,386,282 $ 7,288,517 $ 1,283,402 $ 7,376,603 $ 7,307,402 $ 1,333,550
$ 4,9C9,452 $ 5,643,246 $ 4,187,325 $ 2,624,588 $ 7,623,401 $ 740,566 $ 226,023
(i) Basetl on"Water Fwecasi FY07-12(uptlate)"extended through FY t2-13. Beginning balance for FY 07-OS inaeasetl by $24 million per email from
A. Morales on 2/74/2006. MWD water purchase costs uptlatetl based on calwlations by J. Higbee's on 3/1112008
Analysis
The analysis that follows is based on the financial plan and water rates presented under Option
1. Similar analyses have been performed for Option 2, but are not included in this letter report
for brevity. The financial plan update and water rate calculations are consistent with previous
analyses as described in the 2007 Water Rate Update Study dated March 5, 2007. The rationale
and explanation of the proposed water rate structure changes are described in that report, and
are not repeated herein. The proposed water rate structure changes have the following benefits:
• Improve water conservation incentive embodied in the rate structure:
o Elimination of fixed service charges increases the marginal cost of water service
across the entire spectrum of water use.
~=J
GIL BORBOA
APiuL S, 2008
PAGES
o Significant increases in the marginal cost of water occur in the first and third tier
use ranges under the proposed rates.
o Residential customers will more likely move in and out of various tiers as usage
varies throughout the year, thereby providing a more effective price signal across
the range of typical usage.
o A higher rate for base usage applies to majority of non-residential customers that
had previously had all or most water at the low initial tier.
o Maintains the water shortage cost rate for the last 2 percent of water use within
each customer group, including non-residential customers (by meter size).
• Protect the affordability of basic water usage:
o Elimination of the fixed service charge means customers only pay for water they
use. Fixed service charges are a disproportionately large portion of bills for low
volume users.
o Low and moderate volume residential customers will have lower water bills
under the proposed rate structure, relative to the current structure.
o The City's current low-income discount program would be continued, though in
a different form. The maximum benefit of the program would be increased.
• Maintain equity for all customers
o Average rate paid for water use within a customer group is the essentially the
same across each user group. This helps maintain the equity across groups.
o Average rate paid by non-residential customers is the same, except for usage in
the last 2 percent (second tier). This corrects an inequitable imbalance created by
applying a tier structure across a diverse use profile.
The proposed changes to the City's water rate structure should help the City to better achieve
rate setting objectives. Making the rate structure changes should also help mitigate the impact
of the proposed rate increases for most customers.
The financial plan model is based on the City's five-year financial forecast for the water utility.
The version used for this analysis was received in May 2007 with the file name "Water Forecast
FY07-12 (update).xls'. Operating and maintenance costs, capital program costs, and non-rate
revenues are consistent with the Cit~s financial forecast. The financial plan and rate model was
changed to reflect the proposed rate increases (rather than inflation-only increases) that are
necessary to meet reserve minimums3.
At the City's request, the financial plan and rate model was extended by an additional year to
cover the period through FY 12-13. For the extra year, water utility expenditures and most non-
rate revenues were assumed to increase by 2.5 percent from FY 11-12 to FY 12-13. Water capital
facilities fee revenues were assumed to be unchanged in FY 12-13 and interest earnings for FY
s Interest earnings also change from the City's forecast due to higher fund/reserve balances that result
from the proposed rate increases.
GIL BORBOA
APRIL 8, 2008
PAGES
12-13 are estimated based on a 5.0 percent interest rate and FY 12-13 fund/reserve balances.
Recently, the Finance Department also provided updated information related to the FY 07-08
begmning-of-year fund balance. The revised amount reflects actual results from FY 06-07, with
adjustments for capital projects carried over into FY 07-OS. The beginning-of-year fund balance
for FY 07-08 is about $2.4 million higher than in previous analyses. Finally, the Ufllities
Department recently provided information on MWD's newly adopted water rates for 2009, as
well as revised water purchase cost estimates based on the new rate information. That
information has also been incorporated into the financial plan and rate model.
A number of water rate updates have been prepared over the past several years. Until recently
analyses have relied upon customer account and water usage data from the utility billing
system that was provided in Apri12005. The water rate calculations presented herein have been
updated with customer account data from October 20074. Exhibit 4 summarizes the number of
customer accounts by meter size and customer class as of October 2007. We have long assumed
no new customer growth in rate analyses. The number of accounts in Exhibit 4 is only 116 more
than the previous data from AprIl 2005 (0.7 % growth in 2.5 years). This appears to validate our
previous no-growth assumption. The 17,200 accounts shown in Exhibit 4 are used in rate
analyses for July 2008 and in the financial plan model through FY 12-13.
While we obtained ,updated information on the number of accounts in October 2007, we
continue to rely on water usage data from Apri12005 (water usage from CY 2004). Water usage
data from the billing system in 2004 and estimates for future years are summarized in Exhibit 5.
Water usage from 2004 has been reduced to reflect estimated water conservation savings since
2004. The reduction in annual usage from CY 2004 to FY 06-07 is estimated to be 2.63 percent.
F~chibit 4
City of Santa Monica - Water lHility
Summary of Customer ACwunfs
User Group Owening/
Bus. units
3/4"
1" NO. of Active Accdunts by Meter Size
1 1!2" 2" 3" 4"
6"
8" 10"
Total
No. of Meters
Single Family 8,726 4,207 2,868 954 66 8,095
SF Low Income 174 725 31 5 161
Multi-Family 40,907 7,788 1,304 2,328 474 51 21 9 t 5,376
MF Low Income 36 16 2 1 19
Nan-Residential 3,647 777 594 636 408 125 54 21 2 2,617
Recyded Water 10 1 5 4 10
Fire Services 1,021 41 54 564 202 57 4 922
54,521 6,313 4,799 3,925 994 230 643 232 60 4 77,200
Notes:
(1) From AdiveACCOUnI Billing Count Repon (UBRe84) dated 10/?J2007. Financial and rate analysis assumes no nev customer growth.
This information was provided to The Reed Group, Inc. for the Water System Capital Facilifies Fee
Update, and has now been incorporated into the water rate model.
~_~,
Exhibit 5
City of Santa Monica -- Water Utility
~iIL BORBOA
APRIL 8, 2008
PACE 10
Summary of Estimated Water Use
CY 2004
Actual (1) FY 06-07
Estimate (2) FY 07-08
Estimate (3) FY 08-09
Estimate (4)
Summary of Water Sales (HCF)
Single Family 1,688,000 1,644,000 1,611,000 1,586,000
Multi-Family 2,390,000 2,327,000 2,280,000 2,245,000
Non-Residential
3/4" meter 106,000 103,000 101,000 99,000
1" meter 123,000 120,000 118,000 116,000
1 1/2"meter 355,000 346,000 339,000 334,000
2" meter 447,000 435,000 426,000 419,000
3" meter 283,000 276,000 .270,000 266,000
4" meter 216,000 210,000 206,000 203,000
6" meter 248,000 241,000 236,000 232,000
Recycled Water 24,000 23,000 23,000 23,000
Total 5,880,000 5,725,000 5,610,000 5,523,000
Total in AF 13,499 13,143. 12,879 12,679
Summary of Water Production (5)
mgd 13.00 12.80
AF 14,557 14,333
Unacct.forLosses -11.5% -11.5%
Notes
(1) Based on utility billing system data for CY 2004.
(2) Estimate based on FY 06-07 estimated rate revenue, FY 06-07 rates, Oct. 2007
customers, and CY 2004 water usage adjusted for 2.63% conservation.
(3) Assumes no customer growth and 2.00% conservation.
(4) Assumes no customer growth and 1.54% conservation.
(5) Production volumes from City's 5-Year Water Forecast model.
To estimate this conservation savings we started with the estimated actual water rate revenue
from FY 06-07, as reported in the City's water forecast model. From that total revenue,
estimates of private fire service charge revenue and water service charge revenue were
subtracted. Those estimates are based on the account information in Exhibit 4 and the service
charges applicable during FY 06-07. The remaining water rate revenue is assumed to be from
water usage charges. The FY 06-07 water usage tier rates were applied to the aggregate water
usage from CY 2004 and a water conservation factor applied until the calculated rate revenue
equaled the estimate derived by subtracting service charge revenue from the estimated actual
total rate revenue. The resulting 2.63 percent conservation savings from CY 2004 to FY 06-07
seems reasonable.
~_.
GIL BORBOA
APRIL 8, 2008
PAGE 11
For FY 07-OS and FY 08-09 annual water usage was estimated based on assumptions contained
in the City's water forecast model. For FY 07-OS water conservation savings of 2.00 percent was
assumed and for FY 08-09 water conservation savings of 1.54 percent was assumed.
The bottom portionof Exhibit 5 summarizes water production (water demand) assumptions
reflected in the rate analysis. The production volumes were obtained from the City's water
forecast model. The difference between water production and water sales is estimated to be
about 11.5 percent. This unaccounted for water loss rate appears consistent with prior estimates
for the City.
Exhibit 6 presents the calculation of water rates for FY 08-09 (to be adopted in July 2008). These
water rates are based on the revenue requirements for FY 08-09 using on the financial plan
model, excluding revenue from private fire service charges, as summarized below. Bi-monthly
private fire service charges should be adjusted by the percentages shown for overall rate
increases, as shown at the top of page 2 and in Exhibit 1.
FY 08-09 Revenue Rgmt. from Financial Plan $14,348,000
Less Private Fire Service Charge Revenue -$747,000
Net Revenue Rqmt. from Water Usage Charges $13,601,000
The distribution of water sales into each of the water usage tiers is based on analysis of CY 2004
water usage data for each customer class and by meter size for non-residential customers. Even
though water demand is assumed to decline as a result of water conservation savings, the
distribution of sales across tiers is assumed to be the same (i.e., water conservation savings
occurs across all tiers).
Exhibit 8
City of Santa Monip --Water Utility
w axer tome cmcwanons r or dory w ua
Flrst Tier Secontl Tier ThiM Ter Fourth Tier
s ima Total Water
FY 0809 Break Break i3reak Usage
UserGreu Water USe Rate Revenue Point fta[e Revenue Point Rate Revenue Point Rate Revenue Revenues
(HCFJ (SMCFJ ($) (HCF) ($IHCFJ ($] (HCF) ($IHOr7 ($) (HCF) (SMCh7 ($) (.~
Single Family Resitl. 1,568,000 $ 165 5 900,026 14 $ 2.4] $ 151],084 40 $ 3]0 $ 1319053 146 6 5]8 $ 184,302 $ 3,990,925
Wa@r Ike h)Tier-> 3]% 39% Z2% 2%
Multi-Family Resitl. 2,245,000 6 165 $ 1452,635 4 6 2.4] 6 2,130,468 9 S 3]0 $ i,fi63,656 20 $ 5]8 $ 289,_60 S 5,53fi,339
WaRr lkeMTer-> 39% 38% an% 2%
Non-Residential 1,669,000 $ 235 $ 3,642,126 Vanes $ 5.]B S 190,550 $ 4,IXt2,fi]6
Water llseMTer-> 96% 2%
Recydetl Water 23,000 $ 2.22 $ 51,060 $ 51,030
Totals 5,523,000 $ 6,306,04] $ 3,64],5]2 $ 2,983, ID9 g fi69,2]3 $ 13,fi01,000
rvotes:
(1) Water rotes wkulatetl tasetl On FY 06-09 rwenue mquiremeta, exdutlin9 revenues (mm pnvatefire service charges.
~>
GIL BORBOA
APIUL 8, 2008
PAGE 12
Other information regarding the proposed water rate structure changes, as well as other
assumptions used in the analyses, was presented in previous reports and correspondence. In
particular, City staff may wish to review the 2007 Water Rate Study and its discussion on rate
structure recommendations and implications.
Please give me a call at 916-444-9622 if you have any questions regarding this letter or related
analyses.
Sincerely,
~- O~..vQ
Robert Reed
The Reed Group, Inc.
ATTACHMENT B
City of Santa Monica, California
.; i t cif
WASTEWATER RATE STUDY REPORT
~IN~,
April, 2008
°f F T ~
SECTION 1: Executive Summary ..............................................................................................1=3~
1.1 Customer Classes and Loadings .................................................... .....................................1-4~
1.2 Review of Revenue Requirements ................................................. .....................................1-4~
1.3 Alternative Financing Plans ........................................................... .....................................1=5~-1-
1.4 Alternative Rate Structures ............................................................ .....................................1-6-1~
1.5 Cost of Service ............................................................................... .....................................1=6~
1.6 Proposed Rate Structure /Rate Design .......................................... .....................................1_7~
1.7 Customer Rate Impacts ..:.........................................................:..... .....................................1_7~
SECTION 2: Introduction ................................................................................................................2-1
2.1 Background .................................................................................... ..........................................2-1
2.2 Existing Rate Structure ......................................................:........... .....................................2=2~
2.2.1 Bi-Monthly Service Charges ........................................................:.. .........................................2=2~
2.2.2 Commodity Rates .......................:........:.......................................... .........................................2_3~
2.3 Objectives .......................................:............................................... ....................................2=4~
2.4 Scope ............................................................................................... ....................................2=5~
SECTION 3: Customer Classes and.Loadings ...............................................................................3-1
3.1 Wastewater Flow Estimation .......................................................... .......:................................. 3-1
3.2 BOD and SS Strength Assignments ..........:..................................... ....................................3=23-1-
SECTION 4: Revenue Requirements ...............................................................................:..............4-1
4.1 Assumptions .................................................................................... .........................................4-1
4.2 System Revenues .: .......................................................................... ....................................4=24-~
4.3 System Expenditures ....................................................................... ....................................4=24-1
4.3.1 Operating and Maintenance Expenses ............................................ .........................................4=24~
4.3.2 Capital Expenditures ....................................................................... .........................................4=34-I
4.4 Alternative Financing Plans ............................................................ ....................................4=44-1
SECTION 5: Cost of Service Calculation .......................................................................................5-1
5.1 Cost Allocation to Wastewater Parameters ..............:...................... ......................................... 5-1
5.2 Unit Cost ofService ........................................................................ ....................................5=2~
SECTION 6: Rate Design .................................................................................................................6-1
6.1 Alternative Rate Structures ............................................................. ......................................... 6-1
1-1
6.1.1 Alternative A: Current Structure ............................................................................ .......................6-1
6.1.2 Alternative B: Reduced Bi-Monthly Service Charge ...................:....................... .......................6-1
6.1.3 Alternative C: 100% Commodity Rate ..................:........:..........................:.......... ..................6_26-1-
6.1.4 Alternative D: Flat SFR Service Charge and 100% Commodity Rate ................. ..................6_26-1
6.2 Proposed Rate Structure ..............................................,...................................... ....:...........6_26-~
6.3 Customer Impact Analysis .................................................................................. ................6=46-~
6.3.1 SFR Impacts ........................................................................................................... ..................6_4b-1
6.3.2 MFR Impacts .................:...............:....................................................................... ................:.6_46-1
6.3.3 Non-Residential Impacts ....................................................................................... ..................6=46-1
Appendix A -Customer Strength Classification
Appendix B -System Sewage Generation Factors
1-2
~~~ ~ : XE~~lTIVE SIJAIZY
In October 2006, the City of Santa Monica (City) engaged Raftelis Financial Consultants, Inc. (RFC) to
conduct a wastewater rate study. The City previously conducted a wastewater rate study in 1996 and
has since updated its wastewater rates by applying an annual inflationary factor. During that same
period, the City replaced the majority of its sewer lines with funds provided primarily through the
Federal Emergency Management Agency (FEMA) to rehabilitate the sewer system, which was damaged
by the 1994 Northridge earthquake. Unfortunately, increased construction costs related to steel and
concrete, as well as capital costs related to the City's share of annual improvements to the City of Los
Angeles (LA) Hyperion System, have required the City to tap into. its wastewater reserves. This report
documents the results of the study, describes the cost of service allocations and rate setting process,
provides two alternative fmancial plans to address the five-year capital program, and proposes an
alternative wastewater rate structure.
The City provides wastewater services to approximately 15,500 customers within an eight square mile
service area. The City owns and operates a local wastewater system (local system): Wastewater flows
from the local system are discharged to the Hyperion System for treatment and disposal. The City is one
of 30 "Subscribing Agencies" served by the Hyperion System and the 450 million gallons per day
(MGD) Hyperion Treatment Plant (HTP). Under the terms of the Hyperion Agreement, the City must
pay a proportionate share of the operations and maintenance (O&M) expenses and capital charges for
the Hyperion System. The City also operates the Santa Monica Urban Runoff Recycling Facility and
administers the environmental programs division as part of its wastewater fund.
The specific objectives of the study include:
• Update flow, biochemical oxygen demand (BOD), and suspended solids (SS) loadings for all
customer classes;
• Confirm and/or reclassify wastewater users based on updated wastewater strength estimates in the
"Assignment of Amalgamated System Sewer Generation Factors to County Use Codes" applicable
for users of the Hyperion System;
• Review the overall costs (revenue requirements) of providing wastewater service and provide
alternative financial plans to recover these costs during the planning period;
• Determine cost of service for different customer classes; and
• Evaluate alternative wastewater rate. structures considering the goals of the City's Sustainable City
Program consistent with the water rate structure.
The executive summary highlights the principal findings and suggestions of the study. The remainder of
this report documents our findings and suggestions to address the objectives of the study.
1-3
1.1 Customer Classes and Loadings
The City's current rate structure incorporates a residenfial customer class, which includes single-family
residential (SFR) and multi-family residential (MFR), and anon-residential customer class which
classifies all commercial, industrial, and institutional users into nine sewage strength categories. SFR
and MFR have similar strength characteristics and are therefore assumed to have identical BOD and SS
loadings. Since there is significant variability in wastewater strengths among different types of
commercial/industrial users, the City uses different rates for different classes of non-residential users.
The non-residential customer class is categorized based on the combined strength in milligrams per liter
(mg/1) of BOD and SS defined by LA for users of the Hyperion System.
1.2 Review of Revenue Requirements
Revenue requirements from rates are the net of all expenditures including reserve requirements, less
non-rate revenues. The City's principal sources of revenue to recover operating costs include sewer user
rates and charges paid by the City's customers, miscellaneous charges, interest earnings, transfers from
other divisions, and payments from LA for sewer repairs.
The City's (O&M) expenditures related to the local collection system and the administration of the
environmental programs are estimated to range from $12.9 to $15.7 million between fiscal year (FY)
2008 and FY 2012. Annual capital expenditures, including debt service and rate funded capital projects
range from $6.7 to $14.2 million per year from FY 2008 to FY 2012. The Hyperion capital charges,
recovered by LA for capital improvements to the Hyperion System, constitute the majority of capital
expenditures included in the City's wastewater capital improvements plan (CIP) and range between $2.5
and $8.2 million per year over the same time period.
Figure 1-1 presents the annual capital expenditures, classified as local system improvements and
Hyperion capital charges, which are included in the. City's wastewater CIP.
1-4
Figure 1-1: Wastewater Capital Improvements flan
$14
' $12 - ----- ------ ------- ~ Hyperion - ®Local Improvements ---- -----------------------
e
j
' ..
$4
! 'f.*. ~ %e~,
~ ~'?
f
[ 144~~ ~
~Y
/ ~'`~I
"~ jll+'N~j~N
j 5
/
J~
$
.i . NLiJ
Y!
~f!
'1),~t~I1
lfi'l.bL51rG'idf. I.5 r>
IJS~
Ph4j~
.tj
FY 2008 FY2009 FY 2010 FY 2011 FY 2012
1.3 Alternative Financing Plans
In order to meet projected revenue requirements, including desired operating and capital reserve fund
levels, the City asked RFC to develop two alternative financing plans to evaluate the financial impacts
of funding capital expenditures through various levels of reserve funds and annual rate adjustments. In
addition to the two alternatives described below, RFC also reviewed debt financing alternatives at
various levels of debt funding. However, it was decided that those alternatives were not consistent with
prudent business practices. The two selected alternatives, presented below, both use rate revenues to
fund capital expenses.
• Alternative 1 assumes the entire City's wastewater capital expenditures over the five-year planning
period will be funded through wastewater rate adjustments and available reserves.
• Alternative 2 is similar to Alternative 1 except fora $3 million of additional reserves available to
finance capital expenditures in FY 2008.
Table 1-1 presents the alternative wastewater capital financial plans. It compares. the annual revenue
adjustments needed to meet financing requirements for each year of the five-year planning period.
1-5
Table 1-1: Alternative Capital Financing Plans
FY 2008 ` FY 2009 FY 2010 FY 2011 FY 2012. 5-yr Total
Alternative 1
Alternative 2 0.0%
0.0% 18.0%
15.0% 18.0%
15.0% 15.0%
15.0% 9.0%
9.0% 60.0%
54.0%
1.4 Alternative Rate Structures
The City requested a comparative evaluation of the current wastewater rate structure with alternative
rate structures that complement the City's water rate structure and more effectively address the goals of
its Sustainable City Program. As part of this study, RFC considered the following wastewater rate
structures:
1. Alternative A -The current rate structure: Incorporates bi-monthly service charges based on meter
size and commodity rates per hundred cubic feet (HCF) of estimated wastewater discharge that vary.
with the wastewater strength of different customer classes.
2. Alternative B -Modified bi-monthly service charge: Eliminate bi-monthly service charges by meter
size and replace with a uniform bi-monthly service charge. Continue to charge commodity rates per
HCF of estimated wastewater discharge that vary with the wastewater strength of different customer
classes.
3. Alternative C -Eliminate bi-monthly service charges: Eliminate the bi-monthly service charges all
together and recover 100% of the annual rate revenue requirements through the commodity rates
charged per HCF of estimated wastewater discharge that vary with the wastewater strength of
different customer classes.
4. Alternative D -Eliminate bi-monthly service charges and implement a flat SFR rate: Eliminate the
bi-monthly service charges for all non SFR customers and recover 100% of annual rate revenue
requirements for those customers through commodity rates charged per HCF of estimated
wastewater discharge that vary with wastewater strength. For SFR customers, eliminate the
commodity rates per HCF of wastewater flow and implement a bi-monthly flat service charge based
on the average wastewater discharge and strengths for the typical SFR customer.
1.5 Cost of Service
RFC updated the cost of service allocations based on the methodology approved by the California State
Water Resources Control Board (SWRCB). The revenue requirements are allocated to different user
classes in proportion to their use of the wastewater system. As mandated by the SWRCB, functional
allocations are made to flow, BOD, and SS parameters.
1-6
1.6 Proposed Rate Structure /Rate Design
Consistent with the water rate structure, the City intends to encourage conservation goals established as
part of the Sustainable City Program. Implementation of a rate structure based only on commodity rate
(Alternative C above) best meets the City's conservation objectives. This wastewater rate structure is
also consistent with the regulatory requirements of the SWRCB, as it is based on quantity and strength
of wastewater discharges.
The proposed commodity rates for each of the residential and non-residential customer classes in the
City are shown in Table 1-3.
The rates under the two alternatives will increase annually by the level of annual revenue adjustments
shown for both alternatives in Table 1-1.
Table 1-3: Proposed Commodity Rates per 11CF of Wastewater for FY 2009-2010
Alternative 1 Alternative 2
Commodity Rates (HCF of wastewater) Dischar a Factor FY 2009 FY 2010 FY 2009 FY 2010
Residential
Single-family residential 51.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Single Duplex 95.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Duplex 80.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Triplex 85.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Four Plex 90.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Over Fourplex 95.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Non-Residential
General Commercial 89.00% $ 2.68 $ 3.16 $ 2.61 $ 3.00
Medium Low 89.00% $ 2.79 $ 3.29 $ 2.72 $ 3.13
Medium 89.00% $ 3.22 $ 3.80 $ 3.14 $ 3.61
Medium High 89.00% $ 3.51 $ 4.14 $ 3.42 $ 3.93
High 89.00% $ 4.11 $ 4.85 $ 4.01 $ 4.61
Churches 89.00% $ 2.64 $ 3.12 $ 2.57 $ 2.96
School/Institutional 89.00% $ 2.64 $ 3.12 $ 2.57 $ 2.96
Misc.lndustrial 89.00% $ 3.26 $ 3.85 $ 3.18 $ 3.66
Paper Mate/Gillette 89.00% $ 2.76 $ 3.26 $ 2.69 $ 3.09
Wastewater Rate Increases 18% 18% 15% 15%
There are a few non-metered residential customers. To ensure that these customers pay their fair share,
their bills should be based on the average bi-monthly water usage of 36 HCF.
1.7 Customer Rate Impacts
RFC performed an analysis to evaluate the impact of the changes to the wastewater rate structure and the
changes in user classification and loadings on the bi-monthly bills of different customers of the City's
wastewater system. For this analysis, we calculated bi-monthly bills under both the current and
1-7
proposed rates for customers within each customer class with anticipated wastewater discharges ranging
from low to high. The impacts of each of these changes among user classes and within user classes are
discussed below.
SFR customers with lower bi-monthly wastewater discharges will benefit from the recommended rate
structure, while customers with higher wastewater discharges will be adversely impacted. The impacts
on MFR customers vary because of their varying discharge factors and meter sizes. As a class however,
MFR customers will experience adverse impacts. In general, Non-Residential customers will tend to
experience adverse impacts since costs are recovered entirely through commodity rates and the burden
of cost recovery is shifted to higher use customers. Some Non-Residential customers with low
wastewater discharges may benefit from the new rates. Although customer impacts vary amongst
different customer classes, the recommended. rate structure is more consistent with the resource
conservation goals of the Sustainable City Program.
Tables 1-4 and 1-5 compare sample bi-monthly customer bill impacts under the current and proposed
rates structure under both financing plans.
1-8
Table 1-4: Sample Bi-Monthly Customer Bill Impacts -Alternative C-I
Di
h Bi-monthly Bi-Monthly Bills Difference
Customer Class (Meter Size) sc
arge
F
t Water Use Current FY Proposed FY $ ,/
ac
or
HCF ~~
2008 Rates
- 2009 0
Single Family Residential (3/4")
Low Bi-Monthly Flow 51.00% 18 $30.10 $26.99 ($3.11) -10.32%
Moderate Bi-Monthly Flow 51.00% 36 $42.67 $53.98 $11.31 26.49%
High Bi-Monthly Flow 51.00% 60 $59.44 $89.96 $30.52 51.35%
Multi-Family Residential
Single Duplex (1.5") 95.00% 40 $127.03. $111.72 ($15.31) -12.05%
Duplex (1") 80.00% 50 $93.87 $117.60 $23.73 25.28%
Triplex (1.5") _ 85.00% 75 $162.31 $187.43 $25:12 15.48%
Fourplex (2") 90.00% 80 $216.71 $211.68 ($5.03) -2.32%
Over Four Plex 2" 95.00% 100 $248.22 $279.30 $31.08 12.52%
Non-Residential
General Commercial (1")
LOw Bi-Monthly Flpw 89.00%- 37 $86.16 $88.25 $2.09 2.43%
Moderate Bi-Monthly Flow 89.00% 60 $115.43 $143.11 $27.68 23.98%
High Bi-Monthly Flow 89.00% 120 $191:79 $286.22 $94.43 49.24%
Medium Low Strength (1")
Low Bi-Monthly Flow 89.00% 60 $131.99 $148.99 $17.00 12.88%
Moderate Bi-Monthly Flow 89.00% 100 $193.93 $248.31 $54.38 28.04%
High Bi-Monthly FIOw 89.00% 120 $224.90 $297.97 $73.07 32.49%
Metlium Strength (2"1
Low Bi-Monthly Flow 89.00% ~ 90 $289.48 $257.92 ($31.56) -10.90%
Moderate Bi-Monthly Flow 89.00% 150 $403.76 $429.87 $26.11 6.47%
High BI-Monthly Flow 89.00% 250 $594.22 $716.45 $122.23 20.57%
Medium Hioh Strength (1"1
Low Bi-Monthly Flow 89.00% 60 $180.05 $187.43 $7.39 4.10%
Moderate Bi-Monthly Flow 89.00% 100 $274.03 $312.39 $38.36 14.00%
High Bi-Monthly Flow 89.00% 120 $321.02 $374.87 $53.85 16.77%
High Strength (4")
Low Bi-Monthly Flow 89.00% 400 $1,558.42 $1,463.16 ($95.26) -6.11%
Moderate Bi-Monthly Flow 89.00% 709 $2,482.45 $2,593.45 $111.00 4.47%
.High Bi-Monthly Flow 89.00% 2,000 $6,343.06 $7,315.80 $972.74 15.34%
Ve Hi h Bi-Monthl Flow 89.00% 5,000 $15,314.26 $18,289.50 $2,975.24 19.43%
(I) Represents discharge factor applied to billed water usage.
1-9
Table 1-5: Sample Bi-Monthly Customer Bill Impacts -Alternative C-2
Di
h Bi-monthly Bi-Monthl Bills Difference
Customer Class (Meter Size) sc
arge
F
t Water Use Current FY Proposed FY $ %
ac
or HCF ii> 2008 Rates 2009
Single Familv Residential (3/4")
Low Bi-Monthly Flow - 51.00% 18 $30.10 $26.35 ($3.75) -12.46%
Moderate Bi-Monthly Flow 51.00% 36 $42.67 $52.69 $10.02 23.48%
High Bi-Monthly FIOw 51.00% 60 $59.44 $87.82 $28.38 47.74%
Multi-Familv Residential
Single Duplex (1.5") _ 95.00% 40 $127.03 $109.06 ($17.97) -14.15%
Duplex (1") 80.00% 50 $93.87 $114.80 $20.93 22.30%
Triplex (1.5") 85.00% 75 $162.31 $182.96 $20.66 12.73%
Fourplex (2") 90.00% 80 $216.71 $206.64 ($10.07) -4.65%
Over Four Plex (2") 95.00% 100 $248.22 $272.65 $24.43 9.84%
Non-Residential
General Commercial (1")
LOw Bi-Monthly Flow 89.00% 37 $86.16 $85.95 ($0.21) -0.25%
Moderate Bi-Monthly Flow 89.00% 60 $115.43 $139.37 $23.94 20.74%
High Bi-Monthly Flow 89.00% 120 $191.79 $275.75 $86.95 45.34%
Medium Low Strenoth (1")
Low Bi-Monthly Flow 89.00% 60 $131.99 $145.25 $13.26 10.05%
Moderate Bi-Monthly Flow 89.00% 100 $193.93 $242.08 $48.15 24.83%
High Bi-Monthly Flow 89.00% 120 $224.90 $290.50 $65.59 29.17%
Medium Strength (2'9
Low Bi-Monthly Flow 89.00% 90 $289.48 $251.51 ($37.97) -13.12%
Moderate Bi-Monthly Flow 89.00% 150 $403:76 $419.19 $15.43 3.82%
High Bi-Monthly Flow 89.00% 250 $594.22 $698.65 $104.43 17.57%
Medium High Strength (1'9
Low Bi-Monthly Flow 89.00% 60 $180.05 $182.63 $2.58 1.43%
Moderate Bi-Monthly Flow 89.00% 100 $274.03 $304.38 $30.35 11.08%
High Bi-Monthly Flow 89.00% 120 $321.02 $365.26 $44.23 13.78%
High Strength (4")
Low Bi-Monthly Flow 89.00% 400 $1,558.42 $1,427.56 ($130.86) -8.40%
Moderate Bi-Monthly Flow 89.00% 709 $2,482.45 $2,530.35 $47.90 1.93%
High Bi-Monthly Flow 89.00% ~ 2,000 $6,343.06 $7,137.80 $794.74 12.53%
Ve Hi h Bi-Monthl Flow 89.00% 5,000 $15,314.26 $17,844.50 $2,530.24 16.52%
(1) Represents discharge factor applied to billed water usage.
1-10
°TI 2: iT~~uC~l®~
2.1 Background
The City of Santa Monica (City) engaged Raftelis Financial Consultants, Inc. (RFC) in October 2006 to
perform a wastewater rate study, address revenue requirements, develop a fmancing plan, and identify
potential opportunities to improve the current rate structure. Although the City has updated its
wastewater rates annually to reflect inflation based on the Consumer Price Index (CPI), it has not
conducted a wastewater rate study since 1996.
During the past decade, the City addressed the major wastewater capital needs of its local collection
system primarily through funds received from the Federal Emergency Management Agency (FEMA) to
address sewer rehabilitation needs caused by the 1994 Northridge earthquake. During that same time,
the City faced rapidly increasing costs for steel and concrete, as well as its equivalent portion of capital
costs associated with the City of Los Angeles (LA) Hyperion System. The City has limited influence
over capital costs associated with the Hyperion System. Consequently, addressing these capital needs
with rate adjustments tied to the Consumer Price Index has resulted in the depletion of available
wastewater reserves. Additionally, the City is currently in the process of implementing a new water rate
structure and wishes to evaluate wastewater rate structures that will both complement the new water rate
structure and address the goals of its Sustainable City Program. This report documents the findings,
analyses, results, and suggestions of the wastewater rate study.
The City owns and operates a local wastewater collection system (local system) as part of its wastewater
fund (31). This local system provides wastewater collection to approximately 15,500 wastewater
customers located within the City's eight. square mile service area. The local system comprises
approximately 125 miles of sanitary sewers, 20 miles of storm drains and 825 catch basins, and a
pumping plant. In addition, the City also owns and operates the Santa Monica Urban Runoff Recycling
Facility (SMURRF) which treats low flow dry weather runoff and produces recycled water for irrigation
purposes. Average wastewater flows associated with the local system are approximately 11.1 million
gallons per day (MGD) which represents a decrease over recent years, and supports the City's
permanent water conservation measures associated with its Sustainable City Program. The City operates
the local system as aself-supporting enterprise and costs are accounted for separately under the
wastewater enterprise fund.
Wastewater flows from the local system are discharged to the Hyperion Treatment Plant (HTP), which is
part of the Hyperion System that provides wastewater collection, treatment, and disposal services for an
approximately 600 square mile service area. The Hyperion System, owned by the City of Los Angeles,
provides wastewater services to portions of LA, the City of Santa Monica, and 28 other "Subscribing
2-1
Agencies" pursuant to sewage disposal contracts. The Hyperion System consists of the 450 MGD HTP
and two water reclamation plants, 28 pumping stations, and a collection system that comprises local
service lines and major collection interceptors. Under the terms of the April 22, 1999 Hyperion
Agreement, all treatment and disposal charges are based on actual discharges and comply with federal
and state requirements for measuring discharge in terms of flows and strength. The Hyperion
Agreement also requires that LA and all the Subscribing Agencies pay at the same rates for treatment,
disposal and conveyance based on flow, strength and distance from the treatment plant.
Since LA has received federal grants and state loans, the City is also obligated to comply with the
California State Water Resources Control Board (SWRCB)'s Revenue Program Guidelines. The
guidelines require that recipients of state-administered grants and/or loans establish a system of user
charges that recovers operations, maintenance, and replacement costs from users on a basis
proportionate to use. The guidelines specifically require a fair and equitable apportioning of costs based
on class-specific contributions of flow and strength of wastewater pollutants discharged.
To comply with the revenue program guidelines, the City requested that RFC review the cost of service
and develop astrength-based billing method to allocate costs among the various customer classes within
the City system. The strength-based billing procedure is based on flow and the strength parameters of
Biochemical Oxygen Demand (BOD) and Suspended Solids (SS), which are consistent with the strength
parameters measured by LA and billed to the Subscribing Agencies of the Hyperion System.
2.2 Existing Rate Structure
The City's existing wastewater rate structures for the single-family residential (SFR), Multi-family
residential (MFR), and CommerciaUlndustrial customer classes include bi-monthly service charges and
commodity rates. While the bi-monthly service charges are fixed charges recovered from each customer
account based on water meter size, the commodity rates are applied based on bi-monthly water usage
per hundred cubic feet (HCF). The existing rate structure was developed as part of the 1996 rate study
conducted by David M. Griffith & Associates and the Keese Company (DG&A). The rates determined
as part of that rate study have been updated annually to reflect inflation.
2.2.1 Bi-Monthly Service Charges
The bi-monthly service charges, or service charges, are based on water meter size with no distinction for
customer class. When originally determined, the service charges were calculated to recover fixed
customer related costs and fixed capital costs. The customer costs were allocated to customers equally
with no distinction for meter size, while the capacity costs were allocated to customers based on the
hydraulic capacity of each meter size.
The City's existing bi-monthly service charges per meter size are presented in Table 2-1.
2-2
Table 2-i: Existing Bi-Monthly Service Charges
Bi-Monthly Service Charee: Current
Meter Size
3/4" $ 17.52
I" $ 39.07
1.5" $ 74.97
2" $ 118.07
3" $ 218:61
4" $ 362.26
6" $ 721.37
8" $ 1,152.28
10" $ 1,655.06
2.2.2 Commodity Rates
The commodity rates for each customer class aze based on estimated volumes of wastewater flows
during the bi-monthly billing period. The commodity rate and method of estimating wastewater flows
varies depending on customer class. For each customer class,. the estimated volume of flow is
determined based on actual billed water usage and an assumed discharge factor that represents the
portion of water usage that is returned to the wastewater system. The usage factors range from 51 % for
SFR, to 95% for MFR with more than 4 dwellings. Typically, SFR customers exhibit the greatest level
of outdoor water use that is not returned to the wastewater system. All Non-residential customers aze
assumed to return 89% of water use as wastewater discharge.
The commodity rates vary based on the typical strength of wastewater discharged by customer class.
Residential customers are charged based on domestic or typical residential strengths of wastes. Non-
residential customers are grouped into customer classes that aze based on ranges of pollutant strength.
Specifically, commercial and industrial users aze classified based on LA City Use Code, which defines
BOD and SS strengths for type of business or establishment. The City's existing commodity rates aze
presented in Table 2-2.
2-3
Table 2-2: Existing Commodity Rates per HCF of Wastewater
Commodity Charges (HCF of wastewater) Discharge Factor Current
Residential
Single-family residential 51.00% $ 1.37
Single Duplex 95.00% $ 1.37
Duplex 80.00% $ 1.37
Triplex 85.00% $ 1.37
Four Plex 90.00% $ 1.37
Over Fourplex 95.00% $ 1.37
Non-Residential
General Commercial 89.00% $ 1.43
Medium Low 89.00% $ 1.74
Medium 89.00% $ 2.14
Medium High 89.00% $ 2.64
High 89.00% $ 3.36
Churches 89.00% $ 1.37
SchoollInstitutional 89.00% $ 1.34
Misc. Industrial 89.00% $ 1.55
Paper Mate/Gillette 89.00% $ 1.55
2.3 Objectives
Several related objectives need to be considered in the development of a financial plan and in the design
of rates. This being the case, keen judgment plays a role in the final design of rate structures and rates.
The major objectives of the study update are to:
• Update flow, biochemical oxygen demand (BOD), and suspended solids (SS) loadings for all
customer classes;
• Confirm and/or reclassify wastewater users based on updated wastewater strength estimates in the
"Assignment of Amalgamated System Sewer Generation Factors to County Use Codes" applicable
for users of the Hyperion System;
• Review the overall costs (revenue requirements) of providing wastewater service and provide
alternative financial plans to recover these costs during the planning period;
• Determine cost of service for different customer classes; and
• Evaluate alternative wastewater rate structures considering the goals of the City's Sustainable City
Program consistent with the water rate structure.
2-4
2.4 Scope
The scope of this study includes the determination of wastewater user rates through an update of system
costs, flows, and loadings, review of the current rate design, evaluation of alternative financial plans and
rate designs, and recommendafion of an equitable rate structure in compliance with SWRCB
requirements.
The comprehensive cost of service and rate design component includes three major processes. The three
major processes are as follows:
Financial Planning: Revenue requirements are projected for afive-year period from FY 2008 through.
FY 2012. Financial planning involves an estimation of annual O&M and capital expenditures, annual
debt service and reserve requirements, operating and capital revenue sources, and the determination of
required annual user revenues from rates and charges. Meeting debt coverage requirements also play an
important role in financial planning. The net result is the annual adjustments needed to ensure financial
stability. User classification, annual user loadings estimation for the selected wastewater parameters,
and system mass balance analysis are also performed concurrently. RFC evaluated two capital financing
scenarios as part of this scope and analyzed the impacts on the City's customers.
Cost of Service: Cost of Service involves the apportioning of required annual revenues to the different
user classes proportionate to their contributions of flow, TSS and BOD to the wastewater system.
Rate Design: Rate Design involves the development of a fixed and variable schedule of rates for each of
the different user classes to equitably recover the costs amibutable to them. As part of this study, RFC
developed and evaluated four alternative rate structures or designs.
2-5
CSI 3® Cusp®MER Cl_~sss ~n~® L~~®1tdG~
The City's wastewater customer base reflects a mix of residential, commercial, and industrial users. The
City currently serves a population of approximately 86,000 and a total of approximately 15,500
accounts.
Residential Class: The residential classes, including SFR and MFR customers, are homogenous in that
all the users are assumed to have the same BOD and SS strengths. Since all residential accounts use the
same BOD and SS strengths, they each have a single wastewater rate that includes all three parameters
and is based on metered water usage. However, the volume of wastewater. flows can vary among the
individual users depending on amount and purpose of water usage. The residential users are therefore
classified into SFR and MFR user classes since they differ in their water usage characteristics. SFR
water usage includes significant irrigation usage. MFR water usage includes very low irrigation usage.
MFR complexes that have large common green areas and pools usually have separate water irrigation
meters. In addition, the City serves 47 SFR customers that are not metered. As a consequence, the City
has no water usage information to determine the bi-monthly wastewater bill for these customers. To
ensure these customers pay their equitable share of wastewater charges, it is recommended the City use
bi-monthly water use for the typical or average SFR wastewater customer (36 HCF) in the City of Santa
Monica.
Non-Residential Class: Typically, there is significant variability in both the volume of wastewater flows
and wastewater strengths, among the different types of commercial/industrial users such as food service
establishments, retail stores, and supermarkets. Therefore, to ensure fair and equitable determination of
wastewater service charges, the City uses separate unit rates for its non-residential users based on their
strength characteristics.
3.1 Wastewater Flow Estimation
In order to perform a cost of service analysis, wastewater flow needs to be estimated and projected for
each customer class, and for the various non-residential user types classified within the different non-
residential customer classes. Wastewater flow is not measured for most users because of cost and/or
accuracy concerns. Typically, flows are estimated based on either winter water usage or on an estimated
percentage return of water usage for residential and most non-residential users. Actual wastewater flow
is measured for only a few large commercial/industrial users. The City uses an estimated percentage
return of water use, or discharge factor for its customers.
3-1
A breakdown of the City's sewer customer classes, the number of accounts associated with each
customer class, the discharge factors, and the estimated level of wastewater flow discharged by each
customer class is presented in Table 3-1 below. This information is based on FY 2006 billing data.
Table 3-1: FY 2006 Customer Billing Data
Discharge Estimated
Customer Class Accounts Billed Water Factor WW Flows (1)
fHCF) IHCF)
Residential
Single-family residential 7,420 1,449,900 51.00% 739,449
Single Family multimeter 1,085 59,687 95.00% 56,702
Duplex 598 102,729 80.00% 82,153
Triplex 490 105,623 85.00% 89,780
Four Plex 757 192,328 90.00% 173,095
Over Fourplex 2,773 1,933,279 95.00% 1,836,615
Total Residential 13,123 3,843,545 2,977,824
Non-Residential
General Commercial 1,567 928,765 89.00% 826,601
Medium Low 253 177,844. 89.00% 158,281
Medium 3 996 89.00% 887
Medium High 4 56,049 89.00% 49,883
High 187 204,715 89.00% 182,196
Churches 277 103,609 89.00% 92,212
School/Institutional 128 122,741 89.00% 109,239
Misc.lndustrial 11 5,467 89.00% 4,866
Paper Mate/Gillette 1 11,505 89.00% 10,240
Total Non-Residential Water 2,431 1,611,690 1,434,404
Total 15,554 5,455,236 4,412,229
(1) Estimated wastewater flows based on customer class dischazge factor applied to billed water usage
3.2 BOD and SS Strength Assignments
The BOD and S6 strength assignments are based on the "Assignment of Amalgamated System Sewage
Generation Factors to County Use Codes" used by the City of Los Angeles for flows received and
treated through the Hyperion System. LA has developed sewage generation factors (wastewater flows)
for residential customers and a variety of non-residential users that have been categorized into County
Use Codes, shown in Appendix B. To reduce complexity, the City groups all residential customers into
one strength classification and non-residential customers based on their strength characteristics into
eight classes or groups. All customer classes are defined based on a range of the combined strength in
milligrams per liter (mg/1) of BOD and SS and the wastewater strengths defined by LA. The strength
components for residential customers are based on 265 mg/1 of BOD and 275 mg/1 of SS for a typical
residential customer in the City of Santa Monica.
3-2
Table 3-2 presents the annual wastewater flows and loadings estimated for each of the City's customer
classes for FY 2006.
Table 3-2: Estimated Units of Service
0.62% 0.62%
Units of Service
Single-family residential
Multifamily
General Commercial
Medium Low
Medium
Medium High
High
Churches
School/Institutional
Misc. Industrial
Paper Mate/Gillette .
Total
HCF (t) LBS. Per Year
WW Flow BOD SS
739,449 1,222,753 1,268,894
2,238,375 3,701,378 3,841,052
826,601 773,699 773,699
158,281 246,620 147, 614
887 2,737 1,645
49, 883 168,756 160, 522
182,196 1,115,626 703,521
92,212 80,154 70,919
109,239 94,955 84,015
4,866 8,805 16,699
10,240 11,821 12,140
4,412,229 7,427,302 7,080,720
(1) Water use adjusted by wastewater discharge factors to determine W W flows.
Appendix A provides more information related to the types of users and defined strength concentrations
included in each of the non-residential customer classes.
The projected billable wastewater flow and loadings for FY 2008 and throughout the 5-year rate
planning period are assumed to remain at the FY 20061evels.
~,
~-~
A review of the wastewater system's revenue requirements is an integral part of the rate design process.
The review involves an analysis of annual operating revenues under existing rates, capital revenues,
operating and maintenance (O&M) and capital expenses, transfers between operating and capital funds,
and operating and capital reserve requirements. This section provides a discussion of the projected
revenues, O&M and capital expenditures, capital improvements financing plans, debt service
requirements, and the revenue adjustments required to ensure the financial stability of the wastewater
enterprise.
4.1 Assumptions
To develop a financial plan that provides stability, it is customary to review a five to ten year pro forma.
Since operating costs and user data are not available in the future, it is necessary to make reasonable
assumptions to estimate these data. The following are the assumptions used in the study:
1. Annual O&M and capital expenditures, annual revenues, other revenue sources and reserve
requirements, O&M inflation factors, and user account growth projections are based on the same
assumptions used by City's Water Resources Department in its annual wastewater financial and rate
updates2. User accounts are anticipated to increase at a 1.0 percent annual rate while water usage
and wastewater discharges are anticipated to remain constant to reflect conservation efforts.
2. Capital costs, based on cun•ent costs, aze available for the next five years, future capital costs are
estimated based on a 4.0 percent annual inflation rate.
3. Annual billed wastewater system flows are forecast based on billed water consumption occurring
during fiscal year (FY) 2006 within each customer class with the appropriate discharge factors
applied to that water consumption. It is assumed that billed wastewater flows will remain constant
during the projection period due to continued water conservation efforts.
4. Annual BOD & SS concentrations are forecast based on the annual flows for each customer class (or
business classification within a customer class) and the defined wastewater pollutant strengths for
each customer class. The customer type and strength categories are similar to the existing
categories.
5. The BOD & SS concentrations for different types of establishments or users have been updated to
reflect the current strengths shown in "Assignment of Amalgamated System Sewage Generation
Factors to Los Angeles County Use Codes. (See Appendix B):
z The City uses the Consumer Price Index (CPI) of 3.0% during the forecast period, annual cost of living adjustments
(COLA) of 4.0%, annual workers compensation increases 5.0%, annual health increases of 12.0%, annual dental increases of
6.4%, and other specific factors for items such as retirement and indirect administrative costs.
4-1
4.2 System Revenues
The wastewater fund derives its required annual operating and capital revenues from a number of
sources. The principal sources of operating revenues are the wastewater service charges collected on a
bi-monthly basis from the City's customers. Other revenue sources include miscellaneous operating
revenues such as administrative fines and penalties, industrial waste fees, permit fees, and payments
from LA for sewer repairs. Other non-operating revenues include transfers from other divisions which
primarily include funds to pay a portion of the costs to administer the environmental programs division
(662) that is operated under the wastewater fund (31). Capital revenues include capital facility fees,
reserves, bond proceeds, state and federal grants and loans and interest earnings and investments. RFC
reviewed the various sources of operating and capital revenues and incorporated assumptions related to
hese revenue sources into the development of the two alternative financing plans discussed below.
4.3 System Expenditures
In order to provide for the continued operation of the City's local system, the enterprise must operate on
a sound financial basis. Revenues must be sufficient to meet revenue requirements or cash obligations
of the system. Revenue requirements include O&M expenses, capital improvement program (CIP)
expenditures, principal and interest payments on existing debt, and other obligations.
4.3.1 Operating and Maintenance Expenses
O&M .expenditures include costs of operating and maintaining the wastewater collection system, the
SMURRF, and administering the City's environmental programs. The wastewater division (661) and
the environmental programs division (662) are funded through the wastewater fund (31) within the
environmental and public works management department (500). The costs are a continuing normal
obligation of the system, and are met from operating revenues collected from customers of the
wastewater system and through transfers from other City departments or divisions for the environmental
programs. The environmental programs division .administers programs and incentives to encourage
local stakeholders to conserve energy. and water, reduce waste, and minimize or eliminate use of toxic
materials. As such, other divisions such as -water and solid waste provide annual transfers to the
wastewater fund to help fund the costs to administer the environmental program division.
The majority of O&M cost projections related to the local system are escalated to reflect inflation based
on an estimated annual CPI escalator or other costs escalators such cost of living adjustments (COLA)
over the five-year planning period. The City must also pay LA for wastewater treatment and disposal.
O&M costs associated with the environmental programs include salaries and benefits and other on-going
costs required to promote the environmental programs.
As Figure 4-1 demonstrates; the LA treatment disposal costs represent a substantial portion of the City's
annual O&M expenses and are anticipated to increase substantially from approximately 20% in FY 2008
4-2
to approximately 26% by FY 2012. The City's annual O&M expenditures range from $12.9 to $15.7
million.
Figure 4-l: LA Treatment and Disposal: As Portion of Total O&M Expenses
FY 2012 O&M F.4peuses
4.3.2 Capital Expenditures
The majority of the capital improvements associated with the City's local system relate to wastewater
main replacements, fleet vehicle replacements, street repairs, and technology replacements. Over the
past 10 years, the City has replaced the majority of wastewater mains within its local system. This
aggressive replacement program was financed primarily through FEMA funds provided to address sewer
rehabilitation needs caused by the 1994 Northridge earthquake. However, construction costs
(particularly concrete and steel) have increased at levels exceeding the inflation indices the City has
used to adjust its annual rates during this period. In addition, the City must pay a portion of the capital
costs associated with capital improvements of the Hyperion System which are determined by LA. This
has required the City to deplete the FEMA funds and draw down reserves to address these capital needs.
Capital revenue requirements for wastewater include existing debt service and rate funded portion of
capital. projects to meet the funding requirements for the local wastewater system capital improvement
projects. Hyperion Capital Charges represent a significant portion of the City's annual wastewater
expenditures, ranging from 9 to 31% of total wastewater revenue requirements during the five-year
forecast period.
As Figure 4-2 demonstrates, the Hyperion capital charges represent a substantial portion of the City's
annual capital improvements and are anticipated to drive the City's increased capital costs during the
five-year rate planning period. A significant portion of FY 2008 CIP represents carryover projects from
FY 2007. The City's annual capital expenses range from $6.7 to $14.2 million.
4-3
Figure 4-2: Annual Capital Expenditures
$16
Debt Service
e $14
o ------- -- ------- ------- ---------
~ Local Improvements
~
$12 °~.~,~ ~.
~ ~
,~~,
~:~
®H erion
------ ~ --- ------- - ---- -------
~
~~1~41~f~~.
O
Alta ~,l+i
~a. „~,~:
$4 - ----- ---- ----
$2 fur ~§ ~~~ttS p i
.. ~ f °i ~'~~1 `f ~ ~`Y
P f'.(i{~ fv. I..PhrtlN£.i AG lse~~~ ~ P._ .P•1..
~J-
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
4.4 Alternative Financing Plans
To determine the most appropriate and financially feasible wastewater capital financial plan, RFC
developed a computer model (Model) to evaluate the fmancial and customer impacts of two alternative
capital financing plans. Each of these capital financing plans was developed to address capital
improvement needs of the local wastewater system plus the Hyperion System Capital Charges, which
are the City's portion of the annual capital improvements for the LA Hyperion System.
The financial resources, or financial funding sources, available to the wastewater utility include:
• Wastewater Capital Facility Fees (AB 1600): revenues from one-time capital charges recovered
from development; and
• Rate Revenue: annual user charge revenues and cash reserves available to fund capital projects.
To provide the City an indication of the financiaLimpacts of funding the capital expenditures through
various levels of available cash and annual rate adjustments, RFC and City staff developed two
alternative financing plans. These alternative financing plans include:
• Funding the entire CIP through existing cash reserves and annual rate adjustments.. This scenario
will be referred to as Alternative 1.
• Funding the entire CIP through augmented cash reserves (with an additional $3 million) and
annual rate adjustments. This scenario will be referred to as Alternative 2.
4-4
In addition to the alternative fmancing plans described above, RFC also reviewed various debt financing
scenarios. Essentially, the City would issue debt to pay for part or all of the capital expenditures over
the five-year planning period. However, it was decided that these alternatives were not reflective of
prudent business practices. Hence, these options were dropped from further consideration.
Ultimately, the capital financial plan selected as part of this study should meet the most important
.capital infrastructure needs, maintain appropriate fmancial strength of the wastewater utility, and
mifigate customer impacts over the five-year planning period.
Table 4-1 presents annual rate funded revenue adjustments required during each year of the five-year
'planning period under the alternative wastewater capital financing plans.
Table 4-1: Alternative Capital Financing Plans
FY 2008 ' FY 2009' FY 2010 FY 2011 FI' 2012 S-yr Total
Alternative 1
Alternative 2 0.0%
0.0% 18.0%
15.0% 18.0%
15.0% 15.0%
15.0% 9.0%
9.0% 60.0%
54.0%
4-5
~Ti ®T C~ ~vlc ~AImCtJ~A"ff®
The section provides and overview of the allocation of operating and capital costs to the Flow, BOD,
and SS strength parameters, the determination of the unit rates, and the calculation of commodity rates
for different customer classes.
Total revenue requirements, net of miscellaneous revenue offsets -and transfers in from other
departments represents the net costs of providing service, or costs to be recovered through customer
rates and charges. This net cost of providing service is then used as the basis to develop unit rates for
the wastewater parameters and to allocate costs to the various customer classes in proportion to the
wastewater services rendered. The concept of proportionate allocation to user .classes implies that
allocations should take into consideration the quantity and the strength of the wastewater that a user
contributes.
In this study, wastewater rates were calculated for FY 2009, and accordingly FY 2009 revenue
requirements are used in the cost allocation process. As discussed in Section 4, the annual revenue
requirement or cost of service to be .recovered from wastewater charges includes operation and
maintenance expenses, costs associated with annual renewal and replacements, and other capital related
costs.
5.1 Cost Allocation to Wastewater Parameters
The three cost allocation parameters are Flow, BOD, and SS. BOD and SS constitute the strength
components of the wastewater discharge. The allocation of costs to the three parameters involves:
• Identification of functional areas and costs of the wastewater system.
• Apportioning of FY 2008 O&M and capital costs of service to the functional areas of collection,
treatment & disposal, and customer service.
• Apportioning collection, treatment & disposal, and customer costs to the three wastewater
parameters of Flow, BOD, and SS.
The cost of service allocations and unit rates were developed based on the 100 percent commodity
wastewater rate structure (Alternative C). The O&M and capital costs associated with the Hyperion
System are allocated based on percentages provided by LA to Flow, BOD, and SS used for the Hyperion
System. The City's collection costs are allocated to Flow.
Table 5-1 presents the percentages for allocating the O&M and capital costs under the recommended
wastewater rate structure alternative.
5-1
Table 5-1: Allocation of O&M and Capital Costs
Alternative C: 100% Commodity Charges
Service
Costs Total Flow BOD SS
Char e
O&M 100.00% 76.03% 12.76% 11.21 % 0.00%
Ca ital 100.00% 87.47% 6.34% 6.19% 0.00%
5.2 Unit Cost of Service
In order to allocate costs of service to the different user classes, unit costs of service were developed for
Flow, BOD, and SS. The unit costs of service are developed by dividing the total annual costs allocated
to each parameter by the total annual loadings of the respective parameter (the projected annual Flow,
BOD and SS loadings for FY 2009 were discussed in Section 3).
The development of the FY 2009 unit costs for each of the three wastewater parameters under rate
structure Alternative C is presented below.
t00% Commodity Charge
Development of Unit Costs & Allocated Costs Flow BOD SS Base Char a Total
Net Operating Costs $6,034,823 $1,012,460 $889,901 $0 $7,937,183
Capital Costs $4,053,479 $293,630 $286,906 $0 $4,634,015
Total Cost of Service $10,088,302 $1,306,089 $1,176,807 $0 $12,571,198
Total Units of Service 4,412,229 7,427,302 7,080,720
Unit of Measure CCF LBS LBS
Total Unit Cost of Service $2.286 $0.176 $0.166
Note: The unit costs are calculated based on Alternative 2 financing plan.
The unit cost of Flow, BOD, and SS is then applied to the projected FY 2009 flows and loadings for
each customer class to derive the customer class costs. Table 5-2 presents the FY 2009 user class
loadings and cost responsibility for each customer class under rate structure Alternative C.
5-2
Table 5-2: Allocation of Costs to Customer Classes
Allocation of Costs to Customer Classes
Residential
Single-family residential
Multi-family
Flow BOD SS Total
$1,690,706 $215,021 $210,889 $2,116,616
$5,117,914 $650,886 $638,378 $6,407,179
Non-Residential
General Commercial
Medium Low
Medium
Medium High
High
Churches
School/Institutional
Misc. Industrial
Gillette
Total Cost Recovered Through Commodity Charges
$1,889,975 $136,055 $128,588 $2,154,618
$361,900 $43,368 $24,533 $429,801
$2,028 $481 $273 $2,782
$114,055 $29,676 $26,679 $170,409
$416,581 $196,183 $116,924 $729,688
$210,837 $14,095 $11,787 $236,718
$249,769 $16,698 $13,963 $280,430
$11,125 $1,548 $2,775 $15,449
$23,412 $2,079 $2,018 $27,509
$10,088,302 $1,306,089 $1,176,807 $12,571,198
Note: The unit costs aze calculated based on Alternative 2 financing plan.
The cost of service allocations conducted in this study comply fully with the SWRCB's revenue
program requirements since the City's FY 2009 revenue requirements are allocated to the different user
classes proportionate to their use of the wastewater system.
5-3
SCE ~T1= sly
The revenue requirements and cost of service analyses described in the preceding sections of this report
:provide a basis for the design of wastewater rates. Rate. design involves the development of rate
schedules for each customer class to recover the annual cost of service determined for each user class.
This section of the report discusses alternative wastewater rate structures, presents a schedule of rates for
the City's user classes, and analyzes the impact of the proposed changes in user classifications, cost
allocation and rate design on the user classes.
The commodity rates recover the City's direct costs, and are determined separately for each user class.
The sewer usage rates for the different customer classes are based on the customer classes' required
annual usage revenues and the estimated annual volume of wastewater flows.
6.1 Alternative Rate Structures
In an effort to identify the most effective water and wastewater rate structures for addressing the
conservation goals of the Sustainable City Program, the City engaged RFC to evaluate alternative
.wastewater rate structures. At the same time, the City engaged a consultant to evaluate alternatives to its
.current water rate structure, which is similaz to the existing wastewater rate structure as it incorporates a
bi-monthly service charge based on water meter size with no distinction for customer class and tiered
commodity rates charged per HCF.
To determine the most appropriate and effective wastewater rate structure in addressing these objectives,
RFC and City staff considered the City's current rate structure along with four alternative rate structures.
6.1.1 Alternative A: Current Structure
Again, the current rate structure includes a bi-monthly service charge to each customer account based on
water meter size and commodity rates charged according to bi-monthly water usage per HCF. The
commodity rates vary based on the typical strength of wastewater dischazged by customer class and are
charged to each customer based on billed water usage and the assumed discharge factor for that
customer class. The annual forecast of wastewater rates for this alternative aze determined based on the
current (FY 2008) wastewater rates and charges adjusted annually by an across the board rate increase.
6.1.2 Alternative B: Reduced Bi-Monthly Service Charge
An alternative to the current wastewater rate structure is to eliminate the bi-monthly service charge
based on water meter size and replace it with a bi-monthly service charge that is the same for all
customers. This would represent a reduced fixed charge and recover fixed costs from all customers,
regazdless of customer class or meter capacity, on a consistent basis. Reducing the bi-monthly service
chazge would require that a greater portion of wastewater rate revenue requirements be recovered
6-1
through the commodity rates. This alternative would be more consistent with the Sustainable City
Program by providing a greater incentive for water resource conservation.
The commodity -rates would be similar to the current commodity rates that vary based on the typical
strength of wastewater discharged by customer class and charged to customers based on billed water
usage and the assumed discharge factor for that customer class. However, instead of adjusting the
current commodity rates by an across the board rate adjustment, the commodity rates under this
alternative are determined based on an updated cost of service calculation of each strength component.
6.1.3 Alternative C: 100% Commodity Rate
The third alternative to the current wastewater rate structure is to eliminate the bi-monthly service
charge all together and recover 100% of the annual rate revenue requirements through the commodity
rates. This alternafive is the most consistent with the Sustainable City Program as it provides the
greatest incentive for water resource conservation.
The commodity rates under this alternative would be similar to the current commodity rates that vary
based on the typical strength of wastewaterdischarged by customer class and charged to each customer
based on billed water usage and the assumed discharge factor for that customer class. However, the
commodity rates under this alternative are also determined based on an updated cost of service
calculation of each strength component.
6.1.4 Alternative D: Flat SFR Service Charge and 100% Commodity Rate
The same as Alternative C for non-residential and MFR customers; for SFR customers, the current bi-
monthly service charges per meter size and the commodity rates per HCF of wastewater discharge
would be eliminated and replaced by a flat bi-monthly service charge. The cost of service allocated to
SFR customers would be recovered equally from each of those customers based on a flat bi=monthly
charge and would not recognize any variance in the amount of wastewater discharged by individual SFR
customers. This rate structure provides no water conservation incentive for SFR customers.
6.2 Proposed Rate Structure
Alternative C is the most effective in addressing the City's objectives to improve water resource
conservation incentives. The commodity rates under this alternative are determined based on an updated
cost of service calculation for each wastewater strength component discussed in the previous section.
The SFR and MFR user classes are a homogenous group with the same strength characteristics.
Therefore, uniform sewer usage rates can be established for these classes. Note that the SFR and MFR
classes do have different return factors but the same strength concentrations, so the unit rate in $/HCF of
wastewater is the same for both classes. On the other hand, non-residential customers vary significantly
in terms of strength characteristics. Therefore, unit costs and varying strength concentrations for non-
6-2
residential are used to develop usage rates for the nine non-residential classes grouped by strength
characteristics.
SFR & MFR Commodity Rate
The suggested SFR and MFR sewer commodity rate is determined based on annualized wastewater
generated by SFR and MFR customers. The SFR and MFR commodity rate was calculated by dividing
the estimated FY 2009 Flow, BOD, and SS revenue requirements for SFR~and MFR by the estimated
annualized wastewater flows for each of the residential customers groups.
Non-Residential Commodity Rate
The suggested non-residential sewer commodity rates are also determined based on annualized
wastewater generated (water usage for the various non-residential customers with an 89% discharge
factor) by all non-residential customers. The non-residential customers are grouped based on their
strength and the commodity rates are charged based on the average strength of that group.
The commodity rates for each of the residential and non-residential customer classes in the City of Santa
Monica for FY 2009 and FY 2010 are shown in Table 6-1.
Table 6-1: Proposed Wastewater Rates for FY 2009 and 2010
Alternative 1 Alternative 2
Commodity Rates IHCF of wastewater) Dischar a Factor FY 2009 FY 2010 FY 2009 FY 2010
Residential
Single-family residential 51.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Single Duplex 95.00% $ 2.94 $ 3.47 $ 2.87 $ 3:30
Duplex 80.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Triplex 85.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Four Plex 90.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Over Fourplex 95.00% $ 2.94 $ 3.47 $ 2.87 $ 3.30
Non-Residential
General Commercial 89.00% $ 2.68 $ 3.16 $ 2.61 $ 3.00
Medium Low 89.00% $ 2.79 $ 3.29 $ 2.72 $ 3.13
Medium 89.00% $ 3.22 $ 3.80 $ 3.14 $ 3.61
Medium High 89.00% $ 3.51 $ 4.14 $ 3.42 $ 3.93
High 89.00% $ 4.11 $ 4.85 $ 4.01 $ 4.61
Churches 89.00% $ 2.64 $ 3.12 $ 2.57 $ 2.96
Schoolllnstitutional 89.00% $ 2.64 $ .3.12 $ 2.57 $ 2.96
Misc.lndustrial 89.00% $ 3.26 $ 3.85- $ 3.18 $ 3.66
Paper Mate/Gillette 89.00% $ 2.76 $ 3.26 $ 2.69 $ 3.09
Wastewater Rate Increases 18% 18% 15% 15%
6-3
6.3 CustomerlmpactAnalysis
RFC evaluated the impact of the changes to the wastewater rate structure and the changes in user
classification and loadings on the bi-monthly bills of different customers of the City's wastewater
system. RFC calculated bi-monthly bills under both the current and proposed rates for customers within
.each customer class with anticipated wastewater discharges ranging from low to high. The impacts of
each of these changes among user classes and within user classes are discussed below.
6.3.1 SFR Impacts
SFR customers will experience a range of impacts depending on their usage level. Impacts range from a
decrease of about 10.3% (or 12.5% for Alternative 2) for low bi-monthly wastewater discharge
.customers (using 18 HCF of water bi-monthly) to an increase of about 51.4% (or 47.7% for Alternative
2) for high bi-monthly wastewater customers (using. 60 HCF of water bi-monthly). Moderate bi-
monthly wastewater customers (using 36 HCF of water bi-monthly), which represents the average SFR
customer, will experience an increase of approximately 26.5% (or 23.5% for Alternative 2). The
favorable impacts for the low use customers are the result of eliminating the fixed bi-monthly service
.charges. However, eliminating these service charges naturally increases commodity rates, which results
'in adverse impacts on customers with higher water usage levels. This is consistent with the goals of the
Sustainable City Program. To ensure that the 47 non-metered wastewater customers pay their equitable
share of wastewater charges, the City may use bi-monthly water use for the typical or average SFR
.wastewater customer (36 HCF) in the City of Santa Monica. Tables 6-2 and 6-3 show the bi-monthly
bill impacts at different SFR usage levels for Alternatives 1 and 2, respectively.
6.3:2 MFR Impacts
Since the current and recommended rate structures assume different discharge factors for different types
of MFR customers, our analysis presents bi-monthly bills for a variety of MFR establishments with
different meter sizes and at a range of assumed wastewater discharge levels. MFR accounts typically
.provide service to multiple dwellings and many MFR customer classes must use larger water meters to
.serve these multiple dwellings. Since the current rate structure applies bi-monthly service charges that
.vary based on meter size, those MFR customers with larger meters will experience more favorable
.impacts than MFR customers with smaller meters if they exhibit similar wastewater discharge levels.
'Again, the recommended rate structure is more effective in providing these customers with a
.conservation incentive through the more adverse impacts experienced by higher use customers. Tables
b-2 and 6-3 show the bi-monthly bill impacts at different MFR usage levels under each alternative.
;6.3.3 Non-Residentiallmpacts
Due to updated customer classifications and strength loadings, non-residential customer impacts vary
based on the amount of usage and the strength of discharge. However, eliminating the bi-monthly
service charges and recovering wastewater costs entirely through the commodity rates serves to shift the
6-4
burden of cost recovery on higher wastewater discharge customers. The non-residential customer
impacts are somewhat similar to the impacts experienced by residential customers. Customers with
lower wastewater discharges will experience more favorable impacts than those with higher wastewater
discharges. Additionally, customers with larger meters will tend to experience more favorable impacts
than those with smaller meters. Tables 6-2 and 6-3 show the bi-monthly bill impacts for the different
non-residential customer strength classifications for Alternative 1 and 2, respectively.
Table 6-2: Sample Customer Bi-Monthly Bill Impacts -Alternative C-1
Di
h Bo-monthly Bi-Monthly Bills Difference
Customer Class (Meter Size) arge
sc Water Use Current FY Proposed FY
Factor $ %
HCF h> 2008 Rates 2009
Single Family Residential (3/4")
Low Bi-Monthly Flow 51.00% 18 $30.10 $26.99 ($3.11) -10.32%
Moderate Bi-Monthly Flow 51.00% 36 $42.67 $53.98 $11.31 26.49%
High Bi-Monthly Flow - 51.00% 60 $59.44 $89.96 $30.52 51.35%
Multi-Family Residential
Single Duplex (1.5") 95.00% 40 $127.03 $111.72 ($15.31) -12.05%
Duplex (1") 80.00% 50 $93.87 $117.60 $23.73 25.28%
Triplex (1.5") 85.00% 75 $162.31 $187.43 $25.12 15.48%
FOUrpIEx (2") 90.00% 80 $216.71 $211.68 ($5.03) -2.32%
Over Four Plex 2" 95.00% 100 $248.22 $279.30. $31.08 12.52%
Non-Residential
General Commercial (1")
Low Bi-Monthly Flow 89.00% 37 $86.16 $88.25 $2.09 2.43%
Moderate Bi-Monthly Flow 89.00% 60 $115.43 $143.11 $27.68 23.98%
High Bi-Monthly Flow 89.00% 120 $191.79 $286.22 $94.43 49.24%
Medium Low Strenoth (1")
Low Bi-Monthly Flow 89.00% 60 $131.99 $148.99 $17.00 12.88%
Moderate Bi-Monthly Flow 89.00% 100 $193.93 $248.31 $54.38 28.04%
High Bi-Monthly Flow 89.00% 120 $224.90 $297.97 $73.07 32.49%
Medium Strenoth (2")
Low Bi-Monthly Flow 89.00% 90 $289.48 $257.92 ($31.56) - -10.90%
Moderate Bi-Monthly Flow 89.00% 150 $403.76 $429.87 $26.11 6.47%
High Bi-Monthly Flow 89.00% 250 $594.22 $716.45 $122.23 20.57%
Medium High Strenoth (1'9
Low Bi-Monthly Flow 89.00% 60 $180.05 $187.43 $7.39 4.10%
Moderate Bi-Monthly Flow 89.00% 100 $274.03 $312.39 $38.36 14.00%
High Bi-Monthly Flow 89.00% 120 $321.02 $374.87 $53.85 16.77%
High Strength (4")
Low Bi-Monthly Flow 89.00% 400 $1,558.42 $1,463.16 ($95.26) -6.11%
Moderate Bi-Monthly Flow 89.00% 709 $2,482.45 $2,593.45 $111.00 4.47%
HighBi-Monthly Flow 89.00% 2,000 $6,343.06 $7,315.80 $972.74 15.34%
Ve Hi h Bi-Monthl Flow 89.00% 5,000 $15,314.26 $18,289.50 $2,975.24 19.43%
(1) Represents discharge factor applied to billed water usage.
6-5
Table 6-2: Sample Customer Bi-Monthly Bill Impacts -Alternative C-2
Di
h
r Bo-monthly Bi-Monthly Bills Difference
ge
sc
a
Customer Class (Meter Size) Factor Water Use Current FY Proposed FY $ %
HCF (~) 2008 Rates 2009
Single Family Residential (3/4")
Low Bi-Monthly Flow 51.00% 18 $30.10 $26.35 ($3.75) -12.46%
Moderate Bi-Monthly Flow 51:00% 36 $42.67 $52.69 $10.02 23.48%
High Bi-Monthly Flow 51.00% 60 $59.44 $87.82 $28.38 47.74%
Multi-Family Residential
Single Duplex (1.5") 95.00% 40 $127.03 $109.06 ($17.97) -14.15%
Duplex (1") 80.00% -50 $93.87 $114.80 $20.93 22.30%
Triplex (1.5") 85.00% 75 $162.31 $182.96 $20.66 12.73%
Fourplex (2") 90.00% 80 $216.71 $206.64 ($10.07) -4.65%
Over Four Plex (2") 95.00% 100 $248.22 $272.65 $24.43 9.84%
Nop-Residential
General Commercial.(1")
Low Bi-Monthly Flow 89.00% 37 $86.16 $85.95 ($0.21) ~ -0.25%
Moderate Bi-Monthly Flow. 89.00% 60 $115.43 $139.37 $23.94 20.74%
High Bi-Monthly Flow 89.00% 120 $191.79 $278.75 $86.95 45.34%
Medium Low Strength (1")
Low Bi-Monthly Flow 89.00% 60 $131.99 $145.25 $13.26 10.05%
Moderate Bi-Monthly Flow 89.00% 100 $193.93 $242.08 $48.15 24.83%
High Bi-Monthly Flow 89.00% 120 $224.90 $290.50 $65.59 29.17%
Medium Strength /2"1
Low Bi-Monthly Flow 89.00% 90 $289.48 $251.51 ($37.97) -13.12%
Moderate Bi-Monthly Flow 89.00% 150 $403.76 $419.19 $15.43 3.82%
High Bi-Monthly Flow 89.00% 250 $594.22 $698.65 $104.43 17.57%
Medium High Strength (1"1
Low Bi-Monthly Flow 89.00% 60 $180.05 $182.63 $2.58 1.43%
Moderate Bi-Monthly Flow 89.00% 100 $274.03 $304.38 $30.35 11.08%
High Bi-Monthly Flow 89.00% 120 $321.02 $365.26 $44.23 13.78%
High Strength (4")
Low Bi-Monthly Flow 89.00% 400 $1,558.42 $1,427.56 ($130.86) -8.40%
Moderate Bi-Monthly Flow 89.00% 709 $2,482.45 $2,530.35 $47.90 1.93%
High Bi-Monthly Flow 89.00% 2,000 $6,343.06 $7,137.80 $794.74 12.53%
Ve Hi h Bi-MOnthl Flow 89.00% 5,000 $15,314.26 $17,844.50 $2,530.24 16.52%
(1) Represents discharge factor applied to billed water usage.
6-6
Gty of
tiaot~
CITY OF SANTA MONICA
ENVIRONMENTAL PROGRAMS DIVISION
FUNDING IN COMPLIANCE
WITH PROPOSITION 218
HF&H CONSULTANTS, LLC
HF H
December 14, 2007
FINAL REPORT
ATTACHMENT C
CITY OF SANTA 1VIONICA
1717 - 4TH STREET, Su1'rE 250
SANTA MONICA, CA 90401
City of
S:snta
!Ftion (cam
ENVIRONMENTAL PROGRAMS DIVISION
FUNDING IN COMPLIANCE WITH
PROPOSITION 218
FINAL REPORT
December 14, 2007
HF,H`
HF&H CONSULTANTS, LLC
2175 N. California Blvd., Suite 990
Walnut Creek, CA 94596
Tel: (925) 977-6953 Fax: (925) 977-6955
_~-~
AF&H CONSULTANTS, LLC
Advisory Services to
Municipal Management
2175 North California Boulevard, Suite 990 Walnut Creek
Walnut Creek, California 94596 Newport Beach
Tel: (925)977-6950
Fax: (925)977-6955
wwar.hfh-consultants.com
TECHNICAL MEMORANDUM
To: Craig Perkins, City of Santa Monica Director of Environmental & Public Works
Management
Carol Swindell, City of Santa Monica Director of Finance
Janet Shelton, City of Santa Monica Budget Manager
Dean Kubani, City of Santa Monica Environmental Programs Division Manager
From: John Farnkopf, HF&H Senior Vice President
Edmund Jones, HF&H Associate Analyst
Date: December 14, 2007
Subject: Final Report: City of Santa Monica Environmental Programs Division -
Funding In Compliance with Proposition 218
The City has historically funded the Environmental Programs Division with revenue from the
Water, Wastewater, Solid Waste; and Stormwater enterprises. The purpose of this report is to
present. our findings from our independent review of the funding for the City's Environmental
Programs Division. The report is organized as follows:
Section I. Summary of Findings
Section II. Methodology
Section III. EPD Programs
Section IV. Allocation of EPD Budget to Programs
Section V. Allocation of Program Budgets to Funding Sources
Section VI. Proportional Water and Wastewater Rates
Section VI. References
Appendix. Cost Allocation Model
I. SUMMARY OF FINDINGS
The City has funded the Environmental Programs Division s budget using a methodology that
was developed over time. The purpose of the present study was to perform an independent
cost allocation analysis to determine the appropriate funding. Figure 1 summarizes the
allocations derived in this study and compares them with the City's allocations.
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 2
Fi ure 1. Com arison of Allocationsl
Fund HFBH Allocation City Allocation HF8:H Minus City
Water 34.2% $1,363,871 35.0% $1,395,912 -0.8% ($32,041)
Wastewater 21.4% $855,958 35.0% $1,394,715 -13.5% ($538,756)
Solid Waste 18.7% $745,613 14.2% $564,670 4.5% $180,944
Stormwater ~ 18.5% $739,260 15.9% $635,304 2.6% $103,957
Subtotal 92.8% $3,704,703 100.0% $3,990,600 -7.2% ($285,897)
General Fund/Other Funding 7.2% $285,897 0.0% $0 7.2% $285,897
Total .100.0% $3,990,600 100.0% $3,990,600 0.0% $0
The principal differences are:
• 7.2%.($285,897) of the EPD budget is allocated to the General Fund/Other Funding.2
The allocation is from the Energy Conservation, Green Building Assistance and
Sustainable City Plan programs.
• The $285,897 allocated to the General Fund represents 15.1% of the combined $1,889,076
cost of these programs.
• The. Water Fund's share of the EPD budget decreased 2.3% (from $1,395,912 to
$1,363,871).
• The Wastewater Fund's share decreased 38.6%.
• The Solid Waste Fund's share increased 32.0%.
• The Stormwater Fund's share increased 16.4%.
The overall result is a shift of costs away from the Water and. Wastewater Funds to the Solid
Waste, Stormwater, and General/Other Funds.
II. METHODOLOGY
There are two substantive provisions of Proposition 218 related to setting fees and charges that
are relevant to the present report. The first provision states that "Revenues derived from the
fee or charge shall not exceed the funds required to provide the property related service." 3 We
interpret this to mean that costs included in fees and charges required to provide water,
wastewater, Stormwater, and solid waste services must be related to those services and cannot
exceed the funding requirement. In other words, for example; revenue generated by water
rates cannot be unrelated to providing water service. Hence, any EPD cost reimbursed from
~ The FY 2007-08 budget was used in this report as the cost basis for all analysis.
z "General Fund/Other Funding" is intended to indicate any source of funding other than the four enterprises
and is also referred to as "General Fund".
s California Constitution Article XIII D, section (6)(b)(1).
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 3
water rate revenue cannot exceed the amount that is related to providing water service.
Demonstrating that EPD's budget is related to providing water, wastewater, stormwater, and
solid waste services is the primary purpose of this report.
The second provision states that "The amount of a fee or charge imposed upon any parcel or
person as an incident of property ownership shall not exceed the proportional cost of the
service attributable to the parcel." a We interpret this to mean at Ieast that fees or charges
levied by the Water, Wastewater, stormwater, and Solid Waste Funds must not exceed the
proportional cost of service for each fund. Again, for example, the EPD cost included in water
rates must be proportionately distributed among rate payers. Demonstrating that EPD's
budget is proportionately allocated to appropriate funding sources is a secondary purpose of
this report.
A two-step approach was followed in this study to allocate EPD's budget to appropriate
funding sources:
1. Determine Program Budgets - EPD's total budget was itemized into its seven major
programs based on the activities of staff and the objectives of each program.
2. Allocate Programs to Funding Sources.-The seven program budgets were allocated to
funding sources based on the benefits received by each funding source.
The City has historically allocated the entire EPD budget to the four enterprise funds. For
purposes of this study, we have included the General Fund as a potential funding source for
any expenses for which the nexus to the enterprises may be questionable in our opinion.
III. EPD PROGRAMS.
With the assistance of City staff, the following descriptions of each of the major EPD programs
were developed.
Water Conservation
EPD engages in a number of water conservation programs and activities including:
• Baysaver, which replaces old toilets, faucet aerators and showerheads with new, iow-
..flow ones;
• Rebates for the purchase and installation ofwater-efficient washing machines, irrigation
controllers and the like.
a California Constitution Article XIII D, section (6)(b)(3).
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 4
Reviewing City operations, especially parks, for efficiency opportunities with irrigation
systems and plays a role in the water-efficient design of public spaces.
Outreach targeting homes, landscaping and restaurants where conservation can often
make the greatest gains;
Outreach materials are distributed at a wide variety of venues, from festivals to public
lectures.
Water conservation benefits water rate payers by improving operational efficiency, improving
reliability, and lowering the cost of supplying water. Water conservation reduces sewered
water use, which benefits wastewater customers by lowering the hydraulic load on
wastewater collection and treatment facilities. Water conservation also reduces irrigation
inefficiency, thereby reducing urban runoff pollution from turf, which may contain fertilizer
and pesticide residues; hence, stormwater rate payers benefit from water conservation.
Underground Tank Management
This program handles regulation, inspection and enforcement functions for public and private
underground storage, mostly in the form of gasoline tanks. The monitoring of these tanks is
crucial to the protection of groundwater from leaks of toxic substances. Clean groundwater is
crucial to achieving the City's sustainability goal of increasing the percentage of the City's
potable water sourced from local supplies.
Watershed Management
The primary function of Watershed Management is to minimize urban runoff pollution into
Santa Monica Bay. Staff support the runoff treatment provided by the Santa Monica Urban
Runoff Recycling Facility ("SMURRF") through public outreach efforts, enforcement of the
urban runoff ordinance, plan checks for new construction, and implementing National
Pollution Discharge Elimination System ("NPDES") measures. Staff also write grant proposals
to procure filtration systems for the stormwater system. These activities benefit water,
wastewater, and stormwater rate payers.
Water rate payers benefit because Watershed Management helps reduce urban runoff from
irrigation, which reduces water use and contamination from fertilizers and pesticides that are
used on landscapes, chemicals that can potentially percolate into the groundwater supply.
Wastewater rate payers benefit because Watershed Management improves runoff drainage
into receiving waters. With improved drainage, less runoff can enter the wastewater collection
system as inflow and infiltration, which places a burden on the collection and treatment
facilities.
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 5
Stormwater rate payers benefit because pollution in runoff that drains to Santa Monica Bay is
minimized.
Hazardous Materials Mitigation
This program encompasses Household Hazardous Waste ("HHW") collection, administration
of he City's Certified Unified Program Agency ("CUPA") program and oversight of hazardous
waste remediation for City projects. Program activities support the full-time operation of the
HHW collection facility, which also processes all City-generated hazardous waste. There is
also a program for the collection of electronic waste. The purpose of this type of collection
activity, besides following State requirements, is to prevent toxic materials from reaching the
landfill where they can leach toxins into the groundwater. This program area involves
considerable public outreach on specific items targeted for HHW collection (including
mercury thermometers, batteries, used motor oil and fluorescent light bulbs) as well as efforts
to educate the public about the proper disposal of HHW.
This program also focuses on businesses that generate hazardous waste, such as: drycleaners,
printing companies, auto mechanics and painting companies. Program staff perform
regulatory functions like inspections provided under the auspices of the CUPA program,
working with the fire department on permitting, and the industrial waste section of the
Wastewater system.
'The benefits associated with this program are received by water rate payers (i.e., groundwater
quality is protected), wastewater rate payers (i.e., wastewater pollution is reduced),
Stormwater rate payers (i.e., urban runoff pollution is reduced), and solid waste rate payers
(i.e., hazardous wastes are better controlled).
Energy Conservation
The activities of this program are targeted at improving energy efficiency, which benefits both
municipal and public (e.g., residents and businesses) energy users. Staff work to reduce
energy use by City offices and facilities and to promote the Solar Santa Monica program. Of
the four enterprises, the primary beneficiary is the Water Fund, which uses a large amount of
electricity for pumping water. The Wastewater Fund benefits similarly due to the electricity
involved in pumping wastewater. In addition, the City's water supply benefits from energy
conservation because improved energy efficiency reduces greenhouse gas emissions, which
are predicted to impact the reliability-and availability of water supplies.
The public benefits from outreach designed to educate about energy use and waste and to
influence new building design as it pertains to potential energy loading. Staff perform energy
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 6
audits, promote energy-efficient equipment and work with other cities to share ideas and try
to influence state and federal policy.
Green Building Assistance
This program promotes environrnentally sustainable building in the City. Green building
includes:
• Energy efficiency through the use of proper insulation, solar power and energy-efficient
appliances;
• Water efficiency through appropriate landscaping for the climate and water-efficient
appliances and fixtures;
• Water quality protection by discouraging landscaping that is dependent on large
amounts of chemical fertilizers and pesticides and irrigation that will not over-water
and generate runoff to storm drains;
• Improving indoor air quality by selecting paints, carpeting and sealants that do not
"off-gas' harmful chemicals; this also reduces the amount of toxic materials that go into
landfills or that are poured down storm drains; and
• Selecting sustainable, non-toxic building materials, promoting those that can be used
with minimal waste and recycling the construction and demolition debris that is
generated.
The program includes outreach to educate the public and assistance with choosing and
purchasing green building products. Outreach is focused on both residential and commercial
building.
This program benefits water rate payers (i.e., water conservation is improved), wastewater rate
payers (i.e., wastewater pollution is reduced), stormwater rate payers (i.e., urban runoff
pollution is reduced), and solid waste rate payers (i.e., hazardous wastes are better controlled).
Sustainable City
The Sustainable City Plan began as a series of environmental programs and has grown to
encompass such concepts as Human Dignity, Civic Participation, and Affordable Housing.
Within EPD, Sustainable City functions as an umbrella program, encompassing all of the goals
and activities of the other EPD programs. EPD works within City operations to achieve these
goals and supports and encourages sustainable businesses and individuals through both
awards/recognition programs and hands-on assistance like water or power use audits.
The EPD, in support of the Plan, performs all of the data tracking and most of the public
outreach for all of the Plan s goal areas. Doing this, part of the cost of this program can be
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 7
viewed as overhead expenses for other City departments. Assuch, these departments should
be reimbursing EPD for a portion of the program expenses estimated to be attributable to
them.
Figure 2 summarizes the nexus between the EPD programs and the Enterprise Funds.
Fi a 2. Nexus Summ
EPD Pro am Water Fund Wastewater Fund Stormwater Fund Solid Waste Fund
Water Reducing water use and Reducing wastewater Reducing irrigafion
and associated variable runoff into stormwater No demonstrated nexus
Conservation associated variable costs costs system
Underground Preventing under-
Tank ground storage tanks
No demonstrated nexus
No demonstrated nexus
No demonstrated nexus
from contaminating
Management groundwater
Efficient irrigation Reducing inflow and
reduces customer water -
infiltration of runoff Reducing polluted
Watershed bIDs; less runoff results
into sewer system surface runoff in
No demonstrated nexus
Management in less pollution from ~
reduces treatment costs, SMURRF and in Santa
landscaping and other Monica Bay
chemicals necessary capacity
HaZazdOUS Improper disposal of Keeping hazardous Reducing polluted Primary programfocus
Materials hazardous waste waste out of sewer swface runoff in is diverting Hazardous
contaminates system reduces SMURRF and in Santa waste items from
Mitigation groundwater treatment costs Monica Bay landfill
Energy Improved energy Improved energy Improved energy Improved energy
efficiency in operations efficiency in operations efficiency in operations efficiency in operations
COnserVatiori and at facilities and at facilities and at facilities and at facilities
Greeri
Reducing water use and Reducing the volume of
water introduced into
Reducing polluted Minimizing the amount
of waste generated by
Building associated variable
the sewer system, fewer swface runoff in
C&D; reducing toxic
ASSIStanee costs; reducing
groundwater pollution
toxics in wastewater SMURRF and in Santa
Monica Bay
materials used; focus on
stream recycling and ieuse
Sustainable Umbrella program Umbrella program Umbrella program Umbrella program
encompassing all of the encompassing all of the enwmpassing all of the encompassing all of the
City Plari above above above above
IV. ALLOCATION OF EPD BUDGET TO PROGRAMS
The EPD budget breaks down into three basic sections: Salaries and Wages, Supplies and
Expenses, and Capital Outlay. We slightly reorganized these sections for cost allocation
purposes and divided the budget into Salaries and Wages, Shared Expenses, and Other
Expenses.
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 8
Salaries and Wages
A schedule was prepared with a row for each staff position and a column for each program,
plus one for administrative/other activities. With the assistance of the EPD Manager, staff
time for each staff position was allocated to each program as shown in Figure 3. The
percentages for each position were multiplied by the budget for that position, with the
Admin/Other component reallocated to the programs in proportion to the each program's
direct time allocation.
Figure 3. Allocation of Salaries and Wages to Programs
Environmental Programs
Staff Position Untlerground Hazardous - Green
Water Tank Watershetl Materials Energy euiltling Sustainable
Conservation Management Management Mitigation Conservation Assistance Ci Plan
Admin/Other
Environmental Programs Manager 70.00% 10.00% 70.00% 10.00% 5.00% 5.00% 20.00% 30.00%
Energy and Green 8uiltlings Program
Atlministralor 40.00% 40.00% 20.00%
Energy Eifcienq Engineer 80.00% 20.00%
Gmen 8uiltlings Program Advisor - 20.00% 80.00%
Senior Atlministrative Analyst-Urban
Runoff 15.00% 85.00%
Senior Environmental Analyst -
Sustainable City 700.00
Senior Environmental Analyst-
Hazartlous Materials 5.00% 95.00%
Water Resources Specialist#1 95.00% 5.00%
Water Resources Specialist#2 95.00% 5.00%
Environmental Programs Analyst-
Sustainable City 70.00% 20.00% 5.00% 5.00% 55.00% 5.00%
EnvironmenlalPrograms Analyst-
Hazartlous Materials 100.00%
Environmental Compliance Specialist 95.00% 5.00%
Environmental Outreach Specialist 10.00% 70.00% 10.00% 70.00% 10.00% 50.00%
Hazardous Materials Technician 100.00
Lead Hazardous Materials Technician 700.00%
Environmental Programs Technician 15.00% 85.00%
Atlministrative Staff Assistant -
Environmental Programs
100.00%
OveNme
Temporary Positions
Staff Time
Allocation of Atlmin/Other
Staff Time Allocable to Programs
13.24% 6.47% 7.35% 25.59% 9.41%. 9.41% 14.12% 14.41%
2.23% 1.09% 1.24% 4.37% 1.58% 1.58% 2.38%
75.46% 7.5fi% 8.59% 29.90% 11.00% 11.00% 76.49%
Shared Expenses
A number of the line items listed under Supplies and Expenses and Capital Outlay are for
shared use/staff support and have been renamed here under the heading, Shared Expenses for
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 9
purposes of cost allocation. Shared expenses are allocated to the programs using a composite
of the overall allocation percentages for Salaries and Wages from the last row of Figure 3 and
summarized in Figure 4.
Figure 4. Allocation of Shared Expenses to Programs
haretl Expense Items Environmental Programs
Untlerground Hazartlous Green
Water Tank Watershetl Materials Energy Builtling Sustainable
Conservation Management Management Mitigation Conservation Assistance City Plan
Util-Telephone 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Office Supplies 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Meteretl Postage 75.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Mileage 15.46% 7.56% 8.59% 29.90% 11.00% 11:00% 16.49%
Conf/Meetings/Travel 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 76.49%
Books/Pamphlets 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Administrative lntlirect 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Computer Equipment 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Communications Systems. 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Furniture and Furnishings 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Bltlg Renovation/Maim. 15.46% 7.56% 6.59% 29.90% 11.00% 17.00% 16.49%
Other Expenses
The remaining line items from Supplies and Expenses were allocated according to the program
area(s) that they directly support. In addition, revenue attributed to EPD was allocated among
the programs. The percentage allocations-shown in Figure 5 were derived from the notes to
the line items found in the City budget or in conversations with the EPD Manager. The
support for these allocations can be found in the Appendix, which contains a copy of the entire
allocation model.
Applying the allocation factors in Figures 3, 4, and 5 to the corresponding line-item budget
expenses yields an allocation of the EPD budget to each of the programs, as summarized in
Figure 6.
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 10
Figure 5. Allocation of Other Exvenses to Programs
ther Expense Items Environmental Programs
Underground Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Conservation Management Management Mitigation Conservation Assistance City Plan
Atlvertising 2007-OS 17.04% 2.89% 17.04% 17.83% 17.27% 17.27% 10.66%
Unif/Protective Clothing 100.00
Employee Medical Exams 100.00%
Toxic Chemical 100.00
Training 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Community Sustainability Program 100.00%
Office Rent - 10.00% 10.00% 10.00% 10.00% 25.00% 25.00% 10.00%
Memberships antl Dues 2.00% 2.00 % 50.00% 40.00% 2.00% 2.00% 2.00%
Vehicles-FUels/LUbr 14.29% 14.29% 14.29% 14.29% 14.29% 74.29% 14.29%
Vehicle Mgt. Fund-Maim 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Building/Structure Maintenance 100.00%
Other COSts (BAYSAVER) 75.00% 25.00%
Prof Services 2007-OS 21.85% 5.31% 13.81% 5.12% 6.95% 12.73% 34.23%
Transfer Station Fee 100.00%
Vehicles-Insumnce 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 74.29%
CNG Fuel 14.29% 14.29% 14.29% 14.29% 14.29% 74.29% 74.29%
Insurance-Comprehensive 14.29% 14.29% 14.29% 14.29% 14:29% 14.29% 14.29%
EPD Revenues
Admin Fines/Penalties 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Underground Tank Permits 700.00%
Other Revenue-Miscellaneous 74.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
eaysaver Fees 100.00%
CUPA Atlministration Fees 100.00%
Figure 6. Summary of Program Budgets, FY 2007-08
Environmental Programs
Water Undergrountl
Wffiershed Hazardous
Energy Green
Sustainable
Total
Expense Conservation Tank Management Materials Conservation Building City Plan Expense
Mana ement Mtti ation Assistance
Salaries & Wages $259,729 $138,735 $173,036 $462,665' $241,474 $237,051 $372,124 $1,684,814
Shared Expenses $68,393 $33,436 $37,996 $132,226 $48,635 $48,635 $72,952 $442,273
Other Expenses $304,768 $9,503 $234,110 $246,928 $144,693 $196,693 $524,818 $1,663,513
Total Program Budget $632,889 $181,674 $445,142 $841,816 $434,803 $484,379 $969,894 $3,990,600
%of Total EPD Budget 15.86% 4.55% 11.15% 21.70% 10.90% 12.14% 24.30% 100.00%
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 11
V. ALLOCATION OF PROGRAM BUDGETS TO FUNDING SOURCES
Having established the program budgets in Section IV, the next step was to allocate the
program budgets to the appropriate funding sources based on the rationale in Section III.
With the assistance of the EPD Manager, the qualitative nexus described for each of the
programs in Section III was translated into the allocations shown in Figure 7.
Figure 7. Allocations of Program Budgets to Funding Sources
Fund Untlerground Hazardous Green
Water Tank Watershed Materials Energy guilding Sustainable
ConservaGOn Mana ement Management Miti ation Conservation Assistance City Plan
Composite of
Total Fxpense
Water 50% 100% 30% 20% 60% 22.5% 20% 34.2%
Wastewater 40% 0% 10% 20% 20% 22.5% 20% 27.4%
Solitl Waste 0% 0% 0% 50% 5% 22.5% 20% 16.7%
Stormwater 70% 0% fi0% 70% 5% 22.5% 20% 18.5%
Subtotal 100% 700% 700% 700% 90% 90% 80% 92.8%
General FUnNOther FUntling 0% 0% 0% 0% 10% 10% 20% 7.2%
Total 100% 700% 700% 100% 100% 700% 700% 100.0%
Funtl Untlergrountl Hazardous Green
Water Tank Watershed Materials Energy guilding Sustainable
Conservation Mana ement Management Miti ation Conservation assistance Cily Plan
Total Expense
Water $316,445 $181,674 $133,543 $tfi8,3fi4 $260,882 $108,985 $193,979 $t,3fi3,877
Wastewater $253,156 $0 $44,574 $ifi8,3fi4 $86,967 $108,965 $193,979 $855,956
Solitl Waste $0 $0 $0 $420,909 $21,740 $108,985 $193,979 $745,613
Stormwater - $63,289 $0 $267,065 $84,182 $21,740 $108,965 $193,979 $739,280
Subtotal $632,889 $181,674 $445,742 $847,818 $391,322 $435,942 $775,975 $3,704,703
General FUnd/Other Funding $0 $0 $0 $0 $43,480 $48,438 $193,979 $285,697
Total $632,889 $787,674 $445,742 $847,878 $434,803 $484,379 $969,894 $3,990,fi00
Four of the programs (i.e:, Water Conservation, Underground Tank Management, Watershed
Management, and Hazardous Materials Management) were viewed as being entirely related to
the four enterprises. Three of the programs (i.e., Energy Conservation, Green Building
Assistance, and Sustainable City Plan) were viewed as providing benefits that extend beyond
the four enterprises. In this case, a provision was made for allocations of these three programs
outside of the four enterprise funds to what we refer to as "General Fund/Other Funding."
For these three programs, the allocation process was two-fold. First, a portion of their costs
was allocated to the General Fund/Other Funding category. Second, the remaining cost was
allocated among the enterprises.
In the allocation between the enterprises and General Fund, it was recognized that the
Sustainable City Plan program deals with more issues that are unrelated to the four enterprises
than either the Energy Conservation or Green Building Assistance programs. Toward that
end, the Sustainable City Plan was allocated equally to the five funding sources (20% each to
the four enterprises and the General Fund). It was felt that equa120% allocations of Energy
Conservation and Green Building Assistance to the five funding sources would over allocate
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 12
to the General Fund because these two programs are more closely related to the four
enterprises than is the Sustainable City Program. Hence, only 10% of these two programs was
allocated to the General Fund.
The cost of these three programs was allocated to the four enterprises relative to the benefits
received.. In the case of Energy Conservation, the Water Fund uses the majority of energy and
therefore received the highest allocation, with the other three enterprises receiving token
allocations. 'The Green Building Assistance and Sustainable City Plan programs were viewed
as providing equal benefits to each of the four enterprises.
The allocations in Figure 7 vary from the current allocations, as summarized in Figure 8. Iri
effect, the allocations in this study shift revenue from the Wastewater Fund to the other three
enterprises and the General Fund.
Figure 8. Comparison of Allocations
Fund HF8.H Allocation City Allocation HF&H Minus City
Water 34.2% $1,363,871 35.0% $1,395,912 -0.8% ($32,041)
Wastewater 21.4% $855,958 35.0% $1,394,715 -13.5% ($538,756)
Solid Waste 18.7% $745,613 14.2% $564,670 4.5% - $180,944
Stormwaier 18.5% $739,260 15.9% $635,304 2.6% $103,957
Subtotal 92.8% $3,704,703 100.0% $3,990,600 -7.2% ($285,897)
General Fund/Other Funding 7.2% - $285,897 0.0% $0 7.2 % $285,897
Total 100.0% $3,990,600 100.0% $3,990,600 0.0% $0
Although the allocation of nearly $286,000 away from the four enterprises may improve
compliance with Proposition 218, it also places an additional funding burden on the General
Fund. It is possible that this burden can be offset by reducing funding that may currently be
provided by the General Fund instead of by the enterprises. For example, each of the
enterprises should fully reimburse the City for right-of-way maintenance including, pavement
repair, mapping, fencing, etc., all of which benefit the enterprises. It is also possible that other
sources of revenue (e.g., taxes, grants, fees) currently apportioned to other funds or enterprises
are more appropriately retained by the General Fund.
VI. PROPORTIONAL WATER AND WASTEWATER RATES
As previously mentioned, the primary purpose of this report was to determine the appropriate
sources of funding the EPD budget, which is a condition that must be met to comply with
Proposition 218. The foregoing report has documented the nexus and the proportionate
amount of funding that is appropriate for each funding source.
Mssrs. Perkins, Swindell, Shelton, and Kubani
December 14, 2007
Page 13
Under Proposition 218, not only must the fees and charges be related to the service, but they
must be proportionate to the cost of service. Proportionality in this case refers to the manner
in which the fees and charges distribute the cost of service among water, wastewater, solid
waste, and stormwater rate payers. Each of these enterprise funds has existing fees and
charges that are designed to distribute their respective costs of service proportionately among
customers. From arate-making standpoint, proportionality is established when there is a
reasonable relationship (nexus) between the benefit received by rate payers and the cost of the
benefit paid by rate payers.
We have reviewed the City's recent water and wastewater rate studies. It is our opinion that
the recommended rates conform to industry standards and thereby comply with the
proportionality requirement in Proposition 218. We have not reviewed the stormwater or
solid waste rates to make a similar determination.
VII. REFERENCES
In preparing this report, the following documents were referred to:
Nexus Between EPWM Enterprise Funds and Budgeted Activities of the Environmental Programs
Division. Memorandum from Department of Environmental and Public Works Management.
March 15, 2007.
Legal Considerafions as to Raising EPWM Fees. Memorandum from Office of City Attorney to P.
Lamont Ewell et al. April 17, 2007.
Wastewater Rate Study Report. Raftelis Financial Consultants, Inc March 29, 2007.
2007 Water Rate Study. The Reed Group, Inc March 5, 2007.
Santa Monica Sustainable City Plan. Task Force on the Environment, Sustainable City Working
Group. Revised October 24, 2006.
City of Santa Monica Budget, Fiscal Years 2007-08, 2008-09. City of Santa Monica
Environmental Programs Division Reimbursement Calculations - FY 2007-08, 2008-09. City of
Santa Monica
APPENDIX
Allocation Model
Environmental Pro rams
Underground Hazardous Green
Water Tank Watershed Materials. Energy Building Sustainable
Staff Position Conservation Maria ement Management Miti anon Conservation Assistance Cil Plan Admin/Other
Environmental Programs Manager 10.00% 10.00% 10.00% 10.00% 5.00% 5.00% 20.00% 30.00%
Energy and Green Buildings Program
Administrator 40.00% 40.00% 20.00%
Energy Effciency Engineer 80.00% 20.00%
Green Buildings Program Advisor 20.00 % 80.00
Senior Administrative Analyst-Urban
Runoff 15.00% 85.00%
Senior Environmental Analysl-
Sustainable City 100.00
Senior Environmental Analyst-
Hazardous Materials 5.00% 95.00%
Water Resources Specialist#1 95.00% 5.00%
Water Resources Specialist#2 95.00% 5.00%
Environmental Programs Analyst-
Sustainable City 10.00% 20.00% 5.00% 5.00% 55.00% 5.00%
Environmental Programs Analyst-
Hazardous Materials 100.00%
Environmental Compliance Specialist 95.00% 5.00%
Environmental Outreach Specialist 10.00% 10.00% 10.00% 10.00% 10.00% 50.00%
Hazardous Materials Technician 100.00%
Lead Hazardous Materials Technician 100.00%
Environmental Programs Technician 15.00% 85.00%
Administrative Staff Assistant -
EnvironmentalPrograms 100.00%
OvertimB
Temporary'POSdions
Staff Time 13.24% 6.47%. 7.35% 25.59% 9.41 % 9.41 % 14.12% 14.41 % % of all staff time to each program
Allocation of Admin/Other 2,23% 1.09% 1.24% 4.31% 1.58% 1.56% 2.38% each program's time as%of all program [ime'19.17%
Staff Time Allocable to Programs 15.46 % 7.56 % 6.59% 29.90% 17.00 % 11.00% 16.49% sum of above 2 rows; To Shared Expenses Table
HFBH Consultants, LLC Santa Monica EPD Funding Matrix v3.xls
12/17/2007 9:26 AM l 0/8 Salaries and Wages
2p07-08
Environmental Programs
Underground Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Staff Position Conservation Mana ement Mana ement Mitigation Conservation Assistance Cit Plan
Environmental Programs Manager $22,090 $22,090 $22,090 $22,090 $11,045 $11,045 $44,179
Energy and Green Buildings Program $0 $0 $D $0 $71
938 $71
938 $0
Administrator , ,
Energy Effciency Engineer $0 $0 $0 $0 $106,196 $26,549 $0
Green Buildings Program Advisor $0 $0 $0 $0 $25,075 $700,298 $0
Senior Administrative Analyst-Urban $19,469 $0 $110
323 $0 $0 $0 $0
Runoff ,
Senior Environmental Analyst-
Sustainable City $0 $0 $0 $0 $0 $0 $112,345
Senior Environmental Analyst -
Hazardous Materials $0 $6,279 $0 $119,299 $0 $0 $0
Water Resources Specialist #1 $96,057 $0 $5,056 $0 $0 $0 $0
Water Resources Specialist #2 $96,057 $0 $5,056 $0 $0 $0 $0
Environmental Programs Analyst- $0 $0 $77,543 $23,086 $5
771 $5
771 $63
486
Sustainable City , , ,
Environmental Programs Analyst-
Hazardous Materials $0 $0 $0 $97,605 $0 $0 $0
Environmental Compliance Specialist $0 $102,571 $0 $0 $0 $0 $0
Environmental Outreach Specialist $10,111 $0 $10,171 $10,111 $10,117 $10,111 $50,557
Hazardous Materials Technician $0 $0 $0 $71,347 $0 $0 $0
Lead Hazardous Materials Technician $0 $0 $0 $88,301 $0 $0 $0
Environmental Programs Technician $0 $0 $0 $0 $0 $0 $84,550
Administa[ive Staff Assistant-
Environmental Pragrems $72087 $5,909 $6,715 $23,368 $8,595 $8,595 $12,893
Overtime $7,352 $661 $751 $2,614 $961 $961 $1,442
Temporary Positions $2,505 $1,225 $1,392 $4,844 $1,782 $1,782 $2,672
Total Staff Salaries & Benefits $259,729 $138,735 $173,036 $462,665 $241,474 $237,051 $372,124
HFBH Consultants, LLC Sanfa Monica EPD Fundinq Ma Mx v3.xls
72/77/20079:26AM 2ofB Saltines and Wages
hared Expense Items Environmental Programs
Undergrountl Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Conservation Management Management Mitigation Conservation Assistance Cily Plan
Util-Telephone 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
OKce Supplies 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Metered Postage 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Mileage 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Conf/Meetings/Travel 15.46% 7.56% 8.59% 29.90% 11,00% 11.00% 16.49%
Books/Pamphlets 15.46% 7.56% 8.59% 29.90% 11,00°/ 11.00% 16.49%
Administrative Indirect 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Computer Equipment 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Communications Systems 15.46% 7.56% 8.59% 29.90% 11.OD°/ 11.00% 16.49%
Furniture and Furnishings 15.46°/ 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
Bldg Renovation/Maim. 15.46% 7.56% 8.59% 29.90% 11.00% 11.00% 16.49%
2007.08
Note: Allocations of each shared expense to each program are in the same percentages of the whole
as overall staff time, since these are for shared use items that support the activities of all staff.
hared Ex ense Items Environmental Programs
Underground Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Conservation Management Management Mitigation Conservation Assistance City Plan
Util-Tele hone $2,165 $1,058 $1,203 $4,186 $1,540 $1,540 $2,309
Offce Su lies $13,144 $6,426 $7,302 $25,412 $9,347 $9,347 $14,020
Metered Posta a $1,033 $505 $574 $1,998 $735 $735 $1,102
Milea a $142 $70 $79 $275 $101 $101 $152
Conf/Meelin s/Travel $317 $155 $176 $613 $225 $225 $338
Books/Pam hlets $652 $319 $362 $1,260 $464 $464 $695
Administrative Indirect $47,614 $23,278 $26,452 $92,055 $33,859 $33,859 $50,789
Com uter E ui ment $0 $0 $0 $0 $0 $0 $0
Communications S stems $0 $0 $0 $0 $0 $0 $0
Furniture and Furnishin s $232 $113 $129 $448 $165 $165 $247
Bld Renovation/Maim. $3,093 $1,512 $1,718 $5,979 $2,199 $2,199 $3,299
ocai anarec expenses
$66,393 $33,436 $37,996 $132,226
$48,635 $48,635 $72,952
HF&H Consultants, LLC Santa Monica EPD Funding Matrix v3.x/s
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ther Ex ense Items Environmental Programs
Underground Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Conservation Mana ement Management Miti anon Conservation Assistance Cit Plan
Advertising 2007-08 17.04% 2.89% 17.04% 17.83% 17.27% 17.27% 10.66%
Unif/Protective Clothing 100.00°
Employee Medical Exams 100.00°
Toxic Chemical 100.00%
Training 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Community Suslainability Program 100.00%
Office Rent 10.00% 10.00% 10.00% 10.00% 25.00% 25.00% 10.00%
Memberships and Dues 2.00°/ 2.00% 50.00% 40.00% 2.00% 2.00% 2.00%
Vehicles-Fuels/Lubr 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Vehicle Mgt. Fund-Maint 14.29°/ 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Building/Structure Maintenance 100.00%
Other Costs (BAYSAVER) 75.00% 25.OD%
Prof Services 2007-OS 21.85% 5.31% 13.81% 5.12% 6.95% 12.73% 34.23%
Transfer Station Fee 100.00%
Vehicles -Insurance 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
CNG Fuel 14.29% 14.29% 14.29% 14.29% 14.29 % 14.29% 14.29%
Insurance -Comprehensive 14.29% 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
EPD Revenues
Admin Fines/Penalties 14.29% 14.29°/ 14.29% 14.29% 14.29% 14.29% 74.29%
Underground Tank Permits 100.011%
Other Revenue -Miscellaneous 14.29 % 14.29% 14.29% 14.29% 14.29% 14.29% 14.29%
Baysaver Fees 100.00%
CUPA Administration Fees 100.00%
Note: Advertising and Professional Services are allocated by the breakdown of individual expenses in
the line item account, as noted in the City budge[. The pementage calculations are shown on the
Line Item Allocations tab. All other allocations shown here were arrived at in discussion with Dean
Kubani, EPD Manager.
HFeH Consultants, LLC Santa Monica EPD Funding Matrix v3.x/s
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2007.08
x ense Items Environmental Programs
Underground Hazardous Green
Water Tank Watershed Materials Energy Building Sustainable
Conservation Management Management Mitigation Conservation Assistance City Plan
Advertisin $37,929 $6,429 $37,929 $39,679 $38,429 $38,429 $23,729
Unif/Protective Clothin $0 $0 $0 $2,621 $0 $0 $0
Em to ee Medical Exams $0 $0 $0 $1,000 $0 $0 $0
Toxic Chemical $0 $0 $0 $239,010 $0 $0 $0
Trainin $4,513 $4,513 $4,513 $4,513 $4,513 $4,513 $4,513
Communit Sustainabilit Pro ram $0 $0 $0 $0 $0 $0 $160,000
Office Rent $13,117 $13,117 $13,117 $13,117 $32,793 $32,793 $13,117
Membershi sand Dues $493 $493 $12,336 $9,869 $493 $493 $493
Vehicles--Fuels/Lubr $29 $29 $29 $29 $29 $29 $29
Vehicle M 1. Fund-Maim ~ $1,929 $1,929 $1,929 $1,929 $1,929 $1,929 $1,929
Buildin /Structure Maintenance $0 $13,364 $0 $0 $0 $0 $0
Other Costs BAYSAVER $101,250 $0 $33,750 $0 $0 $0 $0
Prof Services $203,780 $49,571 $128,780 $47,780 $64,780 $118,780 $319,280
Transfer Station Fee $0 $D $0 $44 $0 $0 $0
Vehicles -Insurance $914 $914 $914 $914 $914 $914 $914
CNG Fuel $29 $29 $29 $29 $29 $29 $29
Insurance-COm rehensive $2,643 $2,643 $2,643 $2,643 $2,643 $2,643 $2,643
Less: EPD Revenues
Admin Fines/Penalties ($1,429 $1,429) ($1,429) ($1,429) ($1,429) ($1,429) ($1 429
Under round Tank Permits $0 ($61,670) $0 $0 $0 $0 $D
Other Revenue -Miscellaneous ($429 $429 ($429) ($429 ($429) $429) ($429)
ea saver Fees $60,000 $0 $0 $0 $0 $0 $0
CUPA Administration Fees $0 $0 $0 ($114,390) $0 $0 $0
Total Program Other Expenses $304,768 $9,503 $234,110 $246,928 $144,693 $198,693 $524,818
HF&H Consultants, LLC Santa Monica EPD Funding Matrix v3.xls
12/17/2007 9:26 AM Sofa Other Expenses
zooT.oa
Environmental Programs
Water Underground
Watershed Hazardous
Energy Green
Sustainable
Expanse
Conservation Tank
Management Materials
Conservation guilding
City Plan Total Expense
Mana ement Miti anon Assistance
Salaries 8 Wages $259,729 $136,735 $173,036 $462,665 $241,474 $237,057 $372,124 $1,884,814
Shared Expenses $68,393 $33,436 $37,996 $732,226 $48,635 $48,635 $72,952 $442,273
Other Expenses $304,768 $9,503 $234,110 $24&,928 $144,693 $798,693 $524,878 $1,663,513
Total Progrem Budget $632,869 $181,674 $445,142 $641,818 $434,803 $464,379 $969,894 $3,990,600
of Total EPD Budget 15.8600/a 4.55°°/a 11.75% 21.10o/a 10.90% 12.14% 24.30°°/a 100.00%
Peroentage Allocation
Fund Water Underground Vyatershetl Hazardous Energy Green Sustainable
Conservation Tank Management Materials Conservation Building City Plan
Mona ement Miti anon Assistance Composite of
Total Expense
Water 50% 100% 30% 20% 60% 22.5% 20% 34.2%
Wastewater 40% 0% 10°/a 20% 20% 22.5% 20% 21.4%
Solid Waste 0% 0% 0% 50% 5% 22.5% 20% 16.7%
Stormwater 10% 0% 60% 10% 5% 22.5% 20% 18.5%
Subtotal 700% 100% 700% 100% 90% 90% 80% 92.8%
General Fund/Other Funding 0% 0% 0% 0% 10% 10% 20% 7.2%
Total 700% 100% 100% 100% 100% 100% 100% 100.0%
Fund Underground Hazardous Green
Water Watershed Energy Sustainable
Conservation Tank Management Materials Conservation Building Ciry Plan
Mona ement Miti anon Assistance
Total Expense
Water $316,445 $181,674 $133,543 $166,364 $260,882 $108,965 $193,979 $1,363,871
Wastewater $253,156 $0 $44,514 $168,364 $86,961 $108,965 $193,979 $655,958
Solid Waste $0 $0 $0 $420,909 $21,740 $108,985 $193,979 $745,613
Stormwater $63,289 $0 $267,065 $84,182 $21,740 $108,985 $193,979 $739,260
Subtotal $632,889 $181,674 $445,142 $841,818 $391,322 $435,942 $775,975 $3,704,703
General Fund/Other Funding $0 $0 $0 $0 $43,460 $48,438 $193,979- $285,897
Total $632,889 $781,674 $445,142 $841,818 $434,803 $484,379 $969,894 $3,990,600
HF&H Consultants, LLC Sanfa Monica EPD Funding Mafnx v3.xls
12/17/2007 9'26 AM 6 of a Pmgmm AllocaGOns
Professional Services
20D7-OS
se of Funds Environmental Prog
Underground Hazardous
Water Tank Watershed Materials
Conservation Mana ement Mana ement Miti anon rams
Energy Green Building Sustainable
Conservation Assistance Cil Plan
As en Accord Ener Eificienc Collaborations 15,000
ener efFcienc accounlin for Cit facilities 5,000
Civic Center Ener District 26,000
reen desi nand construction im lementation 100,000
LGC Sustainable Ener coalition p
Urban Runoff mana ement Plan Phase II at Air ort 25,000
catch basin inserts/screens up rades 20,000
water conservation consullin services 145,000
Water Strate is Plan im lementation 40,000
Re Tonal Board monitorin plans 15,000
Runoff rant water qualit re ort 25,000
Urban runoff Grant QAPPs and Monitorin Plans 25,000
residential and business sustainabilit programs 250,000
Sustainable Cit Plan consullin services 20,000
Sustainable Ci Plan surve 20,000
school artlens ro ram fund transfer to SMMUSD 2,500 2,500 2,500 2,500 2,500 2,500
sustainable urchasin training and standards develo ment 10,500
im lementation of Inle rated Pest Mana ement and Toxcis Us e Reduction Pro ram 14,000
Santa Monica Festival 4,571 4,571 4,571 4,577 4,571 4,571 4,571
environmental education 11,708 11,708 11,706 11,708 11,708 11,708
Under round tank Pro ram consultant 30,000
develop and maintain GIS database ~ 15,000 15,000
'LUJ,/tlU 4y,b/7 728,78U
21.85% 5.31 % 13.81%
47,780 64,780 118,780 319,280
5.12% 6.95°/ 12.73% 34.23%
HF&H Consultants, LLC Santa Monica EPD Funding Matrix v3.xls
12/17/2007 9:26 AM 7 of 8 Line Item Allocations Detail
Advertising
2007.06
Environmental Prog rams
Underground Hazardous
Use of Funds Water
Conse
ti Tank Watershed Materials Energy Green Building Sustainable
Ener & reen buildin related pro rams rva
on Maria ement Mana ement Miti anon Conservation Assistance Cit Plan
website activities
714
714 32,000 32,000
Sustainable cit Ian 774 714 714 714 714
toxics use reduction 17,300
hazardous & electronic waste education 13,250
water conservation & urban runoff
31
500 20,000
Cit TV , 31,500
other advertising expenses 4,214 4,214 4,214 4,214 4,214 4,214 4
214
1,500 1,500 1,500 1,500 1,500 1
500 ,
1
500
37 929 6 429 , ,
37,929
77.04% 2.89% 17.04%
39,679 36,429 38,429 23,729
17.83 % 17.27% 77.27 % 10.66%
HFBH Consultants, LLC
12/17/2007 9:26 AM 8 of 8 Santa Monica EPD Funding Matrix v3.xls
Line Item Allocations Detail