SR-12-16-2014-8ACity Council Report
City of
Santa 1Fionlea
City Council Meeting: December 16, 2014
Agenda Item: 8R
To: Mayor and City Council
From: Martin Pastucha, Director of Public Works
Subject: Water Rate Analyses and Proposed Water Rate Options
Recommended Action
Staff recommends that the City Council:
1. Approve a 13% rate increase option (9% first year) as the proposed five -year
plan to raise water rates, to be considered at a public hearing, in accordance with
Proposition 218.
2. Adopt a resolution setting the public hearing to increase water rates on February
24, 2015, in accordance with Proposition 218.
3. Authorize the City Clerk to issue notices of the proposed water rate increases
and public hearing on February 24, 2015, in accordance with Proposition 218.
Executive Summary
Due to declining water sales and increased capital funding needs, the City's cost to
provide water service is projected to exceed the City's water revenues without additional
water rate increases. A Water Rate and Revenue Plan report (Attachment A)
(referenced hereinafter as the "Rate Study ") is included with this report to detail the
revenue requirements of three proposed water rate alternatives to address the projected
revenue shortfall. Water rates were last adjusted in a five year schedule in July 2008.
At that time, a commodity -only rate structure was approved which eliminated the fixed
service charge and provided a strong conservation signal. Presently, revenue
requirements are driven by the need to augment conservation plans, offset reduced
revenues due to declining water sales, and increase capital program funding to address
the needs for continued infrastructure investment and Sustainable Water Master Plan
requirements. Council's recent adoption of city -wide mandatory water conservation will
result in a 20% reduction in water sales. Staff has identified three water rate alternatives
for Council's consideration:
2015
2016
2017
2018
2019
Option 1
2.5%
2.5%
2.5%
2.5%
2.5%
(CPI only)
Option 2
9%
9%
9%
9%
9%
(9% plan)
Option 3
90 /(a
13%
13%
13%
13%
(9/13% plan)
Staff proposes to maintain the existing commodity -only rate structure, and adjust the
unit pricing in each tier. Staff recommends that Council adopt Option 3 because it
would fully support Council's stated goal of achieving water self- sufficiency by the year
2020 as well as continue to invest in the City's water infrastructure.
Background
The City provides water service to three customer classifications. These classifications
are single - family, multi - family and non - residential. The current water rate structure was
adopted on July 8 2.008 to provide equity between customer types and among customers
within a classification. The rate structure adopted in 2008 eliminated the bi- monthly fixed
service charge so that the water bill became entirely based on actual water usage,
thereby improving the water conservation incentive at all levels. For residential
customers, the previously existing three tier structure was replaced with a four tier
structure. For non - residential customers, a uniform commodity rate was established,
applicable to nearly all water use. A second tier for non - residential customers applied at
the high end of consumption, in order to provide a strong disincentive for excessive
water use. 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.
Rates were adjusted by CPI annually between 1999 and 2008 with the exception of a 6%
increase in 2005. After the 2008 schedule of rate adjustments was completed in FY 2012-
13, rates were adjusted by CPI on July 1, 2013, and July 1, 2014.
The Rate Study was completed by Kennedy Jenks Consultants as part of its contract
with the City to prepare the Sustainable Water Master Plan (SWMP). The objectives of
the Rate Study include development of a strategy for meeting the utility's ongoing
financial obligations for the five year planning period (FY 2014 -15 through FY 2019 -20)
and assessment of changes to the rate structure in keeping with the City's self -
sufficiency goals to encourage water conservation and sustainability. The Rate Study is
included with this report as Attachment A.
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Discussion
Water Rate Analysis
Santa Monica's water revenues are expected to cover the cost of providing service
through user charges and other revenues generated by the City's provision of water
service. The financial revenue plans presented in the Rate Study are based on the
premise that the Water Fund will be self - supporting, with revenues sufficient to address
ongoing operations and maintenance expenses as well as capital program expenses
and programmatic expenses in support of the SWMP. Infrastructure rehabilitation,
replacement, and upgrade requirements are necessary to maintain an aging water
distribution system, certain parts of which are approaching 100 years in age. Ongoing
funding of water main replacements at a level necessary to ensure reliability and long term
performance are essential to system sustainability. In addition, other financial demands
placed on the Water Fund arise from the need to fund capital programs to accomplish the
City's water self- sufficiency goals, from the reduction in water sales that reduces annual
revenues, and from increased conservation projects.
Capital Requirements
By nature, water systems are capital intensive operations. The SWMP addresses
system capacity, long range water supply reliability, and conservation programs
necessary to meet the City's stated water self- sufficiency goals. This is supported by
the City's water system Capital Improvement Program (CIP). Details of the five -year
$33 million CIP are provided in Table 4 of the attached Rate Study, with selected
projects and cost projections included below:
® General Water System Capital Improvement Program:
➢ Infrastructure improvements associated with replacing aging existing
infrastructure facilities comprised of water mainlines and appurtenant
distribution system facilities that are approaching the end of their useful
lives, $20M
➢ Commencement of an Advanced Meter Infrastructure (AMI) program to
provide more frequent and accurate metering of water use.
Additionally, AMI would aid customers to better monitor their daily
water use, $5M
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➢ Plans for reliability and water transmission improvements for the City's
highest pressure zone (zone 500) with a new booster pump station,
$2.5M
➢ Funding for various other ongoing rehabilitation and facility specific
improvements or studies, $5.5M
• Sustainable Water Master Plan program expenditures included in the CIP and
identified as those items that comprise short-term Water Fund obligations
related to decreased reliance on imported water and achieving the City's year
2020 self - sufficiency goal, include:
➢ Brine concentrator evaluation at Arcadia Treatment Plant to increase
finished water recovery, $0.3M
➢ Charnock Granular Activated Carbon (GAC) improvements to improve
carbon performance and potentially reduce carbon change -out
frequency, $0.3M
➢ Infrastructure Capacity Improvements (water main connections to new
supply sources), $2.01VI
• Olympic Basin Water Treatment Program. Funding for the capital costs of
these improvements is from settlement agreements with Gillette /Proctor &
Gamble and the Boeing Company arising from groundwater contamination.
System improvements have been noted in the CIP that are associated with
the Olympic well field contamination and related water treatment plant
construction. These improvements are necessary improvements to maintain
and to develop local water sources for water self- sufficiency, and include:
➢ Treatment Evaluation Pilot Study, $0.65M
➢ Well siting, design, construction, $6M
➢ Treatment facility, full scale construction and operation, $40M
Revenue Loss from Reduced Water Consumption
The City's Water Fund is projected to experience a decrease in water sales associated
with the implementation of additional self- sufficiency related water conservation
programs and the City's adoption of a Stage II Water Shortage, which calls for
mandatory 20% reduction in water use by all customers. Since most of the water utility's
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costs are fixed, the Water Fund is projected to be affected by the addition of costs
associated with a new water conservation unit, conservation programs and incentives,
and a reduction in water sales -based revenues. Water sales revenues in FY 2013 -14
were $21.5 million. With a rate adjustment limited to only a CPI increase, and the
projected reduction in demand due to conservation program requirements, projected
revenue from water sales in FY 2015 -16 is $16.9 million.
Water Rate Options
Three projected revenue plan scenarios with various rate adjustments were developed
to compare the water utility's revenues and revenue requirements through FY 2019 -20.
They include the following:
• Option 1 — Baseline scenario (CPI -only)
Implement a water rate increase in accordance with the estimated increase of
the consumer price index (CPI). This scenario is a baseline option;
essentially a status quo or no change alternative.
® Option 2 — Implement a water rate increase of 9 % per year.
This increase would improve the Water Fund's financial position over the CPI-
only plan, but would limit the City's ability to fully invest in all of its
programmed capital improvements, require annual /bi- annual cash flow
balancing by prioritization of capital projects and programs, and place
additional vulnerability on fund reserves and debt financing capabilities in
later years of the projection.
® Option 3 — Implement a water rate increase of 9% in year one, and 13% per
year thereafter.
This increase would improve the financial position of the Water Fund, reduce
the risk of revenue shortfalls from reduced water sales, fund identified self-
sufficiency related improvements, and improve net operating parameters that
are required to issue new municipal debt that may be needed for future water
system improvements.
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The revenue plans include the potential option for a debt financing program in later
years for water system improvements. Although debt funding of capital expenditures is
common among utilities, the City has historically funded its water fund obligations on a
pay -as- you -go basis. From the cash flow pro forma developed herein, approximately
$10 million in additional debt financing is anticipated in FY 2018 -19 to fund various
pipeline or water supply - related capital improvements. It is assumed that the need and
viability of any external borrowing to support Water Fund activities will be evaluated
during the City's annual budget process. As discussed with Finance Department staff,
the City would contract with its municipal financial advisor for the evaluation and support
of such actions as required.
Three options are presented in Table 1 and further discussed below.
Table 1 — Rate Adjustment Options
1. CPI -only increases would be implemented on a fiscal year basis (July 1)
2. Option 2 and 3 would be implemented on a calendar year basis ( March 1 in the first year and
January 1 each year thereafter)
The financial projection for each scenario is based on the City's projected customer
account characteristics, the projected operation and maintenance expenses, and the
inclusion of the City's comprehensive Capital Improvement Program. Additionally,
several ratemaking criteria were also integrated in the revenue plan. These key criteria
include:
® Short term population growth is based on the projections indicated in the
City's 2010 Urban Water Management Plan and estimated annualized LUCE
0
2015
2016
2017
2018
2019
Option 1
2.5%
2.5%
2.5%
2.5%
2.5%
(CPI only)
Option 2
9%
9%
9%
9%
9%
(9% plan)
Option 3
9%
13%
13%
13%
13%
(9113% plan)
1. CPI -only increases would be implemented on a fiscal year basis (July 1)
2. Option 2 and 3 would be implemented on a calendar year basis ( March 1 in the first year and
January 1 each year thereafter)
The financial projection for each scenario is based on the City's projected customer
account characteristics, the projected operation and maintenance expenses, and the
inclusion of the City's comprehensive Capital Improvement Program. Additionally,
several ratemaking criteria were also integrated in the revenue plan. These key criteria
include:
® Short term population growth is based on the projections indicated in the
City's 2010 Urban Water Management Plan and estimated annualized LUCE
0
projections of 0.5% per year. This is expected to be approximately 0.5% per
year and yield a modest increase in new accounts through 2020.
• Water usage is projected to reduce by approximately 10% during FY 2014 -15,
and an additional 10% during FY 2015 -16 due to conservation efforts. Water
usage is projected to essentially remain at these reduced levels during the
balance of the planning period. Reduced water consumption would result in
reduced revenues to the water fund.
• The option of an additional $10 million in debt financing is programmed for FY
2018 -19. This may be available through a new debt issuance, potential short-
term inter -fund borrowing, or other strategies as determined appropriate by
the Finance Department at that time.
• With potential rate increases commencing in March of FY 2014 -15, no
change in rates is proposed beyond FY 2018 -19. Years beyond the five years
in the planning horizon exceed the maximum allowed by state law.
• Rate increases corresponding to Options 2 and 3 would be implemented in
January of each year. Implementation of new rates in this time frame would
minimize the immediate impact of any rate increase as customer water use is
at its lowest during the winter.
To demonstrate the potential short and long -term implications of the alternative rate -
related approaches, a revenue plan of the City's water utility was developed for each
scenario by integrating the ratemaking criteria with the projected water system costs
and projected capital improvement program expenditures. The results of these financial
projections are provided in the following section.
Option 1: Protected Revenue Plan — Consumer Price Index (CPI) Based Annual Water
Rate Increase (Baseline Option)
This percentage is consistent with the City's recent budget forecasts. Including the
actual CPI increases in the analysis in FY 2013 -14 and FY 2014 -15, a projected CPI
increase of 2.5% is included in all subsequent years through FY 2019 -20. The results
of this analysis are shown graphically in Figure 1. Under this option, projected revenues
do not support an ongoing capital program. Water conservation efforts continue to
reduce revenue from water sales. Based on the Council adopted Sustainable Water
Master Plan and water conservation efforts, water rate increases limited only to the
general rate of inflation are insufficient to support the activities of the Water Fund. The
Water Fund would be in deficit as of FY 2016 -17.
7
Option 2: 9% Proiected Revenue Plan — 9% Annual Water Rate Increase
This percentage is less than the annual increases adopted during the 2008 Rate Study,
but higher than the average annual CPI increases derived in the Option 1 baseline plan.
Similar to the prior plan, following actual CPI increases in FY 2013 -14 and FY 2014 -15,
a projected increase of 9% is included in all subsequent years through FY 2018 -19.
The results of this analysis are shown graphically in Figure 1. While this rate plan
provides a much stronger financial performance than the CPI only (baseline) alternative
and achieves a positive net operating performance in the later years of the forecast, it
does fall short of some Water Fund financial goals and performance metrics. These
shortfalls are as follows:
• Approximately $5 million in capital projects would have to be eliminated; a
reduction in general system planned capital improvements of 20 %. The Water
Fund is projected to fall short of the adopted minimum annual reserve fund
targets in four of the five planning years.
• Net operating revenues may not be adequate to issue the $10 million in new debt
forecasted for capital improvements in FY 2018 -19.
Option 3: 9 %/13% Projected Revenue Plan
As previously noted, this plan is based on a 9% increase in the first year, and a 13%
increase in each of the remaining four years of the financial plan. The results of this
analysis are shown graphically in Figure 1. This rate plan provides a much stronger
financial performance over the previous rate plans and provides additional financial
stability for the Water Fund to meet projected capital improvements, potential
emergency system improvements, and absorb more than projected declines in water
demands and water sales revenues. A summary of the benefits of this option follows:
• The $5 million in capital projects would no longer have to be eliminated from the
budget, although there may need to be a small reduction in capital spending in
FY 2017 -18.
• The Water Fund is projected to fall short of the adopted minimum annual reserve
fund targets in essentially only one of the five planning years.
• Net operating revenues should be adequate to issue new debt in the FY 2018-
19.
0
The fund balance trends corresponding to the three options are presented in Figure 1
below. The fund balance trend in the 13% option (red line) dips below the trend of the
9% option (green line) due to reductions in capital improvement and conservation
programs in the 9% option.
Figure 1 — Water Fund Revenue Requirements, Fund balance trends
$50M
$40M
_CPI M ..ease
No Changafo Gpif41 & No Gsh InfuslOn
\\
— 13 %Inttelse
\�
No Change to Qplhl & $I0M Gsh InWgon
$30M
��
- -- 9 %In..easa
Dmreue In Gp11.1 & $10M Gsh Id.O..
$20M
$IOM
FY20M14 FY201415 FY201516 FY2016.
FY2017-18 FY 2018-19 FY 201930
.$10M
.$20M
.$50M
-540M
Recommended Revenue Plan
Based on revenue projections, the rate plan that incorporates a 9% increase in the first
year and a 13% increase in each of the remaining four years in water rates is
recommended at this time. Proceeding with Option 3, the 9%/13% rate plan, provides
the City with the financial stability necessary to fund the projected programs and
projects that will be required to reach self- sufficiency, to promote additional water use
efficiency, and to remain financially stable during the projected level of continued
drought in California. This rate plan is projected to provide a reasonable estimate of the
projected revenue requirements of the City's Water Fund through 2020. Since state law
only permits the adoption of rates up to five - years, no rate increase is schedule for FY
2019 -20 as this is year six of a proposed five -year rate plan.
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Rate Structure Considerations
Potential adjustments to the City's water rates were developed to support both the
financial health of the City's water utility and the Sustainable Water Master Plan
(SWMP) objectives through the 2020 planning period. The rates and rate structures
derived during the rate study were based upon an analysis of future system costs and
financial obligations established by the City and the recommendations from the SWMP.
Input from the City's Task Force on the Environment and the SWMP Advisory
Committee were obtained throughout the development of the SWMP's self- sufficiency
strategies and activities and financial elements contained in this financial plan.
There was extensive discussion among City staff, the SWMP Advisory Committee, and
the Task Force on the Environment regarding enhancements that could be made to the
existing rate structure, adopted in 2008. The alternative structures that were considered
by these groups included:
® Modifying the existing tiered block rate structure for changes in water allocation
per block.
• Increasing the number of tiered blocks.
• Altering the current basis of change in price between tiered blocks.
• Re- introducing a fixed bimonthly service charge back into the structure.
• Consideration for a base level water allocation to be include with the new service
charge.
® Abandoning the current structure and migrate to a full water budget based rate
structure.
The result of this process was the development of a small group of alternative structures
that was considered. This short -list included: a) the current structure, b) a structure with
the current tiered blocks and a new fixed service charge with a potential water
allowance, and c) a structure with new tiered blocks and a new fixed service charge with
a potential water allowance.
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On July 15, 2014, the State Water Resources Control Board (SWRCB) adopted an
Emergency Regulation for Statewide Urban Water Conservation, requiring the City and
other urban retail water agencies to implement all requirements and actions of their
water shortage contingency plans that impose mandatory outdoor irrigation restrictions.
Subsequently on August 12, 2014, Council approved a resolution declaring a Stage 2
Water Supply Shortage requiring mandatory water conservation to achieve a 20%
reduction in water use (as compared to the 2013 base year). On October 28 2014,
Council adopted the SWMP. Additional evaluation and assessment is ongoing
regarding the appropriate basis for new drought surcharges or penalties and the
associated administrative structure to implement these charges. This is anticipated to
be presented to Council in January 2015.
Given the complexities of the development and implementation of the Water Shortage
Response Plan concurrent with consideration of rate adjustments, staff recommends
continuation of the current tiered rate structure rather than a new rate structure with new
blocks and /or a new fixed service charge. This approach would produce a more
understandable message associated with the rate increase and minimize the potential
confusion associated with drought compliance related charges and structures. As such,
no adjustment in the current tiered water rate structure is proposed. The City's current
water rate structure is very common in California. It provides a built in mechanism to
support water conservation on a pay for what you use basis. It is simple to understand,
generally fosters public acceptance, and provides relatively predictable revenues.
Rate Comparison
It is worth noting that Santa Monica has experienced the same pressure for increased
water efficiency and conservation over recent years due to drought and climate effects as
other statewide and regional water agencies. In comparison to other regional jurisdictions,
Santa Monica single - family residential rates remain in the lower third of neighboring
comparison agencies. Figure 2 below provides a comparison of proposed Santa Monica
single - family residential (SFR) water rates, including a 13% increase over current rates,
with neighboring agency SFR water rates. This 13% increase represents the proposed
year two increase following the 9% increase in year one, as in option 3. The bill
11
comparison is based on a %" water meter and 24 hundred cubic feet HCF of bi- monthly
water usage. This represents the water allowance in the Stage 2 Water shortage plan
for single - family residences. The proposed bi- monthly average charge of $89.30 for
Option 3 (13% increase) in year two reflects a monetary increase of $16.80 (bi- monthly)
over the existing charge of $72.50. Even with the proposed 13% increase, residential
water bills in Santa Monica will be lower than the current average rate of the other
communities surveyed. Tables 2, 3, and 4 provide a summary of average water bills
under the presented options for average water use.
Figure 2 — Proposed Water Rate Comparison with Neighboring Agencies
$200
$180
LL $160
U
o $140
m $120
v
Y
3 $100
L
Y
C $80
E
no
$60
u
a
a
� $40
$20
$0
Pasadena Santa Monica Long Beach Burbank Glendale (1) Los Angeles Beverly Hills Culver City(2)
(1)
2013 -14 1,2014.15
(1.) Increases proposed for FY 2014 -15
(2.) Culver City serviced by Golden State Water Company, a CPUC regulated utility
12
A summary of potential bi- monthly water bill impacts for select customer classifications at
average consumption rates is presented in Tables 2, 3, and 4.
Table 2
Example of Proposed Bi- Monthly Bill
Single - Family Residential, % -inch meter, 30 HCF current average use
(1.) CPI Increase only in all years, effective January 1
(2.) 9% increase effective January 1 each year
(3.) 13% increase effective years 2 through 5, 9% increase year 1
Table 3
Example of Proposed Bi- Monthly Bill
Multi - Family Residential, 1 '/2 - inch meter, 77 HCF current average use(l )
Year 1
Year 2
Year 3
Year 4
Year 5
Current Bill,
$90.63
without conservation
Option 1
Current Rates, with 20 %conservation 24HCF
$72.50
$74.31
$76.17
$78.07
$80.03
option,
$79.03
$86.14
$93.90
$102.35
$111.56
9% increase in unit prices, with 20% conservation
$298.49
$325.35
$354.64
$386.55
$421.34
Option 3
13% increase in unit prices, with 20% conservation
$79,03
$89.30
$100.91
$114.03
$128.86
(1.) CPI Increase only in all years, effective January 1
(2.) 9% increase effective January 1 each year
(3.) 13% increase effective years 2 through 5, 9% increase year 1
Table 3
Example of Proposed Bi- Monthly Bill
Multi - Family Residential, 1 '/2 - inch meter, 77 HCF current average use(l )
(1.) 11 HCF per res. unit; average 7 units per Multi - Family residential account
(2.) CPI Increase only in all years, effective January 1
(3.) 9% increase effective March 1, 2015; January 1 each year thereafter.
(4.) 13% increase effective years 2 through 5 (January 1), 9% increase year 1 (March 1, 2015)
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Year
Year
Year
Year
Year
Current Bill,
$342.30
without conservation
Option 1
$273.84
$280.69
$287.70
$294.90
$302.27
Current Rates, with 20% conservation 62HCF
Option 2
$298.49
$325.35
$354.64
$386.55
$421.34
9% increase in unit prices, with 20%
conservation
Option V),
$298.49
$337.29
$381.14
$430.69
$486.68
13% increase in unit prices, with 20%
conservation
(1.) 11 HCF per res. unit; average 7 units per Multi - Family residential account
(2.) CPI Increase only in all years, effective January 1
(3.) 9% increase effective March 1, 2015; January 1 each year thereafter.
(4.) 13% increase effective years 2 through 5 (January 1), 9% increase year 1 (March 1, 2015)
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Table 4
Example of Proposed Bi- Monthly Bill
Non- Residential, 2- inch meter, 192 HCF current average use.
(1.) CPI Increase only in all years, effective January 1
(2) 9% increase effective January 1 each year
(3.) 13% increase effective years 2 through 5, 9% increase year 1
Low Income Provision
On May 13 2008, Council approved a change in the discount for low income customers.
Because the rate structure changed in 2008 to eliminate the fixed charge and move to a
commodity -only rate structure, the reduced first tier water rate for qualified single - family
low income customers was discounted $1 per HCF. Staff recommends continuing this
discount of $1 per HCF for the first tier only. This is appropriate given that the rate
structure is unchanged from the 2008 structure; this discount would apply to all of the
options.
For single - family customers the maximum bi- monthly discount would be $14. Second,
third, and fourth tier rates would not be discounted since these apply to more
discretionary uses of water, rather than basic water needs. Low income customers
become qualified for the water discount by providing evidence of qualification and
enrollment in the low income program offered by Southern California Edison or the
Southern California Gas Company. There are currently 213 customers qualified as low
income and receiving the discounted first tier water rate.
Proposition 218 Compliance
Proposition 218 requires 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 proposed new rates (with a few days allowance for mailing).
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Year 1
Year 2
Year 3
Year 4
Year 5
Current Bill,
$687.23
without conservation
Option 1
$549.78
$563.52
$577.61
$592.05
$606.85
Current Rates, with 20% conservation 154 HCF
Option 2 ,
$599.26
$653.19
$711.98
$776.07
$845.90
9% increase in unit prices, with 20%
conservation
Option 314-1,
$599.26
$677.16
$765.20
$864.67
$977.08
13% increase in unit prices, with 20%
conservation
(1.) CPI Increase only in all years, effective January 1
(2) 9% increase effective January 1 each year
(3.) 13% increase effective years 2 through 5, 9% increase year 1
Low Income Provision
On May 13 2008, Council approved a change in the discount for low income customers.
Because the rate structure changed in 2008 to eliminate the fixed charge and move to a
commodity -only rate structure, the reduced first tier water rate for qualified single - family
low income customers was discounted $1 per HCF. Staff recommends continuing this
discount of $1 per HCF for the first tier only. This is appropriate given that the rate
structure is unchanged from the 2008 structure; this discount would apply to all of the
options.
For single - family customers the maximum bi- monthly discount would be $14. Second,
third, and fourth tier rates would not be discounted since these apply to more
discretionary uses of water, rather than basic water needs. Low income customers
become qualified for the water discount by providing evidence of qualification and
enrollment in the low income program offered by Southern California Edison or the
Southern California Gas Company. There are currently 213 customers qualified as low
income and receiving the discounted first tier water rate.
Proposition 218 Compliance
Proposition 218 requires 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 proposed new rates (with a few days allowance for mailing).
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The notices to be mailed to all property owners will include a description of the need for
a rate adjustment, and explain the protest process for the public to follow if they wish to
oppose the proposed rates. Absent a majority protest, City Council may then approve
the final adoption of the rates at a public hearing.
By not changing the rate structure and staying with the commodity -only rate structure
adopted in 2008, the cost of service requirements of Proposition 218 are achieved. The
findings of a cost of service analysis performed on the commodity -only rate structure,
included in Appendix B of the attached Rate Study, indicates that the costs of providing
service coincide with revenues generated by single family residential, multi - family
residential, and commercial (non - residential) customer classifications.
Community Outreach
Outreach efforts continue in an effort to engage the community in discussions about
proposed rate adjustments, the Sustainable Water Master Plan (SWMP), and the Water
Shortage Response Plan. Staff from Public Works and the Office of Sustainability and
the Environment (OSE) conducted a community forum for the business community and
residents, "Let's Talk Water ", on November 24, 2014 at Ken Edwards Center, and have
presented drought and rate information at neighborhood and business groups including
North of Montana Association, Northeast Neighbors, Ocean Park Association, Chamber
of Commerce Government Affairs Committee, and the Convention and Visitors Bureau
Hotel Managers Group. City staff has also been present at all of the recent Santa
Monica Talks community forums. Outreach will continue with the community throughout
the period leading to the formal adoption of rate adjustments by Council.
Wastewater Rate Analysis
Present day wastewater rates were established in 2008, concurrent with the last water
rate adjustments. Consistent with the adopted water rates at the time, wastewater rates
were also established as a commodity -only rate structure, based upon estimated
wastewater flows 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
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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.
On May 13 2014, Council approved redemption of all outstanding Wastewater
Enterprise Revenue Bonds. This action will save the Wastewater Fund approximately
$600,000 over the next four years (bond maturity was January 1, 2018). Coupled with a
remaining healthy fund balance, an increase in wastewater rates, other than an annual
CPI adjustment, will not be required over the five year planning period considered in this
analysis.
Summary and Recommended Option
Taking into account the expected levels of water conservation mandated by the Stage 2
restrictions and the SWMP, and the added loss of revenue, a revenue increase of 13%
annually (9% in first year) would be required in order to keep the Water Fund balance
positive throughout the five year planning period and fund necessary capital
improvements and conservation programs. Rate increases are driven equally by the
need to fund capital programs to accomplish the City's water self- sufficiency goals, the
need to invest in infrastructure rehabilitation and replacement, the reduction in water
sales that reduces annual revenues, and increased water conservation programs.
Option 1 is presented as the base line option and an indication of the status quo, or the
result of non - action relative to rates, other than an annual CPI increase. This option
would leave the fund unsustainable, as adopting this course would result in a negative
fund balance by FY 2016 -17.
Option 2 includes an across - the -board 9% increase on all tiers of the existing unit
prices. This option is included to indicate the effect of utilizing a single digit rate
increase. As might be expected, a lower percentage rate increase results in lower
revenue generation. Accordingly, expenditure reductions are required to accommodate
the lower rate increase. This may be achieved through modifications in capital
16
programs such as main replacements, valve rehabilitation, automatic meter
infrastructure development, or some water conservation programs. The consequence
of cuts to these programs would likely result in a delay in reaching the self- sufficiency
goal by 2020.
Staff recommends Option 3, (the 9 %/13% option) which fully funds the projected capital
programs, infrastructure investments, and conservation programs over the five year
planning period. Because the first rates increase in the five year planning period is
proposed to take effect in March 2015 only a 9% increase is required for the first year
(i.e., one quarter of FY 2014 -15 would be subject to the rate increase). This approach
maintains progress toward achieving the City's 2020 self- sufficiency goal. Due to the
water conservation achieved by customers as a result of the mandatory Stage 2 water
shortage plan, water bill increases would be somewhat offset by the reduction in water
use which is anticipated from each customer. As indicated in Figure 3, residential water
bills remain competitive with comparison cities even after a 13% rate increase.
Next Steps
Following direction from Council regarding a preferred rate alternative, staff will continue
with community outreach to discuss drought actions and financial planning efforts. Staff
recommends Council set a public hearing date of February 24, 2015 for formal approval
of rate adjustments. This date allows ample time for the required 45 day notice period,
during which the Proposition 218 public notices will be mailed to every property owner in
the City, which allows them to send in a protest vote. If over 50% of the eligible
property owners vote to protest the proposed rates, the Council would not be allowed to
enact the proposed rate increase. At the February 24, 2015 Council meeting, staff will
return with a summary of community responses and a formal recommendation to adopt
new rates (unless there is a majority protest).
17
Financial Impacts & Budget Actions
Contingent upon Council direction, the FY 2014 -15 budget would be revised as follows:
1. For Option 1, no change in water sales revenue account number 25671.402310
would be required because rates were adjusted by CPI on July 1, 2014.
2. For Options 2 and 3 (both 9% in the first year), there would be an increase in
water sales of $645,265 in revenue account number 25671.402310.
Prepared by: Gil Borboa, P.E., Water Resources Manager
Y a . . ' 7
akai .
Martin Pastucha
Director of Public Works
Attachment:
A - Water Rate and Revenue Plan Report
B - Resolution
Forwarded to Council:
Rod Gould
City Manager
M.
3210 El Camino Real, Suite 150
Irvine, CA 92602
949 - 261 -1577
949 - 261 -2134 (Fax)
City of Santa Monica
Water Rate and Revenue Plan
Draft Report
November 7, 2014
City of Santa Monica
Water Resources Division
1212 Fifth Street Third Floor
Santa Monica, CA 90401
K/J Project No. 1282015'00
Table of Contents
Listof Tables ..................................................................................................
...............................
ii
Listof Figures ................................................................................................
...............................
iii
Listof Appendices .........................................................................................
...............................
ui
Section1:
Introduction ................................................... ............................1
-1
1.1
Background and Objectives ...................................... .... ......................
1 -1
Section 2:
Historical and Current Conditions' ................ ............................2
-1
2.1
Evaluation of Historical & Current Financial Condition ...................2
-1
2.2
Customer Accounts and Water Demands ............... ..........:.:...............2
-1
Section 3:
Future
Revenue Requirements .... .............. ............................3
-1
3.1
Projected Customer Growth and Water Sales ....................... ............
3 -1
3.2
Budgeted /Projected Operating Expenses .............. ............................3
-1
3.3
Projected Capital Improvement & Debt Service Financing
Program ........ ..:...... :,;, .........' ........... . .............. ......
3 -3
3.4
Summary of Projected Revenue Requirements_ ................................
3-3
3.5
Projected Revenue Requirements Using Assumed Rate
Scenarios................... ................ ............................................ .............
3 -5
3.5.1 Option 1: Projected Revenue Plan — Consumer Price
Index (CPI) Based Annual Water Rate Increase
(Baseline Option)..:::' .................................... ............................3
-5
3.5.2 Option 2: Projected Revenue Plan — 9% Annual Water
RateIncrease .............................................. ............................3
-6
3.5.3 Option 3: Projected Revenue Plan — 9/13% Annual
Water Rate Increase .................................... ............................3
-6
3.5.4 Recommended Revenue Plan ............. .................... ................
3 -7
Section 4:
Current Water Rates ...................................... ............................4
-1
Section 5:
Alternative
and Proposed Water Rates and Structures ...........
5 -1
5.1
Fixed and Variable Rate Considerations .................................... .........
5 -1
5.2
Development of Alternative Water Rate Structures and Revised
WaterRates ............................................................ ............................5
-1
5.2.1 Development of Alternative Rate Structures ............................5
-2
5.2.2 Development of Alternative Water Rates and Typical Bills .......
5 -3
5.3
Comparison of Monthly Bills with Other Communities ........................5
-3
5.4
Summary of Findings and Proposed Water Rates .. ............................5
-4
Water Rate and Revenue Analysis, City of Santa Monica
Table of Contents (cont'd)
List of Tables
1 Historical Operating Revenues and Expenses
2 Current Accounts and Water Consumption
3A Budgeted and Projected Operation and Maintenance Expenses
3B Projected Water Supply and Production Plan
4 Proposed Capital Improvement and Debt Financing Program
5a Projected Revenue Plan — Consumer Price Index (CPI) Based Rate Increases
5b Projected Revenue Plan — 9% Rate Increases
5c Projected Revenue Plan —9/13% Rate Increases
6 Current Water Rates
7 Alternative Water Rates
8 Alternative Water Rates and Typical Bills
9 Comparison of Monthly Water Bills — Single Family Residential
Water Rate and Revenue Analysis, City of Santa Monica
Table of Contents (cont'd)
List of Figures
5A - Revenue Plan with Annual CPI Based Water Rate Increase
5B - Revenue Plan with 9% Annual Water Rate Increase
5C - Revenue Plan with 9/13% Annual Water Rate Increase
9 - Water Rate Comparison with Neighboring Agencies, single family account
10 —Water Rate Comparison, Non - residential account
List of Appendices
Appendix A - Miscellaneous Tabular Support Information
Appendix B - Miscellaneous Alternative Rate Restructuring Support Information
Water Rate and Revenue Analysis, City of Santa Monica iii
Section 1: Introduction
The City of Santa Monica (City) is a coastal community located in Los Angeles County. The
City provides commonly sought services, including water and sewer services, to approximately
91,000 residents covering an area of approximately 8 square miles. To provide a reliable and
quality water supply to its customers, the City is now in the implementation phase of a
comprehensive long range water system improvement program with the goal of having a
reliable infrastructure and a sustainable water supply by eliminating its dependence on imported
water sources to meet potable water needs by 2020.
101 Background and Objectives
The City's desire to maintain appropriate infrastructure investments and meet a sustainable
water self- sufficiency goal are integral elements of a Sustainable Water Master Plan (SWMP)
that is also underway. Implementation of SWMP capital improvements and programs, as well
as other factors will affect the financial performance of the City's water utility. These factors
include:
• The need to evaluate the future operating and non- operating revenues and expenses
and their effect on the utility's operation,
• The need to fund capital improvements associated with the City's Sustainable Water
Master Plan (SWMP) and other water system capital projects to improve reliability and
system efficiencies,
• The need to develop programs and strategies to meet the City's water conservation
goals and objectives,
• The need to assess and project the impact of- reduced water usage from new water use
efficiency programs, other water conservation measures, and the current drought
conditions in California,
• The need to develop updated rates to fund the projected water enterprise financial
requirements, and 1
• A need to review and develop an appropriate rate structure to maintain the Water Fund's
obligations, meet various cost recovery requirements, and support overall customer
understanding and acceptance .
It is important to note that this report integrates several important considerations that have
affected the short and long -term financial obligations of the Water Fund. This approach phases
in the increased use of local groundwater supplies and water treatment related improvements to
address water quality and incorporates other capital improvement projects to meet water self -
sufficiency by reducing /eliminating reliance on imported water, phases in projected reductions in
water sales -based revenues as the result of an increased effort for additional water
conservation and account -level usage reductions in response the statewide water shortage,
begins a methodical use of fund reserves to fund other local capital projects that are the result
of aging infrastructure and other needed system improvements, and is consistent with the
recommendations of the SWMP.
Water Rate and Revenue Analysis, City of Santa Monica
Together, these factors have placed an increased burden on short -term water rates to improve
the financial position of the Water Fund, and are the basis for the capital, operational, and rate -
related findings presented herein.
Water Rate and Revenue Analysis, City of Santa Monica 1 -2
Section 2: Historical and Current Conditions
This section of the report is developed to provide a background of the water utility's historical
and current financial conditions and customer account summary information. A discussion of
these elements is provided in the following subsections.
— ,
The financial condition of the City's water utility was reviewed and a summary of financial
performance is presented in Table 1. The information presented in this table was derived
largely from the City's Finance Department and Comprehensive Annual Financial Reports
(CAFRs) as appropriate.
The financial condition of a water utility is assessed by contrasting several financial parameters
with the financial performance as reported in the City's financial data. Foremost among these
parameters are criteria for net operating revenues and an assessment of the utility's fund balance.
The findings related to each of these elements are provided as follows.
Net operating revenues are an important financial parameter of a utility's performance. This
financial parameter is generally desired to be at least 20% of total operating revenues to generate
adequate capital improvement funding for new and "replacement (depreciation- based) assets. As
shown in Table 1, the water utility has historically fallen short of this parameter in the last three
years. During the three year period, this parameter has ranged from a positive 2% to 10 %, well
short of the 20% benchmark. As such, the utility currently is not generating sufficient funds to
provide for future capital expenditures and increased water utility operating expenses.
In addition to this operational performance, the impact of various non - operating revenues and
capital expenditures is included so that an assessment of the annual ending cash fund balance
or reserves can be derived. As indicated by the net increase or decrease in cash value, the
water income has essentially broken even in Fiscal Year (FY) 10 -11 and FY 11 -12. The
significant increase in performance and cash in FY 12 -13 can be attributed to the consolidation
of the Fund 25 and Fund 05 (Charnock) for both cash and expenses.
In consideration of these factors and the need for increased capital investment in the coming
years, additional revenues from water rates are needed to improve the financial position of the
Water Fund. The following sections of this study provide the supporting information for the level
and timing of proposed rate adjustments to meet the Water Fund's current and future financial
requirements.
As noted in the City's water billing data, the City provides water service to its residential and
non - residential customers through approximately 16,400 metered water accounts (does not
include dedicated fire protection meters). A summary of the water utility customer information
related to general customer types, number of accounts, and water demands are detailed in
Table 2. As shown, the majority of these water accounts are residential customers.
Water Rate and Revenue Analysis, City of Santa Monica 2 -1
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Recent and projected water demand is also provided in Table 2. For FY 11/12, the total annual
water consumption was approximately 5,408,605 hundred cubic feet (HCF) and the average
consumption per account was approximately 329 HCF per year, or 27.5 HCF per month (674
gallons per day). Based on the current water rate structure, this level of water usage generates
approximately $17 million.
It should be noted that while water sales have increased slightly over the last few years,
additional water conservation - related activities will reduce water usage in the coming years.
Incorporating the planning projections from the 2010 UWMP, and the recent drought compliance
planning, water demand in FY 14/15 is projected to reduce to approximately 4,906,120 HCF and
further reduce to 4,360,995 in FY 15/16. Appendix A includes copies of the water system
reports submitted annually to the Department of Water Resources (DWR) to document the
City's water system statistics as an aid to detailing the City's recent water usage and customer
account trends.
Water Rate and Revenue Analysis, City of Santa Monica 2-2
Section 3: Future Revenue Requirements
An evaluation of future revenue requirements can be focused in the projection of four specific
areas. These areas are customer growth, water supply costs, operating costs, and capital -
related expenditures. The following sections discuss the impact of these factors on the City's
water utility revenue requirements through FY 19/20.
Customer growth affects the revenue requirements of the City's, water utility in two ways. First, it
increases the customer base that is paying for more water usage through the water usage rate
and pays a connection fee to buy into to system capacity. Second, it increases the level of
those costs that vary with the quantity of water used such as water supply, treatment, and
pumping expenses. In financial planning, applying low to moderate growth factors provides a
conservative assessment of future utility revenue requirements.
Based on population projection data taken from the City's 2010 Urban Water Management Plan
and the Land Use and Circulation Element (LUCE) of the General Plan, a very small annual
growth is included in this financial plan. In fact, at a projected increase of approximately 0.5 %,
an addition of only 20 equivalent meter units (EMUs) per year is included in the five year
planning projection. As previously noted, for Santa Monica, foremost among the factors that
needs to be considered is the impact of reduced water usage associated with increased
conservation activities, enhanced customer awareness, and upcoming excess water usage
surcharges or penalties in response to mandatory water usage reductions.
It should be noted that predicting annual growth and water usage can not be derived as precise
values. As such, the future growth and water demand values used herein are to be considered
as estimates only and are intended to provide a conservative forecast of new customers so that
connection fee revenues and water sales are not overestimated. Similarly, while it can be
assumed that water usage should decline with the forthcoming increase in water costs and
rates, behavioral changes are difficult to quantify. Accordingly, the magnitude of future water
conservation included in this financial, plan is only an estimate used for the purpose of projecting
future water sales. All of these factors should be evaluated and integrated as an element of the
City's ongoing rate and budget review process to evaluate the financial performance of the
City's Water Fund.
Budgeted/Projected Operating Expenses
Costs associated with the management, administration, and operations of the City's water utility
are grouped in two primary categories:
® Water Fund 25, Department No. 500 Expenses — This consists of Divisions 671, 672,
and 673, which include operation and maintenance costs associated with the Arcadia
Water Treatment Plant (673), Charnock Water Treatment Plant (672), and General
Water (671). Note that Water Fund 05, the Charnock Fund, was also consolidated with
Water Rate and Revenue Analysis, City of Santa Monica 3 -1
Water Fund 25 for the management, administration and accounting of overall water
utility activities in FY 12/13.
® SWMP Program Budget Adjustments and New Program Expenses— This consists of
items that will promote and support the City's transition from purchasing imported water
to meeting potable water demands with local groundwater sources in accordance with
the City's Sustainable Water Master Plan.
The budgeted and projected water utility costs for these categories are shown in Table 3A.
Note that the Water Fund 25 Department 500 costs included herein are based on the City's
projected budget and are primarily inflation driven, with the integration of some additional costs
associated with anticipated future personnel and cost allocation adjustments. The SWMP
Program Expenses category develops estimated changes in these budgeted cost and funds
new programs to implement the SWMP findings and recommendations. Table 3B includes a
summary of the water supply and production plan that forms the basis for the budget adjustment
categories and a table of enhanced /new water conservation activities that are programmed to
be implemented as part of the SWMP self- sufficiency goals and objectives.
The budgeted and projected water utility costs for these categories are shown in Table
3A. Table 3B includes a summary of the water supply and production plan that forms the basis
for the budget adjustment categories. Note that the Water Fund 25 Department 500 costs
included herein are based on the City's projected budget and are primarily inflation driven, with
the integration of some additional costs associated with anticipated future personnel and cost
allocation adjustments. The SWMP Program Expenses category develops estimated changes
in these budgeted cost and funds new programs to implement the SWMP findings and
recommendations. Notable among the programs are the costs associated with additional
conservation programs that are needed to enhance water use efficiency and support self -
sufficiency. Given the new statewide water shortage conditions and the City's adoption of its
Stage II Water Shortage provisions, these program costs may need to be accelerated to better
align with the City's short -term water conservation goals and objectives. Should that occur, the
City should plan on an annual review of revenues and expenses as some offsetting reductions
in capital or operational costs may be required to meet the funds available in the Water Fund. A
table of enhanced /new water conservation activities that are programmed to be implemented as
part of the SWMP self- sufficiency goals and objectives is provided in Appendix A.
It is important to note that the City has a long- standing practice for the development and
integration of new and updated Best Management Practices (BMPs) to improve utility system
operational efficiencies and control or reduce both operating and capital costs. In fact, since
2003, while the water system has increased from 14,979 accounts to 17,709 accounts, the
number of full time equivalent employees used to manage, operate, and maintain the system
has remained the same. Moreover, upon completion of the new Advanced Meter Infrastructure
(AMI) program, it is anticipated that additional efficiencies and cost reductions will be realized.
This and other projected capital improvement projects are discussed in the following section.
Water Rate and Revenue Analysis, City of Santa Monica 3-2
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3.3 Projected Capital Improvement & Debt Service Financin.--
Program
Utility systems are by nature capital intensive operations. To evaluate system capacity and long
range water supply reliability, the City is implementing a Sustainable Water 'Master Plan. This
program will serve as the basis for the development of many of the City's capacity - related water
system capital improvement program needs.
The City's water system Capital Improvement Program (CIP) is comprised of the following
primary project categories:
• General Water System Capital Improvement Program. This category includes
infrastructure improvements associated with replacing aging existing infrastructure that
are approaching the end of their useful lives, begins to fund a new Advanced Meter
Infrastructure (AMP program, plans for reliability and water transmission improvements
for the City's highest pressure zone (zone 500) with a new booster pump station, and
funds various other ongoing rehabilitation and facility specific improvements or studies.
• SWMP Program Expenditures. SWMP program expenditures are those items additional
expenditures that have been identified as short- term,Water Fund obligations related to
decreased reliance on imported water.
• Olympic Water Treatment Program, While not an obligation of the Water Fund (funding
source is from settlements with the Olympic basin pollution responsible parties), other
water system improvements have been noted that are associated with the Olympic well
field and associated water treatment plant construction as these facilities are necessary
improvements for water self sufficiency. Much like the implementation and
administration of settlement funds used to construct and operate the Charnock WTP
during the last decade, the Olympic,WTP Program will clean this area of the underlying
groundwater basin and provide a source of very high quality water to the City's water
customers at essentially no cost for many years.
A summary of the capital improvement plan for these primary project categories is provided in
Table 4, While not highlighted in Table 4, the resulting revenue plan also includes the potential
need for a debt financing program in later years. Although debt funding of capital expenditures
is common among utilities, the City has historically funded most of its water fund obligations on
a pay -as- you -go basis. From the cash flow pro forma derived herein, approximately $10 million
in additional cash has been programmed in FY 18/19 to fund various pipeline or water supply -
related capital improvements. It is assumed that the need and viability of any external
borrowing to support Water Fund activities will be evaluated during the City's annual budget
process. As discussed with the City Finance Department staff, the City will contract with its
Municipal Financial Advisor for the evaluation and support of such actions as required.
The City's Water Fund is projected to experience a decrease in water sales associated with the
implementation of additional self sufficiency - related water conservation programs and the City's
adoption of a Stage II Water Shortage, resulting in an immediate 20% reduction in water sales
Water Rate and Revenue Analysis, City of Santa Monica 3 -3
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from 2013 levels. Since most of the water utility's costs are fixed, the Water Fund is projected
to be adversely affected by these increases in program costs and reduction in water sales -
based revenues. To evaluate the impact of these changes, three projected revenue plan
scenarios were developed to compare the water utility's revenues and revenue requirements
through FY 19/20. They include the following:
1. Implement a water rate increase in accordance with the estimated increase of the
consumer price index (CPI). This scenario is a baseline option; essentially a status quo
or no change alternative.
2. Implement a water rate increase of 9% per year. This increase would improve the Water
Fund's financial position over the CPI -only plan, but would limit the City's ability to fully
invest in all of its programmed capital improvements, require annual /bi- annual cash flow
balancing by prioritization of capital projects and programs, and place additional
vulnerability on fund reserves and debt financing capabilities in later years of the
projection.
3. Implement a water rate increase of 9% in year one, and 13% per year thereafter. This
increase would improve the financial position of the Water Fund, reduce the risk of
revenue shortfalls from reduced water sales, fund identified self sufficiency related
improvements, and improve net operating parameters that are required to issue new
municipal debt that may be needed for future water system improvements.
The financial projection for each scenario is based on the City's projected customer account
characteristics, the projected O &M expenses, and the inclusion of the City's comprehensive
capital improvement program. Additionally, several ratemaking criteria were also integrated in
the revenue plan. These key criteria include:
• Short term growth is based on the projections indicated in the City's 2010 Urban Water
Management Plan and estimated annualized LUCE projections. This is expected to
yield a modest increase in new accounts through 2020
• Water usage is projected to reduce by approximately 10% during FY 14/15, and an
additional 10% during FY 15/16. Water usage is projected to essentially remain at these
reduced levels during the balance of the planning period.
• A placeholder for an additional cash infusion of approximately $10 million is programmed
for FY 18/19. This may be available through a new debt issuance, potential short -term
inter -fund borrowing, or other strategies as determined appropriate by the Finance
Department at that time.
• With potential rate increases commencing in FY 14/15, no change in rates are proposed
for FY 19/20, as this and later years are beyond the five years of rate increases, the
maximum allowed by state law,
• Rate increases that are greater than inflation are programed to be implemented in
January of each year, or as soon as possible thereafter. Implementation of new rates in
this time frame will minimize the immediate impact of any rate increase as customer
water use is at its lowest during the winter,
Water Rate and Revenue Analysis, City of Santa Monica 3-4
® Target Water Fund reserves have been established based on the sum of the following
financial criteria:
Operating Reserve — equivalent to 50% of the budget for MWD purchases (3 year
running average), with a minimum level of $3 million.
® Capital Reserve — equivalent to 50% of the annual capital program expenditure, with
a minimum level of $3 Million, and
® Rate Stabilization Reserve — established at $1 million.
® Combining these three reserves suggest a minimum goal of approximately $7 million
in reserves for the Water Fund in any fiscal year throughout the planning period.
To demonstrate the potential short and long -term implications of the alternative rate - related
approaches, a revenue plan of the City's water utility was developed for each scenario by
integrating the ratemaking criteria with the projected water system costs and projected capital
improvement program expenditures. The results of these financial projections are provided in
the following section.
3.5 Projected Revenue Requirements Using Assumed Rate
Scenarios
As expected, the results of the revenue plan projections indicate that the baseline option is
unsustainable and additional revenues are needed to meet the future obligations of the Water
Fund if the objectives of the City's Sustainable Water Master Plan are to be partially or fully
implemented under current and projected drought conditions. Several cash flow evaluations
and alternatives were prepared with City staff to balance financial performance with ratepayer
impact. These alternatives varied the debt financing strategies, alternative capital improvement
program phasing, projected growth and water consumption levels, rate increase levels /phases,
and rate structure elements such as fixed meter and water usage charges so that short term
cash flow obligations were met and provisions for future debt service coverage ratios may be
attained, if practical. Based on these evaluations, projected revenue plans for the three
scenarios previously described were prepared to project the water utility annual financial
obligations and revenues through the 2020 planning period, and assess the ability to sustain
positive financial performance., These revenue plans are presented in the following
subsections.
3.5.1 Option 1: Projected Revenue Plan - Consumer Price Index
(CPI) Based Annual Water Rate Increase (Baseline Option)
Table 5A presents a revenue plan using annual rate increase based on the estimated increase
in CPI. This percentage is consistent with the City's basis of planning as reflected in its recent
budget forecasts.
As shown, following actual CPI increases in FY 13/14 and FY 14/15, a projected increase of
2.5% is included in all subsequent years through FY 19/20. The results of this analysis are
Water Rate and Revenue Analysis, City of Santa Monica 3 -5
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shown graphically in Figure 5A; demonstrating the inadequacy of this level of increased funding
and the projected negative fund balance during FY 16/17.
3.5.2 Option 2: Projected Revenue Plan - 9% Annual Water Ratz
Increase
Table 5B presents a revenue plan using a 9% annual water rate increase, which is inclusive of
CPI. This percentage is less than the annual increases adopted during the 2007 Rate Study,
but higher than the average annual CPI increases derived in the Option 1 baseline plan.
Similar to the prior plan, following actual CPI increases in FY 13/14 and FY 14/15, a projected
increase of 9% is included in all subsequent years through FY 18/19. No rate increase is
schedule for FY 19/20 as this is year six of a proposed five year rate plan, The results of this
analysis are shown graphically in Figure 5B. While this rate plan provides a much stronger
financial performance than the CPI only (baseline) alternative and achieves a positive net
operating performance in the later years of the forecast, it does fall short of some Water Fund
financial goals and performance metrics. These shortfalls are as follows:
• Approximately $5 Million in capital projects would have to be eliminated; a reduction in
general system planned capital improvements of 20 %.
• The Water Fund is projected to fall short of the adopted minimum annual reserve fund
targets in four of the five planning years, and
• Net operating revenues may not be adequate to issue the $10 million in new debt
forecasted to be needed in FY 18/19. '-
3.5.3 Option 3: Projected Revenue Plan — 9113% Annual Water Rate
Increase
Table 5C presents ,a revenue plan using a 13 % annual water rate increase. As previously
noted, this plan is based on a 9 % increase in the first year, and a 13% increase in each of the
remaining four years of the financial plan. The results of this analysis are shown graphically in
Figure 5C.
As expected, this rate plan provides a much stronger financial performance over the previous
rate plans and therefore provides additional financial stability for the Water Fund to meet
unforeseen expenses, potential emergency system improvements, and absorb further than
projected declines in water demands and water sales revenues. A summary of the benefits of
this option follows:
The $5 million in capital projects would no longer have to be eliminated from the budget,
although there may need to be a small reduction in capital spending in FY 17/18,
The Water Fund is projected to fall short of the adopted minimum annual reserve fund
targets in essentially only one of the five planning years, and
• Net operating revenues should be adequate to issue new debt in the FY 18/19 forecast.
Water Rate and Revenue Analysis, City of Santa Monica 3 -6
• 1 _,
Based on the findings derived herein, the rate plan that incorporates the 13% increases in water
rates is recommended at this time. Proceeding with Option 3, the 9°/x/13% rate plan, provides
the City with the most financial stability to adjust to changing conditions and fund the projected
programs and projects that will be necessary to reach self sufficiency, promote additional water
use efficiency, and remain financially stable during the projected level of continued drought in
California.
While the magnitude of these increases may vary based on change in costs, demand
conditions, or other unforeseen conditions, this rate plan is projected to provide a reasonable
estimate of the projected revenue requirements of the City's Water Fund through 2020. Since
state law only permits the adoption of rates up to five - years, no rate increase is schedule for FY
19/20 as this is year six of a proposed five year rate plan. As discussed with staff, additional
review of the cost components and revenue requirements should be made during the annual
budget development and review process. Accordingly the level of the required annual rate
increases may differ from the rate and revenue projections derived herein based on those
annual findings.
A discussion of the City's current and proposed rates and rate structure is provided in the
following sections.
Water Rate and Revenue Analysis, City of Santa Monica 3-7
Section : Current Water Rates
The City provides water service to three primary customer types: single - family, multi - family and
non - residential. The current water rate structure was adopted in July 2008, with a focus on
increasing customer awareness on water usage in an effort to promote additional water
conservation. To that end, the rate structure adopted in 2008 eliminated the bi- monthly fixed
service charge so that the water bill became entirely based on actual water usage, clearly a pay
for what you use approach.
In addition to the elimination of the fixed charge to increase the financial incentive for reduced
consumption, new block tiers were also introduced to further support a goal for reduced per
capita water usage. For residential customers, the previously existing three tier structure was
replaced with a four tier structure. For non - residential customers, a uniform commodity rate was
established, applicable to nearly all water use. A second tier for non - residential customers was
developed for high end of water consumption in order to provide a strong disincentive for
excessive water use. Finally, in 1999, a resolution to annually increase rates by the actual
Consumer Price Index (CPI) increase was adopted and has been1mplemented with each
annual budget.
The City's present water rates and rate structure went into effect on July 1, 2014. It consists of
a water volume charge that is charged for all water used by the City's customers. The
characteristics of the present rate structure are described below for residential and non-
residential customers.
• Current Usage Based Rates Residential Customers. The City's current usage based
rates (or variable rates) are applied to water usage using a tiered rate structure.
• Current Usage Based Rates: Non - Residential Customers. The City's current usage
based rates (or variable rates) are applied to water usage using a tiered rate structure by
meter size.
Tiered rates are commonly used by water utilities to recover the costs of providing water service
to its customers. Usage based or commodity rates correlate a customer's costs of service with
the quantity of water consumed in any given tier or block to calculate a bi- monthly water bill. As
such, a customer's water bill will fluctuate in proportion to the change in water usage for each
billing cycle. This usage based' rate element supports a fundamental pay- for -use ratemaking
philosophy. The City's current water quantity rates and rate structures are shown in Table 6.
Water Rate and Revenue Analysis, City of Santa Monica 4 -1
TABLE 6
CURRENT WATER RATES
Single - Family Residential Water Rates ($IHCF)
Meter Size
Start of
End of
(Inches)
Tier
Tier (HCF)
Tier (HCF)
FY 12113161
FY 13/141`1
FY 14/1 5(d)
N/A
1
0
14
$2.43
$2.48
$2.50
NIA
2
15
40
$3.65
$3.74
$3.75
NIA
3
41
148
$5.47
$5.60
$5.62
NIA
4
149
$8.55
$8.76
$8.80
Multi-Family Water Rates ($ /HCF)
Meter Size
Start of
End of
(Inches)
Tier
Tier (HCF)
Tier (HCF)
FY 121131'1
FY 13114101
FY 141151tl1
N/A
1
0
4
$2.43
$2.48
$2.50
N/A
2
5
9
$3.65
$3.74
$3.75
N/A
3
10
20
$5.47
$5.60
$5.62
NIA
4
21
$8.55
$8.76
$8.80
Non - Residential
Water Rates
($ /HCF)
Meter Size
Start of
End of
(Inches)
Tier
Tier (HCF)
Tier (HCF)
FY 121131'1
FY 13/14101
FY 1411 51d)
3/4"
1
0
210
3.48
3.56
3.57
3/4"
2
211
8.55
8.76
8.80
1"
1
0
210
3.48
3.56
3.57
1"
2
211
8.55
8.76
8.80
11/2"
1
0
465
3.48
3.56
3.57
11/2"
2
466
8.55
8.76
8.80
2"
1
0
870
3.48
3.56
3.57
2"
2
871
8.55
8.76
8.80
3"
1
0
1700
3.48
3.56
3.57
3"
2
1701
8.55
8.76
8.80
4"
1
0
2550
3.48
3.56
3.57
4"
2
2551
8.55
8.76
8.80
611+
1
0
5280
3.48
3.56
3.57
6 "+
2
5281
8.55
8.76
8.80
Notes:
Source: City of Santa Monica website: Water and Sewer Rates. Customers billed bi- monthly.
(a) Rates effective July 1, 2011
(b) Rates effective July 1, 2012
(c) Rates effective July 1, 2013
(d) Rates effective July 1, 2014
• •':
Structures
As previously discussed, upon completing various comprehensive studies of the City's water
supplies and overall water system, the City has embarked on a proactive program to assure the
long -term reliability and sustained quality of the City's water system. To meet the objectives of
the Sustainable Water Master Plan, additional revenue is needed to meet the City's current and
projected obligations. The proposed rate increases are developed as staged adjustments to the
current variable water rates. To minimize ratepayer impact, annual increases are suggested to
be implemented in January of each year when water usage is typically at its lowest. A
discussion of the City's variable rates, development of alternative service and usage charges,
development of monthly bills, and a comparison of charges with other communities are provided
in this section of the financial plan.
5.1 Fixed and Variable Rate Considerations
An important element when considering a change in rate structure is the need to consider the
utility's vulnerability to short -term revenue shortfalls. Depending on the utility's rate structure
and water supply situation, short -term revenue shortfalls can occur during periods of drought,
economic downturn, or wet or atypical weather conditions that reduce water sales.
As previously noted, in 2008, the City eliminated the fixed bi- monthly service charge from its
rate structure in favor of a structure that was entirely based on a customer's water usage.
Because water systems are capital and labor intensive, total system costs for most water utility
systems are generally recognized as approximately 60 to 75% fixed. It is for this reason that
many water agencies throughout the United States utilize a fixed rate or monthly service charge
to complement the variable water usage rate component of its water rate structure. Proceeding
in this manner generally improves the financial stability of the water system and enables the
utility to operate with lower fund reserves needed to react to rate stabilization and/or conditions
of economic uncertainty. It is for these reasons that strong consideration was given to
reintroducing a fixed bi- monthly service charge into the City's water rate structure. The
recommended rate structure is discussed later in this section of the report.
5.2 Development of Alternative Water Rate Structures and
Revised Water Rates
Potential adjustments to the City's water rates were developed to support the financial health of
the City's water utility while meeting the Sustainable Water Master Plan objectives through the
2020 planning period. The rates and rate structures derived herein are based upon an analysis
of future system costs and financial obligations established by the City's Public Works/Water
Resources Division and the recommendations from the SWMP. Input from the City's Task
Force on the Environment and the SWMP Advisory Committee were obtained throughout the
development of the SWMP's self- sufficiency strategies and activities and financial elements
contained in this financial plan.
Water Rate and Revenue Analysis, City of Santa Monica 5-1
To more thoroughly explore alternative water rates and rate structures, extensive discussions
occurred with the Advisory Committee over the last year via group meetings, emails and
conference calls. This committee is comprised of: Mark Gold, Chair of the City's Environmental
Task Force, Associate Director UCLA Institute of the Environment and Sustainability; Andy
Lipkis, Tree People Founder and President; Conner Everts, Southern California Watershed
Alliance Executive Director; Ed Osann, Natural Resources Defense Council Senior Policy
Analyst, Water Program; Judy Abdo, Santa Monica representative on the MWD Board of
Directors, former Santa Monica Mayor and Councilmember; Caryn Mandelbaum, Environment
Now Freshwater Program Director, Staff Attorney; and Tracy Quinn, Natural Resources
Defense Council Policy Analyst, Water Program.
A discussion of the development of alternative water rate structures and water rates is provided
in this section of the study.
5.2.1 Development of Alternative Rate Structures
As discussed, there was extensive discussion among City staff, the Advisory Committee, and
the Task Force on the Environment regarding enhancements that could be made to the existing
rate structure, adopted in 2008. The alternative structures that were considered by these
groups included:
• Modifying the existing tiered block rate structure for changes in water allocation per
block,
• Increasing the number of blocks,
• Altering the current basis of change in price between blocks,
• Re- introducing a fixed bimonthly service charge back into the structure,
• Consideration for abase level water allocation to be include with the new service
charge,
• Abandoning the current structure and migrate to a full water budget based rate structure
at this time, and
• Conformance with costs of service findings.
To support the consideration for alternative rate structures, two key areas of service were
performed. First, a cost of service assessment was performed to provide a basis for the
recovery of system costs from each customer class. Second, account level demand models
were constructed so that changes in price, block size, and /or structure could be evaluated
based on its impact on the City's customers. To demonstrate the level of effort associated with
evaluating and deliberating water rate restructuring, and document the basic customer class
related costs of service, a representative sample of the tabular rate structure alternatives
analysis and discussion items is included in Appendix B. Appendix B also includes a summary
of findings for the water system cost of service analysis. This analysis indicates that the current
rate structure continues to provide a reasonable recovery of system costs as allocated among
the City's customer classes.
Water Rate and Revenue Analysis, City of Santa Monica 5 -2
The result of this process was the development of a small group of alternatives structures that
was being considered for dissemination to the City Council for final direction. This short -list of
structures included: a) the current structure, b) a structure with the current blocks and a new
fixed service charge with a potential water allowance, and c) a structure with new blocks and a
new fixed service charge with a potential water allowance. The study group, which included the
Advisory Committee, was inclined to recommend item "c" above when on July 15, 2014, the
State Water Resources Control Board (SWRCB) adopted an Emergency Regulation for
Statewide Urban Water Conservation, requiring the City and other urban retail water agencies
implement all requirements and actions of their water shortage contingency plans that impose
mandatory outdoor irrigation restrictions.
Subsequently, on August 12, 2014, the City Council adopted a resolution declaring a Stage 2
Water Supply Shortage requiring mandatory water conservation to achieve a 20% reduction in
water use (compared to 2013). Much discussion ensued regarding the appropriate basis for
new drought surcharges or penalties and the associated administrative structure to implement
these charges. From this discussion, it became apparent that a concise and understandable
community outreach program will be critically important in achieving this drought response goal.
Based on these new conditions, additional water rate restructuring discussions evolved and it
was believed that the community would benefit from a continuation of the current rate structure,
as this approach would produce a more understandable message associated with the rate
increase and minimize the potential confusion associated with'drought compliance related
charges and structures. As such, no change in 'the current tiered water rate structure is being
proposed at this time. The City's current water rate structure is very common in California as it
provides a built in mechanism to support water, conservation on a pay for what you use basis, is
simple to understand, generally fosters public acceptance, and provides relatively predictable
revenues.
5.2.2 Development of Alternative Water Rates and Typical Bills
Consistent with the revenue requirements derived in Section 3 - Future Revenue Requirements,
three options were derived to generate additional revenues for the Water Fund. These three
rate adjustment options are shown in Table 7. As previously shown, the Water Fund's financial
stability and funding flexibility increases with the higher rate adjustment options.
Typical customer bills are often developed to evaluate the impact of a water rate schedule on a
utility's customers. Current typical bills are derived by correlating the current schedule of charges
shown in Table 6 with the average or typical consumption values for various customer types.
Similarly, projected typical bills are calculated by applying the proposed increase to the usage
charge components of the alternative water rate schedule. Table 8 reflects the resulting impacts
of the proposed rate increases for the next five years under various rate options. As shown, the
calculated typical bills are not projected to increase materially for those customers that meet the
reductions in mandated water use.
5.3 Comparison of Monthly Bills with Other Communities
In addition to the development of typical bills for City customers, Table 9 provides a comparison
of the City's current and proposed bimonthly single - family bill with other local adjacent agencies.
Water Rate and Revenue Analysis, City of Santa Monica 5 -3
The comparison is based on an average Single Family residential bi- monthly water usage of 30
HCF. These results are graphically depicted in Figure 9.
As shown, the City's current water bill is in the lower third when compared to the neighboring
agencies, suggesting that other regional agencies have faced similar water system funding
needs in their communities. Moreover, even when the 13% rate increase is applied, the City's
residential water bills will compare favorably with the current average rate of the other
communities surveyed. A similar comparison for a non - residential commercial account is
presented in Figure 10.
In addition to this finding, it should be noted that rate surveys often do not provide the full picture
of the utility's position. For example, some of the agencies may have additional increases that
are in process or being proposed, may have varying water supply program cost, quality, and
reliability issues or objectives, and certainly there is often a wide range of variance in local level
of service, capital reinvestment, and preventive maintenance considerations. Given the current
condition and direction of the City's water utility and water resource requirements, it appears the
City's water rates are consistent with other local communities.
5.4 Summary of Findings and Proposed Water Rates
In consideration of the financial performance, customer impact, and agency survey findings, the
9/13% increase option is recommended herein. It is believed that this option provides the
highest return on investment for the City and its ratepayers. Coupling the projected level of
decline in fund reserves and the current uncertainty surrounding water usage -based revenues,
this option offers the greatest stability and increases the probability of having adequate funding
in place to meet the goals and objectives of the Sustainable Water Master Plan and the
associated water use efficiency improvements. This increase is recommended to be
implemented as early as possible in 2015 to begin, improving the performance of the Water
Fund.
In addition to the rate- related adjustments provided herein, the City should continue its
methodical review of system costs, water demands, and utility rates. Much of this work can be
incorporated as an element of the annual budget process as additional information is being
developed and evaluated.
Water Rate and Revenue Analysis, City of Santa Monica 5-4
Notes:
Adjustments for Option 1 is applied on July 1 each year.
Adjustments for Options 2 and 3 are applied in January of each year.
FY 14115
FY 15116
FY 16117
FY 17118
FY 18119
Option 1
2.5%
2.5%
2.5%
2.5%
2.5%
Option 2
9.0%
9.0%
9.0%
9.0%
9.0%
Option 3
9.0%
13.0%
13.0%
13.0%
13.0%
Notes:
Adjustments for Option 1 is applied on July 1 each year.
Adjustments for Options 2 and 3 are applied in January of each year.
TABLE 8
EXAMPLES OF TYPICAL BI- MONTHLY BILLS
Example of Proposed Bi- Monthly Bill, Single Family Residential, % -inch meter, 30 HCF current average use
Description of Rate Options
Current Bill, without conservation
Option 1, Current Rates, with 20% conservalion(24HCF)")
Option 2, 9% increase in unit prices, with 20% conservation(b)
Option 3, 13% increase in unit prices, with 20% conservation(`)
Year 1
Year 2
Year 3
Year 4
Year 5
$90.63
Current Bill, without conservation
$342.30
$72.50
$74.31
$76.17
$78.07
$80.03
$79.03
$86.14
$93.90
$102.35
$111.56
$79.03
$89.30
$100.91
$114.03
$128.86
Example of Proposed Bi- Monthly Bill, Multi - Family Residential, 1 %- inch meter, 77 HCF current average use
Description of Rate Options
Year 1
Year 2
Year 3
Year 4
Year 5
Current Bill, without conservation
$342.30
Option 1, Current Rates, with 20% conservation (62HCF)")
$273.84
$280.69
$287.70
$294.90
$302.27
Option 2, 9% increase in unit prices, with 20% conservation (b)
$298.49
$325.35
$354.64
$386.55
$421.34
Option 3, 13% increase in unit prices, with 20% conservation(`)
$298.49
$337.29
$381.14
$430.69
$486.68
Example of Proposed Bi- Monthly Bill, Non- Residential, 2- inch meter, 192 HCF current average use
Description of Rate Options
Year 1
Year 2
Year 3
Year 4
Year 5
Current Bill, without conservation
$687.23
Option 1, Current Rates, with 20% conservation (154 HCF)(a)
$549.78
$563.52
$577.61
$592.05
$606.85
Option 2, 9% increase in unit prices, with 20% conservation(b)
$599.26
$653.19
$711.98
$776.07
$845.90
Option 3, 13% increase in unit prices, with 20% conservation(`)
$599.26
$677.16
$765.20
$864.67
$977.08
Note:
(a) CPI Increase only in all years, effective July 1 each year
(b) 9% increase effective January 1 each year
(c) 13% increase effective years 2 through 5, 9% increase year 1 effective January 1 each year
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APPENDIX A
TABLE OF WATER CONSERVATION PROGRAMS
Simple Water Conservation Program for the City of Santa Monica —April 2, 2013
Residential IIt Clothes Washor Rebate
Single Family
880
30
$24,100
$216,600
Residential HCT Rebate
Slagle Fancily
__.
3562
Z]
$14,400
$129,11
Residential WBIC Rebate
Single Pnmily
1920
79
$29,300
$263,800
CRY% Cash for Gross Rebate Prng'am
Single Fanily
1, 100,000 Square feet
S1
- $209,900
$1,889,100 '.
Cuy's Cap Irrigation Rebate Program
Single family
1,100,000square feet
24
$139,91
$1,259,400 j
City's HE NOUIe Rebate Program
Single Pamliy
SSU,WO squire feat
-7
$52,500
$4%2,300
Water Smart Software S% Reduction In Water Use (t,mM' ) -
Single Family
3,040costomers
8.
$261600
$239,300
118 Rpl Toilets{puect Installation) gffW) --
Multifamily
5,496
13
-- $174,800
$1,577,100
Residential HE Clothes WaMa.'r Rebate
Mu10 Family
540
19
$9,800
$$8,600 I
Residential gF,T Rebate
tviUltl Family
4,000
13
$16,200
$145,400 '
laminar HOw liestdrlors t6156l0bn's MOdlcal CCUtcc (:: V3)
Commercial
860
6
$1,500
$13,600
Commercial Fly Vernon) Pump (rebate
Commercial
40,
S
$1,400
$12,600
Commercial Cannectiontess Food Steamer Rebate
Commercial
2
1
$100
$500 -
CommorUai Zero Water Urinal Rebate
Commercial
A -
011
$25
$1.00
Canmerciol Uitm=law Vohrme Urinal Rebate
Commercial
540
8
$3,500
$31,100
Commercial CoudmflMly Controller Rebate -
Com..."Cut
2...
4
- $0
50 s
Conunorpoi HE9 Rebate
Connnerolal
200
5
52,500
$22,940 '
CH Cooling Tower Troannm4- Zero Bimwlown(WreJ)
Commercial -
1 -
1
$200
$1,41
Coin -0peratad Laundry Machine Retrofit be W)
Commercial
AS
360
33,500
,..
$31,600 !,
NETS far 3tJOiri slNedlFai LYnlcr {Ntit2}
Commercial
10
0.1
$100
41,100
_... _tern.. .teen..
0.125 gpf Urinals for St. John's Medical Center it,e +.;'}
Commercial
7
-
0.1
$40
-
$000
1.5 goal Faucet Aerators for it. iahns Medual Center (NEVI)
Commercial
158 -
0.3
$800
$61900
StdMUSG Audits& Retrofits - Assumes 5'1$ Reduction in Total
Institutional
Maintained through
5
$94,400
$849,400
Source: Sustainable Water Master Plan
Notes: HE — High Efficiency, HET — High Efficiency Toilet, WBIC — Weather Based Irrigation
Controller
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Santa Monica
Demand Model to Evaluate Block Structure for Single Family Water Rates
IVJ 1283015'00 ALT 1
Totals: ::1,308,0$0 $j 100.0%
VellOvc cells are manually inputted values.
1,309,6965. 100%
Variable Revenue: $4,637,789 Calculated increase Variable Revenue: $5,055,190
Fixed Revenue: $0 Assuming No Conservation Fixed Revenue: $0
Total Revenue: $4,637,700 9.0% Total Revenue: $5,055,190 100.0%
Estimated Change in Hi-Monthly BIII by Usage (Both Fixed and Quantity Charge)
Average
BI-Monthly
Usage
(Hot
n a Hcf
Chan eln Bill
Existing Rate Structure
Ye of Total
DU
Block Rana Het
COrreni
Slruelore
13-11 Rate
Structure
Proposed
Block Rate Structure
$)
I% )
6
$1488_
$16.22
2011
90%
413
5.4%
413
820
988
1751
2947
3155
3897
4762
5441
Will
6588
685]
7152
7335
]363
]429
]474
]511
]551
]569
7585
7598
7604
1 7616
7624
7635
7842
]646
]fi48
7649
54%
10.7%
12.6%
22.9%
38.5%
412%
50.9%
82.3%
]1.1%
78.7%
06.1%
8b6%
938%
95.9%
96.3%
W.1%
97.7%
982%
98.7%
99.0%
902%
99.3%
99.4%
99.6%
99.7%
99.8%
99.9%
100.0%
100.0%
1000%
9
$22.32
$24.33
Projected
%
407
9.3%
Water Rate
$24.80
Less Than
Annual
% Annual
Rate (per
Annual
Greater
Less Than
Rate (par
% Rata
Unit Usage
Annual
Projected
Annual
% Annual
Blocks
$5.14
or Tgoual
Usage
Usage
Hcf)
Revenue
TM1an
or Tgoual
Hcf ]
Chung.
Reduction
Usage
Annual
Revenue
Revenue
9.014
742
9.7 04
Hcf'
$94.56
$103.0]
58.51
9.0%
885
11.3%
35
$113.26
Hcf'
Usa a
9.0%
6]9
Blocks
14
566,912
43.3%
52.48
$1,405943
0
14
$2.]0
9.0%
0.0 %
58fi,912
43.3%
$1532,4]8
30.3%
Block2
FThad
__
40
90%
_
396%
$3.]4
51,93],]]0
14
40
54.08
9.0%
0.0%
518,120
39.6%
$2,112.169
41.8%
elack3
9.0%
148
_518,120
213,282
183%
55.60
$1,194,381
40
_
148
28
0%
0.0%
213,282
163%
$1,3018 }fi
25.8%
Block4
0.9%
10000
11381
00%
58.76
$99,695
148
10000
0%
00
11361
0.0%
5108,688
2.1%
Block6
$439.96
10000
0
0.0%
$876
$0
10000
10000
$51008
OA%
0
0.0%
$0
0.0%
Block6
$47.16
10000
0
0.0%
56]6
$0
10000
10000
9.0%
0%
00%
0
0.0%
$0
0.0%
Block}
8
10000
0
0.0%
50. }6
$0
10000
10000
3$M59,0%
0%
00%
0
0.0%
50
00%
Biock8
ifi0
10000
0
90%
9.0%
$0
10000
IODDO
$T 10 6fib
$1204.10
0.0 %-
0
0.0%
so
0.0%
$1,411.28
10000
Io00o
0
00%
_ 0.1°h
so
Uwaii
IODOD
5146.73
9.0%
o.0%
0
90%
50
00%
Block l0
_
10000
10000
_
0
0.0%
_
50
10000
10000
0
0.0%
$0
Oo%
Fixed Chains
BI- MOnthivIOU:
$0.00
50.00
Totals: ::1,308,0$0 $j 100.0%
VellOvc cells are manually inputted values.
1,309,6965. 100%
Variable Revenue: $4,637,789 Calculated increase Variable Revenue: $5,055,190
Fixed Revenue: $0 Assuming No Conservation Fixed Revenue: $0
Total Revenue: $4,637,700 9.0% Total Revenue: $5,055,190 100.0%
Estimated Change in Hi-Monthly BIII by Usage (Both Fixed and Quantity Charge)
Average
BI-Monthly
Usage
(Hot
T Ica18i- Moothl BIII
Chan eln Bill
No. of
DU
Ye of Total
DU
continues.
COrreni
Slruelore
13-11 Rate
Structure
No. of
BU
%of Total
DU
$)
I% )
6
$1488_
$16.22
$1.34
90%
413
5.4%
413
820
988
1751
2947
3155
3897
4762
5441
Will
6588
685]
7152
7335
]363
]429
]474
]511
]551
]569
7585
7598
7604
1 7616
7624
7635
7842
]646
]fi48
7649
54%
10.7%
12.6%
22.9%
38.5%
412%
50.9%
82.3%
]1.1%
78.7%
06.1%
8b6%
938%
95.9%
96.3%
W.1%
97.7%
982%
98.7%
99.0%
902%
99.3%
99.4%
99.6%
99.7%
99.8%
99.9%
100.0%
100.0%
1000%
9
$22.32
$24.33
$2.01
9.D%
407
9.3%
10
$24.80
$2].03
$223
9.0%
146
10 %�
V1
$34]2
_
$3784
$3.12
9.0%
785
103%
20
$57A6
$62.30
$5.14
9.0%
1198
116%
21
$66.38
$5.48
9.0%
208
27%
25
_$60.90
$]5.86
_
$8269
$6.83
9.014
742
9.7 04
30
$94.56
$103.0]
58.51
9.0%
885
11.3%
35
$113.26
_
$123.45
$10.19
9.0%
6]9
8.9%
$131.96
$14384
$1788
90%
5}7
7.5%
$171.16
$188.55
$15.40
9.0%
570
Z5%
$499.16
$21].00
$17.92
90%
269
35%
$243.98
$265.92
$21.96
90%
295.
3.9%
$208.]6
$314.75
$25.99
9.0%
183
24%
$299.96
$326.98
$2]00
9.0%
28
0.4%
[40
$32].98
$357.48
$2952
90%
66
0.9%
$355.9fi
$388.00
$32.04
9.0%
45
08%
$383.96
$418.52
$34.56
9.0%
37
OS%
$439.96
$479.56
$39.60
90%
40
95A
$46].95
$51008
$42.12
90%
1B
0.2%
$5]1.12
$47.16
90%
18
0.2%
_$523.96
5551.96
5801 fi4
$49.68
9.0%
11
0.1 °/t
120
$57996
$632.16
$52.20
gou
8
0.1%
_
130
$635.96
$693.20
55724
9.0%
12
0.2%
_
140
$691.96
$]54.24
_
562.28
90%
8
0.1%
ifi0
584188
$91].65
$]5.71
9.0%
11
0.1%
190
$T 10 6fib
$1204.10
$99.42
9.0%
] _
0.1 °A
225
$1,411.28
512].02
9.0%
4
_ 0.1°h
250
$1,63028
_$1,538.30
5146.73
9.0%
2
00%
125D
- --
_$1.777.01
- - - --
- --.
- --
_
1
00%
Santa Monica
Demand Model to Evaluate Block Structure for Single Family Water Rates
W31203015.00 ALT 2
Estimated Change in BI- Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
Bi- Monthly
Usage
Hcf
Block Rana Hof
Chang, In Bill
(6J 1%1
Eaton. , Rate Structure
%of Total
DU
Block Rana Hcf
Current
Structure
Block Rate
structure
Proposed Block Rate Structure
%of Tolal
DU
6
$14.08
$24.88
$1900
67.2%
413
201t
413
820
966
1751
2947
3155
3097
4762
5441
6010
658B
6857
7152
7335
7363
7429
7474
7511
7551
7589
7505
7596
7604
7616
7824
7635
7642
7846
7848
-ma-L-1-00
5.4%
10.7%
12.6%
22.9%
365%
41.2%
50a%
623%
71.1%
]8]%
86.1%
Bob%
935%
95.9%
96.3%
97.1%
9]]%
982%
90.7%
998%
992%
99.3%
99.4%
99.6%
99.7%
99.8%
99.9%
100.0%
100.0%
.0%
9
$22.32
$32.32
SlD90
44.8%
407
Projectetl
%
$24.80
$3480
$1090
40.3%
Rate
Create
Less Than
Annual
%Annual
Rate (par
Annual
Greater
Less Than
Rate (par
%Rate
Unit Usage
Annual
Projected
Annual
%Annual
21
58090
ks
Than
or Equal
Usage
Usage
Hcf)
Revenue
Than
or Tgoual
Hot
Change
Reduction
Usage
Annual
Revenue
Revenue
10.6%
855
11.3%
_
35
$11326
Hef'
$10.00
0.0%
679
8.9%
40
$131.95
$141.96
$10.00
Hcf°
Usage
75%
47
$1]1.16
$181.16
ks
5.8%
14
566,912
43.3%
$248
$209.16
D
14
$2.40
0.0%
O.D%
_568,912
.k2
510.00
4.1%
295
3.9%
fib
$288.76
40
510,120
39.6%
$3]4
_$1,405,943
51,93],]]0
14
40
$3.]4
0.0 °a
O.D%
518,120
396%
51,93],l]0
4L8%
$337.96
$10.00
k3
66
148
213,282
_
16.3%
$5.60
$1,194,381
40
148
$5.60
00%
0.0%
213282
163%
$1,194,301
37
0.5%
95
[Wler
k4
$449.96
10000
11381
0.9%
$91fi
$99,895
140
10000
$0]6
0.0%
0.0 °0
11,381
0.9%
$99,695
2.1%
$10.00
1.9%
k5
_ 0.2%
t000D
0
$561.98
$876
$0
10000
ID000
$8.76
_
OB%
0.0%
D
90%
$0
O.0%
180
S635,98
k6
*4148
10000
_
12
0.2%
- $B]6
-$0
$704.96
ta00D
$e]0
D.0%
Oo/
0
O.o%
50
Do%
12%
11
k]
190
10000
$1,11468
$10.00
$0.]6-
$0
_10000
10000
10000
$876
90%
00%
0
0.0%
50
OA%
$164026
ke
O6%
10000
0.0%
>250
$0
10000
10000
1
0.0%
0.0%
0
0.0%
$0
0.0%
k9
10000
$0
1W00
10000
_
00 °h
0
O.00 _
SO
k /0
10000
SO
1D000
10000
0
OB%
$0
90%
Charge BI- MOnIM1I !OU :
$0.110
510.00
Totals:
1.309,696 ':"
100.0%
1,309,696`:.
-. 100%
Variable Revenue:
$4,63],]89
Calculated Increase
Variable Revenue:
$4,631,789
Fixed Revenue:
$0
Assuming
No Conservation
Fixed Revenue:
$]2],398
Total Revenue:
$4,63],]89
15.7%
Total Revenue:
$5,365,185
100.0%
Yellow cells are manually
inputted values.
Estimated Change in BI- Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
Bi- Monthly
Usage
Hcf
Typical Bf-- onthly Bill
Chang, In Bill
(6J 1%1
No. of
OU
%of Total
DU
Cumulative
Current
Structure
Block Rate
structure
NO.of
BU
%of Tolal
DU
6
$14.08
$24.88
$1900
67.2%
413
5.4%
413
820
966
1751
2947
3155
3097
4762
5441
6010
658B
6857
7152
7335
7363
7429
7474
7511
7551
7589
7505
7596
7604
7616
7824
7635
7642
7846
7848
-ma-L-1-00
5.4%
10.7%
12.6%
22.9%
365%
41.2%
50a%
623%
71.1%
]8]%
86.1%
Bob%
935%
95.9%
96.3%
97.1%
9]]%
982%
90.7%
998%
992%
99.3%
99.4%
99.6%
99.7%
99.8%
99.9%
100.0%
100.0%
.0%
9
$22.32
$32.32
SlD90
44.8%
407
53%
10
$24.80
$3480
$1090
40.3%
148
1.9%
14
$34]2
_
$44.]2
510.00
289%
]85
10.3%
20
$5].16
$8].16
$10.00
1]5%
1198
_15.6%
21
58090
$70.90
$10.00
_
18.4%
208
2.]%
25
$85.86
$1080
13.2%
742
9.7%
30
__$75.88
$94.56
$10406
_
$10.00
10.6%
855
11.3%
_
35
$11326
$123.26
$10.00
0.0%
679
8.9%
40
$131.95
$141.96
$10.00
7.6%
57 7
75%
47
$1]1.16
$181.16
$10.Oo
5.8%
570
_Z5%
52
$199.16
$209.16
$10.00
_
50%
269
3.5%
60
$243.96
$253.96
510.00
4.1%
295
3.9%
fib
$288.76
$29836_
$10.00
3.5%
103
2.4%
70
$299.96
$309.96
$10.00
8.J%
28
0.4%
75
$32796
$337.96
$10.00
10%
66
0.9%
_
80
$355.98
$36596
$10.00
28%
45 _
0.6%
05
$383.96
$393.96
$10 Do
26%
37
0.5%
95
$439.96
$449.96
$1000
2.3%
40
0.5%
100
$467.96
$4]].96
_
$10.00
2.1%
10
9291G
110
$523.96
$533.96
$10.00
1.9%
16
_ 0.2%
115
$551,9fi
$561.98
$10.00
1.8%
11
0.1%
120
$579.96
$589.96
$10.00
1.7%
8
0.1%
180
S635,98
$645.96
$1000
1.6%
_
12
0.2%
_
140
$691.90
$704.96
$1900
_
1.4%
6
0.1%
160
$841.88
$85L88
_
$10.00
12%
11
0.1%
190
$1,104.60
$1,11468
$10.00
09%
_ 7
0.1%
225
$1,411.28
$1,421.20
$10.00
0.7%
4
0.1 %
250
$164026
$1000
O6%
2
0.0%
>250
_$1,630.28
- - --
- - - -- -
- --
- - - --
1
0.0%
Santa Monica
Demand Model to Evaluate Block Structure for Single Family Water Rates
KIJ 1283015.00 ALT 3
Tends: :1,309,6986 100.0%
Yellow cells are manually inputted values.
1,309696,7; 100%
Variable Revenue: $4,637,789 Calculated Increase Variable Revenue: $4,174,610
Fixed Revenue: $0 Assuming No Conservation Fixed Revenue: $1,091,093
Total Revenue: $4,037,709 18.5% Total Revenue: $5,265,104 10D.0%
Estimated Change in Bi- Monthly BIII by Usage (Both Fixed and Quantity Charge)
Average
Bi- Monthly
Usage
(Hcf)
Block Rana Het
Chan ein Bill
Existing Rate structure
otal
Block Rana 110
Current
structure
Block Rate
Structure
Pro osed Black Rate Structure
%of Total
DU
$)
Water Rate
Blocks
Greater
Than
Less Than
°f iu al
2011
Annual
Usage
Hal'
% Annual
Usage
Rate (per
Het(
Annual
Revenue
Greater
Than
Less Than
or Banat
get. (par
He()
% Change
CM1an9e
Red Usage
Reduction'
cleared
Annual
Usage
Het'
projected
Annual
Usa a
Annual
Revenue
%Annual
Revenue
_
10
14
566,912
43.3%
52.48
51,905,993
D
14
$2.23
- 10.0%
0.0%
566,912
43.3 °0
$1,285,349
30.3%
Block
$66.44
40
518,120
396%
$3.74
$193],]]0
14
40
533]
-10_0%
0.0%
518,120
39.6%
$1743,993
41.8%
5].41
148
213,282
16.3%
$580
$1,194,3f11
40
148
$5.04
- 10.0%
_ o.0%
213,282
16.3%
$1,0]4,943
258%
6]9
10000
11381
_
0.9%
$8.]8
59.9,695
148
10000
$]88
- 100%
0.0%
11,381
0.9 °0
589,]26
2.1%
5
10000
0
_
0.0%
58.]8
$0
10000
10000
$].BB
-10.0%
O6 /°
0
0.0%
50
D.0%
6
IFIxedhaMe
L
1c000
0
0.0%
$a 7fi
$0
_
10000
10000
$].88
-10.0%
0.0%
0
0.0%
$D
D.0%
7
66
faces
0
0.0%
$876
$0
_
10000
10000
$1.88
- 10.0%
0.0%
0
00%
_ $0
OD%
B
95
I000O
o
0.0%
-6.6%
$0
10000
100 0
$467.96
$436.16
0.0%
0
0.0%
$0
0.0%
9
$486.56
10000
0
0.0%
0.2%
_
50
10000
10000
- $40.20
4.3%
0.0%
0
0.0%
$0
0.0%
0
-7.4%
10000
0
0.0%
$635.96
$o
10000
10ODD
12
0.2%
140
0
0.0%
$0
0.0%
al IDU:
0, 1°b
160
$000
$77269
- $69.19
-8.2%
515.00
D.1%
190
$1,104.68
$1 OD9.21
- $95.4]
_
-se%
Tends: :1,309,6986 100.0%
Yellow cells are manually inputted values.
1,309696,7; 100%
Variable Revenue: $4,637,789 Calculated Increase Variable Revenue: $4,174,610
Fixed Revenue: $0 Assuming No Conservation Fixed Revenue: $1,091,093
Total Revenue: $4,037,709 18.5% Total Revenue: $5,265,104 10D.0%
Estimated Change in Bi- Monthly BIII by Usage (Both Fixed and Quantity Charge)
Average
Bi- Monthly
Usage
(Hcf)
Typical Bi- MOnlhl Biil
Chan ein Bill
No. of
DU
otal
umulative
Current
structure
Block Rate
Structure
No. of
DU
%of Total
DU
$)
Mt
6
$1488
$28.39
$13.51
908%
413
413
820
966
7]51
2947
3155
389]
4]62
r22
5441
6018
6588
685]
]152
7335
7363
7429
7474
7511
7551
7569
7585
7596
7604
7616
7624
7635
7642
7846
7648
]649
54%
10.7%
12.6%
22.9%
305%
41.2%
50.9%
62.3%
]t.t%
7B.7%
8B.1%
09.6%
935%
95.9%
96.3%
97.1%
97.7%
98.2%
98.7%
99.0%
99.2%
99.3%
99.4%
99.6%
997%
99.0%
99.9%
100.0%
1000%
100.0%
9
_
$22.32
$35.09
$12]]
5].2%
40]
_
10
$24.80
$3].32
$1252
505%
146
14
$34]2
$4625
$1183
33.2%
]85
%
20
55].16
$66.44
$9.28
16.2%
1196
%
21
560.90
$69.81
$891
14.8%
208
%
25
5]586
$83.2]
5].41
9.8%
792
%
30
$94.56
$100.10
$5.54
5.9%
885
%
35
511326
$116.93
$387
3.2%
6]9
%
40
$131.96
$133]6
$1.80
1.4%
577
%
47
$1]1.16
$169.04
-$2.12
-1.2%
570
%
92
$19434
-$4.92
-2.5%
269
%
80
_$199.18
$243.96
$23456
-5940
-39%
295
%
68
$288.76
5274.88
-$1388
-4.8%
183
2.4%
70
$29996
$284.96
- $15.00
-5.0%
28
0.4%
75
$327.96
$310.16
41TUO
-5.4%
66
0.9%
80
$355.96
$335.36
420 00
-5.89A
45
0.6%
85
$303.96
$360.56
- $2340_
-6.1%
37
0.5%
95
$439.96
$410.96
-$2900
-6.6%
40
05%
100
$467.96
$436.16
- $31.80
-6.8%
18
01%
110
$5238fi
$486.56
_
- $37.40
-T1%
16
0.2%
_
115
$551.96
$511.76
- $40.20
4.3%
11
0.1%
120
$579.98
$536.96
44100
-7.4%
B
0.11A
130
$635.96
$587.36
- $48.60
-7.6%
12
0.2%
140
$69198
$637.76
- $54.20
-7.8%
8
0, 1°b
160
$841.88
$77269
- $69.19
-8.2%
11
D.1%
190
$1,104.68
$1 OD9.21
- $95.4]
_
-se%
7
0.1%
225
$1,41128
$1285.15
_
- 5126.13
-8.9%
4
OA%
250
$1,630.26
$1,48225
- $148.03
-9.1%
2
_0.0%
>250
- - - --
--
-----
----
1
0.0%
Santa Monica
Demand Model to Evaluate Block Structure for Single Family Water Rates
KIJ 1263015.00 ALT 4 New Blocks, No Fixed Rate
Totals: . 1,309,096 100.0%
Variable Revenue: $4,63],]88
Fixed Revenue: $0
Total Revenue: $4,637,709
Yellow cells are manually inputted values.
Estimated Change in Bi- Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
BI- Monthly
Usage
(Hot)))
Block Range Hcf
Chan eln Rill
($) %)
Existing Rate Structure
%of Tr-
DU
Block Range (Hai
Current
8irueWre
Black Rate
$term
Proposed
Block Rata Structure
6
$14.88
Water Rate
Blocks
Greater
Than
Less TM1an
or Toovai
2011
Annual
Usage
Hcf r
%Annual
Usage
Rate (,or
Hap
Annual
Revenue
Greater
Than
Less Than
or Equal
Rate (par
Het)
%Rata
Change
Unit Usage
Reduction
Projected
Annual
Usage
Het'
%
Projected
Annual
Usage
Annual
Revenue
%Annual
Revenue
Black
0
14
566,912
43.3%
$2.98
$1,405,943
0
14
$2.64
6.5%
0.0%
566912
43.3%
$1,49],329
2B.0%
Block
14
40
518,120
398%
$374
$1,937,770
14
30
$404
8.0%
DA%
369,786
29.8%
$15]4,425
29.5%
Black3
40
148
213,282
16.3%
7.4%
$1,194381
30
B8
$5]i
20%
Be%
2]6,828
21.1%
$1,581239
296%
Block
148
10000
11,381
09%
_$5.60
$&76
$99,895
GB
198
$0.94
2.0%
0.0%
84,789
4.9%
55]0,899
$22].2]
Blackb
10000
1.0.0.0.0
0
00%
$8.]8
_
SO
148
10000
$9]4
113%
0.0% _
11,381
0.9%
$110,841
Block6
10000
1000.0
0
0.0%
$36.5]
$0
10000
t000U
75
5327.98
oe%
0
0.0%
$0
0.0%
Block?
10000
10000
0
Om%
_
$0
_
10000
10000
_
$8660
0.0%
0
O6%
$0
0.0%
peak
10000_
10000
0
0.0%
fee
$0
10000
10000
291%
10
_
0.0%
a _
0.0%
$0
0.0%
cloche
10000
10000
a
0.0%
$738.61
_
$0
WOOD
_
10000
0.1%
120
00% -
0
0.0%
50
06%
cloak'%
"000
10000
0
90%
372%
s0
10000
10000
$891.96
$961.99
$270.03
0
0.0%
so
90%
Fixed Charge BI- MonthlylDH:
$1,150.35
$308.47
$0.00
11
0.1%
190
$1,104.68
$33].85
Max,
7
0.1M
_
225
Totals: . 1,309,096 100.0%
Variable Revenue: $4,63],]88
Fixed Revenue: $0
Total Revenue: $4,637,709
Yellow cells are manually inputted values.
Estimated Change in Bi- Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
BI- Monthly
Usage
(Hot)))
T 100181 -MOof ilv Hill
Chan eln Rill
($) %)
No. of
DU
%of Tr-
DU
Cumulative
Current
8irueWre
Black Rate
$term
of
%of Total
BE
6
$14.88
$1585
$0.97
6.5%
413
5.4%
6857
7152
7335
7363
1429
7474
7511
7551
7569
7585
7596
7604
7616
7624
7635
7642
1848
7648
]649
5.4%
10.7%
126%
17.5%
22.9%
41.2%
51l
62.3%
71.1%
]8 .7%
85.1%
096%
93.5%
95.9%
963%
97.1%
97.7%
98.2%
90]%
99.0%
99.2%
993%
99.4%
99.6%
997%
988%
99.9%
100.0%
100.0%
ta0,0%
9
$22.32
$2317
_
$1.45
65%
407
53%
10
$24.80
526.41
$161
65%
146
1.9%
12
$29.76
$3169
$1.93
6.5%
371
4.9]
14
$34.72
$36.98
$226
65%
414
_ 5.41
21
$60.90
$65.25
$4.35
7.1%
1404
18.45
25
$7566
$5.55
7.3%
742
9.7]
30
30
$94.58
_$81.41
$10160
$704
7.4%
865
11.32
35
$11326
$130.16
$16.90
14.9%
679
8.91
40
5131.96
$158.72
$26.76
20.3%
57]
7.58
47
_
$1]116
5198.]1
$2].55
15.1%
570
7.5/8
52
$199.18
$22].2]
$28,11
14.1%
269 _
&5/0
65
$243.98
$272.96_
$29.00
11.9%
295
_ 39%
_
68
$28876
$318 fib
529.90
104%
163
24%
70
$299.96
$336.53
$36.5]
_
42.2%
28
94%
75
5327.98
5361.21
$53.25
66
OBit,
_
80
$355.96
$425.88
$69.92
_16.2%
1961% _
45
D.6%
85
$383.96
$8660
ME%
3]
D.5% _
_
95
$43996
_$4]0.58
$55991
$118.95
2Z3%
40 _
Be%
fee
546].96
$604.513---$138l
291%
10
_0.2%
110
$543.96
$693.94
$169.98
_
32.4%
15
02%
115
$55196
$738.61
$186.55
336%
11 _
0.1%
120
$579.96
$78329
5203.33
_
35.1%
8
_ 0.1%
130
$635.96
$872.64
$236.68
372%
12
0.2%
140
$891.96
$961.99
$270.03
39.0%
0
0 1046
160
$84188
$1,150.35
$308.47
36.6%
11
0.1%
190
$1,104.68
$33].85
Max,
7
0.1M
_
225
$1,41128
_51,44253
$1,783.41
$372.13
26.4%
4
0.1%
250
51,630.28
$2,026.89
243%_
2
0.0%
>250
- --
- --
_$39861
-----
-----
1
0.0%
1,309,696 -7 100%
Calculated Increase Variable Revenue: $5,342,734
Assuming No C.Anervahon Fixed Revenue: $0
15.2% Total Revenue: $5,342,734 100.0%
Santa Monica
Demand Model to Evaluate Block Structure for Single Family Water Rates
KU 1283015'00 ALT 4 b $10.00 Fixed - Block 1 Price = $0.00
Totals: 1,309,696 100.0%
Variable Revenue: $4,63],]69
Fixed Revenue: $0
Total Revenue: $4,637,789
Estimated Change in BI-Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
Block Rana Hof
cM1an eln Blll
($) %
Existin Rate Structure
%of Total
BU
Block Ran a Hof
Current
SI en
Block Rate
Structure
Pro osed Block Rate Stmctore
%or Total
UU
Water Rate
Blocks
Greater
Than
Less an
°r Tgo ual
2011
Annual
Usage
Hcf°
%Annual
Usage
Rate(per
Het)
Annual
Revenue
Greater
Than
Less The.
orE Equal
Tu
Rate (par
Hcf)
%Rate
CM1enge
Unit Usage
Reduction'
Projected
Annual
Usage
Hcf'
%
Projected
Annual
Usage
Annual
Revenue
%Annual
Revenue
Block 1
$29.07
14
566,912
433%
$2.46
$1,405,943
0
4
$0.00
- 100.0%
0.0%
P],18]
135%
$0
00%
elockY
14
40
fi18,120
39.6%
$3.74
564.04
_
4
25
$3.18
-15.0%
_ 0.0%
886,528
52.4%
$2,182,471
46.5%
Block3
_
40
14B
213,282
163%
$5.80
_$1,937,770
51,194_381
25
68
$5.04
-10.0%
0.D%
369,811
262%
$1,863,850
89.]%
Black
148
10000
11,381
0q%,
$8.76
$98,695
68
146
$832
-5,0%
00%
64,789
4.9%
$539,171
115%
Block
_
t000D
10000
0
0.0%
$8.76
$0
148
10000
59.5]
92%
0.0%
11,381
9.9%
$108,91]
2.3%
Block6
10000
10000
0
D.0%
5310.12
50
_
10000
10000
D.4%
]5
0.0%
0
O0%
$0
0.0%
Block]
10000
Wood
0
00%
10.5%
_
$0
10000
10000
$383.96
_
0.0%
0
_ 11.0%
_$0
0.0% -
Block8
_
10000
10000
0
0.0%
0.5%
$0
10000
10006
$91.82
19.6%
0.0 ^/0
0
00%
$0
00%
Block9
10000
10000
0
0.0%
_
$55196
$0
10000
10000
11
Ti % _
120
D
-0
00%
$0
0.0%
-Block 10
10000
10000
0
6o%
$17348
- $0
10000
10000
140
$691.98
-
$200.70
0.0%
so
00%
Fixetl CM1ar
a BI- MOnthlylOU:
$1,0]408
$23220
50.00
11
0.1%
190
$10.00
$1,361.19
$25fi.51
23.2%
]
D.1%
225
Totals: 1,309,696 100.0%
Variable Revenue: $4,63],]69
Fixed Revenue: $0
Total Revenue: $4,637,789
Estimated Change in BI-Monthly Bill by Usage (Both Fixed and Quantity Charge)
Average
icaI BI- Monthl Bill
cM1an eln Blll
($) %
No. of
CU
%of Total
BU
Cumulative
Current
SI en
Block Rate
Structure
%or Total
UU
$14.68
$16.36
$1.46
9.9%
413
5.4%
r6018
6857
7152
7335
7363
7428
]4]4
7511
7551
7569
7585
7596
7804
7616
7624
7635
7642
7646
7648
7649
5.4%
10.7%
12.6%
1].5%
22P%
412%
50.9%
62.3%
71.1%
703%
86A%
896%
935%
95.9%
98.3%
9].1%
9]1%
98.2%
99]%
99.0%
99.2%
99.31k
994%
99.6%
99.7%
99.8%
99.9%
100.0%
1000%
100.0%
$22.32
$25.90
$3.58
16.0%
40]
5.3%
$2480
$29.07
$4.2]
i].2%
146
1.9% _
r(H.0T
$29.]6
$35.43
$58]
19.1%
3T1
4.9%
$34 .72
$41.]9
$]0]
20.4%
414
54%
$66,90
564.04
$3,14
5.2%
1404
18.4%
$]6.86
$]6,]6
$0.90
12%
742
_ 9]%
$94.56
$101.96
$].40
TB%
865
11.3%
$113.26
$12].16
$1390
12.3%
679
8.9%
$131.96
$15236
$2040
15.5%
577
Z5%
47
$1]1.16
$18].64
$16.48
9.8%
5]0
T5%
52
$199.18
$212.84
$13.68
6.9%
Z6 9
35%
60
524396
$253.16
59.20
3.8%
295
3.9%
68
$28836
$293.48
_
$4.72
1A
183
2.4%
70
$299.96
5310.12
$10.16
3.4%
28
D.4%
]5
$327.98
- $351.73
$23.77
7.2%
66
0.9%
an
$355.96
$39334
$37.38
10.5%
45
015%
86
$383.96
$434.95
_
$50.99
13.3%
37
0.5%
95
$439.96 -
$518.17
$]8,21
17.6%
40
0.5%
100
$467.96
$559.78
$91.82
19.6%
16
02%
110
$523.96
$543.00
$119.04
22.]%
16
0.2%
115
_
$55196
$684.61
$132,6 5
24.0%
11
Ti % _
120
$579.96
$72622
5148.26
25.2%
8
0.1%
130
$635.96
$809.44
$17348
27.3%
12
02%
140
$691.98
$892.66
$200.70
29.0%
_
8
0.1% --
160
4841.86
$1,0]408
$23220
27.6%
11
0.1%
190
$1,104.68
$1,361.19
$25fi.51
23.2%
]
D.1%
225
$1,411.26
$1696.15
$28487
20.2%
4
0.1%
250
$1,63028
$1,935.41
$305.13
16.]%
2
0.0%
>250
- - - --
- --
- --
- --
1
00%
1,309,696:;; 100%
Calculated Increase Variable Revenue: $4,694,409
Assuming No Conservation Fixed Revenue: $]2],396
16.9% Total Revenue: $5,421,605 100.0%
APPENDIX A
COST OF SERVICE ACCOUNT AND EQUIVALENT METER DATA
Customer
Class
Bill
Cade
Meter Size
Inches)
Number
of Meters
Percent
of Total
Meters
Meter
Capacity
Ratio
Number
of
Equiv. Meters
Percent
of Total
Equiv. Meters
Single Family
7,604
=46%
12,117
-32%
WASF01
314
117
1.00
117
WASF02
1
40
1.67
67
WASF03
1.5
5
3.33
17
WASF7
314
3,569
1.00
3,569
WASF2
1
2,808
1.67
4,680
WASH
1.5
1,006
3.33
3,353
WASH
2
59
5.33
315
Multi- Family
6,085
<. 37%
16,108
143%
WAMFOt
3/4
19
1.00
19
WAMF02
1
2
1.67
3
WAMFO3
1.5
2
3.33
7
WAMF05
3
0
10.00
0
WAMFO6
4
0
16.67
0
WAMF07
6
0
33.33
0
WAMFO8
8
0
53.33
0
WAMF1
3/4
1,207
1.00
1,207
WAMF2
1
1,382
1.67
2,303
WAMF3
1.5
2,323
3.33
7,743
WAMF4
2
472
5.33
2,517
WAMF5
3
57
10.00
570
WAMF6
4
29
16.67
483
WAMF6A
4
1
16.67
17
WAMF7
6
9
33.33
300
WAMF8
8
2
53.33
107
WAMF9
10
0
96.67
0
WASF01
3/4
7
1.00
7
WASF02
1
1
1.67
2
WASF03
1.5
1
3.33
3
WASF04
2
0
5.33
0
WASF1
3/4
338
1.00
338
WASF2
1
190
1.67
317
WASF3
1.5
35
3.33
117
WASF4
2
4
5.33
21
WASH
3
0
10.00
0
WASH
4
0
16.67
0
WASH
6
0
33.33
0
WASH
8
0
53.33
0
WASF9
10
0
96.67
0
WANR3
1.5
2
3.33
7
WANR5
3
2
10.00
20
Comm./Inst.
2,175
'.13%
7,808
21%
WANR01
3/4
0
1.00
0
WANR7
314
605
1.00
605
WANR2
1
476
1.67
793
WANR3
1.5
544
3.33
1,813
WANR4
2
365
5.33
1,947
WANR5
3
118
10.00
1,180
WANR6
4
47
16.67
783
WANR7
6
19
33.33
633
WANR8
8,
1
53.33
53
Landscape
555
3%
1,411
4%
WANR01
3/4
0
1.00
0
WANR1
314
184
1.00
184
WANR2
1
160
1.67
267
WANR3
1.5
124
3.33
413
WANR4
2
75
5.33
400
WANR5
3
8
10.00
80
WANR6
4
4
16.67
67
WANR7
6
0
33.33
0
WANR8
8
0
53.33
0
TOTAL
16,419
1000%
37,445
100%
APPENDIX
SUMMARY OF COST OF SERVICE FINDINGS
Actual Cost of Service Percent
Equivalent Meters Avg Annual Usage Peak Hour Usage Revenues Costs Difference
Customer Type Number % Hcf % Hcf % $'a $'s %
Single Family Residential
12,117
32.4%
1,323,994
24.5%
77,226
26.6%
$4,017,232
$4,276,700
106%
Multi - Family Residential
16,108
43.0%
2,354,687
43.5%
113,394
39.1%
$7,209,647
$7,124,134
99%
Commercial /Institutional
9,219
24.6%
1,729,924
32.0%
99,168
34.2%
$5,652,328
$5,478,373
97%
Water System Totals
37,444
100%
5,408,605
100%
289,788
100%
$16,879,206
$16,879,206
100%
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9
City Council Meeting: December 16, 2014 Santa Monica, California
RESOLUTION NUMBER 10852 (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA RECOMMENDING CONSIDERATION OF
CERTAIN PROPOSED WATER RATE INCREASES; SETTING
A PUBLIC HEARING ON FEBRUARY 24, 2015, TO
HEAR ANY PROTESTS OR OBJECTIONS TO
THE PROPOSED CONSIDERATION OF WATER RATE INCREASES;
AND DIRECTING THE CITY CLERK TO ISSUE NOTICE OF THE
HEARING TO ALL IMPACTED PROPERTY OWNERS OF RECORD IN
ACCORDANCE WITH PROPOSITION 218
WHEREAS, due to declining water sales and increased capital funding needs,
the City's cost to provide water service is projected to exceed the City's water revenues
unless water rates are increased; and
WHEREAS, City has conducted a water rate study which details the revenue
requirements of three proposed water rate alternatives to address the projected revenue
shortfall; and
WHEREAS, revenue requirements are driven by the need to augment
conservation plans, offset reduced revenues due to declining water sales, and increase
capital program funding to address the needs for continued infrastructure investment
and Sustainable Water Master Plan requirements; and
WHEREAS, Council has considered three proposed water rate alternatives, as
follows:
and;
WHEREAS, Option 3 is based on a 9% increase in the first year, and a 13%
increase in each.of the remaining four years of the financial plan; and
WHEREAS, Option 3 provides for much stronger financial performance than the
other two proposed options and provides additional financial stability for the Water Fund
to meet projected capital improvements, potential emergency system improvements,
and absorb further than projected declines in water demands and water sales revenues.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
KA
2015
2016
2017
2018
2019
Option 1
2.5%
2.5%
2.5%
2.5%
2.5%
(CPI only)
Option 2
9%
9%
9%
9%
9%
(9% plan)
Option 3
9%
13%
13%
13%
13%
(9113% plan)
and;
WHEREAS, Option 3 is based on a 9% increase in the first year, and a 13%
increase in each.of the remaining four years of the financial plan; and
WHEREAS, Option 3 provides for much stronger financial performance than the
other two proposed options and provides additional financial stability for the Water Fund
to meet projected capital improvements, potential emergency system improvements,
and absorb further than projected declines in water demands and water sales revenues.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:
KA
SECTION 2. Council hereby recommends consideration of a 9% increase
above existing water rates in the first year with 13% increases above then existing water
rates in the next four years as the plan for water rate increases in order to ensure
financial stability of the Water Fund.
SECTION 3. Pursuant to Article XIII D Section 6 of the California Constitution,
the City Council does hereby order and declare that on the 24th day of February, 2015,
in the City Council Chambers of City Hall, 1685 Main Street, Santa Monica, California
90401, it will conduct a public hearing upon the proposed plan for water rate increases
and consider all protests and objections against these water rate increases, which may
be raised by any property owner subject to these water rate increases or by any other
interested persons.
SECTION 4. All protests or objections must be in writing and filed with the City
Clerk on or before the time set for the hearing of the protests and objections.
SECTION 5. The City Clerk is hereby directed to mail notices, pursuant to
Article XIII D Section 6 of the California Constitution, to consider the proposed water
rate fee increases to all persons owning commercial, industrial, or residential real
property in the City of Santa Monica whose names and addresses appear on the last
equalized assessment roll for the City taxes or as known to the City Clerk.
SECTION 6. The City Clerk is directed to publish this Resolution, in accordance
with Government Code Section 6066 in the Santa Monica Daily Press once a week for
0
two successive weeks, with at least five days intervening between the first date and the
second date of publication. The first publication is to be made no less than 15 days
prior to the date of the above public hearing.
SECTION 7. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effect.
APPROVED AS TO FORM:
12
Reference:
Resolution No. 10852
(CCS)