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SR 02-23-2016 9A City Council Report City Council Meeting: February 23, 2016 Agenda Item: 9.A To: Mayor and City Council From: Martin Pastucha, Director, Public Works, Water Resources Subject: State of the Water Fund Recommended Action Staff recommends that the City Council suspend part of the 9% water rate increase authorized by Council to go into effect on January 1, 2016 and authorize a 5% increase. The partial suspension would reduce the water rate increase scheduled to go into effect on January 1, 2016 from 9% to 5%. This rate adjustment would be in effect until December 31, 2016. Executive Summary This report recommends the City Council adopt a 5% water rate increase for 2016 instead of the previously approved 9% increase. s, projected expenses and revenues and projected fund balances over the next 5 years. On February 24, 2015, Council approved annual 9% water rate increases for the 5-year period beginning March 1, 2015 and ending December 31, 2019. The first 9% increase went into effect on March 1, 2015, with second 9% rate increase scheduled to go into effect on January 1, 2016. The resolution approving these annual water rate increases authorized the increases to go into effect automatically each year unless Council suspended all or part of the increase, beginning with the January 1, 2016 scheduled rate increase. Based upon review of Water Fund performance for Fiscal Year 2014-15, including greater than anticipated revenues, decreased operating expenses, and decreased capital project expenditures, staff is recommending a partial suspension of the 9% rate increase, and implementation of a 5% increase effective January 1, 2016. The change in rate is only effective for 2016, returning to the adopted 9% increase authorized for subsequent years, evaluated annually. Council can take action to adjust future rate increases at the next annual review. Background On February 24, 2015 Council approved the following schedule of rate increases: 1 of 10 2015, 2016, 2017, 2018, 2019, effective effective effective effective effective Calendar Year March 1, January 1, January 1, January 1, January 1, 2015 2016 2017 2018 2019 Maximum Projected 9% 9% 9% 9% 9% Increase The rate increases go into effect automatically on an annual basis unless Council suspends a scheduled rate increase. The circumstances which might demonstrate that decreased operating expenses, or decreased capital project expenditures. Based upon staff review of Water Fund revenues and expenses for Fiscal Year 2014-15, staff is recommending a suspension of the yearly 9% rate increase and the implementation of a 5% increase which would go into effect for water consumption beginning on January 1, 2016. Since water bills reflect the pr water bills prepared beginning March 1, 2016 would reflect the revised rate, if Council approves the recommended rate adjustment. Discussion The multi-year rate adjustment schedule approved by the City Council in February 2015 was based upon projected revenue and cost estimates in the Water Fund through the year 2019. The financial forecast approved in the 2015 Rate Study (Attachment D) submitted to Council on December 16, 2014 is presented in Figure 1 (Attachment A). For the first year, Council adopted a 9% increase, effective March 1, 2015, with direction to staff to return later in the year with a recommendation for the following At the time rate increases were being considered by Council, reductions in proposed capital programs were deemed necessary to avoid higher increases than the 9% annual rate increases approved by Council over the 5-year rate period. In order to accommodate the series of 9% increases over the 5-year period, $2.5 million in water main replacements, and $5 million in Advanced Meter Infrastructure programs were 2 of 10 eliminated (from the higher 13% rate increase option). Specifically, the revenue plan approved by Council at the February 24, 2015 meeting (Figure 1, Attachment A) projected that the water utility would collect sufficient revenue to cover fixed expenses, maintain cash reserves consistent with adopted Council policy, fund capital improvements on a pay as you go basis, and create a Water Fund balance in the later years of the planning period that would allow for future bond funding. Past Year Water Fund Performance and the Implications for Year 2 Rate Suspension In considering whether to suspend all or part of the scheduled 9% rate adjustment for calendar year 2016, staff analyzed the FY 2014-15 actual performance of the Water Fund. Using financial performance information from a full fiscal year basis coincides financial reporting period, allowing the use of the ending fund balance to be considered along with the five-year projections in formulating a rate adjustment recommendation. Consequently, the ending Fiscal Year performance of the Water Fund, considered along with the five year projections of future operations and capital project expenditures are the key elements in determining future rate adjustment recommendations in the remainder of the 5-year planning period. It is important to note that FY 2014-15 information only reflects performance of the fund through June 30, 2015. Accordingly, the effects of the rate increase approved at the February 24, 2015 meeting (which became effective for water use beginning March 1, 2015) are not fully reflected in the FY 2014-15 numbers. For example, the first bills at the new rates were sent out May 1, 2015. As a result, any impact on revenues which may have been due to the rate increase generated by the 2015 rate adjustment were limited to only one billing cycle. Similarly, the end-of-year ramp-up of conservation programs and implementation very little effect on the FY 2014-15 financial results due to timing. Going forward, the ending fund balance of the Water F performance, in combination with newly projected five year forecasts, typically prepared in December, will serve as the most up-to-date projections upon which to base a 3 of 10 potential rate adjustment recommendation to be implemented annually at the beginning of March. Considerations to Suspend a Part of the 2016 Rate Increase Utilizing FY 2014-15 actuals, the fund balance projection has been updated to show the implications over the remainder of the 5-year planning period of suspending all or a portion of the 9% rate increase previously authorized for 2016. Current and proposed rates are listed in Table 4 (Attachment C). In all options, it is assumed the suspension remains in effect only for 2016 followed by the full 9% increase authorized for subsequent years, evaluated annually. Each option is included in Figure 1 (Attachment A), which indicates the projected performance (ending fund balance) of the Water Fund for the total suspension (Table 1, Attachment B), partial suspension resulting in 5% versus the full 9% increase (Table 2, Attachment B), and the full 9% increase automatically authorized unless suspended (Table 3, Attachment B) relative to the 5- year rate plan (the February 2015 revenue plan) without any suspension of rates as indicated in Figure 1. For all three options presented, the ending fund balance estimates project the changes in revenue realized with the respective proposed change in the rate. For all options, projections in operating and capital expenses are the same. It should be noted that the actual ending fund balance for FY 2014-15 begins at a point higher than envisioned in the rate study forecast (Figure 1). This is due to actual revenues being higher than projected, as the impact of conservation programs had not fully taken effect in FY 2014-15; operating expenses being lower, and capital budget amounts decreasing through review of projects and programs which eliminated substantial amounts from the Capital Improvement Program (CIP). Also contributing to the fund balance was a one-time infusion of $33.4 million in MTBE settlement funds transferred into the Water Fund at the end of FY 2012-13. These funds had been kept in a separate Charnock/Arcadia-only fund; upon completion of treatment plant improvements they were transferred into the Water Fund. These funds are used to offset certain water treatment costs, and in doing so, they effectively subsidize a portion of the water rates. 4 of 10 Total Suspension of the 9% Increase (0% Increase) Suspension in its entirety of the previously authorized 9% rate increase for 2016 leaves water rates unchanged from those effective as of March 1, 2015. This is represented graphically in Figure 1 and Table 1. Advantages: No increase in rates for 2016; rates are not increased beyond the increase adopted by Council in March 2015. Disadvantages: As indicated in Figure 1 and Table 1, the minimum recommended reserve fund balance of $7 million is not achieved for the last two years of the planning period. Financial conditions are not met which would allow the City to bond for future Capital projects. Partial Suspension Resulting in a 5% vs. 9% Increase For 2016 (staff recommendation) As indicated in Figure 1 and Table 2, a 5% increase in year 2 of the planning period shows a forecast of fund balances in the later years of the planning period at levels less than the projections for the full 9%. Ending fund balances through FY 2019-20 meet the minimum reserve level of $7 million. Advantages: Lower increase in unit price compared to the 9% increase option discussed below. Bond issuance criteria for future capital projects (revenues exceeding expenditures by 20% or more) are met by FY2018-19. Disadvantages: Reduced ability to address unforeseen emergency situations due to the lower fund balances in the outer years than the 9% option. No Suspension 9% Increase Based on the five-year forecast prepared annually in December, the ending fund balance for the Water Fund with a 9% increase this year (effective January 1) and 9% increases in the following years is indicated in Figure 1 and Table 3. 5 of 10 Advantages: Creates the strongest financial position (ending fund balances) throughout the planning period in excess of adopted minimum reserve levels. Bond issuance criteria for future capital projects are met by FY 2018-19. Disadvantages: Highest increase in water rates, compounded over the maximum increase in the prior year. Summary and Recommendation producing potable water, meeting capital project goals, and supporting ongoing conservation and drought response plans includes the challenge of accounting for an uncertainty of water usage throughout the service area. Various factors come into play in consideration of the recommended rate adjustment. Water Conservation: Although the City has experienced a sizeable water use reduction starting from approximately March 2015 to present, for FY 2014-15 (period ending June 30, 2015) water use was only reduced 4% from the prior year. In comparison, water conservation city-wide has averaged beyond 20% for the period from March 2015 and analysis and subsequent rate recommendation. Revenues: Revenue projections assumed a water use pattern which included increased water demand in a rebounding economy, a 10% level of conservation throughout the year, and a 9% rate increase. However, since water demand did not fall as much as anticipated during FY 2014-15, revenues came in higher than projected. Revenue from water sales were $3 million higher in FY 2014-15 than projected in the rate study. Capital Expenditures: After significant review and scrubbing of capital program expenditures, which had previously included rollover amounts from prior year there were $6.8 million in savings from projects completed under budget or deferred to later years. Operating Expenses: Operating expenses were less than anticipated by $2.7 million. Conservation Program Expenses: Implementation of conservation programs, for which additional funding was approved by Council in order to accelerate carrying out the 6 of 10 Stage 2 Water Shortage Response Plan, took several months to implement and it was not until late summer 2015, during FY 2015-16, that they became fully operational. The Water Fund-budgeted expenses were $1.9 million less than budgeted in FY 2014-15. In comparing full implementation of the 9% increase previously authorized by Council in February 2015 versus a partial suspension of that increase amounting to a 5% increase over rates in place as of December 31, 2015 clearly creates a stronger fund balance at the end of the planning period, as would be expected with a higher rate increase. However, the 5% increase option does increase fund balances in later years, while still meeting minimum reserve balances and debt issuance criteria. Additionally, the bond issuance criteria is met by the 5% increase, similar to the conditions established by the 9% increase. The 5% water rate increase for 2016 allows the City to continue the current fiscal management of the water utility while ensuring the operation, maintenance, and infrastructure investments necessary to continue the delivery of safe drinking water to the community. The adjusted rate, if approved by Council, will be effective for water use commencing January 1, 2016. Billings for water use beginning this date will begin March 1, 2016, and will reflect the adjusted rate. Council complied with Proposition 218 public notice requirements when it approved a schedule of rate increases (up to 9% per year) in February 2015. Since the rate adjustment does not exceed the maximum 9%, the Proposition 218 public notice period of 45 days is not required. Cost of Service Analysis Subsequent to the adoption of the City's latest 2015 water rate increases, the Court of Appeal, Fourth Appellate District, issued its opinion in the case Capistrano Taxpayers th Association, Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4 1493. In its decision, the court held that for tiered water rates to be valid under Proposition 218, the various water tiers must correspond to the actual cost of delivering water. Because the City of Capistrano could not demonstrate that its tiers followed this principle, the Court 7 of 10 ruled ag the Governor, who is considering proposing an initiative to modify Proposition 218, and while the court's opinion runs counter to the statewide practice of using tiered rates to encourage water conservation, the court did not reject tiered pricing altogether. In light of the Capistrano opinion, staff has reviewed the cost assumptions in the 2015 rate study. Even taking into consideration the Capistrano decision, staff has concluded that the City's rate structure meets Proposition 218 requirements. In performing its analysis, Staff compared current water rates with updated FY 2014-15 cost-of-service data, which is the most recent data available, as well as with the data utilized in the development of the Rate Study. As demonstrated in the tables and attachments, t -of-service. This is true at each Tier breakpoint (the point at which the price for each additional unit of water usage increases) in each customer class, as indicated in Tables 5 and 6 in Attachment E. Moreover, the effective water rate paid by water customers that is, the actual water rate paid for water used, which takes into account the progression of rates through the various Tiers is also below the actual cost of service. An example helps to illustrate. A single family residential customer, who uses 40 hundred cubic feet (HCF) of water, where 1 HCF = 748 gallons, would pay $2.73/HCF at the Tier 1 rate, for the first 14 HCF, and $4.09/HCF at the Tier 2 rate, for next 26 HCF (based upon 2015 prices). The combined or effective blended rate paid for all the water purchased is $3.61/HCF, for 40 HCF of water. However, the actual cost of service to provide 40 HCF to a single family residential customer in FY 2014-15 was $5.51/HCF, based upon the data provided in the 2015 rate study. Thus, a single family customer using 40 HCF of water paid $1.90/HCF less than the actual cost-of-service. The difference between the actual costs-of-service and the amount paid by each customer class represents essentially a subsidy. The subsidy is being funded from $33.4 million in Charnock settlement proceeds and $56.1 million in Olympic Basin 8 of 10 settlement proceeds from FY 2014-15 through FY 2018-19, as indicated in Table 5B of 1 the Rate Study. The settlement proceeds are offsetting certain capital and operation and maintenance costs that otherwise would need to be funded by water sales. As represented by the example above, tiered pricing is a form of progressive or blended pricing. Customers in Tiers 2 and above pay a water rate that is a combination or blend of rates. A Tier 2 customer, for instance, pays Tier 1 pricing for the first 14 HCF of water used and then pays Tier 2 pricing for the balance of the water used. Because of the tiered pricing and the subsidy of rates provided by the various settlements, lower tier water users are benefitted and subsidized more heavily by the Water Fund reserves than higher tier users in each classification. Water users that primarily pay lower tier rates are those with the lower water consumption. As consumption increases, water users graduate to the higher tiers and lower subsidies. However, rate payers at the higher tiers still benefit from paying a blended rate that remains partially subsidized at all tier levels. Nothing in Proposition 218 prevents subsidies of water rates and nothing in Proposition 218 requires the City to subsidize all water customers in the same amount. It must be acknowledged, however, that the 2015 Rate Study assumes certain cost-of- service savings that cannot be anticipated with precision. Because of this, and given that the current rate structure anticipates partial or whole suspension of rates on a year to year basis, staff anticipates that actual revenue and cost scenarios can be adjusted to ensure that the implementation of the annual 9% rate increase authorized in 2015 is warranted on a year to year basis. Furthermore, the legal status of tiered pricing may be further clarified by future court decisions or possible changes Proposition 218. Task Force on the Environment Action the following motion: 1 See, e.g., footnote (d) of Table 5B of the 2015 Rate Study (Attachment D). 9 of 10 The City of Santa Monica Task Force on the Environment recommends a 5% rate increase for the coming year and requests revisiting the rate structure within the next year, particularly in regards to a conservation based block rate structure and fixed charges. Financial Impacts and Budget Actions The revenue budget established at account 25671.402310 will be reduced by $300,867 in FY 2015-16 and reduced by $776,064 in FY 2016-17 to reflect implementation of the partial suspension of water rates for calendar year 2016. Prepared By: Gil Borboa, Water Resources Manager Approved Forwarded to Council Attachments: A. Attachment A - Figure 1 - Water Fund Revenue Plan Options B. Attachment B - Tables 1 to 3 - Water Fund Balance 5-Year Projections at 0%, 5% and 9% 2016 Increases C. Attachment C - Table 4 - Water Rate Summary D. Attachment D - Water Rate and Revenue Plan - February 2015 E. Attachment E - Tables 5 and 6 - Cost of Service and Water Rate Comparison by Tier F. Staff Report - Water Rate Analyses and Proposed Water Rate Options - 12/16/14 - Item 8-A (web link) G. Staff Report - Public Hearing to Adopt Water Rates - 2/24/15 - Item 9-A (web link) H. Powerpoint 10 of 10 FIGURE1WaterFundRevenuePlanOptions $40.0 $30.0 $20.0 $10.0 $0.0 FY201314FY201415FY201516FY201617FY201718FY201819FY201920 EndingCashBalanceOriginalProjectionEndingCashBalance9%Increase February2015RevenuePlan9%Increase EndingCashBalance5%IncreaseEndingCashBalance0%Increase MinimumRecommendedFundReserveBalance TABLE 1 - FULL SUSPENSION OF THE 9% INCREASE FOR 2016 Water Fund - 2 5 SCENARIO 1 - 0% INCREASE Financial Status Update FY 2015-16 to FY 2019-20 FY 2014-15FY 2014-15FINANCIAL STATUS UPDATE FY 2015-16 Rev. Bud./RevisedFY 2016-17 Est. ActualsBudgetBudget Plan ActualsFY 2017-18FY 2018-19FY 2019-20 BEGINNING FUND BALANCE 46,011,392 46,011,392 43,131,22521,950,247 14,924,777 9,715,491 3,730,214 Revenues22,924,019 23,579,659 20,737,53421,997,828 23,070,811 24,794,287 26,299,387 Charges for services (650)22,111,54222,664,71219,970,728 22,330,81121,156,022 24,198,28725,649,387 Interest Income (659)300,000371,274300,000375,000270,000126,000180,000 Other (662)512,477543,673466,806466,806470,000470,000470,000 Expenditures (24,418,876) (20,003,529) (26,237,853)(22,578,372) (23,347,550) (21,057,666)(20,135,059) Salaries and Wages(5,869,325)(5,415,953)(5,974,470)(6,235,587)(6,465,890)(6,679,784)(6,906,198) Supplies and Expenses(18,549,551)(14,587,575)(20,263,383)(16,342,785)(16,881,661)(14,377,882)(13,228,861) Non-Dept.Transactions (1,601,524) (1,262,647) (2,308,313) (1,614,794) (1,650,164) (1,689,683) (1,733,586) All Other Transactions (274)(160,900)48,266(56,226)(57,973)(60,127)(62,377)(64,729) Transfers In (695)20,000364,706104,000104,000 104,000104,000104,000 Transfers Out (695)(1,460,624) (2,356,087)(1,675,619) (1,660,821) (1,694,037) (1,731,306)(1,772,858) Capital Improvement Program (CIP) (5,193,651)(19,579,459) (13,372,346) (7,330,132) (3,282,382) (8,032,215) (3,402,215) Exception Based Requests - - - -2,500,000 - - PROJECTED ENDING FUND BALANCE 23,335,552 43,131,225 21,950,24714,924,777 9,715,491 3,730,214 4,758,740 MINIMUM ESTABLISHED - 7,000,000- 7,000,000- 7,000,000- 7,000,000- 7,000,000 COUNCIL RESERVE 7,924,77714,950,247 2,715,491 (2,241,260)(3,269,786) VARIANCE TABLE 2 - PARTIAL SUSPENSION OF THE 9% INCREASE FOR 2016 Water Fund - 2 5 SCENARIO 2 - 5% INCREASE Financial Status Update FY 2015-16 to FY 2019-20 FY 2014-15FY 2014-15FINANCIAL STATUS UPDATE FY 2015-16 Rev. Bud./RevisedFY 2016-17 Est. ActualsBudgetBudget Plan ActualsFY 2017-18FY 2018-19FY 2019-20 BEGINNING FUND BALANCE46,011,392 46,011,392 43,131,225 22,326,332 16,270,942 12,119,043 7,286,318 Revenues 22,924,019 23,579,659 21,113,619 22,967,908 24,128,198 25,946,839 27,526,446 Charges for services (650)22,111,542 22,664,712 20,346,813 22,126,102 23,388,198 25,350,839 26,876,446 Interest Income (659)300,000 371,274 300,000 375,000 270,000 126,000 180,000 Other (662)512,477 543,673 466,806 466,806 470,000 470,000 470,000 Expenditures(24,418,876) (20,003,529) (26,237,853) (22,578,372) (23,347,550) (21,057,666) (20,135,059) Salaries and Wages(5,869,325) (5,415,953) (5,974,470) (6,235,587) (6,465,890) (6,679,784) (6,906,198) Supplies and Expenses(18,549,551) (14,587,575) (20,263,383) (16,342,785) (16,881,661) (14,377,882) (13,228,861) Non-Dept.Transactions(1,601,524) (1,262,647) (2,308,313) (1,614,794) (1,650,164) (1,689,683) (1,733,586) All Other Transactions (274)(160,900) 48,266 (56,226) (57,973) (60,127) (62,377) (64,729) Transfers In (695)20,000 364,706 104,000 104,000 104,000 104,000 104,000 Transfers Out (695)(1,460,624) (1,675,619) (2,356,087) (1,660,821) (1,694,037) (1,731,306) (1,772,858) Capital Improvement Program (CIP) (5,193,651)(19,579,459) (13,372,346) (7,330,132) (3,282,382) (8,032,215) (3,402,215) Exception Based Requests -- - 2,500,000 - - - PROJECTED ENDING FUND BALANCE 43,131,22523,335,552 22,326,332 16,270,942 12,119,043 7,286,318 9,541,903 MINIMUM ESTABLISHED - 7,000,000- 7,000,000- 7,000,000- 7,000,000- 7,000,000 COUNCIL RESERVE 9,270,94215,326,332 5,119,043 286,318 2,541,903 VARIANCE TABLE 3 - NO SUSPENSION OF THE 9% INCREASE FOR 2016 Water Fund - 2 5 SCENARIO 3 - 9% INCREASE Financial Status Update FY 2015-16 to FY 2019-20 FY 2014-15FY 2014-15FINANCIAL STATUS UPDATE FY 2015-16 Rev. Bud./RevisedFY 2016-17 Est. ActualsBudgetBudget Plan ActualsFY 2017-18FY 2018-19FY 2019-20 BEGINNING FUND BALANCE46,011,392 46,011,392 43,131,225 22,627,199 17,347,873 14,041,883 10,131,199 Revenues 22,924,019 23,579,659 21,414,486 23,743,972 24,974,107 26,868,880 28,508,093 Charges for services (650)22,111,542 22,664,712 20,647,680 22,902,166 24,234,107 26,272,880 27,858,093 Interest Income (659)300,000 371,274 300,000 375,000 270,000 126,000 180,000 Other (662)512,477 543,673 466,806 466,806 470,000 470,000 470,000 Expenditures(24,418,876) (20,003,529) (26,237,853) (22,578,372) (23,347,550) (21,057,666) (20,135,059) Salaries and Wages(5,869,325) (5,415,953) (5,974,470) (6,235,587) (6,465,890) (6,679,784) (6,906,198) Supplies and Expenses(18,549,551) (14,587,575) (20,263,383) (16,342,785) (16,881,661) (14,377,882) (13,228,861) Non-Dept.Transactions(1,601,524) (1,262,647) (2,308,313) (1,614,794) (1,650,164) (1,689,683) (1,733,586) All Other Transactions (274)(160,900) 48,266 (56,226) (57,973) (60,127) (62,377) (64,729) Transfers In (695)20,000 364,706 104,000 104,000 104,000 104,000 104,000 Transfers Out (695)(1,460,624) (1,675,619) (2,356,087) (1,660,821) (1,694,037) (1,731,306) (1,772,858) Capital Improvement Program (CIP) (5,193,651)(19,579,459) (13,372,346) (7,330,132) (3,282,382) (8,032,215) (3,402,215) Exception Based Requests -- - 2,500,000 - - - PROJECTED ENDING FUND BALANCE 43,131,22523,335,552 22,627,199 17,347,873 14,041,883 10,131,199 13,368,431 MINIMUM ESTABLISHED - 7,000,000- 7,000,000- 7,000,000- 7,000,000- 7,000,000 COUNCIL RESERVE 10,347,87315,627,199 7,041,883 3,131,199 6,368,431 VARIANCE Table4WaterRateSummarybyAccountType,TierandMeterSize FullSuspension/ PartialSuspensionNoSuspensionUsageRange TierCurrentRate With5%AdjustmentWith9%AdjustmentperBillingPeriod (perHCF)(perHCF)(perHCF)(HCF's) SingleFamilyAccounts Tier1$2.73$2.87$2.980to14 Tier2$4.09$4.29$4.4615to40 Tier3$6.13$6.44$6.6841to148 Tier4$9.59$10.07$10.45149+ MultiFamilyAccounts Tier1$2.73$2.87$2.980to4perdwellingunit Tier2$4.09$4.29$4.465to9perdwellingunit Tier3$6.13$6.44$6.6810to20perdwellingunit Tier4$9.59$10.07$10.4521+perdwellingunit NonResidentialAccounts Tier1$3.88$4.07$4.23Dependsonmetersize* Tier2$9.55$10.03$10.41Dependsonmetersize* RecycledWater$3.49$3.66$3.80Allusage 1HCF=1HundredCubicFeetofwater=748gallons Eachbillingperiodisapproximately61days(~6billingperiodsperyear) FirelineServiceRates FullSuspensionPartialSuspensionNoSuspension MeterSizeFixedChargeWith5%AdjustmentWith9%Adjustment perBillingPeriodFixedChargeFixedCharge 11/2"meter$39.05$41.00$42.56 2"meter$62.65$65.78$68.29 3"meter$107.82$113.21$117.52 4"meter$172.32$180.94$187.83 6"meter$333.52$350.20$363.54 8"meter$526.97$553.32$574.40 10"meter$752.66$790.29$820.40 *NonResidentialAccountsTierDesignationsbyMeterSizeandUsageRange Tier1UsageTier2Usage MeterSize (HCF's)(HCF's) 3/4"meter0to210211+ 1"meter0to210211+ 11/2"meter0to465466+ 2"meter0to870871+ 3"meter0to1,7001,701+ 4"meter0to2,5502,551+ 6"+meter0to5,2805,281+ for the: City of Santa Monica, Water Resources Division THIS PAGE INTENTIONALLY LEFT BLANK 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 February 2015 City of Santa Monica Water Resources Division 1212 Fifth Street Third Floor Santa Monica, CA 90401 K/J Project No. 1283015*00 3210 El Camino Real, Suite 150 Irvine, California 92602 949-261-1577 949-261-2134 (Fax) 2 February 2015 Mr. Gil Borboa, P.E. Water Resources Manager City of Santa Monica, Water Resources Division rd 1212 Fifth Street, 3 Floor Santa Monica, California 90401 Subject: Final Report – Water Rate and Revenue Plan K/J 1283015*00 Dear Mr. Borboa: Kennedy/Jenks Consultants is pleased to submit the Final Water Rate and Revenue Plan to the City of Santa Monica (City). By way of process, we have submitted this report as a digital “.pdf” file for your distribution as appropriate. This Rate Study Report is a compilation of the analysis and findings of the City’s Water Fund and incorporates the City’s comments obtained from previous draft work products and team discussions. The results of the study are intended to serve as a plan for future revenue and rate adjustments based on the projected costs, water demands, and capital improvement program requirements. It has been a pleasure working with you and City staff on this interesting project. Please contact us if you have any questions or need additional information. Very truly yours, KENNEDY/JENKS CONSULTANTS Roger Null, V.P. Vice President and Project Manager KENNEDY/JENKS CONSULTANTS Table of Contents List of Tables ................................................................................................................................. ii List of Figures............................................................................................................................... iii List of Appendices ........................................................................................................................ iii Section 1:Introduction ............................................................................... 1-1 1.1Background and Objectives ................................................................ 1-1 Section 2:Historical and Current Conditions ............................................ 2-1 2.1Evaluation of Historical & Current Financial Condition ........................ 2-1 2.2Customer Accounts and Water Demands ........................................... 2-2 Section 3:Future Revenue Requirements .................................................. 3-1 3.1Projected Customer Growth and Water Sales .................................... 3-1 3.2Budgeted/Projected Operating Expenses ........................................... 3-1 3.3Projected Capital Improvement & Debt Service Financing Program .............................................................................................. 3-3 3.4Summary of Projected Revenue Requirements ................................... 3-4 3.5Projected Revenue Requirements Using Assumed Rate Scenarios ............................................................................................ 3-5 3.5.1Option 1: Projected Revenue Plan – Consumer Price Index (CPI) Based Annual Water Rate Increase (Baseline Option) ..................................................................... 3-6 3.5.2Option 2: Projected Revenue Plan – 9% Annual Water Rate Increase .......................................................................... 3-6 3.5.3Option 3: Projected Revenue Plan – 9/13% Annual Water Rate Increase ................................................................ 3-6 3.5.4Recommended Revenue Plan ................................................. 3-7 Section 4:Current Water Rates .................................................................. 4-1 Section 5:Alternative and Proposed Water Rates and Structures ........... 5-1 5.1Fixed and Variable Rate Considerations ............................................. 5-1 5.2Development of Alternative Water Rate Structures and Revised Water Rates ........................................................................................ 5-1 5.2.1Development of Alternative Rate Structures ............................ 5-2 5.2.2Development of Alternative Water Rates and Typical Bills ....... 5-3 5.3Comparison of Monthly Bills with Other Communities ........................ 5-4 5.4Summary of Findings and Proposed Water Rates .............................. 5-4 Water Rate and Revenue Analysis, City of Santa Monica i Table of Contents (cont'd) List of Tables 1 Historical Operating Revenues and Expenses 2 Current and Projected Accounts and Water Consumption 3A Budgeted and Projected Operation and Maintenance Expenses 3B Projected Water Supply and Production Plan 4 Proposed Capital Improvement Program 5A Projected Revenue Plan – Consumer Price Index (CPI) Increases 5B Projected Revenue Plan – 9% Rate Increases (Reduced CIP) 5C Projected Revenue Plan –9/13% Rate Increases 6 Current Water Rates 7 Rate Adjustment Options 8 Examples of Typical Bi-Monthly Bills 9 Comparison of Bi-Monthly Water Bills – Single Family Residential List of Figures 5A - Projected Revenue Plan with Annual CPI Based Water Rate Increase 5B - Projected Revenue Plan with 9% Annual Water Rate Increase 5C - Projected Revenue Plan with 9/13% Annual Water Rate Increase 9 - Water Rate Comparison with Neighboring Agencies, Single Family Account 10 - Water Rate Comparison with Neighboring Agencies, Non-Residential 2–inch meter 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 ii KENNEDY/JENKS CONSULTANTS 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. 1.1Background 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 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 1-1 KENNEDY/JENKS CONSULTANTS 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 KENNEDY/JENKS CONSULTANTS 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. 2.1Evaluation of Historical & Current Financial Condition 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. Water Rate and Revenue Analysis, City of Santa Monica 2-1 KENNEDY/JENKS CONSULTANTS TABLE 1 HISTORICAL OPERATING REVENUES AND EXPENSES Actuals Sources and Uses of FundsFY 10/11FY 11/12FY 12/13 Operating Revenues Charges for Service$17,507,315$19,897,464$22,254,867 Total Operating Revenues$17,507,315$19,897,464$22,254,867 Operating Expenses Personnel Services$5,322,057$5,238,400$4,882,720 Administrative Indirect$1,056,418$1,088,111$1,142,516 Contractual Services$551,924$486,458$967,553 Repairs and Maintenance$191,172$221,386$848,669 Materials and Supplies$2,134,167$3,242,253$2,444,691 Utilities$572,180$601,593$730,299 Water Purchases$4,526,073$6,460,974$6,334,786 Casualty Property and Liability Costs$140,000$314,023$327,332 Miscellaneous Fees and Costs$0$0$7,825 Depreciation$1,119,172$1,001,793$1,096,572 Other$801,881$858,017$1,292,094 Total Operating Expenses$16,415,044$19,513,008$20,075,057 Net Operating Income (Loss)$1,092,271$384,456$2,179,810 Net Op Rev as % of Total Op Rev6%2%10% Non-Operating Revenue (Expense) Investment Income$200,555$156,939($14,565) Interest Expense($5,074)($6,892)($6,755) Gain (Loss) on Disposal of Capital Assets($148,130)$0$0 Other Non-Operating$356,559$400,333$673,019 Total Non-Op Revenues (Exp.)$403,910$550,380$651,699 Net Income (Loss) Before Capital/Transfers/Other Costs$1,496,181$934,836$2,831,509 Net Increase (Decrease) in Cash (a)($273,582)($1,220,473)$34,313,740 Beginning Cash and Equivalents (b)$18,135,516$17,861,934$16,641,461 Ending Cash and Equivalents (b)$17,861,934$16,641,461$50,955,201 Source: City of Santa Monica Comprehensive Annual Financial Reports (a) FY 12-13 benefited from a cash infusion of $33,413,430 from the transfer of the pollution remediation recovery assets. (b) Cash and Cash Equivalents does not include depreciation as it is a non-cash expense. KENNEDY/JENKS CONSULTANTS 2.2Customer Accounts and Water Demands As noted in the City’s water billing data, the City provides water service to its residential and non-residential customers through approximately 16,650 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. 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 KENNEDY/JENKS CONSULTANTS TABLE 2 CURRENT AND PROJECTED ACCOUNTS AND WATER CONSUMPTION ActualsProjected (a,b) FY 12/13FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Customer Type c Service Area Population() 91,14591,19491,24391,29291,34191,38991,43891,487 Single Family Residential (d) Metered Accounts7,5107,5147,5187,5227,5267,5307,5347,538 (e) Equivalent Meters12,12312,13012,13612,14312,14912,15612,16212,169 (f) Water Demand (HCF)1,365,2731,358,2351,278,0181,135,9741,135,9321,136,5481,137,1641,137,780 Multi-Family Residential2,086,4461,854,6701,854,7201,855,8451,856,9711,858,096 (d) Metered Accounts6,3026,3056,3096,3126,3156,3196,3226,326 (e) Equivalent Meters16,11716,12516,13416,14316,15116,16016,16816,177 (f) Water Demand (HCF)2,398,4892,322,6052,086,4461,854,6701,854,7201,855,8451,856,9711,858,096 Commercial/Institutional1,301,5191,156,9291,156,9521,157,6451,158,3391,159,033 (d) Metered Accounts2,2532,2542,2552,2572,2582,2592,2602,261 (e) Equivalent Meters7,8127,8167,8217,8257,8297,8337,8377,841 (f) Water Demand (HCF)1,576,1151,507,2861,301,5191,156,9291,156,9521,157,6451,158,3391,159,033 Landscape Irrigation240,136213,422213,390213,482213,574213,666 (d) Metered Accounts570570571571571572572572 (e) Equivalent Meters1,4121,4131,4131,4141,4151,4161,4161,417 (f) Water Demand (HCF)247,047263,116240,136213,422213,390213,482213,574213,666 (g) Water System Totals 4,906,1194,360,9944,360,9944,363,5214,366,0474,368,574 Metered Accounts16,63516,64416,65316,66216,67116,68016,68816,697 (e) Equivalent Meters37,46437,48437,50437,52437,54437,56437,58437,604 (f) Water Demand (HCF)5,586,9255,451,2434,906,1194,360,9944,360,9944,363,5214,366,0474,368,574 Notes: (a) Source: City of Santa Monica; Rate Study Billing Usage Data 2012. Does not include dedicated Fire Service accounts. (b) Source: City of Santa Monica; Summary of FY 12/13 billing data provided by the City 8/28/13. (c) Population projections from the City's 2010 UWMP, which provides population projections for the years 2015 and 2020. All other years assume a linear rate of growt h (d) Account projections assume linear growth as a function of population using a growth rate of the number of FY 12/13 accounts by FY 12/13 service area populatio n (e) Equivalent meters derived using AWWA Manual M6 meter factor sizes. (f) Demand projections from the City's 2010 UWMP, which provides demand projections for the years 2015 and 2020. All other years assume a linear rate of growth (g) Excludes Fire Service accounts and miscelaneous usage. KENNEDY/JENKS CONSULTANTS 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. 3.1Projected Customer Growth and Water Sales 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. 3.2Budgeted/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 KENNEDY/JENKS CONSULTANTS 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 (including approximately 1,100 fire service 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 KENNEDY/JENKS CONSULTANTS TABLE 3A BUDGETED AND PROJECTED OPERATION AND MAINTENANCE EXPENSES ActualForecasted in City Budget Projected Description FY 12/13FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Water Enterprise, Fund 25, Dept. No. 500 - Budget (a) Division 671 (General Water Division) -Supplies and Expenses$5,900,900$5,479,900$4,859,700$5,108,700$5,254,800$5,405,900$5,561,700$5,723,000 -Water Purchase$6,334,800$5,608,500$5,125,500$5,253,600$5,385,000$5,519,600$5,657,600$5,799,000 -Brine Disposal$593,400$650,000$650,000$666,300$682,900$700,000$717,500$735,400 -Salaries and Wages$5,261,600$5,671,400$5,796,800$6,070,500$6,374,600$6,621,600$6,898,200$7,194,500 Subtotal Division 671$18,090,700$17,409,800$16,432,000$17,099,100$17,697,300$18,247,100$18,835,000$19,451,900 Division 672 (Charnock WTP Division) (a), ( e) -Supplies and Expenses $1,493,200$2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (b) -Salaries and Wages $0$0$0$0$0$0$0$0 Subtotal Division 672$1,493,200$2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 Division 673 (Arcadia WTP Division) (a) -Supplies and Expenses $1,135,200$2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 (b) -Salaries and Wages $0$0$0$0$0$0$0$0 Subtotal Division 673$1,135,200$2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 Subtotal - Water Fund 25, Dept. No. 50020,719,10022,069,90021,320,60022,147,60022,912,20023,635,30024,355,40025,109,600 SWMP Program Budget Adjustments and New Program Expenses Budget Adjustment - Water Purchase Cost $1,509,800$294,800$374,200($749,400)($610,500)($451,800)($2,395,300)($3,955,400) Budget Adjustment - Groundwater Production Costs $0$0$0$0$0$0$0$411,700 Budget Adjustment - Arcadia WTP Cost $0$0$0$0$0($802,400)($399,600) Budget Adjustment - Brine Disposal Cost $296,500$343,800$377,200$412,800$450,400$129,400$350,700 (d) $862,000$592,000 Stage II Program Costs Water Cons. Program - Salaries and Wages$100,000$105,000$110,300$115,800$121,600$127,700$134,100 (c) Water Cons. Program - Supplies and Expenses $1,620,400$1,297,900$1,789,600$1,599,000$922,700$943,400$1,421,500 Subtotal - Sustainable Program Expenses$1,509,800$2,311,700$2,982,900$2,119,700$1,517,100$1,042,900($1,997,200)($2,037,000) Total Projected O&M Expenses$22,228,900$24,381,600$24,303,500$24,267,300$24,429,300$24,678,200$22,358,200$23,072,600 Notes: (a) Source: Div. 671, 672, and 673 data provided by City Finance Dept. Water Purchases and Brine Disposal shown seperately. (b) Salaries and Wages associated with Div. 672 and 673 are included in Div 671 costs. (c) Programmatic expenses, including public outreach. Public outreach budget assumed to be 20% of average annual programmatic budget. Does not include labor. (d) Water Shortage Response Plan Program costs reflected in only two years; source: City Finance Dept. (e) Changes in Div 672 Charnock WTP costs from FY 12/13 to FY 13/14 are due to increases in energy, chemicals and filter media replacement costs. TABLE 3B PROJECTED WATER SUPPLY AND PRODUCTION PLAN DescriptionFY 12/13FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Projected Annual Water Demand (AF) Projected Water Demand (a)12,82612,04411,26310,01110,01110,01710,02310,029 Unaccounted for Water (9%)1,1541,0841,014901901902902903 Arcadia WTP Brine1,2101,6201,6201,6201,6201,6201,1361,210 Total Annual Water Demand (AF)15,19014,74813,89712,53212,53212,53912,06112,141 Average Annual Water Supply (AF) Local Water Production Olympic Treatment Plant000004,0354,035 Arcadia Treatment Plant6,7209,0009,0009,0009,0009,0006,3106,310 Arcadia Treatment Plant Expansion1,396 Groundwater Well - SM 1400400400400400400400400 Imported Water (MWD)8,0705,3484,4973,1323,1323,1391,3160 Total Water Supply (AF)15,19014,74813,89712,53212,53212,53912,06112,141 Imported Water Purchases $6,621,400$4,645,100$4,122,000$3,043,900$3,226,500$3,427,000$1,523,000$0 Total Annual Water Purchase Cost RTS (Readiness to Serve) Charge$1,022,000$1,048,600$1,145,600$1,214,300$1,287,200$1,364,400$1,446,300$1,533,000 Capacity Reservation$201,200$209,600$232,100$246,000$260,800$276,400$293,000$310,600 Total Annual Water Purchase Cost$7,844,600$5,903,300$5,499,700$4,504,200$4,774,500$5,067,800$3,262,300$1,843,600 Local Water Production Costs (b)$847,616$2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$1,882,133$2,380,698 Arcadia Treatment Plant $1,493,200$2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (c) Charnock Treatment (d)$0$0$0$0$0$0$0$0 Olympic Treatment Plant Additional Groundwater Production (Fund 25)$411,703 (e)$673,047$946,472$993,795$1,043,485$1,095,659$1,150,442$846,917$1,086,066 Brine Disposal Total Local Water Purchase Cost$3,013,863$5,606,572$5,882,395$6,091,985$6,310,559$6,538,642$5,564,950$6,755,867 Total Annual Finished Water Production Cost$10,858,500$11,509,900$11,382,100$10,596,200$11,085,100$11,606,400$8,827,300$8,599,500 Notes: (a) Source: 2010 UWMP/New Water Shortage Plan. Includes unaccounted-for water (estimated to be 9%). Does not include recycled water or fire service. Source for FY 11/12 and FY 12/13 water demand: City rate study billing usage data 2012 & 2013. Source for FY 13/14 through FY 19/20 water demand = 2010 UWMP, assuming linear change in demand between FY11/12 and FY14/15 and FY14/15 and FY19/20. UWMP adjusted for Water Shortage impact (October, 2014) (b) Variable operating costs only. Does not include labor. Assumes reduction in local production at Arcadia/Charnock when the Olympic WTP comes online in FY 18/19. (c) Variable operating costs only. Does not include labor. (d) Olympic Treatment Plant costs will be paid for out of the Olympic settlement funds and are therefore not a Water Fund 25 obligation. (e) Water Fund brine disposal costs represent 8.7% of total Hyperion disposal costs. City budget based on approx. 6,000 AFY of local WTP production. TABLE 3B PROJECTED WATER SUPPLY AND PRODUCTION PLAN UNIT COST CALCULATIONS Fiscal YearFY 12/13FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Calendar Year20132014201520162017201820192020 IMPORTED WATER (MWD) MWD Tier 1 Cost/AF (FY)$821$869$917$972$1,030$1,092$1,157$1,227 $847$890$943$1,000$1,060$1,124$1,191$1,262 (f) MWD Tier 1 Cost/AF (calendar year) MWD RTS (FY)$1,048,610$1,145,566$1,214,300$1,287,158$1,364,387$1,446,251$1,533,026 $985,020$1,112,200$1,178,932$1,249,668$1,324,648$1,404,127$1,488,374$1,577,677 (f) MWD RTS (calendar year) MWD Capacity Charge (FY)$209,600$232,080$246,004$260,765$276,411$292,995$310,575 $193,880$225,320$238,839$253,170$268,360$284,461$301,529$319,621 (f) MWD Capacity Charge (calendar year) LOCAL WATER PRODUCTION Arcadia/Charnock WTP Variable Production Costs$1,135,200$2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 Charnock Treatment Variable Production Costs$1,493,200$2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (g) Additional Groundwater Production to Arcadia $/AF$100$106$112$118$125$132$139$295 (h) Total Estimated Local Treatment Costs $/AF $359$630$657$678$701$724$740$757 BRINE DISPOSAL (i)1,2101,6201,6201,6201,6201,6201,1361,387 Volume of Brine Disposed (j)$556$584$613$644$676$710$746$783 Base Brine Disposal Unit Cost $/AF Notes: (f) MWD Adopted Rates for 2013 and 2014. A 6% annual increase is estimated thereafter. (g) Assumed cost of $100/AF in FY 12/13. Increased by rate of electricty cost increase (5.7%) annually thereafter. Energy cost doubled in FY 19/20 to account for increased well distances. (h) Local costs are for Div 671 & 672 variable costs only. Does not include labor. Increase in FY 13/14 is due to increases in energy, chemicals and filter media replacement costs. (i) Volume of brine produced assumed to be 18% of City's total groundwater production at the Arcadia WTP; Olympic WTP costs paid from settlement funds. (j) FY 11/12 brine disposal cost source: Brine Flow April 11 - March 12. FY 12/13 and beyond inflated 5% annually. KENNEDY/JENKS CONSULTANTS 3.3Projected Capital Improvement & Debt Service Financing 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 (AMI) 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. Water Rate and Revenue Analysis, City of Santa Monica 3-3 KENNEDY/JENKS CONSULTANTS TABLE 4 PROPOSED CAPITAL IMPROVEMENT PROGRAM FY 13/14 FY 14/15FY 15/16 Estimated ActualsBudgetBudget Project TitleAccount#FY 16/17FY 17/18FY 18/19FY 19/20 General Water System Capital Improvement Program - Fund 25 Tennant Improvements$100,000$450,000$450,000 San Vicente Emergency GeneratorC250784.589000$275,000$2,500,000$0$0$0$0$0 Automatic Meter Reading Pilot Project C250388.589000$5,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000 Valve ReplacementC259040.589000$71,542$500,000$500,000$250,000$250,000$0$0 Water Main Replacement - CitywideC250136.589000$3,250,000$2,000,000$2,000,000$2,000,000$2,000,000$2,000,000$2,000,000 Water Main Replacement - Olympic LoopC259043.589000$63,600$1,000,000$0$0$0$0$0 Water Main Replacement - City forcesM250193.589000$200,000$100,000$100,000$250,000$250,000$250,000$250,000 California Incline Water Main ReplacementC250652.589000$0$1,100,000$0$0$0$0$0 Water Meter Shop RenovationsC254086.589000$150,000$75,000$0$0$0$0$0 Expo Water Betterments C257064.589000$1,557,690$725,000$0$0$0$0$0 Colorado Ave. Esplanade C257040.589000$0$250,000$0$0$0$0$0 Arcadia - Pressure Vessel RehabilitationC250878.589000$256,120$900,000$0$0$0$0$0 Booster Pumps and Actuaters EvaluationC25.589000$0$300,000$100,000$0$0$0$0 Booster Pump Station for 500-foot zoneC25____.589000$0$0$0$2,500,000$0$0$0 Annual Paving and Sidewalk RepairM250152.589000$332,941$300,000$300,000$300,000$300,000$300,000$300,000 Climate Action PlanC25____.589000$0$75,000$250,000$0$0$0$0 Sustainable Urban Water Master Plan C25____.589000$0$0$50,000$0$0$0$0 Groundwater Management Plan C25____.589000$0$200,000$0$0$0$0$0 Water Modeling SoftwareC259039.589000$50,000$150,000$0$0$0$0$0 Ultility Billing SoftwareC250785.589000$19,830$65,000$0$0$0$0$0 SCADA System Upgrades C259015.589000$75,000$200,000$50,000$50,000$0$0$0 Water Systems Data IntegrationC258020.589000$26,000$50,000$50,000$0$0$0$0 Fleet Vehicle Replacement ProjectIS250167.589000$328,536$330,373$363,430$392,855$395,105$394,938$394,938 Telecommunications ServicesIS250006.589000$41,757$41,757$41,757$41,757$41,757$41,757$41,757 Computer Equipment Replacement IS250003.589000$53,895$45,520$45,520$45,520$45,520$45,520$45,520 City Yards StudyP254028.589000$5,000 Charnock Water Treatment PlantC250973.589000$1,143,818 Water Master PlanP250829.589000$323,628 Pico Library Harvesting SystemC254032.589000$61,810 Charnock Wellfield RestorationC250878.589250$89,633 Charnock Wellfield RestorationC250878.589300$10,000 Charnock Wellfield RestorationC250878.589500$2,135 Charnock Wellfield RestorationC250878.589600$333,444 Charnock Wellfield RestorationC250878.589900$554,955 Total Fund Amount (a)$9,281,300$12,007,700$5,300,700$7,280,100$4,282,400$4,032,200$4,032,200 SWMP Program Expenditures - Fund 25 New Production Wells $1,500,000 Additional Groundwater Evaluations/Well Siting$200,000 Multijurisdictional Water Supply Participation$50,000$150,000 Additional Infrastructure Capacity Improvements$1,000,000$1,000,000$1,000,000 Supporting Operational/Capacity Studies$300,000 Charnock Improvements (Greensand/Duplex GAC)$250,000 $50,000$200,000$1,150,000$3,050,000$1,000,000 Subtotal Sustainable Program Expenditures $5,032,200 Total Fund 25 Amount$9,281,300 $12,007,700 $5,350,700 $7,480,100 $5,432,400 $7,082,200 Olympic Water Treatment Program - Olympic Basin Settlement Funds Olympic Treatment Plant - Pilot Study $650,000$0$0$0$0$0 Olympic Treatment Plant - Well Hyrdology, Design & Construction$500,000$2,000,000$0$2,000,000$2,000,000$0 Olympic Treatment Plant - Full Scale Construction $0$1,000,000$20,000,000$20,000,000$0$0 Olympic Subbasin Management Plan$2,000,000$1,000,000$1,000,000$4,000,000$0$0 $0 Total Settlement Fund Amount (Capital Only)$3,150,000$4,000,000$21,000,000$26,000,000$2,000,000 (a) Source: City of Santa Monica. FY 19-20 is based on FY 18-19 budget. Totals are rounded. KENNEDY/JENKS CONSULTANTS 3.4Summary of Projected Revenue Requirements 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 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. Water Rate and Revenue Analysis, City of Santa Monica 3-4 KENNEDY/JENKS CONSULTANTS 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. 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. 3.5Projected 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. The tabular and graphical depictions of these revenue plans are presented at the conclusion of Section 3 of this water rate report. Water Rate and Revenue Analysis, City of Santa Monica 3-5 KENNEDY/JENKS CONSULTANTS 3.5.1Option 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 shown graphically in Figure 5A; demonstrating the inadequacy of this level of increased funding and the projected negative fund balance during FY 16/17. 3.5.2Option 2: Projected Revenue Plan – 9% Annual Water Rate 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. 3.5.3Option 3: Projected Revenue Plan – 9/13% 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 Water Rate and Revenue Analysis, City of Santa Monica 3-6 KENNEDY/JENKS CONSULTANTS 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. 3.5.4Recommended Revenue Plan 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%/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 KENNEDY/JENKS CONSULTANTS TABLE 5A - PROJECTED REVENUE PLAN WITH CPI INCREASES ForecastedProjected Description FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Revenues (a) Consumption Charges (All Classes) $20,325,400$18,485,300$16,971,400$17,395,800$17,840,300$18,296,100$18,763,600 Miscellaneous Revenues $691,100$445,000$445,000$445,000$445,000$445,000$445,000 Total Operating Revenues $21,016,500$18,930,300$17,416,400$17,840,800$18,285,300$18,741,100$19,208,600 Operating Expenses General Water, Division No. 671 $17,409,800$16,432,000$17,099,100$17,697,300$18,247,100$18,835,000$19,451,900 (b) Charnock Treatment Plant, Division No. 672 $2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (c) Arcadia Treatment Plant, Division No. 673 $2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 SWMP Program Expenses $2,311,700$2,982,900$2,119,700$1,517,100$1,042,900($1,997,200)($2,037,000) Total Operating Expenses $24,381,600$24,303,500$24,267,300$24,429,300$24,678,200$22,358,200$23,072,600 Net Operating Revenue ($3,365,100)($5,373,200)($6,850,900)($6,588,500)($6,392,900)($3,617,100)($3,864,000) Non-Operating Revenue (Expense) Interest Revenue $1,527,200$1,187,400$694,900$342,500$0$0$0 Interfund Transfers In (671.402370) $351,400$431,100$347,000$348,000$348,900$349,900$350,900 Interfund Transfers Out (Fund 25 Non-Dept) ($1,466,300)($1,505,100)($1,497,100)($1,534,600)($1,572,900)($1,611,300)($1,650,600) Miscellaneous Non-Operating Revenues $307,100$253,300$259,600$266,100$272,800$279,600$286,600 Facility Charge Revs/Mitigation Fees $600,000$600,000$650,000$650,000$650,000$650,000$650,000 Total Debt Service $0$0$0$0$0$0$0 Total Non-Op Revenues/Expenses $1,319,400$966,700$454,400$72,000($301,200)($331,800)($363,100) Net Income Before Capital Activity ($2,045,700)($4,406,500)($6,396,500)($6,516,500)($6,694,100)($3,948,900)($4,227,100) Capital Expenditures $9,281,300$12,007,700$5,350,700$7,480,100$5,432,400$7,082,200$5,032,200 Capital Financing` Proposed Debt Issuance $0$0$0$0$0$0$0 Net Change in Funds Avail. After Capital Activity ($11,327,000)($16,414,200)($11,747,200)($13,996,600)($12,126,500)($11,031,100)($9,259,300) (d) Beginning Cash Balance $50,906,112$39,579,100$23,164,900$11,417,700($2,578,900)($14,705,400)($25,736,500) Ending Cash Balance $39,579,100$23,164,900$11,417,700($2,578,900)($14,705,400)($25,736,500)($34,995,800) Target Reserve Fund Balance $8,640,700$10,003,900$7,000,000$7,740,100$7,000,000$7,541,100$7,000,000 Operating $3,000,000$3,000,000$3,000,000$3,000,000$3,000,000$3,000,000$3,000,000 Capital $4,640,700$6,003,900$3,000,000$3,740,100$3,000,000$3,541,100$3,000,000 Rate Stabilization $1,000,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000 Minimum Target Reserve Fund Balance $7,000,000$7,000,000$7,000,000$7,000,000$7,000,000$7,000,000$7,000,000 Description/Support Data No. Months New Rate Effective in FY 12121212121212 CPI Increase (Assumes July 1, when applicable) 2.5%0.5%2.5%2.5%2.5%2.5%2.5% (e) Proposed Average Usage Rate Increase 2.5%0.0% Total Annual Water Demands (HCF) 5,451,2434,906,1194,360,9944,360,9944,363,5214,366,0474,368,574 Net Water Sales/Consumption (AF) 12,51411,26310,01110,01110,01710,02310,029 Notes: Costs and revenues have been rounded (a) Includes fire service charge revenues. (b) Does not include salaries and wages associated w/the Charnock Treatment Plant. All staff costs are located in Div. 671 program costs. (c) Does not include salaries and wages associated w/the Arcadia Treatment Plant. All staff costs are located in Div. 671 program costs. (d) FY 13/14 beginning fund balance includes a one-time transfer of approximately $33.4 Milllion from the Charnock (05 Fund) to Water (Fund 25) in FY 12/13 (See Table 1). KENNEDY/JENKS CONSULTANTS FIGURE5A RevenuePlanWithAnnualCPIBasedWaterRateIncreases $50.0 $40.0 $30.0 Millions) $20.0 ($ Expenses $10.0 $0.0 & Revenues FY201314FY201415FY201516FY201617FY201718FY201819FY201920 $10.0 $20.0 $30.0 $40.0 TotalOperatingRevenuesTotalOperatingExpensesCapitalExp/NewDebtIssuanceEndingCashBalance KENNEDY/JENKS CONSULTANTS TABLE 5B - PROJECTED REVENUE PLAN WITH REDUCED CIP AND 9% INCREASES ForecastedProjected Description FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Revenues (a) Consumption Charges(All Classes) $20,325,400$19,266,100$18,730,400$20,340,600$22,105,800$24,029,100$25,649,200 Miscellaneous Revenues $691,100$445,000$445,000$445,000$445,000$445,000$445,000 Total Operating Revenues $21,016,500$19,711,100$19,175,400$20,785,600$22,550,800$24,474,100$26,094,200 Operating Expenses General Water, Division No. 671 $17,409,800$16,432,000$17,099,100$17,697,300$18,247,100$18,835,000$19,451,900 (b) Charnock Treatment Plant, Division No. 672 $2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (c) Arcadia Treatment Plant, Division No. 673 $2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 SWMP Program Expenses $2,311,700$2,982,900$2,119,700$1,517,100$1,042,900($1,997,200)($2,037,000) Total Operating Expenses $24,381,600$24,303,500$24,267,300$24,429,300$24,678,200$22,358,200$23,072,600 Net Operating Revenue ($3,365,100)($4,592,400)($5,091,900)($3,643,700)($2,127,400)$2,115,900$3,021,600 Non-Operating Revenue (Expense) Interest Revenue $1,527,200$1,187,400$718,400$419,400$90,200$20,000$116,700 Interfund Transfers In (671.402370) $351,400$431,100$347,000$348,000$348,900$349,900$350,900 Interfund Transfers Out (Fund 25 Non-Dept) ($1,466,300)($1,505,100)($1,497,100)($1,534,600)($1,572,900)($1,611,300)($1,650,600) Miscellaneous Non-Operating Revenues $307,100$253,300$259,600$266,100$272,800$279,600$286,600 Facility Charge Revs/Mitigation Fees $600,000$600,000$650,000$650,000$650,000$650,000$650,000 Total Debt Service $0$0$0$0$0$0($688,100) Total Non-Op Revenues/Expenses $1,319,400$966,700$477,900$148,900($211,000)($311,800)($934,500) Net Income Before Capital Activity ($2,045,700)($3,625,700)($4,614,000)($3,494,800)($2,338,400)$1,804,100$2,087,100 Capital Expenditures $9,281,300$12,007,700$5,350,700$7,480,100$0$7,082,200$5,032,200 Capital Financing Proposed Debt Issuance $0$0$0$0$0$10,000,000$0 Net Change in Funds Avail. After Capital Activity ($11,327,000)($15,633,400)($9,964,700)($10,974,900)($2,338,400)$3,221,900($2,945,100) Beginning Cash Balance $50,906,112$39,579,100$23,945,700$13,981,000$3,006,100$667,700$3,889,600 Ending Cash Balance $39,579,100$23,945,700$13,981,000$3,006,100$667,700$3,889,600$944,500 Target Reserve Fund Balance $8,640,700$10,003,900$7,000,000$7,740,100$7,000,000$7,541,100$7,000,000 Operating $3,000,000$3,000,000$3,000,000$3,000,000$3,000,000$3,000,000$3,000,000 Capital $4,640,700$6,003,900$3,000,000$3,740,100$3,000,000$3,541,100$3,000,000 Rate Stabilization $1,000,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000$1,000,000 Minimum Target Reserve Fund Balance $7,000,000$7,000,000$7,000,000$7,000,000$7,000,000$7,000,000$7,000,000 Description No. Months New Rate Effective in FY 126666612 CPI Increase (Assumes July 1, when applicable) 2.5%0.5%2.5% (e) Proposed Average Usage Rate Increase 2.5%9.0%9.0%9.0%9.0%9.0%0.0% Total Annual Water Demands (HCF) 5,451,2434,906,1194,360,9944,360,9944,363,5214,366,0474,368,574 Net Water Sales/Consumption (AF) 12,51411,26310,01110,01110,01710,02310,029 Notes: Costs and revenues have been rounded (a) Includes fire service charge revenues. (b) Does not include salaries and wages associated w/the Charnock Treatment Plant. All staff costs are located in Div. 671 program costs. (c) Does not include salaries and wages associated w/the Arcadia Treatment Plant. All staff costs are located in Div. 671 program costs. (d) FY 13/14 beginning fund balance includes a one-time transfer of approximately $33.4 Milllion from the Charnock (05 Fund) to Water (Fund 25) in FY 12/13 (See Table 1). KENNEDY/JENKS CONSULTANTS FIGURE5B RevenuePlanWith9%AnnualWaterRateIncreases $50.0 $40.0 $30.0 Millions) $20.0 ($ Expenses $10.0 & Revenues $0.0 FY201314FY201415FY201516FY201617FY201718FY201819FY201920 $10.0 $20.0 $30.0 TotalOperatingRevenuesTotalOperatingExpensesCapitalExp/NewDebtIssuanceEndingCashBalance KENNEDY/JENKS CONSULTANTS TABLE 5C - PROJECTED REVENUE PLAN WITH 9%/13% INCREASES ForecastedProjected Description FY 13/14FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19FY 19/20 Revenues (a) Consumption Charges(All Classes) $20,325,400$19,266,100$19,066,600$21,423,200$24,096,300$27,115,400$29,427,500 Miscellaneous Revenues $691,100$445,000$445,000$445,000$445,000$445,000$445,000 Total Operating Revenues $21,016,500$19,711,100$19,511,600$21,868,200$24,541,300$27,560,400$29,872,500 Operating Expenses General Water, Division No. 671 $17,409,800$16,432,000$17,099,100$17,697,300$18,247,100$18,835,000$19,451,900 (b) Charnock Treatment Plant, Division No. 672 $2,511,100$2,548,700$2,627,800$2,710,000$2,795,400$2,835,900$2,877,400 (c) Arcadia Treatment Plant, Division No. 673 $2,149,000$2,339,900$2,420,700$2,504,900$2,592,800$2,684,500$2,780,300 SWMP Program Expenses $2,311,700$2,982,900$2,119,700$1,517,100$1,042,900($1,997,200)($2,037,000) Total Operating Expenses $24,381,600$24,303,500$24,267,300$24,429,300$24,678,200$22,358,200$23,072,600 Net Operating Revenue ($3,365,100)($4,592,400)($4,755,700)($2,561,100)($136,900)$5,202,200$6,799,900 Non-Operating Revenue (Expense) Interest Revenue $1,527,200$1,187,400$718,400$429,500$133,100$5,900$194,800 Interfund Transfers In (671.402370) $351,400$431,100$347,000$348,000$348,900$349,900$350,900 Interfund Transfers Out (Fund 25 Non-Dept) ($1,466,300)($1,505,100)($1,497,100)($1,534,600)($1,572,900)($1,611,300)($1,650,600) Miscellaneous Non-Operating Revenues $307,100$253,300$259,600$266,100$272,800$279,600$286,600 Facility Charge Revs/Mitigation Fees $600,000$600,000$650,000$650,000$650,000$650,000$650,000 Total Debt Service $0$0$0$0$0$0($688,100) Total Non-Op Revenues/Expenses $1,319,400$966,700$477,900$159,000($168,100)($325,900)($856,400) Net Income Before Capital Activity ($2,045,700)($3,625,700)($4,277,800)($2,402,100)($305,000)$4,876,300$5,943,500 Capital Expenditures $9,281,300$12,007,700$5,350,700$7,480,100$3,932,400$7,082,200$5,032,200 Capital Financing Proposed Debt Issuance $0$0$0$0$0$10,000,000$0 Net Change in Funds Avail. After Capital Activity ($11,327,000)($15,633,400)($9,628,500)($9,882,200)($4,237,400)$6,294,100$911,300 Beginning Cash Balance $50,906,112$39,579,100$23,945,700$14,317,200$4,435,000$197,600$6,491,700 Ending Cash Balance $39,579,100$23,945,700$14,317,200$4,435,000$197,600$6,491,700$7,403,000 Target Reserve Requirement per Policy $8,640,700$10,003,900$7,000,000$7,740,100$7,000,000$7,541,100$7,000,000 NetFund Balance Less Reserves $30,938,400$13,941,800$7,317,200($3,305,100)($6,802,400)($1,049,400)$403,000 Description No. Months New Rate Effective in FY 126666612 CPI Increase (Assumes July 1, when applicable) 2.5%0.5%2.5% Proposed Average Usage Rate Increase 2.5%9.0%13.0%13.0%13.0%13.0%0.0% Total Annual Water Demands (HCF) 5,451,2434,906,1194,360,9944,360,9944,363,5214,366,0474,368,574 Net Water Sales/Consumption (AF) 12,51411,26310,01110,01110,01710,02310,029 Notes: Costs and revenues have been rounded. (a) Includes fire service charge revenues. (b) Does not include salaries and wages associated w/the Charnock Treatment Plant. All staff costs are located in Div. 671 program costs. (c) Does not include salaries and wages associated w/the Arcadia Treatment Plant. All staff costs are located in Div. 671 program costs. (d) FY 13/14 beginning fund balance includes a one-time transfer of approximately $33.4 Milllion from the Charnock (05 Fund) to Water (Fund 25) in FY 12/13 (See Table 1). KENNEDY/JENKS CONSULTANTS FIGURE5C RevenuePlanWith9%/13%AnnualWaterRateIncreases $50.0 $40.0 $30.0 Millions) $20.0 ($ Expenses $10.0 & Revenues $0.0 FY201314FY201415FY201516FY201617FY201718FY201819FY201920 $10.0 $20.0 $30.0 TotalOperatingRevenuesTotalOperatingExpensesCapitalExp/NewDebtIssuanceEndingCashBalance KENNEDY/JENKS CONSULTANTS Section 4: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 been implemented 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 KENNEDY/JENKS CONSULTANTS TABLE 6 CURRENT WATER RATES Single-Family Residential Water Rates ($/HCF) Start of Meter SizeEnd of (b)(c)(d) Tier (HCF)FY 12/13FY 13/14FY 14/15 (Inches)TierTier (HCF) N/A1014$2.43$2.48$2.50 15$3.65$3.74$3.75 N/A240 41$5.47$5.60$5.62 N/A3148 149$8.55$8.76$8.80 N/A4 Multi-Family Water Rates ($/HCF) Start of Meter SizeEnd of (b)(c)(d) Tier (HCF)FY 12/13FY 13/14FY 14/15 (Inches)TierTier (HCF) N/A104$2.43$2.48$2.50 5$3.65$3.74$3.75 N/A29 10$5.47$5.60$5.62 N/A320 21$8.55$8.76$8.80 N/A4 Non-Residential Water Rates ($/HCF) Meter Size Start ofEnd of (b)(c)(d) (Inches)FY 12/13FY 13/14FY 14/15 TierTier (HCF)Tier (HCF) 3/4"102103.483.563.57 3/4"22118.558.768.80 1"102103.483.563.57 1"22118.558.768.80 1 1/2"104653.483.563.57 1 1/2"24668.558.768.80 2"108703.483.563.57 2"28718.558.768.80 3"1017003.483.563.57 3"217018.558.768.80 4"1025503.483.563.57 4"225518.558.768.80 6"+1052803.483.563.57 6"+252818.558.768.80 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 KENNEDY/JENKS CONSULTANTS Section 5:Alternative and Proposed Water Rates and 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. 5.1Fixed 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. 5.2Development 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 KENNEDY/JENKS CONSULTANTS 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. 5.2.1Development 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 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 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 KENNEDY/JENKS CONSULTANTS 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. 5.2.2Development 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. Water Rate and Revenue Analysis, City of Santa Monica 5-3 KENNEDY/JENKS CONSULTANTS TABLE 7 RATE ADJUSTMENT OPTIONS FY 14/15FY 15/16FY 16/17FY 17/18FY 18/19 Option 12.5%2.5%2.5%2.5%2.5% Option 29.0%9.0%9.0%9.0%9.0% Option 39.0%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. KENNEDY/JENKS CONSULTANTS TABLE 8 EXAMPLES OF TYPICAL BI-MONTHLY BILLS Example of Proposed Bi-Monthly Bill, Single Family Residential, ¾-inch meter, 30 HCF current average use Description of Rate OptionsYear 1Year 2Year 3Year 4Year 5 Current Bill, without conservation$90.63 (a) $72.50 $74.31 $76.17 $78.07 $80.03 Option 1,Current Rates, with 20% conservation(24HCF) (b) $79.03 $86.14 $93.90 $102.35 $111.56 Option 2,9% increase in unit prices, with 20% conservation (c) $79.03 $89.30 $100.91 $114.03 $128.86 Option 3, 13% increase in unit prices, with 20% conservation Example of Proposed Bi-Monthly Bill, Multi-Family Residential, 1 ½ - inch meter, 77 HCF current average use Description of Rate OptionsYear 1Year 2Year 3Year 4Year 5 Current Bill, without conservation$342.30 (a) $273.84 $280.69 $287.70 $294.90 $302.27 Option 1,Current Rates, with 20% conservation (62HCF) (b) $298.49 $325.35 $354.64 $386.55 $421.34 Option 2, 9% increase in unit prices, with 20% conservation (c) $298.49 $337.29 $381.14 $430.69 $486.68 Option 3, 13% increase in unit prices, with 20% conservation Example of Proposed Bi-Monthly Bill, Non- Residential, 1- inch meter, 37 HCF current average use Description of Rate OptionsYear 1Year 2Year 3Year 4Year 5 Current Bill, without conservation$132.09 (a) $108.31 $111.02 $113.80 $116.64 $119.56 Option 1, Current Rates, with 20% conservation (30 HCF) (b) $115.18 $125.55 $136.85 $149.16 $162.59 Option 2, 9% increase in unit prices, with 20% conservation (c) $115.18 $130.16 $147.08 $166.20 $187.80 Option 3, 13% increase in unit prices, with 20% conservation Example of Proposed Bi-Monthly Bill, Non- Residential, 2 - inch meter, 192 HCF current average use Description of Rate OptionsYear 1Year 2Year 3Year 4Year 5 Current Bill, without conservation$687.23 (a) $549.78 $563.52 $577.61 $592.05 $606.85 Option 1, Current Rates, with 20% conservation (154 HCF) (b) $599.26 $653.19 $711.98 $776.07 $845.90 Option 2, 9% increase in unit prices, with 20% conservation (c) $599.26 $677.16 $765.20 $864.67 $977.08 Option 3, 13% increase in unit prices, with 20% conservation Example of Proposed Bi-Monthly Bill, Non-Residential, 4 - inch meter, 709 HCF current average use Description of Rate OptionsYear 1Year 2Year 3Year 4Year 5 Current Bill, without conservation$2,531.13 (a) $2,075.53 $2,127.41 $2,180.60 $2,235.12 $2,290.99 Option 1,Current Rates, with 20% conservation (62HCF) (b) $2,207.15 $2,405.79 $2,622.31 $2,858.32 $3,115.57 Option 2, 9% increase in unit prices, with 20% conservation (c) $2,207.15 $2,494.07 $2,818.30 $3,184.68 $3,598.69 Option 3, 13% increase in unit prices, with 20% conservation 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 KENNEDY/JENKS CONSULTANTS 5.3Comparison 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. 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. 5.4Summary 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 TABLE 9 COMPARISON OF BI-MONTHLY WATER BILLS SINGLE FAMILY RESIDENTIAL Monthly Meter Water Usage/ Water Usage Calculated Bi- Fixed RateQuantity Rate(HCF)Monthly Bill Community Beverly Hills$40.49$3.29 - $13.2730$160.59 Burbank$10.78$1.114 - $1.72730$104.24 Culver City (GSWC)$26.55$3.86 7 - $5.06430$173.57 Glendale - 2014$24.83$1.59 - $4.3430$111.62 Glendale - 2015$27.05$1.87 - $4.3330$123.80 Long Beach$0.44$2.283 - $3.80630$103.00 Los Angeles$0.00$4.685 - $5.90130$143.48 Pasadena$17.51$1.212 - $4.01630$93.36 Santa Monica - Current $0.00$2.50 - $8.8030$95.00 Santa Monica - FY 14/15 (9% Proposed) $0.00$2.73 - $9.5930$103.00 Santa Monica - FY 15/16 (13% Proposed) $0.00$2.83 - $9.9430$117.00 Agency Average $126.71 Notes: Fixed rate based on 5/8 or 3/4-inch meter. Agency average excludes Santa Monica values. FIGURE9 WaterRateComparisonwithNeighboringAgencies SingleFamilyAccount $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 PasadenaSantaMonicaLongBeachBurbankGlendale(1)LosAngelesBeverlyHillsCulverCity(2) (1) 201314201415 Notes:Typicalbillsarebasedona3/4inchmeterand30HCFBimonthlywateruse. 1.TheactualwaterratesforFY201415wasonlyavailableforGlendale.ForSantaMonica,a9%rateincreasewasassumedforFY201415. 2.ThewaterrateincludestheassessedCaliforniaAlternativeRateforWater(CARW)surchargeandexcludesothertemporarysurcharges. FIGURE10 WaterRateComparisonwithNeighboringAgencies NonResidentialAccount $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 BurbankLongBeachGlendalePasadenaSantaMonicaCulverCityLosAngelesBeverlyHills Note:Typicalbillsarebasedona2inchmeterand192HCFbimonthlywateruse. Appendix A Miscellaneous Tabular Support Information A - 1 DEPARTMENT OF WATER RESOURCES State of CaliforniaCalifornia Natural Resources Agency PUBLIC WATER SYSTEM STATISTICS 2013 Calendar Year PWS #1910146Santa Monica, CA 5th Street Third Floor Gil Borboa, Water Resources Mgr 1. General Information2. Active Service Connections Recycled Water Potable Water Please follow the provided instructions. Customer Class Contact :Gil Borboa MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7518 Phone:310-458-8230 Multi-family Residential 6326 Fax:310-496-6697 Commercial/Institutional 22582 E-mail:gil.borboa@smgov.net Industrial 0 Website:water.smgov.net Landscape Irrigation 58015 Los Angeles County: Other Population91,094 served: Agricultural Irrigation Names of communities served:Santa Monica, portions of Los TOTAL 1668217 3. Total Water Into the System-Units of production: MG AFMGCCF (Select:=acre-feet;=million gallons; =hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 234.1219240.1225.5237.7128.1234.2240.6226.6235.82302322683.7 Surface 0000000000000 Potable 1/ Purchased 94.582.9118135.3154.4287.7198.1198.4190.8172.6148.4122.61903.7 Total Potable 328.6301.9358.1360.8392.1415.8432.3439417.4408.4378.4354.64587.4 Untreated Water 0000000000000 2/ Recycled 2.10.0930.125.350.166.120.286.530.254.890.1429.03 1/ Potable wholesale supplier(s): 2/ Recycled wholesale supplier(s): MWDCity of Santa Monica Level of treatment: 4. Metered Water Deliveries-Units of delivery: MGAFMGCCF (Select:=acre-feet;=million gallons; =hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal If recycled is included, X box 56.0259.9167.0184.1786.3490.26104.37109.8582.88109.8582.8889.30 A.SingleFamilyResidential 1022.84 152.88116.81169.64134.99161.87131.52167.7296.33178.38142.98147.06135.85 B.Multi-family Residential 1736.031 x C.Commercial/Institutional 111.4236.47118.5743.02129.9341.77141.1543.61148.5842.22136.3143.071036.12 D.Industrial 0000000000000 9.583.5214.335.4721.647.2628.956.8033.997.8224.505.88 x E.Landscape Irrigation 169.74 F.Other 1.930.0922.70.15.470.135.440.245.970.224.410.1226.822 Total Urban Retail 331.83216.803372.25267.75405.25270.94447.63256.83449.8303.09395.16274.223991.553 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) A - 2 DWR 38 (Rev. 8/12)Page 1 of 1 DEPARTMENT OF WATER RESOURCES State of CaliforniaCalifornia Natural Resources Agency PUBLIC WATER SYSTEM STATISTICS 2012 Calendar Year PWS #1910146Santa Monica, CA 5th Street Third Floor Gil Borboa, Water Resources Mgr 1. General Information2. Active Service Connections Recycled Water Potable Water Please follow the provided instructions. Customer Class Contact :Gil Borboa MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7544 Phone:310-458-8230 Multi-family Residential 6385 Fax:310-496-6697 Commercial/Institutional 2352 E-mail:gil.borboa@smgov.net Industrial 0 Website:water.smgov.net Landscape Irrigation 58010 Los Angeles County: Other 11032 Population89,735 served: Agricultural Irrigation 0 Names of communities served:Santa Monica, portions of Los TOTAL 1796412 3. Total Water Into the System-Units of production: MG AFMGCCF (Select:=acre-feet;=million gallons; =hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 203.3209.1268.2223.1231.3229.4235.7219.7206213.9204.7254.12698.5 Surface 0000000000000 Potable 1/ Purchased 142.1152124.9141.1180.3201.9219.2251.5237.4218.4188.376.82133.9 Total Potable 345.4361.1393.1364.2411.6431.3454.9471.2443.4432.3393330.94832.4 Untreated Water 0000000000000 2/ Recycled 1.650.42.750.473.970.826.470.346.240.254.660.1228.14 1/ Potable wholesale supplier(s): 2/ Recycled wholesale supplier(s): MWDCity of Santa Monica Level of treatment: 4. Metered Water Deliveries-Units of delivery: MGAFMGCCF (Select:=acre-feet;=million gallons; =hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal If recycled is included, X box 62.0878.1760.7777.9976.9682.24107.2398.9593.69108.5587.9979.78 A.SingleFamilyResidential 1014.405 183.82112.22172.07109.28185.79115.22185.83131.52168.57134.78164.95129.26 B.Multi-family Residential 1793.312 x C.Commercial/Institutional 123.583146.5069132.017548.10986139.67147.64386161.416252.88734158.693452.46248146.045545.932441154.97 D.Industrial 0000000000000 11.276.4115.176.2221.266.7937.638.4639.758.6328.836.30 x E.Landscape Irrigation 196.7165 F.Other 0.0284240.0964920.2475880.0852720.2610520.0905080.2266440.1630640.1817640.13090.1967240.1151921.823624 Total Urban Retail 380.7821243.3977380.2757241.69423.9499251.978492.3321291.9781460.8877304.5579428.0071261.39014161.226 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) A - 3 DWR 38 (Rev. 8/12)Page 1 of 1 A - 4 DEPARTMENT OF WATER RESOURCES State of CaliforniaCalifornia Natural Resources Agency PUBLIC WATER SYSTEM STATISTICS 2010 Calendar Year 1. General Information2. Active Service Connections Recycled Water Potable Water Please follow the provided instructions. Customer Class Contact :Gil Borboa MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7546 Phone:310-458-2830 Multi-family Residential 6323 Fax:310-393-6697 Commercial/Institutional 23372 E-mail:gil.borboa@smgov.net Industrial Website:water.smgov.net Landscape Irrigation 5679 Los Angeles County: Other 1063 Population89,735 served: Agricultural Irrigation Names of communities served:Santa Monica/Los Angeles TOTAL 1783611 3. Total Water Into the System-Units of production: AF AFMGCCF (Select:=acre-feet;=million gallons; =hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 259.01287.97267.73279.43242.23283.24257.04270.15250.44199.8823.08608.013228.21 Surface 0000000000000 Potable 1/ Purchased 728.94563.67791.48800.15894.45903.91979.49989.43939.81902.27990.92327.589812.1 Total Potable 987.95851.641059.211079.581136.681187.151236.531259.581190.251102.151014.00935.5913040.31 Untreated Water 2/ Recycled 0.3994841.6964640.4854523.8753880.9888565.2838721.1691245.0445120.9133082.8491320.3687641.4286824.50304 1/ Potable wholesale supplier(s):2/ Recycled wholesale supplier(s): Metropolitan Water District Level of treatment: AFMGCCF 4. Metered Water Deliveries-Units of delivery:(Select:=acre-feet;=million gallons; =hundred cubic feet) AF JanFebMarAprMayJunJulAugSepOctNovDecTotal If recycled is included, X box A.SingleFamilyResidential 199.6274154.0747221.9985214.7825291.2631267.9369334.0837255.0776285.2525207.1763248.8305181.99272862.096 B.Multi-family Residential 294.1215553.6509281.6525522.1811321.9063533.6147359.5175537.1894276.4018521.4671348.7062549.63315100.042 C.Commercial/Institutional 134.6607366.8873134.6102402.6504153.627428.5916172.6415430.4375139.5853416.8206155.6864367.09633303.295 D.Industrial E.Landscape Irrigation 11.2314829.752419.425567.3475528.2761489.6153635.1155994.0808628.8409357.3971821.4504731.40085513.9343 F.Other Total Urban Retail 639.6411104.365657.68671206.962795.07261319.759901.35841316.785730.08061202.861774.67361130.12311779.37 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) City of Santa Monica A - 5 DWR 38 (Rev. 1/11)Page 1 of 2 State of California DEPARTMENT OF WATER RESOURCES California Natural Resources Agency PUBLIC WATER SYSTEM STATISTIC S Calendar Year 2009 1. General Information2. Active Service Connections Potable WaterRecycled Water Please follow the provided instructions. Customer Class Contact :Gil Borboa MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7545 Phone:310-458-8230 Multi-family Residential 6269 Fax:310-393-9967 Commercial/Institutional 23232 E-mail:gil.borboa@smgov.net Industrial Website: Landscape Irrigationwater.smgov.net 5499 Los Angeles County: Other 1023 84084 Population served: Agricultural Irrigation Names of communities served:Santa Monica TOTAL 1770911 AF - 3. Total Water Into the SystemUnits of production: (Select:AF=acre-feet;MG=million gallons; CCF=hundred cubic feet) JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 166.03153.7173.59160.45158.84175.14116.33173.85168.32100.96237.05278.212062.47 Surface 0000000000000 Potable 1/ Purchased 905.44742.8921.321016.831100.631028.551165.681119.961060.421080.83860.42682.4511685.33 Total Potable 1071.47896.51094.911177.281259.471203.691282.011293.811228.741181.791097.47960.6613747.8 Untreated Water 2/ Recycled 1.410.222.1616.963.8923.274.519.23.612.041.378.99107.6 1/ Potable wholesale supplier(s):2/ Recycled wholesale supplier(s): MWD Level of treatment: - 4. Metered Water DeliveriesUnits of delivery: (Select:AF=acre-feet;MG=million gallons; CCF=hundred cubic feet) AF JanFebMarAprMayJunJulAugSepOctNovDecTotal If recycled is included, X box A.SingleFamilyResidential 214.83231.72246.77256.58316.91278.8323.16283.02326.52240.48270.5205.733195.02 B.Multi-family Residential 333.23590.33326530.36336.68611.6289.59663.3288.16528.97364.97545.115408.3 C.Commercial/Institutional 121.99402.43130.31457.97148.98459.39101.47491.31138.51404.75162.56354.13373.77 D.Industrial E.Landscape Irrigation 14.2251.7115.2989.7926.78126.8924.68120.8530.8980.4421.7148.73651.98 F.Other Total Urban Retail 684.271276.19718.371334.7829.351476.68738.91558.48784.081254.64819.741153.6712629.07 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) DWR 38 (Rev. 10/09)Page 1 of 2 A - 6 State of California DEPARTMENT OF WATER RESOURCES California Natural Resources Agency PUBLIC WATER SYSTEM STATISTICS Calendar Year 2008 1. General Information2. Active Service Connections Potable WaterRecycled Water Please follow the provided instructions. Customer Class Contact :Gilber M. Borboa, Jr., P.E. MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7538 Phone:310-458-8230 Multi-family Residential 6223 Fax:310-393-6697 Commercial/Institutional 2319 E-mail:gil.borboa@smgov.net Industrial Website:water.smgov.net Landscape Irrigation 52711 Los Angeles County: Other 991 Population served:84084 Agricultural Irrigation Names of communities served: TOTAL City of Santa Monica 1759811 Note: Beginning in 2008 we are reporting all connections in the system whether or not there is an current customer (vacant). million gallonshundred cubic feet Units of production:acre-feet 3. Total Water Into the System - JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 5450.754.953.753.254.15551.355.77163.354.3671.2 Potable Surface 1 / Purchased 278.8268.8312.5334.9368.8374.2397.7390.9357.3351.4305.7274.64015.6 Total Potable 332.8319.5367.4388.6422428.3452.7442.2413422.4369328.94686.8 Untreated Water 2/ Recycled 2.020.002.060.865.831.087.541.067.240.965.770.5735.00116 1/ Potable wholesale supplier(s):2/ Recycled wholesale supplier(s): Metropolitan Water DistrictCity of Santa Monica Level of treatment: Secondary Units of delivery: 4. Metered Water Deliveries - million gallonshundred cubic feet acre-feet If recycled is included, box JanFebMarAprMayJunJulAugSepOctNovDecTotal A.SingleFamilyResidential 94.5760.9367.6584.89101.16109.22117.31107.83112.5110.7284.0999.091149.96 B.Multi-family Residential 168.98122.41162.93130.71168.05137.85185.49122.63183.28130.56168135.681816.57 C.Commercial/Institutional 126.4838.83132.547.64141.2351.32159.3249.8163.7851.87144.5949.051156.41 D.Industrial E.Landscape Irrigation 14.53.3515.767.5633.311.2936.6911.9541.2211.6531.828.16227.25 F.Other Total Urban Retail 404.53225.52378.84270.8443.74309.68498.81292.21500.78304.8428.5291.984350.19 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) DWR 38 (Rev. 1/09)Page 1 of 2 A - 7 A - 8 Department of Water Resources State of CaliforniaThe Resources Agency PUBLIC WATER SYSTEM STATISTICS Calendar Year 2006 1. General Information2. Active Service Connections Recycled Water Potable Water Please follow the provided instructions. Customer Class Contact :Gil Borboa MeteredUnmeteredMeteredUnmetered Title:Water Resources Manager Single Family Residential 7473 Phone:310-458-8230 Multi-family Residential 6090 Fax:310-393-6697 Commercial/Institutional 2221 E-mail:gil.borboa@smgov.net Industrial Website:santa-monica.org/epwm/water resources Landscape Irrigation 46710 Los Angeles County: Other 924 Population84184 served: Agricultural Irrigation Names of communities served:Santa Monica and Los Angele TOTAL 1717510 million gallonshundred cubic feet 3. Total Water Into the System -Units of production:acre-feet JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 57.241.946.141.549.344.645.555.551.256.139.242.4570.5 Potable Surface 1/ Purchased 316.9312.1298.8317354.1392.9424.8416.4385.8382.4353.43524306.6 Total Potable 374.1354344.9358.5403.4437.5470.3471.9437438.5392.6394.44877.1 Untreated Water 2/ Recycled 3.20.13.40.14.10.17.20.26.40.25.60.230.6 1/ Potable wholesale supplier(s):2/ Recycled wholesale supplier(s): Metropolitan Water DistrictCity of Santa Monica Level of treatment: Title 22 Stormwater 4. Metered Water Deliveries - Units of delivery: million gallonshundred cubic feet acre-feet JanFebMarAprMayJunJulAugSepOctNovDecTotal If recycled is included, box A.SingleFamilyResidential 1187.822 91.9471.81133.5762.9278.7383.10113.00118.64124.43110.36111.1688.17 B.Multi-family Residential 1911.534 155.08131.60179.73138.44155.87159.29162.01177.32164.14168.71170.03149.31 C.Commercial/Institutional 141.526840.62612152.568844.47533146.107651.10336164.626659.4847167.846752.8275162.02846.634811229.856 D.Industrial N/A E.Landscape Irrigation 21.058444.5478416.62433.43182418.92446.7544436.8300210.7854139.614088.16591631.235735.960064203.9325 F.Other Total Urban Retail 409.6048248.5843482.4884249.2658399.6347300.2442476.4655366.2358496.031340.0662474.4504290.07374533.145 ) (A thru F Agricultural Irrigation Wholesale (to other agencies) DWR 38 (Rev. 12/06)Page 1 of 2 A - 9 State of CaliforniaThe Resources Agency Department of Water Resources PUBLIC WATER SYSTEM STATISTICS Calendar Year 2005 Complete this portion if the system serves all or 1. General Information2. Active Service Connections part of an incorporated city Please follow the guidelines on the Customer ClassRecycledPotable WaterInside City LimitsOutside City Limits back of this form. Water MeteredUnmeteredMeteredUnmeteredMeteredUnmetered Contact :Gil Borboa Single Family Residential 743925 Title:Water Resources Mgr Multi-family Residential 6072 Phone:310-458-8230 Commercial/Institutional 2214 Fax:310-393-6697 Industrial E-mail:gil.borboa@smgov.net Landscape Irrigation 10451 Website: Other 912 Communities served: Agricultural Irrigation Cities of Santa Monica & Los Angeles County:Los Angeles TOTAL Population served84084 101708825 million gallonshundred cubic feet Units of production:acre-feet 3. Total Water Into the System - JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 55.78348.37654.13447.07256.43553.80556.72253.22552.5547.37945.46944.751615.701 Potable Surface \\ 1 / Purchased 278.3260.9283.5347.2364.5379.9405.3420368.8365.5326.5328.64129 Total Potable 334.083309.276337.634394.272420.935433.705462.022473.225421.35412.879371.969373.3514744.701 2/ Recycled 10.239.2410.239.910.239.99.39.399.3910.23115.86 1/ Potable wholesale supplier(s):Metropolitan Water District2/ Recycled wholesale supplier(s):City of Santa Monica Level of treatment:Title 22 Stormwater Units of delivery: 4. Metered Water Deliveries - million gallonshundred cubic feet acre-feet JanFebMarAprMayJunJulAugSepOctNovDecTotal A. Single Family Residential 1082.501 71.4462.2269.6667.4294.2091.15118.77107.80125.1198.8898.6877.18 B. Multi-family Residential 169.9306129.7324170.4842137.9282164.5039155.68199164.8255191.6002177170.2321154.2585117.94461904.122 C. Commercial/Institutional 111.963645.51131124.264549.463129.4346748.8631139.007670.33668143.665448.66264138.087534.084121083.344 D. Industrial E. Landscape Irrigation 9.8833243.8469648.931124.50595225.9690649.86163234.0190413.7093436.632558.32000424.761045.2382449.883324 F. Other ) Total Urban Retail (A thru F363.2221241.3093373.3418259.3136414.10776305.55202456.6233383.448482.4032326.0921415.79234.44264079.851 Agricultural Irrigation Wholesale ( to other agencies) DWR 38 (Rev. 4/05)Page 1 of 2 A - 10 A - 11 State of CaliforniaThe Resources Agency Department of Water Resources PUBLIC WATER SYSTEM STATISTICS Calendar Year 2003 Complete this portion if the system serves all or 1. General Information2. Active Service Connections part of an incorporated city Please follow the guidelines on the Customer ClassRecycledPotable WaterInside City LimitsOutside City Limits back of this form. Water MeteredUnmeteredMeteredUnmeteredMeteredUnmetered Contact :Gil Borboa, P. E. Single Family Residential 743324 Title:Water Resources Mgr. Multi-family Residential 6059 Phone:310-458-8230 Commercial/Institutional 2202 Fax:310-393-6697 Industrial E-mail: Landscape Irrigation 9420 gil-borboa@santa-monica.org Website:santa-monica.org Other 865 Communities served: Agricultural Irrigation Santa Monica and a portion of Los Ange County:Los Angeles TOTAL Population served84084 91697924 million gallonshundred cubic feet Units of production:acre-feet 3. Total Water Into the System - JanFebMarAprMayJunJulAugSepOctNovDecTotal Wells 88.3851.2111.8611.5622.424.5624.1522.4323.8521.1720.119.49341.16 Potable Surface 1 / Purchased 296.52269.5362.8379.4393.7405.6435.2460.5409.2393.2349.1354.24508.92 Total Potable 384.9320.71374.66390.96416.1430.16459.35482.93433.05414.37369.2373.694850.08 2/ Recycled 0.530.022.280.122.080.252.463.222.2713.23 1/ Potable wholesale supplier(s):Metropolitan Water District2/ Recycled wholesale supplier(s):City of Santa Monica Level of treatment:Treated stormwater Units of delivery: 4. Metered Water Deliveries - million gallonshundred cubic feet acre-feet JanFebMarAprMayJunJulAugSepOctNovDecTotal A. Single Family Residential 92.1773.1364.7999.0786.66102.69107.6110116.94114.970.06104.031142.04 B. Multi-family Residential 162.3150.34155.36143.5155.56151.29176.09169.92164.89186.24122.07190.521928.08 C. Commercial/Institutional 48.24125.0546.51132.2347.37141.6752.95171.0252.81160.3543.94147.771169.91 D. Industrial ------------ E. Landscape Irrigation 3.8412.754.6316.167.7821.819.4430.5310.9228.55.921.22173.48 F. Other ) Total Urban Retail (A thru F306.55361.27271.29390.96297.37417.46346.08481.47345.56489.99241.97463.544413.51 Agricultural Irrigation Wholesale ( to other agencies) DWR 38 (Rev. 03/02)Page 1 of 2 A - 12 TABLE OF WATER CONSERVATION PROGRAMS Source: Sustainable Water Master Plan Notes: HE – High Efficiency, HET – High Efficiency Toilet, WBIC – Weather Based Irrigation Controller A - 13 THIS PAGE INTENTIONALLY LEFT BLANK Appendix B Miscellaneous Alternative Rate Restructuring Support Information B - 1 CURRENT AND ALTERNATIVE RATES & RATE STRUCTURES Single-Family Residential Water Rates ($/HCF)ALTERNATIVE RATE STRUCTURE CONSIDERATIONS Same TiersSame TiersSame TiersNew TiersNew TiersNew TiersNew Tiers Increase Same Volume Lower Volume Increase Increase Lower Volume Lower Volume Volume RateRateRateVolume RateVolume RateRate,1st Tier=0Rate,1st Tier=0 Start of Meter SizeEnd of + 9% Inc +$10 Fixed +$15 FixedNo FixedNo Fixed+$10 Fixed+$10 Fixed (c) Tier (HCF)FY 13/14 (Inches)TierTier (HCF)Alt 1Alt 2Alt 3Alt 4Alt 4Alt 4bAlt 4b N/A1014$2.48$2.70$2.48$2.230 to 14$2.640 to 4$0.00 15$3.74$3.37 N/A240$4.08$3.7415 to 30$4.045 to 25$3.18 41$5.60$5.04 N/A3148$6.10$5.6031 to 68$5.7126 to 68$5.04 149$8.76$7.88 N/A4$9.55$8.7669 to 148$8.9469 to 148$8.32 nanana$9.74 5Over 148Over 148$9.57 $0.00$10.00$15.00$0.00$10.00 Bimonthy Fixed Meter Charge ($/EM) Multi-Family Water Rates ($/HCF) Start of Meter SizeEnd ofSee AboveSee AboveSee Above (c) Tier (HCF)FY 13/14 (Inches)TierTier (HCF)Alt 1Alt 2Alt 3Alt 4Alt 4Alt 4bAlt 4b N/A104$2.48$2.70$2.48$2.36tbdtbdtbdtbd N/A259$3.74$4.08$3.74$3.55tbdtbdtbdtbd N/A31020$5.60$6.10$5.60$5.32tbdtbdtbdtbd N/A421$8.76$9.55$8.76$8.32tbdtbdtbdtbd Bimonthy Fixed Meter Charge ($/EM)$0.00$10.00$15.00 tbdtbdtbdtbd Non-Residential Water Rates ($/HCF) Meter Size Start ofEnd ofSee AboveSee AboveSee Above (c) (Inches)FY 13/14 TierTier (HCF)Tier (HCF)Alt 1Alt 2Alt 3Alt 4Alt 4Alt 4Alt 4 3/4"10210$3.56$3.88$3.56$3.38tbdtbdtbdtbd 3/4"2211$8.76$9.55$8.76$8.32tbdtbdtbdtbd 1"10210$3.56$3.88$3.56$3.38tbdtbdtbdtbd 1"2211$8.76$9.55$8.76$8.32tbdtbdtbdtbd 1 1/2"10465$3.56$3.88$3.56$3.38tbdtbdtbdtbd 1 1/2"2466$8.76$9.55$8.76$8.32tbdtbdtbdtbd 2"10870$3.56$3.88$3.56$3.38tbdtbdtbdtbd 2"2871$8.76$9.55$8.76$8.32tbdtbdtbdtbd 3"101700$3.56$3.88$3.56$3.38tbdtbdtbdtbd 3"21701$8.76$9.55$8.76$8.32tbdtbdtbdtbd 4"102550$3.56$3.88$3.56$3.38tbdtbdtbdtbd 4"22551$8.76$9.55$8.76$8.32tbdtbdtbdtbd 6"+105280$3.56$3.88$3.56$3.38tbdtbdtbdtbd 6"+25281$8.76$9.55$8.76$8.32tbdtbdtbdtbd Bimonthy Fixed Meter Charge ($/EM)$0.00$10.00$15.00 tbdtbdtbdtbd Notes: Source: City of Santa Monica website: Water and Sewer Rates. Customers billed bi-monthly. B - 2 City of Santa Monica -- Water Utility Comparison of Typical Water Bills Under Current and Alternative Rate Structures FY 14-15 Alternative Structures Bi-Monthly MeterWaterCurrentV plus 9%F =$10, Same VF=$15, Less VNEWNEW Customer ClassUsage DataSizeUse (HCF)Rates/Structurelt 1lt 2lt 3lt 4lt 4 b AAAAA Winter Median3/4"21.00$60.90$66.38$70.90$69.81$65.25$64.04 Annual Average3/4"30.00$94.56$103.07$104.56$100.10$101.60$101.96 Single Family Summer 75th Percentile3/4"47.00$171.16$186.56$181.16$169.04$198.71$187.64 Summer 90th Percentile3/4"68.00$288.76$314.75$298.76$274.88$318.66$293.48 Winter Median1 1/2"9.00$28.62$31.20$30.05$29.33tbdtbd Annual Average1 1/2"11.00$39.82$43.40$41.25$39.97tbdtbd Multi-Family * Summer 75th Percentile1 1/2"12.00$45.42$49.51$46.85$45.29tbdtbd Summer 90th Percentile1 1/2"17.00$73.42$80.03$74.85$71.89tbdtbd Winter Median1 1/2"35.00$124.60$135.81157.93$174.60tbdtbd Annual Average1 1/2"70.00$249.20$271.63282.53$299.20tbdtbd Non-Residential Summer 75th Percentile1 1/2"100.00$356.00$388.04389.33$406.00tbdtbd Summer 90th Percentile1 1/2"203.00$722.68$787.72756.01$772.68tbdtbd * Fixed Charges were spread to each DU, based on 7 DU's/Meter. Where V=Volume Rate, F= Fixed Service Charge Meter SizeBi Monthly Meter Charge Alts 5/8 & 3/4$10.00$15.00 1$16.67$25.00 1.5$33.33$50.00 2$53.33$80.00 3$100.00$150.00 4$166.67$250.00 6$200.00$300.00 8$333.33$500.00 B - 3 Santa Monica Demand Model to Evaluate Block Structure for Single Family Water Rates ALT 1 K/J 1283015*00 Block Range (Hcf)Existing Rate StructureBlock Range (Hcf)Proposed Block Rate Structure 2011Projected % Less Than Less Than Annual Unit Usage Annual Water Rate Greater % Annual Rate (per Annual Greater Rate (per % Rate Projected Annual % Annual or Equal or Equal Usage 1 Usage BlocksThanUsageHcf)RevenueThanHcf)ChangeAnnual RevenueRevenue Reduction ToTo 22 Usage (Hcf)(Hcf) Block 1014566,91243.3%$2.48$1,405,943014$2.709.0%0.0%566,91243.3%$1,532,47830.3% Block 21440518,12039.6%$3.74$1,937,7701440$4.089.0%0.0%518,12039.6%$2,112,16941.8% Block 340148213,28216.3%$5.60$1,194,38140148$6.109.0%0.0%213,28216.3%$1,301,87625.8% Block 41481000011,3810.9%$8.76$99,69514810000$9.559.0%0.0%11,3810.9%$108,6682.1% Block 5100001000000.0%$8.76$01000010000$9.559.0%0.0%00.0%$00.0% Block 6100001000000.0%$8.76$01000010000$9.559.0%0.0%00.0%$00.0% Block 7100001000000.0%$8.76$01000010000$9.559.0%0.0%00.0%$00.0% Block 8100001000000.0%$010000100000.0%00.0%$00.0% Block 9100001000000.0%$010000100000.0%00.0%$00.0% Block 10100001000000.0%$0100001000000.0%$00.0% Fixed Charge (Bi-Monthly/DU): $0.00$0.00 Totals:1,309,696100.0%1,309,696100% Variable Revenue:$4,637,789Calculated IncreaseVariable Revenue:$5,055,190 Fixed Revenue:$0Assuming No ConservationFixed Revenue:$0 Total Revenue:$4,637,7899.0%Total Revenue:$5,055,190100.0% Yellow cells are manually inputted values. Estimated Change in Bi-Monthly Bill by Usage (Both Fixed and Quantity Charge) Average Bi-MonthlyTypical Bi-Monthly BillCumulative UsageCurrentBlock RateChange In BillNo. of% of TotalNo. of% of Total (Hcf)StructureStructure($)(%)DUDUDUDU 6$14.88$16.22$1.349.0%4135.4%4135.4% 9$22.32$24.33$2.019.0%4075.3%82010.7% 10$24.80$27.03$2.239.0%1461.9%96612.6% 14$34.72$37.84$3.129.0%78510.3%175122.9% 20$57.16$62.30$5.149.0%119615.6%294738.5% 21$60.90$66.38$5.489.0%2082.7%315541.2% 25$75.86$82.69$6.839.0%7429.7%389750.9% 30$94.56$103.07$8.519.0%86511.3%476262.3% 35$113.26$123.45$10.199.0%6798.9%544171.1% 40$131.96$143.84$11.889.0%5777.5%601878.7% 47$171.16$186.56$15.409.0%5707.5%658886.1% 52$199.16$217.08$17.929.0%2693.5%685789.6% 60$243.96$265.92$21.969.0%2953.9%715293.5% 68$288.76$314.75$25.999.0%1832.4%733595.9% 70$299.96$326.96$27.009.0%280.4%736396.3% 75$327.96$357.48$29.529.0%660.9%742997.1% 80$355.96$388.00$32.049.0%450.6%747497.7% 85$383.96$418.52$34.569.0%370.5%751198.2% 95$439.96$479.56$39.609.0%400.5%755198.7% 100$467.96$510.08$42.129.0%180.2%756999.0% 110$523.96$571.12$47.169.0%160.2%758599.2% 115$551.96$601.64$49.689.0%110.1%759699.3% 120$579.96$632.16$52.209.0%80.1%760499.4% 130$635.96$693.20$57.249.0%120.2%761699.6% 140$691.96$754.24$62.289.0%80.1%762499.7% 160$841.88$917.65$75.779.0%110.1%763599.8% 190$1,104.68$1,204.10$99.429.0%70.1%764299.9% 225$1,411.28$1,538.30$127.029.0%40.1%7646100.0% 250$1,630.28$1,777.01$146.739.0%20.0%7648100.0% >250--------------------10.0%7649100.0% B - 4 C:\\Users\\RogerN\\Desktop\\sm_rates1\\Santa Monica Base SFR Water Demand Model Rev04_Alt 1.xls Santa Monica Demand Model to Evaluate Block Structure for Single Family Water Rates ALT 2 K/J 1283015*00 Block Range (Hcf)Existing Rate StructureBlock Range (Hcf)Proposed Block Rate Structure 2011Projected % Less Than Less Than Annual Unit Usage Annual Water Rate Greater % Annual Rate (per Annual Greater Rate (per % Rate Projected Annual % Annual or Equal or Equal Usage 1 Usage BlocksThanUsageHcf)RevenueThanHcf)ChangeAnnual RevenueRevenue Reduction ToTo 22 Usage (Hcf)(Hcf) Block 1014566,91243.3%$2.48$1,405,943014$2.480.0%0.0%566,91243.3%$1,405,94330.3% Block 21440518,12039.6%$3.74$1,937,7701440$3.740.0%0.0%518,12039.6%$1,937,77041.8% Block 340148213,28216.3%$5.60$1,194,38140148$5.600.0%0.0%213,28216.3%$1,194,38125.8% Block 41481000011,3810.9%$8.76$99,69514810000$8.760.0%0.0%11,3810.9%$99,6952.1% Block 5100001000000.0%$8.76$01000010000$8.760.0%0.0%00.0%$00.0% Block 6100001000000.0%$8.76$01000010000$8.760.0%0.0%00.0%$00.0% Block 7100001000000.0%$8.76$01000010000$8.760.0%0.0%00.0%$00.0% Block 8100001000000.0%$010000100000.0%00.0%$00.0% Block 9100001000000.0%$010000100000.0%00.0%$00.0% Block 10100001000000.0%$0100001000000.0%$00.0% Fixed Charge (Bi-Monthly/DU): $0.00$10.00 Totals:1,309,696100.0%1,309,696100% Variable Revenue:$4,637,789Calculated IncreaseVariable Revenue:$4,637,789 Fixed Revenue:$0Assuming No ConservationFixed Revenue:$727,396 Total Revenue:$4,637,78915.7%Total Revenue:$5,365,185100.0% Yellow cells are manually inputted values. Estimated Change in Bi-Monthly Bill by Usage (Both Fixed and Quantity Charge) Average Bi-MonthlyTypical Bi-Monthly BillCumulative UsageCurrentBlock RateChange In BillNo. of% of TotalNo. of% of Total (Hcf)StructureStructure($)(%)DUDUDUDU 6$14.88$24.88$10.0067.2%4135.4%4135.4% 9$22.32$32.32$10.0044.8%4075.3%82010.7% 10$24.80$34.80$10.0040.3%1461.9%96612.6% 14$34.72$44.72$10.0028.8%78510.3%175122.9% 20$57.16$67.16$10.0017.5%119615.6%294738.5% 21$60.90$70.90$10.0016.4%2082.7%315541.2% 25$75.86$85.86$10.0013.2%7429.7%389750.9% 30$94.56$104.56$10.0010.6%86511.3%476262.3% 35$113.26$123.26$10.008.8%6798.9%544171.1% 40$131.96$141.96$10.007.6%5777.5%601878.7% 47$171.16$181.16$10.005.8%5707.5%658886.1% 52$199.16$209.16$10.005.0%2693.5%685789.6% 60$243.96$253.96$10.004.1%2953.9%715293.5% 68$288.76$298.76$10.003.5%1832.4%733595.9% 70$299.96$309.96$10.003.3%280.4%736396.3% 75$327.96$337.96$10.003.0%660.9%742997.1% 80$355.96$365.96$10.002.8%450.6%747497.7% 85$383.96$393.96$10.002.6%370.5%751198.2% 95$439.96$449.96$10.002.3%400.5%755198.7% 100$467.96$477.96$10.002.1%180.2%756999.0% 110$523.96$533.96$10.001.9%160.2%758599.2% 115$551.96$561.96$10.001.8%110.1%759699.3% 120$579.96$589.96$10.001.7%80.1%760499.4% 130$635.96$645.96$10.001.6%120.2%761699.6% 140$691.96$701.96$10.001.4%80.1%762499.7% 160$841.88$851.88$10.001.2%110.1%763599.8% 190$1,104.68$1,114.68$10.000.9%70.1%764299.9% 225$1,411.28$1,421.28$10.000.7%40.1%7646100.0% 250$1,630.28$1,640.28$10.000.6%20.0%7648100.0% >250--------------------10.0%7649100.0% B - 5 C:\\Users\\RogerN\\Desktop\\sm_rates1\\Santa Monica Base SFR Water Demand Model Rev04_Alt 2.xls Santa Monica Demand Model to Evaluate Block Structure for Single Family Water Rates ALT 3 K/J 1283015*00 Block Range (Hcf)Existing Rate StructureBlock Range (Hcf)Proposed Block Rate Structure 2011Projected % Less Than Less Than Annual Unit Usage Annual Water Rate Greater % Annual Rate (per Annual Greater Rate (per % Rate Projected Annual % Annual or Equal or Equal Usage 1 Usage BlocksThanUsageHcf)RevenueThanHcf)ChangeAnnual RevenueRevenue Reduction ToTo 22 Usage (Hcf)(Hcf) Block 1014566,91243.3%$2.48$1,405,943014$2.23-10.0%0.0%566,91243.3%$1,265,34930.3% Block 21440518,12039.6%$3.74$1,937,7701440$3.37-10.0%0.0%518,12039.6%$1,743,99341.8% Block 340148213,28216.3%$5.60$1,194,38140148$5.04-10.0%0.0%213,28216.3%$1,074,94325.8% Block 41481000011,3810.9%$8.76$99,69514810000$7.88-10.0%0.0%11,3810.9%$89,7262.1% Block 5100001000000.0%$8.76$01000010000$7.88-10.0%0.0%00.0%$00.0% Block 6100001000000.0%$8.76$01000010000$7.88-10.0%0.0%00.0%$00.0% Block 7100001000000.0%$8.76$01000010000$7.88-10.0%0.0%00.0%$00.0% Block 8100001000000.0%$010000100000.0%00.0%$00.0% Block 9100001000000.0%$010000100000.0%00.0%$00.0% Block 10100001000000.0%$0100001000000.0%$00.0% Fixed Charge (Bi-Monthly/DU): $0.00$15.00 Totals:1,309,696100.0%1,309,696100% Variable Revenue:$4,637,789Calculated IncreaseVariable Revenue:$4,174,010 Fixed Revenue:$0Assuming No ConservationFixed Revenue:$1,091,093 Total Revenue:$4,637,78913.5%Total Revenue:$5,265,104100.0% Yellow cells are manually inputted values. Estimated Change in Bi-Monthly Bill by Usage (Both Fixed and Quantity Charge) Average Bi-MonthlyTypical Bi-Monthly BillCumulative UsageCurrentBlock RateChange In BillNo. of% of TotalNo. of% of Total (Hcf)StructureStructure($)(%)DUDUDUDU 6$14.88$28.39$13.5190.8%4135.4%4135.4% 9$22.32$35.09$12.7757.2%4075.3%82010.7% 10$24.80$37.32$12.5250.5%1461.9%96612.6% 14$34.72$46.25$11.5333.2%78510.3%175122.9% 20$57.16$66.44$9.2816.2%119615.6%294738.5% 21$60.90$69.81$8.9114.6%2082.7%315541.2% 25$75.86$83.27$7.419.8%7429.7%389750.9% 30$94.56$100.10$5.545.9%86511.3%476262.3% 35$113.26$116.93$3.673.2%6798.9%544171.1% 40$131.96$133.76$1.801.4%5777.5%601878.7% 47$171.16$169.04-$2.12-1.2%5707.5%658886.1% 52$199.16$194.24-$4.92-2.5%2693.5%685789.6% 60$243.96$234.56-$9.40-3.9%2953.9%715293.5% 68$288.76$274.88-$13.88-4.8%1832.4%733595.9% 70$299.96$284.96-$15.00-5.0%280.4%736396.3% 75$327.96$310.16-$17.80-5.4%660.9%742997.1% 80$355.96$335.36-$20.60-5.8%450.6%747497.7% 85$383.96$360.56-$23.40-6.1%370.5%751198.2% 95$439.96$410.96-$29.00-6.6%400.5%755198.7% 100$467.96$436.16-$31.80-6.8%180.2%756999.0% 110$523.96$486.56-$37.40-7.1%160.2%758599.2% 115$551.96$511.76-$40.20-7.3%110.1%759699.3% 120$579.96$536.96-$43.00-7.4%80.1%760499.4% 130$635.96$587.36-$48.60-7.6%120.2%761699.6% 140$691.96$637.76-$54.20-7.8%80.1%762499.7% 160$841.88$772.69-$69.19-8.2%110.1%763599.8% 190$1,104.68$1,009.21-$95.47-8.6%70.1%764299.9% 225$1,411.28$1,285.15-$126.13-8.9%40.1%7646100.0% 250$1,630.28$1,482.25-$148.03-9.1%20.0%7648100.0% >250--------------------10.0%7649100.0% B - 6 C:\\Users\\RogerN\\Desktop\\sm_rates1\\Santa Monica Base SFR Water Demand Model Rev04_Alt3.xls Santa Monica Demand Model to Evaluate Block Structure for Single Family Water Rates ALT 4 K/J 1283015*00New Blocks, No Fixed Rate Block Range (Hcf)Existing Rate StructureBlock Range (Hcf)Proposed Block Rate Structure 2011Projected % Less Than Less Than Annual Unit Usage Annual Water Rate Greater % Annual Rate (per Annual Greater Rate (per % Rate Projected Annual % Annual or Equal or Equal Usage 1 Usage BlocksThanUsageHcf)RevenueThanHcf)ChangeAnnual RevenueRevenue Reduction ToTo 22 Usage (Hcf)(Hcf) Block 1014566,91243.3%$2.48$1,405,943014$2.646.5%0.0%566,91243.3%$1,497,32928.0% Block 21440518,12039.6%$3.74$1,937,7701430$4.048.0%0.0%389,78629.8%$1,574,42529.5% Block 340148213,28216.3%$5.60$1,194,3813068$5.712.0%0.0%276,82821.1%$1,581,23929.6% Block 41481000011,3810.9%$8.76$99,69568148$8.942.0%0.0%64,7894.9%$578,89910.8% Block 5100001000000.0%$8.76$014810000$9.7411.2%0.0%11,3810.9%$110,8412.1% Block 6100001000000.0%$010000100000.0%00.0%$00.0% Block 7100001000000.0%$010000100000.0%00.0%$00.0% Block 8100001000000.0%$010000100000.0%00.0%$00.0% Block 9100001000000.0%$010000100000.0%00.0%$00.0% Block 10100001000000.0%$0100001000000.0%$00.0% Fixed Charge (Bi-Monthly/DU): $0.00$0.00 Totals:1,309,696100.0%1,309,696100% Variable Revenue:$4,637,789Calculated IncreaseVariable Revenue:$5,342,734 Fixed Revenue:$0Assuming No ConservationFixed Revenue:$0 Total Revenue:$4,637,78915.2%Total Revenue:$5,342,734100.0% Yellow cells are manually inputted values. Estimated Change in Bi-Monthly Bill by Usage (Both Fixed and Quantity Charge) Average Bi-MonthlyTypical Bi-Monthly BillCumulative UsageCurrentBlock RateChange In BillNo. of% of TotalNo. of% of Total (Hcf)StructureStructure($)(%)DUDUDUDU 6$14.88$15.85$0.976.5%4135.4%4135.4% 9$22.32$23.77$1.456.5%4075.3%82010.7% 10$24.80$26.41$1.616.5%1461.9%96612.6% 12$29.76$31.69$1.936.5%3714.9%133717.5% 14$34.72$36.98$2.266.5%4145.4%175122.9% 21$60.90$65.25$4.357.1%140418.4%315541.2% 25$75.86$81.41$5.557.3%7429.7%389750.9% 30$94.56$101.60$7.047.4%86511.3%476262.3% 35$113.26$130.16$16.9014.9%6798.9%544171.1% 40$131.96$158.72$26.7620.3%5777.5%601878.7% 47$171.16$198.71$27.5516.1%5707.5%658886.1% 52$199.16$227.27$28.1114.1%2693.5%685789.6% 60$243.96$272.96$29.0011.9%2953.9%715293.5% 68$288.76$318.66$29.9010.4%1832.4%733595.9% 70$299.96$336.53$36.5712.2%280.4%736396.3% 75$327.96$381.21$53.2516.2%660.9%742997.1% 80$355.96$425.88$69.9219.6%450.6%747497.7% 85$383.96$470.56$86.6022.6%370.5%751198.2% 95$439.96$559.91$119.9527.3%400.5%755198.7% 100$467.96$604.59$136.6329.2%180.2%756999.0% 110$523.96$693.94$169.9832.4%160.2%758599.2% 115$551.96$738.61$186.6533.8%110.1%759699.3% 120$579.96$783.29$203.3335.1%80.1%760499.4% 130$635.96$872.64$236.6837.2%120.2%761699.6% 140$691.96$961.99$270.0339.0%80.1%762499.7% 160$841.88$1,150.35$308.4736.6%110.1%763599.8% 190$1,104.68$1,442.53$337.8530.6%70.1%764299.9% 225$1,411.28$1,783.41$372.1326.4%40.1%7646100.0% 250$1,630.28$2,026.89$396.6124.3%20.0%7648100.0% >250--------------------10.0%7649100.0% B - 7 C:\\Users\\RogerN\\Desktop\\sm_rates1\\Santa Monica Base SFR Water Demand Model Rev05_Alt 4.xls Santa Monica Demand Model to Evaluate Block Structure for Single Family Water Rates ALT 4 b K/J 1283015*00$10.00 Fixed - Block 1 Price = $0.00 Block Range (Hcf)Existing Rate StructureBlock Range (Hcf)Proposed Block Rate Structure 2011Projected % Less Than Less Than Annual Unit Usage Annual Water Rate Greater % Annual Rate (per Annual Greater Rate (per % Rate Projected Annual % Annual or Equal or Equal Usage 1 Usage BlocksThanUsageHcf)RevenueThanHcf)ChangeAnnual RevenueRevenue Reduction ToTo 22 Usage (Hcf)(Hcf) Block 1014566,91243.3%$2.48$1,405,94304$0.00-100.0%0.0%177,18713.5%$00.0% Block 21440518,12039.6%$3.74$1,937,770425$3.18-15.0%0.0%686,52852.4%$2,182,47146.5% Block 340148213,28216.3%$5.60$1,194,3812568$5.04-10.0%0.0%369,81128.2%$1,863,85039.7% Block 41481000011,3810.9%$8.76$99,69568148$8.32-5.0%0.0%64,7894.9%$539,17111.5% Block 5100001000000.0%$8.76$014810000$9.579.2%0.0%11,3810.9%$108,9172.3% Block 6100001000000.0%$010000100000.0%00.0%$00.0% Block 7100001000000.0%$010000100000.0%00.0%$00.0% Block 8100001000000.0%$010000100000.0%00.0%$00.0% Block 9100001000000.0%$010000100000.0%00.0%$00.0% Block 10100001000000.0%$0100001000000.0%$00.0% Fixed Charge (Bi-Monthly/DU): $0.00$10.00 Totals:1,309,696100.0%1,309,696100% Variable Revenue:$4,637,789Calculated IncreaseVariable Revenue:$4,694,409 Fixed Revenue:$0Assuming No ConservationFixed Revenue:$727,396 Total Revenue:$4,637,78916.9%Total Revenue:$5,421,805100.0% Estimated Change in Bi-Monthly Bill by Usage (Both Fixed and Quantity Charge) Average Bi-MonthlyTypical Bi-Monthly BillCumulative UsageCurrentBlock RateChange In BillNo. of% of TotalNo. of% of Total (Hcf)StructureStructure($)(%)DUDUDUDU 6$14.88$16.36$1.489.9%4135.4%4135.4% 9$22.32$25.90$3.5816.0%4075.3%82010.7% 10$24.80$29.07$4.2717.2%1461.9%96612.6% 12$29.76$35.43$5.6719.1%3714.9%133717.5% 14$34.72$41.79$7.0720.4%4145.4%175122.9% 21$60.90$64.04$3.145.2%140418.4%315541.2% 25$75.86$76.76$0.901.2%7429.7%389750.9% 30$94.56$101.96$7.407.8%86511.3%476262.3% 35$113.26$127.16$13.9012.3%6798.9%544171.1% 40$131.96$152.36$20.4015.5%5777.5%601878.7% 47$171.16$187.64$16.489.6%5707.5%658886.1% 52$199.16$212.84$13.686.9%2693.5%685789.6% 60$243.96$253.16$9.203.8%2953.9%715293.5% 68$288.76$293.48$4.721.6%1832.4%733595.9% 70$299.96$310.12$10.163.4%280.4%736396.3% 75$327.96$351.73$23.777.2%660.9%742997.1% 80$355.96$393.34$37.3810.5%450.6%747497.7% 85$383.96$434.95$50.9913.3%370.5%751198.2% 95$439.96$518.17$78.2117.8%400.5%755198.7% 100$467.96$559.78$91.8219.6%180.2%756999.0% 110$523.96$643.00$119.0422.7%160.2%758599.2% 115$551.96$684.61$132.6524.0%110.1%759699.3% 120$579.96$726.22$146.2625.2%80.1%760499.4% 130$635.96$809.44$173.4827.3%120.2%761699.6% 140$691.96$892.66$200.7029.0%80.1%762499.7% 160$841.88$1,074.08$232.2027.6%110.1%763599.8% 190$1,104.68$1,361.19$256.5123.2%70.1%764299.9% 225$1,411.28$1,696.15$284.8720.2%40.1%7646100.0% 250$1,630.28$1,935.41$305.1318.7%20.0%7648100.0% >250--------------------10.0%7649100.0% B - 8 C:\\Users\\RogerN\\Desktop\\sm_rates1\\Santa Monica Base SFR Water Demand Model Rev05_Alt 4 new_B.xls COST OF SERVICE ACCOUNT AND EQUIVALENT METER DATA Percent MeterNumber Percent CustomerBill Meter SizeNumberof TotalCapacityof of Total ClassCode(Inches)of MetersMetersRatioEquiv. MetersEquiv. Meters Single Family7,60446%12,11732% WASF013 / 41171.00117 WASF021401.6767 WASF031.553.3317 WASF13 / 43,5691.003,569 WASF212,8081.674,680 WASF31.51,0063.333,353 WASF42595.33315 Multi-Family6,08537%16,10843% WAMF013 / 4191.0019 WAMF02121.673 WAMF031.523.337 WAMF053010.000 WAMF064016.670 WAMF076033.330 WAMF088053.330 WAMF13 / 41,2071.001,207 WAMF211,3821.672,303 WAMF31.52,3233.337,743 WAMF424725.332,517 WAMF535710.00570 WAMF642916.67483 WAMF6A4116.6717 WAMF76933.33300 WAMF88253.33107 WAMF910096.670 WASF013 / 471.007 WASF02111.672 WASF031.513.333 WASF04205.330 WASF13 / 43381.00338 WASF211901.67317 WASF31.5353.33117 WASF4245.3321 WASF53010.000 WASF64016.670 WASF76033.330 WASF88053.330 WASF910096.670 WANR31.523.337 WANR53210.0020 Comm./Inst.2,17513%7,80821% 0 1.000 WANR013 / 4 605 WANR13 / 41.00605 476 WANR211.67793 544 WANR31.53.331,813 365 WANR425.331,947 118 WANR5310.001,180 47 WANR6416.67783 19 WANR7633.33633 1 WANR8853.3353 Landscape5553%1,4114% 0 WANR013 / 41.000 184 WANR13 / 41.00184 160 WANR211.67267 124 WANR31.53.33413 75 WANR425.33400 8 WANR5310.0080 4 WANR6416.6767 0 WANR7633.330 WANR88053.330 TOTAL16,419100%37,445100% B - 9 SUMMARY OF COST OF SERVICE FINDINGS Cost of Service Percent Actual CostsDifference Equivalent MetersAvg Annual UsagePeak Hour Usage Revenues Customer Type Number%Hcf%Hcf%$'s$'s% Single Family Residential12,11732.4%1,323,99424.5%77,22626.6%$4,017,232$4,276,700106% Multi-Family Residential16,10843.0%2,354,68743.5%113,39439.1%$7,209,647$7,124,13499% Commercial/Institutional9,21924.6%1,729,92432.0%99,16834.2%$5,652,328$5,478,37397% Water System Totals37,444100%5,408,605100%289,788100%$16,879,206$16,879,206100% Fire Services2,381$1,128,975 B - 10 CostofService SummaryofFindings 12.0 10.0 8.0 6.0 4.0 2.0 0.0 SingleFamilyResidentialMultiFamilyResidentialCommercial/Institutional ActualRevenuesCostofServiceCosts Note:BasedonFY201112Actuals B - 11 /źƷǤƚŅ{ğƓƷğaƚƓźĭğ May21,2014 B - 12 MeetingAgenda 1.WaterFundrevenuerequirements 2.Waterraterestructuring 1.Summaryof2007ratechanges 2.Currentrateconsiderations 3.NextSteps/OpenDiscussion B - 13 WaterFundRevenueRequirements Notablereductionsinwaterusage • Increasedfundingforconservationprograms • Historicalrateincreasesoffsetbylowerwater • sales B - 14 2007WaterRateStudy WaterFundRevenueRequirements 2007RateStudyΑ!ǝĻƩğŭĻSFRusage=35Hcf 2014RateStudyΑ!ǝĻƩğŭĻSFRusageΑЌЉHcf B - 15 WaterFundRevenueRequirements 2014FindingsΑ/tLIncreasesonly B - 16 WaterFundRevenueRequirements 2014FindingsΑВіAnnualIncreases B - 17 RateRestructuringConsiderations SFRWaterRateComparisonSurvey B - 18 WaterRateRestructuring Summaryof2007ratestructurechanges • Costofservicefindings • Currentrateconsiderations • B - 19 2007WaterRateStudy Thencurrentwaterrates • Summaryofwaterratechanges • B - 20 ThenCurrentWaterRates(2007) FixedBiMonthlyServiceCharge B - 21 ThenCurrentWaterRates(2007) CommodityCharges B - 22 Summaryof2007RateChanges Demandassessment • SFR&MFRexhibithomogeneousdistributionofuse – NonResexhibitlargediversity(averagebimonthly – useistwotimesmedianuse) Toptierappliedto2%ofwateruseperclass – Conservationsupport • AllClasses:Fixedservicechargeeliminated – SFR/MFR:3tiersincreasedto4tiers – NonRes:3tierssimplifiedto2tiers;toptierset • for2%ofusepermetersize Sametierstoday,capturetop5% – B - 23 RateRestructuringConsiderations CurrentCostofServiceFindings Currentratestructurereasonablyrecoversthecostsofservice B - 24 RateRestructuringConsiderations BasicRateStructureAlternatives StatusQuoΑĭǒƩƩĻƓƷtierswithincremental • increaseinunitrates New$10FixedCharge:rateincreases/meter • size,currenttiers&rates New$15FixedCharge:rateincreases/meter • size,currenttiers&lowerrates OtherΑ.ǒķŭĻƷBasedRates,NewTiers • B - 25 RateRestructuringConsiderations AlternativeRateStructures RefertoDemandSummaryTables • Refertohandoutsfor: • Currentratesandstructure – Alternativerates/ratestructures – Usageparametersbycustomerclass – Typicalbillsanddollarimpactbyusagebycustomer – class DetailedalternativeanalysisforSFRaccounts – B - 26 RateRestructuringConsiderations UsageSummary UsageTypeSFRValueMFRValue WinterMedian218 AnnualAverage2911 AnnualMedian259 SummerMedian2910 Summer75thPercentile4611 Summer90thPercentile6817 AverageAnnual(hcf/du/BC) 90thPercentile5316 95thPercentile6519 98thPercentile8325 B - 27 RateRestructuringConsiderations SFRRateTiersCurrent B - 28 RateRestructuringConsiderations NonResidential Basisofcurrentratestructure • Essentiallyuniform – Toptierincludes45%ofannualwateruse – Currentcostofservicefindings • Raterestructuringconsiderations • Statusquo/tweak/overhaul – Stillunderreview – Waterusageinformation – B - 29 RateRestructuringConsiderations UsageSummary NonResidential UsagebyMeterSize(hcf/BC) UsageType0.75122346 WinterMedian916356823626116 AnnualAverage21327012928697226 AnnualMedian142038631661111 SummerMedian1019419231127612 Summer75thPercentile25411022506748162584 Summer90thPercentile5581203519108915784402 AverageAnnual 90thPercentile487015831868427350 95thPercentile68972345038955821686 98thPercentile10415033867312859733101 B - 30 FinancialPlanningUpdate Summary Waterusageisdownfromthe2007RateStudy • Anincreaseinwaterrevenuesisneeded;aseries • ofincreasesareproposed Wateruseefficiencywillcontinuetobeacore • Cityprogram,butnotwithoutacost Raterestructuringfocusingonsimplicity,equity, • andrevenuegenerationatthistime SantaaƚƓźĭğ͸sratesareamongthelowestofthe • othercitiessurveyed B - 31 NextSteps&OpenDiscussion B - 32 ATTACHMENT E TABLE 5 COST OF SERVICE Tiered Rates & Costs by Customer Class 2015 Water Rate Study Data Single-Family Water Rates ($/HCF) Costs of Service TierFY 13/14FY 14/15FY 15/16 1$5.13$5.95$5.36 2$5.46$6.30$5.68 3$8.99$10.39$9.97 4$9.14$10.58$10.15 Adopted Rates 1$2.48$2.50$2.73 $3.74$3.75 2$4.09 $5.60$5.62 3$6.13 $8.76$8.80 4$9.59 Multi-Family Water Rates ($/HCF) Costs of Service TierFY 13/14FY 14/15FY 15/16 1$5.02$6.11$5.51 2$5.35$6.45$5.83 3$8.88$10.55$10.11 4$9.04$10.73$10.30 Adopted Rates 1$2.48$2.50$2.73 $3.74$3.75 2$4.09 $5.60$5.62 3$6.13 4$8.76$8.80$9.59 Non-Residential Water Rates ($/HCF) Costs of Service TierFY 13/14FY 14/15FY 15/16 1$5.02$6.29$5.67 $9.03$10.91$10.46 2 Adopted Rates 13.56$3.57$3.88 28.76$8.80$9.55 Costs shown herein are based on Water Rate Study projections. Water Rate Study assumes the integration of additional Olympic Water Treatment Plant related Water Fund Subsidies. ATTACHMENT E TABLE 6 COST OF SERVICE Tiered Rates & Costs by Customer Class FY 14-15 Actual Costs Single-Family Water Rates ($/HCF) Costs of Service TierFY 14/15FY 15/16 1$4.43$5.71 $5.51 2$6.50 $9.39 3$14.54 $9.39 4$14.54 Adopted Rates 1$2.50$2.73 $3.75 2$4.09 $5.62 3$6.13 $8.80 4$9.59 Multi-Family Water Rates ($/HCF) Costs of Service TierFY 14/15FY 15/16 1$4.23$5.46 $5.44 2$6.25 $9.20 3$14.28 $9.20 4$14.28 Adopted Rates 1$2.50$2.73 $3.75 2$4.09 $5.62 3$6.13 $8.80 4$9.59 Non-Residential Water Rates ($/HCF) Costs of Service TierFY 14/15FY 15/16 1$4.43$5.71 $9.39 2$14.53 Adopted Rates 1$3.57$3.88 2$8.80$9.55 FY 14-15 findings based on actual costs. FY 15-16 findings based on new projections. Last Year’s Adopted Rate Schedule (February 24, 2015): Calendar Year20152016201720182019 Maximum Projected 9%9%9%9%9% Increase Council approved up to 9% annual increase with provisions for “suspension” of all or part of • each following year’s adjustment 9% increase for the first year beginning March 1, 2015, • Council directed staff to return with a State of the Water Fund report and a • recommendation for each following year’s rate adjustment, up to the maximum 9%. Recommendation presented for 2016 is a Partial Suspension, = 5% increase for 2016 • Three options for year 2 rate adjustment: No suspension -9% Increase Strongest financial position of the three options at end of planning period Reserve fund minimums exceeded throughout the planning period Bonding requirements achieved FY 18/19 Tier 1 Residential rate rises from $2.73/HCF to $2.98/HCF Tier 1 Commercial rises from $3.88/HCF to $4.23/HCF Partial Suspension -5% Increase Tier 1 Residential rate rises from $2.73/HCF to $2.87/HCF Tier 1 Commercial rises from $3.88/HCF to $4.07/HCF Minimum reserves barely met FY 18/19 Bonding requirements achieved by FY 18/19 Total Suspension -No Increase (0%) Rates remain the same as adopted 2/24/15 Reserves not met in later years of the planning period Bonding requirements not met by FY 18/19 FIGURE 1 -Water Fund -Revenue Plan Options $40.0 Water Fund Balance ($ Millions) $30.0 $20.0 $10.0 $0.0 FY 2013-14FY 2014-15FY 2015-16FY 2016-17FY 2017-18FY 2018-19FY 2019-20 Ending Cash Balance - Original Projection February 2015 Revenue Plan FIGURE 1 -Water Fund -Revenue Plan Options $40.0 Water Fund Balance ($ Millions) $30.0 $20.0 $10.0 $7 M $0.0 FY 2013-14FY 2014-15FY 2015-16FY 2016-17FY 2017-18FY 2018-19FY 2019-20 Ending Cash Balance - Original Projection February 2015 Revenue Plan MinimumRecommended Fund Reserve Balance FIGURE 1 -Water Fund -Revenue Plan Options $40.0 Water Fund Balance ($ Millions) $30.0 $20.0 $10.0 $7 M $0.0 FY 2013-14FY 2014-15FY 2015-16FY 2016-17FY 2017-18FY 2018-19FY 2019-20 Ending Cash Balance - Original Projection Ending Cash Balance –9% Increase February 2015 Revenue Plan MinimumRecommended Fund Reserve Balance FIGURE 1 -Water Fund -Revenue Plan Options $40.0 Water Fund Balance ($ Millions) $30.0 $20.0 $10.0 $0.0 FY 2013-14FY 2014-15FY 2015-16FY 2016-17FY 2017-18FY 2018-19FY 2019-20 Ending Cash Balance - Original ProjectionEnding Cash Balance - 9% Increase February 2015 Revenue Plan Ending Cash Balance - 5% Increase MinimumRecommended Fund Reserve Balance FIGURE 1 -Water Fund -Revenue Plan Options $40.0 Water Fund Balance ($ Millions) $30.0 $20.0 $10.0 $0.0 FY 2013-14FY 2014-15FY 2015-16FY 2016-17FY 2017-18FY 2018-19FY 2019-20 Ending Cash Balance - Original ProjectionEnding Cash Balance - 9% Increase February 2015 Revenue Plan Ending Cash Balance - 5% IncreaseEnding Cash Balance - 0% Increase MinimumRecommended Fund Reserve Balance Water Rate Comparison with Neighboring Agencies Single Family Residential Accounts Average use 23 HCF per billing period $200 $180 Monthly Water Bill (23 HCF) $160 $140 $120 $100 $80 - Typical Bi $60 $40 $20 $- Santa MonicaBurbankLong BeachLos AngelesPasadenaBeverly HillsGlendaleCulver City* CurrentBills issued after 3/1/16 w/5% Increase . *The water rate includes the accessed California Alternative Rate for Water (CARW) surcharge Onehundred cubic feet (HCF) of water = 748 gallons. Presented to Water Advisory Committee, February 2, 2016 • Presented to City’s Task Force on the Environment, January 25, 2016; • The City of Santa Monica Task Force on the Environment recommends • a 5% rate increase for the coming year, and • requests revisiting the rate structure within the next year, particularly in • regards to a conservation based block rate structure and fixed charges. RECOMMENDATION TO COUNCIL, February 23, 2016 meeting: In consideration of, Conservation effects not fully realized in FY 14/15 • Actual revenues +$3M, actual expenses -$2.7M, actual CIP expenditures - • $6.8M Objectives can be achieved with 5% increase at this time, • Recommend, Approve a partial suspension, 5% increase in unit water rates, effective March 1, 2016 Calendar Year20152016201720182019 Maximum Projected 5% Increase 9%9%9%9% (Recommended)