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Home My WebLink AboutSS2 - 2023 Water and Wastewater Rate Study - PowerPointAugust 22, 2023 Item No. SS2 2023 Water & Wastewater Rate Study Presentation City Council August 22, 2023 Presented by Mark Vukojevic, Utilities Director Summar from May 11 and July 26tn Finance Committee: 0 Water and wastewater is a 24/7 community service, asset, and commodity The systems operate as independent/segregated Enterprise Funds The balance between fixed and variable costs Current and future capital improvement projects are necessary Operational & Capital costs continue to go up - Buying water, construction, materials, equipment, insurance, conservation, regulatory compliance Rates need to recover costs, especially with inflation * Operations * Capital Improvements * Reserves/Emergencies Rate increases are needed to keep up with inflation of Maintain similar rate structure — (maintain simplified customer understanding) P o02 Develop a financial plan that corrects the structural O.deficit; and sufficiently funds operations, capital and reserves UTILITIES DEPARTMENT 2023 Rate Studies - I �. moon* _ 03 Move rates to recover more fixed business costs SEW PORT U � S esc Cq�I FO RN`P Current Water Rates: > • Monthly and Bimonthly Billing • Fixed Charge and Use Charge • Use Charge incentivizes conservation $641month is the typical home water bill Rate revenue: vs. '--40 % Fixed Charges r-60% Variable Charges Business costs: '--65 % Fixed Costs 35% Variable Costs Goal: Gradually adjust revenue % to better match business costs NEWPORT BEACH WATER DELIVERED IN ACRE FEET 19,000 18,000 O 17,000 16,000 0- O - O O 15,000 O O 14,000 - O 13,000 - 12,000 - 11,000 - 10,000 - 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 UTILITIES DEPARTMENT 2023 Rate Studies Current Revenues & Expenditures: Water: -$1+mil Structural deficit N$35million Revenues -$36mil Expenses * Water purchases * Operations * Capita Escalation/Inflation Factors >5% over next years * Water purchases * Contracts * CIP, labor & materials * Electricity & Equipment * Insurance $13 million $17 million $6 million NEWPORT BEACH Water System 3 02 202 6 4 2 MILES OF POTABLE Million gallons P R E S S U R E WATER PIPELINE storage capacity R E D U C I TATIONS 269550 Service connections 017 k 0 0 S T E R PUMPS UTILITIES DEPARTMENT 2023 Rate Studies 32112 iTRIBUTION ALVES NEWPORT BEACH Aging Infrastructure P. - - - A - V Y, 00 UTILITIES DEPARTMENT jr 2023 Rote Studies 1%oor 8 NEWPORT BEACH 2019 Water Master Plan / 30-year Capital Improvements Plan Increased capital Capital projects: annual total: ESCALATING 7 ANNUALLYlij? I L L I n FACILITIES PROJECTS o � 0 0 Pressure reducing stations projects C2 UTILITIES DEPARTMENT 2023 Rate Studies 1%gor 9 Reserve Targets for Water: Type O&M Reserve* Capital Reserve Drought/ Stabilization 120 days of O&M $10.0/$11.5 Mil 75% of annual CIP 30% water use reduction * this reserve is also an emergency water purchase reserve $5.6/$6.8 Mil $3.0/$3.3 Mil $18.6/$21.6 Mil Water Reserve Comparisons With Rate Increases: Target $18.6 M $19.3 M $20.0 M Proposed $17.9 M Status Quo $17.9 M $17.6 M $15.5 M $18.9 M $11.4 M 1w $20.8 M $21.6 M $19.8 M $5.4 M Estimated 2028 Rate Revenue = 48% fixed & 52% variable $19.9 M -$2.4 M Proposed Water Financial Plan: Revenues $34.8 M $38.3 M $41.7 M $43.0 M $44.2 M Water & Ops $30.0 M $30.7 M $32.1 M $33.4 M $34.9 M Expenses Infrastructure $6.2 M $7.9 M $8.3 M $8.7 M $9.1 M Expenses Total $36.2 M $38.6 M $40.4 M $42.1 M $44.0 M Expenses Ending $17.9 M $17.6 M $18.9 M $19.8 M $20.0 M Reserves Typical Water Customer Impacts: monthly increase 2024 - $4.77 (previously approved rate study) ($1.87 fixed plus $2.90 variable) 2025 - $5.50 Year 2, new rate study ($4.50 fixed plus $1.00 variable) 2026 - $6.00 Year 3, new rate study ($5.00 fixed plus $1.00 variable) 2027 - $6.00 Year 4, new rate study ($5.00 fixed plus $1.00 variable) 2028 - $6.00 Year 5, new rate study ($5.00 fixed plus $1.00 variable) Proposed Water Rates $64/month is the typical home water bill Monthly Fixed Charge 5/8" Meter * $25.22 Approved 2023 $25.22 + Approved 2024 $27.09 $38.70 Proposed 2025 $ 31.59 = $63.92 Proposed Proposed 2026 2027 $ 36.59 $41.59 Proposed 2028 $46.59 Use Charge $3.87 $4.16 $4.26 $4.36 $4.46 $4.56 Net Increase (most common) * 5/8" meters represent $4.44 64% of $4.77 accounts $E.50 $L.00 $6.00 6.00 /Q0 Proposed Water Rates: :> Monthly Fixed Approved Approved Proposed Proposed Proposed Proposed Charge 2023 2024 2025 2026 2027 2028 518" 25.22 27.09 31.59 36.59 41.59 46.59 1" 39.09 41.99 50.07 58.31 66.53 74.75 1-1/2" 73.69 79.15 96.28 112.60 128.88 145.17 2" 115.23 123.76 151.73 177.74 203.71 229.66 3" 305.61 328.23 405.88 476.34 546.65 616.92 4" 523.69 562.45 697.00 818.37 939.48 1,060.51 6" 1,112.15 1,194.45 1,482.55 1,741.30 1,999.50 2,257.50 8" 1,942.91 2,086.69 2,591.56 3,044.27 3,495.99 3,947.37 Use Charge $3.87 $4.16 $4.26 $4.36 $4.46 $4.56 Net Increase (most common) $4.44 $4.77 $5.50 $6.00 $6.00 $6.00 Current Wastewater Rates • Monthly and Bimonthly Billing • Fixed Charge and Use Charge $141month is the typical home wastewater bill Rate revenue: vs. --'50 % Fixed Charges -'50% Variable Charges Business costs: 100 % Fixed Costs Goal: Gradually adjust revenue % to better match business costs Current Revenues & Expenditures: Wastewater: -$1 mil Structural deficit -$4.7mil Revenues -$5.7mil Expenses * Pump Stations * Operations * Capital Escalation/Inflation Fartnr-; - S % over next yea * Contracts * CIP, labor * Equipmen- * Insurance $5.1 mil operations $600k CI P Wastewater Capital needs: 200+ miles of pipelines 25,000 Laterals 21 Pump Stations $1.1 Million Annual Escalating Investment Reserve Targets for Wastewater LTYp� O&M Reserve 90 days of O&M $1.2/1.5 Mil Capital Reserve 1-Year of CIP $1.1/1.3 Mil $2.3/2.8 Mil Wastewater Reserve Comparisons With Rate Increases: �Ivw Ow M Target $2.3 M $2.4 M $2.5 M $2.7 M Proposed $800k $200k Status Quo $500k -$1.2 Mil $150k -$3.3 Mil $800k -$5.6 Mil Estimated 2028 Rate Revenue = 70% fixed & 30% variable F020 L J $2.8 Mil $2.1 Mil -$8.3 Mil Proposed Wastewater Financial Plan Revenues $5.0 M $5.9 M $6.7 M $7.7 M $8.7 M Operation $5.1 M $5.4 M $5.6 M $5.9 M $6.1 M Expenses Infrastructure $0.7 M $1.1 M $1.1 M $1.2 M $1.3 M Expenses Total $5.8 M $6.5 M $6.7 M $7.1 M $7.4 M Expenses Ending $0.8 M $0.2 M $0.2 M $0.8 M $2.1 M Reserves Wastewater Typical Customer Impacts: monthly increase • 2024 - $2.20 Year 1, new rate study ($2.00 fixed plus $0.20 variable) • 2025 - $2.50 Year 2, new rate study ($2.30 fixed plus $0.20 variable) • 2026 - $3.00 Year 3, new rate study ($2.80 fixed plus $0.20 variable) • 2027 - $3.50 Year 4, new rate study ($3.30 fixed plus $0.20 variable) • 2028 - $3.50 Year 5, new rate study ($3.50 fixed plus $0.20 variable) Proposed Wastewater Rates $141month is the typical home wastewater bill $8.55 + $5.10 = $13.65 Monthly Fixed Charge Existing Proposed 2024 Proposed 2025 Proposed 2026 Proposed 2027 Proposed 2028 Up to 1" Meter * $8.55 $10.55 $12.85 $15.65 $18.95 $22.25 Use Charge $0.51 $0.53 $0.55 $0.57 $0.59 $0.61 Net Increase (mostcommon) Up to 1" meters $Z.20 $2.50 represent 92% of accounts 3.00 3.50 3.50 �� Proposed Wastewater Rates: Monthly Fixed Charge Existing 20 202 2027 2028 518" 8.55 10.55 12.85 15.65 18.95 22.25 1" 8.55 10.55 12.85 15.65 18.95 22.25 1-1/2" 9.41 15.82 19.27 23.48 28.42 33.38 2" 12.83 21.09 25.69 31.31 37.90 44.50 3" 14.54 26.37 32.12 39.13 47.37 55.63 4" 17.11 31.64 38.54 46.96 56.85 66.76 6" 19.25 36.91 44.96 54.79 66.32 77.88 8" 21.39 42.18 51.39 62.62 75.80 89.01 Use Charge $0.51 $0.53 $0.55 $0.57 $0.59 $0.61 Net Increase (most common) $2.20 $2.50 $3.00 $3.50 $3.50 Recommendation Review the Water and Wastewater Rate Study Information provided • Provide Input to Staff regarding the rate structure and proposed rates • Approve in concept the proposed rate structures Direct staff return with the final studies and setting of the public hearing Tentative Schedule: • August 22, 2023, City Council Study Session • Proposed Water and Sewer Rate Studies • September 26t", City Council Meeting • Approve Water & Wastewater Rate Study Reports • Set Public Hearing for Rates Change for November 14tn • Authorize Mailed Public Notice (Prop 218 Compliance) • Public Information and Outreach • Public notices, direct mailings, utility bill messages & inserts, community meetings, City website • November 141", Public Hearing to amend Rates • November 281", 2nd Reading to amend Rates • January 1st, 2024, Implement Water and Wastewater Rate Changes