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City of Puyallup Utility Rate Study & System Development Charges Presented by Tom Gould, HDR Engineering, Inc. October 12, 2010 ---PAGE BREAK--- 2 Overview of the Presentation Overview of a comprehensive rate study Review the results of the water, sewer, storm and surface water (SSW) and sanitation utilities: Revenue requirement Cost of service Overview of rate design options Review of water, sewer, storm and surface water system development charges (SDCs) Next Steps ---PAGE BREAK--- 3 Policy Decisions Needed From Council Revenue Requirements: Timing and level of rate adjustments for each utility Cost of Service: Implement cost of service results or apply adjustments equally adjust across the board Rate Design: Direction on rate design for each utility Maintain sewer winter water averaging for all classes, or remove for commercial and multi-family? System Development Charges: Level of change and timing of implementation ---PAGE BREAK--- 4 Overview of a Comprehensive Rate Study Cost of Service Rate Design Revenue Requirement Compares the revenues of the utility to its expenses to determine the overall level of rate adjustment Equitably allocates the revenue requirements between the various customer classes of service Design rates for each class of service to meet the revenue needs of the utility, along with any other rate design goals and objectives ---PAGE BREAK--- 5 Detail of the “Cash Basis” Approach + Total Capital Projects – Revenue Bonds (Bond Proceeds) – Grants – Customer Contributions (e.g. SDC’s) = Capital Projects Funded from Rates + O&M Expenses + Taxes/Transfer Payments + Debt Service (P&I) + Capital Projects Funded from Rates = Total Revenue Requirements – Miscellaneous Revenues = Balance Required from Rates (i + Term) (≥Annual Deprec. Exp.) ---PAGE BREAK--- 6 Financial Planning Considerations Debt service coverage (DSC) ratios “Minimum” reserve levels Financing of capital projects - levels and methods Proper use of growth related revenues Adequate Funding of Renewal and Replacement Capital Projects (Existing Facilities) ---PAGE BREAK--- 7 Key Issues for the Study Focus on adequate funding to maintain existing system Past several years utilities forced (by growth) to expand systems; Using funding capacity that would have maintained existing infrastructure Renewal and replacement funding is key to: Maintaining level of service in the most cost effective manner • Regular repair and maintenance extends useful life • Reduces risk and liability due to potential failures Funding capital from rates aids utility financial stability, improves debt service coverage ratio (DSC) ---PAGE BREAK--- 8 Fully Funding Annual Replacement Cost Each utility has an inventory file with assets, estimated year of installation, useful life, replacement costs Updated using the Engineering New Record Construction Cost Index Asset management plan – condition assessment, etc. Utility Utility Utility Utility Replacement Replacement Replacement Replacement Cost Cost Cost Cost 2011 Replacement 2011 Replacement 2011 Replacement 2011 Replacement Cost (60 Cost (60 Cost (60 Cost (60-year Life) year Life) year Life) year Life) % of Rate % of Rate % of Rate % of Rate Revenue Revenue Revenue Revenue $/Month $/Month $/Month $/Month Avg. Res. Avg. Res. Avg. Res. Avg. Res. Water $116.7 M $2.05 M 47% $10.40 Sewer $166.3 M $2.93 M 33% $14.25 Storm and Surface Wtr. $ 74.3 M $1.26 M 35% $3.65 Total $357.3 M $6.25 M $28.30 (Not including any inflationary increases for operations) ---PAGE BREAK--- 9 Alternatives for Funding Existing System (Renewals and Replacements - R&R) Rate funding (and debt financing) Several funding levels reviewed: Annual depreciation expense 2% of original asset value Replacement cost – 60 year useful life Rate funding provides financial stability; DSC Utility Utility Utility Utility 2010 Rate 2010 Rate 2010 Rate 2010 Rate Funding Funding Funding Funding Funding Range Funding Range Funding Range Funding Range (‘09 09 09 09 Deprec Deprec Deprec Deprec. . . . – ‘16 16 16 16 Replacemnt Replacemnt Replacemnt Replacemnt.).).).) Targeted 2016 Targeted 2016 Targeted 2016 Targeted 2016 Rate Funding Rate Funding Rate Funding Rate Funding Water $168,000 $920,000 – $2.640 M $1.250 M Sewer $150,000 $1.770 M – $3.790 M $2.100 M Storm & Surface Wtr. $ 0 $640,000 – $1.60 M $1.100 M Total $318,000 $4.450 M ---PAGE BREAK--- 10 Summary of the Comprehensive Rate Study Process Develops cost-based rates using “generally accepted” methodologies Provides the basis for “fair and equitable” rates Develops rates that reflect the reason for costs being incurred Provides the information to allow the City Council to make sound and rational decisions Addresses Lane vs. City of Seattle fire protection costs ---PAGE BREAK--- 11 Water Utility Analysis ---PAGE BREAK--- 12 Water Utility Capital Plan (CIP) Summary Total 7-year (2010-2016) - CIP is $11.3 million Average annual CIP $1.6 Million 2010 – 2016 Funding renewals and replacements from rates is 50% of annual replacement cost by 2016 ($1.25 M) ---PAGE BREAK--- 13 Water Revenue Requirement Results ($000) Using 30% of SDC revenue toward growth related debt 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $4,403 $4,430 $4,474 $4,519 $4,564 $4,610 $4,656 Miscellaneous Revenue 196 117 520 544 584 602 616 Total Revenue Total Revenue Total Revenue Total Revenue $4,600 $4,600 $4,600 $4,600 $4,547 $4,547 $4,547 $4,547 $4,994 $4,994 $4,994 $4,994 $5,063 $5,063 $5,063 $5,063 $5,148 $5,148 $5,148 $5,148 $5,212 $5,212 $5,212 $5,212 $5,272 $5,272 $5,272 $5,272 Expenses Expenses Expenses Expenses O&M Expenses $3,388 $3,478 $3,589 $3,724 $3,862 $4,006 $4,155 Taxes 682 601 607 613 631 637 643 Net Debt Service 470 564 693 750 745 855 867 Capital Funded From Rates 168 250 450 650 850 1,050 1,250 Change in Working Capital 0 0 (20) (90) (70) (245) (290) Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $4,708 $4,708 $4,708 $4,708 $4,893 $4,893 $4,893 $4,893 $5,319 $5,319 $5,319 $5,319 $5,647 $5,647 $5,647 $5,647 $6,018 $6,018 $6,018 $6,018 $6,302 $6,302 $6,302 $6,302 $6,625 $6,625 $6,625 $6,625 Balance (Deficiency) of Rates ($108) ($346) ($324) ($584) ($870) ($1,091) ($1,353) Plus: Additional Taxes ($14) ($45) ($42) ($76) ($113) ($142) ($176) Net Balance/(Deficiency) of Funds ($122) ($391) ($367) ($660) ($983) ($1,233) ($1,529) Balance (Def.) of Rates as % of Rates 2.8% 8.8% 8.2% 14.6% 21.5% 26.7% 32.8% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $4,403 $4,430 $4,474 $4,519 $4,564 $4,610 $4,656 Miscellaneous Revenue 196 117 520 544 584 602 616 Total Revenue Total Revenue Total Revenue Total Revenue $4,600 $4,600 $4,600 $4,600 $4,547 $4,547 $4,547 $4,547 $4,994 $4,994 $4,994 $4,994 $5,063 $5,063 $5,063 $5,063 $5,148 $5,148 $5,148 $5,148 $5,212 $5,212 $5,212 $5,212 $5,272 $5,272 $5,272 $5,272 Expenses Expenses Expenses Expenses O&M Expenses $3,388 $3,478 $3,589 $3,724 $3,862 $4,006 $4,155 Taxes 682 601 607 613 631 637 643 Net Debt Service 470 564 693 750 745 855 867 Capital Funded From Rates 168 250 450 650 850 1,050 1,250 Change in Working Capital 0 0 (20) (90) (70) (245) (290) Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $4,708 $4,708 $4,708 $4,708 $4,893 $4,893 $4,893 $4,893 $5,319 $5,319 $5,319 $5,319 $5,647 $5,647 $5,647 $5,647 $6,018 $6,018 $6,018 $6,018 $6,302 $6,302 $6,302 $6,302 $6,625 $6,625 $6,625 $6,625 Balance (Deficiency) of Rates ($108) ($346) ($324) ($584) ($870) ($1,091) ($1,353) Plus: Additional Taxes ($14) ($45) ($42) ($76) ($113) ($142) ($176) Net Balance/(Deficiency) of Funds ($122) ($391) ($367) ($660) ($983) ($1,233) ($1,529) Balance (Def.) of Rates as % of Rates 2.8% 8.8% 8.2% 14.6% 21.5% 26.7% 32.8% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% ---PAGE BREAK--- 14 Water Revenue Requirement Results ($000) ---PAGE BREAK--- 15 Summary of the Water Financial Planning Considerations Rate adjustments needed to meet debt service coverage, on a stand alone basis With SDC revenue, 1.25 DSC is met by utility Funding of renewals and replacement projects from rates helps utility meet debt service coverage 90 days O&M target met through 2016 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.97 0.73 1.04 0.88 0.76 0.58 0.48 After Needed Rate Adjustment 1.20 1.34 1.52 1.68 1.89 1.85 2.02 After Proposed Rate Adjustment 0.97 1.01 1.51 1.68 1.89 1.86 2.02 Fund Balance Fund Balance Fund Balance Fund Balance Target Fund Balance (O&M) $835 $858 $885 $918 $952 $988 $1,025 Target Capital Balance (Avg. Annual CIP) 1,620 1,620 1,620 1,620 1,620 1,620 1,620 Target Fund Balance (O&M & Avg. Annual CIP) $2,455 $2,478 $2,505 $2,538 $2,572 $2,608 $2,645 Ending Fund Balance (O&M & Avg. Annual CIP) 2,061 1,851 1,869 1,820 1,790 1,598 1,291 Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) ($394) ($627) ($636) ($718) ($782) ($1,010) ($1,354) 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.97 0.73 1.04 0.88 0.76 0.58 0.48 After Needed Rate Adjustment 1.20 1.34 1.52 1.68 1.89 1.85 2.02 After Proposed Rate Adjustment 0.97 1.01 1.51 1.68 1.89 1.86 2.02 Fund Balance Fund Balance Fund Balance Fund Balance Target Fund Balance (O&M) $835 $858 $885 $918 $952 $988 $1,025 Target Capital Balance (Avg. Annual CIP) 1,620 1,620 1,620 1,620 1,620 1,620 1,620 Target Fund Balance (O&M & Avg. Annual CIP) $2,455 $2,478 $2,505 $2,538 $2,572 $2,608 $2,645 Ending Fund Balance (O&M & Avg. Annual CIP) 2,061 1,851 1,869 1,820 1,790 1,598 1,291 Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) Above/(Below) Target Balance (O&M & Avg. CIP) ($394) ($627) ($636) ($718) ($782) ($1,010) ($1,354) ---PAGE BREAK--- 16 Water Rate Transition Plan Target replacement cost is $2.64 million by 2016 Transition of CIP from rates: 2010 at $170,000 to 2016 at $1.25 million Approximately 10% of rate adjustment funds future operational needs; 90% funds future capital needs 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Residential Bill $41.69 Proposed Rate Adjustment 0.0% 4.0% 4.0% 6.0% 6.0% 4.5% 4.5% Rate After Proposed Adjustment $41.69 $43.36 $45.09 $47.80 $50.67 $52.95 $55.33 Bill Change $0.00 $1.67 $1.73 $2.71 $2.87 $2.28 $2.38 Cumulative Bill Change $0.00 $1.67 $3.40 $6.11 $8.98 $11.26 $13.64 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Residential Bill $41.69 Proposed Rate Adjustment 0.0% 4.0% 4.0% 6.0% 6.0% 4.5% 4.5% Rate After Proposed Adjustment $41.69 $43.36 $45.09 $47.80 $50.67 $52.95 $55.33 Bill Change $0.00 $1.67 $1.73 $2.71 $2.87 $2.28 $2.38 Cumulative Bill Change $0.00 $1.67 $3.40 $6.11 $8.98 $11.26 $13.64 Change $0.00 $0.83 $0.87 $1.35 $1.43 $1.14 $1.19 Change $0.00 $0.83 $0.87 $1.35 $1.43 $1.14 $1.19 ---PAGE BREAK--- 17 Summary of Water Cost of Service (000’s) Cost of Service is a snap-shot in time Lane vs. City of Seattle fire protection allocation are to be billed to Fire District; fire protection costs removed from water rates, as required by court case Recommend across the board adjustments Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $2,366 $2,507 ($141) Multi-Family 856 628 228 Commercial 943 938 5 Irrigation 265 377 (111) Public Fire Protection 0 372 (372) Total $4,430 $4,821 ($391) Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $2,366 $2,507 ($141) Multi-Family 856 628 228 Commercial 943 938 5 Irrigation 265 377 (111) Public Fire Protection 0 372 (372) Total $4,430 $4,821 ($391) ---PAGE BREAK--- 18 Sewer Utility Analysis ---PAGE BREAK--- 19 Sewer Utility Capital Plan (CIP) Summary Total 7-year (2010-2016) CIP is $18 million Average annual CIP $2.5 Million 2010 – 2016 Funding renewals and replacements from rates is 55% of annual replacement cost by 2016 Transitions from $625,000 in 2010 to $2.1 M by ‘16 ---PAGE BREAK--- 20 Sewer Utility Revenue Requirement Results ($000) Using 30% of SDC revenue toward debt 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $8,803 $8,856 $8,945 $9,034 $9,125 $9,216 $9,308 Miscellaneous Revenue 227 47 69 61 65 76 87 Total Revenue Total Revenue Total Revenue Total Revenue $9,030 $9,030 $9,030 $9,030 $8,904 $8,904 $8,904 $8,904 $9,014 $9,014 $9,014 $9,014 $9,096 $9,096 $9,096 $9,096 $9,189 $9,189 $9,189 $9,189 $9,292 $9,292 $9,292 $9,292 $9,396 $9,396 $9,396 $9,396 Expenses Expenses Expenses Expenses O&M Expenses $6,231 $5,987 $6,177 $6,406 $6,639 $6,881 $7,133 Transfers (650) (250) (250) (250) (250) (250) (250) Taxes 1,044 987 997 990 1,010 1,020 1,030 Net Debt Service 1,997 1,995 2,240 2,243 2,166 2,132 2,174 Capital Funded From Rates 625 700 900 1,150 1,470 1,790 2,110 Change in Working Capital 0 40 110 350 460 470 420 Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $9,247 $9,247 $9,247 $9,247 $9,458 $9,458 $9,458 $9,458 $10,174 $10,174 $10,174 $10,174 $10,888 $10,888 $10,888 $10,888 $11,495 $11,495 $11,495 $11,495 $12,044 $12,044 $12,044 $12,044 $12,618 $12,618 $12,618 $12,618 Balance (Def.) of Rates ($218) ($555) ($1,160) ($1,793) ($2,306) ($2,752) ($3,222) Plus: Additional Taxes ($26) ($66) ($137) ($212) ($273) ($326) ($382) Net Balance/(Deficiency) of Funds ($244) ($620) ($1,297) ($2,005) ($2,579) ($3,078) ($3,604) Balance (Def.) of Rates as % of Rates 2.8% 7.0% 14.5% 22.2% 28.3% 33.4% 38.7% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 6.7% 6.7% 6.7% 6.7% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $8,803 $8,856 $8,945 $9,034 $9,125 $9,216 $9,308 Miscellaneous Revenue 227 47 69 61 65 76 87 Total Revenue Total Revenue Total Revenue Total Revenue $9,030 $9,030 $9,030 $9,030 $8,904 $8,904 $8,904 $8,904 $9,014 $9,014 $9,014 $9,014 $9,096 $9,096 $9,096 $9,096 $9,189 $9,189 $9,189 $9,189 $9,292 $9,292 $9,292 $9,292 $9,396 $9,396 $9,396 $9,396 Expenses Expenses Expenses Expenses O&M Expenses $6,231 $5,987 $6,177 $6,406 $6,639 $6,881 $7,133 Transfers (650) (250) (250) (250) (250) (250) (250) Taxes 1,044 987 997 990 1,010 1,020 1,030 Net Debt Service 1,997 1,995 2,240 2,243 2,166 2,132 2,174 Capital Funded From Rates 625 700 900 1,150 1,470 1,790 2,110 Change in Working Capital 0 40 110 350 460 470 420 Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $9,247 $9,247 $9,247 $9,247 $9,458 $9,458 $9,458 $9,458 $10,174 $10,174 $10,174 $10,174 $10,888 $10,888 $10,888 $10,888 $11,495 $11,495 $11,495 $11,495 $12,044 $12,044 $12,044 $12,044 $12,618 $12,618 $12,618 $12,618 Balance (Def.) of Rates ($218) ($555) ($1,160) ($1,793) ($2,306) ($2,752) ($3,222) Plus: Additional Taxes ($26) ($66) ($137) ($212) ($273) ($326) ($382) Net Balance/(Deficiency) of Funds ($244) ($620) ($1,297) ($2,005) ($2,579) ($3,078) ($3,604) Balance (Def.) of Rates as % of Rates 2.8% 7.0% 14.5% 22.2% 28.3% 33.4% 38.7% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 6.7% 6.7% 6.7% 6.7% 5.0% 5.0% 5.0% 5.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% ---PAGE BREAK--- 21 Sewer Utility Revenue Requirement Results ($000) ---PAGE BREAK--- 22 Summary of the Sewer Financial Planning Considerations Rate adjustments needed to meet debt service coverage, on a stand-alone basis With SDC revenue, 1.25 DSC is met by utility Funding of renewals and replacement projects from rates helps utility meet debt service coverage 60 days O&M target met through 2016 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.81 0.89 0.76 0.70 0.64 0.59 0.51 After Required Rate Adjustment 0.92 1.17 1.29 1.53 1.72 1.89 2.01 After Proposed Rate Adjustment 0.81 1.17 1.29 1.53 1.72 1.89 2.01 Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Target Fund Balance (O&M) $1,024 $984 $1,015 $1,053 $1,091 $1,131 $1,173 Target Capital Balance (Avg. Annual CIP) 2,580 2,580 2,580 2,580 2,580 2,580 2,580 Target Fund Balance (O&M & Avg. Annual CIP) $3,604 $3,564 $3,595 $3,633 $3,671 $3,711 $3,753 Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) $5,336 $5,336 $5,336 $5,336 $4,310 $4,310 $4,310 $4,310 $3,741 $3,741 $3,741 $3,741 $2,925 $2,925 $2,925 $2,925 $2,306 $2,306 $2,306 $2,306 $2,731 $2,731 $2,731 $2,731 $2,437 $2,437 $2,437 $2,437 Above/(Below) Target Balance (O&M & Avg. CIP) $1,732 $746 $146 ($708) ($1,365) ($980) ($1,316) 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.81 0.89 0.76 0.70 0.64 0.59 0.51 After Required Rate Adjustment 0.92 1.17 1.29 1.53 1.72 1.89 2.01 After Proposed Rate Adjustment 0.81 1.17 1.29 1.53 1.72 1.89 2.01 Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Target Fund Balance (O&M) $1,024 $984 $1,015 $1,053 $1,091 $1,131 $1,173 Target Capital Balance (Avg. Annual CIP) 2,580 2,580 2,580 2,580 2,580 2,580 2,580 Target Fund Balance (O&M & Avg. Annual CIP) $3,604 $3,564 $3,595 $3,633 $3,671 $3,711 $3,753 Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) $5,336 $5,336 $5,336 $5,336 $4,310 $4,310 $4,310 $4,310 $3,741 $3,741 $3,741 $3,741 $2,925 $2,925 $2,925 $2,925 $2,306 $2,306 $2,306 $2,306 $2,731 $2,731 $2,731 $2,731 $2,437 $2,437 $2,437 $2,437 Above/(Below) Target Balance (O&M & Avg. CIP) $1,732 $746 $146 ($708) ($1,365) ($980) ($1,316) ---PAGE BREAK--- 23 Sewer Rate Transition Plan Target replacement cost is almost $4 million by 2016 CIP from rates transitions from $625,000 in 2010 to $2.1 million in 2016 Approximately 30% of increase funds future operational needs, 70% funds future capital needs Change $0.00 $3.76 $4.03 $4.12 $3.28 $2.76 $2.87 Change $0.00 $3.76 $4.03 $4.12 $3.28 $2.76 $2.87 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Residential Bill $107.54 Proposed Rate Adjustment 0.0% 7.0% 7.0% 6.7% 5.0% 4.0% 4.0% Rate After Proposed Adjustment $107.54 $115.07 $123.12 $131.37 $137.94 $143.46 $149.20 Bill Change $0.00 $7.53 $8.05 $8.25 $6.57 $5.52 $5.74 Cumulative Bill Change $0.00 $7.53 $15.58 $23.83 $30.40 $35.92 $41.66 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Residential Bill $107.54 Proposed Rate Adjustment 0.0% 7.0% 7.0% 6.7% 5.0% 4.0% 4.0% Rate After Proposed Adjustment $107.54 $115.07 $123.12 $131.37 $137.94 $143.46 $149.20 Bill Change $0.00 $7.53 $8.05 $8.25 $6.57 $5.52 $5.74 Cumulative Bill Change $0.00 $7.53 $15.58 $23.83 $30.40 $35.92 $41.66 ---PAGE BREAK--- 24 Summary of Sewer Cost of Service (000’s) Similar to water, snap shot in time Recommend across the board adjustments Commercial rates can remove winter water averaging of consumption Possibly also change for multi-family class Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $4,580 $4,608 ($28) Multi-Family 2,303 2,346 (43) Commercial 1,974 2,523 (549) Total $8,856 $9,477 ($620) Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $4,580 $4,608 ($28) Multi-Family 2,303 2,346 (43) Commercial 1,974 2,523 (549) Total $8,856 $9,477 ($620) ---PAGE BREAK--- 25 Storm and Surface Water (SSW) Analysis ---PAGE BREAK--- 26 SSW Utility Capital Plan (CIP) Summary Total 7-year (2010-2016) CIP is $12.2 million Average annual CIP $1.7 Million 2010 – 2016 Funding renewals and replacements from rates is 70% of annual replacement cost by 2016 ($1.1 M) ---PAGE BREAK--- 27 SSW Revenue Requirement Results ($000) Using 20% of SDC revenue toward growth related debt 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $3,600 $3,628 $3,664 $3,701 $3,738 $3,775 $3,813 Miscellaneous Revenue 91 17 61 56 77 73 20 Total Revenue Total Revenue Total Revenue Total Revenue $3,691 $3,691 $3,691 $3,691 $3,645 $3,645 $3,645 $3,645 $3,726 $3,726 $3,726 $3,726 $3,757 $3,757 $3,757 $3,757 $3,815 $3,815 $3,815 $3,815 $3,849 $3,849 $3,849 $3,849 $3,833 $3,833 $3,833 $3,833 Expenses Expenses Expenses Expenses O&M Expenses $2,999 $2,956 $3,053 $3,175 $3,298 $3,426 $3,560 Taxes 414 396 400 404 397 401 405 Net Debt Service 399 395 261 332 370 481 482 Capital Funded From Rates 0 300 700 800 900 1,000 1,100 Change in Working Capital 0 (200) (260) (230) (115) (70) (70) Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $3,812 $3,812 $3,812 $3,812 $3,846 $3,846 $3,846 $3,846 $4,154 $4,154 $4,154 $4,154 $4,481 $4,481 $4,481 $4,481 $4,849 $4,849 $4,849 $4,849 $5,238 $5,238 $5,238 $5,238 $5,476 $5,476 $5,476 $5,476 Balance (Def.) of Rates ($121) ($201) ($429) ($723) ($1,034) ($1,390) ($1,643) Plus Additional Taxes ($12) ($20) ($42) ($71) ($98) ($132) ($156) Net Balance/(Deficiency) of Funds ($133) ($221) ($471) ($794) ($1,132) ($1,522) ($1,799) Balance (Def.) of Rates as % of Rates 3.7% 6.1% 12.8% 21.5% 30.3% 40.3% 47.2% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 6.0% 6.0% 6.0% 6.0% 6.5% 6.5% 6.5% 6.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 5.0% 5.0% 5.0% 5.0% 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $3,600 $3,628 $3,664 $3,701 $3,738 $3,775 $3,813 Miscellaneous Revenue 91 17 61 56 77 73 20 Total Revenue Total Revenue Total Revenue Total Revenue $3,691 $3,691 $3,691 $3,691 $3,645 $3,645 $3,645 $3,645 $3,726 $3,726 $3,726 $3,726 $3,757 $3,757 $3,757 $3,757 $3,815 $3,815 $3,815 $3,815 $3,849 $3,849 $3,849 $3,849 $3,833 $3,833 $3,833 $3,833 Expenses Expenses Expenses Expenses O&M Expenses $2,999 $2,956 $3,053 $3,175 $3,298 $3,426 $3,560 Taxes 414 396 400 404 397 401 405 Net Debt Service 399 395 261 332 370 481 482 Capital Funded From Rates 0 300 700 800 900 1,000 1,100 Change in Working Capital 0 (200) (260) (230) (115) (70) (70) Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $3,812 $3,812 $3,812 $3,812 $3,846 $3,846 $3,846 $3,846 $4,154 $4,154 $4,154 $4,154 $4,481 $4,481 $4,481 $4,481 $4,849 $4,849 $4,849 $4,849 $5,238 $5,238 $5,238 $5,238 $5,476 $5,476 $5,476 $5,476 Balance (Def.) of Rates ($121) ($201) ($429) ($723) ($1,034) ($1,390) ($1,643) Plus Additional Taxes ($12) ($20) ($42) ($71) ($98) ($132) ($156) Net Balance/(Deficiency) of Funds ($133) ($221) ($471) ($794) ($1,132) ($1,522) ($1,799) Balance (Def.) of Rates as % of Rates 3.7% 6.1% 12.8% 21.5% 30.3% 40.3% 47.2% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 6.0% 6.0% 6.0% 6.0% 6.5% 6.5% 6.5% 6.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 5.0% 5.0% 5.0% 5.0% ---PAGE BREAK--- 28 SSW Revenue Requirement Results ($000) ---PAGE BREAK--- 29 Summary of the SSW Financial Planning Considerations Rate adjustments needed to meet debt service coverage, on a stand-alone basis With SDC revenue utility meets DSC of 1.25 Funding of renewals and replacement projects from rates helps utility meet debt service coverage 60 days O&M target met through 2016 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.56 0.59 0.75 0.41 0.26 0.04 (0.22) After Required Rate Adjustment 0.82 1.04 2.05 2.24 2.65 2.63 2.84 After Proposed Rate Adjustment 0.56 1.03 2.05 2.23 2.66 2.63 2.84 Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Target Fund Balance (O&M) $493 $486 $502 $522 $542 $563 $585 Target Capital Balance (Avg. Annual CIP) 1,750 1,750 1,750 1,750 1,750 1,750 1,750 Target Fund Balance (O&M & Avg. Annual CIP) $2,243 $2,236 $2,252 $2,272 $2,292 $2,313 $2,335 Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) $3,289 $3,289 $3,289 $3,289 $3,016 $3,016 $3,016 $3,016 $2,758 $2,758 $2,758 $2,758 $2,524 $2,524 $2,524 $2,524 $2,415 $2,415 $2,415 $2,415 $638 $638 $638 $638 $571 $571 $571 $571 Above/(Below) Target Balance (O&M & Avg. CIP) $1,046 $780 $506 $252 $123 ($1,675) ($1,764) 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio Debt Service Coverage Ratio (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) (SDC revenue not included) Before Rate Adjustment 0.56 0.59 0.75 0.41 0.26 0.04 (0.22) After Required Rate Adjustment 0.82 1.04 2.05 2.24 2.65 2.63 2.84 After Proposed Rate Adjustment 0.56 1.03 2.05 2.23 2.66 2.63 2.84 Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Fund Balance (not including SDCs) Target Fund Balance (O&M) $493 $486 $502 $522 $542 $563 $585 Target Capital Balance (Avg. Annual CIP) 1,750 1,750 1,750 1,750 1,750 1,750 1,750 Target Fund Balance (O&M & Avg. Annual CIP) $2,243 $2,236 $2,252 $2,272 $2,292 $2,313 $2,335 Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) Ending Fund Balance (O&M & Avg. Annual CIP) $3,289 $3,289 $3,289 $3,289 $3,016 $3,016 $3,016 $3,016 $2,758 $2,758 $2,758 $2,758 $2,524 $2,524 $2,524 $2,524 $2,415 $2,415 $2,415 $2,415 $638 $638 $638 $638 $571 $571 $571 $571 Above/(Below) Target Balance (O&M & Avg. CIP) $1,046 $780 $506 $252 $123 ($1,675) ($1,764) ---PAGE BREAK--- 30 SSW Rate Transition Plan Projected replacement cost is roughly $1.6 million by 2016 CIP from rates transitions from $0 in 2010 to $1.1 million in 2016 Approximately 20% of rate adjustment funds future operational needs, 80% funds future capital needs 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Average Residential Bill $20.89 Proposed Rate Adjustment 0.0% 6.0% 6.5% 7.5% 7.5% 7.5% 5.0% Rate After Proposed Adjustment $20.89 $22.14 $23.58 $25.35 $27.25 $29.30 $30.76 Average Res. Bill Change $0.00 $1.25 $1.44 $1.77 $1.90 $2.04 $1.46 Cumulative Average Res. Bill Change $0.00 $1.25 $2.69 $4.46 $6.36 $8.41 $9.87 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Average Residential Bill $20.89 Proposed Rate Adjustment 0.0% 6.0% 6.5% 7.5% 7.5% 7.5% 5.0% Rate After Proposed Adjustment $20.89 $22.14 $23.58 $25.35 $27.25 $29.30 $30.76 Average Res. Bill Change $0.00 $1.25 $1.44 $1.77 $1.90 $2.04 $1.46 Cumulative Average Res. Bill Change $0.00 $1.25 $2.69 $4.46 $6.36 $8.41 $9.87 Change $0.00 $0.63 $0.72 $0.88 $0.95 $1.02 $0.73 Change $0.00 $0.63 $0.72 $0.88 $0.95 $1.02 $0.73 ---PAGE BREAK--- 31 Summary of SSW Cost of Service (000’s) Cost of Service is a snap-shot in time Recommend no change; apply rate adjustments across the board Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $1,092 $1,250 ($158) Multi-Family 435 440 Commercial 2,101 2,158 ($57) Total $3,628 $3,849 ($221) Present Present Present Present Allocated Allocated Allocated Allocated $ Classes of Service Classes of Service Classes of Service Classes of Service Revenues Revenues Revenues Revenues Costs Costs Costs Costs Difference Difference Difference Difference Residential $1,092 $1,250 ($158) Multi-Family 435 440 Commercial 2,101 2,158 ($57) Total $3,628 $3,849 ($221) ---PAGE BREAK--- 32 Sanitation Analysis [Landfill Costs] This utility covers costs of landfill closure, monitoring , and related expenses Solid waste collection and disposal services are provided separately by DM Disposal ---PAGE BREAK--- 33 Sanitation Utility Revenue Requirement Results ($000) Every $100,000 increase in expenses (e.g. legal fees) will be an additional bill 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $148 $149 $150 $152 $153 $155 $156 Miscellaneous Revenue 610 300 0 0 0 0 0 Total Revenue Total Revenue Total Revenue Total Revenue $758 $758 $758 $758 $449 $449 $449 $449 $150 $150 $150 $150 $152 $152 $152 $152 $153 $153 $153 $153 $155 $155 $155 $155 $157 $157 $157 $157 Expenses Expenses Expenses Expenses O&M Expenses $705 $461 $163 $169 $175 $181 $188 Transfers In ($85) $0 $0 $0 $0 $0 $0 Taxes $0 $0 $0 $0 $0 $0 $0 Net Debt Service $32 $128 $165 $163 $161 $159 $157 Change in Working Capital $105 $40 $3 $0 $8 $7 $6 Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $757 $757 $757 $757 $629 $629 $629 $629 $331 $331 $331 $331 $332 $332 $332 $332 $344 $344 $344 $344 $347 $347 $347 $347 $351 $351 $351 $351 Balance (Def.) of Rates $1 ($180) ($180) ($180) ($191) ($192) ($195) Net Balance/(Deficiency) of Funds $1 ($180) ($180) ($180) ($191) ($192) ($195) Balance (Def.) of Rates as % of Rates -0.6% 121.3% 119.8% 118.4% 124.2% 124.2% 124.4% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 120.0% 120.0% 120.0% 120.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 Revenue Revenue Revenue Revenue Rate Revenue $148 $149 $150 $152 $153 $155 $156 Miscellaneous Revenue 610 300 0 0 0 0 0 Total Revenue Total Revenue Total Revenue Total Revenue $758 $758 $758 $758 $449 $449 $449 $449 $150 $150 $150 $150 $152 $152 $152 $152 $153 $153 $153 $153 $155 $155 $155 $155 $157 $157 $157 $157 Expenses Expenses Expenses Expenses O&M Expenses $705 $461 $163 $169 $175 $181 $188 Transfers In ($85) $0 $0 $0 $0 $0 $0 Taxes $0 $0 $0 $0 $0 $0 $0 Net Debt Service $32 $128 $165 $163 $161 $159 $157 Change in Working Capital $105 $40 $3 $0 $8 $7 $6 Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement Total Revenue Requirement $757 $757 $757 $757 $629 $629 $629 $629 $331 $331 $331 $331 $332 $332 $332 $332 $344 $344 $344 $344 $347 $347 $347 $347 $351 $351 $351 $351 Balance (Def.) of Rates $1 ($180) ($180) ($180) ($191) ($192) ($195) Net Balance/(Deficiency) of Funds $1 ($180) ($180) ($180) ($191) ($192) ($195) Balance (Def.) of Rates as % of Rates -0.6% 121.3% 119.8% 118.4% 124.2% 124.2% 124.4% Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment Proposed Rate Adjustment 0.0% 0.0% 0.0% 0.0% 120.0% 120.0% 120.0% 120.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0% 2.0% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% ---PAGE BREAK--- 34 Summary of the Water, Sewer, SSW and Sanitation Proposed Rate Adjustments Present Bill 2011 2012 2013 2014 2015 2016 Cumulative BILLING Water (5/8" meter; 8 ccf) $20.85 $21.68 $22.55 $23.90 $25.33 $26.47 $27.66 Sewer (8 ccf) 53.77 57.53 61.56 65.69 68.97 71.73 74.60 Sanitation - Landfill Fee 1.25 2.75 2.75 2.75 2.81 2.81 2.81 Storm and Surface Water 10.45 11.07 11.79 12.68 13.63 14.65 15.38 Total Ave. Res. Bill $86.31 $93.03 $98.65 $105.01 $110.73 $115.65 $120.45 CHANGE Water $0.00 $0.83 $0.87 $1.35 $1.43 $1.14 $1.19 $6.82 Sewer 0.00 3.76 4.03 4.12 3.28 2.76 2.87 20.83 Sanitation 0.00 1.50 0.00 0.00 0.06 0.00 0.00 1.56 Storm and Surace Water 0.00 0.63 0.72 0.88 0.95 1.02 0.73 4.94 Total $ Change per Month $0.00 $6.72 $5.61 $6.36 $5.72 $4.92 $4.79 $34.14 BILL Water (5/8" meter; 16 ccf) $41.69 $43.36 $45.09 $47.80 $50.67 $52.95 $55.33 Sewer (16 ccf) 107.54 115.07 123.12 131.37 137.94 143.46 149.20 Sanitation - Landfill Fee 1.25 2.75 2.75 2.75 2.81 2.81 2.81 Storm and Surface Water 20.89 22.14 23.58 25.35 27.25 29.30 30.76 Total Ave. Res. Bill $171.37 $183.32 $194.55 $207.27 $218.66 $228.50 $238.09 Total % Change - Combined Utilities Bill 0.0% 7.8% 6.0% 6.4% 5.5% 4.4% 4.1% REVENUE REQUIREMENT RESULTS ---PAGE BREAK--- 35 Rate Design ---PAGE BREAK--- 36 Goals of Rate Design Easy to understand Easy to administer Equitable and non- discriminating (cost-based) Provide revenue stability Promote conservation/ efficient use of resource Economic development Those who benefit should pay The problem of competing goals! ---PAGE BREAK--- 37 Overview of Rate Design Options Water – Maintain existing rates, apply the necessary adjustments, or Water Option 2 – Meter charges adjusted to capacity weighting factors Sewer – Maintain existing rates, apply the necessary adjustments, or Option 2 – Remove winter water averaging from commercial and multi- family customer classes SSW and Sanitation Maintain existing rates, apply the necessary adjustments ---PAGE BREAK--- 38 Water Rate Design Option 1 – Maintain Rates Structure, Apply Increases Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.53 $15.11 $16.02 3/4" Meter 15.08 15.68 16.31 17.29 1" Meter 19.31 20.08 20.89 22.14 1 1/2" Meter 24.84 25.83 26.87 28.48 2" Meter 40.29 41.90 43.58 46.19 3" Meter 105.71 109.94 114.34 121.20 4" Meter 192.60 200.30 208.32 220.82 6" Meter 288.88 300.44 312.45 331.20 8" Meter 398.82 414.77 431.36 457.25 10" Meter 519.40 540.18 561.78 595.49 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 2.24 2.33 2.46 Irrigation 2.15 2.24 2.33 2.46 ***Outside rates are subject to a 1 1/2 rate differential Proposed Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.53 $15.11 $16.02 3/4" Meter 15.08 15.68 16.31 17.29 1" Meter 19.31 20.08 20.89 22.14 1 1/2" Meter 24.84 25.83 26.87 28.48 2" Meter 40.29 41.90 43.58 46.19 3" Meter 105.71 109.94 114.34 121.20 4" Meter 192.60 200.30 208.32 220.82 6" Meter 288.88 300.44 312.45 331.20 8" Meter 398.82 414.77 431.36 457.25 10" Meter 519.40 540.18 561.78 595.49 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 2.24 2.33 2.46 Irrigation 2.15 2.24 2.33 2.46 ***Outside rates are subject to a 1 1/2 rate differential Proposed ---PAGE BREAK--- 39 Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.53 $15.11 $16.02 3/4" Meter 15.08 21.79 22.66 24.02 1" Meter 19.31 36.32 37.77 40.04 1 1/2" Meter 24.84 72.64 75.55 80.08 2" Meter 40.29 116.23 120.88 128.13 3" Meter 105.71 217.93 226.65 240.25 4" Meter 192.60 363.22 377.75 400.41 6" Meter 288.88 726.44 755.50 800.83 8" Meter 398.82 1,162.30 1,208.80 1,281.32 10" Meter 519.40 1,670.81 1,737.64 1,841.90 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 1.87 1.95 2.06 Irrigation 2.15 1.87 1.95 2.06 Proposed ***Outside rates are subject to a 1 1/2 rate differential Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.53 $15.11 $16.02 3/4" Meter 15.08 21.79 22.66 24.02 1" Meter 19.31 36.32 37.77 40.04 1 1/2" Meter 24.84 72.64 75.55 80.08 2" Meter 40.29 116.23 120.88 128.13 3" Meter 105.71 217.93 226.65 240.25 4" Meter 192.60 363.22 377.75 400.41 6" Meter 288.88 726.44 755.50 800.83 8" Meter 398.82 1,162.30 1,208.80 1,281.32 10" Meter 519.40 1,670.81 1,737.64 1,841.90 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 1.87 1.95 2.06 Irrigation 2.15 1.87 1.95 2.06 Proposed ***Outside rates are subject to a 1 1/2 rate differential Water Rate Design Option 2 – AWWA Meter Charge adjustments for capacity City AWWA Meter Meter Capacity Size Equivalency Equivalency 5/8" 1.00 1.00 3/4" 1.08 1.50 1" 1.38 2.50 1 1/2" 1.78 5.00 2" 2.88 8.00 3" 7.57 15.00 4" 13.79 25.00 6" 20.68 50.00 8" 28.55 80.00 10" 37.18 115.00 City AWWA Meter Meter Capacity Size Equivalency Equivalency 5/8" 1.00 1.00 3/4" 1.08 1.50 1" 1.38 2.50 1 1/2" 1.78 5.00 2" 2.88 8.00 3" 7.57 15.00 4" 13.79 25.00 6" 20.68 50.00 8" 28.55 80.00 10" 37.18 115.00 Decreased consumption charge in commercial and irrigation to the average of first and second residential block charges to balance increase in revenue ---PAGE BREAK--- 40 Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.25 $14.82 $15.71 3/4" Meter 15.08 21.37 22.23 23.56 1" Meter 19.31 35.62 37.04 39.27 1 1/2" Meter 24.84 71.24 74.09 78.53 2" Meter 40.29 113.98 118.54 125.66 3" Meter 105.71 213.72 222.27 235.60 4" Meter 192.60 356.20 370.45 392.67 6" Meter 288.88 712.40 740.90 785.35 8" Meter 398.82 1,139.84 1,185.43 1,256.56 10" Meter 519.40 1,638.52 1,704.06 1,806.30 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 1.87 1.95 2.06 Irrigation 2.15 2.15 2.24 2.37 Proposed ***Outside rates are subject to a 1 1/2 rate differential Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 4.0% 4.0% 6.0% Service Charge 5/8" Meter $13.97 $14.25 $14.82 $15.71 3/4" Meter 15.08 21.37 22.23 23.56 1" Meter 19.31 35.62 37.04 39.27 1 1/2" Meter 24.84 71.24 74.09 78.53 2" Meter 40.29 113.98 118.54 125.66 3" Meter 105.71 213.72 222.27 235.60 4" Meter 192.60 356.20 370.45 392.67 6" Meter 288.88 712.40 740.90 785.35 8" Meter 398.82 1,139.84 1,185.43 1,256.56 10" Meter 519.40 1,638.52 1,704.06 1,806.30 Disability/Low-Income Senior Discount $10.31 $10.72 $11.15 $11.82 Service Charge (Multi-Family) Per Unit $10.48 $10.90 $11.34 $12.02 Consumption - $/CCF Residential 0 - 10 ccf. $1.53 $1.59 $1.65 $1.75 11 - 24 ccf 2.07 2.15 2.24 2.37 Over 24 ccf 2.77 2.88 3.00 3.18 Multi-Family 1.80 1.87 1.95 2.06 Commercial 2.15 1.87 1.95 2.06 Irrigation 2.15 2.15 2.24 2.37 Proposed ***Outside rates are subject to a 1 1/2 rate differential Water Rate Design Option 2.A – AWWA Meter Charge w/ irrigation changes City AWWA Meter Meter Capacity Size Equivalency Equivalency 5/8" 1.00 1.00 3/4" 1.08 1.50 1" 1.38 2.50 1 1/2" 1.78 5.00 2" 2.88 8.00 3" 7.57 15.00 4" 13.79 25.00 6" 20.68 50.00 8" 28.55 80.00 10" 37.18 115.00 City AWWA Meter Meter Capacity Size Equivalency Equivalency 5/8" 1.00 1.00 3/4" 1.08 1.50 1" 1.38 2.50 1 1/2" 1.78 5.00 2" 2.88 8.00 3" 7.57 15.00 4" 13.79 25.00 6" 20.68 50.00 8" 28.55 80.00 10" 37.18 115.00 To reflect cost of service results increased Irrigation consumption charge; therefore reduced meter charges to balance revenue increase ---PAGE BREAK--- 41 Sewer Rate Design Options 1 and 2 - Maintain Rate Structure, Apply Increases Rates same for each option, but administratively billed differently – no winter water averaging commercial & M-F Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 7.0% 7.0% 6.7% Service Charge Residential $31.38 $33.58 $35.93 $38.33 Multi-Family (Per Unit) * 23.54 25.19 26.95 28.76 Commercial 31.38 33.58 35.93 38.33 Disability/Low-income Senior Discount $13.56 $14.51 $15.52 $16.57 Consumption - $/CCF Residential $4.76 $5.09 $5.45 $5.81 Disability/Senior $4.76 5.09 5.45 5.81 Multi-Family $4.76 5.09 5.45 5.81 Commercial Strength Category 1 $4.76 5.09 5.45 5.81 Strength Category II $6.26 6.70 7.17 7.65 Strength Category III $7.38 7.90 8.45 9.02 Strength Category III w/Discount $6.72 7.19 7.69 8.21 Proposed ***Outside rates are subject to a 1 1/2 rate differential. *Multi-Family is 75% of residential rate. **Multi-family and commercial customer consumption will not be averaged. Present 1/1/2009 2011 2012 2013 Proposed Rate Adjustment 7.0% 7.0% 6.7% Service Charge Residential $31.38 $33.58 $35.93 $38.33 Multi-Family (Per Unit) * 23.54 25.19 26.95 28.76 Commercial 31.38 33.58 35.93 38.33 Disability/Low-income Senior Discount $13.56 $14.51 $15.52 $16.57 Consumption - $/CCF Residential $4.76 $5.09 $5.45 $5.81 Disability/Senior $4.76 5.09 5.45 5.81 Multi-Family $4.76 5.09 5.45 5.81 Commercial Strength Category 1 $4.76 5.09 5.45 5.81 Strength Category II $6.26 6.70 7.17 7.65 Strength Category III $7.38 7.90 8.45 9.02 Strength Category III w/Discount $6.72 7.19 7.69 8.21 Proposed ***Outside rates are subject to a 1 1/2 rate differential. *Multi-Family is 75% of residential rate. **Multi-family and commercial customer consumption will not be averaged. ---PAGE BREAK--- 42 Storm and Surface Water Utility Rate Design Present 1/1/2009 2011 2012 2013 STORM AND SURFACE WATER Proposed Rate Adjustment 6.0% 6.5% 7.5% Service Charge Per E.S.U. Residential $20.89 $22.14 $23.58 $25.35 Multi-Family $20.89 22.14 23.58 25.35 Commercial $20.89 22.14 23.58 25.35 Disability/Low-income Senior Discount $7.41 $7.85 $8.37 $8.99 Proposed Present 1/1/2009 2011 2012 2013 STORM AND SURFACE WATER Proposed Rate Adjustment 6.0% 6.5% 7.5% Service Charge Per E.S.U. Residential $20.89 $22.14 $23.58 $25.35 Multi-Family $20.89 22.14 23.58 25.35 Commercial $20.89 22.14 23.58 25.35 Disability/Low-income Senior Discount $7.41 $7.85 $8.37 $8.99 Proposed ESU = Equivalent Service Unit; 2,800 square feet of impervious area ---PAGE BREAK--- 43 Sanitation Utility Rates SANITATION (landfill) Proposed Rate Adjustment 120.0% 0.0% 0.0% Service Charge Residential $1.25 $2.75 $2.75 $2.75 Disability/Low income Senior Discount $1.25 2.75 2.75 2.75 Multi-Family $1.25 2.75 2.75 2.75 Commercial $1.25 2.75 2.75 2.75 Large Yard Bin Usage $14.67 $32.27 $32.27 $32.27 SANITATION (landfill) Proposed Rate Adjustment 120.0% 0.0% 0.0% Service Charge Residential $1.25 $2.75 $2.75 $2.75 Disability/Low income Senior Discount $1.25 2.75 2.75 2.75 Multi-Family $1.25 2.75 2.75 2.75 Commercial $1.25 2.75 2.75 2.75 Large Yard Bin Usage $14.67 $32.27 $32.27 $32.27 Every $100,000 increase in expenses (e.g. legal fees) will be an additional bill ---PAGE BREAK--- 44 Summary of Water Rate Comparisons (Option 1) ---PAGE BREAK--- 45 Summary of Sewer Rate Comparisons (Both options same for residential) ---PAGE BREAK--- 46 Summary of SSW Rate Comparisons ---PAGE BREAK--- 47 Summary of Rate Comparisons ---PAGE BREAK--- 48 System Development Charges One-time fee for new customers Equitable share of system costs State Law - RCW 35.57 – ‘Authority to assess charges for connecting to utility systems.’ Component by component basis 10 years of interest, as appropriate System planning criteria Comprehensive plans System financing criteria Debt credit, developer contributions ---PAGE BREAK--- 49 Summary of System Development Charges Purposes: Growth pays for growth Provide equity between existing and new customers Generate revenue for growth related facilities Utility Utility Utility Utility Current SDCs Existing Assets Future CIP Coordina- tion CIP New SDC New SDC New SDC New SDC Variance Water $3,130 $3,110 $290 $130 $ 3,530 $ 3,530 $ 3,530 $ 3,530 $ 400 Sewer 4,520 4,020 520 340 4,880 4,880 4,880 4,880 360 Storm (SSW) 1,760 1,260 990 700 2,950 2,950 2,950 2,950 1,190 Total $9,410 $8,390 $1,170 $1,710 $11,360 $11,360 $11,360 $11,360 $1,950 ---PAGE BREAK--- 50 Policy Direction from Council Implement rate adjustments as presented beginning January 2011? Implement shift in rates for sewer utility? Adjust meter charge for capacity? No winter water averaging for commercial and multi-family? Adopt and implement new system development charges for: 30 days from publication of ordinance? January 2011? ---PAGE BREAK--- 51 Next Steps Finalize water, sewer, SSW and sanitation analyses: Rate transition plans Rate designs Present water, sewer, SSW and sanitation rates and SDCs to the City Council at public hearing