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HomeMy WebLinkAbout2013-11-05; City Council; 21413; Public Hearing Water Rate Structure and IncreasesA CITY OF CARLSBAD AND CARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL 15 AB# MTG. DEPT. 21.413 11/05/2013 PW-UTIL PUBLIC HEARING FOR POTABLE WATER, RECYCLED WATER, AND WASTEWATER RATES: NEW RATE STRUCTURE AND RATE INCREASES DEPT. DIRECTOR CITY ATTY. CITY MGR. 1482 of the Board of Directors of the Carlsbad Municipal Water District, RECOMMENDED ACTION: Adopt Resolution No. California, conducting a Majority-Protest Public Hearing to Approve a new Potable Water Rate Structure and Increases to the Potable Water and Recycled Water Rates as well as future rate adjustments allowing for the pass through of wholesale water costs and inflationary adjustments for operations and maintenance. Adopt Resolution No. 2013-257 of the City Council of the City of Carlsbad, California, conducting a Majority-Protest Public Hearing to Approve increases in wastewater rates as well as allowing for the pass through of inflationary adjustments for operations and maintenance. ITEM EXPLANATION; Carlsbad Municipal Water District (CMWD) Service Area CMWD currently supplies potable water and recycled water to a 32.3 square mile service area within the City of Carlsbad (refer to Exhibit 3). For Fiscal Year 2013-2014 there are approximately 28,000 potable and recycled water customers within the service area with an annual demand projected at 16,300 acre-feet (AF) for potable water, and 4,300 AF for recycled water. Existing Potable Water and Recycled Water Rate Structure On June 23, 2009 the CMWD adopted the current rate structure and rate increases for its potable water and recycled water service. The adopted rate structure incorporated an increasing block three-tiered potable water rate for residential customers and a uniform rate for non-residential potable water customers and recycled water customers. This rate structure also included a monthly Delivery Charge that increases with meter size. The CMWD last increased its rates by 8 percent, effective January 1, 2013, primarily as a pass through for the imported water rate that CMWD paid to the San Diego County Water Authority (SDCWA). Proposed Potable Water and Recycled Water Rate Structure Raftelis Financial Consultants, Inc. (RFC) was retained to perform a "Cost of Service" study and to evaluate the existing and alternative rate structures. For the potable water system, the cost of service allocations conducted in the study is based on the Base-Extra Capacity method endorsed by the American Water Works Association. Under the Base-Extra Capacity method, revenue requirements are allocated to the different user classes proportionate to their use ofthe potable water system. DEPARTMENT CONTACT: William Plummer, (760) 602-2768, bill.plummer^carlsbadca.gov FOR CLERK USE. COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC • DENIED CONTINUED TO DATE UNKNOWN • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER - SEE MINUTES • AMENDED • REPORT RECEIVED • The analysis performed by RFC revealed that the existing three-tiered rate structure for Single Family Residential (SFR) and Multi-Family Residential (MFR) should be maintained; however, RFC recommended changes to the tier cutoff points for the SFR customer class rate structure to more accurately reflect a first-tier breakpoint that is related to internal water consumption. There are lower peaks associated with Tier 1 demand; therefore, the cost per unit is less than the rates in the higher tiers. The cost of service analysis also resulted in a lower amount of peaking-related costs compared to the allocations that served as the basis for the current rate structure. Non-residential customer classes would retain the uniform volumetric rate structure, but there are adjustments to the rates recommended based on the analysis of customer peaking demand activity. Potable Water and Recycled Water Rates For potable water, RFC recommends 5 percent annual revenue increases in calendar year 2014 and calendar year 2015, both effective on January 1'^ of the respective years. The primary reason for the potable water rate increase is the increase in purchased water costs from the SDCWA. For recycled water, no increase is proposed for the Usage Charge. A summary of the recommended changes per customer class is shown on Exhibit 5. Refer to the Rate Study (Exhibit 8) for a detailed explanation of all recommended changes. City of Carlsbad Wastewater Rates The City of Carlsbad's wastewater service area is shown on Exhibit 4. The wastewater rate structure itself has not changed. The proposed wastewater rates will increase by a maximum of 2 percent because of inflationary costs associated with operation and maintenance of the collection system and treatment and to maintain adequate reserves. The proposed single family monthly flat rate beginning January 1, 2014 is $25.52, an increase of $0.50, or approximately 2 percent over the current rate. A summary of the recommended changes per customer class is shown on Exhibit 6, and is calculated as follows: • Single-family residential - Flat monthly charge • Multi-family - Based on 100% of water usage • Commercial - Based on 100% of water usage • Schools - Based on number of students • Large Volume - Based on 100% of water usage Public Notice Requirement The California Constitution, Article XIIID, Section 6, states that local governments must hold a Majority-Protest public hearing, and notify property owners and customers forty-five (45) days in advance of public hearings related to proposed water, recycled water, and wastewater rates. The public hearing is to be held forty-five (45) days after noticing the ratepayers. At the public hearing, if it is determined that a majority of property owners has submitted a formal protest, the proposed fee change must be rejected. This is a requirement of Proposition 218, which was passed by California voters in 1996 to limit methods by which local governments can create or increase taxes, fees and charges without taxpayer consent. Any person interested in objecting to the increases may file a signed written protest with the City Clerk. The written protest must contain the address of service, the rate change being protested and be received prior to the close ofthe public hearing. While protestors may appear at the hearing and be heard on the matter, only written protests are considered as part ofthe majority protest. Staff took the following actions at least forty-five (45) days prior to this public hearing: • Affected utility customers and property owners were notified by mail of the public hearing. • The notice (see Exhibit 7) outlined the proposed rate changes. • The notice provided information relating to the public hearing. • In addition, information about the Majority-Protest public hearing and proposed rates was posted on the City's website at www.carlsbadca.gov. Protest Letters Received As of October 18, 2013 there were 19 protest letters were received. The protest letters are attached as Exhibit 9. Any protest letters received prior to the close ofthe Majority-Protest public hearing will be forwarded to the Board of Directors and City Council. If there is no majority protest, staff is recommending that the Board of Directors and City Council, after hearing public comment, adopt the proposed rate increases. ENVIRONMENTAL IMPACT; The California Environmental Quality Act (CEQA) and the State CEQA Guidelines provide a statutory exemption for the review and modification of fee and rate schedules. Specifically, Section 21080(b)(8) of CEQA and Section 15273(a) ofthe CEQA Guidelines provide for such statutory exemptions if such rates or charges are for the purpose of: (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment, or materials; and (3) meeting financial reserve needs and requirements, etc. Section 15273(c) of the CEQA Guidelines requires that the Board make findings regarding such an exemption indicating specifically the basis for the claim of exemption. Staff recommends that the Board make the findings required by Section 15273(c) ofthe CEQA Guidelines as follows: The rates and charges identified in the Schedule of Fees, Deposits, and Charges are for the purpose of: (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment, or materials; and (3) meeting financial reserve needs and requirements. A copy of this CEQA exemption shall be retained in the CMWD file and filed with the county clerk to serve as verification ofthis evaluation and as the CEQA environmental determination record. FISCAL IMPACT; The proposed rate increases, if approved, will be effective January 1, 2014 and January 1, 2015, and will provide adequate funding to properly operate and maintain Carlsbad's water, recycled water, and wastewater systems and provide adequate operational reserves. EXHIBITS; 1. Resolution No. 1482 of the Board of Directors of the Carlsbad Municipal Water District, California, conducting a Majority-Protest public hearing to approve a new potable water rate structure and increases to the potable water and recycled water rates as well as future rate adjustments allowing for the pass through of wholesale water costs and inflationary adjustments for operations and maintenance. 2. Resolution No. 2013-257 of the City Council of the City of Carlsbad, California, conducting a Majority-Protest public hearing to approve an increase to the wastewater rates, as well as allowing for the pass through of inflationary adjustments for operations and maintenance. 3. Carlsbad Municipal Water District Boundary Map. 4. City of Carlsbad Wastewater Boundary Map. 5. Potable Water and Recycled Water Rate increases. 6. Wastewater (Sewer) Rate Increases. 7. Notice of Public Hearing. 8. 2013 Carlsbad Municipal Water District Potable Water and Recycled Water Rate Study. 9. Protest Letters Received. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 1482 A RESOLUTION OF THE BOARD OF THE CARLSBAD MUNICIPAL WATER DISTRICT, CALIFORNIA, CONDUCTING A MAJORITY-PROTEST PUBLIC HEARING TO APPROVE A NEW POTABLE WATER RATE STRUCTURE AND INCREASES TO THE POTABLE WATER AND RECYCLED WATER RATES AS WELL AS FUTURE RATE ADJUSTMENTS ALLOWING FOR THE PASS THROUGH OF WHOLESALE WATER COSTS AND INFLATIONARY ADJUSTMENTS FOR OPERATIONS AND MAINTENANCE. WHEREAS, it is in the best interest of CMWD and its customers to implement a new rate structure beginning January 1, 2014; and WHEREAS, the Carlsbad Municipal Water District is proposing water and recycled water rate increases in January 2014 and January 2015; and WHEREAS, the California Legislature passed Assembly Bill 3030 that allows a locally owned water utility to adopt a multi-year rate schedule establishing water service charges and fees, for a period not to exceed 5 years, provided that the rate schedule be adopted by the governing board of the water utility in a public ratemaking case proceeding using the procedures authorized by current law; and WHEREAS, the California Constitution Article XIII D § 6(A)(2) states that local governments must hold a majority-protest public hearing, and notify customers not less than forty-five (45) days in advance of increases in water rates; and WHEREAS, in September 2013, Carlsbad residents and property owners were notified by mail of the proposed rate increases (Exhibit 7), thereby complying with the advance notice requirement of forty- five (45) days; and WHEREAS, the Board of Directors of the Carlsbad Municipal Water District approves the new water and recycled water rate structure presented in the 2013 Rate Study (Exhibit 8) and also the rate increases as set forth in Exhibit 5; and WHEREAS, the Board determines that actions regarding the new potable water and recycled water rate structure and increases to the rates are in accordance with the findings required by Section 15273(c) of the California Environmental Quality Act (CEQA) Guidelines as follows: The rates and charges identified in the Schedule of Fees, Deposits, and Charges are for the purpose of: (1) meeting operating expenses, including employee wage rates and fringe benefits; 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (2) purchasing or leasing supplies, equipment, or materials; and (3) meeting financial reserve needs and requirements; and WHEREAS, a copy of this CEQA exemption shall be retained in the CMWD file and files with the county clerk to serve as verification of this evaluation and as the CEQA environmental determination record. NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board ofthe City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the Board of Directors of the Carlsbad Municipal Water District imposes the new rate structure described in Exhibit 8 and the rates as set forth in Exhibit 5, as well as future rate adjustments for the pass-through of wholesale water and inflationary costs. These rates shall be effective as of January 1, 2014 and January 1, 2015. /// /// /// /// /// /// /// /// /// /// /// /// /// /// 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting ofthe Carlsbad Municipal Water District Board of Directors and the Carlsbad City Council on the 5*^ day of November, 2013, by the following vote to wit: AYES: Board Members Hall, Packard, Wood, Blackburn and Douglas. NOES: None. ABSENT: None. -nAj{r./J-A/„A^A^ MATT HALL, President ATTEST: BARBARA ENGLESON, Secs^tary 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2013-257 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, CONDUCTING A MAJORITY-PROTEST PUBLIC HEARING TO APPROVE AN INCREASE TO THE WASTEWATER RATES AS WELL AS FUTURE RATE ADJUSTMENTS ALLOWING FOR THE PASS THROUGH OF WHOLESALE WATER COSTS AND INFLATIONARY ADJUSTMENTS FOR OPERATIONS AND MAINTENANCE. WHEREAS, the City of Carlsbad (city) is proposing wastewater (sewer) rate increases in January 2014 and January 2015; and WHEREAS, the California Legislature passed Assembly Bill 3030 that allows a locally owned water utility to adopt a multi-year rate schedule establishing wastewater (sewer) fees, for a period not to exceed 5 years, provided that the rate schedule be adopted by the governing board of the agency in a public ratemaking case proceeding using the procedures authorized by current law; and WHEREAS, the California Constitution Article XIII D § 6(A)(2) states that local governments must hold a majority-protest public hearing, and notify customers not less than forty-five (45) days in advance of increases in wastewater rates; and WHEREAS, in September 2013, Carlsbad residents and property owners were notified by mail of the proposed rate increase (Exhibit 7), thereby complying with the advance notice requirement of forty-five (45) days; and WHEREAS, the City Council of the City of Carlsbad approves the wastewater rate increases as set forth in Exhibit 6; and WHEREAS, the city determines increases to the wastewater (sewer) rates are in accordance with the findings required by Section 15273(c) of the CEQA Guidelines as follows: The rates and charges identified in the Schedule of Fees, Deposits, and Charges are for the purpose of: (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment, or materials; and (3) meeting financial reserve needs and requirements; and WHEREAS, A copy of this CEQA exemption shall be retained in the city file and files with the county clerk to serve as verification of this evaluation and as the CEQA environmental determination record. 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council of the City of Carlsbad approves the increases in wastewater (sewer) rates as well as future rate adjustments for inflationary costs, effective January 1, 2014, and January 1, 2015 as set forth in Exhibit 6. /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// /// 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Carlsbad City Council and the Carlsbad Municipal Water District Board of Directors on the 5*^ day of November, 2013, by the following vote to wit: AYES: Council Members Hall, Packard, Wood, Blackburn and Douglas. NOES: None. ABSENT: None. 4^ MATT HALL, Mayor ATTEST: BARBARA ENGLESON, Wf Clerk CARLSBAD MUmClPAL miER DISTRICT BOUNDARY WOT TO SCALE 4GLM lEDlOiVi 60 1/ J "1 ' ' B^*'*'t£if<:*' i' PACIRC OCEAN J. ^-'^vJt "<^A f C/WtVD BOUNDARY f?D EXHIBIT 3 11 u CITY OF CARLSBAD WASTEWATER BOUNDARY P/iOFIC ' HA- 1 ' ^iix^^ C/rr OF CARLSBAD WASTEWATER BOUNDARY LJ^ /^-/^ EXHIBIT 4 12 EXHIBIT 5 Water Rates Fixed Monthly "Delivery Charge" Proposed Proposed Existing Service Charge Service Charge Meter Size Service Charge 1/1/2014 1/1/2015 5/8" $21.38 $20.07 $21.08 3/4" $26.97 $27.02 $28.38 1" $38.52 $40.93 $42.98 1-1/2" $67.60 $75.70 $79.49 2" $102.27 $117.43 $123.31 2-1/2" $147.80 $166.10 $174.41 3" $194.72 $214.78 $225.52 4" $298.75 $353.86 $371.56 6" $588.03 $701.56 $736.64 8" $934.75 $1,118.80 $1,174.74 10" $1,339.61 $1,605.58 $1,685.86 Customer Class Volumetric "Usage Charge" Existing Tier Existing Proposed Tier Proposed 1/1/2014 Proposed 1/1/2015 ($ per HCF) Single Familv Residential Oto 12 $3.20 Oto 10 $3.19 $3.35 13 to 20 $4.13 11 to 18 $4.24 $4.45 21+ $5.62 19+ $6.11 $6.42 Multi-Familv Residential Oto 5 $2.71 Oto 5 $3.19 $3.35 6 to 10 $3.05 6 to 10 $4.24 $4.45 11+ $3.64 11+ $6.11 $6.42 Non-Residential (2) Commercial NA $3.70 NA $3.85 $4.05 Agricultural NA $3.70 NA $3.95 $4.15 Irrigation NA $4.15 NA $4.22 $4.44 Recycled NA $3.53 NA $3.53 $3.53 1. HCF = One Hundred Cubic Feet or 748 gallons 2. Non-residential rates are not subject to a tier structure, the rate is flat. 13 EXHIBITS Wastewater (SEWER) Rates Discharger Current Rate Proposed 1/1/2014 Proposed 1/1/2015 Residential Group 1 - Single Family (Flat Monthly Charge) $ 25.02 $ 25.52 $ 26.03 Group 1 - Multi-Family (100% of monthly water usage per ccf) $ 2.88 $ 2.94 $ 3.00 Group 1 - Mobile Home (100% of monthly water usage per ccf) $ 2.88 $ 2.94 $ 3.00 Commercial Group II (100% of monthly metered water usage per ccf) $ 2.35 $ 2.40 $ 2.44 Group III (100% of monthly metered water usage per ccf) $ 3.56 $ 3.63 $ 3.70 Group IV (100% of monthly metered water usage per ccf) $ 6.60 $ 6.73 $ 6.87 Institutional Group V - Elementary School (per student) $ 0.51 $ 0.52 $ 0.53 Group V - Junior High School (per student) $ 0.75 $ 0.77 $ 0.78 Group V - High School (per student) $ 1.02 $ 1.04 $ 1.06 Group V - Boarding School (per student) $ 5.32 $ 5.43 $ 5.53 Group V - Other Institutional (per ccf of water usage) $ 2.23 $ 2.27 $ 2.32 Large Volume $ $ Group VI - (100% of monthly metered water usage per ccf) $ 2.03 $ 2.07 $ 2.11 1) ccf = one hundred cubic feet 14 NOTICE OF PUBUC HEARING EXHIBIT? Sample rate changes Ths table bsiow dtsmonstratesthe effects ofthe proposed rat«sfor a singis-family rssidsncs with a 5/S" mster The first row shows ths changes based on average demand, whicii is IS units per month. The second example is for 26 units per month. Current Water Rates No. of Delivery Usage Monthly Units Charge Charge Bill 13 $21.38 $42. S3 $63,91 26 $21.38 $105.16 $126,54 Proposed Water Rates Delivery Usage Monthly Percent Charge Charge Bill Changed $20.07 $44 62 $64.69 1% $20.07 $114.70 $134,77 The proposed rate increase will pay for costs associated with operations, maintenance, and replacement of aging or failing infrastructure, as well as establishing and maintaining an adequate operating resen/e. Wastewater rates Residential customers pay a flat monthly charge for wastevyater services, while most non- residential customers pay a rate per unit of water used. The proposed wastewater rate imxease is 2 psercent for all vvastewater customers. The proposed rate inaease wiil payfor costs associated with operations, maintenance,, and replacement of aging or failing infrastrudure^ as wei! as establishing and maintaining an adequate operating reserve. Monthly Wastewater Rates 1/1/2014 1/1/2015 Current Proposed Proposed Residential Single Family $2S.02 $25,52 $26.03 Multi-Farnily $2.88 $2,94 $3.00 Mobile Home $2.88 $2,94 $3.00 Commercial Croup II $2,3S $2.40 $2,44 Croup III $3,56 $3,63 $3,70 Group IV $6.60 $6,73 $6.87 Croup V - Schools Elementary $0.51 $0.,52 $0.53 junior Hkih $0,75 $0.77 $0,78 High School $1.02 $1.04 $1,06 Boarding $5.32 $5.43 $5,53 Sch ool Croup V - Other Other I $2,35 | $2.40 | $2,44 Croup VI -Uige Volume Bio Hyd ration I $2,03 I $2,07 $2.11 Protesting the rates As the property ovwer/rate payeo you hs'^e the right to protest the proposed increases. Only one proterrt notice is allowed per parcel, if you choose to protest, you must submit a signed written protest to the City Cieri< on or before the close ofthe hearing. The witten protest must contain your full name and signature, the address ofthe ser\nce and the rate change being protested. If it is determined that a majorit"/ of property ovmers have submitted a formal protest, the proposed fee <±iange must be rejected. The protester may appear at the hearing and be heard on the matter however a v^ritten protest is also required. Please send aii protests to; Office of the Cit>' Clerk, City of Carisbad, 1200 Carlsbad Village Dnve, Carlsbad CA92008, More information For more information about the public hearing process or the proposed changes, please call 760-^2-2420, or visit the city's website at www.carlsbadca.gov/ finance. CITV OF CARLSBAD wwvv .ca rl sbad ca, g ov Notice of Majority Protest Public Hearing on Proposed Water Rate Structwe and Maximum Water & Wastewater Rate Increases Tuesday, Nov. 5, 2D13 6 p.m. City Carlsbad City Council Chambers 1200 Carlsbad Village Drive Carlsbad, CA 92008 This notice contains information on proposed changes to the water rate structure and rate increases for water and wastewater ser/ices, for more information about the public hearing process or the proposed changes, please call 760-602-2420, or vi si t th e ci t/s websi te a t ^vww.carl sbadca.gov/flnance CITY OF CARLSBAD 15 NOTICE OF PUBLIC HEARING EXHIBIT 7 Proposed changes to water and wastewater rates The Carlsbad Municipal Water District, a subsidiary district of the City of Carisbad, purchases TOO percent of its drinking water from the San Diego County Water Authority. The cost to purchase imported water continues to increase. To accommodate the anticipated increases in cost, a new water rate structure and an increase in water and wastewater rates over the next two years is being proposed. No rate increase is proposed for recycled water. If the Carlsbad Municipal Water District Board of Directors approves the rate increases at the public hearing on Nov., 5, 2013, the new rates for the first year will be effective )an. 1, 2014, and the second year will be effective on Jan. 1, 2015. The proposed rates wiil enable the city to continue to provide quality services in a fiscally responsible manner by funding ongoing operations, maintenance, and replacement of the water system, as well as maintaining adequate operating reserves. How your water rate is calculated To accommodate the anticipated increases in cost for purchasing imported water, the proposed rate changes will increase Carlsbad Municipal Water District revenues by 5 percent overall. Rates are allocated to each customer class based on its proportionate use of the water system. There are two components to the water rates: the usage charge and the monthly delivery charge. The usage charge is the charge for the volume of water used. The monthly delivery charge is a fixed charge based on the size of the meter. Residential meters are typically 5/8" to 1". Larger meters are primarily for larger water demands, such as commercial buildings. Monthly Water Delivery Charge Two Year Maximum Rate Increase 1/1/2014 1/1/2015 Current Proposed Proposed Meter Size: 5/8" $21.38 $20.07 $21.08 314' $26.97 $27.02 $28.38 $38.52 $40,93 $42.98 1.5" $67.60 $75.70 $79.49 2" $102,27 $117.43 $123.31 2.5" Jl 47.80 $166.10 $174.41 3" $194.72 $214,78 $225.52 4" $298.75 $353.86 $371.56 6' $588.03 $701.56 $736.64 8' $934.75 $1,118.80 $1,174.74 10" $1,339,61 $1,605.58 $1,685.86 Residential water rates Residential rates are grouped into tiers, with the first tier having the lowest per unit rate and the second and third tiers having incrementally higher rates. The tier rate that is charged depends on a customer's actual water usage. Tier 1 is designed to meet water use essential for internal residential use. Tier 2 is designed to meet exterior landscaping requirements for typical residential propetty. Tier 3 is designed to recover costs associated with external irrigation consumption, as well as the increased cost to provide the excess system capacity needed to meet peak demands. Single-family residential The proposed rate structure change adjusts the number of water consumption units associated with each tier. These adjustments are miore consistent with actual demand, ensure adequate cost recovery for water services and encourage water conservation. Multi-family residential No changes are being proposed to the tier cutoff points for multi-family residential customers; however the volumetric rate will be adjusted to be more consistent with single-family residential customers. Due to the consumption patterns and existing consumption tier cutoffs, multi-family residential customers wil! continue to see a lower average bill per dwelling unit. Non-residential water rates Non-residential customers have different water usage needs than residential customers. Therefore, the usage charge is a flat per unit rate rather than a tiered rate. Examples of non-residential customers include commercial, agricultural and irrigation. The recycled water rate will remain unchanged because it is not dependent on the purchase cost of water from the San Diego County Water Authority. Recycled water cost is estimated baasd on cost of treatment, and operation and maintenance costs of the distribution system. Water Usage Charge « Two Year Maximum Rate Increase • 1 unit = 748 gallons Current Tier Current Proposed Proposed Proposed (S/unit) Tier 1/1/2014 1/1/2015 (S/unit) ($/unit) (S/unit) Single-Family Rates Tier 1 (0-12 units) $3.20 Tierl (0-10unit-s) $3.19 $3.35 Tier 2 (1 3-20 units) $4.13 Tier 2 (11-18 units) $4.24 $4,45 Tier 3 (21-1- units) $5.62 Tier 3 (19+ units) $6.11 $6.42 Multi-Family Rates Tier 1 (0-5 units) $2.71 Tier 1 (0-5 units) $3.19 $3.35 Tier 2 (6-10 units) $3.05 Tier 2 (6-10 units) $4.24 $4.45 Tier 3 (11+ units) $3.64 Tier 3 (11 + units) $6.11 $6.42 Non-Residential Rates Commercial $3.70 N/A $3.85 $4.05 Agricultural Rales $3.70 N/A $3.95 $4.15 Irrigation Rate $4.15 N/A $4.22 $4.44 Recycled Water $3.53 N/A $3.53 $3.53 16 EXHIBITS 2013 CARLSBAD MUNICIPAL WATER DISTRICT POTABLE WATER AND RECYCLED WATER RATE STUDY RAFTELIS FINANCIAL CONSULTANTS, INC, Cityof Carlsbad \1 201S. Lake Avenue Phone 626 . 583 .1894 www.raftelis.com Suite 301 Fax 626.583.1411 Pasadena, CA 91101 RAFTELIS FINANCIAL CONSULTANTS, INC. August 12,2013 Ms. Wendy Chambers Assistant Utilities Director Carlsbad Municipal Water District 5950 El Camino Real Carlsbad, CA 92008 Subject: Potable Water and Recycled Water Rate Study Report Dear Ms. Chambers, Raftelis Financial Consultants (RFC), Inc. is pleased to provide this Potable Water and Recycled Water Rate Study Report (Report) to the Carlsbad Municipal Water District (District). This Report summarizes the process through which we conducted a long-term financial planning and cost of service rate study. The implementation of the recommendations of this report will enhance equity to the District's customers and meet the District's pricing objectives. It has been a pleasure working with you, and we wish to express our thanks to you and the rest of District staff for the support provided throughout the course of this study. Sincerely, Raftelis Financial Consultants, Inc. ^ ^A^y^--:Ai^ Sudhir Pardiwala Vice-President Contents 1 Executive Summarv 1.1 Revenue Requirements 21 1.2 Cost of Service Allocations 1.3 Rate Design 1.4 Customer Impacts 1.5 Comparison of Bills with Surrounding ARencies 26 2 Introduction ^° 2.1 Proiect Overview 28 2.2 Current Environment 28 2.3 Pricing Obiectives 28 2.4 Study Scope 3 Svstem and Rate Structures ^2 3.1 Water Sources ^2 3.2 Water Customer and Consumption Characteristics 32 3.3 Existing Water Rate Structure 3.4 Potable Water Rate Revenue Composition 35 3^ Growth 4 Revenue Requirements 4.1 Potable Water Proiected Requirements 37 4.2 Potable Water Operating and Capital Expenses 37 A3 Potable Water Debt 38 4.4 Proiected Revenue Increases 38 4.5 Potable Water Operating Cash Flow 38 4.6 Potable Water Reserves 39 4.6.1 Potable Water Operating Reserve 39 4.7 Recycled Water Proiected Revenue Reouirements 40 4.8 Recycled Water Operating and Capital Expenses 41 4.9 Recycled Water Debt Loans 43 4.10 Recycled Water Reserves 43 4.10.1 Recycled Water Operating Reserve 43 5 Rate Design and Cost of Service (COS) Analysis 45 Raftelis Financial Consultants, Inc. P^g^ 5.1 Overview of Rate Setting 45 5.2 Cost of Service Analysis 45 5.3 Unit Costs of Service 49 5.4 Existing Rate Structure Analysis 56 6 Proposed Water Rate Structure and Rates 57 6.1 Fixed Monthly Charges 57 6.2 Single Family Residential (SFR) Potable Water Commodity Rates 57 63 Multi Family Residential (MFR) Potable Water Commodity Rates 57 6.4 Non-Residential Potable Water Commodity Rates 58 6.5 Agricultural Potable Water Commodity Rates 58 6.6 Irrigation Potable Water Commodity Rates 58 6.7 Recycled Water Rates 58 6.8 Customer Rate Impacts 59 7 Comparison of Bills with Surrounding Agencies ^3 Raftelis Financial Consultants, Inc. P^g^ 20 Executive Summary Carlsbad Municipal Water District (District) engaged Raftelis Financial Consultants, Inc. (RFC) to conduct a comprehensive potable water and recycled water rate study that included a review of revenue requirements, user classifications, and costs of services. RFC developed a rate and financial planning model that would be used to evaluate alternative rate structures and to provide more detailed forecasts to assist in planning and updating rates in future years. This report documents the results ofthe study and suggests changes to cost allocations and the potable and recycled water rate structures that will The specific objectives of this study include the development of a financial plan and rate structure that: • Promotes Financial Sufficiency; • Promotes Revenue Stability; • Promotes Rate Stability; • Is Based on Cost of Service Based Allocations; and • Is Legally Defensible. The following sections briefly describe our findings and recommendations resulting from this study. Revenue Requirements Forecasts show that the District's total revenue requirement from rates for FY 2014 is approximately $35.6 million for the potable water system and approximately $6.9 million for the recycled water system. The Capital Improvement Program (CIP) will be financed through cash for the water system and a Clean Water State Revolving Fund (CWSRF) loan for the proposed Phase III on the recycled water system. In order to meet all potable water operating and capital revenue requirements, including the funding of reserves, RFC recommends 5% annual revenue increases in FY 2014 and FY 2015, both effective on January ofthe respective years. The primary reason for the potable water rate increase is the increase in purchased water costs from the San Diego County Water Authority (SDCWA). It should be noted that 5% is the overall level of revenue increase recommended. Under the proposed rate structures, customers are affected differently. For example, some customers may see bill decreases while others may experience bill increases higher than 5%. At this time, RFC does not anticipate the need for revenue increases for the recycled water system. However, this assessment is based on forecasted growth in customers that will help the utility meet future revenue requirements. If this expansion in customers does not occur, rate increases may be needed. Cost of Service Allocations The cost of service allocations, for the potable water system, conducted in this study are based on the Base-Extra Capacity method endorsed by the American Water Works Association (AWWA), a nationally recognized industry group. Under the Base-Extra Capacity method, revenue requirements are allocated to the different user classes proportionate to their use of the potable water system. Allocations are based on average day (base), maximum day peak (Max Day) usage, maximum hour peak (Max Hour) usage, meters and services, and billing and customer service. Our analysis revealed that revisions to the Single Family Residential (SFR) and Multifamily Residential (MFR) rate structures will enhance equity and meet the District objectives. Non-residential customer classes would retain the uniform volumetric rate structure, but there are adjustments to the rates recommended based on our analysis of customer peaking activity. Raftelis Financial Consultants, Inc. P^g^ 21 Rate Design The monthly fixed meter charges are comprised of two components: a meter charge that varies by meter size and a customer service portion that does not vary by meter size. Our analysis of the costs to be recovered from the existing monthly fixed charge resulted in changes to these rates. RFC also recommends changes to the tiers in the SFR customer class rate structure. The proposed rate structure enhances equity by more accurately reflecting a first-tier breakpoint that is related to internal water consumption. There are lower peaks associated with this demand and therefore are typically charged less than the rates in the higher tiers. Our cost of service analysis also resulted in a lower amount of peaking-related costs compared to the allocations that served as the basis for the current rate structure. This had the effect of increases to the rates the MFR customer class pays. Changes to the non-residential customer classes results from our analysis of demand peaking associated with each customer class. Table 1-1 outlines the existing rates and the proposed rates. Raftelis Financial Consultants, Inc. P^g^ 22 TABLE 1-1 CURRENT AND PROPOSED RATES Monthly Fixed Charge Existing Proposed Meter Service Service Charge Size Charge 1/1/2014 Proposed Service Charge 1/1/2015 5/8" 3/4" 1" 1- 1/2" 2" 2- 1/2" 3" 4" 6" 8" 10" $ $ $ $ $ $ $ $ $ $ 21.38 26.97 38.52 67.60 102.27 147.80 194.72 298.75 588.03 934.75 $1,339.61 $ $ $ $ $ $ $ $ $ $ $ 20.07 27.02 40.93 75.70 117.43 166.10 214.78 353.86 701.56 1,118.80 1,605.58 21.08 28.38 42.98 79.49 123.31 174.41 225.52 371.56 736.64 1,174.74 1,685.86 Volumetric Charge (per HCF) Single Family Tier (HCF) 12 20 21+ Existing 3.20 4.13 5.62 Proposed Tier (HCF) 10 18 19+ Proposed Proposed 1/1/2014 1/1/2015 3.19 4.24 6.11 3.35 4.45 6.42 Multifamily 5 $ 2.71 10 $ 3.05 11+ $ 3.64 Non-Residential $ 3.70 Agricultural $ 3.70 Irrigation $ 4.15 Recycled $ 3.53 5 10 11+ 3.19 4.24 6.11 3.85 3.95 4.22 3.53 3.35 4.45 6.42 4.05 4.15 4.44 3.53 Customer Impacts The following tables display the customer billing impacts under the proposed rate structure as compared to the existing rate structure. As the proposed rate structure makes changes to the cost of service allocations, some Raftelis Financial Consultants, Inc. Page 23 customers will see increases in bills while others will see decreases. Recycled water customers will not see an increase in their volumetric charges, but will see an increase in their fixed monthly charges. TABLE 1-2 FY 2014 MONTHLY SFR RATE IMPACT 5/8" METER Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 2 21.38 6.40 27.78 20.07 6.37 26.44 -1.34 -5% 4 21.38 12.80 34.18 20.07 12.75 32.82 -1.36 -4% 6 21.38 19.20 40.58 20.07 19.12 39.19 -1.39 -3% 10 21.38 32.00 53.38 20.07 31.87 51.94 -1.44 -3% 12 21.38 38.40 59.78 20.07 40.34 60.41 0.63 1% 1 13 21.38 42.53 63.91 20.07 44.57 64.64 0.73 1% 18 21.38 63.18 84.56 20.07 65.76 85.83 1.27 1% 20 21.38 71.44 92.82 20.07 77.98 98.05 5.23 6% 26 21.38 105.16 126.54 20.07 114.66 134.73 8.19 6% 34 21.38 150.12 171.50 20.07 163.56 183.63 12.13 7% 40 21.38 183.84 205.22 20.07 200.24 220.31 15.09 7% 13 units = SFR Average TABLE 1-3 FY 2014 MONTHLY MFR RATE IMPACT - 3/4" METER (4 UNIT BUILDING) Total DU Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 2 26.97 21.68 48.65 27.02 25.49 52.51 3.86 8% 5 26.97 54.20 81.17 27.02 63.73 90.75 9.58 12% 1 6 26.97 66.40 93.37 27.02 80.68 107.70 14.33 15% 8 26.97 90.80 117.77 27.02 114.57 141.59 23.82 20% 10 26.97 115.20 142.17 27.02 148.46 175.48 33.31 23% 14 26.97 173.44 200.41 27.02 246.27 273.29 72.88 36% 20 26.97 260.80 287.77 27.02 392.98 420.00 132.23 46% 26 26.97 348.16 375.13 27.02 539.69 566.71 191.58 51% 34 26.97 464.64 491.61 27.02 735.30 762.32 270.71 55% 40 26.97 552.00 578.97 27.02 882.01 909.03 330.06 57% 6 units = MFR per dwelling unit average Raftelis Financial Consultants, Inc. Page 24 TABLE 1-4 FY 2014 MONTHLY NON-RESIDENTIAL RATE IMPACT - 2" METER Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 60 102.27 222.00 324.27 117.43 231.00 348.43 24.16 7% 80 102.27 296.00 398.27 117.43 308.00 425.43 27.16 7% 100 102.27 370.00 472.27 117.43 385.00 502.43 30.16 6% 120 102.27 444.00 546.27 117.43 462.00 579.43 33.16 6% 140 102.27 518.00 620.27 117.43 539.00 656.43 36.16 6% 160 102.27 592.00 694.27 117.43 616.00 733.43 39.16 6% 180 102.27 666.00 768.27 117.43 693.00 810.43 42.16 5% 200 102.27 740.00 842.27 117.43 770.00 887.43 45.16 5% 220 102.27 814.00 916.27 117.43 847.00 964.43 48.16 5% TABLE 1-5 FY 2014 MONTHLY AGRICULTURAL RATE IMPACT 2" METER Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill($) Charge ($) Charge ($) Bill($) Change Change 60 102.27 222.00 324.27 117.43 237.00 354.43 30.16 9% 80 102.27 296.00 398.27 117.43 316.00 433.43 35.16 9% 100 102.27 370.00 472.27 117.43 395.00 512.43 40.16 9% 120 102.27 444.00 546.27 117.43 474.00 591.43 45.16 8% 140 102.27 518.00 620.27 117.43 553.00 670.43 50.16 8% 160 102.27 592.00 694.27 117.43 632.00 749.43 55.16 8% 180 102.27 666.00 768.27 117.43 711.00 828.43 60.16 8% 200 102.27 740.00 842.27 117.43 790.00 907.43 65.16 8% 220 102.27 814.00 916.27 117.43 869.00 986.43 70.16 8% 240 102.27 888.00 990.27 117.43 948.00 1,065.43 75.16 8% TABLE 1-6 FY 2014 MONTHLY IRRIGATION RATE IMPACT - 2" METER Raftelis Financial Consultants, Inc. Page 25 Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill($) Charge ($) Charge ($) Bill ($) Change Change 60 102.27 249.00 351.27 117.43 253.20 370.63 19.36 6% 80 102.27 332.00 434.27 117.43 337.60 455.03 20.76 5% 100 102.27 415.00 517.27 117.43 422.00 539.43 22.16 4% 120 102.27 498.00 600.27 117.43 506.40 623.83 23.56 4% 140 102.27 581.00 683.27 117.43 590.80 708.23 24.96 4% 160 102.27 664.00 766.27 117.43 675.20 792.63 26.36 3% 180 102.27 747.00 849.27 117.43 759.60 877.03 27.76 3% 200 102.27 830.00 932.27 117.43 844.00 961.43 29.16 3% 220 102.27 913.00 1,015.27 117.43 928.40 1,045.83 30.56 3% 240 102.27 996.00 1,098.27 117.43 1,012.80 1,130.23 31.96 3% Comparison of Bills with Surrounding Agencies Figures 1-1 displays a bill comparison of the District and nearby agencies that was provided by the District. The chart compares the bills for a customer with a %" meter that uses 14 hef per month. As displayed, even with the forecasts revenue increases, the District's bills are toward the low end ofthe regional sample. Raftelis Financial Consultants, Inc. Page 26 $120 $100 $80 $60 $40 $20 $- FIGURE 1-1 BILL COMPARISON %" METER AND 14 HCF PER BILL SURVEYOR MEMBERAGENCYWATERRATES 14 Unit Water Use and 3/4" Residential Meter Water bill effective February 2014 Data provided by the District. Raftelis Financial Consultants, Inc. Page 27 Introduction Project Overview The Carlsbad Municipal Water District (District) engaged Raftelis Financial Consulting, Inc. (RFC) to perform a potable and recycled water rate study. The key deliverables ofthe study were a financial plan and rate structures that would ensure the financial stability of the District and allow for recovery of revenue requirements based on cost of service principles. The District last completed a cost of service rate study in 2009 and most recently increased rates effective on January 1, 2013. The proposed rates will be effective January 1st of 2014 and 2015. Current Environment The District serves approximately 28,000 potable and recycled water customers in its service area in northern San Diego County. The District purchases 100% of its treated potable water from SDCWA. Beginning in January 2016, the District will begin purchasing desalinated seawater to supplement its purchases from SDCWA. Recycled water is purchased from three sources, including Leucadia Wastewater District (Leucadia), Vallecitos Water District (Vallecitos), and produced internally at the District's Carlsbad Water Recycling Facility (CWRF). As with most utilities in the region, the District is facing supply constraints and reduced water sales. The District service area is experiencing slow growth in potable accounts and usage of approximately 0.5% per year. Pricing Objectives At the beginning of the study, RFC conducted a pricing objectives workshop. The goal of the workshop was to prioritize the District's rate-making objectives. Often, pricing objectives can conflict with each other. Therefore, it is beneficial to have a formal ranking of objectives that can guide the rate-setting process and resolve conflicts should they occur. Participants ofthe workshop were asked to prioritize the District's pricing objectives based on a weighted score as either "Most Important = 4," "Very Important = 3," "Important = 2," or "Least Important = 1." These data were compiled to serve as the basis for evaluating the alternative potable water rate structures that will represent the framework for the proposed rates resulting from this study. Table 2-1 presents the rate criteria matrix based on the results ofthe rankings provided by representatives ofthe District. Raftelis Financial Consultants, Inc. P^g^ 28 TABLE 2-1 PRICING OBJECTIVES RANKINGS Financial Sufficiency 20 Primary Pricing Objectives Revenue Stability 19 Primary Pricing Objectives Rate Stability 16 Secondary Pricing Objectives Cost of Service Based Allocations 15 Secondary Pricing Objectives Defensibility 15 Secondary Pricing Objectives Simple to Understand and Update 14 Secondary Pricing Objectives Minimization of Customer Impacts 13 Secondary Pricing Objectives Ease of Implementation 11 Tertiary Pricing Objectives Conservation 9 Tertiary Pricing Objectives Affordability to Disadvantaged Customers 6 Least Important Equitable Contributions from New Customers 5 Least Important Economic Development 5 Least Important RFC then graded the District's current rate structure and three other potential rate structures for SFR and MFR customers on how they meet the meet the pricing objectives. 1. Current Rates - This option would keep the current rate structure unchanged at three tiers and at the current tier cutoffs. 2. Modified Tiers - This option would keep the three-tier rate structure for residential customers, but potentially make changes to the tier cutoffs. 3. Added Tier - This option would add a fourth tier to the residential customer class rate structures. 4. Hybrid - This option would make changes to the tiers and also add a fourth tier to the residential customers. Table 2-2 outlines the results of our grading. Raftelis Financial Consultants, Inc. Page 29 TABLE 2-2 RATE STRUCTURE GRADING RESULTS Current Modified Structure Tiers Added Tier Hybrid Financial Sufficiency 10 10 10 10 Revenue Stability 10 9 9 9 Rate Stability 10 9 8 9 Cost of Service Based Allocations 8 10 9 9 Defensibility 8 10 8 9 Simple to Understand and Update 10 9 8 8 Minimization of Customer Impacts 10 8 7 7 Ease of Implementation 10 9 9 9 Conservation 8 9 10 10 Affordability to Disadvantaged Customers 8 9 9 10 Equitable Contributions from New Customers N/A N/A N/A N/A Economic Development N/A N/A N/A N/A Economic Development Score: 262.00 259.00 1 243.00 1 250.00 As shown, the first two options scored the highest. These scores guide the rate-setting process by identifying the current rate structure and the one with modified tiers as the preferred options for the District. Study Scope The scope ofthis study results in the development of cost-based water rates through a comprehensive cost of service and rate design study process. Figure 2-1 provides a graphical representation ofthe various steps involved in the comprehensive cost of service and rate design process. • Financial Planning: Revenue requirements are projected for fiscal year (FY) 2014. Financial planning involves estimation of annual Operating and Maintenance (O&M) and capital expenditures, reserve targets, operating and capital revenue sources and the determination of required annual user revenues from rates and charges. • Cost of Service Analysis: Cost of service analysis involves identifying and apportioning annual revenue requirements to the different potable water user classes proportionate to their demand on the water system. • Potable Water Rate Design: Rate design involves the development of a fixed and variable schedule of rates for different user classes to proportionately recover the costs attributable to them. Policy objectives, such as encouraging conservation, are considered at this stage. FIGURE 2-1 COST OF SERVICE/RATE DESIGN PROCESS Raftelis Financial Consultants, Inc. Page 30 FINANCIAL PLANNING Step 1 Review Revenue Requirements and Determine Revenues Required from Rates Define User Classes and Estimate User Class Accounts and Usage by Class Bill Tabulation/ Usage Analysis Step COST OF «,p^ SERVICE Step RATE DESIGN Step^jl Design Rate Structure Raftelis Financial Consultants, Inc. Page 31 System and Rate Structures This section ofthe report presents a brief overview ofthe potable and recycled water sources, existing rates, and user/usage characteristics. Water Sources The District's customers include residential, commercial, industrial, agricultural, irrigation, and recycled customers. The District is expected to purchase approximately 16,300 acre-feet (AF) of potable water from SDCWA in FY 2014 to serve its potable customers. As the District relies on SDCWA for 100% of its potable water purchases, it is especially sensitive to regional supply conditions that impact SDCWA. During periods of drought or other supply- related cutbacks, the District's supply could potentially be negatively impacted. In an effort to diversify its supply, the District will begin purchasing desalinated seawater in FY 2016 from the SDCWA to supplement water purchased from SDCWA. Recycled water is supplied from three sources. In FY 2014, 200 AF is forecasted to be purchased from Leucadia, 3,000 AF from Vallecitos, and 1,070 AF from CWRF. Future growth in demand is expected to be met by supplies from CWRF. Water Customer and Consumption Characteristics The vast majority of District customer accounts are residential customers. Table 3-1 displays the number of accounts by customer class and meter size as of FY 2012. TABLE 3-1 FY 2012 WATER CUSTOMER ACCOUNTS Meter Size Single Family Multifamily Non-Residential Agricultural Irrigation Recycled 5/8" 21,248 251 311 1 59 1 3/4" 1,423 102 153 2 46 12 1" 756 159 282 2 184 160 1-1/2" 26 187 314 3 222 247 2" 8 313 571 13 357 258 2-1/2" --1 --- 3" -7 60 6 1 8 4" -2 3 8 4 6 6" -2 1 -4 2 8" --2 -1 1 10" -- Total 23,461 1,023 1,698 35 878 695 Figure 3-2 displays water consumption in hundred cubic feet (HCF) by customer class. As shown, the majority (approximately 52%) of potable water is for residential purposes. Although Non-Residential customers make up a relatively small amount of total customers, they use a large amount of water on a per-account basis. Raftelis Financial Consultants, Inc. Page 32 Vi/ATEFI, COfiSUMPTION BY CLAS-S FY 2,0: Recycled 20% Single Family 43% Irrigation 10% Agricultural 2% Non-Residential 16% Multifamily 9% The District currently utilizes a three-tiered water rate structure for residential customers and a uniform water rate structure for non-residential customers and recycled water customers. One billing unit is equal to one HCF or 748 gallons. This rate structure also includes a monthly meter service charge that varies with meter size. The District last increased its rates effective January 1, 2013. Table 3-2 outlines the existing rates. Raftelis Financial Consultants, Inc. Page 33 TABLE 3-2 EXISTING WATER RATE STRUCTURE Monthly Fixed Charge Volumetric Charge Single Family Existing Tier (HCF) Meter Service 12 $ 3.20 Size Charge 20 $ 4.13 5/8" $ 21.38 21+ $ 5.62 3/4" $ 26.97 1" $ 38.52 Multifamily 1-1/2" $ 67.60 5 $ 2.71 2" $ 102.27 10 $ 3.05 2-1/2" $ 147.80 11+ $ 3.64 3" $ 194.72 4" $ 298.75 Non-Reside $ 3.70 6" $ 588.03 Agricultural $ 3.70 8" $ 934.75 Irrigation $ 4.15 10" $ 1,339.61 Recycled $ 3.53 As tiered rate structures exist for the residential customers, it is often helpful to consider how many customers are impacted at each tier and how much consumption is charged at each level. Table 3-3 displays the bills and consumption levels at various intervals. Percentages marked in yellow reflect the tier cutoff points for the respective residential classes. The data shows that 60% ofthe annual single family residential (SFR) bills fall within the first tier and 83% of the bills fall within the first two tiers. This means that the remaining 17% of the annual bills exceed the 20 hef per month usage. The total usage in the first tier is 68% ofthe total SFR usage and 85% ofthe SFR usage falls within the first two tiers. Similarly 60% ofthe multi-family residential (MFR) bills fall within the first tier and 94% in the first two tiers. The corresponding usage in the first tier is 75% and in the first two tiers 93% of the total MFR usage. These percentages are reasonable. Raftelis Financial Consultants, Inc. P^g^ 34 TABLE 3-3 FY 2012 SINGLE FAMILY AND MULTIFAMILY - PERCENT OF Bl LLS AND CONSUMPTION THROUGH EACH BLOCK Single Family Multifamily % Bills in % Total % Bills in % Total Usage Block Consump Block Consump 1 2% 8% 1% 17% 2 6% 15% 5% 34% 3 11% 22% 19% 51% 4 17% 29% 39% 65% 5 23% 35% 60% 75% 6 29% 41% 75% 82% 7 35% 47% 83% 86% 8 41% 52% 88% 89% 9 46% 56% 92% 92% 10 51% 60% 94% 93% 11 56% 64% 96% 94% 12 60% 68% 97% 95% 13 64% 71% 98% 95% 14 67% 73% 98% 96% 15 70% 76% 99% 96% 16 73% 78% 99% 96% 17 76% 80% 99% 96% 18 78% 82% 99% 97% 19 81% 84% 99% 97% 20 83% 85% 99% 97% Potable Water Rate Revenue Composition Rate revenue makeup is an important concept to consider when designing a financial plan and rate structure. A high amount of fixed revenue (derived from monthly charges that are not dependent on water consumption) promotes revenue stability for the District. However, a high level of fixed revenue/charges reduces the incentive to conserve water among its customers. Figure 3-3 displays the current amount of fixed and variable revenue derived from the potable water rates. Raftelis Financial Consultants, Inc. Page 35 PERCENTAGE OF FIXED AND VARiABLE RATE REVENUI 72.4% 27.6% • Fixed Revenue Variable Revenue The District's current level of fixed revenue of 27.6% and variable revenue of 72.4% is consistent with industry practices. The California Urban Water Conservation Council's Best Management Practice (BMP) 1.4 states that variable rate revenue should be greater than or equal to 70% of total rate revenue. The District meets this guideline. Any future rate structures should not deviate significantly from this level of fixed and variable revenue. District potable water customer accounts and usage is expected to increase at a rate of less than 0.5% per year over the life of this study. The recycled water system, however, is expected to have significant growth over the study period. Demand in FY 2012 was 3,837 AF and in FY 2013 was 4,211 AF. By FY 2019, the recycled utility is expected to increase demand to approximately 5,900 AF. Table 3-4 outlines the expected growth in demand per year. NEW RECYCLED WATER DEMAND f AF) Customers FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Vista Oceanside Phase III 161 300 106 327 254 157 Raftelis Financial Consultants, Inc. Page 36 Revenue Requirements A review of revenue requirements is a key first step in the rate design process. The review involves an analysis of annual operating revenues under existing rates, O&M expenses, capital expenditures, reserves, and transfers between funds. This section ofthe report provides a discussion ofthe projected revenues, operating and capital expenditures, debt coverage requirements, reserve funding policies, and the revenue adjustments required to ensure the financial stability ofthe water enterprise. While all rate options are two-year plans, long-term financial impacts are analyzed. Therefore, the graphs and tables show five years' worth of data. Potable Water Projected Requirements Figure 4-1 displays the District's revenue requirements via the stacked bar charts. The red line graph represents the revenue under the existing rate structure, which shows that the revenue under the existing rates is insufficient to meet revenue requirements and revenue adjustments are needed. The red stacked bar component in red indicates when reserves are being added to or being drawn upon to meet annual revenue requirements. FIGURE 4-1 POTABLE WATER REVENUE REQUIREMENTS FY 2014 Water Purchases I Depreciation I Annual Suprlus/Deficit •Proposed Revenue FY 2016 FY 2018 ••1 O&M (Less Water) •Mi Debt Service Existing Revenue Potable Water Operating and Capital Expenses The District's FY 2014 budget was used to develop a long-term forecast in the rate model. Various escalation rates were used to project future O&M expenses. Nearly all O&M expenses are subject to an minimum annual 3 % inflation increase (based on historical CPI), while others have an additional escalation factor related to growth. The main drivers in the increases in operating costs, and also the need for revenue increases, are the cost increases in imported water purchases and desalinated seawater purchases beginning in FY 2017. Table 4-1 displays the potable operating expenses from FY 2014 through FY 2018. TABLE 4-1 Raftelis Financial Consultants, Inc. Page 37 POTABLE WATER OPERATING EXPENSES Line No. FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 1 Personnel $ 3,222,962 $ 3,395,103 $ 3,513,932 $ 3,633,406 $ 3,664,147 2 O&M (less water & Depr.) $ 4,891,322 $ 5,103,931 $ 5,272,441 $ 5,441,242 $ 5,620,845 3 Depreciation $ 3,475,000 $ 3,579,250 $ 3,686,628 $ 3,797,226 $ 3,911,143 4 Transfers Out to Capital $ 893,000 $ 893,000 $ 893,000 $ 893,000 $ 893,000 5 Imported Water Purchases (Fixed) $ 5,850,000 $ 6,131,983 $ 6,418,659 $ 6,693,452 $ 6,981,423 6 Imported Water Purchases (Variable) $17,650,000 $18,574,419 $19,752,315 $23,744,506 $25,100,724 7 Total $35,982,284 $37,677,686 $39,536,974 $44,202,831 $46,171,282 Potable Water Debt The potable water fund does not currently have any outstanding debt. Based upon our analysis, we do not see the need to issue debt at this time. The District's reserves and revenue stream are sufficient to meet all revenue requirements. This will allow the District to maintain its debt capacity for potential future needs. Projected Revenue Increases In order to meet all District revenue requirements, including the desired funding of reserves, RFC recommends 5% revenue increases in FY 2014 and FY 2015. For planning purposes, additional 5% revenue increases are assumed in the years beyond FY 2015 as well. For the recycled water system, we do not see the need for additional revenue increases at this time. With new recycled water customers joining the system in the coming years, the expected growth in customers and sales is expected to be sufficient to fund any additional growth related expenditures. However, should the expected customer growth not materialize, we would recommend reviewing the level of rates in the coming years. Potable Water Operating Cash Flow The operating cash flow statement shown in Table 4-2 displays the rate revenue from the current rate structure (Line 1), the rate revenue generated from the proposed revenue increases of 5% per year from FY 2014 to FY 2018 (Line 2), and the sum of the existing and proposed revenue (Line 3). The table demonstrates how the revenue requirements (beginning on Line 6) are met and the resulting surplus/deficit (Line 10). TABLE 4-2 OPERATING CASH FLOW Raftelis Financial Consultants, Inc. P^g^ 38 Line FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 No. $ $ $ $ $ 1 Revenue from Existing Retail Rates 33,876,180 34,045,442 34,199,183 34,351,446 34,485,969 2 Additional Rate Revenue Required 635,200 2,372,600 4,212,500 6,160,300 8,217,900 3 Total Rate Revenue 34,511,380 36,418,042 38,411,683 40,511,746 42,703,869 4 Non-Rate Revenue 3,767,000 3,907,484 4,037,619 4,168,580 4,308,492 5 Total Revenue 38,278,380 40,325,526 42,449,302 44,680,326 47,012,361 Revenue Requirements 6 O&M (less Depreciation) 31,614,284 33,245,436 34,998,746 39,555,413 41,318,607 7 Depreciation 3,475,000 3,579,250 3,686,628 3,797,226 3,911,143 8 Transfers Out to Capital 893,000 893,000 893,000 893,000 893,000 9 Total Revenue Requirements 35,982,284 37,717,686 39,578,374 44,245,639 46,122,750 10 Net Annual Cash Balance 2,296,096 2,607,840 2,870,929 434,687 889,611 Potable Water Reserves The District reserves consist of an operating reserve and a capital replacement reserve. The District's operating reserve currently has an informal target of 40% of annual operating expenditures. Over the forecast period, the District is making significant progress toward reaching this target. Reserve fund cash flows are shown in Figures 4-2 and 4-3. Potable Water Operating Reserve Operating reserves are used for working capital requirements to meet the ongoing expenses of the District. Because the District's fixed rate revenue is approximately 27% of total rate revenue, the District's cash flows are relatively stable. The District's current trajectory of approaching 40% of annual operating expenses is therefore appropriate. FIGURE 4-2 POTABLE WATER OPERATING RESERVE Raftelis Financial Consultants, Inc. Page 39 $18 I $16 ^ $14 $12 $10 $8 $6 $4 $2 $- FY 2014 FY 2016 FY 2018 Ending Balance Target-40% of O&M Figure 4-4 displays the District's recycled revenue requirements via the stacked bar charts. The line graph represents the revenue under the existing rate structure. As mentioned previously, the existing rate structure and revenue stream are sufficient to meet revenue requirements in the near-term. $12 (/I I $10 $8 $6 $4 $2 $- FIGURE 4-3 RECYCLED WATER REVENUE REQUIREr^lENTS FY 2014 FY 2015 Water Purchases • DebtServlce — Existing Revenue FY 2016 FY 2017 FY 2018 O&M (Less Water) ••i Annual Suprlus/Deficit Raftelis Financial Consultants, Inc. Page 40 Recycled Water Operating and Capital Expenses The District's FY 2014 recycled budget was used to develop a long-term forecast in the rate model. Various escalation rates were used to project future O&M expenses. Nearly all O&M expenses are subject to an minimum annual 3 % inflation increase (based on historical CPI), while others are subject to an additional escalation factor related to growth. Table 4-3 displays the recycled water operating expenses from FY 2014 through FY 2018. The District's recycled water CIP through FY 2018 is shown in Table 4-4. TABLE 4-3 RECYCLED WATER OPERATING EXPENSES Line FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 No. $ $ $ $ S 1 Personnel $ 862,909 $ 898,288 $ 929,728 $ 961,339 $ 994,025 2 O&M (less water) $2,674,914 $2,755,357 $2,836,249 $3,213,016 $ 3,596,321 3 Water Purchases $2,000,000 $1,934,611 $1,992,649 $2,052,429 $ 2,114,002 4 Debt Service $2,002,387 $1,876,482 $1,876,482 $1,876,482 $ 3,639,373 5 Totai $7,540,210 $7,464,739 $7,635,108 $8,103,266 $10,343,721 Currently, the Recycled Water capital expenditures consist ofthe Phase III Recycled Water Project expansion, which is expected to begin in FY 2015 and be completed in FY 2017. There are no projects scheduled for FY 2014 or FY 2018 at present. Raftelis Financial Consultants, Inc. Page 41 TABLE 4-4 RECYCLED WATER CAPITAL EXPENSES FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 $ $ $ $ $ Phase III PiDeline Costs Expansion Alignment lA 608,000 608,000 608,000 Expansion Alignment 2 2,020,333 2,020,333 2,020,333 Expansion Alignment 4A 147,000 147,000 147,000 Expansion Alignment 5 2,493,000 2,493,000 2,493,000 Expansion Alignment 7 431,667 431,667 431,667 Expansion Alignment 9 356,667 356,667 356,667 Expansion Alignment 18 129,667 129,667 129,667 Retrofit Customers Near Existing System 58,667 58,667 58,667 Subtotal 6,245,000 6,245,000 6,245,000 CWRF 4.0 MGD Treatment Expansion GMF Feed Pump Station 100,000 100,000 100,000 GMF (4.0 MGD expansion) 566,667 566,667 566,667 Chlorine Feed and Storage System 66,667 66,667 66,667 Chlorine Contact Basin 666,667 666,667 666,667 Misc. Items, Controls, Electrical, etc. 166,667 166,667 166,667 Construction Costs 1,566,667 1,566,667 1,566,667 Construction Cost Contingency (20% of Direct) 313,333 313,333 313,333 Engineering and Design (10% ofthe Subtotal) 188,000 188,000 188,000 Project Administration (2.5% of the Subtotal) 47,000 47,000 47,000 Construction Mgmt. and Inspection (10% of Subtotal) 188,000 188,000 188,000 Subtotal 2,303,000 2,303,000 2,303,000 Reservoir Storage Cost 1.5 MG Steel Tank Reservoir 612,667 612,667 612,667 Total CIP - 9,160,667 9,160,667 9,160,667 Raftelis Financial Consultants, Inc. Page 42 Recycled Water Debt Loans The recycled water utility has received loans from the State Water Resources Control Board (SWRCB) to develop its recycled water system. Additional loans are expected to be received to fund further expansion. Table 4-5 displays existing loan repayment schedules. TABLE 4-5 EXISTING DEBT SERVICE Line FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 1 Interest 165,883 153,859 141,534 128,901 115,952 2 Principal 480,976 493,001 505,326 517,959 530,908 3 Total 646,859 646,859 646,859 646,859 646,859 SWRCB - Recvclinq Loan 4 Interest 335,261 314,691 293,648 272,120 250,098 5 Principal 894,361 914,932 935,975 957,502 979,525 6 Total 1,229,623 1,229,623 1,229,623 1,229,623 1,229,623 SWRCB - Phase 1 - Loan No. 3-870-550-0 7 Interest 2,683 ---- 8 Principal 123,222 9 Total 125,905 --- • 10 Total Existing Debt Service 2,002,387 1,876,482 1,876,482 1,876,482 1,876,482 Our financial forecast also assumes an additional Clean Water State Revolving Fund (CWSRF) loan in the amount of $27.4 million dollars. The term of the loan is expected to be 20 years and at a 2.5% interest rate. Loan repayment is projected to commence the year after the projects are completed, FY 2018 (possibly FY 2019). This will add an additional $1.76 million in annual debt service forthe recycled water utility, which is reflected in Table 4-3. Recycled Water Reserves The District's recycled reserves consist of an operating reserve. The District's operating reserve currently has an informal target of 40% of annual operating expenditures. The recycled water utility is expected to meet this target over the forecast period. The Operating Reserve fund cash flows are shown in Figure 4-4. Recycled Water Operating Reserve Operating reserves are used for working capital requirements to meet the ongoing expenses ofthe District. Due to the recycled water utility's operating reserve beginning balance and expected growth in customers and usage, the utility is forecasted to meet and exceed its 40% operating expenditure target by FY 2015. Raftelis Financial Consultants, Inc. Page 43 $9 I $8 1 $7 $6 $5 $4 $3 $2 $1 $- FY 2014 FY 2016 FY 2018 Ending Balance ———Target Raftelis Financial Consultants, Inc. Page 44 Rate Design and Cost of Service (COS) Analysis Once the financial planning process is complete, the next step is to determine how the overall revenue requirements will be recovered from the water system's customers. This section describes that process. Overview of Rate Setting As an enterprise fund, water operations are financed and operated as a distinct business. Appropriate fees and charges should be established to ensure that the water operations can operate on a self-sustaining basis. For a water utility, the majority of revenue is normally derived through user charges. These service fees, rates, and billings are charged to the beneficiaries of the water services. Development of a user charge system is defined as the total process of identifying costs, allocating costs to the water beneficiaries, and designing a rate structure to recover allocated costs. Cost of Service Analysis The cost of service analysis is based upon the premise of generating revenues sufficient to meet the estimated annual revenue requirements and allocating the revenue requirements to the customer classes in proportion to the service that they receive. Revenue requirements include operating costs and rate-funded capital costs, annual debt service, and reserve requirements. Deductions from revenue requirements include miscellaneous operating and non-operating revenues, interest revenues, and reserves funding. Adjustments are also made to account for cash balances (transfers to reserves) to ensure collection of adequate revenues. The FY 2014 total costs of service to be recovered from the retail users, shown in Table 5-1 on line 12, are estimated at approximately $35.6 million. Approximately $31.2 million is considered operating expenses and the remaining $4.4 million is capital expenses. The total cost of water service is analyzed by system function in order to equitably distribute costs of service to the various classes of customers. For this analysis, using the AWWA Base-Extra Capacity Methodology of allocating costs, water utility costs of service are assigned to three basic functional cost components: base costs, extra capacity costs, customer costs. Base costs are those operating and capital costs ofthe water system associated with serving customers at a constant average rate of use or average daily demand (ADD). Water systems are designed to handle peak demands and extra capacity costs represent those operating and capital costs incurred to meet customer peak demands for water in excess of ADD. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demands. Maximum day demand is the maximum usage recorded on any day in a year. The maximum hour usage is the maximum usage recorded in any hour ofthe maximum usage day. Customer costs are subdivided into customer service and billing costs, and meter costs. Customer costs are uniform for all customers and include expenses, such as customer service, meter reading, billing, accounts receivables, and accounting. Meter service costs include maintenance and capital costs associated with meters, and a portion of extra capacity- related costs. The separation of costs of service into these principal components provides the foundation for further allocation of such costs to the customer classes on the basis of their demands. TABLE 5-1 Raftelis Financial Consultants, Inc. Page 45 FY 2014 POTABLE WATER COST OF SERVICE TO BE RECOVERED FROM RATES Line Operating Capital No. Expense Expense Total Revenue Requirements 1 O&M 31,614,284 $31,614,284 2 Depreciation 3,475,000 $ 3,475,000 3 Transfer to Capital 893,000 $ 893,000 $ Subtotal $31,614,284 $4,368,000 $35,982,284 Less Rev. Requirements Met from Other Sources Non-Rate Revenue 3,767,000 $ 3,767,000 Subtotal $ 3,767,000 $ $ 3,767,000 Less Adjustments Adjustment for Annual Cash Balance Adjustment to Annualize Rate Increase $ (2,296,096) $(1,058,667) $ (2,296,096) $ (1,058,667) Subtotal $ (3,354,763) $ $ (3,354,763) Net Revenue to be Recovered from Rates $31,202,047 $4,368,000 $35,570,047 RFC performed the following steps to allocate District O&M and capital costs. To allocate costs, the first step is to identify the system peaking factors. Base is assigned a value of 1.00, as it represents ADD. The District's maximum day (Max Day or Peak Day) demand is estimated to be 1.65 times the ADD. Max Day is therefore assigned a value of 1.65. The maximum instantaneous usage is approximated by the maximum hourly (Max Hour or Peak Hour) usage and is estimated to be 2.90 times the ADD. Max Hour is therefore assigned a value of 2.90. These factors are derived from the District's master plan and confirmed by District staff. The system peaking factors are summarized in Table 5-2. TABLE 5-2 SYSTEM PEAKING FACTORS' Factors Base 1.00 Max Day 1.65 Max Hour 2.90 The District is comprised of various facilities, each designed and operated to fulfill a given function. In order to provide adequate service to its customers at all times, the utility must be capable not only of providing the total Carlsbad Municipal Water District, 2012 Water Master Plan Raftelis Financial Consultants, Inc. Page 46 amount of water used, but also of supplying water at peak or maximum rates of demand. The separation of costs into functional components provides a means for distributing such costs to the various classes of customers on the basis of respective responsibilities for each particular type of service. The functional cost allocations are calculated from the peaking factors as follows: Cost categories that are solely Base or ADD-related, such as source of supply, are allocated 100 % to the Base cost component. Cost categories that are designed to meet Max Day peaks are allocated to Base and Max Day factors. Therefore, the allocations are as follows: Base: Max Day: 60.6% 39.4% 1.00/1.65 0.65/1.65 Cost categories such as distribution, which are designed for Max Hour peaks, are allocated similarly. The Base allocation percentage is calculated by dividing the Base units of 1.00 by the Max Hour peaking factor of 2.9. The Max Day allocation percentage is calculated by dividing the incremental Max Day units (0.65) by the Max Hour factor of 2.9. The Max Hour allocation percentage is calculated by dividing the incremental Max Hour units by the total peak of 2.9. Base: 34.5% 1.00/2.9 Max Day: 22.4% 0.65/2.9 Max Hour 43.1% 1.25/2.9 A summary ofthe allocation is displayed in Table 5-3. TABLE 5-3 SUMMARY OF ALLOCATION PERCENTAGES Demand Factors Base Max Day Max Hour Base 1.00 100% Max Day 1.65 60.6% Max Hour 2.90 34.5% 22.4% 43.1% These percentages are used to allocate the operating and capital costs amongst Base, Max Day, and Max Hour parameters for cost of service calculations. The budgeted operating costs are categorized by function and then allocated to the parameters as summarized in Table 5-4. TABLE 5-4 Raftelis Financial Consultants, Inc. Page 47 ALLOCATION TO BASE EXTRA CAPACITY PARAMETERS Line Base Peak Day Peak Hour Meter Charges Billing & Customer Service General Conservation Total No. Function 1 Source of Supply $23,500,000 $ -$ $ $ -$ -$ -$23,500,000 2 Treatnnent $ 27,273 $ 17,727 $ $ $ -$ -$ -$ 45,000 3 Meters $ $ -$ $1,245,682 $ -$ -$ -$ 1,245,682 4 Customer Billing $ $ -$ $ $584,712 $ -$ -$ 584,712 5 General Plant $ $ -$ $ $ -$2,505,576 $ -$ 2,505,576 6 Assets $ 2,156,934 $ 952,113 $ 358,929 $ 7,023 $ -$ -$ -$ 3,475,000 7 Labor $ 1,472,085 $ 839,327 $1,082,555 $ 797,906 $226,430 $ -$ 208,012 $ 4,626,314 8 Total $27,156,292 $1,809,168 $1,441,484 $2,050,611 $811,142 $2,505,576 $ 208,012 $35,982,284 9 Operating % 81.12% 5.40% 4.31% 6.13% 2.42% 0.00% 0.62% 10 Capital % Allocation 62.07% 27.40% 10.33% 0.20% 0.00% 0.00% 0.00% Line 9 on Table 5-4 displays how the net operating expense to be recovered from user rates will be allocated. The capital cost allocation percentages are shown on Line 10. The capital percentages were derived from an analysis completed by RFC and are based on the total assets of the water utility. Costs shown in the "General" column are items that cannot be allocated to one specific parameter and are reallocated to the direct parameters based on the percentage of the total for each parameter. The allocation percentages on lines 9 and 10 reflect this. The next step is to apply the operating and capital allocation percentages outlined in Table 5-4 to the net operating and capital expenses to be recovered from rates (from Table 5-1). Table 5-5 outlines that process. TABLE 5-5 ALLOCATION OF NET REVENUE REQUIREMENTS Line Base Peak Day Peak Hour Meter Charges Billing & Customer Service General Conservation Total No. 1 Net Operating Costs $25,311,088 $1,686,239 $1,343,539 $1,911,277 $756,027 $ -$ 193,878 $31,202,047 2 Capital Costs $ 2,711,220 $1,196,786 $ 451,166 $ 8,828 $ $ -$ $ 4,368,000 3 Total Cost of Service $28,022,307 $2,883,025 $1,794,705 $1,920,105 $756,027 $ -$ 193,878 $35,570,047 Note that the values in the "Total" column correspond to the net revenue requirements including operating and capital costs outlined in Table 5-1. The next step in the COS process is to determine the unit costs of service. Raftelis Financial Consultants, Inc. Page 48 Unit Costs of Service In order to allocate costs of service to the different user classes, units of service and unit costs of service need to be developed for each functional cost component. The units of service for the parameters are outlined in Table 5-6. TABLE 5-6 UNITS OF SERVICE Category Base Peak Day Peak Hour Meter Charges Billing & Customer Service Unit of Service HCF HCF/Day HCF/Hour Equiv. Meters Annual Bills Base units of service are based on annual water consumption in HCF. Peak Day units are based on the extra capacity needed to serve beyond ADD to meet Max Day demand in HCF/day. Peak Hour or Max Hour units are based on the extra capacity needed to serve Max Hour demands in excess of Max Day demands in HCF/day. Units of service for meter charges are the total annual equivalent meters. Billing & Customer Service units of service are the number of bills delivered, which is derived from the number of accounts. Equivalent meters are used instead of accounts when allocating meter charges in order to recognize the fact that larger meters provide more capacity and are more expensive to install, maintain, and replace than smaller meters are. Meters are assigned a hydraulic capacity according to size that is based on the sustained maximum flow rate of the meter. For example a 5/8" meter has a sustained hydraulic capacity of 20 gallons per minute (gpm) whereas a 6" meter has a sustained hydraulic capacity of 1,000 gpm. Therefore, a 6" meter is equivalent to 1,000/20, or 50, 5/8" meters. In this manner, capacity ratios are used to calculate the total number of equivalent meters in the system. The total number of potable equivalent meters included in our cost of service analysis, which takes into account hydraulic flow using the 5/8" meter as a base, is estimated to be 44,246 in FY 2014. Given that billing occurs monthly, a total of 530,952 potable equivalent meters are billed per year. The total projected equivalent water meters included in our cost of service analysis for our test year, FY 2014, are presented in Table 5-7. Equivalent meters are used in the unit cost calculation of meters and services charges in the cost of service section. Raftelis Financial Consultants, Inc. Page 49 TABLE 5-7 PROJECTED EQUIVALENT POTABLE METERS FY 2014 Meter Size Meters Capacity Ratio Equiv. Meters 5/8" 22,038 1.0 22,038 3/4" 1,739 1.5 2,609 1" 1,394 2.5 3,484 1-1/2" 758 5.0 3,789 2" 1,272 8.0 10,173 2-1/2" 1 11.5 12 3" 75 15.0 1,119 4" 17 25.0 428 6" 7 50.0 353 8" 3 80.0 242 10" -115.0 - Total 44,246 Per Year 530,951 The total units of service for all parameters are shown in Table 5-8. Raftelis Financial Consultants, Inc. Page 50 TABLE 5-8 UNITS OF SERVICE BY POTABLE CUSTOMER CLASS Maximum Day Requirements Maximum Hour Requirements Line Annual Average Capacity Total Extra Capacity Use Daily Use Factor Capacity Capacity Factor (HCF) (HCF/dav) % (HCF/day) (HCF/day) % Total Extra Capacity Capacity (HCF/day) (HCF/day) No. of No. of Meters Customers (Equiv.) (No.) Annual No. of Meters ( Equiv.) Annual No. of Bills (No.) 1 Single Family 3,556,940 9,745 200% 19,490 9,745 300% 29,235 9,745 25,662 23,641 307,943 283,692 2 Multifamily 781,901 2,142 177% 3,786 1,644 265% 5,679 1,893 4,530 1,031 54,360 12,370 3 Non-Residential 1,346,908 3,690 192% 7,094 3,404 288% 10,641 3,547 8,646 1,711 103,750 20,532 4 Agricultural 151,135 414 211% 873 459 316% 1,310 437 421 35 5,054 423 5 Irrigation 846,708 2,320 260% 6,042 3,722 391% 9,063 3,021 4,987 885 59,844 10,617 6 Total 6,683,593 18,311 37,286 18,975 55,929 18,643 44,246 27,303 530,951 327,635 Raftelis Financial Consultants, Inc. Page 51 The first column in Table 5-8 identifies the District's potable water customer classes. The "Annual Use" column identifies the annual consumption for each customer class. The "Average Daily Use" column is the previous column divided by 365 (days per year) to determine the base capacity. The next three columns consist of Maximum Day data. The Maximum Capacity Factor column contains estimates on the class peaking characteristics. For example, the Single Family Maximum Day Capacity Factor means that the maximum day requirements are 200% of base/average demand. The next column. Total Capacity, lists the capacity needed to serve average demand and Max Day demands. The next column. Extra Capacity, lists only the capacity needed to service the Max Day demand in excess of the base/average demand. The next three columns are similar to the Max Day group of columns except that they relate to the Max Hour capacity needs. The Capacity Factor column means that the Max Hour requirements are 300% of base/average demand. The Total Capacity lists the total capacity needed to meet ADD, Max Day, and Max Hour demands. The third column. Extra Capacity, lists the capacity needed to meet demand in excess of average/base and maximum day. The final four columns are based on the equivalent meters and customers both multiplied by 12 (months per year). This will allow us to calculate the meter cost and customer service components of a fixed charge component ofthe rate structure on a monthly basis. Unit costs of service are developed by dividing the total annual costs allocated to each cost parameter by the total annual service units ofthe respective category. The unit cost calculations are shown in Table 5-9. Raftelis Financial Consultants, Inc. Page 52 TABLE 5-9 POTABLE WATER UNIT COSTS OF SERVICE Meter Charges Billing & Line Base Peak Day Peak Hour Meter Charges Customer Service General Conservation No. 1 Net Operating Costs $ 25,311,088 $ 1,686,239 $ 1,343,539 $ 1,911,277 $ 756,027 $ -$ 193,878 2 Capital Costs $ 2,711,220 $ 1,196,786 $ 451,166 $ 8,828 $ $ -$ 3 Total Cost of Service $ 28,022,307 $ 2,883,025 $ 1,794,705 $ 1,920,105 $ 756,027 $ -$ 193,878 4 Modified Total Cost $ 21,296,954 $ 2,883,025 $ 1,794,705 $ 7,384,455 $ 2,017,030 $ -$ 193,878 5 Total Units of Service 6,683,593 18,975 18,643 530,951 Equiv. 327,635 929,595 6 Unit of Measure HCF HCF/Day HCF/hour Meters/Mo. Bills/Mo. HCF 7 Total Unit Cost of Service $ 3.19 $ 151.94 $ 96.27 $ 13.91 $ 6.16 0.21 Raftelis Financial Consultants, Inc. Page 53 In order to more accurately reflect cost of service and ensure that the District collects a similar amount of fixed revenue, certain costs from the Base component are recovered from the Meter Charges portion and the Billing and Customer Service items. SDCWA has certain supply-related components that are fixed costs and are more accurately recovered from these components. These costs include the Customer Service Charge, Emergency Storage Charge, Infrastructure Access Charge, and MWD Capacity Charge. With the units of service of each customer class and the unit costs of service, we can now allocate costs to the respective customer classes, as shown in Table 5-10. Raftelis Financial Consultants, Inc. Page 54 TABLE 5-10 COSTS OF SERVICE ALLOCATED TO POTABLE WATER CUSTOMER CLASSES Line Base Peak Day Peak Hour Meter Charges Billing& Customer Service Conservation No. Single Family 1 Units 3,556,940 9,745 9,745 307,943 283,692 639,890 2 Costs - $ $11,334,022 $1,480,678 $938,131 $4,282,863 $1,746,505 $ 133,456 Multifamily 3 Units 781,901 1,644 1,893 54,360 12,370 55,230 4 Costs - $ $ 2,491,491 $ 249,794 $182,244 $ 756,037 $ 76,155 $ 11,519 Non-Residential 5 Units 1,346,908 3,404 3,547 103,750 20,532 134,691 6 Costs - $ $ 4,291,860 $ 517,225 $341,474 $1,442,953 $ 126,404 $ 28,091 Agricultural 7 Units 151,135 459 437 5,054 423 15,113 8 Costs - $ $ 481,584 $ 69,742 $ 42,024 $ 70,298 $ 2,606 $ 3,152 Irrigation 9 Units 846,708 3,722 3,021 59,844 10,617 84,671 10 Costs - $ $ 2,697,997 $ 565,586 $290,831 $ 832,305 $ 65,361 $ 17,659 The Base, Peak Day, and Peak Hour columns will comprise the commodity/volumetric rates for each customer class. The Meter Charges and Billing & Customer Service columns will comprise the fixed monthly charge. The fixed portion of our proposed rate structure will vary by meter size, not by customer class. The commodity or volume rate, however, will vary by customer class. The average volumetric rates by customer class are outlined in Table 5-11 and include rates with and without conservation costs. Typically conservation costs are assigned to higher volume customers who may benefit from the conservation program by using water more efficiently. For residential tiered rates, conservation costs are included in the higher tiers. For other classes that do not have tiered rates conservation costs are included in the uniform rates. Raftelis Financial Consultants, Inc. Page 55 TABLE 5-11 AVERAGE VOLUMETRIC RATES BY POTABLE WATER CUSTOMER CLASS Total Units Average Volume Average Volume Volume-based of Rate without Rate with Line Charges Service Conservation Cost Conservation Cost No. Customer Class $ HCF $/HCF $/HCF 1 Single Family $ 13,886,289 3,556,940 $ 3.87 $ 3.91 2 Multifamily $ 2,935,047 781,901 $ 3.74 $ 3.76 3 Non-Residential $ 5,178,650 1,346,908 $ 3.83 $ 3.85 4 Agricultural $ 596,503 151,135 $ 3.93 $ 3.95 5 Irrigation $ 3,572,073 846,708 $ 4.20 $ 4.22 Existing Rate Structure Analysis RFC conducted an analysis of the District's existing rate structure and its underlying cost of service allocations. Two specific allocations were of note. Underthe previous allocation, a large portion ofthe water supply costs were allocated to peaking. Under industry standards, supply costs are typically allocated to "Base" in the Base- Extra Capacity methodology. Allocating a large portion of supply costs to peaking caused a disproportionate difference in the average rates charge to multifamily customers. These residential customers typically have lower peaking characteristics than single-family customers. Thus, multifamily customers should typically have lower average commodity rates than single-family customers; however, the difference between the two rates is more pronounced when there are excessive peaking costs. The second item of note was the allocation of 20% of annual debt service to customer service costs. As debt is generally incurred to fund capital projects, it is appropriate to allocate it in proportion to how the existing asset base is allocated amongst the Base-Extra Capacity categories. Allocating 20% of annual debt service to customer service costs causes excessive monthly meter charges for lower-sized meters, as the customer service portion is much larger as a percentage of the total monthly fixed meter charge. Our cost of service analysis changes these two allocations and results in the changes one would expect. The difference between single-family and multifamily rates is much smaller and the customer service portion of the fixed monthly service charge is reduced. Raftelis Financial Consultants, Inc. Page 56 Proposed Water Rate Structure and Rates As part ofthe exercise of prioritizing pricing objectives, RFC evaluated alternative rate structures and, based on the pricing objective exercise results, the current rate structure: a fixed charge and three volumetric tiers best meets the needs ofthe District. A monthly meter charge will continue to be assessed to each customer and will vary depending on the customer's meter size. The monthly meter charge includes a customer service component and a meter cost component. The meter cost component varies based on meter size by reflecting the difference in potential demand that can be placed on the system by different sized meters. The remaining revenue requirements will be recovered from a volumetric or consumption charge. The volume rate per hef varies by customer class. The volume rates are designed to ensure that each customer class pays its share ofthe costs of service shown in Table 5-11. Details and proposed modifications to the commodity rate structure are outlined in the following sections. Fixed Monthly Charges As shown in Table 5-9, the monthly charge per equivalent meter is $13.91. Thus, a 5/8" meter, or one equivalent meter, is charged $13.91 per month. A %" meter, which is 1.5 equivalent meters, is charged $20.86 per month ($13.91 * 1.5). The other component of the fixed monthly charge is the billing and customer service component. As shown in Table 5-9, this amount is $6.16 per month. This charge ofoes not vary by meter size; customer service and billing costs incurred are not any greater for larger meters compared to smaller meters. Therefore, in our previous examples the 5/8" and the YA meter would be charged $6.16 per month for this component, totaling $20.07 and $27.02 per month respectively when combined with the meter charge component. The proposed rates are shown in Table 6-1. Single Family Residential (SFR) Potable Water Commodity Rates RFC recommends that the District retain its three-tier inclining rate structure for SFR customers. However, RFC does recommend adjustments to the tier cutoff points. RFC recommends reducing the first tier from 12 HCF per month to 10 HCF per month. This level of consumption is more consistent with internal demand for the average single-family household. The lower rate for this essential quantity of water is available for all customers. RFC recommends reducing the second tier from 20 HCF to 18 HCF. This level of usage still provides an adequate amount of water for external landscaping needs, while continuing to send a signal for conservation to high-usage customers. The first tier is designed to provide essential usage with low peaking, the rate excludes peaking costs and is available to all residential customers. This design allows the peaking costs to be assigned to the higher tiers and effectively increases those rates consistent with cost of service and provides an incentive for conservation. The second tier, which is designed to cover mostly irrigation usage which has high peaking, includes the peaking costs and is closer to the average rate. The third tier is designed to recover costs associated with external consumption, and recovers the remaining costs of service associated with the single family class of customers. The proposed rates are shown in Table 6-1. Multi Family Residential (MFR) Potable Water Commodity Rates RFC recommends that the District retain its three-tier inclining rate structure and tier cutoffs for MFR customers. However, RFC does recommend adjustments to volumetric rates. Underthe current rate structure, MFR customers are receiving a much lower volumetric rate compared to SFR customers. To some extent, this is Raftelis Financial Consultants, Inc. Page 57 appropriate as peaking characteristics of MFR customers are lower than SFR customers. However, the current spread between the two classes is not appropriate given the peaking characteristics found in these classes. RFC recommends increasing the rates to be identical to the SFR customers. However, due to the consumption patterns and existing tier cutoffs, MFR customers will continue to pay a lower average rate per hef than SFR customers, which is appropriate and expected. The proposed rates are shown in Table 6-1. Non-Residential Potable Water Commodity Rates RFC recommends that the District retain the uniform commodity rate for this customer class since these customers are very non-homogenous and it is difficult to apply a standard tiered rate structure to these customers without being overly punitive to large customers. In addition, they are motivated to control costs and therefore generally limit unnecessary water use. Also, their lower peaking characteristics result in lower average rates than for the residential customers. The proposed rates are shown in Table 6-1. Agricultural Potable Water Commodity Rates RFC recommends that the District retain the uniform commodity rate for this customer class. The rates have been revised to more accurately reflect the peaking characteristics of these customers. The proposed rates are shown in Table 6-1. Irrigation Potable Water Commodity Rates RFC recommends that the District retain the uniform commodity rate for this customer class. The rates have been revised to more accurately reflect the peaking characteristics of these customers. The proposed rates are shown in Table 6-1. Recycled Water Rates RFC recommends that the District retain the uniform commodity rate for this customer class. As there are no revenue increases included as part ofthe recycled water revenue plan, the commodity rates are forecasted to remain the same over the study period. The proposed rates are shown in Table 6-1. Raftelis Financial Consultants, Inc. Page 58 TABLE 6-1 CURRENT AND PROPOSED RATES Monthly Fixed Charge Existing Proposed Proposed Meter Service Service Charge Service Charge Size Charge 1/1/2014 1/1/2015 5/8" $ 21.38 $ 20.07 $ 21.08 3/4" $ 26.97 $ 27.02 $ 28.38 1" $ 38.52 $ 40.93 $ 42.98 1-1/2" $ 67.60 $ 75.70 $ 79.49 2" $ 102.27 $ 117.43 $ 123.31 2-1/2" $ 147.80 $ 166.10 $ 174.41 3" $ 194.72 $ 214.78 $ 225.52 4" $ 298.75 $ 353.86 $ 371.56 6" $ 588.03 $ 701.56 $ 736.64 8" $ 934.75 $ 1,118.80 $ 1,174.74 10" $ 1,339.61 $ 1,605.58 $ 1,685.86 Volumetric Charge (per HCF) Single Family Tier (HCF) 12 20 21+ Existing 3.20 4.13 5.62 Proposed Tier (HCF) 10 18 19+ Proposed Proposed 1/1/2014 1/1/2015 3.19 4.24 6.11 3.35 4.45 6.42 Multifamily 5 $ 2.71 10 $ 3.05 11+ $ 3.64 Non-Residential $ 3.70 Agricultural $ 3.70 Irrigation $ 4.15 Recycled $ 3.53 5 10 11+ 3.19 4.24 6.11 3.85 3.95 4.22 3.53 3.35 4.45 6.42 4.05 4.15 4.44 3.53 Customer Rate Impacts An important component of the rate study was an analysis of how the proposed rate structure would impact the monthly bills of water customers. RFC worked closely with District staff to ensure that appropriate revenue requirements would be recovered, while still paying close attention to the related impacts on customers. Raftelis Financial Consultants, Inc. Page 59 The proposed water rate structure results in meter charges and different volume charges for all customer classes. Tables 6-2 through 6-6 demonstrate the impacts of the proposed rates on the District's potable water customers across varying usage levels. TABLE 6-2 FY 2014 MONTHLY SFR RATE IMPACT - 5/8" METER Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 2 21.38 6.40 27.78 20.07 6.37 26.44 -1.34 -5% 4 21.38 12.80 34.18 20.07 12.75 32.82 -1.36 -4% 6 21.38 19.20 40.58 20.07 19.12 39.19 -1.39 -3% 10 21.38 32.00 53.38 20.07 31.87 51.94 -1.44 -3% 12 21.38 38.40 59.78 20.07 40.34 60.41 0.63 1% 1 13 21.38 42.53 63.91 20.07 44.57 64.64 0.73 1% 18 21.38 63.18 84.56 20.07 65.76 85.83 1.27 1% 20 21.38 71.44 92.82 20.07 77.98 98.05 5.23 6% 26 21.38 105.16 126.54 20.07 114.66 134.73 8.19 6% 34 21.38 150.12 171.50 20.07 163.56 183.63 12.13 7% 40 21.38 183.84 205.22 20.07 200.24 220.31 15.09 7% 13 units = SFR Average TABLE 6-3 FY 2014 MONTHLY MFR RATE IMPACT - 3/4" METER (4 UNIT BUILDING) Total DU Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 2 26.97 21.68 48.65 27.02 25.49 52.51 3.86 8% 5 26.97 54.20 81.17 27.02 63.73 90.75 9.58 12% 6 26.97 66.40 93.37 27.02 80.68 107.70 14.33 15% 8 26.97 90.80 117.77 27.02 114.57 141.59 23.82 20% 10 26.97 115.20 142.17 27.02 148.46 175.48 33.31 23% 14 26.97 173.44 200.41 27.02 246.27 273.29 72.88 36% 20 26.97 260.80 287.77 27.02 392.98 420.00 132.23 46% 26 26.97 348.16 375.13 27.02 539.69 566.71 191.58 51% 34 26.97 464.64 491.61 27.02 735.30 762.32 270.71 55% 40 26.97 552.00 578.97 27.02 882.01 909.03 330.06 57% 6 units = MFR per dwelling unit average TABLE 6-4 FY 2014 MONTHLY NON-RESIDENTIAL RATE IMPACT-2" METER Raftelis Financial Consultants, Inc. Page 60 Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill($) Change Change 60 102.27 222.00 324.27 117.43 231.00 348.43 24.16 7% 80 102.27 296.00 398.27 117.43 308.00 425.43 27.16" 7% 100 102.27 370.00 472.27 117.43 385.00 502.43 30.16 6% 120 102.27 444.00 546.27 117.43 462.00 579.43 33.16 6% 140 102.27 518.00 620.27 117.43 539.00 656.43 36.16 6% 160 102.27 592.00 694.27 117.43 616.00 733.43 39.16 6% 180 102.27 666.00 768.27 117.43 693.00 810.43 42.16 5% 200 102.27 740.00 842.27 117.43 770.00 887.43 45.16 5% 220 102.27 814.00 916.27 117.43 847.00 964.43 48.16 5% TABLE 6-5 FY 2014 MONTHLY AGRICULTURAL RATE IMPACT - 2" METER Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill ($) Change Change 60 102.27 222.00 324.27 117.43 237.00 354.43 30.16 9% 80 102.27 296.00 398.27 117.43 316.00 433.43 35.16 9% 100 102.27 370.00 472.27 117.43 395.00 512.43 40.16 9% 120 102.27 444.00 546.27 117.43 474.00 591.43 45.16 8% 140 102.27 518.00 620.27 117.43 553.00 670.43 50.16 8% 160 102.27 592.00 694.27 117.43 632.00 749.43 55.16 8% 180 102.27 666.00 768.27 117.43 711.00 828.43 60.16 8% 200 102.27 740.00 842.27 117.43 790.00 907.43 65.16 8% 220 102.27 81400 916.27 117.43 869.00 986.43 70.16 8% 240 102.27 888.00 990.27 117.43 948.00 1,065.43 75.16 8% TABLE 6-6 FY 2014 MONTHLY IRRIGATION RATE IMPACT-2" METER Raftelis Financial Consultants, Inc. Page 61 Total Bill Existing Existing Existing Proposed Proposed Proposed Usage Monthly Fixed Variable Monthly Monthly Fixed Variable Monthly $ % (HCF) Charge ($) Charge ($) Bill ($) Charge ($) Charge ($) Bill ($) Change Change 60 102.27 249.00 351.27 117.43 253.20 370.63 19.36 6% 80 102.27 332.00 434.27 117.43 337.60 455.03 20.76 5% 100 102.27 415.00 517.27 117.43 422.00 539.43 22.16 4% 120 102.27 498.00 600.27 117.43 506.40 623.83 23.56 4% 140 102.27 581.00 683.27 117.43 590.80 708.23 2496 4% 160 102.27 664.00 766.27 117.43 675.20 792.63 26.36 3% 180 102.27 747.00 849.27 117.43 759.60 877.03 27.76 3% 200 102.27 830.00 932.27 117.43 844.00 961.43 29.16 3% 220 102.27 913.00 1,015.27 117.43 928.40 1,045.83 30.56 3% 240 102.27 996.00 1,098.27 117.43 1,012.80 1,130.23 31.96 3% Raftelis Financial Consultants, Inc. Page 62 Comparison of Bills with Surrounding Agencies Figures 7-1 displays a bill comparison ofthe District and nearby agencies that was provided by the District. The chart compares the bills for a customer with a %" meter that uses 14 hef per month. As displayed, even with the forecasted revenue increases, the District's bills are toward the low end ofthe regional sample. FIGURE 7-1 BILL COMPARISON YA METER AND 14 HCF PER BILL $120 $100 $80 $60 $40 $20 SURVEY OF MEMBERAGENCYWATERRATES 14 Unit Water Use and 3/4" Residential Meter Water bill effective February 2014 Data provided by the District. Raftelis Financial Consultants, Inc. Page 63 EXHIBITS PROTEST LETTERS RECEIVED P.O. Box 489 Carlsbad, CA 92018 Nov 4, 2013 Office of the City Clerk City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 Dear Clerk of the City: I am writing in protest of the proposed water rate increase for single family residential customers. The address of my service is 2722 Chestnut Avenue, Carlsbad, 92010. Your brochure explains that "multi-family residential customers will continue to see a lower average bill per dwelling unit." Using the single family homeowners' increased rates to subsidize the multifamily water usage needs is not equitable. The multifamily dweller should be just as responsible for conserving water as every other human being. Unless the multifamily dweller is responsible for increased costs, just like the single family owner, it is likely that conservation is not going to be a priority in those households. It is your responsibility to make everyone equally accountable for conservation efforts and increased costs. This is not reflected in your "Proposed Water Rate Structure". Sincerely, Diane \. Lech Single family homeowner Andrea Dykes For the Information of tlhi(Si Omir OJUPCQtl From: Sent: To: Subject: kasey <kcinciarelli@roadrunner.com> Tuesday, November 05, 2013 10:05 AM Council Internet Email NOv. 4 city council meeting comments ACM Date CA .CC City Manager •_/A On the proposed water rate increases for the next two years: A system needs to be deviced to compensate homeowners when the water meters are not read within 32 days. When my reading stretches to 35 days - as it did in July /August (the hottest months of the year) I end up unfairly showing more units and have to pay the higher above baseline rates. In addition conservation continues to be somewhat of a joke here in CArlsbad. The folks sent out to perform audits have on both my audit and a neighbors just said "everythings looks good" you are using a reasonable amount of water. When I had a major underground leak and the neighbors newly landscaped yard has hundreds of gallons of run-off everytime the front yard sprinklers run. You need better trained personel, so they are not merely wasting everyones time. They can take the irrigation class at Mira Costa, it's just one class. kasey cinciarelli Carlsbad. CA u LJ ^'J U^t.t f^..d I AH^^/^^^' A^<^-'i-A' ET /^^-'"^' . , c A I I ci^n vfr-- AH October 3, 2013 Office of City Clerk City of Carlsbad 1200 Carlsbad Village Dr Carlsbad Ca 92008 Re Proposed Water Rate Structure This letter serves as a formal written protest to the proposed changes to water and wastewater rates that was received via mailed notice at the end of September. The proposed changes indicate that water charges would increase by approximately 14% through the 2015 year. That amount of increase is unacceptable given the stagnation of the economy, wage earnings and general lack of economic Inflation. Sincerely, Dennis D Capps 760-525-2798 thecapps@cox.net Ownership Parcel # 215-430-07-00 7111 El Fuerte St Carlsbad 92009 (Ao 9/25/13 Erin Goforth 2077 Caleta Court Carlsbad, CA 92009 To Whom It May Concem: Vm writing to protest the proposed changes to the water rate structure and rate increases for water and wastewater services. Sincerely, Oct. 7,2013 To the City of Carlsbad, Ca. City Council, I would like to protest all ofthe proposed water rate structure and maximum water and wastewater rate increases proposed for a vote on Nov. 5,2013. Which mclude the monthly delivery charge, water usage charge, and monthly wastewater rates. Proposition 26, a law passed by voters in 2010 that requires a two-thirds supermajority of voters to approve a tax or fee increase not directly tied to the cost of providing a govemment service. Read more: http://www.sandiegoreader.com/weblogs/news-ticker/2013/sep/24/los-angeles-based- metropolitan-water-district-must/#ixzz2fp8kyJDe Thank you for giving me the time to deliver my protest. Ettore Graziano ' / 1107 Buena Vista way [ Carisbad, Ca. 92008 | Ah Jack Debes 4055 Park Drive Carisbad, CA 92008 September 22,2013 Office of the City Clerk Cityof Carlsbad 1200 Cartsbad Village Drive Carlsbad, CA 92008 Dear City Cierk: This letter is a formal protest to the proposed rate changes for single family residents as It pertains to the parcel located on this letter head. Please count my protest vote when considering the proposed rate change. A4ack C. Debes James Vitalie September 20, 2013 (F.A. Vitalie Tmst) 3037 Jefferson St. Carlsbad, CA 92008 Utility Bill Account Number: 00815400-00 City of Carlsbad City Council Chambers 1200 Carlsbad Village Dr. Carlsbad. CA 92008 Subject: Protest of Proposed Changes to the Water Rate Increases I am the homeowner at 3037 Jefferson Street in Carlsbad. I recently received your pamphlet outlining proposed rate increases to the "Monthly Water Delivery Charge" and the "Water Usage Charge". I protest both water rate increases. While I realize we live in a desert and all the water must be obtained from external sources, the cunent rates are still the highest I have ever experienced, especially in comparison to other kx^tions I have resided including the East Coast, Mid-West and Northem Caiifomia areas. The quality of the water delivered by Carisbad is poor in comparison to these other locations. Since it is too brackish to drink, I pay another $35.00 a month to a private vendor for purified drinking water. Periiaps you can look internally for efficiencies that will allow Carisbad to deliver water to their residents at a fair cost to its homeowners. Thanks for your consideration in this matter. 70 Office ofthe City Clerk City of Carlsbad 1200 Carisbad Village Drive Carlsbad, CA 92008 Protesting the rates: I formally protest the proposed increase, all of them, the one for 1/1/2014 and 1/1/2015. Since the new water meter was installed, my bill doubled to $300. I cannot afford this and have cut in the last two years cut down my water usage by not showering every day, and cutting the water for my grass to the point where the homeowners association wrote me a letter and told me to water more. Sincerely, Janice Hooks 3563 Pebble Street Carisbad, Ca 92010 Sept. 16, 2013 Office of the City Clerk City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 I formally protest the proposed Water and Wastewater Rates Increases.. Contrary to your assertion to encourage water conservation, a financial incentive already exists to conserve water - namely, curtailed use savings on my water bill. I do not need a rate increase to establish an incentive, as there is already one by savings. Indeed, when you intend increase the rate, you have actually punished my heretofore conservation efforts and charge me the difference, and possible more, for what I have already conserved - the opposite effect of your assertion. ^U^il/c John A. D'Andrea Service address: 6615 Sitio Cedrela Carlsbad. CA 92011 -1^ City of Carlsbad, Office of the City Clerk 1200 Carisbad Village Drive Carisbad, CA 92008 Sept 28,2013 Dear Sir: I am writing to officially protest the proposed water rate hike being considered by our city, ^erelyd D. Gluiiano 1732 Havens Pt Pl Carisbad, CA 92008 7^ 09-21-13 I, Roland Maus, residing at 3825 Nautical Drive, Carlsbad protest any and all rate increases currently being considered for Water and Wastewater services. EGEOWIE { SFP 2 5 2013 CITY OF CARLSBAD CITY CLERK'S OFFICE September 19,2013 Office ofthe City Clerk, City of Carlsbad, Protest Single-Family Water Rate Increases. Being a retired senior on fixed income, every penny counts as you might imagine. The proposed water rate increases just add another fmancial burden to our meager lives. Furthermore, m my opmion; the methodology utilized by the City Carlsbad that requires *a majority of property owners to provide protest letters' insures that the rate increases will be initiated. Final thought: How about those residents that support a water rate increase submit letters to the city clerk and if a majority is not received the water rate increase is rejected. Kind Regards, Michael Tage Klmt 2759 Spokane Way Carlsbad, Ca. 92010 September 21,2013 To Whom It May Concern: I would definitely like to protest both the trash and water rate hike scheduled for January of 2014 and 15.1 am already paying over $200.00 a month and I am the only water user for a single femily home. Accordingly, I still only water my lawn 3 times a week, but have been experiencing Increases over the last 5 years. I believe this rate Increase is unjust and uncalled for. As a govemment vtorker, I have received no raises fbr the last four years, and have had to do without, while expenses keep climbing, I believe the businesses can take a hit for the next four years and do without like the rest of us. *atJeffr( Carisbad resident 77 October 1.2013 City Of Carlsbad Carlsbad Municipal Water District Carisbad, CA 92008 Dear Sir or Madame, We oppose any Increase to the water delivery charge and water usage Charge as Is currently being proposed. Sincerely, Mike and Annetta Wilson 3611 Seavlew Way Carisbad CA 92008 OCT-7 2013 Philip & Sondra Boone 2042 Cordoba Place Carlsbad CA 92008 Office ofthe aty Clerk City of Carlsbad 1200 Carlsbad Village Drive Carlsbad CA 92008 To Whom It May Concern: This is a formal protest to the proposed fee change to the City of Carlsbad water rates. ^ My full name is: J, Philip Boone ^ Sondra Boone ^^r^s^^^^^>^ .^^CHN^ Our resident address is: 2042 Cordoba Place Carlsbad CA 92008 The rate change I am protesting is for Monthly Wastewater Rates Single Family Residential current is $24.02; proposed 1/1/2014 is $25.52 Proposed 1/1/2015 is $26.03 The rate change I am protesting is for Monthly Water Delivery Charge 3/4" current $26.97, proposed 1/1/2014 $27.02,1/1/2015 $28.38 1" current $38.52, proposed 1/1/2014 $40-93,1/1/2015 $42.98 The rate change I am protesting is for Water Usage Charge Single-Family Rates Tier 1 (0-12 units) current $3.20 proposed 1/1/2014 Tier (0-10 units) $3.19 proposed 1/1/2015 Tier (0-10 units) $3.35 Tier 2 (13-20) current $4.13 Proposed 1/1/2014 proposed 1/1/2014 Tier (11-18 units) $4.24 proposed 1/1/2015 Tier (0-10 units) $445 11 September 25,2013 Gary and Rana Coleman 1552 Regatta Road Carlsbad, CA 92011 Dear City Clerk, I am writing in protest ofthe following rate increases: Monthly Water Delivery Charge, Water Usage Charge, and Monthly Wastewater Rates. Sincerely, Rana Coleman Carisbad Resident 1552 Regatta Road Carlsbad, CA 92011 7^ <3L. [o\- ^o(e, vssohur -VW -^Vc^ v<s-V +VyL. \<)gfxAi><!Ax>«-- rszeAs e\fe*^ vOiAVv noer-y (irot^^k^- aftifj'^tA A^\tXi> -ArNci '':pn>_poi>«i' Y^c- lH6»'*4<(e^ . <5^HS<\ ByroA?\<=ui«, - ^JULV USA Alex Szabo 5338 Forecastle Ct Carlsbad, CA 92008-3824 \ irr\ rs'fTsr^rns/^r --+— 6^4.?) 11%: Office of the City Cleric 1200 Carlsbad Village Drive Carisbad, CA 92008 Saturday, October 05, 2013 6643 Halite Place Carisbad. CA 92009 Re: Water Rate Increase City Cleric, Please take this letter as our written protest to the Proposed Water Rate Structure and Maximum Water & Wastewater Rate increase. There should be no increases to the existing high rates that exist today. Sincerely, Wilbur E. Mower, Jf. cc File September 21,2013 Office ofthe City Clerk City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 Dear Sir/Madam We reside at 2917 Rancho Rio Chico, Carlsbad, CA The purpose ofthis letter is to protest the increase m Monthly Water Delivery charge 5/8" delivery charge for 2015. We also protest the Water Usage Charge for Smgle Family Residents for 2014 and 2015. Also, we are protesting the Monthly Wastewater Single Family increases in 2014 and 2015. William R. Blank Patricia A. Blank ^3 Office of City Clerk City of Carlsbad 120 Carlsbad Village Drive Carlsbad, ca 92008 Re: Proposed water rate Increases Gentlemen: Please accept this letter as a formal protest to the proposed new water rates - Wastewater rates: $25.02 to $26.03 by 2015 and Water Rates: up to 6% increase by 2015. When we approved on the ballot the desalination plant, we were promised to never pay more that the current water rates. The city has already advised that this will not occur due to unforeseen costs and now with current water rates Increasing it appears we are facing another government boondoggle like the Calif. Bullet Train. The Carlsbad Golf Course (Crossings) has proved to be a disaster. We need to protect our citizens from excessive spending, over-taxation and fees. Sincerely, Theodore Van de Kamp homeo\Nner 1708 Evergreen Circle Carlsbad, CA 92008 c> rage z ot z From: joe abreu [mailto:jrabreu(aroadrunner.com] Sent: Tuesday, October 01, 2013 10:10 AM To: City Clerk Subject: Protesting the water rate increases. Pursuant to the Notice of Majority Protest Public Hearing and the ability to protest by e-mail, we the inhabitants of 7304 Melodia Terrace protest the increase in Water Usage Charge for Tier 2 and Tier 3. for Jan 12014 and Jan 1 2015. Also the Increase in Monthly Wastewater Rates for Jan 1,2014 and Jan 1, 2015. We were charged with similar increases in Jan 1, 2012 and again in Jan 1, 2013. When will it stop, if we do not keep our grass green then the HOA sends us a letter to water. The City Council must pay attention to what is happening at the Carisbad Municipal Water District and the San Diego Water Authority. Thank you, Joseph R. Abreu Ingrid M. Abreu to 10/1/2013 1 NOV - 5 2013 CITY OF CARLSBAD CiTY CLERK'S OFFICE November 5, 2013 Office ofthe City Clerk City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 RE: Protest ofthe proposed increase to the water rates for single-family residential I am a homeowner at 6511 Onda Place, Carisbad, CA 92009, and I am protesting the proposed single-family residential water usage rate increases for 2014 and 2015. We already pay some ofthe highest rates in the country for water. The tiered system is unfair and skewed towards penaUzing those who have larger yards or pools and yet still conserve water as much as they can. The proposed structure for the new tiers moves more families into the second and third tiers, and I believe this is unfair also. I particularly object to the increase in rates for the tier 3 in 2015, when the cost v^ll increase by almost $.80 per unit! That is outrageous! The City of Carlsbad usually gets things right. The price stmcture for water is not one of them. We can barely afford the water utility rate as it is and, when we retire, we will probably be forced to sell our home because there seems to be no end in sight for the increases. Had we been able to foretell the future 20 years ago when we put in our pool, we would never have constructed it. THE TIERED WATER SYSTEM AND THE PROPOSED RATE INCREASES ARE FLAWED AND SHOULD BE REJECTED. Sincerely, Carolyn B. Reinmiller 6511 Onda Place, Carlsbad, CA 92009 ALTERNATE PROPOSAL ON WATER RATE STRUCTURE DAN DOWNING First of all, I do not disagree with a rate increase That is a natural result of supply and demand THE CITY HAS SAID IT SHOULD BE RUN MORE LIKE A BUSINESS •In any business a vendor offers a product or service at a price. •The buyer always negotiates for a better deal. •The Water District has offered to sell water for a price. •It is incumbent on the citizens and businesses in Carlsbad to ask for a better deal. CITY PROPOSAL ON DELIVERY CHARGE Meter Size Current 1/1/2015 Change % Change 5/8 21.38 21.08 -0.3 -1.4% 3/4 26.97 28.38 1.41 5.2% 1 38.52 42.98 4.46 11.6% 1 1/2 67.6 79.49 11.89 17.6% 2 102.27 123.31 21.04 20.6% 2 1/2 147.8 174.41 26.61 18.0% 3 194.72 225.52 30.8 15.8% 4 298.75 371.56 72.81 24.4% 6 588.03 736.64 148.61 25.3% 8 934.75 1174.74 239.99 25.7% 10 1339.61 1685.86 346.25 25.8% Average Increase 8.9% PROPOSED WATER AND SEWER RATES •Water Tier 1 (0-10 units) $3.19/unit •Water Tier 2 (11-18 units) $4.24/unit •Sewer (single family) $26.03 monthly fixed rate CONSIDER THE WATER DISTRICT’S EXAMPLE OF A RESIDENCE USING THE AVERAGE OF 13 UNITS PER MONTH. •Delivery Charge is $20.07 •Usage charge is $4.24 x 13 = $55.12 •Sewer Charge is $25.52 •Total is $100.71 •(The example in the notice has an error, their usage charge is calculated as $44.62) THE RESULT OF A 50% WATER USE REDUCTION •Delivery Charge is $20.07 •Usage charge is $4.24 x 6.5 = $27.56 •Sewer Charge is $25.52 •Total is $73.15 •Therefore a 50% use reduction yields a 27% cost reduction ANALYSIS •When water usage goes down, the Water District’s costs should go down. •The proposed structure with high fixed charges create no incentive for the district to cut costs when usage is down. •This is essentially a no-layoff, cradle to grave welfare system for the Public Employees, this cannot be allowed to happen. MY PROPOSAL •Cut the water fixed charges in half •Raise the usage rates to balance the revenue •Cut the fixed sewer charge in half, the balance made up with a charge proportional to water use. THE RESULT •If the consumer continues to use the same amount of water, their cost will be unchanged. •If the consumer uses less water, they pay less. •If the consumer uses more water, they pay more. •If overall city water usage goes down, revenue to the Water District goes down, and they must find a way to cut costs, like any other business. EXPECTED RESPONSE FROM THE WATER DITRICT •“The fixed charges are necessary to cover the costs of water infrastructure.” •If that is true, show us the calculations that say you can never cut costs. Majority Protest Public Hearing: Water and Wastewater Rate Increases City of Carlsbad/Carlsbad Municipal Water District November 5, 2013 Cost of Service Study: Potable Water and Recycled Water •Consultant: Raftelis Financial Consultants, Inc. •Objectives: –Respond to increase in water purchase costs from SDCWA –Update data on current customer water demands –Maintain pricing signal to high water users –Ensure sufficient funding for operations –Comply with Proposition 218 Cost of Service Study: Potable Water Findings •Annual revenue increase of 5% for calendar years 2014 and 2015 •Rate structure revisions to mirror usage patterns –Tier 1: 12 HCF/month to 10 HCF/month –Tier 2: 20 HCF/month to 18 HCF/month –Tier 3: 21+ HCF/month to 19+ HCF/month •Multi-family rates altered to mirror single-family rates •Reserve policy: maximum of 40% of operating budget 3 Cost of Service Study: Potable Water Bill Comparison 4 Cost of Service Study: Recycled Water Findings •Annual volumetric rate increase of 0% for calendar years 2014 and 2015 •Reserve policy: maximum of 40% of operating budget 5 Wastewater Rates •Annual rate increase of 2% for calendar years 2014 and 2015 6 Example of Monthly Bill Changes (a) Average single-family house: Potable Water: 5/8” meter using 13 units Wastewater: Pay a flat monthly charge (b) Industrial Park site with 2” meter using 350 units in July 7 Current Proposed (1/1/2014) Proposed (1/1/2015) Potable Water (a) $63.91 $64.69 $67.93 Wastewater (a) $25.02 $25.52 $26.03 Total $88.93 $90.21 $93.96 Recycled Water (b) $1,337.77 $1,352.93 $1,358.81 Action Items •Protest letters •Open public hearing •CMWD Board action •Carlsbad City Council action 8 Water and Wastewater Rates Questions? 9 Calendar •September 10, 2013: Set majority-protest public hearing for November 5, 2013 •September 17, 2013: Mailed written public notice to comply with Proposition 218 (45 day) noticing requirement •November 5, 2013: Hold majority-protest public hearing, set rates for 2 years, and approve new rate design •January 1, 2014: Implement new rates 10 Potable Water Where does the money go? 11 Recycled Water Where does the money go? 12 Wastewater Where does the money go? 13 Monthly Fixed “Delivery Charges” 14 Monthly Fixed Charge Existing Proposed Proposed Meter Service Service Charge Service Charge Size Charge 1/1/2014 1/1/2015 5/8"21.38$ 20.07$ 21.08$ 3/4"26.97$ 27.02$ 28.38$ 1"38.52$ 40.93$ 42.98$ 1-1/2"67.60$ 75.70$ 79.49$ 2"102.27$ 117.43$ 123.31$ 2-1/2"147.80$ 166.10$ 174.41$ 3"194.72$ 214.78$ 225.52$ 4"298.75$ 353.86$ 371.56$ 6"588.03$ 701.56$ 736.64$ 8"934.75$ 1,118.80$ 1,174.74$ 10"1,339.61$ 1,605.58$ 1,685.86$ “Usage Charges” 15 Volumetric Charge (per HCF) Proposed Proposed Proposed Existing 1/1/2014 1/1/2015 Single Family Tier (HCF)Tier (HCF) 12 3.20$ 10 3.19$ 3.35$ 20 4.13$ 18 4.24$ 4.45$ 21+5.62$ 19+6.11$ 6.42$ Multifamily 5 2.71$ 5 3.19$ 3.35$ 10 3.05$ 10 4.24$ 4.45$ 11+3.64$ 11+6.11$ 6.42$ Non-Residential 3.70$ 3.85$ 4.05$ Agricultural 3.70$ 3.95$ 4.15$ Irrigation 4.15$ 4.22$ 4.44$ Recycled 3.53$ 3.53$ 3.53$ Wastewater Charges 16 Monthly Wastewater Rates 1/1/2014 1/1/2015 Current Proposed Proposed Residential Single Family $25.02 $25.52 $26.03 Multi-Family $2.88 $2.94 $3.00 Mobile Home $2.88 $2.94 $3.00 Commercial Group II $2.35 $2.40 $2.44 Group III $3.56 $3.63 $3.70 Group IV $6.60 $6.73 $6.87 Group V – Schools Elementary $0.51 $0.52 $0.53 Junior High $0.75 $0.77 $0.78 High School $1.02 $1.04 $1.06 Boarding School $5.32 $5.43 $5.53 Group V – Other Other $2.23 $2.27 $2.32 Group VI – Large Volume Bio Hydration $2.03 $2.07 $2.11 Water Agency Contact Information San Diego County Water Authority http://www.sdcwa.org 4677 Overland Avenue San Diego, CA 92123 858-522-6600 Metropolitan Water District http://www.mwdh2o.com Mailing address: P.O. Box 54153 Los Angeles, CA 90054-0153 Street address: 700 North Alameda Street Los Angeles, CA 90012-2944 213-217-6000 17