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HomeMy WebLinkAbout2016-10-04; City Council; ; Set the public hearing date for proposed increases in potable and recycled water ratesMUNICIPAL WATER DISTRICT Staff Report Meeting Date: To: From: Staff Contact: Oct. 4, 2016 President and Board Kevin Crawford, Executive Manage~ Ligeia Heagy, Management Analyst Ligeia.heagy@carlsbadca.gov or 760-438-2722 x7110 CA Review f-/:5 Subject: Set the public hearing date for proposed increases in potable and recycled water rates. Recommended Action Approval of a Resolution setting the public hearing date regarding a new water rate structure and proposed increases in potable water and recycled water rates. Executive Summary The Carlsbad Municipal Water District (CMWD) recently completed a cost of service study for potable water and recycled water. This study recommends several rate structure changes to address projected water demands, the phase-out of recycled water rebates, the start of debt service for Phase Ill of the recycled water program, and recent case law regarding tiered water rates. The study also recommends increases to the potable water and recycled water rates. Staff recommends using reserves to help mitigate the magnitude of the proposed rate increases. The proposed rates reflect utilizing reserves to mitigate the proposed rate increases. Staff recommends setting the public hearing date for Nov. 29, 2016. Financial results for the City of Carlsbad's wastewater utility were better than anticipated during Fiscal Year 2015-16, which increased the utility's reserves. These reserves offset the need for a rate increase. No rate increase is being proposed for wastewater rates. Discussion CMWD supplies potable water and recycled water to a 32.3 square mile service area within the city (refer to Exhibit 3). For Fiscal Year (FY) 2016-17, there are approximately 29,400 potable and recycled water connections within the service area. The projected annual demand for potable water is 13,240 acre-feet (AF), and for recycled water it is 3,660 AF. The City of Carlsbad provides wastewater service to an approximately 30 square mile service area within the city (refer to Exhibit 4). For FY 2016-17, there are approximately 23,400 wastewater connections within the service area. Item #6 October 4, 2016 Page 1 of 14 Schedule for Rate Structure Adoption and 2017 -2018 Rates Implementation: The following schedule will allow CMWD and the city to implement a new water rate structure, and adopt changes to water rates in a timely manner. • Oct. 4, 2016 Set the public hearing for Nov. 29, 2016 • Nov. 29, 2016 Hold the public hearing and set calendar year 2017 and 2018 rates • Jan. 1, 2017 Implement calendar year 2017 rates • Jan. 1, 2018 Implement calendar year 2018 rates Existing Water Rate Structure: On Nov. 5, 2013, CMWD adopted a new rate structure for its potable and recycled water services. The cost of service allocations in the study were 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 of the potable water system. The structure also includes a three-tier rate structure for Single Family Residential (SFR) and Multi-Family Residential (MFR). Non-residential customer classes are based on the uniform volumetric rate structure, with adjustments to the rates based on customer peaking demand activity. The rate structure consists of a base monthly delivery charge and a volumetric usage charge. The base monthly delivery charge is paid regardless of water consumption and is imposed proportionate to water meter size. This fixed delivery charge helps recover costs such as utility billing, maintenance, operations, and replacement funding. The usage charge is imposed based on actual water consumption. Proposed Water Rate Structure and Rates: A Water Cost of Service Study was completed in September 2016 by Carollo Engineers (Carollo). At the Nov. 29, 2016 public hearing, staff will recommend the adoption of a new water rate structure and a two year rate increase beginning Jan. 1, 2017. The drivers behind the rate structure changes and rate increases are discussed below. The financial impacts are discussed in the Fiscal Analysis section. The changes to the water rate structure are driven by the current legal landscape and shifting demand patterns resulting from extraordinary conservation. The increase in potable and recycled water rates is primarily driven by increases in the purchased water cost from SDCWA, the delivery of desalination water pursuant to the Uniform Member Agency Purchase Contract (UMAPC), the phase-out of the recycled water rebates, and the addition of the Recycled Water Phase Ill debt service. Item #6 October 4, 2016 Page 2 of 14 Legal Landscape: In 2015, an appellate court examined the constitutionality of tiered rate structures in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493. The court held that the City of San Juan Capistrano did not prove its tiered rate increases were proportional to the cost of providing water services to its customers in each tier, and therefore had violated Proposition 218. The court did not hold that tiered water rates are an invalid approach to structuring rates, only that the pricing of each tier needs to correspond to the cost of providing water to the level of usage in each tier. There are several industry standard best practice approaches to allocating costs under a tiered rate structure including the Base-Extra Capacity Method and the layering approach. Carollo used a layering approach to determine the price of water in each tier. This approach ties the price of water in each tier to the cost to provide each increment of water. CMWD has secured additional water supplies and has built system capacity in excess of its base winter water needs in order to meet peak seasonal water demands. The existing and proposed rate structures account for the additional costs to make peak, summer water available to CMWD's customers and proportionally recovers these costs from system users based on their use of the system. The residential tiers reflect this incremental cost to provide peak water. Additionally, Carollo took a holistic look at the water system and its relationship with the various customer classes to ensure compliance with Proposition 218. Certain customer classes (e.g. commercial, industrial, multi-family) have a separate fire meter for fire suppression sprinklers. The fire meters require maintenance, service, and a portion of system capacity. These costs should be allocated and borne by the customers benefiting from the fire meters. Carollo recommends that fire line fixed delivery charges should be established to ensure legal compliance and ratepayer equity. Water Demand and Sales Forecast: The State Emergency Water Conservation Regulations in 2015 and 2016 have affected demand patterns for water. Potable water sales during FY 2013-14 were approximately 16,650 AF. Due to state mandated conservation, potable water sales declined to approximately 12,765 AF in FY 2015-16, a 23.33 percent decrease. Many rate payers made permanent changes to their water demand patterns to support the extraordinary conservation efforts by installing water efficient appliances, drought tolerant landscape, artificial turf, etc. These changes have permanently altered the hydrologic demands for our region. As a result, the demand bounce back will be unlike bounce back trends after previous droughts. In the 2015 long range Financial Plan, the San Diego County Water Authority (SDCWA) has projected much slower demand increases. The SDCWA expects demand to increase 9.60 percent by 2020. CMWD is estimating a 3.70 percent increase in demand for FY 2016-17 and a 13 percent increase by 2020. The California Urban Water Conservation Council has historically suggested the revenue derived from volumetric usage charges should not exceed 70 percent, and revenue from fixed delivery charges should not exceed 30 percent. Based on the cost of service study, Carollo recommends adjusting the current percentage of the fixed delivery charge from 27 percent of the total revenue Item #6 October 4, 2016 Page 3 of 14 to 30 percent. This will help decrease revenue volatility in the current hydrologic landscape and more closely align revenue collection with how costs are incurred. Drought restrictions during dry hydrologic years can also have significant impacts on revenue. Demand projected in each pricing tier should reflect the current pattern of water consumption. Because demand is not expected to quickly rebound to pre-drought levels, Carollo is projecting a greater portion of the demand will occur in the first pricing tier(s). The first tier's price of water is proportionally greater than the price in the outer tiers, as compared to the current pricing structure, after adjusting for reduced demand and using the layering cost-of-service approach to allocate costs. Revenues will be less sensitive to decreases in demand as a result of the adjusted tier demand and tier pricing. Additionally, the tier pricing will more accurately recover the cost of service. Other Rate Drivers: In addition to the current legal landscape and water demand projections, the proposed rate increases for potable water and recycled water are also driven by increases in the purchased water cost from SDCWA, the delivery of desalination water pursuant to the UMAPC, the phase- out of the recycled water rebates, and the addition of the Recycled Water Phase Ill debt service. The SDCWA is increasing their "all-in" rate to 5.89 percent for treated water. The "all-in" rate combines the fixed and variable rates into a per acre-foot rate. The SDCWA increase is primarily driven by water sales uncertainty due to the long-term impacts of state water conservation regulations and the Metropolitan Water District's (MWD) rate and charge increases. SDCWA is mitigating the necessary increases through recent debt restructurings and a projected draw on their rate stabilization fund of approximately $20.lM. Desalinated water deliveries began in July 2016 per the UMAPC. The actual FY 2016-17 rates were slightly lower than anticipated helping temper desalinated water's impact on the overall rate increase. Desalinated water deliveries are estimated to represent approximately 17 percent of the overall water delivery costs for FY 2016-17. The recycled water rate increase is being driven by two factors. First, the recycled water rebates are phasing out in 2018. These rebates represent almost $1.2M in revenue each Fiscal Year. Second, the debt service for Phase Ill of the recycled water project is projected to begin in FY 2017-18 and will represent about $860,000 in additional costs. The absence of the recycled water rebates and addition of the Phase Ill debt service create an impact of approximately $2M dollars by FY 2018-19. To help prevent rate shock several years from now, recycled water rates are being recommended for increase now in anticipation of these events. Portions of the operating reserve in potable and recycled water are being used to help temper these increases. See the Fiscal Analysis section for more information on how these rate drivers translate to financial impacts. A summary of the recommended changes per customer class for potable and recycled water is shown in Exhibit 2. Item #6 October 4, 2016 Page 4 of 14 Wastewater Rates: Staff recommends no increase to wastewater rates at this time. The utility generated unanticipated surplus funds during FY 2015-16 which increased the wastewater reserves. These reserves offset the need for a rate increase. Please see the Fiscal Analysis section for more information. A summary of the wastewater rates by customer class for wastewater is shown in Exhibit 2. Fiscal Analysis At the Nov. 29, 2016 public hearing, the proposed rate structure and rate increases, if approved, will be effective Jan. 1, 2017, and Jan. 1, 2018, respectively, and will provide adequate funding to properly operate and maintain Carlsbad's water and wastewater systems and provide adequate funding of reserves. Recommended Potable Water Rate Increase: Staff recommends increasing potable water revenue by 4.85 percent effective for one year beginning Jan. 1, 2017, and potable water rates by 4.85 percent effective for one year beginning Jan. 1, 2018. Based on Carollo's cost of service study, the rates for customer classes increase or decrease in varying amounts based on the use of the layering cost-of-service approach to tier cost allocations and changes to demand patterns. Effective in 2018, the percentage increase is identical for each customer class. As discussed above, the recommended potable water increases are driven by changes in the law, water demand and sales forecasts, increases to the SDCWA all-in rate, and desalinated water deliveries. The table below provides the volumetric rate changes Carollo recommends for calendar year 2017. Customer Class · Current Rate Proposed Percentage Dollar 2017 Rate Variance Variance Single Family -Tier 1 $3.53 $3 .84 8.8% $0.31 Single Family -Tier 2 $4.68 $4.57 (2.4%) ($0.11) Single Family -Tier 3 $6.76 $6.82 0.9% $0.06 Multi-Family-Tier 1 $3.53 $3.77 6.8% $0.24 Multi-Family-Tier 2 $4.68 $4.55 (2.8%) ($0.13) Multi-Family-Tier 3 $6.76 $6.80 0.6% $0.04 Commercial $4.26 $4.11 {3.5%) ($0.15) Agricultural $4.37 $4.41 0.9% $0.04 Irrigation $4.67 $5.03 7.7% $0.36 Based on the recent case law discussed previously, Carollo is approaching multi-family customers differently. Carollo developed a multifamily class specific volumetric usage rate based on their impacts to the system, helping to ensure the rates continue to be correlated to the cost of Item #6 October 4, 2016 Page 5 of 14 providing water to that customer class. This explains why multi-family rates are no longer identical to the single family rates. The table below provides the volumetric rate changes Carollo recommends for calendar year 2018. Customer Class Proposed Proposed Percentage Dollar 2017 Rate 2018 Rate1 Variance Variance Single Family-Tier 1 $3.84 $4.03 4.85% $0.19 Single Family -Tier 2 $4.57 $4.79 4.85% $0.22 Single Family -Tier 3 $6.82 $7.15 4.85% $0.33 Multi-Family-Tier 1 $3.77 $3.95 4.85% $0.18 Multi-Family-Tier 2 $4.55 $4.77 4.85% $0.22 Multi-Family-Tier 3 $6.80 $7.13 4.85% $0.33 Commercial $4.11 $4.31 4.85% $0.20 Agricultural $4.41 $4.62 4.85% $0.21 Irrigation $5.03 $5.28 4.85% $0.25 1. The increase applied is 4.85%. Due to rounding there may be a slight variance. Carollo also recommends adjusting the fixed delivery charges to help account for shifting demand patterns due to extraordinary water conservation and more closely align revenue collection with how costs are incurred. For example, the fixed delivery charge for a 5/8" meter is proposed to increase approximately 9 percent to $24.11, an increase of $1.92. The fixed delivery charge for a 3/4" meter is proposed to increase approximately 9 percent to $32.54, an increase of $2.67. As discussed above, Carollo also recommends the creation of a fixed delivery charge for fire meters. There are almost 781 customers, or roughly 3 percent of the total water customers, that have separate fire meters for their fire suppression sprinklers. These new fire meter fixed delivery charges are proposed at $7.50 for a 5/8" fire meter increasing to $54.72 for a 12" fire meter. The recommended increase in the potable water rates is also driven in part by the current desalination rate associated with purchasing 2,500 acre-feet of water under the UMAPC. The current UMAPC desalination rate is approximately $2,498 per acre-foot. Staff estimates the purchase of desalinated water would not have been necessary if no customers exceeded the average single family residential usage of 13 units of water per month. Based on the layered approach Carollo took during the cost of service study, the cost of providing desalinated water was allocated to customers that place a high demand (i.e. "peak") on the water system such as residential customers above that average single family residential usage in Tier 3, agricultural, and irrigation customers. A target operating reserve of 40 percent of operations and maintenance, better than anticipated financial results, and long range financial planning have helped temper the recommended potable water rate increase by creating excess operating reserves. A portion of these operating reserves are being used to soften, or stabilize, the recommended potable water rate increases for calendar year 2017 and 2018. Staff recommends using Item #6 October 4, 2016 Page 6 of 14 approximately $2M (~9.50 percent) from reserves during calendar year 2017 and approximately $1.7M (~8.90 percent) in reserves in 2018. Reserves are projected to total approximately $17. 7M, or 47 percent of operations, at the end of FY 2018-19. Due to the uncertainty surrounding the demand bounce back, staff does not recommend using more reserves at this point in case a portion of those reserves is needed for rate smoothing in FY 2018-19 or beyond. All proposed potable water rates are shown in Exhibit 2 and reflect the utility's cost of providing potable water services for the upcoming calendar years. Recommended Recycled Water Rate: Staff recommends increasing recycled water revenue by 4 percent effective for one year beginning Jan. 1, 2017 and recycled water rates by 4 percent effective for one year beginning Jan. 1, 2018. As discussed above, the rate increases are being recommended to prevent rate shock when the recycled water rebates phase out and the Recycled Water Phase Ill debt service begins. The combined impact of these two events represents approximately $2M dollars to the recycled water fund in FY 2018-19. Waiting to increase rates can have rate increase impacts greater than 15 percent because you lose the benefit of interest earnings on incremental rate increases. Carollo recommends separating the fixed delivery charge for recycled water from the potable water fixed delivery charge. This will help ensure system costs are being appropriately allocated to the system impacts, thereby ensuring compliance with Proposition 218. The fixed delivery charge for a 5/8" meter is increasing approximately 3 percent to $22.77, an increase of $0.58. The fixed delivery charge for a 2" meter, the most common for recycled customers, is increasing approximately 11 percent to $143.99, an increase of $14.21. As of calendar year 2016, the recycled water rate is less than the blended potable water commodity rate for the average single family resident who uses 13 units of water. Additionally, it continues to be less expensive than the agricultural and irrigation rates for potable water. This value continues to support the expansion of Carlsbad's recycled water system, diversifying its water portfolio and helping reduce reliance on imported water. The proposed recycled water rates are shown in Exhibit 2 and reflect the utility's cost of providing recycled water services for the upcoming calendar years. Recommended Wastewater Rate: Staff recommends no increase to wastewater rates at this time. The utility generated unanticipated surplus funds during FY 2015-16 which increased the wastewater reserves. The three largest factors contributing to the surplus include better than anticipated revenues, personnel savings due to vacancies, and lower than anticipated expenses for the Encina Wastewater Authority. Staff recommends using wastewater reserves over the next several years to offset the need for rate increases. The proposed wastewater rates are shown in Exhibit 2 and reflect the utility's cost of providing wastewater services for the upcoming calendar years. Item #6 October 4, 2016 Page 7 of 14 Example Monthly Bill : The following table provides an estimate of the impacts to a monthly bill for each enterprise if the above increases are adopted at the public hearing on Nov. 29, 2016: Current Bill Proposed Bill Proposed Bill (1/1/2017) (1/1/2018) Potable Water1 $62.17 $67.082 $70.372 Wastewater1 $27.81 $27.81 $27.81 Total Single Family Residential $89.98 $94.89 $98.18 Recycled Water3 $1,365.28 $1,433.52 $1,489.41 1. Assumes an average single family house: a. Potable Water: 5/8" meter using 11 units per month. b. Wastewater: Pays a flat monthly charge. A property with a second dwelling unit pays 50 percent more, or $41.72 in total. 2. Price per gallon for average single family home is approximately $0.008. 3. Recycled Water: Industrial Park site with 2" meter using 350 units in July. Multi-Year Rates: The wastewater cost of service study was completed in FY 2015-16. The water cost of service study was completed in FY 2016-17. Now that both cost of service studies have been updated, staff recommends using a multi-year rate approach to keep the enterprises on the same rate setting schedules. This approach is an efficient use of rate payer funds and is recommended when at all possible. Having to notice the enterprises separately is costly; combining the noticing spreads the costs amongst all three enterprises increasing economies of scale. Next Steps Hold the Nov. 29, 2016 public hearing for the proposed rate structure and rate increases, and if approved, the proposed rates would be effective Jan . 1, 2017, and Jan. 1, 2018, respectively, and would provide adequate funding to properly operate and maintain Carlsbad's water and wastewater systems and provide adequate reserves. Environmental Evaluation (CEQA) Pursuant to Public Resources Code section 21065, this action does not constitute a "project" within the meaning of CEQA in that it has no potential to cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and therefore does not require environmental review. Item #6 October 4, 2016 Page 8 of 14 Public Notification California Constitution, Article XIIID, Section 6, states that local governments must hold a public hearing, and notify property owners and customers by mail at least 45 days in advance of public hearings related to proposed water, recycled water, and wastewater rates. At the public hearing, if it is determined that a majority of property owners have 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 counted for the purpose of determining whether there has been a majority protest. Staff will take the following actions at least 45 days prior to the Nov. 29, 2016 public hearing: • Notify affected utility customers and property owners by mail of the public hearing. • The notice will provide information relating to the public hearing. • The notice will provide information regarding the proposed rates. • In addition, information about the public hearing and proposed rates will be posted on the city's website at www.carlsbadca.gov. Information regarding public notifications of this item such as mailings, public hearing notices posted in the newspaper and on the city website will be available in the office of the City Clerk. Exhibits 1. Resolution of the Board of Directors of the Carlsbad Municipal Water District, California, setting a public hearing regarding a new water rate structure and proposed increases in water rates. 2. Notice of public hearing. 3. Carlsbad Municipal Water District Boundary Map. 4. City of Carlsbad Wastewater Boundary Map. Item #6 October 4, 2016 Page 9 of 14 RESOLUTION NO. 1555 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT BOARD (CMWDL SETIING A PUBLIC HEARING REGARDING A NEW RATE STRUCTURE AND PROPOSED INCREASES IN POTABLE WATER AND RECYCLED WATER RATES EXHIBIT 1 WHEREAS, the California Constitution Article XIIID, section 6(a)(2) states that local governments must notify customers not less than 45 days in advance of a public hearing prior to increasing water rates; and WHEREAS, California Constitution Article XIIID, section 6(a)(2) states that if a majority of customers submit a written protest prior to the close of the public hearing, then the rate increase shall not be imposed; and WHEREAS, the Carlsbad Municipal Water District is proposing a new water rate structure and rate increases in January 2017 and January 2018; and NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District Board of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the Carlsbad Municipal Water District Board of the City of Carlsbad, California sets a public hearing to consider the proposed water rate structure and potable water and recycled water rate increases for Tuesday, Nov. 29, 2016, in accordance with applicable law. PASSED, APPROVED AND ADOPTED at a Special Meeting of the Carlsbad Municipal Water District of the City of Carlsbad on the 4th day of October, 2016, by the following vote, to wit: AYES: Halt Wood, Schumacher, Blackburn, Packard. NOES: None. ABSENT: None. MA HALL, PRESIDENT (SEAL) Item #6 October 4, 2016 Page 10 of 14 Wastewater Rates No changes are being made to wastewater rates for the next two years. Residential customers pay a flat monthly charge for wastewater services, while most non-residential customers pay a rate per unit of water used. Monthly Wastewater Rates 1/1/2017 1/1/2018 Current Proposed Proposed Residential -Single Family $27.81 $27.81 $27.81 Single Family $41.72 $41.72 $41.72 with Second Dwelling Unit Multi-Family $3.29 $3.29 $3.29 Mobile Home $3.29 $3.29 $3.29 Commercial Group ii $2.70 $2.70 $2.70 Group Iii $4.10 $4.10 $4.10 Group IV $7.65 $7.65 $7.65 Group V -Schools Elementary $0.55 $0.55 $0.55 Junior High $0.82 $0.82 $0.82 High School $1.10 $1.10 $1.10 Boarding School $5.75 $5.75 $5.75 Group V -Other Other 1. $2.61 $2.61 $2.61 Group VI -Large Volume Bio Hydration I $0.00 $0.00 $0.00 Industrial Pretreatment Class Ill Des~lination Plant I $4.53 I $4.53 I $4.53 About the Proposed Rate Changes The Carlsbad Municipal Water District, a subsidiary district of the City of Carlsbad, purchases 100 percent of its drinking water from the San Diego County Water Authority. The District reviews rates periodically, and makes adjustments to ensure adequate revenues are collected to provide sustainable and reliable operations for all CMWD customers. The goal is to carefully plan for the future, and stabilize necessary rate increases over time to lessen their impacts to ratepayers. If the Carlsbad Municipal Water District Board of Directors approves the proposed rate increases at the public hearing on Nov. 29, 2016, new rates will be effective Jan. 1, 2017 and Jan. 1, 2018. The proposed water rate increases account for increased costs for water purchased from the San Diego County Water Authority, and the blending of desalinated water with our current supply. Desalinated water deliveries are estimated to represent approximately 17 percent of overall water delivery costs. The city also proactively plans for increases in costs associated with operations, maintenance and replacement of aging infrastructure. The proposed recycled water rate increases recover costs due to the phasing out of available recycled water rebates, and additional costs associated with continued expansion of the recycled water system. Increasing recycled water capacity helps reduce our reliance on imported water by diversifying our water resources. Providing quality services in a fiscally responsible manner is achieved by funding ongoing operations, maintenance and replacement of the water and wastewater system, as well as maintaining adequate operating reserves. Important Notice I ( Notice of Majority Protest Public Hearing on Proposed Maximum Water Rate Increases I' ' I I Tu•:::;:::;::! 2016, at 6 p~~-- 1 , City Council Chamber 1200 Carlsbad Village Drive Carlsbad, CA 92008 This notice contains information on proposed changes·to the water rate structure and rate increases for water services. I' I For more information about the public · hearing process or the proposed J changes, please call 760-602-2420 or visit www.carlsbadca.gov/finance. Ccarlsbad · Municipal Water District; J Item #6 October 4, 2016 Page 11 of 14 How Your Water Rate Is Calculated 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 S/8"to 1''. Larger meters are primarily for larger water demands, such as commercial buildings. Monthly Potable Water Delivery Charge Two Year Maximum Rate Increase Current Meter Size· 5/8" $22.19 3/4" $29.87 1" $45.24 1.5" $83.66 2" $129.78 2.5" $183.57 3" $237.36 4" $391 .07 6" $775.31 8" $1,236.41 10" $1,774.37 -,~ 1/1/2017 Proposed $24.11 $32.54 $49.38 $91.50 $142.02 $201.04 $260.01 $428.39 $849.52 $1,354.87 $1,944.44 Residential Water Rates 1/1/2018 Proposed $25.28 $34.12 $51.78 $95.94 $148.91 $210.79 $272.62 $449.17 $890.72 $1,420.58 $2,038.75 Residential rates are grouped into tiers. The tier rate that is charged depends on a customer's actual water usage. Tier 1 is designed to meet water use essential for internal residential use. Tier 2 is designed to meet exterior landscaping needs for a typical residential property. Tier 3 is designed to recover costs associated with external irrigation consumption, as well as the increased cost to provide the excess system capacity needed to meet peak demands. The proposed rate changes will increase Carlsbad Municipal Water District water revenue by an average of approximately 4.85 percent each year for the next two years. Rates are allocated to customer classes based on their proportionate use of the water system. Water Usage Charge Two Year Maximum Rate Increase 1 unit= 748 gallons Proposed Proposed Current 1/1/2017 1/1/2018 Current Tier ($/unit) ($/unit) ($/unit) Single Family Rates Tierl (0-10 units) $3.53 $3.84 $4.03 Tier2 (11-18 $4.68 $4.57 $4.79 units) Tier 3 (19+ units) $6.76 $6.82 $7.15 Multi-Family Rates Tier 1 (0-5 units) $3.53 $3.77 $3.95 Tier 2 (6-10 units) $4.68 $4.55 $4.77 Tier 3 (11 + units) $6.76 $6.80 $7.13 Non-Residential Rates Commercial $4.26 $4.11 $4.31 Agricultural Rates $4.37 $4.41 $4.62 Irrigation Rate $4.67 $5.03 $5.28 Recycled Water $3.53 $3.69 $3.83 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. Water Sample Bill Assumes a 5/S"water meter using 11 units of water Proposed Proposed Current 1/1/2017 1/1/2018 $62.17 $67.08 $70.37 Wastewater $27.81 $27.81 $27.81 Total $89.98 $94.89 $98.18 Recycled Water Rates Recycled water cost is estimated based on the cost of treatment, and operation and maintenance costs of the distribution system. The proposed rate changes will increase Carlsbad Municipal Water District recycled water rates by approximately four percent each year for the next two years. The changes are in anticipation of recycled water rebates being phased out, and additional costs associated with expansion of the recycled water system. In previous years recycled water delivery charges were the same as potable water delivery charges. New delivery charges have been calculated for recycled water to more accurately reflect actual use of the system, and ensure compliance with Proposition 218. Using recycled water will still cost less than using potable water for commercial, agricultural or irrigation purposes. Monthly Recycled Water Delivery Charge Two Year Maximum Rate Increase Current Meter Size: ·-.-5/8" $22.19 3/4" $29.87 1" $45.24 1.5" $83.66 2" $129.78 2.5" $183.57 3" $237.36 4" $391.07 6" $775.31 8" $1,236.41 10" $1,774.37 1/1/2017 Proposed $22.77 $31.43 $48.75 $92.04 $143.99 $204.65 $265.28 $438.39 $871.32 $1,390.83 $1,996.94 1/1/2018 Proposed $23.68 $32.69 $50.69 $95.72 $149.75 $212.84 $275.89 $455.92 $906.17 $1,446.47 $2,076.82 Fixed Fire Service Certain customer classes (e.g. commercial, industrial, multi-family) have a separate fire meter for fire suppression sprinklers. The fire meters require maintenance, service, and a portion of system capacity. These rates are being established to reflect that use, and ensure compliance with regulations governing rate structures. Monthly Water Delivery Charge -Fire Lines Two Year Maximum Rate Increase Current Meter Size: 5/8" N/A 3/4" N/A 1" N/A 1.5" N/A 2" N/A 2.5" N/A 3" N/A 4" N/A 6" N/A 8" N/A 10" N/A 12" N/A Protesting the Rates 1/1/2017 Proposed $7.50 $7.62 $7.86 $8.45 $9.16 $9.99 $10.82 $13.20 $19.13 $26.25 $34.55 $54.72 1/1/2018 Proposed $7.86 $7.99 $8.24 $8.86 $9.61 $10.48 $11.35 $13.84 $20.06 $27.52 $36.23 $57.38 As the property owner/rate payer, you have the right to protest the proposed increases. Only one protest notice is allowed per parcel. If you choose to protest, you must submit a signed written protest to the City Clerk on or before the close of the hearing. The written protest must contain your full name and signature, the address of the service and the rate change being protested. If it is determined that a majority of property owners have submitted a formal protest, the proposed fee change must be rejected. The protester may appear at the hearing and be heard on the matter; however a written protest is also required. Please send all protests to: Office of the City Clerk, City of Carlsbad, 1200 Carlsbad Village Drive, Carlsbad CA 92008. Item #6 October 4, 2016 Page 12 of 14 PACIFIC OCEAN CMWD BOUNDARY NOT TO SCALE EXHIBIT 3 Item #6 October 4, 2016 Page 13 of 14 CITY OF CARLSBAD WASTEWATER BOUNDARY PACIFIC OCEAN CITY OF CARLSBAD WASTEWATER BOUNDARY EXHIBIT 4 Item #6 October 4, 2016 Page 14 of 14 Set Public Hearing For Nov. 29, 2016 Water Rate Increases Carlsbad Municipal Water District Oct. 4, 2016 Cost of Service Study:Water •Consultant: Carollo Engineers, Inc. •Objectives: –Comply with Proposition 218 –Update data on current customer usage demands –Ensure sufficient funding for operations Cost of Service Study: Water Findings •Rebalanced rates to account for water reductions •Rate structure revisions to mirror usage patterns: –Created a specific rate for multi-family residential –Added a fire meter fixed delivery charge –Created a specific fixed delivery charge for recycled water •Reserve policy: target of 40% of operating budget 3 Potable Water Rates •Revenue increase of 4.85% for calendar year 2017 •Increase primarily driven by: –Legal landscape –Demand pattern shifts from extraordinary conservation efforts –San Diego County Water Authority all-in rate increase of 5.89% •Reserve policy: target of 40% of operating budget 4 Potable Water Bill Comparison 5 $70.75 $- $20 $40 $60 $80 $100 $120 Proposed Calendar Year 2017 Residential Rates Recycled Water Rates •Revenue increase of 4% for calendar year 2017 •Increase primarily driven by: –Phase-out of recycled water rebates –Phase III debt service •Reserve policy: target of 40% of operating reserves 6 Wastewater Rates •Rate increase of 0% for calendar year 2017 •Reserve policy: target of 40% of operating reserves 7 Wastewater Bill Comparison 8 $48.74 $- $20 $40 $60 $80 $100 $120 Proposed Calendar Year 2017 Residential Rates Example of Monthly Bill Changes Current Proposed (1/1/2017)Proposed (1/1/2018) Potable Water1 $62.17 $67.082 $70.372 Wastewater1 $27.81 27.81 $27.81 Total $89.98 $94.89 $98.18 Recycled Water3 $1,365.28 $1,433.52 $1,489.41 9 1.Average single-family house: •Potable Water: 5/8” meter using 11 units •Wastewater: Pays a flat monthly charge 2.Price per gallon for average single family home is approximately $0.008 3.Industrial Park site with 2” meter using 350 units in July Calendar •Oct. 4, 2016: Set majority-protest public hearing for Nov. 29, 2016 •Oct. 15, 2016: Mail written public notice on or before this date to comply with Proposition 218 (45 day) noticing requirement •Nov. 29, 2016:Hold majority-protest public hearing, set rates, and approve new rate design •Jan. 1, 2017: Implement new rates 10 Water and Wastewater Rates Questions? 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 12 13 Lake Shasta ater Project Facilities educt San Diego Water Authority Facilitie 14 What can Product Gallons for $50 .... + Tap water 5,423 i i Bottled 45 water I Soda 9 ~ Milk 5 (I 2 -: Coffee 1. Tap Water based on proposed 2017 residential water rates and a 5/8" meter. (carlsbad 2. Information derived from 2016 survey of various Carlsbad establishments. Municipal Water District 15 How each dollar is spent: • • Reserves e!l • Personnel ·~" -r • Maintenance & I ... • Operations ~ • Replacement ' • Water Purchases Based on actual expenditures for potable water in FY16. I I I I 8 cents 10 cents 10 cents 12 cents 60 cents (carlsbad Municipal Water District Potable Water Rate Increase History 16 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% Potable Water: Monthly Fixed “Delivery Charges” Meter Size Existing Service Charge Proposed Service Charge (1/1/2017) Proposed Service Charge (1/1/2018) 5/8”$22.19 $24.11 $25.28 3/4"$29.87 $32.54 $34.12 1”$45.24 $49.38 $51.78 1-1/2”$83.66 $91.50 $95.94 2”$129.78 $142.02 $148.91 2-1/2”$183.57 $201.04 $210.79 3”$237.36 $260.01 $272.62 4”$391.07 $428.39 $449.17 6”$775.31 $849.52 $890.72 8”$1,236.41 $1,354.87 $1,420.58 10”$1,774.37 $1,944.44 $2,038.75 17 Potable Water: Monthly Fixed Fire Line Charges Meter Size Existing Service Charge Proposed Service Charge (1/1/2017) Proposed Service Charge (1/1/2018) 5/8”N/A $7.50 $7.86 3/4"N/A $7.62 $7.99 1”N/A $7.86 $8.24 1-1/2”N/A $8.45 $8.86 2”N/A $9.16 $9.61 2-1/2”N/A $9.99 $10.48 3”N/A $10.82 $11.35 4”N/A $13.20 $13.84 6”N/A $19.13 $20.06 8”N/A $26.25 $27.52 10”N/A $34.55 $36.23 18 Recycled Water: Monthly Fixed “Delivery Charges” Meter Size Existing Service Charge Proposed Service Charge (1/1/2017) Proposed Service Charge (1/1/2018) 5/8”$22.19 $22.77 $23.68 3/4"$29.87 $31.43 $32.69 1”$45.24 $48.75 $50.69 1-1/2”$83.66 $92.04 $95.72 2”$129.78 $143.99 $149.75 2-1/2”$183.57 $204.65 $212.84 3”$237.36 $265.28 $275.89 4”$391.07 $438.39 $455.92 6”$775.31 $871.32 $906.17 8”$1,236.41 $1,390.83 $1,446.47 10”$1,774.37 $1,996.94 $2,076.82 19 Water: Monthly Variable “Usage Charges” Existing Variable Charge (per HCF) Proposed Variable Charge (1/1/2017) Proposed Variable Charge (1/1/2018) Single Family: Tier 1 (10 units)$3.53 $3.84 $4.03 Tier 2 (11-18 units)$4.68 $4.57 $4.79 Tier 3 (19+ units)$6.76 $6.82 $7.15 Multi-family: Tier 1 (5 units)$3.53 $3.77 $3.95 Tier 2 (6-10 units)$4.68 $4.55 $4.77 Tier 3 (11+ units)$6.76 $6.80 $7.13 Non-residential $4.26 $4.11 $4.31 Agricultural $4.37 $4.41 $4.62 Irrigation $4.67 $5.03 $5.28 Recycled $3.53 $3.69 $3.83 20 Wastewater Charges Monthly Wastewater Rates Current Proposed (1/1/2017)Proposed (1/1/2018) Residential Single family $27.81 $27.81 $27.81 Single Family w/ SDU $41.72 $41.72 $41.72 Multi-family $3.29 $3.29 $3.29 Mobile home $3.29 $3.29 $3.29 Commercial Group II $2.70 $2.70 $2.70 Group II $4.10 $4.10 $4.10 Group IV $7.65 $7.65 $7.65 Group V –Schools Elementary school $0.55 $0.55 $0.55 Junior high school $0.82 $0.82 $0.82 High school $1.10 $1.10 $1.10 Boarding school $5.75 $5.75 $5.75 Group V –Other Other $2.61 $2.61 $2.61 Group VI –Other Bio Hydration $0.00 $0.00 $0.00 Industrial Pretreatment Class III Desalination Plant $4.53 $4.53 $4.5321 Potable Water Where does the money go? 22 $3,909,478 , 10% $4,296,947 , 11% $26,800,000 , 67% $4,733,000 , 12% Fiscal Year 2016-17 Personnel M&O Water Purchases Replacement 3,710,723 , 10% 4,303,631 , 11% 25,728,685 , 67% 4,523,000 , 12% Fiscal Year 2015-16 Personnel M&O Water Purchases Replacement Recycled Water Where does the money go? 23 1,202,751 , 15% 768,847 , 10% 879,232 , 11% 1,876,482 , 24% 2,080,000 , 26% 1,110,000 , 14% Fiscal Year 2015-16 Personnel M&O Encina Debt Service Water Purchases Replacement $1,380,877 , 18% $784,154 , 10% $1,017,461 , 13% $1,876,482 , 24% $1,580,000 , 20% $1,140,000 , 15% Fiscal Year 2016-17 Personnel M&O Encina Debt Service Water Purchases Replacement Wastewater Where does the money go? 24 $2,091,315 , 17% $2,486,488 , 20% $3,496,079 , 28% $4,355,000 , 35% Fiscal Year 2016-17 Personnel M&O Encina Replacement 2,352,436 , 19% 2,478,416 , 20% 3,349,024 , 27% 4,225,000 , 34% Fiscal Year 2015-16 Personnel M&O Encina Replacement