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