HomeMy WebLinkAbout1996-01-24; Municipal Water District; 0124.01; Report for Water & Wastewater Rate StudyCARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL I DEPT. HD. $?m M #' ITITLE: REPORT FOR WATER AND WASTEWATER
RATE STUDY AND FINANCIAL PIAN
z 0 F 0 4 n a 4 8
CITY ATTY
CITY MGR. ~
ATG. 01/24/96 CMWD IEPT.
IECOMMENDED ACTION:
Staff is requesting Commission recommendations to the Board of Directors
concerning the results of the District's Water Rate Study.
ITEM EXPLANATION:
In April of 1995 the District embarked on a Rate Study that was to look at the
following issues and needs arriving at certain recommendations:
0 Water Delivery charges for different meter sizes need to be examined.
Customers with large meters do not pay delivery charges proportional
to the demand they place on the system. Multi-family units are required
to pay delivery charges for each multi-family unit in addition to the
delivery charge established for each water meter.
0 The basis for connection fees needs to be reviewed. At the present
time, water connection fees are based on EDUs defined for sewer use.
This allows some users to receive water service without paying their full
share of connection fees.
0 The financing of several major capital improvement projects needs to
be reviewed.
0 Metropolitan has revised its rate structure. Rates therefore need to be
adjusted to produce adequate revenues to meet expenses.
The impacts of reclaimed water service on potable water need to be
examined.
0 Residential wastewater service charges for single family and multi-family
units need to be reviewed to enhance equity between these user
groups.
A review was done with input from a Citizens Review Committee (Committee). The
purpose was to solicit input from the Committee after educating the members of the
Committee on the various issues, the available alternatives to address these issues,
and the impacts of changes on the District as well as the District's customers. This
Committee produced a final report that represented their efforts to provide community
input to the process of designing a new water rate structure. This Committee report
was presented to the Water Commission and Board of Directors in September of
1995.
Page 2 of Agenda Bill No. 0124-96
Once the Committee's report was presented and received the consultant used that
report to produce the Water and Wastewater Rate Study and Financial Plan.
This plan has been reviewed by staff over the last few months and a final draft has
/
been produced. The following recommendations are presented in the Plan: 1
WATER
1.
2.
3.
4.
5.
Water rates should be revised on the attached Table. (Exhibit #l). The
existing rate structure including a conservation rate should be retained. The
Committee recommended that the conservation rate be extended to all classes
of customers. It is recommended that the conservation commodity rate be
implemented by meter size as shown in the Table. The recommended rate will
generate an average revenue increase of 7.5 percent. No rate increase is
required in pr' 1996-97.
The Committee recommended a five percent discount for reclaimed water use.
The District has the option to either retain the existing parity with domestic
water use and continue to provide assistance with retrofit programs, or to
provide a discount of five percent and let users bear the costs of retrofitting.
Retrofits are required to convert, or replace potable water connections with
reclaimed water connections to provide reclaimed water service.
Rates need to be increased in future years to cover the higher costs of water
purchases, capital improvement and funding reserves. The actual rate
increase to be implemented in subsequent years should be reviewed each
year to ensure the costs are accurate.
The method of assessing connection fees should be revised and based on
meter size. The recommended connection fee for different meter sizes are as
shown on the attached Table (Exhibit #2) are for displacement, turbine and
turbo meters. If other meters are used, the charges may be adjusted in
proportion to the meter capacity. Connection fees should be revised annually
to recover the increased New Demand Charge.
Connection fees should not be charged for retrofits if there is no increase in
capacity. However, new reclaimed water connections should be charged the
connection fee shown here. Reclaimed water users are not required to pay
San Diego County Water Authority's connection fee.
The monthly fee for administering the backflow connection program may be
increased to $3 per account. This charge is required for non-residential users
only and covers administrative costs related to maintaining records and
administering the backflow program.
Page 3 of Agenda Bill No. 0124-96
6. The water enterprise operating and capital replacement reserves have
adequate balances and do not need additional cash. In FY 199596, the
operating reserve is at 49 percent. Normal utility practicd is to provide a
balance in the operating reserve (and quantity) of between 10 to 50 percent
of annual operating expenses. We recommend a 40 pdrcent level which
translates to 5 months of operating expenses. The recommended level is at
the upper end of the range because the District is dependent entirely on
imported water and the larger reserve would provide resources in case of
emergencies. Interest on the funds in this reserve may be used to finance
operations. This resewe is used for working capital and emergencies.
Normal utility practice is to maintain a capital replacement reserve with a
balance of between 50 to 100 percent of the average annual capital expense
for the next five to ten years. The District has adequate reserves to meet this
requirement. This reserve should be maintained at the present level to fund
future capital replacement and upgrade projects.
The capital expansion reserve is project to be depleted by the planned capital
expansion projects due to the slow growth and reduced connection fee
revenues. The District should consider delaying some of the capital expansion
projects if the growth rate does not pick up.
7. The expansion of reclamation facilities will require debt financing. The District
should seek low cost loans from the State Revolving Fund.
WASTEWATER
1. The wastewater enterprise is in good financial condition. Only small rate
increases are needed to maintain pace with inflation. The projected rate
increases are three percent per year.
2. The committee recommended that wastewater rates for residential customers
be based on water use. This would be similar to rates for non-residential
customers. Since the major portion of the wastewater service charges are
from residential customers, and water use can vary significantly from year to
year, this type of rate structure makes the District vulnerable to fluctuations in
revenue. To ensure that revenues are not too high or too low, rates would
need to be reviewed on an annual basis. Our recommendation is to switch
multi-family units to a water use-based system, but continue to charge single
family homes a uniform charge. Flat or uniform residential rates, as well as
rates based on average winter use for single-family residences and based on
monthly water use for multi-family residences, are presented on the attached
Table (Exhibit 3). It is recommended that multi-family wastewater rates be
based on monthly water use. If water use-based single family rates are
desired, they should be based on average winter use. For single family
Page 4 of Agenda Bill No. 0124-96
3.
residences, this will eliminate some of the inequities resulting from imgation
demand. It should be noted that though the average revenue increase is 3
percent, the rate increase for single family units will be significantly higher and
other users will actually benefit from a rate reduction. It is recommended that
rates for FY 1996-97 be implemented td preclude another rate adjustment in
July 1996.
If uniform rates are implemented for single family residences, an additional fee
should be charged for granny units (studios) to ensure the adequate fees are
collected for wastewater service. It is expected that these units will be used
by single individuals in most cases and therefore, this charge should be 40
percent of that for a single family residence. Larger units that may be used as
rentals, may be charged 75 percent of that for a single family residence. If
water use-based charges are implemented, they will automatically reflect the
increased use by granny units.
4. If water use based rates are implemented for residential customers, the
maximum charge per month should be capped based on 6 persons per
household.
5. The wastewater enterprise reserves are in good condition and should be
maintained to meet operating and capital replacement needs in the future.
The capital expansion reserve used to pay off debt service is being depleted
at a fast pace because of reduced revenues from connection fees due to the
slow growth.
6. The District will need to issue debt of $5 million in 1996-97 and $4 million in
1998-99 to meet the cost of expansion-related wastewater capital improvement
projects.
The consultant and staff will be making a presentation to the Commission meeting
to review this report. (An Executive Summary is attached for your review)
EXHIBITS:
1. Exhibit #1
2. Exhibit #2
3. Exhibit #3
4. Executive Summary of Water Wastewater Rate Study and Financial Plan.
EXHIBIT #1
/
~~ ~. I Actual Recommended 1994-95 Rates
34"
1"
1-1m
$8.70 $1 1.75
$8.75 $16.75
$9.30 $29.25
2"
3"
4"
6"
$404.50
$25.70 $44.25
$30.60 $79.50
$37.65 $1 29.50
$40.55 $254.50
--- 8" $46.15
Multi-family Unit $4.90
Commodity Charge, per hcf
1-7 hcYm, Single Family $1.51
98"
Y4"
Conservation Block, bd
I-ln"
2"
3"
7
10
30
45
79
1"
4"
6"
8"
16
123
228
336
standard Rate
$1.51 $1 .52
$1 -70 $1.70
Average Commodity Charge, per bcf $1.70 $1 .69
Single Family Residential Charge per mntb @ 14 bcflmo $33.05 $32.30
I I laid Rate hcf - hundred cubic feet I $1.70 $1.62
Conrcrwztion rate applies onty ifthe wuter conswnption for a given meter is less than or equal to the allow& rrnrgr
in rhc consew&n block for that month
- Meter Size Recommended Connection Fees
Displacement Turbine Turbo
5/8" $2,8 IO
I"
I-In.
2"
3"
4"
6"
8"
As the New Demund Charge increases every year the connection fie needs to be revised accordingly.
$6,424
$12,249 $14,050
$18,638 $22,500
$33,147 $49,200
$52,244 $84,300 $145,500
$98.500 $175,600 $28 1 ,ooO
$148.000 $252,900 $49 1,800
/ Wastewater Rate Options
I I MlnJMu. I 1
uour 1 udcort YMdWatcr
I Orarp I ResideDtid
Single Family Residence (1) $1.64
Multi-family Resideace (2) $1.97
Mobile Home (2) $1.97
-Pn- 'al (3) I $1.64
oroupm- 'd (3) $2.10
hp N Cornmacid(3) $3.35
Group v krstipltid j $1.61
3CCk=UMicroOpal i u.oo
1 scboolr pa ADA (4) -ur
HiLb Boudisl
Jooia
1
3oupvI~VdumeUsas :
;ra* Airenft $131
htligm $1.39
MOllUllY worm I UnHCast
Cbiwge.,S hh ~$6dOfWi~
$16.91
$8.46638.29 $16.91 $1.71
$8.46638.29 $13.27 $205
S8.46638.29 $1 1.10 $205
510.60 $1.65
$16.91 $217
$16.91 $357
$16.91 51.62
S0.u $0.47
$0.7 1
$3.54
! $16.91 $1.20
$16.91 $5.43
$16.91 $1.37
$11.00 +
$17.54
$17.54
$034
$0.47
$0.7 1
$3356
Executive Summary
MONTGOMERY WATSON @
Executive Summary
This report recommends water and wastewater rates to be charged by Carlsbad Municipal Water
District (District) to its customers in FY 1995-96 for water and wastewater service. The objective
of this report is to prepare a ten-year financial plan that will secure the financial stability of the
water enterprise while ensuring good quality service for customers. Wastewater rates are also
updated as part of this study. The preparation of the financial plan is to culminate in a set of rates
that is fair and equitable, connection fees for new water COM~C~~O~S and a plan for funding capital
improvements.
To ensure that the community had a voice in the rate structure design and rates, and understood the
different issues involved in a rate study, Citizens Review Committee (Committee) was formed.
Committee members represented different constituents in the Diseict's service area. Tht
Committee members were educated about operations and provided a background on finances of the
Dishict so that they could provide input on the rate structure and recommend changes they
considered important to the community. Tbe changes recommended by the Committee are
discussed in Appendix A. The notes of the Committee meetings are compiled separately and titIed
Water Rates Workinn Conmu 'ttee 1995.
CONCLUSIONS AND RECOMMENDATIONS
The main conclusions and recommendatioIls an summanzed ' below. Details on recomMndtd
rates arc shown in this referenced tables and discussed further in the repk
The District should increase its water rates by an average of 75 percent. This rate increase
will precludc the need for another rate increase in FY 1996-97. The delivery charges should
be increased as shown in Table ES-1. The standard commodity rate of $1.70 per bundrcd
cubic feet does not need to be increased. The conservation rate increases hm $1.50 to
$1.52 per hundred cubic feet and will be available to all users if thy consume less than a
certain quantity of water depending on their meter size.
The District has the option to eithex retain the existing parity of nclaimed water rates with
potable water rates and continue to provide assistance with retrofit programs, or to provide a
discount of five percent on reclaimed water use and let users bear the costs of retrofitting. If
the discount is provided, the reclaimed water rate would be $1.62 per hundred cubic feet
The Wct should assess COIlLKction fees for all new potable and reclaimed water
connections. This does not apply to users converting from potable to reclaimed water. The
method of assessing connection fees should be revised from an Equivalent Dwelling Unit
method to one based on meter size. Tbe recommended COMection fees for different meter
sizes are as shown in Table ES-2. The recommended fees include a new cost called the
New Demand Charge imposed by the Metropolitan District of Southern California to new
users so that existing system users are not required to bear this burden.
MONTGOMERY WATSON Page ES-1
Executive Summary
Actual 1994-95
Table ES-1
Recommended Rates
5/8"
34"
1"
1-10"
2"
3"
$8.50 $9.25
$8.70 $11.75
$8.75 $16.75
$9.30 $29.25
$25.70 $44.25
$30.60 $79.50
4" $37.65 $129.50
6" $40.55 $254.50
8" $46.15 $404.50
Multi-family Unit 54.90 ---
1-7 hcflmo, Single Family $1.51
5/8"
34"
1"
l-lt2"
Conservation Block, hci
7
10
16
30
2"
3"
4"
6"
ComervotiOn rate applies ody #the wer consumption for a given meter u lcrs than or eqwl to the allowed usage in he conservation block for that month
45
79
123
228
MONTGOMERY WATSON Page ES-2
I
Conservation Rate $1.51 $1.52
Standard Rate SI .70 $1.70
Average Commodity Charge, per bcf $1.70 $1.69
Single Family Residential Charge per month 0 14 hcf/mo $33.05
fltxlaimed Rate bcf - hundred cubic feet S 1.70 $1.62
$32.30
.
Executive Summary
Table ES-2
Recommended Water Connection Fees
(Includes New Demand Charge, Excludes County Water Authority Charge)
I 8" $148,000 $252,900 $49 1,800
I I I
As the New Demand Charge increases every year the connection fee needs to be revised accordingly.
The monthly fee for administering the backflow connection program may be increased to $3
per account. This charge is required for non-residential users only and covers 've
costs related to maintaining recocdr and administering the backflow program-
..
The water enterprise operating and capital replacement reserves have adequzde balances and do
not need additional cash to boost reserve levels.
The expansion of reclamation facilities will require debt fmancing. The District should seek
low cost loans from the State Revolving Fund.
The wastewater entexprise is in good frnancial condition. Only small rate increases are needcd
to maintain pace with inflation.
The recommended wastewater rates are shown in Table ES-3. A significant change is
fecommended to switch multi-family units to a water use-based system, but continue to charge
single family homes a uniform charge. Another option presented is to charge single famih.
residences based on average winter use. It should be noted that though the average revenue
increase is three percent, the rate increase for single family units will be significantly higher and
other users will actually benefit from a rate reduction. It is recommended that rates for
J!'Y 1996-97 be implemented to preclude another rate adjustment in July 1996.
MONTGOMERY WATSON Pago ES3
Executive Summary
Table ES3
Wastewater Rate Options
MONTGOMERY WATSON Page E-
Executive Summary
If uniform rates are implemented for single family residences, an additional fee should be
charged for granny units to ensure that adequate fees are collected for wastewater service. This
charge may vary between 40 and 75 percent of that for a single family residence depending on
the size of the granny unit. Water use-based charges, will automatidy reflect the increased
use by granny units.
If water use based rates are implemented for residential customers, the maximum wastewater
charge per month should be capped based on 6 persons per household.
The wastewater enterprise reserves axe in good condition and should be maintained to mect
operating and capital replacement needs in the future. The capital expansion reseme used to
pay off debt service is beiig depleted at a fast pace because of reduced revenues from
Connection fees due to the slow growth.
The District will need to issue debt of $5 million in 1996-97 and $4 million in FY1998-99 to
meet the cost of expansion-related wastewater capital improvement projects.
There an several factors that need to be considered in tbe design of rates. Some of these conflict
with others and many times it is a matter of judgment and/or policy to decide among conflidng
factors. Some of the factors that were addressed are:
0
0
0
0
0
0
0
0
0
0
0
0
0
Revenue sufficiency - to meet the operating and capital costs of the District
Quitability - to ensure that users pay in proportion to costs of semice
customer acceptaMx
Conservation - so that ratcs encourage conservation without penalizing normal use
Lifeline rates - to pmvide a subsidy to the weaker seztions of the cornunity
Growth - to ens= that new users pays their fair share of costs so that existing users are not
burdened with providing capacity for new users
Incentives for the business community - to encourage new businesses in the District
Simplicity - to ease administration and implementation
Flexibility - to respond to changes in the regional situation
Revenue Stability - to ensure financial stability
Fmancial Ratings - to provide a stable and reliable picture so that debt issuance cau be
achieved at the lowest cost
hJ.bhb~ Rate Shock - to reduce financial hardship to customers and enhance acceptaLKx
Reclaimed Water Incentives - to encourage users to switch to reclaimed water use
MONTGOMERY WATSON Pago EM
Executive Summary
These factors were considered by the Committee in making their recommendations. Practical
administrative and implementation constraints were also considered in our final recommendations.
The findings and recommendations of this study are summarized below.
FINDINGS
Water and Reclaimed Water
1.
2.
3.
4.
5.
The District provides water service to 56,000 residential, commercial, industrial and
agricultural users in the City of Carlsbad. The water service boundary does not coincide with
the wastewater service boundary. The District provides wastewater service to 46,000
residents of the City.
The District purchases treated water from the San Diego County Water Authority (CWA).
Water sales in the District have dipped signifcantly from the peak in FY 1989-90. Water
consemation measures have kept the demand lower in aU years since FY 1989-90.
The normal unaccounted-for water, i.e., the Werence between production and sales, has
ranged between three and five percent. This is on the low side and representative of a well
maiatained system
The water rate structure designed by the Metropolitan Water District of Southern California
(MWD), which is the prime supplier of water in Southern California, has changed. In
addition to the commodity charge, additional charges have been imposed. These include tht
New Demand Charge (NDC), Readiness--Serve Charge (RTS), Connection MaintenanCt
Charge, and Treated Water Peaking Charge. The Readiness-to-Serve charges and New
Demand Charge will have significant impact on the District in the coming years. Tbese
charges will reduce the rate of increase of the commodity cost of water sold by Metropolitan
Water District of Southern California; however, the overall cost of purchased water will
continue to increase at a significantly higher rate than the rate of general inflation when tb
other charges are considered. Considering tbe standby charges for FY 1994-95 and
Readiness-to-serve charges for futurc years, the effective rate increase of San Diego county
Water Authority water is 7.7 percent in FY 1995-96, and is expected to be 4.5 percent in FY
1996-97 and 6.3 percent in FY 1997-98.
The District's water rate structure consists of a commodity rate for water consumed and a
fixed delivery charge that varies with meter size. Water commodity rates were last revised in
July 1994. Water me increases are required because of higher purchased water costs,
increased operating costs due to Marion, capital replacement costs and capital upgrades.
The District currently bas a uniform rate st~~ctuxe with a lower conservation rate for single
family residences consuming less than 7 hundred cubic feet (hcf) per month.
~~
MONTGOMERY WATSON Pagm ES-6
Executive Summary
6.
7.
8.
9.
10.
11.
Large water meters are not presently charged at rates that are consistent with their size and the
demands they place on the water system. Multi-family units are. charged the basic meter
charge and a per unit (apartment) charge after the first unit. This system is not equitable to
multi-family units.
The recommended rates correct this situation. Delivery charges for larger meter sizes will
increase signrfcantly and the per unit charge for multi-family units is dropped. The average
total delivery charge will increase to 20 percent of the total water service charge with the
recommended rates. The average delivery charge increases gradually for subsequent years.
Delivery charges repented 17 percent of the revenues from sales in FY 1993-94. This is
lower than it should be and leaves the District more vulnerable to variation in the water
demand. The cost of purchased water represents 68 percent of the commodity rate of $1.70
per hundred cubic feet of water.
Growth in new COMCX~~OIB has decreased during the last few years and is expected to be
slow through the next few years.
The water enterprise has adequate operaring and capital replxement reserves. The capital
expansion reserve has been depleted because of slow growth.
The District is planning sigdicant capital expenditures to maintain and improve the existing
facilities. Many projects to meet the needs of future users are also planned.
The District is expected to continue to encourage sales of reclaimed water. Plans to increase
production of reclaimed water are in place. It is expected that within the next five years,
reclaimed water sales will increase substantially as existing customers am switched and new
customers added to reclaimed water systems.
Wastewater
1. The District collects wastewater for treatment at the kina Wastewater Authority. Tbe
District’s wastewater rates are in compliance with EPA requirements.
2. The existing wastewater rate structure is a single uniform charge for all residential customers
and a charge based on water use and discharge strength for other customers. Tzhere is no
need to change the existing rate structure. However, there is a strong desire to make rates
faher to multi-family units which are presently charged on the total number of units
(apartments).
3. The wastewater enterprise resemes are at codortable levels. However, if revenues fiom
new connections do not pick up over the next decade, the cagital expansion fund will be
depleted.
Executive Summary
RECOMMENDATIONS
Montgomery Watson has determined rates taking into consideration the recommendations of the
Committee. In cases where there are significant administrative or implementation impacts, we have
provided alternatives so that the District may choose the most suitable alternative.
Water
1.
2.
3.
4.
5.
Water rates should be revised as shown in Table ES- 1 on the following page. The existing
rate structure including a conservation rate should be retained. The Committee recommended
that the conservation rate be extended to all classes of customers. It is recommended that the
consexvation commodity rate be implemented by meter size as shown in Table ES-I. The
remmmended rate will generate an average revenue increase of 7.5 percent. No rate increase
is required in FY 1996-97.
Tb Committee recommended a five percent discount for reclaimed wate!r use. The District
has the option to either retain the existing parity with domestic water use and continue to
provide assistance with retrofit programs, or to provide a discount of five percent and k
users bear the costs of retrofitting. Retrofits are required to convert, or replace potable water
COMW~~OIE with reclaimed water connections to provide reclaimed water service.
Rates need to be increased in futurt years to cover the higher costs of water purchases,
capital improvements, and funding reserves. The actual rate incmse to be implemented in
subsequent years should be reviewed each year to ensm the costs are accurate.
The method of assessing Connection fees should be revised and based on meter she. The
recommended connection fee for Merent meter sizes are as shown in Table s-2. 'Ibc
District should add a New Demand Charge component to the connection fee so that existing
system users are not required to bear this burden. This New Demand Charge wmponent is
based on 0.39 ac-ft of water usage per year for a customer with a 5/8-in meter. Tk charges
shown in Table ES-2 are for displacement, turbine and turbo meters. If other meters an
Used, the charges may be adjusted in proportion to the meter capacity. CoMection fees
should be revised annually to recover the increased New Demand Charge.
Connection fees should not be charged for retrofits if there is no increase in capacity.
However, new reclaimed water connections should bt charged the connection fet shown
here. Reclaimed water users azle not required to pay San Diego County Water Authority's
COMectiOll fee.
The monthly fee for administering the backflow connection program may be increased to $3
per account. This charge is required for non-residential users only and covers achmtmb 've
costs dated to maintaining records and administering the backflow program
..
MONTGOMERY WATSON P.0. E-
Executive Summary
6. The water enterprise operating and capital replacement reserves have adequate balances and
do not need additional cash. In FY 1995-96, the operating reserve is at 49 percent. Nod
utility practice is to provide a balance in the operating reserve (and quantity) of between 10 to
50 percent of annual operating expenses. We recommend a 40 percent level which translates
to 5 months of operating expenses. The recommended level is at tbc upper end of the range
because the District is dependent entirely on imported water and the larger reserve would
provide resources in case of emergencies. Interest on tk funds in this reserve may be used
to fmane operations. This reserve is used for working capital and emergencies.
Normal utility practice is to maintain a capital replacement reserve with a balance of between
50 to 100 percent of the average annual capital expense for the next five to ten years. 'Ibt
District has adequate reserves to meet this requirement. This reserve should be maintained at
the present level to fund future capital replacement and upgrade projects.
The capital expansion reserve is projected to be depleted by the pla~ed capital expansion
projects due to the slow growth and reduced connection fee revenues. The District should
consider delaying some of the capital expansion projects if the growth rate does not pick up.
7. The expion of reclamation facilities will require debt financing. Thc District should seek
low cost loans from the State Revolving Fund.
Wastewater
1. The wastewater enterprise is in good financial condition. Only small rate increases are
needed to maintain pace with inflation. The projected rate increases are three percent per
Y=*
2. The committee recommended that wastewater rates for residential customers be based on
water use. This would be similar to rates for non-residential customers. Since the major
portion of the wastewater service charges an from residential customers, and water use can
vary significantly from year to year, this typc of ratc sttucturc makes the District vulnerable to
fluctuations in revenue. To ensure that revenues an not too high or too low, rates would
need to be reviewed on an annual basis. Our recommendation is to switch multi-family units
to a water use-based system, but continue to charge single family homes a uniform charge.
Flat or uniform residential rates, as well as rates based on average winter use for single-
family residences and based on monthly water use for multi-family residences, are presented
in Table ES-3. It is recornmeended that multi-family wastewater rates be based on monthly
water use. If water use-based single family rates are desired, they should be based on
average winter use. For single family residences, this will eliminatt some of the inequities
resulting from irrigation demand. It should be noted that though the average revenue increase
is three percent, the rate increase for single family units will be significantly higher and other
users will actually benefit from a rate Ieduction. It is recommended that rates for FY 1996-
97 be implemented to preclude another rate adjustment in July 1996.
MONTGOMERY WATSON Pago Es-9
..
Executive Summary
3.
4.
5.
6.
If uniform rates are implemented for single family residences, an additional fee should be
charged for granny units (studios) to ensure that adequate fees are collected for wastewater
service. It is expected that these units will be used by single individuals in most cases and
therefore, this charge should be 40 percent of that for a single family residence. Larger units
that may be used as rentals, may be charged 75 percent of that for a single family residence.
If water use-based charges are implemented, they will automatidy reflect the increased use
by granny units.
If water use based rates are implemented for residential customers, the maximum charge per
month should be capped based on 6 persons per household.
The wastewater enterprise reserves are in good condition and should be maintained to meet
operating and capital replacement needs in the future. Tbe capital expansion reserve used to
pay off debt seMce is being depleted at a fast pace because of reduced revenues from
connection fees due to the slow growth.
The Distria will need to issue debt of $5 million in 1996-97 and $4 million in 1998-99 to
meet the cost of expansion-related wastewater capital improvement projects.
MONTGOMERY WATSON Paw ES-10