HomeMy WebLinkAbout2021-09-23; Status of Wastewater and Water Funds (Districts - All); Gomez, Paz{city of Carlsbad ·(carlsbad
Municipal Water District
Memo ID #2021179
Council/CMWD Board Memorandum
Sept. 23, 2021
To:
From:
Via:
Re:
Honorable Mayor Hall and Members of the City Council
CMWD Board President Hall and Members of the Board
Paz Gomez, Deputy City Manager, Public Works
Laura Rocha, Deputy City Manager, Administrative Services
Geoff Patnoe, Assistant City Manager ~
Status of Wastewater and Water Funds (Districts -All)
This memorandum provides information on the status of Wastewater and Water Funds for the
City of Carlsbad and Carlsbad Municipal Water District (CMWD).
Background
Water and wastewater agencies in the San Diego region and statewide share the challenges of
aging infrastructure, pension costs, emergency repairs, increasing regulatory compliance costs
and rising construction costs. The city's water and wastewater rates remain among the lowest
in San Diego County, and increases are needed to continue to maintain these systems and to
protect the health of our community and the clean safe environment enjoyed in Carlsbad.
Discussion
Wastewater
Significant wastewater rate increases will be required in 2022 and the two subsequent years to
support the city's Wastewater Master Plan Capital Improvement Program (CIP) and Encina
Wastewater Authority's (EWA) capital and operating expenses. Wastewater rates for the city
trend among the lowest in the county while operational and capital improvement costs
continue to increas~. EWA's costs make up 29% of the City Council-approved Wastewater
Operating Budget and 32% of the Sewer Replacement Capital Improvement Program Budget for
fiscal year 2021-22.
The wastewater rate increases for a single-family residential home with seven units of
wastewater are expected to be approximately as follows:
2021 Potential Potential Potential Potential
(current) Increase 2022 Increase 2023
$29.52 $5.90 $35.42 $7.08 $42.50
Utilities Department and Carlsbad Municipal Water District
5950 El Camino Real I Carlsbad, CA 92008 I 760-438-2722 t
2021
Potential Potential Average of
Increase 2024 comparable
I agencies in
' SD County
$8.50 $51.00 I $54.52
Council/CMWD Board Memo -Status of Wastewater and Water Funds (Districts -All)
Sept. 23, 2021
Page 2
By 2024, these increases will bring the city close to the 2021 average cost of wastewater service
in San Diego County. Assuming other districts implement increases, the regional average will
continue to increase, and Carlsbad's rate will continue to be lower than the regional average.,
. All other customer classes could expect an increase of similar magnitude. The average
commercial wastewater customer bill could change approximately as shown below. The
Utilities Department plans to visit some of our largest commercial customers to go over their
increases before the public hearing on utility rates.
2021 Potential Potential Potential Potential Potential Potential
(current) Increase 2022 Increase 2023 Increase 2024
$236.28 $47.25 $283.53 $56.71 $340.24 $68.05 $408.29
The chart below shows wastewater revenue in a relatively flat green line against rising costs,
shown as stacked columns. A revenue increase for the wastewater fund is imperative to
support these costs.
Wastewater Fund Revenue vs Expenditures
$25,000,000
$20,000,000 --~
$15,000,000
I $10,000,000
' $5,000,000
$0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Carlsbad Ops -Carlsbad CIP -EWA Ops -EWA CIP -Revenue
In addition to the CIP costs, the following conditions and unexpected events are increasing the
cost of providing wastewater service:
• Aging infrastructure for both the city and EWA
• Delayed project implementation by EWA, resulting in higher construction costs
• Decreasing wastewater volumes associated with water conservation are causing
higher treatment costs due to more concentrated wastewater that is harder to treat
Council/CMWD Board Memo -Status of Wastewater and Water Funds {Districts -All)
Sept. 23, 2021
Page 3
• EWA's decision to pay off 100% of the Cal PERS retirement liability in three years,
while other agencies choose to remain closer to 80% funded (like the City of
Carlsbad) or payoff the liability over a longer time span
• EWA's $95 million of capital requirements for infrastructure over the next 10 years
• Construction projects at the Agua Hedionda and Foxes Landing Lift Stations
exceeding budgets
• Materials such as steel,.copper, chlorine and odor control chemicals have not only
risen in cost but are now difficult to obtain
The chart below compares the city's current average wastewater bill for single-family
residential customers with other agencies in San Diego County. The average monthly
wastewater bill for San Diego County is currently $54.52 (shown in a horizontal dashed line), in
comparison to Carlsbad's current $29.52 (shown in light purple bar). The darker purple bars for
Carlsbad represent potential increases in 2022 to 2024, as described above. The green bars
represent known increases for other agencies in San Diego County, which range from 2% to
17%. These numbers do not include increases that other wastewater agencies are currently
considering, which could raise the average significantly in 2022 and beyond.
{city of Carlsbad Ccarlsbad
Municipal Water District
Regional Monthly Single Family Residential Wastewater Bill
$14•
5120
5100
sso
5&0 _.,,.-Cu rrent:Ave rage554.52
.• _ _.,.-· ✓-- - -- -- - -_.,._ ---- -- - - -- -- - - - --+S.S.5
•57.0S
S40 •55.9
529.52
52
S·
~~ ,f1~ r:3.'r> ~ i-> 'i>'~ -d~~ ~'?>"4. -~o.:., ~~.., C'~ "f'r,:, ~~...._ . ~~ '-~4.. c:5~io -Ji'-~~ ~.o cc:;; o~ . o~ ~.::_::;\.. . .,.-;_...'?.,, ~·e -.:,...,'o-o -.l......_......,, ·:S-· ~~ ·:-..':1'-' ._pc <:fr 't:,..~' _9/t=· (..;--;:,:::,..i:P ~◊,,_~ ~◊.,._,-.,;~◊~""'(:.CV<.,,--;,. 0~...,."-; 0 :§:-Q.,,<..,~<::--◊~ <';:--<::)~ &'°><-"',,, <..,~'-~~~~ <::-~ . .pxY qO ~~ ....:}>~ ~,S.~ <.;;;:-c_,..":>"'0,'-'b 6"~~ .... ~~x <..-<§'~ -::_,....<:-;,-.; :.;:-.'-~Q ~'C<::). ;._.:;:,.<;j e,"':>..::,.'> ~'O..,_o<:;,C::-~~r:::,'--x
~::::, -;-...~ :--..~ v ~-::,. ~ c..,":S <:::l..,· <S' ~..P ~ ~ ~o-o'->~ .-~-6' «..,~ ;::s:-'7:, ~,<-.z: <Q.~ ~'7i-oc <.c. -<::>~ <...,.'7:1' <-~ <..,,-?>' .._cv -::,.<:--~ ...p'°'~ ~o \..; ~ -~~ <"' ~-:;,. ~ ~',,,.¼ 6 r ◊ cf ,'->~ r'-,'7>
<..,.<:,<:-~ o<::--<;) o<:-'7:J.
Utilities Department and Carlsbad Municipal Water District
5950 El Camino Real I Carlsbad, CA 92008 I 760-438-2722 t
,.,__€'--"I:--,,<$' ~,._<$' ..:,,_-:;.
Council/CMWD Board Memo -Status of Wastewater and Water Funds (Districts -All)
Sept. 23, 2021
Page 5
Potable Water and Recycled Water
CMWD rates will need to increase to keep up with rising water costs from the San Diego County
Water Authority. In January 2022, the water that is purchased from the San Diego County
Water Authority will increase in cost by 5.5%. Staff anticipate rate increases for potable water
and recycled water to be approximately 4% and 6%, respectively, for multiple years. These
increases are due to rising costs to purchase water from the San Diego County Water Authority,
inflation and increased materials costs. The chart below shows water revenue in a green line
against costs, shown as stacked columns. Revenue increases for the Water Fund will be
necessary to continue to purchase and deliver water for Carlsbad customers.
60,CO , 00
50,000.,000
40,000,000
, 30, 0,000
20.,0D-0,000
10,0'00, 00
Potable Water Fund Revenue vs
Expenditures
2012 2013 2014 201 5 2016 2017 2018 2019 2020 2021 2022
CMWDOps(not WaterPurchase) -CM t.JDC IP
-Total Water Purcha:es -Re,enue
Carlsbad's water rates have remained low compared to other agencies in San Diego County.
The chart below compares the CMWD current average water bill for single-family residential
customers with those from neighboring agencies. The average monthly water bill for San Diego
County is currently $90.50, in comparison to Carlsbad's $71.33. The first-year increase is
expected to be approximately $1.50 per month. These numbers do not include increases that
other water agencies are currently considering.
Council/CMWD Board Memo -Status of Wastewater and Water Funds (Districts -All)
Sept. 23, 2021
Page 6
$140
: $120
$100
$80
$60
I $40
$20
$0
Regional Monthly Single Family Residential Water Bill
Average $90.50 -~ ---------------------------I J-17Tl1l I-_ _ -= = __
Most agencies in San Diego County and statewide share the challenges of aging infrastructure,
pension costs, emergency repairs and rising construction costs. The city's water and
wastewater rates remain among the lowest in San Diego County, and increases are needed to
continue to maintain these systems and protect the health of our community and the
environment that our C!,JStomers enjoy.
Other alternatives to raising rates
There are other alternatives to raising rates that could be considered. Issuing long term debt,
such as issuing bonds, St ate Revolving Fund (SRF) loans or other borrowing has been considered
and utilized to maximize the benefit to our customers and where spreading large, one-time
costs over longer periods makes sense. This is not advisable 1n this case as the costs are
recurring in nature, debt funding costs would ultimately be passed to our customer's, and large
rate increases would still be required. An example where the city has used long term debt is
how CMWD issued a large SRF loan that allowed the build out of the city's recycled water
system while smoothing rates and providing generational equity.
CMWD was also recently selected for a federal grant for a small portion of the D-4 recycled
water tank project and applied for an SRF loan for a portion of the wastewater SCADA project
for flow monitoring. Using these debt options spreads the impact of large one-time costs and
results in generational funding equity. However, given the recurring nature of the current and
forecasted costs, limited revenue and low rates when compared with the San Diego County,
staff recommend rate increases in the upcoming years and will continue to analyze debt
options in the future as part of holistic enterprise fund management.
Council/CMWD Board Memo -Status of Wastewater and Water Funds (Districts -All)
Sept. 23, 2021
Page 7
Next Steps
Staff plan to present an update on the status of Wastewater and Water Funds to City
Council/CMWD Board on Sept. 28, 2021. Staff plan to return on Oct. 19, 2021, to present the
results of the Cost of Service Studies and request setting a date for a public hearing to discuss
utility rates, which would possibly be held in January 2022.
cc: Scott Chadwick, City Manager/CMWD Executive Manager
Celia Brewer, City Attorney/CMWD General Counsel
Gary Barberio, Deputy City Manager, Community Services
Vicki Quiram, Utilities Director/CMWD General Manager
Ryan Green, Finance Director
Kristina Ray, Communication & Engagement Director
Robby Contreras, Assistant City Attorney