HomeMy WebLinkAbout04-27-22 Board Packet1
OTAY WATER DISTRICT
SPECIAL MEETING OF THE BOARD OF DIRECTORS
DISTRICT BOARDROOM
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
WEDNESDAY
April 27, 2022
12:00 P.M.
AGENDA
1.ROLL CALL
2.PLEDGE OF ALLEGIANCE
3.APPROVAL OF AGENDA
4.PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK
TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD’S JURISDICTION BUT
NOT AN ITEM ON TODAY’S AGENDA
The District’s meeting is live streamed. Information on how to watch and listen to the Dis-
trict’s meeting can be found at this link:https://otaywater.gov/board-of-directors/agenda-and-
minutes/board-agenda/
WORKSHOP
5.DISCUSSION OF THE FISCAL YEAR 2023 BUDGET KEY FIGURES AND ASSUMPTIONS
(BEACHEM/KOEPPEN)
ACTION ITEMS
6.FINANCE
a)REVIEW THE RESULTS OF THE WATER COST OF SERVICE STUDY AND OBTAIN
BOARD DIRECTION TO INCORPERATE THE COST OF SERVICE STUDY RESULTS
INTO THE FISCAL YEAR 2023 BUDGET (KOEPPEN)
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7. BOARD
a) AUTHORIZE STAFF TO CONDUCT REMOTE TELECONFERENCE MEETINGS OF
THE BOARD OF DIRECTORS, INCLUDING COMMITTEE MEETINGS, PURSUANT
TO RESOLUTION NO. 4401 WHICH THE BOARD ADOPTED AT A SPECIAL BOARD
MEETING ON SEPTEMBER 27, 2021, AND IN ACCORDANCE WITH THE
PROVISIONS OF GOVERNMENT CODE § 54953(e) FOR THE NEXT 30 DAYS
BECAUSE (1) A STATE OF EMERGENCY RELATED TO COVID-19 IS CURRENTLY
IN EFFECT; (2) LOCAL OFFICIALS IN SAN DIEGO COUNTY HAVE IMPOSED OR
RECOMMENDED MEASURES TO PROMOTE SOCIAL DISTANCING IN
CONNECTION WITH COVID-19; AND (3) DUE TO THE COVID-19 EMERGENCY,
MEETING IN PERSON WOULD PRESENT IMMINENT RISKS TO THE HEALTH AND
SAFETY OF ATTENDEES (MARTINEZ)
RECESS TO CLOSED SESSION
8. CLOSED SESSION
a) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION SIGNIFICANT
EXPOSURE TO LITIGATION PURSUANT TO §54956.9(b): FOUR (4) CASES
i. COST OF SERVICE STUDY
RETURN TO OPEN SESSION
9. REPORT ON ANY ACTIONS TAKEN IN CLOSED SESSION. THE BOARD MAY ALSO
TAKE ACTION ON ANY ITEMS POSTED IN CLOSED SESSION.
10. ADJOURNMENT
All items appearing on this agenda, whether or not expressly listed for action, may be deliberated
and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the District’s web-
site at www.otaywater.gov. Written changes to any items to be considered at the open meeting, or
to any attachments, will be posted on the District’s website. Copies of the Agenda and all attach-
ments are also available by contacting the District Secretary at (619) 670-2253.
If you have any disability which would require accommodation in order to enable you to participate in
this meeting, please call the District Secretary at 670-2253 at least 24 hours prior to the meeting.
Certification of Posting
I certify that on April 25, 2022, I posted a copy of the foregoing agenda near the regular
meeting place of the Board of Directors of Otay Water District, said time being at least 24 hours in
advance of the special meeting of the Board of Directors (Government Code Section §54954.2).
Executed at Spring Valley, California on April 25, 2022.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Budget Workshop MEETING DATE: April 27, 2022
SUBMITTED BY: Kevin Koeppen, Assistant Chief
of Finance
PROJECT: DIV. NO.All
APPROVED BY:
(Chief) Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Informational Item to Present FY 2023 Budget Key Figures and
Assumptions Impacting the Upcoming Budget Proposal
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item presenting the FY 2023 budget key
figures and assumptions.
PURPOSE:
The purpose of this informational item is to present to the Board
key figures and assumptions impacting the FY 2023 budget.
BACKGROUND:
The District’s budget process begins in January and ends with the
adoption of the next fiscal year budget at the June Board meeting,
and implementation of rates the following January. This Budget
Workshop represents the second and third of four presentations
related to the FY 2023 budget. The first presentation, the 2022
Economic Study, was given to the Board on April 6, 2022. Today,
staff will be giving two presentations, this first presentation
covers key figures and assumptions, and the second presentation will
cover the Water Cost of Service Study which is the third
presentation overall. The final presentation of the consolidated
budget is scheduled for the June 8 Board meeting. At the June 8
Board meeting, staff will be presenting the consolidated FY 2023
budget and requesting that the Board:
•Approve the FY 2023 Operating and Capital Improvement Program
(CIP) Budget.
•Approve the fund transfers for potable, recycled, and sewer.
•Adopt the Salary Schedule.
•Approve the continued advance funding of the District’s
unfunded pension liability forwarding OPEB retiree medical
reimbursement funds to CalPERS.
AGENDA ITEM 5
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•Approve the continued advance funding of the District’s
unfunded pension liability through forwarding OPEB annual cost
funds to CalPERS.
•Direct staff to draft and mail rate increase notices for sewer
and Proposition 218 hearing notices for a 218 public hearing in
October 2022 for water.
The budget is put together presenting the most realistic set of
factors and assumptions based on information received from various
sources including: the wholesale water suppliers, the Metropolitan
Water District of Southern California (MWD), the San Diego County
Water Authority (CWA), and the City of San Diego (the City); vendors
such as SDG&E, and an economic report prepared this year by Vertex.
Staff uses this information in conjunction with other economic
indicators affecting taxes and revenues, such as inflation and
interest rates, to prepare the budget.
FY 2022 Projected Results
Through February 28, 2022, the District has an operating surplus of
$3.5 million, primarily due to a $2.5 million refund from CWA as
part of CWA’s lawsuit against MWD. Staff is projecting the surplus
will remain close to this level for the remainder of the fiscal
year. Staff is proposing that the surplus benefit be utilized to
offset pressure on rates in FY 2023 and the six-year projection
including increasing CIP, increasing potable water purchase costs,
and rising inflation.
Budget Strategy
The culmination of the budget process is the recommendation of
changes to water and sewer rates, which meet the following primary
budget objectives:
•Recommend rates that are compliant with the requirements of
Proposition 218,
•Maintain reserve levels above minimum or target levels in each
of the next six (6) years,
•Maintain debt coverage, excluding growth, above minimum or
target levels for the next six (6) years,
•Maintain debt coverage, including growth, above the target of
150% for water and sewer for the next six (6) years, and
•Support the Strategic Plan initiatives.
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Strategic Planning
In addition to the budget and rate setting process, the District’s
ongoing focus on strategic planning continues to play a positive
role in the financial strength of the agency. By managing staffing,
leveraging business and operating technologies, and implementing
best management practices, the District has become more efficient
and cost effective. The Strategic Plan is essential to the budget
process as it drives and prioritizes funding for many of the
District’s service and operational programs.
Proposition 218
The State of California has well-established legal constraints
regarding utility rate setting, of which California Constitution
Article XIII D, Section 6 (commonly referred to as “Proposition
218”), is at the forefront. Proposition 218 requires that water and
sewer utilities establish cost-based rates for the services
provided. To comply with this requirement, the District performs
periodic cost of service studies and Proposition 218 hearings.
Prior to the current water cost of service study, the last study was
completed and presented to the Board on April 17, 2017. A sewer cost
of service study was completed and presented to the Board on May 6,
2020. Subsequent to the completion of the 2017 and 2020 cost of
service studies, Proposition 218 hearings were held on October 4,
2017, for water and October 7, 2020, for sewer. At the conclusion of
the 218 hearings, the Board approved the terms of the 218 Notices
which allowed for rate increases to pass-through 100% of cost
increases from the District’s suppliers, and up to 10% rate
increases for internal costs for a period of up to five (5) years.
The five-year period for water has expired; therefore, staff has
completed a cost of service study that is projected to be
incorporated into the FY 2023 budget. A Proposition 218 hearing is
planned for October 5, 2022, with the new rates and charges being
effective January 1, 2023.
A sewer cost of service study is scheduled to be performed in FY
2025, with a Proposition 218 hearing projected to be held in October
2025 and will affect the January 1, 2026 rates.
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FY 2023 Challenges
COVID-19
The District anticipates there to be continued impacts of COVID-19
in FY 2023. However, the financial impacts are anticipated to be
minimal due to the continued reopening of the economy, declining
unemployment, opportunities for grant funding, continuation of
arrearage funding programs, and the reinstatement of pre-COVID-19
collection practices.
Inflation
According to the Bureau of Labor Statistics, in March 2022, the
Consumer Price Index (CPI) for all goods rose 1.2% during the month.
The gasoline index rose 18.3% in March 2022 and accounted for over
half of the monthly CPI increase. While national energy indexes were
mixed, effective rates from SDG&E have increased up to 10% year-
over-year. The CPI for all urban consumers increased 8.5% over the
last 12 months, which is the largest 12-month increase since the
period ending December 1981. With gas prices remaining high, the
inflationary trend is expected to continue.
As gas prices, materials, utilities, and services increase, the
District’s budget is proposed to similarly increase to cover these
expenses. Staff’s best estimate regarding inflationary increases on
the budget, excluding water purchases and labor, is an approximate
$850 thousand increase to the annual operating budget beginning in
FY 2023 and a $5.6 million increase in the six-year CIP budget.
Overall, these increases represent inflationary impacts to the
Operating and CIP budgets of 5.5%. Inflationary impacts to the
District are partially mitigated through long-term contracts with
pricing structures that are fixed for the duration of the contract
or include pricing structures whereby annual price increases are for
fixed dollar amounts that are less than the CPI. Examples of such
contracts that the District has committed to in recently include:
the current banking agreement with Union Bank, as well as
janitorial, landscaping, and audit contracts approved by the Board
this year.
CIP Projects
The six-year CIP projection is increasing due to the need for newly
identified CIP projects. The total six-year CIP budget is increasing
$7.3 million from $101.4 million in FY 2022 to $108.7 million in FY
2023. The proposed CIP six-year budget is discussed further in the
CIP section of this staff report.
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Water Costs
Water purchase costs from the District’s suppliers are a significant
component of the District’s overall budget. Potable and recycled
water costs are approximately 64% of the operating budget. For FY
2022, the CWA/MWD purchases budget was approximately $54.2 million.
Every 1% increase in CWA/MWD rates equates to an approximately $540
thousand increase cost to the District or a 0.5% increase in
District potable rates.
For FY 2022, the recycled purchases budget from the City was
approximately $4.9 million. A 1% increase in the City’s recycled
rates equates to a $50 thousand increase cost to the District or a
0.5% increase in the District’s recycled rates. While the dollar
impact is less for recycled, the rate impact to customers is the
same because the dollar impacts for potable and recycled are
proportionately the same compared to their respective budgets.
In addition, there are outstanding items that may impact CWA/MWD
future rates and charges. These outstanding items carry uncertainty
as to the amount and timing of the impacts to the District. These
items include a potential CWA rate redesign, agencies detaching from
CWA, and a renegotiated recycled agreement with the City.
Sewer Challenges
The primary long-term challenge for sewer continues to be the City’s
increasing wastewater fees.
The City’s Pure Water program, which incorporates a secondary
equivalency for the Point Loma WWTP, impacts the wastewater fees
paid for by the District’s sewer customers for sewage treatment. The
ultimate cost of the City’s Pure Water program remains the most
significant cost increase facing the sewer customers over the next
six (6) years, and beyond. There is still significant ambiguity on
how these costs will affect our customers. As mentioned in an April
3, 2019 Engineering Staff Report, the District’s sewer customer’s
share of Pure Water Phase I is estimated at $2.6 million and Phase
II is estimated at $5.7 million. The combined effect on rates
totaling 29% will need to be phased into the District’s sewer rates
over the next 15 years. The District is three (3) years into the 15-
year period. While estimates of the Pure Water program are built
into the budget projections, the separate billing of the Pure Water
program has not been incorporated into the City’s sewage treatment
fees; therefore, there is still some risk regarding the ultimate
outcome to the District.
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The City has received grant funding and low-cost State Revolving
Fund (SRF) financing for its Pure Water program. These funding
sources directly reduce the overall Pure Water cost and reduce the
District’s pay-go funding requirement, smoothing out the cashflow
impact to the District’s customers. Payments for SRF do not start
until a year after construction completion, meaning the Pure Water
program cost impacts covered by SRF are expected to be delayed until
the 2026 or 2027 timeframe.
The District has also mitigated the cost of the Pure Water program
by lowering our contracted capacity. A modification in annual
average daily metro capacity from 1.287 MGD to 0.38 MGD, under the
new Metro amended agreement, has reduced the District’s ultimate
Pure Water burden.
For the CIP component of Pure Water, staff is assuming a $62
thousand increase of the District’s operating Metro fees in FY 2023
based on an estimate provided by the City. In addition to the
operating fees, the District has established a CIP project
associated with the capacity under the new amended agreement. The
sewer CIP is estimated to cost $8.3 million over the next 15 to 20
years. Based on information from the City, the current six (6) year
CIP projection includes $480 thousand for the Pure Water program.
The District is also anticipating an increase in costs related to a
shared-facility agreement with the County of San Diego (the County).
A section of the District’s sewer system is a shared facility owned
and operated by the County. The County is undergoing a necessary
rehab project of the shared facility, which is estimated to cost the
District’s sewer operation approximately $800 thousand over the next
four (4) years.
Drought Resiliency
Following Governor Gavin Newsom’s declaration of a statewide drought
and a CWA Board of Directors vote to activate Level 1 under its
Water Shortage Contingency Plan (WSCP), on October 29, 2021, the
District declared a Shortage Level 1 Drought Alert under its WSCP. A
Shortage Level 1 Drought Alert urges customers to voluntarily reduce
water use by 10%. At that same time, the District further called for
its customers to voluntarily reduce use by 15% to align with the
Governor’s July 2021 executive order.
The Governor’s July executive order called on Californians to
voluntarily reduce water use by 15% from 2020 volumes to protect
water reserves and complement local conservation mandates. In
August, the State Water Resources Control Board (SWRCB) reported
that California reduced urban water use by 5% compared to 2020. The
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Governor’s October 19 proclamation added the remaining eight
counties not included in the previous drought state of emergency
declarations and required local water suppliers to implement their
WSCPs that are responsive to local conditions and prepare for the
possibility of a third dry year. The proclamation also authorized
the SWRCB to ban wasteful practices, including the use of potable
water for washing sidewalks and driveways.
On March 28, 2022, the Governor signed Executive Order N-7-22, which
encourages suppliers, “where appropriate, to consider” going above
and beyond Level 2 of their WSCPs. The executive order also asks, by
May 25, 2022, for the SWRCB to “consider” adopting emergency
regulations to include defining “non-functional turf” and a ban on
irrigation of decorative/ornamental (non-functional) grass around
commercial, industrial, and institutional buildings. The requested
considerations include activating Level 2 (up to 20%) if the SWRCB
decides this by May 25. The SWRCB will then set the date by which
urban water agencies will need to implement this order. The District
is already asking its customers to voluntarily save 15%, 5% above
its Level 1 conservation. Nevertheless, if the SWRCB requires the
20% savings, the District would then be required to trigger Level 2.
If the SWRCB does not mandate that urban agencies activate 20%
savings, the District could remain at Level 1, potentially asking
customers to voluntarily save up to 20% from 2020 volumes.
San Diego County is better prepared for drought than other parts of
the state, having invested heavily in water conservation, water
recycling, seawater desalination, and transitional storage over the
last 20-plus years. However, severe drought in other parts of
California can affect the whole state. Despite recent rainfall,
consecutive seasons with limited rain and snow melt will force
regional wholesale suppliers to begin to draw down key reservoirs
serving San Diego County. The San Diego region and its water
agencies continue to monitor state direction for the potential need
for extraordinary water conservation measures.
For now, the order continues to call on Californians to strive to
limit summertime water use and to use water more efficiently indoors
and out. By May 25, the District should know more about what actions
the SWRCB will take per the Governor’s order. Until then, the
District will continue to push conservation messaging to its
customers through the state’s “Save Our Water” conservation
campaign, Metropolitan Water District, and the Water Authority.
As part of preparing the FY 2023 budget, staff has performed
preliminary sensitivity evaluations of potential drought-related
usage reductions on the District’s financial targets and covenants.
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Staff will continue to monitor the fiscal impact of conservation on
the District. The preliminary sensitivity analysis determined that a
20% reduction in FY 2023 volumes would result in the District’s FY
2023 debt service coverage falling below target but remaining above
covenant levels. Reserves would remain above target levels in FY
2023. As a data point, 1% conservation results in a $190 thousand
reduction in net revenues.
There are several alternatives that the District may utilize to
respond to the ongoing financial challenges of conservation, if
necessary. These alternatives include implementing savings
initiatives, deferring CIP, and an additional rate increase if
necessary.
CalPERS and OPEB Update
As of June 30, 2020, which is the most recent CalPERS actuarial
pension valuation, the District’s pension is 84.4% funded and the
unfunded pension liability is approximately $23.8 million. The
pension and OPEB liabilities carry an interest cost of 7.0%, which
is the District’s highest interest cost. By focusing on reducing and
eliminating the unfunded pension liability, the District is reducing
the highest interest cost liability which represents a savings
opportunity to the District.
As of June 30, 2020, the OPEB plan was fully funded, and the plan
began reimbursing the District for retiree medical costs. In FY
2021, the District received its first reimbursement of retiree
medical costs since the plan was expanded in 2010. Prior to FY 2021,
the District utilized the approximate $1.2 million per year to
advance fund the retiree medical unfunded liability. Based on the
most recent OPEB actuarial report, the plan reached 109% funding
level.
The Board approved for the FY 2022 OPEB actuarial determined
contribution to be applied to CalPERS. Staff is recommending that
the FY 2023 actuarial determined OPEB contribution of $925 thousand
again be redirected to advance fund the District’s CalPERS pension
fund.
The objective of this advance funding is to save the ratepayers
money. The District’s unfunded pension liability is approximately
$24 million. Preliminary calculations have determined that
continuing the annual advance fundings of the CalPERS plans will
save the District approximately $6.0 million over the 12-year
advance funding period, which began in 2021. The District has
completed two (2) years of the advanced fundings.
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Major Assumptions
Potable Sales Volumes
Through March 31, 2022, actual potable water sales were 9.1 million
units, which was 2.4% above budget of 8.9 million units. The surplus
is due to below average rainfall. Through March 31, 2022, year—to-
date rainfall of 6.8 inches was 20% below the historical average.
Staff is continuing the practice of using an average of actual
historic volumes to determine budgeted volumes. This practice
results in budgeted volumes that are in the median range of recent
annual high and low volumes. Using this methodology anticipates
that, over the long term, rainfall will equal average levels
reducing the likelihood of rate spikes due to shifts between wet and
dry years.
For the FY 2023 budget, staff is using a four-year average from FY
2019 to FY 2022, plus a growth factor based on the Vertex Economic
Outlook Study presented at the April Board meeting. Staff recognized
FY 2021 volumes were above historic levels due to COVID-19; however,
inclusion or exclusion of FY 2021 volumes has less than a 1% impact
on the total budgeted volume.
The following table contains a chart of historical potable volumes,
rainfall, the four-year average, and the FY 2023 volume calculated
as the four-year average, plus growth.
Following are the projected unit sales assumptions proposed for the
FY 2023 six-year rate model. Additional discussion pertaining to the
projected volumes can be found immediately following the table.
Projected Unit Sales (in million HCF)
6-Year Rate Model Projection
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 6-year Avg Growth %
11.9 12.0 12.0 12.0 12.1 12.1 12.0 0.30%
Historical Unit Sales (in million HCF) and Rainfall (in inches)
Actual Projected Average Budget
FY 2019 FY 2020 FY 2021 FY 2022 4-Year FY 2023
Rainfall 12.6 16.7 4.8 7.3 10.4 N/A
Units 11.3 11.4 12.6 11.9 11.8 11.9
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The following analysis shows historic and projected volumes compared
to last year’s projections and ranges.
•The green line represents a maximum volume year based on
relevant historical actual volume.
•The red line represents the minimum volume year based on
relevant historical actual volume.
•The yellow section represents the volume associated with
growth.
•The black solid line represents the FY 2023 projection,
totaling the existing (blue) plus the growth (yellow) volumes.
Recycled Sales Volumes
Through March 31, 2022, the actual recycled water sales volume was
1.2 million units, which was 1.8% above budget. The surplus volume
is largely due to less than average rainfall discussed in the
previous potable sales volume section of this report. The FY 2023
volume projections have been prepared using the same historical
average plus growth methodology used to prepare the potable volume
projection. The table on the following page contains a chart of
historical recycled volumes, rainfall, the four-year average, and
the FY 2023 volume calculated as the four-year average, plus growth.
12.2
12.5
11.3
11.6
FY 2023
11.9
12.1
10.5
11.0
11.5
12.0
12.5
13.0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Otay Water District
Potable Sales Projection Analysis
FY 2023 Budget and Six-Year Projection
(in million units)
Base Volume Cumulative Growth Ceiling Floor
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Following are the projected unit sales assumptions proposed for the
FY 2023 six-year rate model. Additional discussion pertaining to the
projected volumes can be found immediately following the table.
Projected Unit Sales (in million HCF)
6-Year Rate Model Projection
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 6-year Avg Growth %
1.6 1.6 1.6 1.6 1.6 1.6 1.6 0.25%
The following analysis shows historic and projected volumes compared
to last year’s projections and ranges.
•The green line represents a maximum volume year based on
relevant historical actual volume.
•The red line represents the minimum volume year based on
relevant historical actual volume.
•The yellow section represents the volume associated with
growth.
•The black solid line represents the FY 2023 projection,
totaling the existing (blue) plus the growth (yellow).
Historical Unit Sales (in million HCF) and Rainfall (in inches)
Actual Projected Average Budget
FY 2019 FY 2020 FY 2021 FY 2022 4-Year FY 2023
Rainfall 12.6 16.7 4.8 7.3 10.4 N/A
Units 1.5 1.5 1.8 1.6 1.6 1.6
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Capital Improvement Program (CIP) Budget
As a component of the annual budget development process, the
Engineering staff update the CIP budget using the following process:
•CIP projects are selected based on the Water Facilities Master
Plan (WFMP), the Urban Water Management Plan (UWMP), Sub Area
Master Plans (SAMP), Integrated Water Resources Plan (IRP),
Wastewater Management Plan (WWMP), the Cathodic Protection
Plan, the District’s Strategic Plan, and other focused or
specific planning documents and reports to manage growth,
maintenance, and the life extension of assets.
•The CIP goes through an iterative process to meet the criteria
of growth, service levels, supply targets, and system
reliability.
•CIP target expenditures for the next six (6) years are refined
and used in the rate model.
The following general criteria are used to determine the
reasonableness of a project before it is considered for inclusion
within the CIP budget:
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•Safety and existing facility conditions
•Operating system conditions and energy improvements
•Water and sewer system deficiencies
•Regulatory and permitting agencies requirements
•Developer driven requirements
•Economic outlook
•Growth projections
•Water supply diversification goals
•Board and management directives
This year, the total six-year CIP budget of $108.7 million is
increasing by $7.3 million versus last year. The total water CIP
budget for the six-year period is $98.9 million, which is a $5.5
million increase compared to FY 2022. The sewer CIP of $9.8 million
is increasing $1.9 million compared to FY 2022. To maintain reserves
at target levels for sewer, staff is projecting debt issuances for
sewer in 2025 and 2027. As the District approaches the timing of
issuing debt, an analysis will be performed to determine the cost
benefit of combining the two sewer debt issuances into a single
issuance. The following schedule contains a roll-forward of the six-
year CIP budget followed by explanations for the roll-forward
amounts.
FY 2022 Six-Year CIP Budget $ 101.4
New Projects $ 6.1
Completed Projects $ (0.3)
Ongoing Project Changes
Budget Increases $ 7.8
Budget Decreases $ (0.5)
Budget Expenditures for FY 2022 $ (5.8)
FY 2023 Six-Year CIP Budget $ 108.7
The $6.1 million for 11 new CIP projects consists mainly of the
following:
•$2.0 million for Zero Emission Vehicles and Charging
Infrastructure to meet regulatory requirements.
•$1.3 million for the renovation of three vaults and a pressure
reducing station.
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•$900 thousand total in two (2) CIP budgets for standby power
generator replacement equipment to meet regulatory
requirements.
Budget increases of $7.8 million are due to a combination of
increasing scope of work, updates to engineering estimates, natural
progression of projects, and inflation. Scope of work increases and
updated engineering estimates, which inherently include an
inflationary component, are approximately $5.2 million. Increases
associated with the natural progression of projects are
approximately $1.5 million. Increases associated solely with
inflation are $1.1 million.
Financing Plan
The District uses a comprehensive approach to financing. The Debt
Policy provides guidance for debt issuance and refinancing. The
Reserve Policy provides guidance on both fund transfers and reserve
balances. With these policies, a six-year financing plan is
formulated that identifies the timing and amounts of debt issuances,
the level of rate increases, debt coverage ratios, reserve balances,
and necessary transfers.
The District’s comprehensive approach to financing establishes
financial targets that add to the financial strengths of the
District. Those strengths include:
•AA credit rating which saves ratepayers money through reduced
debt costs.
•Financial stability which allows the District to set rates
based on the long-term financial needs of the District. This
allows the District to anticipate financial challenges well
into the future and prevents unnecessary rate spikes to
District customers.
Open Items
Following is a list of items that are in process and will be
presented at the final Budget Board presentation on June 8:
•Overall budget summary
•Rates and rate increases
•Debt service coverage
•Sewer annual and winter average updates
•CWA Rates and Fixed Charges
•Labor and benefits
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•Materials and maintenance expense
•Administrative and legal expense
•Salary Schedule
•Rate comparison
•Fund transfers
•Budget approval
FISCAL IMPACT: Joseph R. Beachem, Chief Financial Officer
This is an informational item. Each one of the items discussed above
will impact the proposed rate increases over the next six-year
period. Recommended changes to rates will be based on the District
maintaining reserves at minimum or target levels and meeting its
debt coverage targets. To the degree that these targets and
covenants are met, the financial impact of the items discussed in
this staff report will be phased in over multiple years. For both
water and sewer, staff is estimating that debt service coverages and
the reserve requirements will be above minimum and targeted levels
for the six-year period.
STRATEGIC OUTLOOK:
The District ensures its continued financial health through long-
term financial and debt planning.
LEGAL IMPACT:
None.
Attachments:
A)Presentation – FY 2023 Budget Workshop
OTAY WATER DISTRICT
FY 2023 BUDGET
WORKSHOP
APRIL 27, 2022
1
Attachment A
WORKSHOP AGENDA
2
➢Introduction and Objectives (Joe Beachem)
➢Challenges, Strengths, Drought Resiliency, and District Actions
(Jose Martinez)
➢Strategic Plan Initiatives (Adolfo Segura)
➢Capital Improvement Budget (Bob Kennedy)
➢Key Assumptions, Financing Plan, and Conclusion (Kevin Koeppen)
BUDGET OBJECTIVES
3
➢Support Strategic Plan objectives
➢Support essential operations of the District
➢Reserves at or above minimum or target for all six years
➢Debt coverage, excluding growth, above target of 150% for both
water and sewer for all six years
➢Fund the Six-Year CIP budget
➢Establish rates that are compliant with Proposition 218
BUDGET SCHEDULE
4
April
Board
Meeting
➢Economic
Studypresented
Today,
April 27th
➢Budget
Workshop
➢Water Cost
of Service
Study
presented
June
Board
Meeting
➢Budget
Approval
October
Board
Meeting
➢Proposition
218 Hearingfor Water
BUDGET PROCESS
5
Six-Year
Rate Model
Year-end
Balances
Operating
Budget Input
Six-Year CIP
Budget Input
MWD/CWA &
City Sewer Rates
Strategic
Plan
Assumptions
Interest Rates
Inflation
Growth
Sales
Debt
Targets
Debt Coverage
Reserve Levels
Operating
Budget
CIP
Budget
Water
&
Sewer
Rates
Drought
PROPOSITION 218 –WATER
6
➢Timeline
▪Cost of Service Study Performed –2022
▪Proposition 218 Hearing –October 5, 2022
▪Next Cost of Service Study Planned –FY 2025
▪Next Proposition 218 Hearing –October 2025
➢Board Approved Terms
▪5-years
▪100% pass-through of supplier-related costs, including SDG&E
▪Up to 10% rate increases for internal costs
PROPOSITION 218 –SEWER
7
➢Timeline
▪Last Cost of Service Study Performed –2020
▪Completed Proposition 218 Hearing –October 7, 2020
▪Next Cost of Service Study –FY 2025
▪Next Proposition 218 Hearing –October 2025
➢Board Approved Terms
▪5-years
▪100% pass-through of sewer service provider costs and SDG&E
▪Up to 10% rate increases for internal costs
CHALLENGES, STRENGTHS,
DROUGHT RESILIENCY, AND
DISTRICT ACTIONS
(JOSE MARTINEZ)
8
CHALLENGES
9
➢Increase in Six-Year CIP plan
➢Water purchase costs
➢Workforce turnover
➢Proposition 218 challenges/Water Cost of Service study
➢Sewer
▪City of San Diego Pure Water
▪County of San Diego shared facilities rehabilitation projects
➢Inflation
➢Drought
DROUGHT RESILIENCY
➢Shortage Level 1 declared October 29, 2021
▪Urges customers to voluntarily reduce water use by 10%.
▪District further called on customers to voluntarily reduce by 15%, aligning with the
Governor’s July 2021 executive order.
➢Executive Order N-7-22 signed on March 28, 2022
▪Encourages suppliers to consider going above and beyond Level 2 (up to 20%
savings vs. 2020).
▪Specifically asks SWRCB to consider adopting emergency regulations including a
ban on irrigation of non-functional turf by May 25, 2022.
➢San Diego County water agencies continue to monitor State direction
➢District response to financial impacts
10
STRENGTHS
11
➢Strategic Planning process
➢CWA diversification of regional supply (drought-proofing San Diego)
➢CWA refunds
▪$3.2 million received in FY 2021
▪$2.5 million received in FY 2022
➢Fully-funded OPEB
➢Efficiency Gains (since 2007)
▪35% increase in customers per FTE
➢Bond Rating
▪S&P ‘AA’ rating
➢Sound Financial Management
▪Reserve, Debt, and Investment Policies
DISTRICT UNPRECEDENTED ACTIONS
➢Advocating for Customers
▪Engaging CWA/MWD –received over $5.7 million in rebates
▪Engaging MWD –rate reductions from 8% to 5%
▪Arrearage Funding
▪Water –over $500 thousand to date
▪Sewer –over $20 thousand to date
▪In March, District completed registration to access additional arrearage
▪Federal Stimulus –over $70 thousand
▪Coordinated 165 accounts to avoid shutoffs through payment plans (historically
payment plans were rare since customer’s past due balance stayed relatively low)
➢FEMA Assistance –Documented and submitted over $320 thousand for
reimbursement
➢Grant Efforts
12
BOARD’S PROACTIVE APPROACH TO
FINANCIAL AND OPERATIONAL STABILITY
13
➢Financial strength through establishing debt coverage targets and Reserve
Policy
➢Investment in disaster preparation from policies to disaster kits
➢Invested in staffing, software, equipment, and other infrastructure to
allow remote operations
➢Efficient use of equipment and vehicles
➢Converted variable bonds to fixed
➢Limited exposure to CalPERS changes in future discount rates by making
advanced payments
STRATEGIC PLAN
FY2023 –FY2026
(ADOLFO SEGURA)
14
OVERVIEW
15
The District’s four-year strategic plan (SP), FY23 –FY26, is a roadmap for how the District will respond to
current challenges and improve the essential services it provides its customers. The SP also provides a shared
vision for the agency and a new path towards common goals. With the successful execution of multi-year SPs
over the past twenty years, the development of this plan reaffirms the District’s mission “To provide
exceptional water and wastewater service to its customers, and to manage District resources in a transparent
and fiscally responsible manner.” Key areas of focus include:
Aging Workforce/Knowledge Transfer
Culture (Retention & Recruitment of Top Talent)
Customer Service
Advancement of Cybersecurity
Analysis of Future Storage & Distribution System Needs
Advancement of Asset Management
Analysis of Long-Term Financial Obligations & Next Generation Business Systems
SP: 11 strategies, 35 objectives, and 34 KPIs
BALANCE SCORECARD PERSPECTIVES
“Alignment of the District’s mission, vision, and plan execution”
Employee development/
Retention
Financial sustainability Customer satisfaction/
Engagement
Operational efficiency
Customer Financial
Internal
Business
Processes
Learning &
Growth
16
CUSTOMER
Enhance and build public awareness of the District’s priorities,
initiatives,programs,and services.(4 objectives)
Answer Rate
Technical Water Complaint
Potable Water Compliance Rate
Customer Opinion Survey
STRATEGIES | 1
TOTAL OBJECTIVES | 4
KEY PERFORMANCE INDICATORS (KPIs) | 4
Enhance customer and community engagement to increase public awareness of the water industry and the District, while continuing to provide superior customer service.
17
18
FINANCIAL
Maintain a long-range financing plan that sets forth the long-term funding
needs of the District. (5 objectives)
Invest in technology infrastructure to enhance customer engagement and
satisfaction. (2 objectives)
STRATEGIES | 2
TOTAL OBJECTIVES | 7
Operate the District in a financially sustainable and transparent manner while maintaining a Fair Rate Structure.
CIP Project Expenditures vs. Budget
Construction Change Order
Incidence
Billing Accuracy
Sewer Rate Ranking
Water Rate Ranking
Water Debt Coverage Ratio
Sewer Debt Coverage Ratio
Reserve Levels
KEY PERFORMANCE INDICATORS (KPIs) | 14
Accounts per Full-Time Employee
(FTE)
Distribution System Loss
Planned Potable Water
Maintenance Ratio in $
Planned Recycled Water
Maintenance Ratio in $
Planned Wastewater Maintenance
Ratio in $
Direct Cost of Treatment per MGD
INTERNAL BUSINESS
PROCESSES
STRATEGIES | 6
TOTAL OBJECTIVES | 19
Leverage the use of renewable and clean energy resources and
reduce the use of hazardous chemicals. (4 objectives)
Implement technologies to improve response time, security, and
operational effectiveness. (4 objectives)
Develop appropriate water resource mix to meet the water
reliability needs of the community. (3 objectives)
Respond to anticipated water shortages through rate structure
modification, conservation assistance, and outreach. (2 objectives)
Advancement of District's Asset Management Program. (4
objectives)
Cyber and Physical Security (2 objectives)
19
Practice ongoing
infrastructure renewal and
organizational
improvement through
planning and increased
operational efficiency.
20
Business Recovery Exercises
Vulnerability Assessment
Mark-out Accuracy
Easement Evaluation and Field
Inspection
System Valve Exercising Program
Potable Water Distribution System
Integrity (Leaks)
Potable Water Distribution System
Integrity (Breaks)
Recycled Water System Integrity
(Leaks)
Recycled Water System Integrity
(Breaks)
Sewer Overflow Rate
Potable Tank Inspection and
Cleaning
Hydrant Maintenance Program
Injury Incident Rate
INTERNAL BUSINESS
PROCESSES
Practice ongoing
infrastructure renewal and
organizational
improvement through
planning and increased
operational efficiency.
KEY PERFORMANCE INDICATORS (KPIs) | 13
21
Coordinate workforce planning activities to determine future
needs,identify gaps,and implement actions to close the gaps.
(3 objectives)
Improve Organization Effectiveness.(2 objectives)
Employee Voluntary Turnover Rate
Training Hours per Employee
Safety Training Program
STRATEGIES | 2
TOTAL OBJECTIVES | 5
LEARNING AND
GROWTH
Foster a workforce culture of employee development and innovation.
KEY PERFORMANCE INDICATORS (KPIs) | 3
22
CAPITAL IMPROVEMENT PROGRAM
FY 2023 –FY 2028
(BOB KENNEDY)
CONSTRUCTION CLIMATE/MITIGATION
Factors Influencing Construction Climate
➢Shortage of skilled and unskilled labor
➢Regional competition for contracting resources
➢Materials cost escalation due to demand and material shortages
Mitigation Strategies
➢Value engineering
➢Grouping projects to attract bidders
➢Pre-purchasing of materials
➢Adding no-cost time extension into specs
➢Grant funding
23
CIP BUDGET GUIDELINES
➢Development trend is expected to be unchanged in FY 2023
➢New development with multi-family dwellings in greater
proportion to single-family dwellings
➢In preparing the budgets for the individual CIP projects, the
Engineering Department used recent construction and bidding
data to adjust costs for each project
➢Reprioritized projects based on District’s planning documents and
to control spending to keep rates stable
24
CIP SIX-YEAR BUDGET LOOK FORWARD
($Millions)
25
FY 2022
FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Totals $ 8.7 $ 15.6 $ 20.0 $ 24.3 $ 20.1 $ 12.6
Six-Year Total: $101.4
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Totals $ 13.0 $ 22.0 $ 24.2 $ 18.0 $15.9 $15.6
Six-Year Total: $108.7
FY 2023
$2.6 / 17%
Reduction
$2.0 / 10%
Increase
SIX-YEAR BUDGET DIFFERENCES
FY 2022 vs. FY 2023 $ Millions (Negative Value)
FY 2022 Six-Year CIP Budget $ 101.4
New Projects 6.1
Completed Projects (0.3)
Ongoing Project Changes
Budget Increases
Budget Decreases
Budget Expenditures for FY 2022
7.8
(0.5)
(5.8)
FY 2023 Six-Year CIP Budget $ 108.7
26
HIGH PROFILE CIP PROJECTS
Fiscal Year 2023 CIP ($ Millions)
Various Waterline Replacements (27 Total)
1004-2 & 485-1 Reservoir Improvements
RWCWRF Disinfection System Improvements
Pump Station Upgrades & Modifications
Sewer Basin Improvements (10 total)
$ 4.2
1.3
0.8
0.6
0.6
Total Expenditure Projection
% of Total FY 2023
$ 7.5
58%
27
Pipeline Replacement Projects (27 Total)
Reservoir Construction or Rehabilitation Projects (17 Total)
Pump Station Replacement and Rehabilitation
Meter Replacement & AMI Pilot Project
Sewer Basin Improvements
Pipeline Misc. Appurtenances
Equipment & Vehicles
RWCWRF Projects (12 Total)
$ 34.7
21.1
11.7
8.9
7.4
6.2
4.4
3.6
Total Expenditure Projection $ 98.0
% of Total FY 2023 –FY 2028 Budget 90%
28
HIGH PROFILE CIP PROJECTS
Fiscal Year 2023 –2028 CIP ($ Millions)
KEY ASSUMPTIONS,
FINANCING PLAN, AND
CONCLUSION
(KEVIN KOEPPEN)
29
FY 2023 ASSUMPTIONS
30
➢Revenues
▪Budgeted volumes
▪Growth revenues
➢Operating and CIP Costs
▪Impacted by inflation
▪Regulatory creep
➢Pension and OPEB Strategy
WATER VOLUMES
31
➢Average Usage Approach
▪Four-year historic average usage
▪Ceiling based on highest normal volume/driest year
▪Floor based on lowest volume/wettest year
➢Goal = Projected Volumes at the Midpoint
▪Long-term accuracy of rate projections
➢Budget Drought Resiliency
▪20% volume reductions
▪$3.8 million reserve reduction
▪40% debt service coverage reduction
▪Reserves maintained above target and debt service coverage above covenant
32
FY 2023 BUDGET VOLUMES
Potable
Units
(in millions)
Recycled
Units
(in millions)
Rainfall
(inches)Notes
2019 Actual 11.3 1.5 12.6 Wet year with above average rainfall
2020 Actual 11.4 1.5 16.7 Wet year with above average rainfall
2021 Actual 12.6 1.8 4.8 Dry year with below average rainfall
2022 Projected 11.9 1.6 7.3 Dry year with below average rainfall
4-year Average 11.8 1.6 10.4
Growth 0.30%0.15%
FY 2023 Budget 11.9 1.6
POTABLE WATER VOLUMES
Unit Sales (in millions)
33
12.2
12.5
11.3
11.6
FY 2023
11.9
12.1
10.5
11.0
11.5
12.0
12.5
13.0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Base Volume Cumulative Growth Ceiling Floor
RECYCLED WATER VOLUMES
Unit Sales (in thousands)
34
1,799 1,817
1,452 1,470
FY 2023
1,572 1,587
1,000
1,200
1,400
1,600
1,800
2,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Base Volume Cumulative Growth Ceiling Floor
35
PENSION & OPEB STRATEGY
➢OPEB –Fully funded
▪OPEB trust will reimburse the general fund for retiree medical costs
▪District will not contribute to OPEB in 2023
➢Continue advance PERS funding strategy:
▪Transfer $1.2 million retiree medical to advance fund PERS
▪Transfer $0.9 million foregone OPEB contribution to advance fund PERS
▪$6 million estimated savings over 12 years
RATE DRIVERS
36
➢Water
▪Water purchase costs
▪Increase in Six-Year CIP projection
▪Debt coverage above target for six years
▪Reserves above minimum and/or target over six years
➢Sewer
▪City of San Diego Pure Water Project
▪Increase in Six-Year CIP projection
▪County shared facility projects
▪Reserves at target over six years
FINANCING PLAN
37
Water
➢No projected debt
issuances
Sewer
➢2025 debt issuance*
➢2027 debt issuance*
*An evaluation will be performed closer to the debt issuance to determine the cost benefit of combining issuances into a single debt issuance.
JUNE 8TH PRESENTATION & NEXT STEPS
38
➢Budget Summary
➢Cost of Service Study Incorporation
➢Rate Increase Recommendation
➢Debt Coverage Projection
➢Winter Average Update
Next Steps
➢Proposition 218 and Rate Increase Notices
➢Proposition 218 Hearing
➢Labor and Benefit Costs
➢Admin & Material Costs
➢Salary Schedule
➢Rate Comparison
➢Budget Approval
QUESTIONS?
39
STAFF REPORT
TYPE MEETING: Budget Workshop MEETING DATE: April 27, 2022
SUBMITTED BY: Kevin Koeppen, Assistant
Chief Finance Officer
PROJECT: DIV. NO. All
APPROVED BY: Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Review the Results of the Water Cost of Service Study and
Obtain Board Direction to Incorporate the Cost of Service
Study Results into the FY 2023 Budget
GENERAL MANAGER’S RECOMMENDATION:
Review the results of the Water Cost of Service Study and obtain
Board direction to incorporate the cost of service study results into
the FY 2023 budget.
COMMITTEE ACTION:
This item was not taken to Committee.
PURPOSE:
To review the results of the Water Cost of Service Study and obtain
Board direction to incorporate the cost of service study results into
the FY 2023 budget.
ANALYSIS:
The District performs rate studies every three to five years
depending on changes in economic factors, price increases, water use
patterns, regulations, infrastructure, and other cost drivers. The
cost of service study is a crucial tool when setting retail rates
because as water use and cost drivers change over time, and
imbalances may occur in the equity of how various customer classes
pay for water. It has been five years since the District performed
the last water rate study and changes in usage patterns and the legal
environment have occurred that warrant the study be updated at this
time.
AGENDA ITEM 6a
The analysis performed in this cost of service study and the proposed
rates respond directly to a ruling by the San Diego Superior Court
(Court), which determined the District failed to meet its burden of
proof of demonstrating that the tiered water rates from 2013 to 2021
for single-family residential customers were proportional to the cost
of service attributable to each customer's parcel, as required by
Proposition 218. The District may appeal the Court’s decision;
however, a response by the District to the ruling was required to
mitigate potential future damages.
The State of California has certain well-established legal
constraints regarding utility rate making and California Constitution
Articles XIII C and D (referred to as “Proposition 218”) are at the
forefront. Proposition 218 requires water (and sewer) utilities to
establish cost-based rates for the services provided. The last
comprehensive water rate study that was performed for the District in
2017, developed and structured the technical analysis to comply with
the requirements of Proposition 218 as they were known at that time.
Since the adoption of the District’s rates in 2017, inconsistent
rulings throughout the state have created challenges in determining
precisely what meets the requirements of Proposition 218. The current
study and technical analysis have been structured to comply with the
requirements of Proposition 218 as they are known and understood at
this time.
Setting rates based on cost of service in compliance with Proposition
218 was the primary goal of this study. The current rate study
examined the assignment of costs to the various customer types. The
costs assigned to customer types are then allocated to tiers within
each customer type. Costs are allocated to tiers based on the
necessity to size the system to meet customer peak demands. The
system infrastructure (pipes, pump stations, distribution storage
reservoirs, etc.) must be sized to meet peak demands. The costs
associated with servicing peak demand capacity are greater than the
costs associated with average usage; therefore, the customers that
drive the peaking pay for the costs associated with the sizing of the
infrastructure necessary to meet those demands. The technical
analysis of evaluating usage patterns utilized historical actual use.
As part of this study and in response to the Court’s ruling, staff:
•Is recommending a rate structure that is both compliant with
Proposition 218 requirements as they are known and interpreted
at this time, and responsive to the current Superior Court
decision regarding the District’s residential rates.
•Evaluated cost allocation to various customer classes and tiers.
•Evaluated tiered and uniform rate structures for all classes.
•Evaluated water meter equivalencies using AWWA’s hydraulic
capacity factors for water customers.
This study will be used to prepare the FY 2023 budget and will be the
basis for the rates effective on January 1, 2023. The timeline for
performing a cost of service study and incorporating the results into
rates is as follows:
1. April – Staff presents the Water Cost of Service Study to the
Board and seeks direction from the Board to incorporate the
study into the FY 2023 budget.
2. June – Staff presents the Fiscal Year 2023 Operating and Capital
Budgets to the Board and requests the Board’s adoption of the
Budget which incorporates the Study’s rates.
3. July – August – Staff prepares and delivers Proposition 218
hearing notices to customers.
4. October – The District holds a Proposition 218 hearing and the
Board votes on the proposed rates.
5. January 1, 2023 – The proposed rates become effective for all
billing after January 1,2023 and may apply to water used as
early as the beginning of December 2022.
When performing a cost of service study, it is important to note that
revenue neutrality is maintained for the study year. This means that,
based on the study data provided, an agency collects the same amount
of total revenue through fees and charges. However, due to changes in
usage patterns and rate structures, the impact to individual customer
bills may vary. Customers’ usage patterns that drive costs higher,
pay the higher costs incurred for their usage patterns. Customer
usage patterns that drive lower costs, pay lower costs for those
usage patterns. It also means that specific cost drivers, such as
energy for pumping, should match the revenue collected through energy
fees charged to customers. Once the rate structure is determined by
the findings of the rate study, higher budgeted costs including water
and power, higher meter counts, and sales volume changes determine
the necessary rate increases. The study year used to prepare this
cost of service study was the District’s draft FY 2023 budget
(excluding any proposed FY 2023 rate increase) and volumes.
For the current study the District’s rates have been updated based on
evaluations of usage patterns, updated meter data, and updated
functional cost allocations. Evaluations and cost allocations were
performed in accordance with standard AWWA rate setting practices
established for the reasonable allocation of costs and in response to
the Court’s ruling. The following tables summarize the shifts in
revenues between classes and the revenue neutrality between the
proposed and current rates for potable and recycled.
Potable Revenue by Customer Class
Recycled Revenue by Customer Class
Steve Gagnon, PE (AZ) and his team from Raftelis performed the
current study and assisted with the evaluation of the rate
structures. The rate study process consists of the following steps:
1. Establish the Revenue Requirement - This step compares the
revenues of the District to the expenses to determine the
overall level of the rate adjustment.
2. Prepare the Cost of Service – During this process, the
revenues and costs are functionalized, assigned to cost
components, and then distributed to customer classes.
3. Rate Design – Design rates for each class of service to
reflect the cost of providing service to the individual
customer groups and tiers.
The proposed rates include the following rate structure changes:
• Raftelis evaluated the use of either a uniform or tiered rate
structure for all classes of service. Raftelis supports the use
of a tiered rate structure for residential and multi-residential
as an acceptable methodology to recover costs from customer
classes as required by Proposition 218. The use of a tiered rate
structure for residential customers is common in California and
is appropriate for residential and multi-residential classes
because, respectively as classes, water use for these customer
classes is more homogeneous compared to other classes. Raftelis
also supports the use of a uniform rate for the all the
District’s other classes because it is also an acceptable
methodology to recover costs from non-residential classes. It is
common to have a uniform rate for non-residential classes whose
water use is not homogeneous, which makes defining tiers
difficult.
• For this study, the tier breakpoints and breakpoint methodology
were updated for residential and multi-residential customers.
Tier breakpoints were developed based on the combined usage
patterns of residential and multi-residential customers, and the
same breakpoints are used for both classes. Both residential and
multi-residential classes use water in a similar manner. A
change to the methodology for establishing the tier 1 upper
breakpoint from a calculation based on winter average use to one
based on annual average use is recommended as part of this study
as the breakpoints based on average annual use aligns more with
how the system was built.
Residential Tier Breakpoints
Tier Current
Breakpoint
Proposed
Breakpoint
Tier 1 0 – 10 0 - 8
Tier 2 11 – 22 9 – 12
Tier 3 >=23 >=13
Multi-Residential Tier Breakpoints
Tier Current
Breakpoint
Proposed
Breakpoint
Tier 1 0 - 4 0 - 8
Tier 2 5 – 9 9 – 12
Tier 3 >=10 >=13
• The government fee currently charged to government (“public”)
customers was eliminated. Commercial and public customer classes
have now been separated into their own distinct classes. For
example: Irrigation which currently includes both commercial and
public customers was separated into Commercial Irrigation and
Public Irrigation. The public rates exclude the property tax
benefit as public customers do not pay property taxes. The rates
for all other classes, including commercial, that pay property
taxes include a benefit related to property taxes paid by these
classes.
• The temporary class, which was a separate class of customers who
need water service on a temporary basis, has been replaced in
the study by a construction class. The rate for the construction
class is not twice the irrigation rate and construction
customers will be charged the CWA/MWD fixed charge, which was
not previously charged to temporary customers. The majority of
CWA/MWD fixed charges are based on purchased water volumes,
which includes temporary customer volumes; therefore, it was
determined that this customer class should also contribute
towards covering those fixed costs.
• Separate energy charges for potable and recycled customers were
updated in this study.
The cost of service study uses a draft FY 2023 budget and does not
include the impact of a rate increase. These cost of service study
rates will be the basis for the rates in the proposed budget, with
the proposed rates incorporating changes due to the following:
• The proposed rate increases necessary to meet the District’s
debt coverage and reserve targets,
• Changes to the CWA variable rate from estimates to the actual
rates,
• Changes in CWA/MWD fixed fees from estimates to the actual
charges from CWA/MWD, and
• Modifications to energy fees to recover the applicable SDG&E
power costs.
The calculations of average monthly bills in the following tables
were prepared using actual meter sizes and usages by tier for each
customer. The changes presented may differ from those presented by
Raftelis due to differing customer meter sizes and differences in
actual month-to-month usage compared to average monthly usage.
Overall, the estimated changes in monthly bills of users are driven
by changes in the fixed and variable rates. Changes in rates were due
to updated technical evaluations, which included evaluations of usage
patterns, updated meter data, and updated functional cost
allocations, which were performed in accordance with standard AWWA
rate setting practices established for the reasonable allocation of
costs and in response to the Court’s ruling. While the overall
revenue for the District remains neutral, the individual monthly
bills for customers will be impacted differently as a result of the
listed updates.
The following tables summarize the impacts the proposed rates will
have on average monthly customer bills based on usage levels and
customer class.
Average
Monthly Usage
(hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 2 Units 1,821 1 43.24$ 41.38$ (1.86)$ -4%
3 - 5 Units 7,157 4 52.90$ 55.60$ 2.70$ 5%
6 - 8 Units 10,133 7 63.86$ 70.50$ 6.63$ 10%
9 - 12 Units 11,716 10 80.54$ 89.62$ 9.08$ 11%
13 - 20 Units 11,008 16 114.28$ 121.84$ 7.56$ 7%
> 20 Units 4,467 29 221.48$ 208.80$ (12.68)$ -6%
Total 46,302 11 92.77$ 97.44$ 4.67$ 5%
Residential
Average
Monthly Usage
per Dwelling
Unit (hcf)
# of
Customers
Average
Usage per
Dwelling
Unit
Average
Current Bill
per Dwelling
Unit
Average
Proposed Bill
per Dwelling
Unit
$ Increase
(Decrease)
per Dwelling
Unit
%
Increase
(Decreas
e)
0 - 10 Units 749 5 35.50$ 33.37$ (2.13)$ -6%
11 - 15 Units 61 12 80.16$ 69.27$ (10.88)$ -14%
16 - 20 Units 15 17 117.56$ 97.77$ (19.79)$ -17%
> 20 Units 7 27 216.03$ 167.77$ (48.26)$ -22%
Total 832 6 1,186.70$ 1,092.02$ (94.68)$ -8%
Multi-Residential
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 50 496 4 131.27$ 81.32$ (49.94)$ -38%
11-20 201 15 216.71$ 161.92$ (54.79)$ -25%
21-30 122 25 263.82$ 218.69$ (45.13)$ -17%
31-50 123 39 354.91$ 308.65$ (46.25)$ -13%
51-100 126 71 506.73$ 488.77$ (17.95)$ -4%
101-500 159 197 1,142.27$ 1,226.31$ 84.04$ 7%
501-1,000 17 683 3,452.19$ 4,032.60$ 580.41$ 17%
> 1,000 13 2,258 10,489.33$ 12,813.00$ 2,323.66$ 22%
Total 1,257 75 497.23$ 500.57$ 3.34$ 1%
Commercial
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 81 5 257.04$ 156.25$ (100.79)$ -39%
11-20 41 16 371.29$ 262.22$ (109.08)$ -29%
21-30 30 25 302.68$ 249.05$ (53.63)$ -18%
31-50 30 39 390.40$ 339.42$ (50.98)$ -13%
51-100 24 75 672.30$ 603.24$ (69.06)$ -10%
101-500 30 223 1,622.87$ 1,654.71$ 31.85$ 2%
501-1,000 8 641 3,603.64$ 4,154.23$ 550.59$ 15%
1,001-5,000 6 2,561 14,100.39$ 16,604.56$ 2,504.16$ 18%
5001-10,000 1 8,484 45,232.41$ 54,556.19$ 9,323.78$ 21%
>10,000 1 17,010 86,711.33$ 106,615.79$ 19,904.46$ 23%
Total 252 228 1,456.48$ 1,584.18$ 127.70$ 9%
Public
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 185 3 136.58$ 81.17$ (55.41)$ -41%
11-20 70 16 216.44$ 161.93$ (54.51)$ -25%
21-30 60 26 281.77$ 225.94$ (55.83)$ -20%
31-50 101 40 379.97$ 319.71$ (60.26)$ -16%
51-100 199 72 619.41$ 540.67$ (78.74)$ -13%
101-500 386 202 1,464.04$ 1,372.58$ (91.45)$ -6%
501-1,000 15 618 4,129.73$ 4,040.93$ (88.80)$ -2%
> 1,000 1 1,908 12,504.79$ 12,427.73$ (77.07)$ -1%
Total 1,017 109 844.18$ 769.57$ (74.61)$ -9%
Irrigation
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 82 4 195.22$ 111.61$ (83.61)$ -43%
11-20 29 15 291.36$ 199.21$ (92.15)$ -32%
21-30 19 25 353.48$ 265.72$ (87.76)$ -25%
31-50 28 40 475.31$ 374.99$ (100.32)$ -21%
51-100 34 71 661.22$ 577.82$ (83.40)$ -13%
101-500 64 239 1,848.13$ 1,755.73$ (92.40)$ -5%
501-1,000 4 804 5,734.39$ 5,614.03$ (120.36)$ -2%
>1,000 2 1,212 8,969.25$ 8,818.13$ (151.11)$ -2%
Total 262 98 863.05$ 773.21$ (89.84)$ -10%
Public Irrigation
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 16 5 113.27$ 101.54$ (11.73)$ -10%
11-20 14 16 154.05$ 146.59$ (7.46)$ -5%
21-30 15 27 214.17$ 207.44$ (6.73)$ -3%
31-50 27 41 286.18$ 280.35$ (5.83)$ -2%
51-100 76 76 489.07$ 483.87$ (5.20)$ -1%
101-500 225 208 1,195.76$ 1,201.93$ 6.17$ 1%
501-1,000 18 654 3,571.81$ 3,624.47$ 52.65$ 1%
>1,000 4 2,791 15,074.55$ 15,392.82$ 318.27$ 2%
Total 395 196 1,128.39$ 1,135.13$ 6.74$ 1%
Recycled Irrigation
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 26 4 114.39$ 100.42$ (13.97)$ -12%
11-20 20 15 173.33$ 157.54$ (15.79)$ -9%
21-30 31 26 229.35$ 212.48$ (16.88)$ -7%
31-50 35 41 315.20$ 294.04$ (21.16)$ -7%
51-100 86 83 504.37$ 475.23$ (29.14)$ -6%
101-500 134 232 1,421.54$ 1,352.81$ (68.73)$ -5%
501-1,000 23 655 3,903.31$ 3,745.38$ (157.93)$ -4%
>1,000 3 1,128 6,649.46$ 6,397.05$ (252.41)$ -4%
Total 358 166 1,028.41$ 977.99$ (50.41)$ -5%
Recycled Irrigation - Public
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
14,353 1 14,353 58,268.92$ 75,519.68$ 17,250.76$ 30%
Total 1 14,353 58,268.92$ 75,519.68$ 17,250.76$ 30%
Recycled Commercial
Average
Monthly
Usage (hcf)
# of
Customers
Average
Usage
Average
Current Bill
Average
Proposed Bill
$ Increase
(Decrease)
% Increase
(Decrease)
0 - 10 46 5 393.45$ 453.14$ 59.69$ 15%
11-20 30 16 576.53$ 576.51$ (0.02)$ 0%
21-30 15 26 661.21$ 580.80$ (80.41)$ -12%
31-50 24 39 863.50$ 704.56$ (158.93)$ -18%
51-100 38 72 1,297.76$ 937.12$ (360.64)$ -28%
101-500 63 225 3,260.80$ 1,896.25$ (1,364.54)$ -42%
501-1,000 15 714 9,477.22$ 4,915.26$ (4,561.96)$ -48%
> 1,000 10 1,576 20,447.70$ 10,245.07$ (10,202.63)$ -50%
Total 241 188 2,769.37$ 1,639.07$ (1,130.30)$ -41%
Construction (Temporary)
The cost of service study results will cause the District’s
residential customers to move from the 5th lowest to the 9th lowest in
a comparison with other agencies.
Conclusion
Today we are bringing rate structure modifications to the Board’s
attention. The next step will be to incorporate these changes into
the FY 2023 rate model and budget. In June of 2022, staff will
request that the Board approve the FY 2023 budget and direct staff to
move forward with the Proposition 218 process. The Board can only
approve the rates after the completion of the Proposition 218
hearing.
The District’s historic practice is to propose a five-year
Proposition 218 notice. The District and many other agencies have
used this five-year process with positive results. While the District
will be proposing a five-year period, it is currently planning to
implement a meter reading system that will provide the District with
customer usage data on a more frequent basis. The District’s current
metering system stores hourly usage, but the District does not have a
cost-effective means of pulling the hourly information. The new meter
reading system will report hourly customer usage data via cell
signal. Staff will be monitoring the hourly usage data. If changes in
rates are necessary because of this data evaluation, staff will
recommend a new study be performed prior to the five-year timeframe.
In the past, to make these notices effective for five-years, the
Board has approved a pass-through component of future rate increases
for supplier costs and a separate maximum rate increase for the
portion of rates due to increases in internal costs. Supplier costs
have historically been defined as costs charged by SDG&E, CWA, MWD,
the City of San Diego, and Metro. As part of the FY 2023 budget
process, staff will again recommend a five-year Proposition 218
notice. In mid-2022, staff will prepare the Proposition 218 notices
and in mid to late 2022 a Proposition 218 hearing will be held to
adopt the rates. If the Board adopts the proposed rates after the
Proposition 218 hearing, the proposed rate structures and rate
increase provisions will be effective in January 2023, giving the
required lead time to customers and allowing staff the time to
evaluate and implement the various changes.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning.
LEGAL IMPACT:
Since its adoption in 1996, Proposition 218 has been and
is likely to continue to be the subject of ongoing litigation,
judicial interpretation, constitutional amendment, and
statutory clarification. The cost of service study will be used to
demonstrate compliance with Proposition 218 if the District’s rates
are challenged.
Attachments:
A)Presentation
Otay
Water District
Water Rate Study
April 27, 2022
Attachment A
Otay Water District
Steve Gagnon, PE (AZ)
Project Manager
25 years experience
Extensive southern CA water and
wastewater rate setting experience
E: sgagnon@raftelis.com
P: 714.351.2013
Rate Study Project Team
2
Theresa Jurotich, PE, PMP
Technical Reviewer
23 years experience
Extensive national water and
wastewater rate setting experience
E: tjurotich@raftelis.com
P: 206.707.9155
Joe Collins
Lead Consultant
5 years experience
National water and wastewater rate
setting experience
E: jcollins@raftelis.com
P: 816.285.9017
Presentation Outline
1.Summarize Cost of Service and Rate Derivation
2.Present Bill Impacts
3.Discussion and Questions
3
Notes
•We are using the Commodity Demand method
›Fully recognized and described in the AWWA M1 Manual
›Reasonably allocates costs to parcels
•Max Day (Demand) allocations only –no max hour
4
How do we
set rates
under Cost-
-of-Service
principles?
5
Design Rates Tiered or Uniform rates collect the cost to serve each class
Distribute to
Classes
Single Family Residential, Multi-family Residential, Commercial,
Irrigation, Public, Public Irrigation, Construction
Cost
Components
Commodity, Demand, Customer Service, Meter Maintenance,
Direct Fire Protection, General
Functionalize Supply, Transmission, Treatment, Distribution, Storage, Customer
Service, Meter Maintenance, General
How Much
Money?Determine revenue requirement (Costs)
6
Potable Water
Revenue Requirement
7
A B C
Operating Capital Total
Expenses
1 Operating Expenses 93,437,200$ 93,437,200$
2 Debt Service 8,169,700 8,169,700
3 Rate Funded Capital 10,114,100 10,114,100
4 Subtotal 93,437,200$ 18,283,800$ 111,721,000$
5 Non-Rate Revenue (8,904,123)$ (10,928,100)$ (19,832,223)$
Adjustments
6 Contribution to Reserves -$ 1,157,223$ 1,157,223$
7 Mid-Year Increase - - -
8 Subtotal -$ 1,157,223$ 1,157,223$
9 Total Revenue Required 84,533,077$ 8,512,923$ 93,046,000$
Revenue RequirementLine
Functionalize and Allocate Costs
•The cost component allocations (right table) summarize the O&M
revenue requirement ($93.0M) after functions have been allocated to cost
components
8
Function
Supply 59,023,904$ 63.2%
Treatment 1,588,386 1.7%
Transmission 743,917 0.8%
Distribution 5,333,208 5.7%
Treated Water Pumping 1,920,921 2.1%
Distribution Storage 1,750,363 1.9%
Customer Service 3,186,022 3.4%
Meters and Services 1,084,740 1.2%
Direct Public Fire 93,678 0.1%
Direct Private Fire 36,039 0.0%
Energy 2,949,000 3.2%
General 15,727,022 16.8%
Total 93,437,200$ 100.0%
Budget Functionalization Results %
Cost Component
Commodity 44,650,904$ 47.8%
Demand 23,668,917 25.3%
Accounts 6,217,409 6.7%
Cost Meters 2,116,832 2.3%
Cap. Meters - 0.0%
CWA/MWD 13,581,000 14.5%
Public Fire 182,810 0.2%
Private Fire 70,328 0.1%
Energy 2,949,000 3.2%
Total 93,437,200$ 100.0%
Initial O&M Allocation to Cost Components %
Cost to Serve Each Class
9
•Increase to SFR is mostly attributed to calculating the AWWA hydraulic
capacity ratios in proportion to the ¾” meter instead of the 5/8” meter
Proposed Current Dollars Percent
Customer Class
1 SFR 55,597,005$ 52,722,782$ 2,874,223$ 5.5%59.8%56.7%
2 MFR 11,310,126 11,952,634 (642,508) -5.4%12.2%12.8%
3 Commercial 7,591,669 7,496,276 95,392 1.3%8.2%8.1%
4 Irrigation 8,200,364 9,083,922 (883,558) -9.7%8.8%9.8%
5 Construction 2,824,061 4,491,196 (1,667,136) -37.1%3.0%4.8%
6 Public 5,111,834 4,616,615 495,219 10.7%5.5%5.0%
7 Public Irrigation 2,095,585 2,342,151 (246,566) -10.5%2.3%2.5%
8 Private Fire 315,356 340,423 (25,068) -7.4%0.3%0.4%
9 Total 93,046,000$ 93,046,000$ -$ 0.0%100.0%100.0%
Current
Percent of
Total
Line
Proposed
Percent of
Total
Change
Cost of Service Summary
Revenue
Max Day Peaking Factors
10
A B C
Annual Use Average
Day Use
Max Day
Peak Factor
SFR
1 Tier 1 3,992,200 10,938 1.26
2 Tier 2 701,000 1,921 1.55
3 Tier 3 1,798,100 4,926 1.98
4 Customer
5 Subtotal 6,491,300 17,784 1.49
MFR
6 Tier 1 1,611,600 4,415 1.22
7 Tier 2 93,600 256 1.52
8 Tier 3 152,700 418 1.65
9 Customer
10 Subtotal 1,857,900 5,090 1.27
11 Commercial 1,132,700 3,103 1.43
12 Irrigation 1,131,900 3,101 1.99
13 Construction 286,500 785 1.96
14 Public 744,900 2,041 1.48
15 Public Irr.262,700 720 2.05
16 Public Fire
17 Private Fire
18 Total 11,907,900 32,624 1.59
Line Customer Class
Rate Structure Changes
•Updated the tier breakpoints for residential and multi-residential
•Separated commercial and public customers into distinct classes for
both the potable and recycled utilities –Public customers do not receive
a tax offset to lower their rates since they don’t pay taxes
•Created a Construction class to separate Construction & Temporary
Construction customers from the Irrigation class (currently Construction
and Irrigation pay the same rate, Temporary Construction pays 2X
irrigation rate)
•Changed meter equivalency from 5/8” equivalent meters to 3/4”
equivalent meters
11
Residential Rate and Bill Impacts
12
A B C D
Current Proposed $ Change % Change
Volume Rate
1 Tier 1 3.52$ 5.03$ 1.51$ 42.9%
2 Tier 2 6.30 5.46 (0.84) -13.3%
3 Tier 3 8.12 6.08 (2.04) -25.1%
System Fee
4 5/8"20.08$ 17.29$ (2.79)$ -13.9%
5 3/4"20.08 17.29 (2.79) -13.9%
6 1"28.39 21.50 (6.89) -24.3%
7 1 1/2"49.11 32.27 (16.84) -34.3%
8 2"73.98 45.01 (28.97) -39.2%
CWA/MWD Fee
9 5/8"17.00$ 16.49$ (0.51)$ -3.0%
10 3/4"17.00 16.49 (0.51) -3.0%
11 1"31.57 27.49 (4.08) -12.9%
12 1 1/2"71.36 54.97 (16.39) -23.0%
13 2"121.39 87.94 (33.45) -27.6%
Line SFR Rates
Multi-Family Rate and Bill Impacts
13
A B C D
Current Proposed $ Change % Change
Volume Rate
1 Tier 1 3.29$ 4.99$ 1.70$ 51.7%
2 Tier 2 5.97 5.41 (0.56) -9.4%
3 Tier 3 7.35 5.60 (1.75) -23.8%
System Fee
4 5/8"44.17$ 15.95$ (28.22)$ -63.9%
5 3/4"44.17 15.95 (28.22) -63.9%
6 1"62.37 19.27 (43.10) -69.1%
7 1 1/2"107.92 27.81 (80.11) -74.2%
8 2"162.53 37.87 (124.66) -76.7%
9 3"308.22 79.98 (228.24) -74.1%
10 4"472.17 134.77 (337.40) -71.5%
11 6"927.63 264.45 (663.18) -71.5%
12 8"1,474.12 408.31 (1,065.81) -72.3%
13 10"2,111.67 626.10 (1,485.57) -70.4%
CWA/MWD Fee
14 5/8"17.00$ 16.49$ (0.51)$ -3.0%
15 3/4"17.00 16.49 (0.51) -3.0%
16 1"31.57 27.49 (4.08) -12.9%
17 1 1/2"71.36 54.97 (16.39) -23.0%
18 2"121.39 87.94 (33.45) -27.6%
19 3"258.17 192.37 (65.80) -25.5%
20 4"413.41 346.27 (67.14) -16.2%
21 6"846.28 769.48 (76.80) -9.1%
22 8"1,366.65 1,319.10 (47.55) -3.5%
23 10"1,967.12 2,088.58 121.46 6.2%
Line MFR Rates
Commercial Rate and Bill Impacts
14
A B C D
Current Proposed $ Change % Change
1 Volume Rate 4.17$ 5.28$ 1.11$ 26.6%
System Fee
2 5/8"41.61$ 17.43$ (24.18)$ -58.1%
3 3/4"41.61 17.43 (24.18) -58.1%
4 1"58.75 21.74 (37.01) -63.0%
5 1 1/2"101.66 32.74 (68.92) -67.8%
6 2"153.11 45.76 (107.35) -70.1%
7 3"290.34 97.23 (193.11) -66.5%
8 4"444.76 165.82 (278.94) -62.7%
9 6"873.81 333.46 (540.35) -61.8%
10 8"1,388.56 526.62 (861.94) -62.1%
11 10"1,989.08 813.42 (1,175.66) -59.1%
CWA/MWD Fee
12 5/8"17.00$ 16.49$ (0.51)$ -3.0%
13 3/4"17.00 16.49 (0.51) -3.0%
14 1"31.57 27.49 (4.08) -12.9%
15 1 1/2"71.36 54.97 (16.39) -23.0%
16 2"121.39 87.94 (33.45) -27.6%
17 3"258.17 192.37 (65.80) -25.5%
18 4"413.41 346.27 (67.14) -16.2%
19 6"846.28 769.48 (76.80) -9.1%
20 8"1,366.65 1,319.10 (47.55) -3.5%
21 10"1,967.12 2,088.58 121.46 6.2%
Line Commercial Rates
Commercial Irrigation Rate and Bill Impacts
15
A B C D
Current Proposed $ Change % Change
1 Volume Rate 6.09$ 6.09$ -$ 0.0%
System Fee
2 5/8"35.13$ 15.43$ (19.70)$ -56.1%
3 3/4"35.13 15.43 (19.70) -56.1%
4 1"49.62 18.41 (31.21) -62.9%
5 1 1/2"85.86 26.08 (59.78) -69.6%
6 2"129.28 35.11 (94.17) -72.8%
7 3"245.19 73.93 (171.26) -69.8%
8 4"375.63 123.89 (251.74) -67.0%
9 6"737.94 240.26 (497.68) -67.4%
10 8"1,172.69 366.86 (805.83) -68.7%
11 10"1,679.86 560.46 (1,119.40) -66.6%
CWA/MWD Fee
12 5/8"17.00$ 16.49$ (0.51)$ -3.0%
13 3/4"17.00 16.49 (0.51) -3.0%
14 1"31.57 27.49 (4.08) -12.9%
15 1 1/2"71.36 54.97 (16.39) -23.0%
16 2"121.39 87.94 (33.45) -27.6%
17 3"258.17 192.37 (65.80) -25.5%
18 4"413.41 346.27 (67.14) -16.2%
19 6"846.28 769.48 (76.80) -9.1%
20 8"1,366.65 1,319.10 (47.55) -3.5%
21 10"1,967.12 2,088.58 121.46 6.2%
Line Commercial
Irrigation Rates
Construction Rate and Bill Impacts
•Most temporary construction customers pay 2X
the construction rate but will no longer under
the proposed rates
16
A B C D
Current Proposed $ Change % Change
1 Volume Rate 12.18$ 6.05$ (6.13)$ -50.3%
System Fee
2 5/8"35.13$ 15.86$ (19.27)$ -54.9%
3 3/4"35.13 15.86 (19.27) -54.9%
4 1"49.62 19.12 (30.50) -61.5%
5 1 1/2"85.86 27.51 (58.35) -68.0%
6 2"129.28 37.40 (91.88) -71.1%
7 3"245.19 78.95 (166.24) -67.8%
8 4"375.63 132.92 (242.71) -64.6%
9 6"737.94 260.34 (477.60) -64.7%
10 8"1,172.69 401.27 (771.42) -65.8%
11 10"1,679.86 614.94 (1,064.92) -63.4%
CWA/MWD Fee
12 5/8"16.49$ 16.49$
13 3/4"16.49 16.49
14 1"27.49 27.49
15 1 1/2"54.97 54.97
16 2"87.94 87.94
17 3"192.37 192.37
18 4"346.27 346.27
19 6"769.48 769.48
20 8"1,319.10 1,319.10
21 10"2,088.58 2,088.58
Line Construction Rates
Public Rate and Bill Impacts
17
A B C D
Current Proposed $ Change % Change
1 Volume Rate 4.59$ 5.82$ 1.23$ 26.8%
System Fee
2 5/8"41.61$ 16.24$ (25.37)$ -61.0%
3 3/4"41.61 16.24 (25.37) -61.0%
4 1"58.75 19.75 (39.00) -66.4%
5 1 1/2"101.66 28.76 (72.90) -71.7%
6 2"153.11 39.40 (113.71) -74.3%
7 3"290.34 83.32 (207.02) -71.3%
8 4"444.76 140.79 (303.97) -68.3%
9 6"873.81 277.83 (595.98) -68.2%
10 8"1,388.56 431.27 (957.29) -68.9%
11 10"1,989.08 662.44 (1,326.64) -66.7%
CWA/MWD Fee
12 5/8"17.00$ 16.49$ (0.51)$ -3.0%
13 3/4"17.00 16.49 (0.51) -3.0%
14 1"31.57 27.49 (4.08) -12.9%
15 1 1/2"71.36 54.97 (16.39) -23.0%
16 2"121.39 87.94 (33.45) -27.6%
17 3"258.17 192.37 (65.80) -25.5%
18 4"413.41 346.27 (67.14) -16.2%
19 6"846.28 769.48 (76.80) -9.1%
20 8"1,366.65 1,319.10 (47.55) -3.5%
21 10"1,967.12 2,088.58 121.46 6.2%
Line Public Rates
Public Irrigation Rate and Bill Impacts
18
A B C D
Current Proposed $ Change % Change
1 Volume Rate 6.51$ 6.64$ 0.13$ 2.0%
System Fee
2 5/8"35.13$ 15.43$ (19.70)$ -56.1%
3 3/4"35.13 15.43 (19.70) -56.1%
4 1"49.62 18.41 (31.21) -62.9%
5 1 1/2"85.86 26.08 (59.78) -69.6%
6 2"129.28 35.11 (94.17) -72.8%
7 3"245.19 73.93 (171.26) -69.8%
8 4"375.63 123.89 (251.74) -67.0%
9 6"737.94 240.26 (497.68) -67.4%
10 8"1,172.69 366.86 (805.83) -68.7%
11 10"1,679.86 560.46 (1,119.40) -66.6%
CWA/MWD Fee
12 5/8"17.00$ 16.49$ (0.51)$ -3.0%
13 3/4"17.00 16.49 (0.51) -3.0%
14 1"31.57 27.49 (4.08) -12.9%
15 1 1/2"71.36 54.97 (16.39) -23.0%
16 2"121.39 87.94 (33.45) -27.6%
17 3"258.17 192.37 (65.80) -25.5%
18 4"413.41 346.27 (67.14) -16.2%
19 6"846.28 769.48 (76.80) -9.1%
20 8"1,366.65 1,319.10 (47.55) -3.5%
21 10"1,967.12 2,088.58 121.46 6.2%
Line Public Irrigation
Rates
Energy Surcharge per 100 feet
A B D E
Energy Surcharge Cost Unit Rate Current
1 Energy Cost 2,901,876$ 43,170,047 Adj. Ccf 0.068$ 0.063$
Line Units
C
19
Private Fire Rates
20
•Developed using yearly backflow (A) and lateral replacement (B) costs
•Column C is the system capacity to fight fires
A B C D E F G H
Backflow Lateral Capacity Total Current $ Change % Change No of
Connections
Meter Size
1 5/8"2.42$ 0.01$ 0.03$ 2.46$ 24.00$ (21.54)$ -89.75%-
2 3/4"2.42 0.01 0.05 2.49 24.00 (21.51) -89.63%2
3 1"2.42 0.02 0.11 2.56 24.00 (21.44) -89.33%7
4 1 1/2"2.42 0.06 0.32 2.80 24.00 (21.20) -88.33%-
5 2"2.42 0.12 0.68 3.23 24.00 (20.77) -86.54%20
6 3"2.42 0.36 1.98 4.77 24.00 (19.23) -80.13%2
7 4"2.42 0.76 4.22 7.42 32.34 (24.92) -77.06%87
8 6"2.42 2.22 12.27 16.92 32.34 (15.42) -47.68%170
9 8"2.42 4.73 26.15 33.31 32.34 0.97 3.00%488
10 10"2.42 8.51 47.03 57.96 32.34 25.62 79.22%112
Line Private Fire
21
Recycled Water
Revenue Requirement
22
A B C
Operating Capital Total
Expenses
1 Operating Expenses 8,535,500$ 8,535,500$
2 Debt Service 1,233,300 1,233,300
3 Rate Funded Capital 2,000,000 2,000,000
4 Subtotal 8,535,500$ 3,233,300$ 11,768,800$
5 Non-Rate Revenue (756,000)$ (1,476,000)$ (2,232,000)$
Adjustments
6 Contribution to Reserves -$ (193,800)$ (193,800)$
7 Mid-Year Increase - - -
8 Subtotal -$ (193,800)$ (193,800)$
9 Total Revenue Required 7,779,500$ 1,563,500$ 9,343,000$
Revenue RequirementLine
Functionalize and Allocate Costs
23
%
Function
Supply 5,698,041$ 66.8%
Treatment 448,294 5.3%
Transmission 179,734 2.1%
Distribution 371,211 4.3%
Recycled Water Pumping 242,660 2.8%
Distribution Storage 97,393 1.1%
Customer Service 88,129 1.0%
Meters and Services 94,807 1.1%
Fire Service - 0.0%
Energy 562,000 6.6%
General 753,231 8.8%
Total 8,535,500$ 100%
Budget Functionalization Results %
Cost Component
Commodity 5,698,041$ 66.8%
Demand 2,002,003 23.5%
Accounts 131,737 1.5%
Cost Eq. Meters 141,719 1.7%
Capacity Eq. Meters - 0.0%
Energy 562,000 6.6%
General - 0.0%
Total 8,535,500$ 100.0%
Cost Allocation to Cost Components
Results
Recycled Cost to Serve Each Class
24
Proposed Current Dollars Percent
Customer Class
1 Recycled 4,966,187$ 4,823,645$ 142,542$ 3.0%53.2%51.6%
2 Public Recycled 3,547,432 3,894,140$ (346,708) -8.9%38.0%41.7%
3 Recycled Commercial 829,381 625,215$ 204,166 32.7%8.9%6.7%
4 Total 9,343,000$ 9,343,000$ -$ 0.0%100.0%100.0%
Revenue Current % of
TotalLineProposed %
of Total
ChangeCost of Service
Summary
Peaking Factors
25
Customer Class Annual Use Avg. Day ADMM /
Avg. Day
Recycled Irrigation 834,700 2,287 1.62
Recycled Public 581,700 1,594 1.71
Recycled Commercial 155,900 427 1.25
Total 1,572,300 4,308
Energy Rate
26
A B D E
Energy Surcharge Cost Unit Rate Current
1 Energy Cost 504,190$ 6,209,151 Adj. Ccf 0.082$ 0.063$
Line Units
C
Recycled Irrigation Bill Impacts
27
A B C D
Current Proposed $ Change % Change
1 Volume Rate 5.05$ 5.10$ 0.05$ 1.0%
System Fee
2 5/8"36.93$ 34.31$ (2.62)$ -7.1%
3 3/4"36.93 34.31 (2.62) -7.1%
4 1"52.16 46.46 (5.70) -10.9%
5 1 1/2"90.25 77.28 (12.97) -14.4%
6 2"135.90 113.93 (21.97) -16.2%
7 3"257.73 249.69 (8.04) -3.1%
8 4"394.84 435.78 40.94 10.4%
9 6"787.55 907.15 119.60 15.2%
10 8"1,232.66 1,472.09 239.43 19.4%
11 10"1,765.77 2,294.50 528.73 29.9%
Line Recycled
Recycled Public Irrigation Bill Impacts
28
A B C D
Current Proposed $ Change % Change
1 Volume Rate 5.48$ 5.20$ (0.28)$ -5.1%
System Fee
2 5/8"36.93$ 34.31$ (2.62)$ -7.1%
3 3/4"36.93 34.31 (2.62) -7.1%
4 1"52.16 46.46 (5.70) -10.9%
5 1 1/2"90.25 77.28 (12.97) -14.4%
6 2"135.90 113.93 (21.97) -16.2%
7 3"257.73 249.69 (8.04) -3.1%
8 4"394.84 435.78 40.94 10.4%
9 6"787.55 907.15 119.60 15.2%
10 8"1,232.66 1,472.09 239.43 19.4%
11 10"1,765.77 2,294.50 528.73 29.9%
Line Recycled Public
Recycled Commercial Bill Impacts
29
A B C D
Current Proposed $ Change % Change
1 Volume Rate 3.58$ 4.68$ 1.10$ 30.7%
System Fee
2 5/8"43.74$ 34.31$ (9.43)$ -21.6%
3 3/4"43.74 34.31 (9.43) -21.6%
4 1"61.76 46.46 (15.30) -24.8%
5 1 1/2"106.89 77.28 (29.61) -27.7%
6 2"160.98 113.93 (47.05) -29.2%
7 3"305.28 249.69 (55.59) -18.2%
8 4"467.65 435.78 (31.87) -6.8%
9 6"918.73 907.15 (11.58) -1.3%
10 8"1,459.97 1,472.09 12.12 0.8%
11 10"2,091.41 2,294.50 203.09 9.7%
Line Recycled
Commercial
Next Steps
•Incorporate Study Results into the District’s
FY 2023 Budget and Rate Model.
30
Question and Discussion?
31
32
End of
Presentation