2018 Town HallWater Rates

Mayor & Council is Seeking your Input

• Smoothing Model vs Traditional

• Reclaimed Rate Increase

• Monthly Service Charge

• Limited Income Assistance Program

• Two or Four Year Rate Adjustments

2

3

Revenue and Rates Recommendations

Proposal is to adopt a Four-Year Rate Adjustment based on the following components:

• Gradually declining annual revenue increases over the next four years to minimize impacts to all customers

• Annual reclaimed water rate increases that match the general revenue requests each year to achieve equity with all other water users

• Continuing the “rate smoothing” practice, adopted in our prior two-year rate approval, to protect the single-family residential rate class

4

● Reduced interest rates

● Operational efficiencies

● Preventative maintenance

● CAP costs

● Existing debt service

● Replacing aging infrastructure

● Investments in Customer Service

● Declining water sales

Downward

Pressure

Upward

Pressure

What Drives Rate Changes?

5

Tucson Leads the Way inWater Conservation

To date, programs funded by the conservation fee have resulted in:

• More than 1.6 billion gallons (5,026 acre-feet) conserved

• More than 8.8 million dollars invested in rebates and incentives

• Nearly 50,000 HET and urinal installations

• Over 1,700 rainwater harvesting, and gray water installations

Conservation Saves Cash

Alliance for Water Efficiency Report (2017):

“In Tucson, Arizona, customers today pay water and wastewater rates that are at least 11.7% lower than they might have been if they had not conserved for the past 30 years.”

Annual Revenue Requests:Trending in a Good Direction

8

Benefits of Proposed Rate Adjustments

• Proposed Rate Adjustments will achieve the following financial goals:

– Meets anticipated utility O&M needs and increases CIP budget to meet investment target of $70 M/year

– Maintains compliance with all key financial metrics

– Decreases annual revenue requests year-by-year, reflecting ongoing process improvement and efficiency

– Reduces new debt, creates peak of debt service, and progresses towards a pay-as-you-go approach for CIP funding in the future

9

Charges Included on the Water Portion of Your Utility Services Statement

10

Monthly Service Charge

• Fixed charge based on meter size

Volume

Charges

• Variable charge per unit of water consumption

CAP

Charge

• Costs to purchase Colorado River water

Conservation

Fee

• Fund dedicated to water efficiency and conservation programs

Proposed Residential Rate AdjustmentsFiscal Years 2019-2022

11

Effective Date

Monthly

Service

Charge

Tier I

1-7 Ccf

Tier II

8-15 Ccf

Tier III

16-30 Ccf

Tier IV

> 30 Ccf CAP Fee

Conservation

Fee

Current Rates 13.53$ 1.73$ 3.32$ 7.48$ 11.75$ 0.69$ 0.09$

July 2018 15.00$ 1.87$ 3.56$ 7.95$ 12.35$ 0.69$ 0.10$

July 2019 16.33$ 2.07$ 3.82$ 8.39$ 12.93$ 0.70$ 0.10$

July 2020 17.78$ 2.24$ 4.04$ 8.54$ 13.17$ 0.76$ 0.10$

July 2021 19.35$ 2.40$ 4.27$ 8.87$ 13.56$ 0.79$ 0.10$

Residential (Single Family) Rate Adjustments

Debt Service:Bending Down the Debt Curve

12

New Debt IssuancesFY 19 - $23.5mFY 20 - $22.2mFY 21 - $20.9mFY 22 - $17mFY 23 - $ 9.0m

Average Single Family Customer uses 8 Ccf a month

Fiscal Year(July 1-

June 30)

Average Monthly

Bill

Proposed MonthlyIncrease

FY 2018 $35.20

FY 2019 $37.97 $2.77

FY 2020 $41.05 $3.08

FY 2021 $44.38 $3.33

FY 2022 $47.54 $3.16

How much is 8 Ccf? Approximately 6,000 gallons How much does 8 Ccf cost?

Mayor & Council is Seeking your Input

• Smoothing Model vs Traditional

• Reclaimed Rate Increase

• Monthly Service Charge

• Limited Income Assistance Program

• Two or Four Year Rate Adjustments

14

Average Residential Impacts

15

SMOOTHING CCF’s FY 2018 FY 2019 Change Percent

Winter Average 7 $31.10 $33.76 $2.66 8.6%

Annual Average 8 $35.20 $38.15 $2.95 8.4%

Summer Average 9 $39.30 $42.54 $3.24 8.2%

SMOOTHING w/

RECLAIMEDCCF’s FY 2018 FY 2019 Change Percent

Winter Average 7 $31.10 $33.62 $2.52 8.1%

Annual Average 8 $35.20 $37.97 $2.77 7.9%

Summer Average 9 $39.30 $42.32 $3.02 7.7%

TRADITIONAL CCF’s FY 2018 FY 2019 Change Percent

Winter Average 7 $31.10 $34.11 $3.01 9.7%

Annual Average 8 $35.20 $38.57 $3.37 9.6%

Summer Average 9 $39.30 $43.03 $3.73 9.5%

Total Reclaimed Costswith Portions Paid by Reclaimed Users & Incentives Paid by Potable Users

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Projected2019

Projected2020

Projected2021

Projected2022

Costs Paid by Reclaimed Users Incentive Paid by Potable Users

Monthly Service Charge – 2018 Survey

17

% Increase

Current Charge $13.53

Proposed FY19 $15.00 10.9%

Proposed FY20 $16.33 8.9%

Proposed FY21 $17.78 8.9%

Proposed FY22 $19.35 8.8%

Residential Service Charge

*Rate outside jurisdiction

Limited Income: New Option

Customers with limited income may be eligible for financial assistance to help with the charges on their utility services statement.

• Current Option: Assistance covers 50% of Water Bill– Includes Base Rate portion of bill & volumetric charges

• New Option: Assistance covers Base Rate plus 2 Ccf– Ex: Base Rate of $15.00 + ($1.87 Ccf x 2) = $18.74 in monthly assistance

18

Choice: Two or Four Year Rate ScheduleCurrently in two year rate schedule (FY 2017 & FY 2018)

Staff recommends a Four Year schedule (FY 2019 through FY 2022)

Benefits of proposed four year schedule

• Improves revenue stability

• Supports long term planning

• Gives predictability to customers

• Lowers dependence on new debt

• Helps bond ratings

• Requires highest level of accountability

• Commits utility to downward trend

Risks of proposed four year schedule

• Economic conditions may change

• New regulations

19

Ways to Learn More AboutWater Rates, Service Fees & Water Reliability

Website for rates & fees, rebates, reports & moretucsonaz.gov/water

Call to request more info or group presentation(520) 791-4331 (800) 598-9449(520) 791-2639 TDD

Email public information office pico@tucsonaz.gov

Like Tucson Water on Facebook facebook.com/tucsonwater

Attend May 22, 2018, Mayor and Council public hearing on proposed rates and fees

Follow Tucson Water on Twitter twitter.com/tucsonwater