City of VallejoWater Department
and
Recommended Water Rate Plan 218 Notice Request
Agenda
Vallejo Water System (not Green Valley or Travis)
1. Recap Rate Study Goals & Process
2. Water System Challenges
3. Proposed Financial Plan
4. Proposed Capital Plan
5. Plan Rate Adjustment
6. Next Steps
7. Questions
Water DirectorMike Malone
Water Admin & Conservation
9 Employees
Water Engineering Manager
Mark Quady
11.5 Employees
Treatment Superintendent
Joe Abitong (Acting)
21 Employees
Water Quality/Laboratory
Danielle Bonham
5 Employees
Distribution Superintendent
Oscar Alcantar
36 Employees
Water Facilities Superintendent
John Palesi
17 Employees
Water Operations Manager
Beth Schoenberger
Water Department
Water System Challenges
• Insufficient capital spending to replace
aging infrastructure
• Deferred maintenance due to insufficient funding
• Mounting regulatory requirements (without funding)
• Out-of-date information technology
• Vacancies, retention, and failed recruitments
• Increasing security requirements
Challenges: Increased Regulatory Requirements (without funding for staffing to do the work)
Recent example: Lead Fixture Testing - State requires all Water agencies to test drinking fountains and faucets in all public schools K-12 for lead. Staff time is required for training, planning, coordination, implementation, sampling, testing. No funding is provided to carry out the work, so staff works longer hours to ensure compliance.
Challenges:
Aged Infrastructure & Deferred Maintenance
Aged Pipe: mineral deposits
New Pipe
Skyview Water TankIn Need of Cleaning
and Maintenance
Treatment Plant Aged Basin Flocculation Trough
Cache Main Pipeline Break
Mineral corrosion (a common problem in old pipes)is not a health hazard, but reduces water flow andpipe life. Reduced flow increases electrical pumping costs.
Challenges: Vallejo Pipeline Breaks & Leaks vs. National Rankings
Number of Pipeline Breaks and LeaksPer 100 Miles of Pipe
2017 American Water Works Association National Benchmark Survey
• Mile for Mile, Vallejo Pipes Break and Leak More Often Than “Worst Case” Water Agencies Nationally
Water System Challenges: Vallejo Pipe Replacement vs Industry Standard
• Vallejo’s current pipeline replacement cycle is 450 years.
• Vallejo Water’s goal is to establish a pipeline replacement cycle of 100 years.
23% of Vallejo’s 475 miles of pipeline is over 70 Years Old
American Water Works Association industry standard pipeline replacement cycle is 75-100 years.
Vallejo Water’s Capital Spending vs.
Industry Standard of 1% Total System Value• Vallejo’s Current 5-Year Avg Annual Capital Spending:
$4.7 Million
• Industry Standard for System Capital Investment/Spending:
1% of Estimated System Valuation
• Vallejo’s Estimated System Valuation: $1 Billion
• Applying Industry Standard to Vallejo’s $1Billion System Valuation:
$10 Million Annual Capital Investment (1% of $1 Billion)
• Proposed Rates Would Increase Annual Capital Investment
From $6.6M (Proposed FY 19-20 CIP) to $12M
Infrastructure and Capital Projects Funded By Proposed Rates
• Pipe Replacement
• Meter Replacement
• Pump Station Improvements
• Treatment Plant Upgrades
• Emergency Generators/Redundancy
Phase II Water Rates Goals and Process• Phase I Emergency Rate Setting: 2016-17
– Meet bond covenants and operating costs– Council direction to address infrastructure and deferred maintenance in Phase II
• Phase II Goals– Address Infrastructure and Deferred Maintenance– Create Long Term Financial Stability– Establish Targets for Reserves and Fund & Maintain Reserves– Ensure Sufficient Staffing to Deliver Services– To finance capital projects, balance debt vs “pay as you go”– Engage Community– Phase-In Rate Increases to Mitigate Community Impact
• Phase II Process: Community Engagement and Financial Planning 2017-19– Hired Financial Consultants, Raftelis Inc. to Create Financial Model for Rate-Setting– Developed Necessary Data – Engaged the Community:
• Establish City Council Ad Hoc Water Rate Committee• Establish Citizen Water Rate Working Group
Engaged Council & Community
• City Council Ad Hoc Water Rate Committee– 3 members of City Council: Mayor, Sunga, Brown, Malgapo (former member)
– Focused on in-depth understanding of Vallejo Water System– 8 workshops/meetings and 5 Water System tours over 12 months– Will recommend Rate Plan to Full Council
• Citizen Water Rate Working Group– 10 Vallejo residents (23 applied) selected by Council Ad Hoc Committee– Included representatives from local businesses, and financial, and water
industries– Year-long investment to understand Vallejo’s water system– 12 workshops/meetings, 5 water systems tours over 12 months– Work with staff to develop recommended rate plan
• Other Community Engagement Activities– Introduction to Your Water Department – 22 events – Conservation Outreach – 13 events
Tours and WorkshopsCitizen Water Rate Working Group & City Council Water Rate Ad Hoc Committee
Fleming Hill Facilities Maintenance Shop
Workshops and Rates Discussions in Fleming Hill Water Treatment Plant Meeting Room
Cordelia Reservoir and Pump Station
Phase II Financial Goals• Financial Stability
– Raftelis Financial Consultants Develop Vallejo Enterprise’s 15 year Financial Plan
– Meet bond covenants– Meet debt service requirements (current and future)– Balance Debt vs Pay-Go– Phase-in rate increases to minimize community impact
• Establish and Fund Reserve Targets– 120 days of Operating Reserves– Fully fund Rate Stabilization Reserve– Capital Reserve
• Address Infrastructure and Deferred Maintenance– Progress toward 100 year replacement cycle
• Address Service Delivery Requirements & Staffing– Needs assessment
5-Year Water Financial Plan (Million $)
USE OF FUNDS FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Water Supply and O&M Expenses $31,890,000 $34,130,000 $35,150,000 $36,660,000 $38,430,000 $40,440,000
Debt Service $5,170,000 $5,320,000 $6,550,000 $6,550,000 $6,550,000 $6,550,000
Pay as you go Capital Spending $6,830,000 $6,130,000 $0 $180,000 $5,350,000 $12,350,000
Additions to Reserves $0 $0 $2,670,000 $4,290,000 $360,000 $0
Total $43,890,000 $45,580,000 $44,370,000 $47,680,000 $50,690,000 $59,340,000
Rate Study Capital Financing Plan (Million $)City System
Operating Fund Balance (5 Years)(Million $)
Proposed Rate Plan & DeliverablesHighlights 5 Year Plan
Rate Adjustments
Pipe ReplacementCycle
150 years in 5-year plan100 years in 10-year forecast
Facilities Investment $30.7M Budget (City) 12% of 30-year project listWater Treatment, Pump Stations, SCADA, Storage, Dams
Total Capital Investment $48.7M Budget (City & Lakes)Meets target of 1% of system value investment in 5th year
Funding ReservesOperating Reserve Target: 120 days operationsRate Stabilization Target: 15% Revenue
Projected at end of FY 2023/24Operating Reserve Target ($13.5M): 100% MetRate Stabilization Reserve Target ($7.5M): 38% Met ($2.9M)
New Debt Water Revenue Bonds
$27.0M in FY 2020/21New Debt Rating Assumption: Standard and Poor’s A+
Staffing Plan Aiming toward accelerated hiring to support the Capital Investment Plan and overall service delivery
FY19/204.3%
FY20/2110%
FY21/227%
FY22/236%
FY23/245%
Proposed Pipe Replacement Plan
• Ramp up capital investment
over 5 years
• 9.3 miles replaced by 5th year
• ~28 miles replaced by 10th year
• 100-year replacement cycle by 10th
year (with second ramp up in years 6-10)
1.1
1.46
1.83
2.19
2.72
0
0.5
1
1.5
2
2.5
3
2020 2021 2022 2023 2024
Mile
s o
f P
ipe
Re
pla
ced
9.3 miles total5-year plan
Year CIP Budget
2020 $1.6M
2021 $2.1M
2022 $2.8M
2023 $3.4M
2024 $5.1M
Total $15.0M
5th Year: 150-year replacement cycle
More than doubles the budget of current Water Main CIP!
Current CIP Budget (5 years): $2.3M (average)Current Pipe Replacement Cycle: ~450 years
Debt Coverage (5 Years): Proposed rates allow Vallejo Water Department to meet all bond and other debt requirements
City System
Water Rate Study Parameters
• Uniform Water Usage (Consumption) Charge for Multi-Family, Commercial, Industrial, Institutional, Irrigation, and Construction
• Uniform Service Charge for all customer classes per meter size and billing frequency
• Meter Size Factors are set by American Water Works Association Manual 22
• Single Family Residential Tier 1 lowered
from 11 HCF (hundred cubic feet) to 7 HCF per month– Meets California standards for indoor residential use
at 55 gallons per capita daily (GPCD)
Proposed Rate Plan: Sample Water Bills
These bills are based upon single family residential, bi-monthly, average usage of 16 units (12Kgallons)
Regular Current
Water BillAs of July 1
Bill For Proposed
October 24 Increase
$100.06$105.90
Vallejo’s Current Water Rates Among Lowest in RegionRegional Comparison: Average Residential Monthly Bill RateFor ¾” Meter, 8 Units of Water (5,984 gallons), which is the average single family monthly use
$0 $10 $20 $30 $40 $50 $60 $70
Napa
Fairfield
Suisun
Vallejo Current
Vallejo - New Proposed
Benicia
American Canyon
EBMUD
Pittsburg
Sonoma
Contra Costa Water
Martinez
$41.82
$44.86
$47.49
$50.03
$52.87
$54.45
$55.38
$56.25
$59.14
$61.20
$66.53
$68.79
Amounts Based on
Monthly Service Charge
1 Unit = 748 Gallons
Rates Effective July 1, 2019 (3.5%)
New Proposed Rates Effective Oct 24, 2019
Your Vallejo Tap Water:
Less Than 1 ¢ per Gallon
Delivered Directly To Your Home!
How Much Does 1 Gallon Cost?
Latte: $31.50 Gas: $3.90 Milk: $3.40
Bottled Water: $2.75
Approved & Proposed Rate Adjustments
Approved 2017: Current rate structure includes a
scheduled increase of 3.5% that goes into effect July 1, 2019. (Approved by Council in 2017 Phase I emergency rates process.)
Proposed Rate Plan:
Fiscal Year Revenue
Adjustment Date Effective
FY 2020 4.3% October 24, 2019
FY 2021 10.0% July 1, 2020
FY 2022 7.0% July 1, 2021
FY 2023 6.0% July 1, 2022
FY 2024 5.0% July 1, 2023
Next: Proposition 218 Calendar
07-09-2019 City Council Direction on Prop 218 Noticing
07-26-2019 Deadline for Prop 218 Mailing (for 09-10-19 Council Meeting)
09-10-2019 City Council Rate Consideration, Public Hearing, Prop 218 1st Reading
09-24-2019 City Council 2nd Reading of Water Rates Ordinance
10-24-2019 New Rates Effective Date
– Meets 30 day minimum from 2nd Reading of Ordinance
– Subsequent years: July 1st
– Effective Dates to be included in proposed Water Rates Ordinance
Rates Outreach
• Community Engagement on Rate Adjustment– 22 stakeholder meetings held to date
– Additional invitations to community groups in progress
– Scheduled to present at VCUSD School Board meeting August 21st
– 2 general information community meetings to be scheduled
• Informational Flyers
Accountability ZoneComing Soon to the Water Department Website “Accountability Zone”
You will be able to easily find out more about:
• Annual budget and audit information
• Past water rate information
• How your rates are spent and audited
• Proposed and completed capital improvement projects
• Project infrastructure status updates
Access this information and more at vallejowater.org
Capital
Projects
(CIP)
Finances Conservation Key Contact
Information
Questions ?
Appendix
5-Year CIP FY 19/20 - FY 23/24DRAFTWATERDEPT5-YEARCAPITALIMPROVEMENTPLAN(5.10.19)
ProjectTitle FY2019-20 FY2020-21 FY2021-22 FY2022-2023 FY2023-2024 4YearTotal 5YearTotal
Water
GreenValleyDiversionDamRepairs $350,000 -$ 350,000$
GreenValleyWaterTreatmentPlantCorrosionControl $250,000 -$ 250,000$
SiebeandRockvilleTankReplacement $350,000 400,000$ 1,500,000$ 1,250,000$ 3,150,000$ 3,500,000$
MareIslandReservoirDisinfectantBy-Product(DBP)
DestructionUnit $80,000-$ 80,000$
NewCapitolZonePumpStation $200,000 600,000$ 600,000$ 600,000$ 1,800,000$ 2,000,000$
NewEnterpriseResourcePlanningProject(HTEReplacement) $280,000 280,000$ 280,000$ 280,000$ 280,000$ 1,120,000$ 1,400,000$
NewEnterpriseResourcePlanningProject(HTEReplacement) $35,000 35,000$ 35,000$ 35,000$ 35,000$ 140,000$ 175,000$
NewEnterpriseResourcePlanningProject(HTEReplacement) $35,000 35,000$ 35,000$ 35,000$ 35,000$ 140,000$ 175,000$
PumpStationEquipmentRenovation $100,000 -$ 100,000$
WaterMainReplacementFY19-20 $1,500,000 -$ 1,500,000$
WaterMainReplacementFY20-21 2,000,000$ 2,000,000$ 2,000,000$
WaterMainReplacementFY21-22 2,500,000$ 2,500,000$ 2,500,000$
WaterMainReplacementFY22-23 3,000,000$ 3,000,000$ 3,000,000$
WaterMainReplacementFY23-24 4,300,000$ 4,300,000$ 4,300,000$
LakeChabotDamImprovementProject 100,000$ 200,000$ 200,000$ 400,000$ 500,000$
AssetManagementProject(CMMS) 75,000$ -$ 75,000$
LakesFacilitiesRenovation 100,000$ -$ 100,000$
CordeliaUnitNo3Emergency 500,000$ 500,000$ 500,000$ 500,000$ 2,000,000$ 2,000,000$
FlemingHillFilterMediaReplacement 650,000$ -$ 650,000$
SolanoTransitAuthorityandCaltransPipeReplacement 300,000$ 400,000$ 400,000$ 400,000$ 400,000$ 1,600,000$ 1,900,000$
SacramentoBridgeWaterline 100,000$ -$ 100,000$
Trans-VallejoPipelineandGridPumps 175,000$ 175,000$ 350,000$ 350,000$ 875,000$ 1,050,000$
LakeCurryValve&PipeRepair/Replace 100,000$ 100,000$ 100,000$
DistributionSystemSCADARenovation 150,000$ -$ 150,000$
DistributionSamplingStations 85,000$ -$ 85,000$
FlemingHillChemicalSystemReplacement 100,000$ 100,000$ 100,000$ 100,000$ 300,000$ 400,000$
Flocculation&SedimentationBasinConversion/Replace 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 3,000,000$ 4,000,000$
LakeCurryDamImprovementProject 500,000$ 500,000$ 500,000$ 500,000$ 500,000$ 2,000,000$ 2,500,000$
SwingCheckValveReplacement 75,000$ 75,000$ 75,000$ 75,000$ 300,000$ 300,000$
MeterReplacementProject 563,084$ 600,000$ 600,000$ 600,000$ 600,000$ 2,400,000$ 2,963,084$
LakeFreyDamImprovement 200,000$ 200,000$ 100,000$ 500,000$ 500,000$
LakeMadiganDamImprovement 100,000$ 100,000$ 100,000$
SUBTOTAL 7,078,084$ 7,300,000$ 8,875,000$ 8,825,000$ 6,725,000$ 31,725,000$ 38,803,084$
Fundsavailablefromclosedprojects 513,084$
NETCIP 6,565,000$
Water Use by Customer Class
Water Use by Customer Class and Tier (FY 2019 Projected)
CCF= hundred acre feetAF = acre feet
Service ChargesBi-Monthly Single Family Rate (SFR) Charges: Current & Proposed
Monthly Other* Charges: Current & Proposed
Meter Current Proposed Proposed Proposed Proposed Proposed
Size July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023
5/8" or 3/4" $41.66 $44.96 $49.46 $52.93 $56.11 $58.92
1" $62.54 $66.93 $73.63 $78.79 $83.52 $87.70
1 1/2" $104.32 $121.86 $134.05 $143.44 $152.05 $159.66
2" $154.46 $187.77 $206.55 $221.01 $234.28 $246.00
Meter Current Proposed Proposed Proposed Proposed Proposed
Size July 1, 2019 Oct 10,2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023
5/8" or 3/4" $29.88 $28.48 $31.33 $33.53 $35.55 $37.33
1" $42.92 $39.47 $43.42 $46.46 $49.25 $51.72
1 1/2" $71.41 $66.93 $73.63 $78.79 $83.52 $87.70
2" $111.93 $99.89 $109.88 $117.58 $124.64 $130.88
3" $206.52 $204.25 $224.68 $240.41 $254.84 $267.59
4" $341.49 $358.05 $393.86 $421.44 $446.73 $469.07
6" $679.31 $726.06 $798.67 $854.58 $905.86 $951.16
8" $1,084.62 $1,549.96 $1,704.96 $1,824.31 $1,933.77 $2,030.46
10" $1,557.41 $2,318.94 $2,550.84 $2,729.40 $2,893.17 $3,037.83
12" $2,908.31 $2,923.14 $3,215.46 $3,440.55 $3,646.99 $3,829.34
* Current 7/1/2019 rates are for “Non-Residential” Accounts.
Rate Classes
Rate Classes/Tiers Adjustments
Uniform Rate applies to these classes:
Multi-Family Residential, Commercial, Industrial, Institutional, Irrigation, and Construction
Meter
Size
2018-19
Bi-Monthly
Service
Charge
July 1, 2019
Bi-Monthly
Service
Charge
5/8" or
3/4" $40.24 $41.66
1" $60.42 $62.54
1 1/2" $100.80 $104.32
2" $149.24 $154.46
Current Proposed Proposed Proposed Proposed Proposed
July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023
Tiered Water Rates
SFR Tier 1 $3.65 $3.62 $3.99 $4.27 $4.53 $4.76
SFR Tier 2 $6.84 $5.13 $5.65 $6.05 $6.42 $6.75
Uniform Water Rate $4.47 $4.76 $5.24 $5.61 $5.95 $6.25
Raw Water $2.58 $3.22 $3.55 $3.80 $4.03 $4.24
Customer Class/Tier
Proposed Rate Adjustments
Service Charges
Bi-Monthly Fire Service: Current & Proposed
Meter Size July 1, 2019 Oct 24,
2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023
5/8" or 3/4" $41.54 $13.57 $14.93 $15.98 $16.94 $17.79
1" $49.38 $15.33 $16.87 $18.06 $19.15 $20.11
1 1/2" $65.34 $21.67 $23.84 $25.51 $27.05 $28.41
2" $84.58 $32.61 $35.88 $38.40 $40.71 $42.75
3" $129.40 $71.85 $79.04 $84.58 $89.66 $94.15
4" $193.22 $139.53 $153.49 $164.24 $174.10 $182.81
6" $353.02 $382.43 $420.68 $450.13 $477.14 $501.00
8" $544.72 $801.40 $881.54 $943.25 $999.85 $1,049.85
10" $768.58 $1,431.60 $1,574.76 $1,685.00 $1,786.10 $1,875.41
GIS Maps: Pipe Age & Pipe ReplacementMI Pipeline replacements will be completed in conjunction with development at Mare Island.