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Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 1
November 4, 2015
HF&H Consultants, LLC
Western Hills Water DistrictWater Rate Update
Board MeetingNovember 4, 2015
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 2
November 4, 2015
Agenda
• Purpose of the meeting• Study Process & Background• Revenue Requirements• Cost of Service Analysis• Rate Structure Recommendation• Bill Impacts (current vs proposed rates)• Summary• Questions & Discussion
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 3
November 4, 2015
Purpose of the Meeting
• Present revised rate alternatives based on feedback from September Town Hall meeting
• Elicit input from rate payers and Board members• Authorize staff to draft and mail notices to rate
payers
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 4
November 4, 2015
Study Process• Kickoff meeting – October 6, 2014
– Preliminary analysis: Revenue requirements, cost of service analysis, rate design
• Town Hall meeting – May 20, 2015– Received public input; developed additional alternatives
• 2nd Town Hall meeting – September 27, 2015– Received public input; developed additional alternatives
• Board Meeting – November 4, 2015– Present rate alternatives– Board authorizes mailing notices to rate payers
• Protest Hearing – At least 45 days after November 4 Board Meeting– Board adopts rates if no majority protest
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Background• Ad Hoc Water Committee completed review of usage and cost
data – February 2011• District adopted water rate increases – June 2011
FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY15-16**
Treated – Residential
Service charge $51.67 $68.34 $85.00 $87.55 $89.56
Usage charge $/750 gals $1.25 $1.25 $1.25 $1.29 $1.32
Treated – Commercial
Service charge None None None None None
Usage charge $/750 gals $1.65 $3.30 $4.95 $5.10 $5.22
Raw Water
Service charge None None None None None
Usage charge $/AF* $1,075.00 $1,275.00 $1,475.00 $1,519.25 $1,554.19* AF = 435.6 HCF = 325,851 gallons** 2.3% CPI increase over FY 14-15
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
FY 2014-15 Rate Structure
Observations:• Industry standard: revenue from service charges should be ~30%.• Industry standard: all services should pay service charges.• Industry standard: service charges should be proportionate to size of
connection.• Current rates do not allow for contributions to operating or capital reserves• Current revenue < cost of service.
Per Month % of Revenue Per ccf/mo. % of Revenue
Treated WaterResidential $87.55 80% $1.29 20%HOA $0.00 0% $5.10 100%Non-residential $0.00 0% $5.10 100%Combined 76% 24%
Raw Water $0.00 0% $3.49 100%= $1,519.25/AF
Service Charge Usage ChargeRate Structure
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Projected Revenue Requirements
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Cost of Service Analysis
• Total Revenue Requirement allocated to customer classes based on their proportionate share of costs.
• For example:– Water treatment costs allocated to residential and non-
residential customer classes based on their percentage share of water used
– Raw water customers are not allocated any water treatment costs
– Pump station costs are allocated based on each customer classes share of water used (including raw water customers)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
FY2015-16 Estimated# of % of Cost of Revenue at % of
Customer Class Customers Customers Service FY2015-16 Rates $ Current Rev
Treated Water Cost of Service - Residential $1,503,209
Current Residents 437 54.6% $820,752 $592,590 ($228,162) 38.5%Residential Growth 363 45.4% $682,457 $0 ($682,457)
800 $1,503,209 $592,590 ($910,619) 153.7%
Allocate Resi COS Revenue Surplus/(Shortfall)
Cost of Service Allocation Summary
Current annual shortfall covered by Developer
Breakout of Residential $910k Revenue Shortfall
FY2015-16 EstimatedCost of Revenue at % of
Customer Class Service FY2015-16 Rates $ Current Rev
Treated WaterResidential $1,503,209 $592,590 ($910,619) 154%Non-Residential $294,478 $26,838 ($267,640) 997%
$1,797,687 $619,428 ($1,178,259) 190%
Raw Water $1,415,355 $1,230,473 ($184,882) 15%Total $3,213,042 $1,849,901 ($1,363,141) 74%
Revenue Surplus/(Shortfall)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Cost of Service Allocation Summary
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Bridging the $228k Gap• Alternatives discussed at the September
Town Hall meeting, included:– Timing of revenue increases
• Immediate or over 3-year period– With and without contributions to operating
and capital reserves for existing infrastructure only; not for growth-related expenses
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Bridging the $228k Gap• Revised alternatives include:
– 4-year phase-in period– Reserve contributions
• 45-day (six week) operating reserve• 5-year annual average for capital projects• $46,000 annually for operations and capital• Capital reserves for existing infrastructure
only; not for growth-related capital expenses
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate Alternatives
• Alternative 1: Phase-in over 4-year period w/o contribution to Reserves– Fixed charges reduced from $89.56/mo to $62.00/mo by FY2018-19– Per-unit usage charges increase from $1.32 per hcf ($0.00176/gal.) to
$7.53 per hcf ($0.01004/gal.) by FY2018-19– No contribution towards reserves during phase-in; revisit after phase-in
period is complete
• Alternative 2: Phase-in over 4-year period w/ contribution to Reserves– Fixed charges reduced from $89.56/mo to $62.00/mo by FY2018-19– Per-unit usage charges increase from $1.32 per hcf ($0.00176/gal.) to
$8.19 per hcf ($0.01092/gal.) by FY2018-19– $46,000 annual contribution to reserves
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate Alternatives• Both alternatives:
– Shifts revenue from the fixed service charge to the usage charges• Reduces fixed revenue from 80% to 40%• Increases usage revenue from 20% to 60%• Improves balance between rate payer equity and revenue
stability– Requires the developer to contribute revenue so that current
residents are not covering the costs of future customers (approx. $3M over the 4-year phase-in period)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate AlternativesPhase-in Rate Increases over a 4-year Period
Increased Revenue By
Year 4Alt. 1 – No Reserve
Contribution
10.3% per year $228,000
Incremental Increase For
Reserves
1.5% per year $46,000
Alt. 2 – With Reserve
Contribution
11.8% per year $274,000
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Rates and Sample Bills (Water Only): Alt. #1
• No contribution to reserves
• Reduced fixed service charge phased-in over 4 years
• Usage rate increase phased-in over 4 years
• Note: In addition, residents pay a monthly storm drain and sewer charge
• Sewer = $55.79/mo• Storm Drain = $5.00/mo
A B C D E F1 Alt. # 1: 4-Year Phase-in WITHOUT Contribution to Reserves2 Rates Current FY2015-16 FY2016-17 FY2017-18 FY2018-193 Fixed Charge ($/Month) $89.56 $84.00 $77.00 $70.00 $62.004 Usage Charge ($/hcf) $1.32 $2.64 $4.14 $5.74 $7.535 Usage Charge ($/gal) $0.00176 $0.00352 $0.00552 $0.00765 $0.0100467 Sample Bill Impacts (monthly) Current FY2015-16 FY2016-17 FY2017-18 FY2018-198 Low Water User - 4,500 gal./mo.9 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.00
10 Usage Charge $7.92 $15.84 $24.84 $34.44 $45.1811 Total Monthly Water Bill $97.48 $99.84 $101.84 $104.44 $107.1812 $ incr $2.36 $2.00 $2.60 $2.7413 % incr 2.4% 2.0% 2.6% 2.6%1415 Med. Water User - 9,750 gal./mo.16 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0017 Usage Charge $17.16 $34.32 $53.82 $74.62 $97.8918 Total Monthly Water Bill $106.72 $118.32 $130.82 $144.62 $159.8919 $ incr $11.60 $12.50 $13.80 $15.2720 % incr 10.9% 10.6% 10.5% 10.6%2122 High Water User - 22,500 gal./mo.23 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0024 Usage Charge $39.60 $79.20 $124.20 $172.20 $225.9025 Total Monthly Water Bill $129.16 $163.20 $201.20 $242.20 $287.9026 $ incr $34.04 $38.00 $41.00 $45.7027 % incr 26.4% 23.3% 20.4% 18.9%28
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Range of Bill Impacts: Alt #1• FY2015-16 average bill impacts
• Bills vary month-to-month based on actual usage• 52.4% of bills will see no more than a $5 increase• When any resident uses less than 3,150 gallons in a month,
their bill will be less
• Similar $/mo. Increases: effective July 1, 2016; July 1, 2017; and, July 1, 2018
Cumulative% of bills
0.1 to 4.2 50 to 3,150 22.8% 22.8% ($5.43) to ($0.02) -6.1% to 0.0%4.3 to 7.9 3,151 to 5,925 29.6% 52.4% $0.12 to $4.87 0.1% to 4.9%8.0 to 11.9 5,926 to 8,925 18.0% 70.4% $5.00 to $10.15 5.0% to 9.6%
12.0 to 19.9 8,926 to 14,925 18.3% 88.8% $10.28 to $20.44 9.8% to 17.7%20.0 to 29.9 14,926 to 22,425 6.5% 95.3% $21.10 to $33.25 18.2% to 25.9%30.0 to 39.9 22,426 to 29,925 2.7% 97.9% $34.17 to $44.73 26.4% to 32.0%40.0 to 60.0 29,926 to 45,000 2.1% 100.0% $56.74 to $70.21 37.4% to 42.5%
100.0%
hcf/mo gallons per month $ Impact % ImpactRange of Usage (monthly) %
of billsMonthly Bill Increase/(Decrease)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Rates and Sample Bills (Water Only): Alt. #2
• $46,000 annual contribution to reserves
• Reduced fixed service charge phased-in over 4 years
• Usage rate increase phased-in over 4 years
• Note: In addition, residents pay a monthly storm drain and sewer charge
• Sewer = $55.79/mo• Storm Drain = $5.00/mo
A B C D E F1 Alt. # 2: 4-Year Phase-in WITH Contribution to Reserves2 Rates Current FY2015-16 FY2016-17 FY2017-18 FY2018-193 Fixed Charge ($/Month) $89.56 $84.00 $77.00 $70.00 $62.004 Usage Charge ($/hcf) $1.32 $2.76 $4.41 $6.19 $8.195 Usage Charge ($/gal) $0.00176 $0.00367 $0.00588 $0.00825 $0.0109267 Sample Bill Impacts (monthly) Current FY2015-16 FY2016-17 FY2017-18 FY2018-198 Low Water User - 4,500 gal./mo.9 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.00
10 Usage Charge $7.92 $16.53 $26.44 $37.12 $49.1511 Total Monthly Water Bill $97.48 $100.53 $103.44 $107.12 $111.1512 $ incr $3.05 $2.91 $3.68 $4.0213 % incr 3.1% 2.9% 3.6% 3.8%1415 Med. Water User - 9,750 gal./mo.16 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0017 Usage Charge $17.16 $35.82 $57.29 $80.44 $106.4818 Total Monthly Water Bill $106.72 $119.82 $134.29 $150.44 $168.4819 $ incr $13.10 $14.47 $16.15 $18.0520 % incr 12.3% 12.1% 12.0% 12.0%2122 High Water User - 22,500 gal./mo.23 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0024 Usage Charge $39.60 $82.67 $132.21 $185.62 $245.7325 Total Monthly Water Bill $129.16 $166.67 $209.21 $255.62 $307.7326 $ incr $37.51 $42.54 $46.42 $52.1127 % incr 29.0% 25.5% 22.2% 20.4%28
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Range of Bill Impacts: Alt #2• FY2015-16 average bill impacts
• Bills vary month-to-month based on actual usage• 48.2% of bills will see no more than a $5 increase• When any resident uses less than 2,850 gallons in a month,
their bill will be less
• Similar $/mo. Increases: effective July 1, 2016; July 1, 2017; and, July 1, 2018
Cumulative% of bills
0.1 to 3.8 50 to 2,850 19.8% 19.8% ($5.42) to ($0.10) -6.0% to 0.5%3.9 to 7.3 2,851 to 5,475 28.4% 48.2% $0.04 to $4.92 0.6% to 5.8%7.4 to 11.9 5,476 to 8,925 22.2% 70.4% $5.06 to $11.52 5.9% to 10.9%
12.0 to 19.9 8,926 to 14,925 18.3% 88.8% $11.67 to $22.72 11.1% to 19.7%20.0 to 29.9 14,926 to 22,425 6.5% 95.3% $23.44 to $36.65 20.2% to 28.5%30.0 to 39.9 22,426 to 29,925 2.7% 97.9% $37.65 to $49.14 29.1% to 35.1%40.0 to 60.0 29,926 to 45,000 2.1% 100.0% $62.20 to $76.84 41.0% to 46.5%
100.0%
Range of Usage (monthly) % of bills
Monthly Bill Increase/(Decrease)hcf/mo gallons per month $ Impact % Impact
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Summary
• Current rate revenue is less than the cost of service.• Current rate structure does not reflect industry standards.
– Service and usage charges could be aligned closer to cost structure
• Rate structure modifications can be gradually made in conjunction with rate increases over a period of time.
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
QUESTIONS & DISCUSSION
HF&H Consultants, LLC
201 N. Civic Drive, Suite 230, Walnut Creek, CA 94596 925-977-6950
John Farnkopf Rick Simonson
Senior Vice President Vice President