Body
Department of Utilities
Reference: 2015 Proposed Utility Rates
To: Mayor Richard N. McLean and Members of City Council
Through: Manuel Esquibel, City Manager
Prepared By: Curtis Bauers, P.E., Director of Utilities
Sarah Borgers, P.E., Assistant Director of Utilities
Date Prepared: November 10, 2014
PURPOSE
To modify the 2014 Utilities rates based on Willdan Financial Services cost-of-service analysis and rate study analysis in conjunction with the Utilities Cash Flow Model previously presented and direction provided by Council following the Study Session on 2015 Proposed Utility Rates.
BACKGROUND
The Utilities Department has completed an intensive cost of service and rate study analysis through consultation with Willdan Financial Services. The analysis included a thorough review of current and future operational and capital expenditures required to operate City utilities in a conscientious and sustainable manner.
The result of this study showed the need for a 2015 revenue increase of 8% in the water fund, 4% in the wastewater fund, and by $0.64 per customer bill for stormwater fees over the average revenues generated from 2011-2013. Services are also required by statute to be based on "cost of service". This means that each customer class (such as residential, commercial, or irrigation users) should be charged fairly and equitably based on how much it costs to provide those services.
The majority of Residential water customers will see a slight decrease in their bills, and commercial customer rates will not be changed substantially either. Multi-family customers will see increases between 6-9% depending on their usage. Irrigation-only and bulk rate users that will see the biggest change in their bills, based on the need to more closely reflect cost-of-service in their rates. This may also help in water conservation management since irrigation is by far the biggest impact on the water system, pushing summertime consumption up more than four and half times higher than wintertime usage system-wide.
In order to more equitably charge residential customers, the proposed rate structure does not include a senior citizen discount any longer. Instead, it includes a 'life line' rate. The life line rate is a reduced rate that is applied to the first 3,000 gallons of water consumption for all residential users. This allows customers to purchase water for essential needs such as bathing and washing clothes at a reduced rate - irrespective of their age - during times of financial stress.
The 'Schools' rate is no longer separated as a unique customer class. Although there are certainly criteria that suggest it is a separate class, there are not enough schools in our system to equitable represent cost-of-service and forcing a distinct rate for schools would be somewhat artificial. Therefore, it is proposed that schools be treated as either commercial-indoor, commercial-dual, or commercial-irrigation depending on the meter placement, just as commercial and industrial entities be treated. This concept has been presented to the School District.
The existing rate structure is overly complicated, particularly when it comes to commercial rates, and does not really function as it was apparently designed to do. Currently, over 90% of the bills fall into the single rate tier of 0-25,000 gallons. Therefore, the proposed water rate structure for 2015 is significantly simplified.
The proposed 2015 water rates are as follows:
Draft City of Brighton 2015 Water Rates |
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Meter Size (inches) |
Monthly Water Fixed Charge |
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Class |
Block |
Block Threshold (kgals) |
$/1,000 |
3/4 |
$14.00 |
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Single Family Residential |
1 |
0 - 3 |
$2.65 |
1 |
$23.25 |
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2 |
4 - 15 |
4.46 |
1.5 |
$46.50 |
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3 |
16 -25 |
4.80 |
2 |
$74.40 |
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4 |
25 - 40 |
5.20 |
3 |
$139.50 |
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5 |
> 40 |
6.05 |
4 |
$232.50 |
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6 |
$465.00 |
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Multifamily Residential |
1 |
0-40 |
$4.90 |
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2 |
>40 |
$6.05 |
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Commercial - indoor use |
Uniform |
> 0 |
$4.60 |
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Commercial - dual use |
Uniform |
> 0 |
$5.95 |
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Commercial - irrigation |
Uniform |
> 0 |
$8.10 |
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Bulk - hydrant |
Uniform |
> 0 |
$8.10 |
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Fewer changes are suggested to the wastewater rate schedules, which will be highlighted in the presentation. In general, the wastewater rates will increase by approximately 4%. Similarly, stormwater fees will simply increase from $2.12 to $2.76 per month for Single Family Residential customers.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
FINANCIAL IMPACT
Approval of this Ordinance to modify the rate structures will provide the necessary revenue increases to meet the needs of the water, wastewater, and stormwater systems. It will have negligible effects on most residential and commercial users. A majority of residential customers will actually see a slight decrease in their bill. There will be a small increase for customers who have been receiving the senior citizen discount; however, that policy did not comply with cost of service standards and others were subsidizing those customers. The current proposed 'lifeline rate' allows all residential customers to significantly reduce their bill, by lowering water usage to less than 3,000 gallons, during times of financial stress. Irrigation and bulk water users will see the largest increase in their bills.
STAFF RECOMMENDATION
Willdan Financial Services and City staff have been through intensive analysis on necessary expenditures, revenue requirements, and equitable rate structure design. Based on this analysis and review, staff recommends the approval of the proposed 2015 utility rate structures.
OPTIONS FOR COUNCIL CONSIDERATION
1. Approve the Ordinance adopting the proposed 2015 Utility Rates and PIFs
2. Deny the Ordinance to modify the 2014 Utility Rates and PIFs, leaving them unchanged.
3. Change the Ordinance the modify the 2014 Utility Rates and PIFs as Council sees fit
ATTACHMENTS
2014 Utility Rates Ordinance
2015 Proposed Utility Rates and PIFs Ordinance