The URL can be used to link to this page

Home My WebLink AboutWS 2024-06-03 COMPLETE AGENDA PACKETw 2 /2 Tukwila City •.'� .WORK Council Agenda .'• SESSION . �.tr11LA o J %A r Thomas McLeod, Mayor Counci/members: ❖ De'Sean Quinn ❖ Tosh Sharp Marty Wine, Interim City Administrator ❖ Armen Papyan ❖ Jovita McConnell Mohamed Abdi, Council President ❖ Dennis Martinez ❖ Hannah Hedrick 1905/ ON -SITE PRESENCE: TUKWILA CITY HALL COUNCIL CHAMBERS 6200 SOUTHCENTER BOULEVARD REMOTE PARTICIPATION FOR THE PUBLIC: 1-253-292-9750, ACCESS CODE: 70090635# Click here to: Join Microsoft Teams Meeting For Technical Support: 1-206-433-7155 Monday, June 3, 2024; 5:30 PM 1. CALL TO ORDER 2. BUSINESS ITEMS Utility Rate Study John Ghilarducci, President, Principal FCS Group Pg.1 3. ADJOURNMENT This agenda Remote is available at www.tukwilawa.gov, and in alternate formats with advance notice for those with disabilities. taped, and available at www.tukwilawa.gov) Tukwila Council meetings are audio/video op- If you are in need of translation or interpretation services at a Council meeting, ��;,`,Q please contact us at 206-433-1800 by 12:00 p.m. on the meeting date. it Utility Rate Study Part of the Tukwila Financial Plan 2024 FCS GROUP Solutions -Oriented Consulting ,,,\,777\11,111111,11111111"1 Jo> _ kttinaLAWAcci Zech Hazel June 3, 2024 N • Agenda • Background • Revenue Requirements • Cost -of -Service • Next Steps •:;> FCS GROUP Solunons-Oriented consulting Slide 2 Background • Why Are Rate Studies Important? Your Utility Is A Business • Revenues need to cover utility costs • Revenues dedicated to utility purpose • Quantifies policies, priorities, and initiatives • Tells the "true" cost of providing service • Communicates impact of financial decisions • Public meetings •:;> FCS GROUP Soinnons-Orientecl Consulting Slide 4 • Comprehensive Rate Study: Start to Finish Communication Plan What level of communication is needed? Do your rate structures align with your objectives? •:;> FCS GROUP Solnnons-Oriented consulting cri Financial Policy Evaluation Rate Study Components Rate Design Are you adequately protected against financial risks? Revenue Requirement Forecast Cost -of - Service Analysis Are your revenues sufficient to achieve full cost recovery? Are you charging your customers equitably? 1 Slide 5 0) tigONSUiia \\ • Revenue Requirement Introduction • Utility rates are set to recover the cost of providing service • Financial policies • Operating costs (regular / ongoing) » Employee salaries and benefits » Routine inspections & maintenance » Professional services » Utilities / power • Capital costs (periodic) » Infrastructure replacement » Facility expansions and upgrades •:;> FCS GROUP Solunons-Oriented consulting Year 1 Year 2 ❑ Operating Year 3 Year 4 Year 5 ❑ Capital Slide 7 00 • How Much Revenue is Needed? •:;> FCS GROUP Solunons-Oriented consulting Financial Policy Impacts Forecasted O&M Costs Rate Funded Capital Existing & New Debt Service } J Annual Revenue Needs Slide 8 • Financial Policies Policy Purpose Policy Recommendations Operating Reserve* Capital Reserve Accommodate variations in revenue & expenses Emergency repairs, unanticipated capital, & project cost overruns Water = 90-120 days O&M Sewer = 45-60 days O&M Storm** = 120 days O&M 1-2% of the original cost of capital assets Rate Funded Capital Debt Service Coverage Annual rate funded capital mechanism Annual depreciation Compliance with existing debt covenants; Target 2.0 or higher; Maintain credit worthiness Minimum 1.5 *The City's current policy is to hold 20 percent of the previous year's revenue as an operating reserve, exclusive of non -operating, non -recurring revenues. **For stormwater utilities with monthly billing, 45-60 days is typical •:;> FCS GROUP Solunons-Oriented consulting O Slide 9 cri •:;> FCS GROUP Solunons-Oriented consulting • Capital Funding Philosophy :fp • Cash (pay-as-you-go) » Higher near -term rates » Existing customers pay 100% of costs • Debt �r » Lowest near -term rates... but interest cost • Spreads cost between existing/ future customers p » Execute projects sooner; reduce effects of inflation • Hybrid » Cash fund repair and replacement projects » Debt fund large expansion projects Slide 10 • Initial Results • Recent rate increases are good indicators of future needs • Primary drivers of rate increases are: • Capital improvement programs • Current and forecasted debt service •:;> FCS GROUP Solunons-Oriented consulting Slide 11 N • Existing Water Rates 4) FCS GROUP Solunons-Oriented consulting Class / Meter Size Monthly Fixed SFR-MFR / DU /„ 4 1" 1 1/2" 2" 3" 4" 6" 8" $21.50 $60.00 $72.00 $104.00 $135.00 $194.00 $259.00 $391.00 $520.00 10" 12" $650.00 $770.00 Consumption / cc Oct — May Sep Commercial / Industrial Single Family Multiple Family $6.95 $3.83 $4.56 $7.38 $4.18 $5.02 Slide 12 • Existing Sewer and Surface Water Rates • Sewer Commercial / Industrial $58.86 / RCE $55.11 / RCE Single Family Multiple Family $32.00 / RCE $113.97 / RCE $55.11 / RCE $87.11 / RCE 1 RCE = 750 cf $32.00 / DU $55.11 / RCE 1 RCE = 750 cubic feet •:;> FCS GROUP Solunons-Oriented consulting W $87.11 / RCE • Surface Water Class Annual Rate SFR $226.00 All other Natural 0-20% Developed Surface $271.01 $589.40 21-50% Developed Surface $1,080.27 51-70% Developed Surface $1,611.96 71-85% Developed Surface $1,941.94 86-100% Developed Surface $2,265.30 Slide 13 • Bi-Monthly Water Bill Comparisons Renton Highline District (Oct. - May) Tukwila (Oct. -May) Highline District (June - Sep.) Kirkland Water District 125 Kent Tukwila (June -Sept.) Water District 20 Sammamish Plateau Water & Sewer District Issaquah Water District 49 Bellevue Skyway Water & Sewer District Redmond ===== $78.74 $93.52 $96.62 $96.64 $97.99 $99.85 $100.88 $101.52 $103.75 $107.82 $113.63 $119.06 $129.64 $133.90 $139.00 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 • We will update this slide with calculated rates at the next meeting •:J FCS GROUP Solurion,-Oriented Co,,.whrnb Slide 14 • Bi-Monthly Sewer Bill Comparisons Southwest Suburban Sewer District Valley View # $147.00 Issaquah $154.38 Kent $170.44 Bellevue $171.92 Kirkland $172.52 Tukwila $174.22 Renton $177.56 Redmond $195.70 Sammamish Plateau Water & Sewer District 11=1111$196.86 Skyway Water & Sewer District $237.96 $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 $100.00 • We will update this slide with calculated rates at the next meeting •:;> FCS GROUP Solunons-Oriented consulting Slide 15 • Annual Stormwater Bill Comparisons Bellevue $143.64 Kent I $185.04 Redmond $202.68 Renton $204.48 Tukwila $226.00 Issaquah $239.04 Kirkland ■ $248.88 $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 $300.00 • We will update this slide with calculated rates at the next meeting •:;> FCS GROUP Solnnons-Oriented consulting Slide 16 Cost -of -Service Analyses // ////%////l�14///G'� C3 • How Will Costs Be Equitably Distributed? Revenue requirement: How big is the pie? 1 Cost of service: How should the pie be sliced? •:;> FCS GROUP Solunons-Oriented consulting Single-family 8% Multi -family 14% Existing Structure (Water) Commercial / Industrial 78% Slide 18 • Customer Classes Single Family Residential (SFR) Multi -family Residential (MFR) Commercial 1 Industrial •:;> FCS GROUP Solunons-Oriented consulting • Typically, largest customer group • Relatively low usage per unit • High peak demand • Lowest fire flow requirement; domestic sewer strength • Lower usage per dwelling unit • Usually master metered • Relatively constant use • Domestic sewer strength • Diversity in use per account • Can have relatively constant use • Highest fire flow requirement • Varying sewer strength Slide 19 • Allocating the Costs of Service (Example) $1 million Customer 60% of customer accounts, $600,000 1 Single Family •:;> FCS GROUP Solunons-Oriented consulting Rate Revenue Requirement 25% of customer 15% of customer accounts, $250,000 accounts, $150,000 W Multi Family Nip Commercial Customer Accounts Slide 20 • Functions of Service •:;> FCS GROUP Solunons-Oriented consulting N FEWater Customer Meters and Services Base Use Peak Use Fire 2.5% 3.5 44.5 34.5% 15.0% Customer Flow 3.0% 97.0 Slide 21 Multi -family 14% •:;> FCS GROUP Soiurions-Oriented Consulting • Water Results (DRAFT) Existing Revenue Collection Single- family Single- 8/ family 18% Commercial / Industrial 78% Multi -family 11% Estimated Cost of Service Commercial / Industrial 71% Slide 22 • Sewer Results (DRAFT) Existing Revenue Collection Single- family 8% Multi -family 16% •:;> FCS GROUP Soiurions-Oriented Consulting Commercial / Industrial 76% Multi -family 17% Estimated Cost of Service Single- family 12% Commercial / Industrial 71% Slide 23 • Next Steps • Finalize revenue requirement scenarios • Finalize cost -of -service and rate design scenarios • Adopt updated rate schedule •:;> FCS GROUP Solunons-Oriented consulting Slide 24 Thank you! Questions? John Ghilarducci, President 1 Principal (425) 336-1865 johng@fcsgroup.com www.fcsgroup.com •:•> FCS GROUP Solutions -Oriented Consulting • About FCS GROUP Utility Rate and Fee Consulting Utility Management 4) FCS GROUP Solunons-Oriented Consulting General Government it„„\\ Financial Analysis Economic and Funding Strategies 4,000+ PROJECTS COMPLETED 650+ PUBLIC CLIENTS SERVED 35 MANAGEMENT AND TECHNICAL PROFESSIONALS 36 YEARS IN OPERATION EST. 1988 4 OFFICES IN WASHINGTON, COLORADO, AND OREGON