The URL can be used to link to this page

Home My WebLink AboutWS 2024-06-03 Item 2 - Utility Rate Studyit 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