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Home My WebLink AboutWS 2024-09-16 Item 3 - Discussion - Utility Rate Study RecommendationsUtility Rate Study ran, of the fukwild Financial Plan 2024 ottotagoilit#00 •F s a Bowman company r1.11,;1 •;�� Agenda Background Results Stormwater Sewer Water Next Steps •:;>i cs y Slide 2 Background //%/�%//�%l/22 d r r w •;�� 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 Public Accountability • Communicates impact of financial decisions Public meetings Slide 4 • •;�� Comprehensive Rate Study: Start to Finish •>FCS Communication Plan What level of communication is needed? Do your rate structures align with your objectives? 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? Slide 5 01 •;:� 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 1 1 1 Year 1 Year 2 Year 3 Year 4 Year 5 • Operating Capital Slide 6 •;:� How Much Revenue is Needed? • Financial Policy Impacts Forecasted O&M Costs Rate Funded Capital Existing & New Debt Service } ) Annual Revenue Needs Slide 7 CO • •;�� How Will Costs Be Equitably Distributed? Revenue requirement: How big is the pie? 1 Cost of service: How should the pie be sliced? Single-family Existing Structure (Water) 8% Multi -family 14% Commercial / Industrial 78% Slide 8 Stormwater Results •;�� Existing Stormwater Rates Class SFR All other Natural 0-20% Developed Surface 21-50% Developed Surface 51-70% Developed Surface 71-85% Developed Surface 86-100% Developed Surface >CS $226.00 $271.01 $589.40 $1,080.27 $1,611.96 $1,941.94 $2,265.30 Slide 10 •;�� Stormwater Capital Spending Forecast $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- •>FCS $7.5M Capital Spending (Escalated) ■ Original CIP ■ Additions since June 2024 2025 2026 2027 2028 2029 2030 Slide 11 IV •;�� Stormwater Results (with Phase 2 of PW Project) $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 6.00% O S MN NM 6.00% w e 6.00% U M 10111 0111 _ mil- l 6.00% itio 6.00°%° ma 00 2024 2025 2026 Cash Operating Expenses Existing Debt Service 6.00% • WV 2027 2028 2029 2030 Phase 2 of PW Project New Debt Service Additions to Operating Fund Balance 1 Rate Funded Capital Total Revenues — Total Revenues with Rate Increases Slide 12 •;�� Stormwater Results (without Phase 2 of PW Project) $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 3.25% NNE 0" 2024 2025 3.25% no 3.25% 3.25% moo 00° ism 2026 Cash Operating Expenses Existing Debt Service 2027 2028 Phase 2 of PW Project New Debt Service Additions to Operating Fund Balance d Rate Funded Capital Total Revenues 3.25% swo NM 3.25% 2029 Total Revenues with Rate Increases 2030 Slide 13 W • •;4 Current Rate Method Stormwater Class Annual Rate SFR All other Natural $226.00 $271.01 0-20% Developed Surface $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 •:;>FCS y Inequities created at boundaries between classes Single-family pays less than even a natural property (with no impervious surface area) Impervious surface area is generally recognized as the best measure of stormwater runoff contribution Slide 14 • ❖4 ERU Method • •:;>FCS y Commercial Parcel A 8,882.5 ISF = 2.5 ERUs Single Family 3,500 ISF = 1 ERU prara Single Family 4,500 ISF = 1 ERU Commercial Parcel B 14,212 ISF = 4 ERUs ISF = impervious square feet Commercial Parcel C 28,424 ISF = 8 ERUs Slide 15 f� • **4 Stormwater Rate Calculation • Rate Code Accounts Impervious Square Feet ERUs 1 13 Natural 171 0-20% Developed Surface 482 21-50% Developed Surface 72 51-70% Developed Surface 77 71-85% Developed Surface 92 86-100% Developed Surface 826 Single-family 3,564 WSDOT 4 Total 5,288 216,814 5,861,529 5,818,866 9,980,754 5,853,473 70,983,357 14,277,415 Not measured 112,992,207 54 1,465 1,455 2,495 1,463 17,746 3,564 54 28,243 • The average impervious square feet (ISF) for a single- family customer is 4,006 • For purposes of charging, 4,000 ISF can be assumed to be the equivalent of a single residential unit Slide 16 •;�� Stormwater Rate Calculation (2026) Rate Code 2026 Billing Current Structure 2026 Billing (Proposed Structure Differenc - Single-family Rate (ERU rate) 278.53 $ 37.60 1 2 3 4 5 6 7 13 Natural 0-20% Developed Surface 21-50% Developed Surface 51-70% Developed Surface 71-85% Developed Surface 86-100% Developed Surface Single-family WSDOT Total •:;>FCS y $ 51,982 471,250 363,707 818,765 580,917 4,966,013 813,544 172,728 $ 8,238,906 $ 15,478 418,437 415,392 712,496 417,862 5,067,291 1,019,222 172,728 $ 8,238,906 $ (36, 504) (52,813) 51,684 (106,269) (163,055) 101,277 205,679 • Rates for single-family would increase under the ERU method • Most other classes would see a decrease in their stormwater bill Slide 17 OD Sewer Results -71)V '191.11110' Ar •;�� Existing Sewer Rates IMITIIIMI 1 KC Metro Commercial /Industrial $58.86 / RCE $55.11 / RCE Single Family $32.00 / RCE $55.11 / RCE Multiple Family $32.00 / DU $55.11 / RCE 1 RCE = 750 cubic feet •cl $113.97 / RCE $87.11 /RCE $87.11 /RCE Slide 19 •;�� Sewer Capital Spending Forecast $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- >FCS 2024 2025 Capital Spending (Escalated) ■ Original CIP Additions since June 2026 2027 2028 2029 2030 Slide 20 •� Sewer Results (with Phase 2 of PW Project) $18,000, 000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6, 000,000 $4, 000,000 $2, 000,000 $0 4.50% 4.50% do, UMW imb 2024 2025 2026 Cash Operating Expenses Existing Debt Service 4.50% amp mown 4.50% 4.50% i gap ammo 4.50°/0 woo 0 mow One-time payback of an interfund loan causes a bump in revenue 2027 2028 2029 2030 Phase 2 of PW Project New Debt Service Additions to Operating Fund Balance Rate Funded Capital Total Revenues — Total Revenues with Rate Increases Slide 21 •� Sewer Results (without Phase 2 of PW Project) $18,000, 000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6, 000,000 $4, 000,000 $2, 000,000 $0 3.00% 3.00% 2024 2025 2026 Cash Operating Expenses Existing Debt Service 3.00% 3.00% mown One-time payback of an interfund loan causes a bump in revenue 3.00% 3.00% din ono 2027 2028 2029 2030 Phase 2 of PW Project New Debt Service Additions to Operating Fund Balance Rate Funded Capital Total Revenues — Total Revenues with Rate Increases Slide 22 • Sewer COSH Results (2025) Single-family revenue collection is below its cost of service Multi -family and non- residential are within the reasonable range of their cost of service •:;>FCS y 140% 120% 100% I 60% 40% 20% 0% Cost Recovery as a % of Cost -of -Service 57% 97% 109% S ingle-family M ulti-family N on -residential Slide 23 • • •;4 Sewer Phase -in Plan • • The single-family class faces steep increases to return to its cost -of -service Rate increases for other classes are calculated to produce the correct amount of revenue The phase -in plan below brings classes within 10% of their cost -of -service in 2029 Rate Increase by Class 2025 2026 2027 2028 2029 Single-family Multi -family 14.00% 13.82% 14.00% 14.00% 3.54% 3.59% Non-residential 1.62% 3.66% 3.54% Overall •:;>i cs y 4.50% 4.50% 4.50% 14.00% 3.42% 14.00% 3.33% 3.46% 3.35% 4.50% 4.50% Slide 24 • •;�� Sample Monthly Sewer Bills (COSA) • City Bill Only Customer 2024 2025 2026 2027 2028 2029 Single-family $32.00 Multi -family $32.00 Non-residential $ 58.86 $36.48 $41.59 $ 3 6.42 $37.71 $59.81 $62.00 • With King County Charge ($55.11 per month) $47.41 $54.05 $39.06 $40.40 $64.19 $66.41 $61.61 $41.75 $68.64 Customer 2024 2025 2026 2027 2028 2029 Single-family $87.11 Multi -family $87.11 Non-residential $113.97 •:;>i cs y $91.59 $96.70 $91.53 $92.82 $114.92 $117.11 $102.52 $109.16 $94.17 $95.51 $119.30 $121.52 $116.72 $96.86 $123.75 Slide 25 •;�� Sample Monthly Sewer Bills (ATB) • City Bill Only Customer 2024 2025 2026 2027 2028 2029 Single-family $32.00 Multi -family $32.00 Non-residential $58.86 $33.44 $34.94 $33.44 $ 34.94 $61.51 $64.28 • With King County Charge ($55.11 per month) $36.52 $38.16 $36.52 $38.16 $67.17 $70.19 $39.88 $39.88 $73.35 Customer 2024 2025 2026 2027 2028 2029 Single-family $87.11 Multi -family $87.11 Non-residential $113.97 $88.55 $90.05 $88.55 $90.05 $116.62 $119.39 $91.63 $93.27 $91.63 $93.27 $122.28 $125.30 $94.99 $94.99 $128.46 Slide 26 Water Results -71)V '191.11110' Ar •;�� Existing Water Rates Class / Meter Size Monthly Fixed SFR-MFR / DU 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" 10" 12" •:;>FCS y $21.50 $60.00 $72.00 $104.00 $13 5.00 $194.00 $259.00 $391.00 $520.00 $650.00 $770.00 Consumption / ccf Oct — May Jun — Sep Commercial / Industrial $6.95 $7.38 Single Family Multiple Family $3.83 $4.18 $4.56 $ 5.02 Slide 28 4 Capital Spending Forecast • $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- •>FCS • Original CIP • Additions since June Capital Spending (Escalated) 2024 2025 2026 2027 2028 2029 2030 Slide 29 •;•� Water Results (with Phase 2 of PW Project) $25,000,000 $20,000,000 $15,000, 000 $10,000,000 $5,000,000 $0 •:;>FCS y 14.50% 40,11 14.50% timID Mal 14.50% or r 14.50% 14.50% 40,. WIN 3.00% r a 2024 2025 2026 2027 2028 2029 2030 Cash Operating Expenses Phase 2 of PW Project Existing Debt Service New Debt Service Additions to Operating Fund Balance Rate Funded Capital Total Revenues — Total Revenues with Rate Increases Slide 30 4 Water Results (without Phase 2 of PW Project) • $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 •:;>i cs y 2024 12.25% 2025 12.25% 2026 12.25% ono woo sow aro 2027 12.25% row r 2028 12.25% 3.25% am' Am 0 2029 2030 Cash Operating Expenses Phase 2 of PW Project Existing Debt Service New Debt Service Additions to Operating Fund Balance Rate Funded Capital Total Revenues — Total Revenues with Rate Increases Slide 31 • Water COSA Results (2025) Dotted lines indicate a reasonable range of revenue collection Single-family revenue collection is below its cost of service Multi -family and non- residential are paying above their cost of service 100% 60° 40% 20% 0% Cost Recovery as a % of Cost -of -Service 43% 125% 112% Single-family Multi -family Non-residential Slide 32 •;�� Phase -in Plan • • The single-family class faces steep increases to return to its cost -of -service • Rate increases for other classes are calculated to produce the correct amount of revenue • The phase -in plan below brings classes within 10% of their cost -of -service in 2029 Rate Increase by Class 2025 2026 2027 2028 2029 Single-family Multi -family Non-residential Overall •:;>FCS y 36.00% 2.17% 14.34% 14.50% 36.00% 11.86% 36.00% 11.20% 36.00% 10.87% 12.11% 11.61% 10.91% 14.50% 14.50% 14.50% 36.00% 9.67% 10.16% 14.50% Slide 33 • Sample Monthly Water Bills (COSA Rates) Customer Water Usage Summer 2024 2025 2026 2027 2028 2029 Single-family Multi -family (1 Unit) Multi -family (15 Units) Non-residential (3/4" meter) Non-residential (1 1/2" meter) 10 CCF $63.30 10 CCF 90 CCF 10 CCF 10 CCF $71.70 $372.70 $133.80 $177.80 $86.09 $117.08 $73.25 $380.78 $152.99 $203.30 $81.94 $425.94 $171.51 $227.91 $159.23 $91.12 $473.65 $191.42 $254.37 $216.55 $294.51 $101.02 $110.79 $525.13 $575.90 $212.31 $282.13 $233.89 $310.81 Slide 34 • Sample Monthly Water Bills (ATB Rates) Customer Water Usage Summer 2024 2025 2026 2027 2028 2029 Single-family Multi -family (1 Unit) Multi -family (15 Units) Non-residential (3/4" meter) Non-residential (1 1/2" meter) 10 CCF $63.30 10 CCF 90 CCF 10 CCF 10 CCF $71.70 $372.70 $133.80 $177.80 $72.48 $82.99 $82.10 $426.74 $153.20 $203.58 $94.00 $488.62 $175.42 $233.10 $95.02 $107.63 $ 5 59.47 $200.85 $266.90 $108.80 $124.58 $123.24 $640.59 $733.48 $229.97 $305.60 $263.32 $349.91 Slide 35 •;�� Next Steps - Finalize revenue requirement scenarios Finalize cost -of -service and rate design scenarios Consider updated rate schedule Slide 36 • •;�� Questions What are your thoughts on the proposed rate structure and reconciliation with the Cost -of -Service Analysis? How should rates be designed for the next biennium? What other factors should be considered in advance of rate proposal and adoption? Do you have any further questions about the proposed financial policies? •:;>i cs y Slide 37 Thank you! Questions? John Ghilarducci, Principal (425) 336-1865 johng@fcsgroup.com www.fcsgroup.com •FCS a Bowman company