WATER, WASTEWATER, AND RECLAIMED WATER RATE STUDY Public Meeting to Review Study Results. January 5, 2016

Transcription

1 WATER, WASTEWATER, AND RECLAIMED WATER RATE STUDY Public Meeting to Review Study Results January 5, Public Resources Management Group, Inc. Utility, Rate, Financial and Management Consultants

2 Utility Overview Utility Provides Essential Service on Continuous Basis Public Health and Safety Primary Objective Highly-Regulated (EPA / FDEP / SJRWMD / Florida Department of Health) Permits Require Satisfactory Operating Performance Operations Funded Through Monthly User Rates 2

3 Why We Are Here Last Formal Rate Analysis Performed in 2007 Monthly Water, Wastewater, and Reclaimed Water User Rates Last Adjusted in October 2014 Prepared Financial Forecast to Reflect Current Conditions Need to Ensure Proper Recovery of System Costs Have Identified Need for Rate Adjustments Have Also Reviewed Other Utility Fees and Charges 3

4 Financial Risk of Not Adjusting Rates at This Time Inability to Fund All Revenue Requirements / Capital Program and Meet Financial Targets 4

5 Financial Risk of Not Adjusting Rates at This Time (cont.) User Rates May Be Even Higher in Future Capital Needs for System Not Anticipated to Go Away, But May Be More Expensive to Address in the Future Inflation and Costs of Construction Continue to Affect System Costs Interest Rate Risk Interest Rates for Debt Financing Close to Historical Lows Without Increases, Limit Debt Financing Capability 5

6 Rate Guiding Principles Recognized Revenues Should Be Sufficient to Recover Full Cost of Providing Service Utility Should Remain Financially Viable and Sustainable Adequate Funding for Operating and Maintaining the System Capital Investment to Improve, Renew, and Rehabilitate Facilities Compliance With Rate Covenants for Anticipated Debt 150% All-In Debt Service Coverage Target Balanced Debt Risk (Pay-As-You-Go vs. Debt Financing) 6

7 Rate Guiding Principles Recognized (cont.) Utility Should Remain Financially Viable and Sustainable (cont.) Adequate Cash Reserves Working Capital: 90 Days of Rate Revenue Target Cash Balance Renewal and Replacement Fund Balance: One Year of Depreciation Expense Target Cash Balance Compliance With Regulatory Requirements EPA / FDEP / SJRWMD 7

8 Revenue Requirements Reflect Total Expenditures Funded from Rates Projected Through Fiscal Year 2020 Expenditures Include the Following: Operation and Maintenance Expenses Debt Service Requirements Renewals and Replacements Ongoing: Allows Assets to Meet Useful Service Life Major: Extends Useful Service Life of Assets Administrative Transfers 8

9 Major Issues Currently Affecting Utility System Staff Has Identified Approximately $35.6 Million in Capital Projects to Be Completed Through Fiscal Year 2020 Renewals, Repairs, and Upgrades to Utility System Public Health and Safety / Quality of Service / Asset Management Projects to Support Growth of City Line Extensions Wastewater Treatment Plant Expansions Line Relocations ($8.1 Million - Mandated By FDOT) Vehicles, Equipment, and Other Departmental Capital Need to Prepare Utility for Possible Major Capital Expenditures Beyond Fiscal Year

10 Major Issues Currently Affecting Utility System (cont.) Sample Renewal and Replacement Needs: Reclaimed Water Storage Tank at Wastewater Treatment Plant #2 Water Line Break Statistics Since June 2014: Amount Major Water Line Breaks 14 Moderate Water Line Breaks 22 Minor Water Line Breaks 28 Total Water Line Breaks 64 Fire Hydrant 10

11 Overview of Multi-Year Capital Program Summary of Water System Multi-Year Capital Program Description Amount Percent Water System: Line Extensions $5,536, % Line Relocations 4,039, % Water Treatment Plant Replacements 2,575, % Downtown Streetscape (Multiple Phases) 1,992, % Water Main Renewals / Replacements 822, % Meter Replacements 370, % Valve Replacements 312, % Other 718, % Total Water System Projects $16,369, % Summary of Wastewater and Reclaimed Water System Multi-Year Capital Program Description Amount Percent Wastewater and Reclaimed Water System: Line Extensions $5,536, % Line Relocations 4,039, % Downtown Streetscape (Multiple Phases) 1,992, % Wastewater Treatment Plant Replacements 1,909, % Biosolids Solar Drying Facility 1,500, % Line and Manhole Renewals / Replacements 1,196, % Wastewater Treatment Plant Expansions 806, % Reclaimed Water Storage / Supply (Thrill Hill Planning) 600, % Lift Station Upgrades 489, % Other 1,135, % Total Wastewater and Reclaimed Water System Projects $19,206, % Total Multi-Year Capital Program $35,575,421 11

12 Overview of Multi-Year Capital Program (cont.) Projected Funding of Capital Program Through Fiscal Year 2020: Multi-Year Capital Improvement Program Funding Sources Total Capital Costs = $35,575, % 4.9% Additional Debt Proceeds ($17.4 million) Existing Debt Proceeds ($6.3 million) 16.1% 49.0% Wastewater and Reclaimed Water Impact Fees ($5.7 million) Operating Revenues / Reserves / Deposits to Renewal and Replacement Fund ($4.4 million) 17.6% Water Impact Fees ($1.7 million) 12

13 Major Issues Currently Affecting Utility System (cont.) Operating Expenses Projected to Continue Increasing Congressional Budget Office National CPI Projections: Over 2% Increase Per Year Due to Regulatory Environment, Capital-Intensive Nature of Utility Operation, and Commodity Cost Increases (Electricity, Chemicals, Fuel, etc.), Utility Costs Typically Increase at Higher Rate Than General Inflation Water and Sewerage Maintenance Index: Between 5% and 6% Per Year 13

14 Revenue Under Existing Rates Projected to Be Insufficient to Meet All Revenue Requirements Projected Need to Adjust Rates to Keep Utility Sustainable 14

15 Projected Need for Revenue Adjustments: Summary of Water and Wastewater Revenue Adjustments Increase in Increase in Cost Per Water Wastewater Combined Average Customer 1,000 Gallons for Fiscal Year System System System Monthly Bill [*] Average Customer [*] 2016 (4/1/2016) 31.50% 14.00% 21.19% $13.76 $ (4/1/2017) 5.00% 2.00% 3.33% (4/1/2018) 5.00% 2.00% 3.35% (4/1/2019) 5.00% 2.00% 3.37% (4/1/2020) 5.00% 2.00% 3.38% [*] Based on residential customer with 7,000 gallons of monthly usage under proposed rate design. 15

16 Residential Water Bill Comparison (FY 2016) (About 82% of Approx. 9,600 Water Customers) Water Bills Under Inside-City Rates Usage Current Proposed in Gallons Monthly Bill Monthly Bill Difference 0 $7.15 $9.40 $2.25 2, , , , , , , [*] Customers located outside the City are subject to a 25% outside-city surcharge as allowed per Florida Statute

17 Residential Wastewater Bill Comparison (FY 2016) (About 89% of Approx. 6,300 Wastewater Customers) Wastewater Bills Under Inside-City Rates Usage Current Proposed in Gallons Monthly Bill Monthly Bill Difference 0 $26.94 $26.94 $0.00 2, , , , , , , [*] Customers located outside the City are subject to a 25% outside-city surcharge as allowed per Florida Statute

18 Residential Combined Water and Wastewater Bill Comparison (FY 2016) Combined Water and Wastewater Bills Under Inside-City Rates Usage Current Proposed in Gallons Monthly Bill Monthly Bill Difference 0 $34.09 $36.34 $2.25 2, , , , , , , [*] Customers located outside the City are subject to a 25% outside-city surcharge as allowed per Florida Statute

19 Combined Water and Wastewater User Rate Comparison Monthly Usage of 7,000 Gallons Average Usage of Residential Customer in System [*] Utilities in CAPITALIZED letters: i) are involved in rate study; ii) are planning to conduct rate study; or iii) will implement rate revision or price index / pass-through adjustment within twelve months 19

20 Some Reasons Why User Rates Differ Among Utilities Size of Existing Customer Base / Available System Growth Demographics (e.g., Customers Spread Out vs. Close Together, Types of Customers Served) Level of Capital Improvements to Meet Service Area Growth Amount of Needed Renewals and Replacements / Remaining Service Life of Assets Differences in Bond Covenants Source of Water Supply and Treatment Process Costs Plant Capacity Utilization and Assistance in Funding of Such Capacity (e.g., Grants, Impact Fees) Time of Last Rate Review Amount of General Fund and Administrative Fee Transfers 20

21 Residential Reclaimed Water Bill Comparison (FY 2016) (About 96% of Approx. 1,350 Reclaimed Water Customers) Reclaimed Water Bills Under Inside-City Rates Usage Current Proposed in Gallons Monthly Bill Monthly Bill Difference 0 $9.54 $9.40 ($0.14) 6, , , , , , , [*] Customers located outside the City are subject to a 25% outside-city surcharge as allowed per Florida Statute

22 Reclaimed Water User Rate Comparison Monthly Usage of 10,000 Gallons Average Usage of Residential Customer in System 22

23 Price Indexing Adjustment Clause Automatic Rate Increases Each Year for Effects on Costs of Operating Without Formal Hearing or Analysis Applied By Many Utilities Throughout State of Florida Initial Implementation Year of Fiscal Year 2021 Unless Superseded By Future Rate Study Recommendation Recommended Automatic Rate Adjustment: 100% of Change in Consumer Price Index (CPI) Plus 1% (CPI + 1%), But Not Less Than 2% Favored By Bond Rating Agencies More Assurance That Utility Rates Will Keep Up With Inflation Less Implied Risk of Default on Debt Service Payments Any Adjustments Above Indexed Adjustment Would Require Council Adoption 23

24 Impact Fees Impact Fees Recover Capital Cost Allocable to New Growth Very Common in Utility Industry Historically Used By City as Capital Financing Tool Support Policy of Growth "Paying Its Own Way" Long-Term Effect = Stabilize Rates for Service (e.g., Reduces Need for Future User Rate Increases) Fees Used to Directly Pay for Growth-Related Capital Projects or Growth-Related Debt Service Reduces Debt Service Component of Rates for Existing Users 24

25 Impact Fees (cont.) Last Formal Review Completed in 2007 City Has Been Annually Indexing Impact Fees By Changes in Engineering News-Record Construction Cost Index PRMG Impact Fee Calculations Based on: Cost of Installed Assets Available to Serve New Growth Multi-Year Capital Program Proposed Adjustments to Level of Service (LOS) Standards Water LOS = 300 gpd per Equivalent Residential Unit (ERU) Wastewater LOS = 300 gpd per ERU 25

26 Impact Fees (cont.) Calculated Impact Fees per ERU Current Study Difference from Existing System Existing Fee Calculation Amount Percent Water Treatment Component $530 $1.77/gal Transmission Component $820 $2.73/gal Combined $2,527 $1,350 ($1,177) -46.6% $8.42/gal $4.50/gal 26

27 Impact Fees (cont.) Calculated Impact Fees per ERU (cont.) Current Study Difference from Existing System Existing Fee Calculation Amount Percent Wastewater Treatment Component $2,145 $7.15/gal Transmission Component $1,145 $3.82/gal Combined $3,290 $10.97/gal Reclaimed Water $640 $2.13/gal Combined Wastewater $3,804 $3,930 $ % and Reclaimed Water $12.68/gal $13.10/gal Combined Water, Wastewater, and Reclaimed Water $6,331 $5,280 ($1,051) -16.6% 27

28 Impact Fee Comparison 28

29 Some Reasons Why Impact Fees Differ Among Utilities Source of Supply Proximity to Source of Supply Type / Complexity of Treatment Effluent Disposal Method Availability of Grant Funding to Finance CIP Administrative Policies Time Elapsed Since Last Impact Fee Review Density Within Service Area / Size of System Utility Life Cycle (Growth-Oriented Vs. Mature) Level of Service Per ERU Standards 29

30 Miscellaneous Service Charges Proposed Charges Reflect Balance of: Current Utility Costs to Provide Service Comparison with Similar Charges of Other Florida Utilities City Policies To the Extent Charges Do Not Recover Cost of Providing Miscellaneous Services, Cost Difference Must Be Paid Through Monthly User Rates 30

31 Miscellaneous Service Charges (cont.) Proposed Changes to Miscellaneous Service Charges: Description Existing Proposed Minimum Customer Deposits - Reclaimed Water Service All Services N/A $30.00 or twice the amount of the estimated monthly billing, whichever is greater Termination Charge (Voluntary) Normal Business Hours $10.00 $20.00 After Hours Service Charges for Restoring Water Service Normal Business Hours $20.00 $20.00 After Hours Late Fee N/A 5% of delinquent amount, with a minimum of $5 Meter / Connection Charges 3/4" Meter $ $ " Meter /2" Meter , " Meter , Above 2" Meter Actual Cost Actual Cost 31

32 RECOMMENDATIONS Adopt Proposed Water, Wastewater, and Reclaimed Water User Rates for All Fiscal Years Including Price Indexing Adjustment Clause Help Ensure Full Cost Recovery and Address Capital Needs Adopt Proposed Impact Fees Adopt Proposed Miscellaneous Service Charges Monitor Actual Vs. Projected Financial Results Re-evaluate User Rates / Financial Forecast in Two to Three Years Changes in Economic Conditions, Customer Usage Trends, Regulatory Environment, Etc. 32

33 QUESTIONS AND DISCUSSION 33