Rate Comparison & Benchmarking Analysis

Transcription

1 + Rate Comparison & Benchmarking Analysis Final Report September 2016 Firm Headquarters Redmond Town Center th Ave. NE Suite D-215 Redmond, WA T: (425) F: (425)

2 Rate Comparison and Benchmarking Analysis September 2016 TABLE OF CONTENTS EXECUTIVE SUMMARY... 1 SECTION 1: STUDY FRAMEWORK INTRODUCTION BACKGROUND METHODOLOGY... 7 SECTION 2: SURVEY FINDINGS SUMMARY SURVEY RESULTS OPERATIONAL METRICS SYSTEM CHARACTERISTICS SUPPLY SOURCE WATER O&M COST PER MILLION GALLONS CUSTOMER BASE PROFILE STAFFING LEVELS SURVEY RESULTS FISCAL/MANAGEMENT POLICIES ASSET MANAGEMENT PRINCIPLES ASSET REPLACEMENT VALUES RATE-FUNDED CAPITAL REINVESTMENT AGGREGATE UTILITY BILL BREAKDOWN UTILITY MANAGEMENT PERFORMANCE MEASURES RATE STRUCTURES FREQUENCY OF RATE REVIEWS APPENDICES APPENDIX A: 2016 UTILITY RATES APPENDIX B: SAMPLE MONTHLY BILL CALCULATIONS APPENDIX C: WATER METER INVENTORY APPENDIX D: SUPPLEMENTAL LABOR COST CALCULATIONS APPENDIX E: REPORTED ASSET-MANAGEMENT PRACTICES APPENDIX F: SERVICE AREA MAPS APPENDIX G: BENCHMARKING REPORT EXHIBITS

3 Rate Comparison & Benchmarking Analysis September 2016 EXECUTIVE SUMMARY Sammamish Plateau Water ( SP Water ) and Cascade Water Alliance, engaged FCS GROUP to conduct a rate comparison and benchmarking study for a select group of water and sewer utilities: Members of Cascade Water Alliance: City of Bellevue City of Issaquah City of Kirkland City of Redmond Sammamish Plateau Water (SP Water) Skyway Water & Sewer District City of Tukwila Other Local Utilities: Covington Water District (Water Only) Northeast Sammamish Sewer & Water District (NESSWD) Woodinville Water District This analysis considered a variety of operational metrics and financial policies in order to develop an explanation for observed differences in single-family customer bills among the surveyed utilities. This report focuses primarily on bills at three usage levels that are representative of SP Water s residential customer base, though Appendix B provides a more comprehensive bill comparison. Because each utility s rates reflect a unique blend of cost structure, organizational arrangement, and policy decisions, some of these metrics did not contribute meaningfully to the overall narrative. With this in mind, the key conclusions stemming from this study are summarized below. Exhibit ES-1 provides a summary of the key comparative water metrics considered in this study. Exhibit ES-1: Summary of Relative Water Utility Rankings Monthly Water Bill Rank Rankings - Customers / Usage 1 Rankings - Infrastructure per Square Mile 1 Conn. Per CERUs Per 2014 Usage Booster Low User Average User High User Square Mi. Square Mi. per Connection Stations Mains Pressure Zones Reservoirs 3 ccf 6 ccf 15 ccf (n th Lowest) (n th Lowest) (n th Lowest) (n th Highest) (nth Highest) (nth Highest) (nth Highest) SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Rankings 1 Total O&M Cost per MG (n th Highest) Rankings - Capital 1 Debt Service as % of Rev. Cap. Reinvestment Per CERU (n th Highest) (n th Highest) Rankings - Revenue Avg. Revenue Per CERU % From Fixed Charges (n th Highest) (n th Highest) Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill FCS GROUP Page 1

4 Rate Comparison & Benchmarking Analysis September 2016 Exhibit ES-2 provides a summary of the key comparative sewer metrics considered in this study. Exhibit ES-2: Summary of Relative Sewer Utility Rankings Monthly Sewer Bill Rank Rankings - Customers Rankings - Infrastructure Conn. Per RCEs Per RCEs Per Lift Stations Mains Per Force Mains Conn. To Reg. Low User Average User High User Square Mi. Square Mi. Connection Per Square Mi. Square Mile as % of Total System 3 ccf 6 ccf 15 ccf (n th Lowest) (n th Lowest) (n th Lowest) (n th Highest) (nth Highest) (nth Highest) (n th Lowest) SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD (N/A) 10 Tukwila (N/A) 6 Woodinville WD SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Rankings 1 Rankings - Capital 1 Rankings - Revenue Total O&M Cost per RCE (n th Highest) Debt Service as % of Rev. (n th Highest) Cap. Reinvestment Per RCE (n th Highest) Avg. Revenue Per RCE (n th Highest) % From Fixed Charges (n th Highest) Cell colors highlight how each metric might influence relative sewer bill rankings. Lower Bill Higher Bill The key factors that appear to impact observed differences in single-family bills between SP Water and the other surveyed utilities include: Fixed versus variable revenue philosophy. In response to consecutive years of low water sales (and related revenue shortfalls), SP Water s Board of Commissioners made a policy decision in late 2011 to target a higher level of cost recovery through fixed charges. This policy decision intended to improve revenue stability, recognizing that the majority of utility costs are fixed and do not vary with the amount of water used. As shown in Exhibit 19, SP Water sets its single-family water rates to target 60% cost recovery through fixed charges system-wide, it recovers almost 52% of its water utility costs through fixed charges. The other surveyed utilities generally recover 30 40% of their water rate revenue through fixed charges. Because SP Water recovers a substantially greater share of its water utility costs through fixed charges, its single-family bills are relatively high compared to other utilities at lower usage levels and among the lowest at higher usage levels. SP Water imposes flat sewer rates on single-family customers, recovering almost 80% of its costs through fixed charges system-wide. Compared to the utilities that impose volumetric sewer rates (Bellevue, Issaquah, and Kirkland), SP Water s singlefamily sewer bill is higher at low usage levels and lower at high usage levels. Customer base profile. Exhibit 9 shows that SP Water has a predominantly residential customer base, with single-family customers representing over 90% of accounts served, about 74% of total water demand, and roughly 70% of annual rate revenue. With one of the FCS GROUP Page 2

5 Rate Comparison & Benchmarking Analysis September 2016 smallest non-residential customer bases in the survey group, SP Water lacks the flexibility that other utilities have to influence single-family rates through cost-allocation decisions (at least, without adverse impacts to its other customer classes). Service area characteristics. SP Water appears to have a low-density customer base compared to many of the other surveyed utilities. Exhibit 5 indicates that SP Water has the 3 rd lowest number of CERUs per square mile and the 4 th lowest number of water service connections per square mile. At an average of 88 LF per connection, SP Water has the 4 th highest length of mains per connection. Exhibit 6 indicates that SP Water has the lowest number of RCEs per square mile and the 3 rd lowest number of sewer service connections per square mile. At an average of 82 LF per connection, SP Water has the 3 rd highest length of mains per connection. It is also worth noting that SP Water s sewer customer base is substantially smaller than its water customer base (64% of the water utility s accounts, 60% of its customer equivalents), which is partially due to the fact that the Cascade View Zone customers do not receive sewer service. With a relatively small sewer customer base to pay for SP Water s overhead costs, the average cost per customer (or customer equivalent) is higher than it is for jurisdictions that have more comparably sized water and sewer utilities. These differences result in certain cost inefficiencies for SP Water resulting from the infrastructure required to serve customers in less densely populated areas. Other notable service-area differences include: As shown in Exhibit 6, force mains represent a greater share of SP Water s sewer system than the other surveyed utilities this results in incremental operating costs associated with mechanical conveyance. Exhibit 6 also indicates that SP Water has the lowest number of connections to the regional wastewater system. Under King County s standards, SP Water should have connections to the regional transmission lines however, SP Water only has a single connection. This results in incremental operating costs for SP Water to convey wastewater to its sole connection to the regional system, as well as capital investments to address capacity issues in its conveyance system. Capital funding embedded in rates. SP Water has been proactive in quantifying the replacement liability associated with its water and sewer infrastructure, and is phasing in a policy to fund capital reinvestment through rates based on 80% of replacement-cost depreciation (commonly estimated to be 3 5 times original-cost depreciation expense). This benchmark is relatively aggressive compared to most of the other surveyed utilities, which either set funding targets based on original-cost depreciation or do not explicitly build capital funding into their rates at all. Exhibit 14 indicates that SP Water had the third highest amount of water utility capital reinvestment per CERU in 2014, and the fifth highest amount of sewer utility capital reinvestment per RCE. It is worth noting that SP Water is one of two utilities in the survey group that transfers capital reinvestment funding into a dedicated replacement fund, explicitly restricting the funding for replacement projects. This policy results in higher near-term rates relative to utilities that allow the funding to be used for non-replacement projects, but intends to facilitate a more stable long-term financial strategy. FCS GROUP Page 3

6 Rate Comparison & Benchmarking Analysis September 2016 Recovery of fire protection costs. SP Water s rates include the full cost of fire protection. A number of the city utilities recover at least a share of their fire protection costs through utility taxes, which might not appear in sample bill comparisons that exclude taxes. It is worth noting that SP Water and Redmond both have two distinct water service areas, and their rate policy decisions likely have an impact on observed differences in their rates. Redmond imposes a higher set of rates in its Novelty Hill service area to reflect the higher cost of serving that area; as a result, the rates in its City service area can be % lower than they would be under a combined or uniform rate structure independent of geographic location. SP Water imposes a single set of rates in both its Plateau and Cascade View Zones, despite the fact that Cascade View has higher supplyrelated costs (especially wheeling) and may be more costly to serve in other ways given its rural nature. More analysis would be needed to identify Cascade View s fully allocable share of SP Water s costs however, as Cascade View represents slightly less than 4% of the total water customer base, it is relatively unlikely that SP Water would be able to materially reduce rates in its Plateau Zone without adversely impacting customers in Cascade View. In general, the other operational metrics considered did not materially correlate with the observed differences in rates. Exhibits ES-1 and ES-2 suggest that there is not a clear pattern in a specific utility s ranking in the various revenue requirement components, as a utility may be relatively high in one area and relatively low in another area. Exhibit ES-3 summarizes the key findings for the surveyed utilities. Exhibit ES-3: Summary of Findings by Utility SP Water Water Bill Sewer Bill Relative Ranking Key Observations Relative Ranking Key Observations Among the highest bill at lower usage levels; among the lowest bill at higher usage levels High level of capital reinvestment funded through rates Relatively high percentage of revenue from fixed charges Among the highest bill at lower usage levels; converges to median at higher usage levels Relatively high O&M cost per RCE Bill falls below 3 utilities with volumetric rates at higher usage levels Bellevue Above median at lower usage levels; otherwise near the sample median. Highest level of capital reinvestment funded through rates Largest utility in sample group Among the lowest bills at lower usage levels; among the highest bills at higher usage levels 1 of 3 utilities surveyed with volumetric singlefamily sewer rates Highest rate-funded capital reinvestment Largest utility in group Covington WD Above median at lower usage levels; otherwise near the sample median. Relatively low-density / rural customer base Relatively high debt burden Rates do not include explicit funding for capital reinvestment (N/A) (N/A) Issaquah Among the lowest bill at lower usage levels; among the highest bill at higher usage levels. Relatively high percentage of revenue from volume charges Appears to have significant commercial customer base Capital reinvestment has not explicitly been built into rates; plans to do so moving forward Among the lowest bill at lower usage levels; relative rank increases with the amount of water used 1 of 3 utilities surveyed with volume-based single-family rates Appears to have significant commercial customer base Capital reinvestment has not explicitly been built into rates; plans to do so moving forward FCS GROUP Page 4

7 Rate Comparison & Benchmarking Analysis September 2016 Kirkland Water Bill Sewer Bill Relative Ranking Key Observations Relative Ranking Key Observations Near or slightly below sample median at most usage levels Relatively high O&M cost per MG, offset by low debt burden Near the middle of the group for capital reinvestment per CERU Among the lowest bill at lower usage levels; among the highest at higher usage levels 1 of 3 utilities surveyed with volume-based single-family rates Relatively high debt burden Relatively high capital reinvestment per RCE NE Sammamish SWD Near or slightly below sample median at most usage levels Relatively high debt burden, offset by relatively low O&M cost per MG Near the middle of the group for capital reinv. Near or slightly below sample median at most usage levels Relatively high debt burden, offset by relatively low capital reinvestment per RCE Redmond (City) Among the lowest bill at most usage levels Relatively low O&M cost per MG; near the middle of the group in terms of debt burden / capital reinvestment funded through rates Significant nonresidential customer base to which costs can be spread Lowest bill at all usage levels Relatively low O&M cost per RCE; no outstanding debt Near the middle of the group in terms of capital reinvestment funded through rates Significant nonresidential customer base to which costs can be spread Redmond (Novelty Hill) Among the highest bill at most usage levels Primarily residential customer base; one of the smallest utilities surveyed Among the highest ratefunded capital reinvestment per CERU Among the highest bill at lower usage levels; converges to median at higher usage levels Relatively low O&M cost per RCE; no outstanding debt Among the highest ratefunded capital reinvestment per RCE Primarily residential customer base; one of the smallest utilities surveyed Skyway WSD Relatively high bill at most usage levels Relatively high O&M cost per MG Relatively high debt burden Primarily residential customer base; one of the smallest utilities surveyed Among the highest bill at lower usage levels; converges to median at higher usage levels Relatively high debt burden, offset by relatively low capital reinvestment per RCE Primarily residential customer base; one of the smallest utilities surveyed Tukwila Among the lowest bill at most usage levels Does not appear to maintain separate operating and capital funds Capital reinvestment not explicitly built into rates Significant nonresidential customer base to which costs can be spread Near the sample median at lower usage levels; otherwise relatively low single-family sewer bill Does not appear to maintain separate operating and capital funds Highest O&M cost per RCE Capital reinvestment not explicitly built into rates Significant non-res. customer base to which costs can be spread Woodinville WD Relatively high bill at lower usage levels, converges to median at higher usage levels O&M cost per MG above sample median Rate-funded capital reinvestment above sample median Offset by relatively low debt burden Near the sample median at lower usage levels; otherwise relatively low single-family sewer bill Relatively high O&M cost per RCE, offset by relatively low debt burden Rate-funded capital reinvestment above sample median FCS GROUP Page 5

8 Rate Comparison & Benchmarking Analysis September 2016 SECTION 1: STUDY FRAMEWORK 1.0 INTRODUCTION Sammamish Plateau Water ( SP Water ) and Cascade Water Alliance engaged FCS GROUP to conduct a rate comparison and benchmarking study for a select group of water and sewer utilities: Members of Cascade Water Alliance: City of Bellevue City of Issaquah City of Kirkland City of Redmond Sammamish Plateau Water (SP Water) Skyway Water & Sewer District City of Tukwila Other Local Utilities: Covington Water District (Water Only) Northeast Sammamish Sewer & Water District (NESSWD) Woodinville Water District This study attempts to determine which factors influence the difference in rates charged by these utilities, assessing operational and financial metrics and evaluating the impacts of policy decisions. 1.1 BACKGROUND A utility s rate evaluations commonly include a comparison of residential bills under its existing and proposed rates to those of other utilities. Exhibit 1 provides a comparison of residential water and sewer bills for the utilities included in this analysis, assuming usage levels of 3, 6, and 15 hundred cubic feet (ccf) per month. Appendix A provides water and sewer bill calculations for a wider range of monthly usage levels. Exhibit 1: Survey of Residential Water & Sewer Bills Under 2016 Rates Low User Average User High User Monthly Water Usage 3 ccf 6 ccf 15 ccf Water Bill Sewer Bill Total Bill Water Bill Sewer Bill Total Bill Water Bill Sewer Bill Total Bill Monthly Residential Bill 1 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 SP Water $ $ $ $ $ $ $ $ $ Bellevue $ $ $ $ $ $ $ $ $ Covington WD 2 $ $17.85 (N/A) $ $ $17.85 (N/A) $ $ $17.85 (N/A) $ Issaquah $ $ $ $ $ $ $ $ $ Kirkland $ $ $ $ $ $ $ $ $ NE Sammamish SWD $ $ $ $ $ $ $ $ $ Redmond (City) $ $ $ $ $ $ $ $ $ Redmond (Novelty Hill) $ $ $ $ $ $ $ $ $ Skyway WSD $ $ $ $ $ $ $ $ $ Tukwila $ $ $ $ $ $ $ $ $ Woodinville WD $ $ $ $ $ $ $ $ $ Excluding local utility taxes and charges for King County Wastewater Treatment. 2 Covington WD does not provide sewer service (and is not included in the sewer bill rankings); sewer bill shown reflects Soos Creek WSD's rates. 3 Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High FCS GROUP Page 6

9 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 1 (and this report in general) focuses primarily on bills at three usage levels that are representative of SP Water s residential customer base, though Appendix B provides a more comprehensive bill comparison. It is important to note that the comparison shown in Exhibit 1, while commonly requested by elected officials and other stakeholders, fails to provide meaningful insight into the cause of observed differences in rates. Each utility s rates are influenced by a unique set of operational conditions, management practices, and policy decisions. Various internal and external factors may impact a utility s rates, including: Source of Supply Level of Treatment Population Density Organizational Structure/Goals Age/Type of Infrastructure Water Use Patterns Strategic Plans Economies of Scale Policy Decisions A benchmarking analysis can provide valuable context to better understand and explain how these considerations impact the bottom line of a bill comparison. It usually provides a snapshot of utility performance at a specific point in time multi-year analyses facilitate an evaluation of performance trends over time, better informing potential modifications to operational practices or policies. Exhibit 2 presents the suggested benchmarking process. Exhibit 2: Steps to Benchmarking 1. Review and evaluate utility goals 2. Select relevant and material performance measures 3. Define evaluation criteria 6. Identify strong and weak performance 5. Compare your utility to comparable industry data 4. Collect and validate data 7. Develop prioritized action plans 8. Follow through and follow up REPEAT 1.2 METHODOLOGY The initial data-collection effort involved gathering information from public documents such as financial statements, budgets, and readily available system data. With input from SP Water and Cascade staff, FCS GROUP prepared a survey requesting additional information from each jurisdiction most jurisdictions submitted responses voluntarily, but FCS GROUP had to submit public records requests to get data from Issaquah and NE Sammamish SWD. We evaluated the information provided and followed up as needed to get clarification and additional information. Any data that the jurisdictions could not or would not provide is noted in the respective charts and tables. FCS GROUP Page 7

10 Rate Comparison & Benchmarking Analysis September 2016 The benchmarking analysis considers two types of comparative information: Operational metrics, which characterize operational conditions and customer demographics for each utility. Utilities generally have limited control of these metrics. Financial/management policies, which directly influence rate levels by defining needs above current operating and debt service costs. These policies generally reflect explicit and discretionary decisions by utility management and elected officials as part of a longer-term strategy or philosophy. Exhibit 3 lists the metrics and policies reviewed: Exhibit 3: Benchmarking Metrics and Policies Operational Metrics Customers / Customer Equivalents / Infrastructure per Square Mile Water Production per Connection Supply Utilization (Purchased vs. Produced Water) O&M Cost per Million Gallons Supply Costs Other Direct O&M Costs Total O&M Costs Customer Base Profile / Unit Rate Revenue Summary Labor Cost Metrics Labor Cost per FTE Water Production per FTE Length of Mains per FTE FTEs per 1,000 Connections Monthly Labor Cost per Customer Equivalent Labor Cost as a Percent of Total Rate Revenue Financial / Management Policies Asset Management Principles Rigor of asset management planning Implementation of best-management practices Methodology for estimating / tracking asset replacement values Asset Replacement Liability per Customer Equivalent Rate-Funded Capital per Customer Equivalent per Month Average Capital Reserves per Connection Ratio of Capital Reserves / Reinvestment Capital Reserves as % of Repl. Value Level of Utility Debt Debt-Asset Ratio Debt Service as a Percent of Annual Revenue Requirements Performance Measures for Utility Management Financial Maintenance Customer Service Water Quality Percent of Rate Revenue from Fixed vs. Variable Charges Frequency of Rate Reviews / Adjustments Each metric reviewed will be described in more detail in Section 2. FCS GROUP Page 8

11 Rate Comparison & Benchmarking Analysis September 2016 SECTION 2: SURVEY FINDINGS 2.0 SUMMARY Exhibit 4 summarizes the metrics considered in this analysis, and how each can influence rates. Exhibit 4: Summary of Metrics Considered Operational Metrics Customers / Customer Equivalents / Infrastructure per Square Mile Water Delivery per Connection Supply Utilization (Purchased vs. Produced Water) Supply / Other Direct O&M Cost per Million Gallons Customer Base Profile / Unit Rate Revenue Summary Labor Cost Metrics Correlation to Rates Less densely populated utilities may have higher unit costs due to innate inefficiencies in service delivery Differences in customer base demographics may lead to differences in system sizing and configuration Treated surface water is generally more costly than groundwater Measure of operational efficiency Utility-specific allocation philosophies can impact rates for a given customer class Common measure of operational efficiency Fiscal & Management Policy Metrics Pipe Replacement Liability / Rate-Funded Capital per Customer Equivalent per Month Average Capital Reserves per Connection Debt-Asset Ratio, Debt Service as a Percent of Annual Revenue Requirements Percent of Rate Revenue from Fixed vs. Variable Charges Correlation to Rates Capital reinvestment directly impacts revenue needs; liability provides context for funding decisions Reserves can be used to buy down rates; higher rates are generally needed to accumulate higher balances Debt enables utilities to spread capital costs out over time, potentially lowering near-term revenue needs Ratemaking decisions can impact bills at a given level of usage; can also affect revenue stability and reserve needs Differences in operating & maintenance (O&M) costs, rate revenue characteristics, water production, customer data, and staffing levels may impact rates. Overall, we found that many of the utilities that have independent groundwater supply sources appear to have lower supply costs compared to the other utilities that purchase treated surface water to meet most or all of their water demands. Our analysis of the jurisdictions customer base profiles found that jurisdictions with lower single-family bills tend to recover a greater share of revenue from non-single family customers. The fiscal and management policy survey considers how decisions made by each jurisdiction impacts its rates and reserve levels. Best practices for asset management, including rate-funded capital replacement, lead to lower long-term costs but often result in increased near-term operating and capital costs. Differences in capital funding philosophies can also contribute to observed differences in rates, as debt-averse utilities often have higher near-term rates than utilities that use debt to spread the financial burden of capital investment over a longer period. Tracking utility performance metrics can also lead to higher near-term costs through actions required to meet targets, but provides a framework and path to reaching organizational goals and efficiencies for improving utility FCS GROUP Page 9

12 Rate Comparison & Benchmarking Analysis September 2016 performance. Based on the responses received, Bellevue and SP Water generally appear to have the most comprehensive asset management and capital replacement funding programs of the jurisdictions surveyed, and as a result may have additional costs embedded in their rates relative to other utilities. Sections 2.1 and 2.2 provide additional detail on survey findings. Appendix G provides a larger copy of the more detailed report exhibits for easier viewing. 2.1 SURVEY RESULTS OPERATIONAL METRICS SYSTEM CHARACTERISTICS Exhibit 5 summarizes water system characteristics and the relative rankings: Exhibit 5: Water System Summary Monthly Water Bill Rank Water Service Connections Cascade Equivalent Res. Units (CERUs) 1 Service Area Low User Average User High User Number Per Rank 3 CERUs as of Avg. Number Rank 3 Avg. Number Rank 3 (Sq. Mi.) Number 3 ccf 6 ccf 15 ccf Sq. Mi. (n th Lowest) 12/31/14 Per Conn. (n th Lowest) Per Sq. Mi. (n th Lowest) SP Water , , Bellevue ,754 1, , ,843 9 Covington WD , , Issaquah , , ,268 6 Kirkland ,431 1, , , NE Sammamish SWD , , Redmond (City) , , ,752 8 Redmond (Novelty Hill) ,227 2, , , Skyway WSD ,341 1, , ,573 7 Tukwila , , Woodinville WD , , Water Production Booster Stations Water Mains Average Average per Rank 3 Rank 3 Rank 3 Rank 3 (n th Asset Age Connection Number Per Avg. Length Avg. Length Number Lowest) (n th Total Length Sq. Mi. Highest) per Sq. Mi. (n th Lowest) per Conn. (n th Highest) SP Water 283 gpd 6 10 Years ,531,913 LF 52,302 LF 6 88 LF 4 Bellevue 401 gpd Years ,272,001 LF 88,218 LF 8 80 LF 6 Covington WD 208 gpd 3 11 Years ,447,287 LF 36,511 LF 2 82 LF 5 Issaquah 326 gpd 8 12 Years ,448 LF 49,634 LF 4 73 LF 7 Kirkland 289 gpd 7 19 Years ,166 LF 91,295 LF 9 72 LF 9 NE Sammamish SWD 204 gpd 2 13 Years ,687 LF 46,279 LF 3 60 LF 11 Redmond (City) 395 gpd 9 13 Years ,690,831 LF 106,494 LF LF 2 Redmond (Novelty Hill) 222 gpd 4 12 Years ,947 LF 180,962 LF LF 8 Skyway WSD 176 gpd 1 18 Years ,104 LF 86,928 LF 7 63 LF 10 Tukwila 854 gpd Years ,788 LF 25,838 LF LF 1 Woodinville WD 276 gpd 5 16 Years ,548,449 LF 51,996 LF LF 3 Pressure Zones Reservoirs Number Per Rank 3 Number Per Rank 3 Capacity per Rank 3 Number (n th Total Number Highest) (n th Total Capacity Sq. Mi. Sq. Mi. Highest) CERU (n th Highest) SP Water MG 1,027 gal 4 Bellevue MG 623 gal 9 Covington WD MG 1,105 gal 3 Issaquah MG 1,016 gal 5 Kirkland MG 810 gal 7 NE Sammamish SWD MG 1,143 gal 2 Redmond (City) MG 940 gal 6 Redmond (Novelty Hill) MG 1,656 gal 1 Skyway WSD MG 572 gal 10 Tukwila MG 252 gal 11 Woodinville WD MG 766 gal 8 1 CERUs are computed based on meter size using American Water Works Association (AWWA) flow equivalency ratios, and are not assigned to fire flow meters or exempt/deduct meters. 2 The "average asset age" is computed as the ratio of accumulated depreciation to annual depreciation expense. 3 Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill The color scheme in Exhibit 5 intends to highlight how metrics might impact a utility s single-family bill. The metrics are ranked to promote consistent color coding for factors contributing to higher rates versus lower rates. For example, Exhibit 5 shows a ranking from highest to lowest (e.g. SP Water is the 7 th highest) for the number of booster stations per square mile because a greater number of booster stations suggests a higher operating cost for mechanical conveyance. It shows a ranking from lowest to highest (e.g. SP Water is the 6 th lowest) for the average length of mains per square mile in this case, fewer mains per square mile might indicate a less densely populated customer base with potential cost inefficiencies relative to more urban utilities. FCS GROUP Page 10

13 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 6 summarizes sewer system characteristics: Exhibit 6: Sewer System Summary Monthly Sewer Bill Rank Sewer Service Connections Residential Customer Equivalents (RCEs) 1 Service Area Low User Average User High User Number Per Rank 3 RCEs as of Avg. Number Rank 3 Avg. Number Rank 3 (Sq. Mi.) Number 3 ccf 6 ccf 15 ccf Sq. Mi. (n th Lowest) 12/31/14 Per Conn. (n th Lowest) Per Sq. Mi. (n th Lowest) SP Water , , Bellevue , , ,689 9 Issaquah , , ,264 6 Kirkland ,434 1, , ,682 8 NE Sammamish SWD , , Redmond (City) , , ,615 7 Redmond (Novelty Hill) , , Skyway WSD ,051 1, , , Tukwila , , Woodinville WD , , Sewer Mains Lift Stations Length of Length of Total Length Force Main % Rank 3 Avg. Length Rank 3 Avg. Length Rank 3 Number Per Rank 3 Number Gravity Mains Force Mains of Mains of Total (n th Highest) Per Conn. (n th Highest) Per Sq. Mi. (n th Lowest) Sq. Mi. (n th Highest) SP Water 809,402 LF 105,601 LF 915,003 LF 11.5% 1 82 LF 3 43,120 LF Bellevue 2,771,685 LF 158,812 LF 2,930,497 LF 5.4% 3 79 LF 5 78,209 LF Issaquah 418,450 LF 23,020 LF 441,470 LF 5.2% 4 68 LF 6 51,999 LF Kirkland 604,447 LF 6,447 LF 610,894 LF 1.1% 7 59 LF 9 69,420 LF NE Sammamish SWD 277,992 LF 34,848 LF 312,840 LF 11.1% 2 65 LF 7 60,394 LF Redmond (City) 962,443 LF 17,022 LF 979,465 LF 1.7% 6 81 LF 4 60,852 LF Redmond (Novelty Hill) 171,200 LF 5,655 LF 176,855 LF 3.2% 5 51 LF 10 34,717 LF Skyway WSD 250,706 LF (NA) (N/A) 62 LF 8 102,748 LF Tukwila 202,743 LF (NA) (N/A) 115 LF 1 21,141 LF Woodinville WD 263,065 LF 2,139 LF 265,204 LF 0.8% 8 90 LF 2 32,263 LF Average # of Connections to Regional System Monthly O&M Cost per RCE Rank 3 Rank 3 Asset Age 2 Number Per All Operating Number (n th Direct O&M 1,000 Acres Lowest) Costs (n th Highest) SP Water 11 Years $50.45 $ Bellevue 20 Years $50.80 $ Issaquah 12 Years $51.79 $ Kirkland 16 Years $42.80 $ NE Sammamish SWD 23 Years $45.59 $ Redmond (City) 18 Years $44.79 $ Redmond (Novelty Hill) 10 Years $43.45 $ Skyway WSD 17 Years $44.08 $ Tukwila 18 Years $55.78 $ Woodinville WD 16 Years $65.38 $ RCEs are computed based on the number of single-family connections and multi-family / commercial water usage (1 RCE = 750 cubic feet per month). 2 The "average asset age" is computed as the ratio of accumulated depreciation to annual depreciation expense. 3 Cell colors are used to highlight how each metric might influence relative sewer bill rankings. Lower Bill Higher Bill The information presented in Exhibit 5 and Exhibit 6 suggests considerable diversity among the surveyed utilities. While it can be difficult to directly equate infrastructure differences to differences in costs or rates, qualitative observations include: For some utilities, potential service inefficiencies associated with less densely populated service areas may lead to higher unit costs. Exhibit 5 indicates that Covington WD and Woodinville WD consistently rank at the higher end of the single-family water bill comparison, and appear to be at the low end in terms of customers per square mile of service area. Exhibit 6 shows Redmond s Novelty Hill service area and SP Water consistently ranking at the higher end of the single-family sewer bill comparison; both appear to be at the low end in terms of connections / RCEs per square mile of service area. For other utilities, rate structure features (e.g. fixed versus variable charges) may play a more significant role in bill rankings than system configuration. Issaquah and SP Water appear to have fairly comparable rankings in terms of water infrastructure per square mile, but vary considerably in their relative water bill rankings at different usage levels. Economies of scale (or lack thereof) may also impact rates, particularly for small utilities. Redmond s Novelty Hill service area and Skyway WSD generally appear to be at the high end of the single-family water bill comparison despite having a greater density of infrastructure per square mile than virtually all of the other surveyed utilities. Despite having FCS GROUP Page 11

14 Rate Comparison & Benchmarking Analysis September 2016 the least number of service connections, Tukwila s residential rates are consistently among the lowest in the survey group because it serves a disproportionately high number of commercial customers with larger meters relative to the other surveyed utilities. Exhibit 6 supports this observation, showing that Tukwila s RCE count is near the middle of the group despite the fact that it serves fewer connections than any of the other utilities. Customer demographics can also play a role in observed cost differences. Each utility is customized to meet the expected demands of its unique customer base, which can lead to differences in infrastructure and capacity requirements. The utilities at the low end of the single-family bill ranking (Issaquah, Redmond s City service area, and Tukwila) are at the top of the group in terms of the average number of CERUs per connection as well as the average monthly water demand per connection, suggesting that they have a greater number of large non-residential meters in their system). Even for the other utilities that have primarily single-family customer bases, Exhibit 5 shows differences in the average demand per connection that can be attributed to differences in the customers being served. For example, it is reasonable to expect that more rural utilities such as Covington WD would have higher demand than more densely developed utilities such as Skyway WSD due to larger average lot sizes with higher irrigation demands. Differences in asset ages can also explain cost differences. Higher age values may suggest a need for greater investments in maintenance to keep aging assets working to an acceptable standard. Conversely, lower age values may be indicative of recent investment in capital assets, with the potential for corresponding impacts to debt loads or reserve balances. The average asset age is computed using available data on annual and accumulated depreciation though simple to calculate, it is of limited value for comparisons because it does not account for fully depreciated assets (and may understate the true age of infrastructure). Exhibit 5 and Exhibit 6 show an average asset age of years for the surveyed utilities, and but do not appear to suggest a meaningful link between asset age and costs or rates. Differences in the level of service provided by King County may impact local operating and capital costs. SP Water only has one connection to the regional system. King County s standard is for trunk sewers to serve 1,000-acre basins. Given that SP Water s sewer service area is 13,864 acres, it should have at least 13 or 14 connections by County standards. With only 1 connection, SP Water faces complications due to a lack of flexibility to convey wastewater to King County s transmission lines it is facing capacity issues, and has to invest $10.4 million in the North Diversion Delay without adequate service from King County. Redmond s Novelty Hill service area does not have a direct connection to the regional system, relying on a connection to the City service area to convey wastewater to King County s interceptors. It benefits from the operational flexibility that Redmond s City service area has to convey wastewater to the regional system at multiple points in its system. In general, the utilities with the highest number of connections to the regional system per thousand acres (e.g. Issaquah, Kirkland, and Redmond) appear to have relatively low singlefamily bills; the exception is Skyway WSD, which has one of the highest sewer bills despite having the greatest number of connections per thousand acres to the regional system SUPPLY SOURCE Treated surface water generally costs more on a per-unit basis than water produced from independent supply sources. In Cascade s case, substantial investments in capacity to meet projected demands have resulted in a relatively high fixed unit cost compared to utilities that derive most or all of their water from groundwater sources. Higher supply costs can lead to higher overall operating costs, FCS GROUP Page 12

15 Rate Comparison & Benchmarking Analysis September 2016 suggesting the possibility that supply costs might contribute meaningfully to observed differences in rates. Exhibit 7 summarizes each utility s 2014 supply source utilization. Exhibit 7: Summary of 2014 Supply Source Utilization SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (NH) Skyway WSD Tukwila Woodinville WD 2014 Supply Costs Water Purchases $ 1,432,894 $ 18,353,836 $ 551,674 $ 1,123,582 $ 4,764,337 $ - $ 5,155,195 $ 932,032 $ 480,615 $ 2,310,175 $ 3,614,886 Wheeling 36,636 Electricity 315, , , ,433 25,600 20,756 Chemicals 95,605 27,653-18,891 Repair & Maintenance 47,193 9,965 Other 272,494 Total $ 1,927,567 $ 18,699,266 $ 824,168 $ 1,123,582 $ 4,764,337 $ 125,325 $ 5,366,628 $ 957,632 $ 520,262 $ 2,310,175 $ 3,614, Water Delivered Purchased 362 MG 5,962 MG 1,145 MG 290 MG 1,310 MG 1,272 MG 261 MG 182 MG 700 MG 1,438 MG Produced 1,429 MG 186 MG 498 MG 245 MG 953 MG 32 MG Total 1,791 MG 5,962 MG 1,332 MG 788 MG 1,310 MG 245 MG 2,225 MG 261 MG 214 MG 700 MG 1,438 MG Average Cost per MG Purchased $4,063 $3,136 $3,874 $4,053 $3,668 $2,638 $3,300 $2,513 Produced $321 $511 $222 $1,228 Total $1,077 $3,136 $619 $1,426 $3,637 $511 $2,412 $3,668 $2,426 $3,300 $2,513 Monthly Water Bill Rank Low User - 3 ccf Average User - 6 ccf High User - 15 ccf Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill Covington WD purchases water through Tacoma s Second Supply Project, Skyway WSD purchases some of its water from the City of Renton, and Woodinville WD is a wholesale customer of Seattle Public Utilities. Other than this, the utilities shown in Exhibit 7 generally purchase water from Cascade. The amounts shown as purchased for Issaquah and SP Water reflect a minimum purchase (Demand Share) of 0.75 MGD and 1.0 MGD, respectively. This results in higher supply costs for those utilities, relative to what they would have to pay under their optimal supply strategy. In addition, SP Water pays wheeling charges to Redmond to supply water to the Cascade View Zone since there is only one regional connection for SP Water that cannot supply the Cascade View Zone. Exhibit 7 suggests that there is a relatively weak correlation between the average supply cost per ccf and the overall water bill rankings. For example, Redmond s City service area and Tukwila have the lowest overall water bills but higher unit costs for supply than utilities that derive a greater share of supply from groundwater sources, such as Covington WD and NE Sammamish SWD. This is a reasonable finding considering that supply costs are only a portion of the total cost basis for rates, which are also set to recover labor costs, debt service, and other costs. It is worth noting that Exhibit 7 includes costs that were readily identifiable in financial documents as supply-related costs, such as water purchases, electricity, and chemicals however, there are also other costs that would need to be accounted for in order to establish a credible finding with respect to differences in supply costs. The groundwater production costs shown in Exhibit 7 generally do not include labor and other costs related to operating and maintaining supply facilities, and therefore likely understate the true cost of groundwater production WATER O&M COST PER MILLION GALLONS Higher O&M costs per million gallons may indicate utility-specific operating conditions or practices, inefficiencies, or may be the result of additional maintenance needed to support aging infrastructure. Exhibit 8 provides a summary of 2014 operating expenses. FCS GROUP Page 13

16 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 8: Water O&M Cost per Million Gallons Water Purchases 2014 Operating Expenses (Excluding City Utility Taxes) 1 Other O&M Administrative State Taxes Total Total Operating Cost per MG Direct O&M Cost per MG 2 Relative Rank 3 (n th Highest) Low User Average User Total O&M High User Cost per MG Water Water Water 3 ccf/month 6 ccf/month 15 ccf/month SP Water $1,432,894 $1,535,520 $3,940,921 $590,657 $7,499,992 $4,189 $1, Bellevue $18,353,836 $8,135,704 $672,186 $2,020,962 $29,182,688 $4,894 $4, Covington WD $551,674 $2,332,382 $3,594,825 $524,993 $7,003,874 $5,259 $2, Issaquah $1,123,582 $3,524,127 $4,647,709 $5,898 (N/A) Kirkland $4,764,337 $1,419,788 $2,750,014 $8,934,139 $6,820 $4, NE Sammamish SWD $0 $462,316 $610,613 $93,819 $1,166,748 $4,759 $1, Redmond (City) $5,155,195 $2,918,948 $1,085,566 $573,238 $9,732,947 $4,375 $3, Redmond (Novelty Hill) $932,032 $406,524 $183,720 $117,146 $1,639,422 $6,280 $5, Skyway WSD $480,615 $385,112 $508,887 $96,042 $1,470,656 $6,858 $4, Tukwila $2,310,175 $1,204,879 $676,681 $213,256 $4,404,991 $6,293 $5, Woodinville WD $3,614,886 $2,073,010 $2,779,083 $584,830 $9,051,809 $6,293 $3, Based on the information provided, Issaquah's direct O&M costs were not separable from admin costs and taxes; Kirkland's tax expenses were not separable from other administrative costs. 2 Includes water purchase and other O&M costs; excludes administrative costs and taxes. 3 Cell colors highlight relative water bill rankings and contributions to those rankings. Lower Bill Higher Bill Exhibit 8 appears to suggest that jurisdictions using groundwater to meet a greater share of their demands appear to have lower direct O&M unit costs than those that primarily purchase treated surface water. However, establishing a credible finding related to differences in direct O&M costs was difficult because the cost summaries shown in Exhibit 8 rely on varying levels of input provided by the jurisdictions regarding direct and indirect O&M costs. Given the difficulty in ensuring an apples-to-apples comparison of direct O&M cost per MG, Exhibit 8 shows relative rankings of the total O&M cost per MG. The total O&M cost per MG does not appear to be indicative of the relative water bill rankings, which depend on the level of water usage assumed for most of the utilities CUSTOMER BASE PROFILE Differences in customer base may also explain differences in single-family bills. For example: Most of a utility s annual costs are attributable to providing capacity to meet average and peak demands, and are often allocated among customer classes based on some measure of water usage. Non-residential customers generally use more water per customer than singlefamily customers, and tend to bear a greater share of costs as a result. For this reason, utilities with a larger non-residential customer base can allocate single-family customers a smaller percentage of total costs than utilities that are primarily residential in nature. Utilities also differ in how they assign costs to fire protection, depending on how they define needs related to fire protection versus other water service functions. There is considerable diversity in how utilities recover fire protection costs from customers city utilities have the flexibility to recover these costs through utility rates and taxes (the latter of which might not appear in some bill comparisons), while the surveyed special-purpose districts embed the full cost of fire protection in their water rates. Even within the context of rate-based cost recovery, utilities can influence what single-family customers pay for fire protection through cost-allocation decisions. For example, some utilities recover a higher share of fire protection costs from multi-family and commercial customers to reflect their higher fire flow requirements, while others allocate these costs more proportionately among classes. Exhibit 9 provides a profile of accounts, usage, and revenue by customer class. FCS GROUP Page 14

17 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 9: Customer Base Profile Distribution of Water Service Connections By Customer Class 4.42% 5.53% 2.38% 1.00% 5.39% 1.73% 0.08% 10.15% 9.69% 8.22% 3.80% 2.72% 2.52% 2.51% 1.02% 9.44% 6.44% 38.43% 9.93% 7.21% 90.19% 92.74% 97.54% 80.41% 83.87% 99.00% 90.76% 93.68% 94.76% 90.07% 54.35% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond Skyway WSD Tukwila Woodinville (Novelty Hill) WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res % 12.12% 73.98% 28.73% 22.99% 48.28% 20.57% 0.85% 78.59% Distribution of Water Demand By Customer Class 35.51% 28.07% 36.42% 26.05% 21.06% 52.89%? (NA) 42.30% 25.66% 32.03% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) 22.21% 9.85% 67.94% 8.19% 17.69% 74.12% 80.13% 10.88% 8.99% 25.62% 74.38% Redmond Skyway WSD Tukwila Woodinville (Novelty Hill) WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Unknown / Not Provided Distribution of Water Rate Revenue By Customer Class 19.98% 10.87% 69.15% 25.85% 15.33% 58.82% 20.72% 22.79% 0.64% 78.64%? (NA) 26.34% 50.87%? (NA) 44.75% 23.84% 28.84% 7.48% 63.69%? (NA) 78.21% 43.53% 56.47% 31.41% 13.05% 8.74% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond Skyway WSD Tukwila Woodinville (Novelty Hill) WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Unknown / Not Provided FCS GROUP Page 15

18 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 9 (Continued): Customer Base Profile Distribution of Sewer Service Connections By Customer Class 1.90% 4.61% 8.39% 1.76% 10.15% 9.44% 5.84% 1.00% 8.05% 5.93% 1.00% 0.73% 2.27% 0.48% 2.44% 36.36% 19.47% 9.19% 89.71% 93.63% 80.41% 88.23% 99.00% 90.95% 98.79% 95.29% 80.53% 54.45% SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Skyway WSD Tukwila Woodinville WD Distribution of Sewer Rate Revenue By Customer Class 8.80% 21.35% 22.53% 18.70% 26.79% 4.51% 7.02% 10.23% 23.09% 69.85% 29.15% 48.32%? (NA) 22.54% 58.76%? (NA) 32.43% 40.78% 85.26% 69.89% 74.33% 15.01%? (NA) 10.66% SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Single-Family (SFR) Multi-Family (MFR) Non-Residential Unknown / Not Provided Skyway WSD Tukwila Woodinville WD Though the relative bill rankings shown in Appendix B depend heavily on the assumed level of water usage, Exhibit 9 suggests that differences in the utilities customer base profiles may help explain some of the observed differences. Single-family bills in Redmond s City service area and Tukwila are consistently near the bottom of the group at most usage levels; these utilities appear to derive the lowest share of their revenue from single-family customers, recovering a greater share of costs from their non-residential customers. In contrast, utilities with bills that are consistently above the sample median (Covington WD, Redmond s Novelty Hill service area, and Skyway WSD) have primarily single-family customer bases. The relative single-family sewer bill rankings appear to depend less on the class structure than the water bill rankings, likely reflecting the simpler cost allocations underlying sewer rates as all of the surveyed utilities use King County for wastewater treatment. The actual rate structures imposed by the utilities play a larger role in the observed differences at various usage levels Bellevue, Issaquah, and Kirkland have volume-based single-family sewer rates, while the other utilities impose flat sewer rates on single-family customers. We looked at the average revenue per connection from each class and in total for the system to see if there was a meaningful basis for comparison among utilities. Because a number of the surveyed utilities were unable to separately identify King County charges by customer class, we had to include King County s charges when summarizing sewer revenue per connection by class. To account for FCS GROUP Page 16

19 Rate Comparison & Benchmarking Analysis September 2016 potential impacts from including King County charges in this evaluation, we also determined the average local revenue per connection on a system-wide basis. Recognizing that differences in customer bases served may impact comparisons of average revenue per connection, we also computed the average revenue per equivalent unit, using Cascade Equivalent Residential Units (CERUs) for water and Residential Customer Equivalents (RCEs) for sewer since neither CERUs nor RCEs were separable into customer classes, we focused on the system average. Exhibit 10 summarizes the unit revenue comparison: Exhibit 10: Unit Revenue Comparison Monthly SFR Water Bill Rank 4 Average Monthly Water Rate Revenue Low User Average User High User Per Connection Per CERU 2 3 ccf 6 ccf 15 ccf SFR MFR Non-Residential System Average Rank (nth Highest) System Average Rank (nth Highest) SP Water $41.58 $ $ $ $ Bellevue $65.85 $ $ $ $ Covington WD $44.50 $ $ $ $ Issaquah (NA) 1 (NA) 1 (NA) 1 $ $ Kirkland $46.61 $ $ $ $ NE Sammamish SWD (NA) 1 (NA) 1 (NA) 1 $ $ Redmond (City) $29.02 $1, $ $ $ Redmond (Novelty Hill) $45.12 $ $ $ $ Skyway WSD (NA) 1 (NA) 1 (NA) 1 $ $ Tukwila $33.18 $ $ $ $ Woodinville WD $46.77 (NA) 2 $ $ $ Monthly SFR Sewer Bill Rank 4 Average Monthly Sewer Rate Revenue Low User Average User High User Per Connection, Including King County Per Conn., Excluding King County Per RCE, Excluding King County 3 3 ccf 6 ccf 15 ccf SFR MFR Non-Residential System Average System Average Rank (nth Highest) System Average Rank (nth Highest) SP Water $72.50 $ $ $93.11 $ $ Bellevue $61.02 $1, $ $ $ $ Issaquah (NA) 1 (NA) 1 (NA) 1 $97.44 $ $ Kirkland $68.15 $ $ $ $ $ NE Sammamish SWD (NA) 1 (NA) 1 (NA) 1 $62.31 $ $ Redmond (City) $53.01 $3, $ $ $ $ Redmond (Novelty Hill) $70.82 $1, $ $82.05 $ $ Skyway WSD $67.63 $ $ $92.21 $ $ Tukwila $75.40 $ $ $ $ $ Woodinville WD (NA) 1 (NA) 1 (NA) 1 $ $ $ (NA): Not available; jurisdiction does not track or did not provide this information. 2 CERU = Cascade Equivalent Residential Unit. Defined by meter size, using American Water Works Association meter flow equivalency ratios. 3 RCE = Residential Customer Equivalent. Defined by King County as 750 cubic feet of water usage per month. 4 Cell colors are used to highlight relative bill rankings. Lower Bill Higher Bill Exhibit 10 suggests that there may be correlation between the average revenue per connection and the relative water bill rankings. Just as the jurisdictions with lower single-family bills had a lower share of single-family revenue, they also generally have higher average revenue per connection this supports the assertion that multi-family and non-residential properties use more water and have higher bills than single-family customers. Bellevue and NE Sammamish SWD appear to defy this pattern, as Bellevue has a relatively high bill and high average revenue per connection while the opposite is true for NE Sammamish SWD. Average revenue per connection appears to have a limited correlation with SP Water s water bill ranking, which depends more on the level of water use. The average revenue per connection did not appear to correlate as well to differences in single family sewer bills, likely due to the influence of flat vs volume-based sewer rates. s with higher revenue per connection and lower single-family bills tended to have volume-based single-family sewer rates. s with lower revenue per connection and lower bills tended to have flat single-family sewer rates. Exhibit 10 shows particularly high revenues per connection for multi-family customers due to the fact that each multi-family connection serves multiple living units. The unit-revenue comparison for FCS GROUP Page 17

20 Rate Comparison & Benchmarking Analysis September 2016 multi-family customers would likely be more meaningful if done on the basis of living units rather than connections, but living-unit counts were not available. Overall, Exhibit 10 shows a relatively weak correlation between the average revenue per CERU and the relative water bill rankings. Low average revenue per CERU may be indicative of low aggregate revenue needs or a relatively high number of CERUs conversely, high average revenue per CERU may be indicative of high aggregate revenue needs or a relatively low number of CERUs. Tukwila appears to contradict this observation, as it has the highest revenue per CERU as well as the highest CERU-to-meter ratio (suggesting that Tukwila serves a disproportionate number of larger meters relative to other utilities; see Appendix C for a more detailed meter inventory). The fact that Tukwila has the highest average revenue per CERU and among the lowest revenue per single-family connection suggests that Tukwila s single-family rates may be low due to cost-allocation decisions that recover costs more aggressively from other customer classes. The average monthly revenue per RCE appears to match the relative single-family bill rankings at 6 ccf per month relatively well, which makes intuitive sense as King County defines an RCE as 7.5 ccf per month of water use. Skyway WSD and Tukwila are the only utilities whose bill ranking at 6 ccf differs materially from the relative ranking of their average monthly revenue per RCE, which can potentially be explained by differences in customer demographics. Tukwila has the highest average revenue per RCE, but a single-family sewer bill that is below the median for the survey group this is possibly due to the fact that Tukwila has a substantial commercial customer base from which it can more aggressively recover costs (while adhering to logical and defensible cost-allocation principles). Skyway WSD, however, is primary residential and does not have as much flexibility to allocate costs. A utility s policy decisions related to area-dependent rates can also impact a bill comparison. For example, parallels can be drawn between Redmond s Novelty Hill service area and SP Water s Cascade View Zone, which are predominantly residential service areas that are largely if not entirely operated as separate systems. Redmond and SP Water have different rate policies with respect to these areas, impacting what their other customers pay. The City of Redmond made a policy decision to set rates in Novelty Hill based on the cost of serving that specific area, avoiding subsidies by customers in its City service area. As a result, about 16.2% of Redmond s water rate revenue comes from Novelty Hill despite the fact that it only represents about 12.7% of Redmond s meter equivalents and 10.5% of Redmond s water demand. This differential allows rates in Redmond s City service area to be about % lower than they would have to be under a uniform structure. SP Water has uniform rates for customers in the Plateau and Cascade View Zones, despite the fact that Cascade View is likely more costly to serve due to incremental supply costs (e.g. wheeling) and its rural nature. SP Water s 2013 customer billing records suggest that about 3.7% of SP Water s total water rate revenue comes from Cascade View, which is consistent with its share of SP Water s meter equivalents and water demand (3.5% and 3.7%, respectively). To the extent that the Cascade View Zone is more costly to serve than the Plateau Zone, Plateau Zone rates could potentially be lower under an area-specific rate structure however, more analysis would be required in order to fully define the costs allocable to the Cascade View Zone. It is also worth noting that the Cascade View Zone does not receive sewer service from SP Water, and as a result does not contribute to the sewer utility s overhead costs. Sewer customers in the Plateau Zone must cover the sewer utility s fixed costs, resulting in higher sewer rates. FCS GROUP Page 18

21 Rate Comparison & Benchmarking Analysis September STAFFING LEVELS Labor costs are also part of the overall basis for utility rates, and are an important consideration when evaluating differences in rates between utilities. However, it is often difficult to arrive at an applesto-apples comparison of labor costs given differences in organizational structure, allocation methodologies, and targeted service levels. For example, some cities may directly allocate administrative full-time equivalents (FTEs) to their utilities while others keep those FTEs in the general fund and recover a share of the cost from their utilities via interfund charges. Specialpurpose districts explicitly focus on utility service, and as a result their labor costs tend to be exclusively attributable to utility functions and directly related support services. Cities and districts can both vary in the degree to which they outsource services versus maintaining in-house expertise. Exhibit 11 and Exhibit 12 summarize 2014 labor costs (salaries and benefits) for the surveyed utilities, also showing benchmarks that are commonly used to evaluate labor costs. Exhibit 11: Water Staffing Summary Monthly Water Bill Rank # of FTEs Labor Cost Labor Cost per FTE Low User Average User High User Admin Direct O&M Total Admin Direct O&M Total Admin Direct O&M Total 3 ccf 6 ccf 15 ccf SP Water $1,610,714 $1,819,105 $3,429,818 $98,768 $107,259 $103,097 Bellevue $1,899,730 $5,053,878 $6,953,608 $114,718 $103,140 $106,065 Covington WD $4,413,194 $116,137 Issaquah $336,741 $1,496,139 $1,832,880 $192,423 $119,883 $128,804 Kirkland $1,191,059 $92,402 NE Sammamish SWD $478,163 $123,986 Redmond (City) Redmond (Novelty Hill) $119,564 $2,205,530 $2,325,094 $109,959 $114,160 $113,936 Skyway WSD $449,055 $105,126 Tukwila $0 $784,722 $784,722 $112,103 $112,103 Woodinville WD $1,406,985 $1,984,165 $3,391,150 $116,833 $123,718 $120,765 SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD 2014 Production Per FTE Length of Mains Per FTE FTEs per 1,000 Conn MG 8.72 Miles MG MG MG MG MG 9.45 Miles 7.21 Miles 6.41 Miles Miles 9.66 Miles MG Miles MG MG MG 9.40 Miles 6.70 Miles Miles Labor Cost as % of Rev % 14.81% 38.67% 26.92% 10.39% 26.14% 1.09 $ % Mo. Labor Cost per CERU $12.64 $8.48 $19.73 $12.42 $5.07 $11.39 $9.75 $8.24 $ % 13.14% 26.68% 1 Admin costs include general & administrative, customer service, and IT / finance; Direct O&M includes engineering / development review and other operating costs. FCS GROUP Page 19

22 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 12: Sewer Staffing Summary Monthly Sewer Bill Rank # of FTEs Labor Cost Labor Cost per FTE Low User Average User High User Admin Direct O&M Total Admin Direct O&M Total Admin Direct O&M Total 3 ccf 6 ccf 15 ccf SP Water $1,003,326 $1,360,871 $2,364,197 $95,810 $108,350 $102,648 Bellevue $1,220,381 $4,542,802 $5,763,183 $122,038 $116,482 $117,616 Issaquah $225,428 $454,275 $679,703 $281,785 $174,721 $199,913 Kirkland $951,047 $113,626 NE Sammamish SWD $513,722 $123,986 Redmond (City) Redmond (Novelty Hill) $119,352 $1,766,283 $1,885,635 $109,764 $110,147 $110,123 Skyway WSD $444,516 $104,063 Tukwila $0 $435,168 $435,168 $217,584 $217,584 Woodinville WD $343,906 $294,399 $638,305 $116,289 $305,981 $162,854 SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Length of Mains Per FTE 7.52 Miles Miles Miles Miles Miles Miles Miles Miles Miles FTEs per 1,000 Conn. Mo. Labor Cost per RCE Labor Cost as % of Rev $14.54 $7.59 $5.28 $5.35 $ % 26.49% 32.59% 17.24% 39.47% $5.24 $7.03 $4.74 $ % 23.52% 10.00% 37.67% 1 Admin costs include general & administrative, customer service, and IT / finance; Direct O&M includes engineering / development review and other operating costs. 2 Excluding King County share of revenue. Exhibit 11 and Exhibit 12 present the labor cost information that was available for our analysis, with the caveat that we were unable to get to the apples-to-apples comparison needed in order to establish credible findings related to differences in labor costs among the surveyed utilities. NE Sammamish SWD and Skyway WSD were unable to provide an allocation of FTEs between utilities (the estimates shown are based on those utilities allocation of labor costs between their water and sewer utilities). Most of the other jurisdictions were able to provide financial documents with some detail of FTE allocations to their utilities. SP Water and Woodinville WD provided FTE counts that were inclusive of all employees, while the cities provided FTE counts that included some utility-related administrative FTEs (not necessarily representing all labor costs allocated to the utilities through interfund charges). The cities reported allocating overhead based on various combinations of FTEs, budgets, indirect cost plans, proportionate time spent, and directly assigned expenses (note that Redmond s City and Novelty Hill areas are combined in Exhibit 11 and Exhibit 12 because Redmond does not assign FTEs directly to Novelty Hill). Even where detailed FTE counts were available, the corresponding labor costs were not necessarily separable into the same level of detail Appendix D shows the assumptions and calculations used to allocate labor costs between administrative and direct O&M FTEs for some of the surveyed utilities. Recognizing the limitations in comparing labor-cost metrics for special-purpose districts with those of cities (which due to their organizational structure, often have less transparent labor costs and staffing levels), the available data appears to support the assertion that differences in individual O&M cost components do not necessarily explain observed differences in customer bills. O&M costs are only a part of the total revenue requirement; factors such as cost-allocation principles and rate structure (fixed versus variable charges) appear to also materially impact customer bills. 2.2 SURVEY RESULTS FISCAL/MANAGEMENT POLICIES The following sections summarize the results of the survey of fiscal and management policies. Appendix E provides a more detailed view of the responses received from the surveyed utilities. FCS GROUP Page 20

23 Rate Comparison & Benchmarking Analysis September ASSET MANAGEMENT PRINCIPLES Formal asset management plans can establish capital replacement schedules and routine operating and maintenance practices. While these policies and practices can increase costs in the near-term, the goal is to lower long-term costs. Bellevue and SP Water have formal asset management plans and apply asset management principles for rate-setting Covington WD, Kirkland, and Redmond are currently developing asset management plans and implementing principles The other surveyed jurisdictions do not have formal asset management plans. Tukwila reported that it uses principles of asset management as part of its Comprehensive Plan updates Woodinville WD funds depreciation expense (not part of an asset management plan) ASSET REPLACEMENT VALUES Determining an appropriate amount of funding for future capital replacement requires credible and realistic asset replacement values. True replacement costs are generally higher than book values or reproduction costs, increasing over time with the cost of labor and materials. The book value of donated assets is not fully comparable to the cost of the assets installed because private developers can pay lower wages than the public sector; also, developer-built assets might not conform to the same standard as utility-built assets. Useful lives should be based on condition assessments (considering construction materials, where relevant) rather than accounting values. The schedule of replacement combined with accurate replacement costs enables jurisdictions to be more informed when setting a level of funding from rates. The surveyed jurisdictions fell into several categories: Bellevue and SP Water perform condition assessments to prioritize capital projects and estimate replacement value regularly based on current unit costs. This level of assessment and planning is most consistent with utility best-management practices. Covington WD and Kirkland perform condition assessments to prioritize their capital projects. Kirkland estimates replacement value by adjusting the original cost of assets for inflation, and Covington WD is currently developing an estimate of replacement value. The other surveyed jurisdictions may perform condition assessments to prioritize capital projects, but do not track or regularly update the replacement values of assets. Woodinville WD provided a replacement value estimate from the King County Hazard Mitigation Plan Exhibit 13 summarizes the replacement cost estimates provided for mains, which collectively represent the largest asset replacement liability. FCS GROUP Page 21

24 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 13: Estimated Main Replacement Values Monthly Water Bill Rank Est Water Main Repl. Value Repl. Liability per Mile of Pipe Length of Water Utility Low User Average User High User Rank 4 Water Mains Per Per SPW Unit Costs 1 Amount 3 ccf 6 ccf 15 ccf (n th Highest) SP Water Miles $513,487,224 $513,487,224 $1,769,822 6 Bellevue Miles $1,030,000,000 $1,074,412,711 $1,733,771 8 Covington WD Miles $49,743,328 $490,217,485 $1,788,414 4 Issaquah Miles (NA) 3 $163,048,978 $1,788,145 5 Kirkland Miles $40,550,108 $300,739,986 $1,764,016 7 NE Sammamish SWD Miles (NA) 3 $60,971,409 $1,636, Redmond (City) Miles (NA) 3 $587,318,046 $1,834,032 3 Redmond (Novelty Hill) Miles (NA) 3 $86,550,823 $1,953,384 1 Skyway WSD Miles (NA) 3 $65,308,188 $1,625, Tukwila Miles (NA) 3 $86,863,756 $1,850,940 2 Woodinville WD Miles $164,080,000 $507,909,463 $1,731,902 9 Exhibit 13 (Continued): Estimated Main Replacement Values Monthly Sewer Bill Rank Est Sewer Main Repl. Value Repl. Liability per Mile of Pipe Length of Sewer Utility Low User Average User High User Rank 4 Sewer Mains Per Per SPW Unit Costs 1 Amount 3 ccf 6 ccf 15 ccf (n th Highest) SP Water Miles $274,808,236 $274,808,236 $1,585, Bellevue Miles $1,318,000,000 $907,792,091 $1,635,607 9 Issaquah Miles (NA) 3 $149,362,258 $1,786,379 3 Kirkland Miles $44,210,561 $203,647,494 $1,760,140 5 NE Sammamish SWD Miles (NA) 3 $103,156,997 $1,741,046 7 Redmond (City) Miles (NA) 3 $328,181,118 $1,769,125 4 Redmond (Novelty Hill) Miles (NA) 3 $66,082,390 $1,972,887 1 Skyway WSD Miles (NA) 3 $79,536,851 $1,675,088 8 Tukwila Miles (NA) 3 $70,859,519 $1,845,382 2 Woodinville WD Miles $52,500,000 $87,739,318 $1,746, SPW unit costs based on a 5-year study for utilities in the Puget Sound region using open-cut / trenchless methods. 2 Assumes that the replacement value of mains based on SPW unit costs is amortized over a useful life of 75 Years. 3 (NA): Not available; not tracked by the jurisdiction. 4 Cell colors highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Of the surveyed jurisdictions, only Bellevue, SP Water, and Woodinville WD could provide replacement values Covington WD and Kirkland provided book values, which are original cost rather than replacement cost. We applied SP Water s unit costs to the inventory of mains (length of mains by size) provided by each utility to validate the replacement cost estimates shown in Exhibit 13. Bellevue s estimate is consistent with the estimate derived based on SP Water s unit costs, suggesting that Bellevue and SP Water likely use similar unit-cost methods. Woodinville WD provided an estimate from the King County Hazard Mitigation Plan, which appears to be low given that it has a comparable length of water mains to SP Water (293 miles for Woodinville WD versus 290 miles for SP Water). It is reasonable to expect that the replacement liability metrics do not currently correlate strongly to relative bill rankings, as most of the jurisdictions surveyed do not track the replacement value of their assets. Even the jurisdictions that do track replacement values differ in the degree to which their current rates incorporate funding for future replacement RATE-FUNDED CAPITAL REINVESTMENT Funding capital reinvestment through rates provides cash resources for future projects, recovering the cost of capital assets from customers as they use them. The amount is often set based on depreciation expense, but can be based on future replacement cost estimates or other metrics. Capital reinvestment funding intends to facilitate lower longer-term rates by building a stable funding source for capital replacement needs however, it results in higher near-term rates while customers pay for FCS GROUP Page 22

25 Rate Comparison & Benchmarking Analysis September 2016 current capital projects and build funds for future capital needs. The policy decision to fund capital reinvestment through rates should consider generational equity or the relative burden that existing customers should bear to pay for infrastructure that will benefit future customers. We found that most of the surveyed jurisdictions are providing for future capital in their rates to some extent, with the money either combined with the other capital fund resources (such as connection fees) or held in an explicit reserve. The policies are summarized below: Bellevue and SP Water have explicit benchmarks for funding capital reinvestment through rates and keep funding in a dedicated replacement reserve for select projects. This is intended to be a best-management practice that promotes adequacy of cash funding for longterm asset replacement. Kirkland, Redmond, Skyway WSD, and Woodinville WD have benchmarks for rate-funded capital reinvestment, but keep the funding in a general capital reserve available to fund all projects. Issaquah has not historically funded capital reinvestment through rates explicitly, but its 2015 rate study assumes $0.9 $1.5 million in annual funding going forward. NE Sammamish SWD has an explicit benchmark for funding capital reinvestment through rates, but does not segregate funding from other operating reserves. Covington WD and Tukwila lack explicit benchmarks for funding capital through rates. Exhibit 14 shows the amount of capital reinvestment funded by each jurisdiction in 2014: Exhibit 14: Rate-Funded Capital per Customer Equivalent per Month Monthly Water Bill Rank Repl. Liability Rate-Funded Capital Reinvestment Water Utility Low User Average User High User Per CERU Per Amt. Per CERU Rank 1 % of Mo. Repl. Rank 1 3 ccf 6 ccf 15 ccf Month 2014 Amount Per Month (n th Highest) Liability Funded (n th Highest) SP Water $25.22 $2,579,352 $ % 3 Bellevue $17.47 $10,160,463 $ % 1 Covington WD $29.22 $0 $ % 9 Issaquah $14.73 $0 $ % 9 Kirkland $17.08 $1,442,887 $ % 4 NE Sammamish SWD $19.36 $282,915 $ % 5 Redmond (City) $23.46 $2,300,758 $ % 7 Redmond (Novelty Hill) $22.75 $597,678 $ % 2 Skyway WSD $18.91 $183,493 $ % 8 Tukwila $12.17 $0 $ % 9 Woodinville WD $29.01 $2,012,000 $ % 6 Monthly Sewer Bill Rank Repl. Liability Rate-Funded Capital Reinvestment Sewer Utility Low User Average User High User Per RCE Per Amt. Per RCE Rank 1 % of Mo. Repl. Rank Amount 3 ccf 6 ccf 15 ccf Month Per Month (n th Highest) Liability Funded (n th Highest) SP Water $22.53 $688,183 $ % 6 Bellevue $15.94 $11,817,397 $ % 1 Issaquah $15.47 $0 $ % 9 Kirkland $15.29 $1,642,826 $ % 3 NE Sammamish SWD $23.98 $114,510 $ % 8 Redmond (City) $14.02 $871,977 $ % 5 Redmond (Novelty Hill) $18.41 $692,026 $ % 2 Skyway WSD $16.77 $115,877 $ % 7 Tukwila $10.30 $0 $ % 9 Woodinville WD $17.37 $444,500 $ % 4 1 Cell colors are used to highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Exhibit 14 suggests that there can be a strong link between the level of capital reinvestment funded through rates and the single-family bill comparison for example, the fact that Issaquah and Tukwila have bills that are at the low end of the group could possibly be explained by the fact that they do not FCS GROUP Page 23

26 Rate Comparison & Benchmarking Analysis September 2016 appear to be explicitly funding capital reinvestment through rates (at least as of 2014). However, as previously noted, rates are set based on a variety of needs including operating costs, debt service, and capital reinvestment funding (among others). It is reasonable to expect that the link between capital reinvestment funding and rate levels is not necessarily strong for all jurisdictions. For example, Redmond s Novelty Hill area and Skyway WSD have among the highest single-family bills but are at opposite ends of the spectrum in terms of how much capital reinvestment they are funding through rates. Novelty Hill rates could be lower without the capital-reinvestment component, but Exhibit 14 suggests that Skyway WSD s rates are among the highest for other reasons. As discussed earlier, some jurisdictions use the capital reinvestment to pay for current capital projects (some of which might not involve infrastructure replacement) while others segregate this funding for designated replacement projects. It is worth noting that Exhibit 14 provides only a snapshot view of the level of rate-funded capital some utilities may be phasing in capital reinvestment and may increase their funding level in the coming years. Exhibit 15 shows the combined water and sewer ending balances, indicating the accumulation of funds in separate capital reserves for Bellevue and SP Water, and show combined capital balances in other jurisdictions. It also shows the average capital reserve balance per connection for each jurisdiction, including both general capital reserves and dedicated replacement reserves. Exhibit 15: 2014 Combined Water / Sewer Ending Balances Monthly Combined Water / Sewer Bill Rank 2 Low User Average User High User 3 ccf 6 ccf 15 ccf Operating Capital Replacement Other Capital 1 Debt / Other SP Water $15,229,634 $15,219,790 $15,349,613 $3,856,543 $49,655,580 Bellevue $18,389,904 $96,124,000 $114,513,904 Covington WD $1,300,000 $11,496,257 $3,265,637 $16,061,894 Issaquah $6,306,114 $8,698,413 $662,773 $15,667,300 Kirkland $5,091,468 $2,496,390 $7,587,858 NE Sammamish SWD $3,820,398 $1,400,241 $5,220,639 Redmond (City) $12,066,682 $9,384,312 $21,450,994 Redmond (Novelty Hill) $3,750,090 $12,422,938 $16,173,028 Skyway WSD $1,198,139 $4,658,648 $542,666 $6,399,453 Tukwila $8,017,808 $393,547 $8,411,355 Woodinville WD $4,908,756 $7,930,025 $1,107,209 $21,876,015 Total Avg. Capital Reserves Per Conn. Ratio of Cap. Reserves / Cap. Reinv. Cap. Reserves as % of Repl. Value Water Sewer Water Sewer Water Sewer SP Water $1,174 $ % 3.71% Bellevue $858 $1, % 6.74% Covington WD $655 (NA) (N/A) (NA) 2.35% (NA) Issaquah $745 $584 (N/A) (N/A) 3.02% 2.53% Kirkland NE Sammamish SWD $201 $ % 0.85% Redmond (City) $535 $ % 0.34% Redmond (Novelty Hill) $1,874 $1, % 9.65% Skyway WSD Tukwila $1,150 $ (N/A) 3.22% 0.00% Woodinville WD $366 $ % 3.10% 1 Woodinville WD indicated that its Water Construction Fund balance includes unspent proceeds from its 2012 revenue bonds, but did not specify the amount of proceeds includ 2 Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High Though reserve amounts can vary based on utility policy (e.g. a percent of revenues, operating expenses, or asset values), many of the surveyed utilities had similar average capital reserves per connection. The low-end outliers are Redmond (City) sewer, Woodinville WD water, Kirkland, and NE Sammamish SWD. Of the utilities that funded capital reinvestment in 2014, Most had capital reserves on the order of 3 5 times the annual capital reinvestment transfer. FCS GROUP Page 24

27 Rate Comparison & Benchmarking Analysis September 2016 Tukwila does not appear to have a separate fund for capital projects, retaining its reserves in its water and sewer utility funds. Redmond s Novelty Hill service area has more than twice the average capital reserves per connection of most other jurisdictions. SP Water and Novelty Hill have relatively high ratios of capital reserves to annual capital reinvestment compared to the other utilities, suggesting a more material accumulation of funds for future infrastructure replacement (Skyway WSD actually has the highest ratio, which Exhibit 14 suggests is due to the fact that it funds relatively little capital reinvestment in its rates compared to the other utilities). Considering the utilities capital reserves as a percent of the main replacement liability identified in Exhibit 13, the utilities that consistently have the lowest bills (e.g. Redmond, Tukwila, and even NE Sammamish SWD) appear to have a smaller percentage of their replacement liability funded in capital reserves than the utilities with consistently higher rates. It is important to note, however, that lower ending capital reserve balances may be a consequence of recent capital investment as part of a long-term infrastructure replacement plan. It is also worth mentioning that several of the surveyed jurisdictions were unable to split their reserves between their water and sewer utilities. Though it involves a higher level of administrative effort, tracking reserve balances separately by utility is a best-management practice that helps avoid interfund subsidies (which can skew sample bill comparisons) and facilitates the development of water and sewer rates that reflect each utility s full cost of service. Capital reinvestment funding can also reduce the amount of debt needed to fund capital projects, allowing for lower long-term rates. On the other side, debt issuance can spread capital investments over a longer period and mitigate upfront rate impacts however, utilities with a substantial amount of debt may have higher rates due to the reserve requirements and coverage requirements that come with debt issuance. Utilities that fund a substantial amount of capital reinvestment through rates tend to maintain higher bond coverage ratios and can earn more favorable bond ratings. Exhibit 16 provides a summary of outstanding debt for each of the surveyed utilities: FCS GROUP Page 25

28 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 16: Summary of Water / Sewer Utility Debt (2014) Cap. Reinv. Ranking (n th Highest) Outstanding Debt Principal Water Sewer 12/31/14 Bal. Debt-Asset Ratio Rank (n th Highest) Bond Rating SP Water 3 5 $18,914, Aaa / AAA Bellevue 1 1 $ Aaa / AAA Covington WD 9 $49,773, Aa3 / AA- Issaquah 9 9 $3,850, Aa2 / AA Kirkland 7 3 $1,573, Aaa / AAA NE Sammamish SWD 6 7 $7,776, Aa1 / AA+ Redmond (City) 5 6 $7,980, Aaa / AAA Redmond (Novelty Hill) 2 2 $ Aaa / AAA Skyway WSD 8 8 $8,578, Aa3 / AA- Tukwila 9 9 $5,383, Aaa / AAA Woodinville WD 4 4 $11,182, Aaa / AAA Monthly Combined Water / Sewer Bill Rank Annual Water Utility Debt Service 1 Annual Sewer Utility Debt Service 1 Low User Average User High User % of Annual Rank 2 % of Annual Rank Payment 2014 Payment 3 ccf 6 ccf 15 ccf Revenue (n th Highest) Revenue (n th Highest) SP Water $859, % 7 $480, % 4 Bellevue $29, % 10 $0 0.00% 7 Covington WD $3,515, % 1 Issaquah $638, % 4 $0 0.00% 7 Kirkland $310, % 9 $533, % 3 NE Sammamish SWD $264, % 3 $244, % 2 Redmond (City) $1,082, % 6 $0 0.00% 7 Redmond (Novelty Hill) $0 0.00% 11 $0 0.00% 7 Skyway WSD $409, % 2 $572, % 1 Tukwila $554, % 5 $364, % 5 Woodinville WD $970, % 8 $26, % 6 1 Annual debt service funded from rates / operations. For SPW, this excludes debt service allocated to GFC / LFC funds. 2 Cell colors are used to highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Exhibit 16 indicates a possible correlation between capital reinvestment levels and bond rating, as the utilities that are rated below the highest level (Moody s: Aaa; S&P: AAA) generally appear to be at the low end of the group with respect to the level of capital reinvestment that they fund from rates. It also shows considerable diversity in the level of indebtedness among utilities, ranging from no debt (Bellevue and Redmond s Novelty Hill area) to almost $50 million as of the end of 2014 (Covington WD). Relatively high debt levels appear to be a possible explanation for why Covington WD s and Skyway WSD s rates are consistently above the median, though it is worth noting that Novelty Hill s rates are also at the high end despite the fact that they do not include any debt. Considering the impacts of capital reinvestment on fund balances and debt issuance, differences in how the funding is used can also play a role in near-term rates. In particular, policies restricting the use of capital reinvestment funding to replacement projects may result in higher near-term rates than more flexible policies that allow the funding to be used for other capital projects. The trade-off, however, is that using capital reinvestment funding to keep near-term rates low leaves less funding for longer-term replacement needs unless replenished ( paid back ) AGGREGATE UTILITY BILL BREAKDOWN Exhibit 17 summarizes the breakdown of a $1.00 customer bill into the key components discussed in this report (based on 2014 data), including operating costs, debt service, contributions into a dedicated replacement reserve, and other rate-funded capital. FCS GROUP Page 26

29 Rate Comparison & Benchmarking Analysis September 2016 Exhibit 17: Summary of 2014 Utility Bill Breakdowns Breakdown of $1.00 Water Bill (2014) $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.23 $0.20 $0.08 $0.69 $0.80 $0.33 $0.67 SP Water Bellevue Covington WD $0.12 $0.88 $0.85 $0.12 $0.14 $0.09 $0.16 $0.03 $0.21 $0.07 $0.20 $0.35 $0.51 Issaquah Kirkland NESSWD Redmond (City) $0.77 $0.79 Redmond (NH) $0.71 Skyway WSD $0.10 $0.90 Tukwila $0.18 $0.08 $0.74 Woodinville WD O&M Debt Service Replacement Fund Contributions Other Rate-Funded Capital $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.16 $0.11 $0.73 Breakdown of $1.00 Sewer Bill, Excluding King County (2014) $0.43 $0.57 $1.00 $0.30 $0.10 $0.60 $0.09 $0.24 $0.67 $0.25 $0.75 SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) $0.58 $0.42 Redmond (NH) $0.08 $0.41 $0.51 $0.11 $0.89 $0.32 $0.02 $0.66 Skyway WSD Tukwila Woodinville WD O&M Debt Service Replacement Fund Contributions Other Rate-Funded Capital Exhibit 17 illustrates the differences that exist between the surveyed utilities with respect to the components that comprise their rate revenue requirements. The primary difference is in the share of the revenue requirement attributable to debt service and rate-funded capital (including both replacement fund contributions and other rate-funded capital). The trend appears to be that the utilities with relatively high debt burdens tend to be at the lower end of the amount of capital being funded from rates. This is likely the result of a conscious decision to limit the amount of capital funded from rates to keep near-term rates down, though it is worth noting that the debt burdens are a consequence of the level of capital funding that has historically come from rates. The opposite also appears to be generally true, as the utilities with higher levels of rate-funded capital appear to have less of a debt burden UTILITY MANAGEMENT PERFORMANCE MEASURES All jurisdictions track some type of utility management performance measures, which lead to more comprehensive decision-making in the other areas discussed in this analysis. Financial metrics such as reserve targets, budget realization, or debt ratios contribute to overall financial stability, solvency, and improved debt ratings. Maintenance measures such as main breaks, inflow & infiltration rate, and miles of pipe replaced guide capital prioritization and spending, and can improve other metrics discussed above, such as O&M cost per account. Customer service and water quality measures FCS GROUP Page 27

30 Rate Comparison & Benchmarking Analysis September 2016 evaluate customer satisfaction with service and compliance with state/federal regulatory requirements and can bring to attention specific areas of improvement needed. Exhibit 18 summarizes some of the key performance measures cited by the surveyed jurisdictions in response to our inquiries: Exhibit 18: Utility Management Performance Measures SP Water Bellevue Financial Measures Operating Budget Realization Operating Reserves Billing Accuracy Capital Reinvestment (% of Target) Debt Ratio Debt Service Coverage Minimum Bond Rating Covington WD Issaquah Kirkland NESSWD Redmond Tukwila Skyway WSD Woodinville WD Maintenance Measures Main Breaks Sewer Overflows Inflow & Infiltration Rate Project Completion Rate Miles of Pipe Replaced Frequency of Main Flushing Customer Service Measures Satisfaction Survey Number of Shut-Off Notices Water Quality Measures All jurisdictions track at least some financial and water quality metrics; Issaquah, Kirkland, Redmond, and Tukwila also track some additional operational metrics. SP Water and Bellevue track the most comprehensive set of performance metrics. It is worth noting that the jurisdictions may track other metrics than those listed in Exhibit RATE STRUCTURES The rate structure charged to customers is a reflection of each jurisdiction s policies, at least at the time that it is initially established (periodic reviews are important to verify that rates reflect current policy priorities). It can vary in the recovery of costs from fixed versus variable charges, and in the recovery of costs from customer classes. The level of cost recovery from fixed and variable charges reflects the jurisdiction s emphasis on revenue stability (through a greater proportion of fixed charges) versus conservation or affordability (through a greater proportion of volume charges). Within the fixed and variable components of the rates, the structure can vary. For example, fixed charges can increase with meter size or the number of dwelling units connected; volume charges can, but do not have to, include volume blocks or seasonal rate features. The recovery of costs by customer class varies based on policy decisions to form class-specific rates and / or the frequency of evaluation of cost allocations. Additionally, utilities may choose to attain their policy objectives through means other than rate signals, such as reserves, assistance programs, or education/public outreach. The most common rate structure features implemented by the surveyed utilities include: FCS GROUP Page 28

31 Rate Comparison & Benchmarking Analysis September 2016 Water: Base rates that increase with meter size, block volume rates for single-family customers, and seasonal rates for other customers. Sewer: Flat rates for single-family customers and base rates with a volume allowance for other users. s imposing volume-based sewer rates on single-family customers generally use winter-average water use to account for summer irrigation; multi-family and commercial customers pay volume charges based on actual usage, as they are more often metered separately for irrigation. Note that SP Water, Bellevue, and Tukwila impose multifamily base rates per living unit. Appendix A provides more detail on the surveyed utilities rate structures and how a single-family bill compares to the sample median for varying levels of water use. Exhibit 19 summarizes the cost recovery for each jurisdiction through base and volume charges, for all customer classes. Exhibit 19: 2014 Rate Revenue by Component Water Rate Revenue Breakdown Sewer Rate Revenue Breakdown SP Water Bellevue Covington WD Issaquah* Kirkland NE Sammamish SWD Redmond (City)* Redmond (NH)* Skyway WSD* Tukwila* Woodinville WD 51.7% 29.7% 40.1% 23.4% 29.9% 31.7% 31.1% 35.2% 37.7% 35.8% 32.2% 48.3% 70.3% 59.9% 76.6% 70.1% 68.3% 68.9% 64.8% 62.3% 64.2% 67.8% SP Water Bellevue Issaquah* Kirkland NE Sammamish SWD Redmond (City)* Redmond (NH)* Skyway WSD* Tukwila* Woodinville WD* 79.7% 61.7% 70.5% 44.5% 100.0% 53.4% 88.2% 68.0% 83.9% 75.0% 20.3% 38.3% 29.5% 55.5% 46.6% 11.8% 32.0% 16.1% 25.0% Base Volume Base Volume *Utility was not able to provide a split between base / volume charges; values were estimated for Redmond and Skyway WSD using utility-specific customer data. Values for the other utilities were estimated b applying each utility's rates to SP Water's 2013 customer counts and water use. Exhibit 19 shows that most of the surveyed utilities recover 30 40% of their water rate revenue through fixed charges, while their costs are typically more than 80% fixed. SP Water is the exception at 51.7%, which is the result of a policy decision by SP Water s Board of Commissioners to target a higher level of cost recovery through fixed charges to improve revenue stability. There appears to be more diversity in how the sewer utilities recover costs through fixed and variable charges. Seven out of the ten sewer utilities impose flat single-family sewer rates, resulting in relative sewer bill rankings that are less sensitive to the assumed level of water use than the water bill rankings are. Bellevue, Issaquah, and Kirkland have volume-based sewer rates, ranking near the bottom of the survey group at lower usage levels and near the top at higher usage levels. The utilities also vary in how they charge multi-family customers, with some imposing a fixed charge per living unit and others imposing a fixed charge per account plus a volume charge. In general, utilities that recover a greater share of their costs through fixed charges have higher bills at lower usage levels relative to utilities that emphasize cost recovery through volume charges. As usage increases, the relative rankings shift considerably for example, SP Water has the highest single-family bill of the group at 3 ccf per month and the second lowest bill at 15 ccf per month. FCS GROUP Page 29

32 Rate Comparison & Benchmarking Analysis September FREQUENCY OF RATE REVIEWS Variations in the frequency and depth of rate reviews among jurisdictions may also contribute to observed differences in bills. A comprehensive rate review typically consists of three analyses: The revenue requirement analysis focuses on defining the amount of revenue needed to cover costs and other revenue needs. Without a recently completed revenue requirement analysis, a utility s rates may be insufficient to cover its costs reserve balances may enable management of short-term cash-flow deficits and phasing of rate increases, but rates that are artificially low in the near-term generally end up being higher in the long-term. The cost-of-service analysis focuses on allocating a utility s costs equitably among its customers, given their relative service needs and demand characteristics. Without a recently completed cost-of-service analysis, the rates for a given customer class may be artificially low due to inadvertent subsidies from other customers. The rate structure analysis focuses on developing rates for each class to recover its assigned share of costs. Without a recently completed rate structure analysis, a utility s rates might not be aligned with its current priorities (e.g. revenue stability, conservation, affordability). Exhibit 20 summarizes the timing of the last comprehensive rate study completed by each of the jurisdictions, as well as the date of the most recent rate adjustments. Exhibit 20: Rate Studies & Adjustments Date of Last Comprehensive Rate Study Most Recent Rate Adj. Water Sewer Rev Req COS Rate Design Rev Req COS Rate Design Water Sewer SP Water Bellevue Covington WD N/A N/A N/A 2016 N/A Issaquah Kirkland NE Sammamish SWD 2011 N/A N/A N/A Redmond Skyway WSD Tukwila Woodinville WD All of the jurisdictions increased their rates in All jurisdictions except NE Sammamish SWD and Bellevue s sewer utility have completed a revenue requirement study in the past two years; most have also completed cost-of-service and rate structure analyses within the past five years. FCS GROUP Page 30

33 Appendix A: 2016 Water & Sewer Rate Structures

34 Sammamish Plateau Water Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Monthly Water Rates Single-Family Residential Multi-Family Residential Commercial Irrigation Fixed Charge: 3/4 Meter $27.31 $27.31 $27.31 $ Meter $58.65 $58.65 $58.65 $ /2 Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Winter/Summer Winter/Summer Winter/Summer Commodity Charges per ccf $1.47/$2.15 $1.47/$2.15 Block One (0 6 ccf per Month) $1.82 Block Two (6 12 ccf per Month) $2.22 Block Three (12 25 ccf per Month) $3.58 Block Four (> 25 ccf per Month) $5.95 Irrigation, With Audit (All Usage) $5.78/$5.95 Irrigation, Without Audit (All Usage) $9.76/$10.12 Monthly Sewer Rates Single-Family Multi-Family Residential Residential Commercial Fixed Charge Sammamish Plateau Water $33.16 $ $37.76 Fixed Charge King County $42.03 $42.03 $42.03 Total Fixed Charge $75.19 $63.58 $79.79 Charge per ccf of Billable Volume 2 Sammamish Plateau Water $ King County $ Total $ Multi-family fixed charges apply to each apartment/condo/dwelling unit. 2 Volume charges apply to commercial water usage over 7.5 ccf per month. $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) SPW Sample Median Page A-1

35 City of Bellevue Utility Taxes (Not Included In Published Rates): 2016 Rates Water: 10.40% Sewer: 5.00% Bimonthly Water Rates Single-Family Residential Multi-Family Residential Non-Residential Irrigation Basic Charge: 3/4 Meter $42.28 $42.28 $42.28 $ Meter $74.83 $74.83 $74.83 $ /2 Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Meter $1, $1, $1, $1, Meter $1, $1, $1, $1, Meter $2, $2, $2, $2, Charges per ccf of Water Consumed Block 1 (0-11 ccf Bimonthly) $3.32 Block 2 (11 17 ccf Bimonthly) $4.21 Block 3 (17 45 ccf Bimonthly) $5.53 Block 4 (> 45 ccf Bimonthly) $7.89 All Usage (November June) $4.17 $4.19 $7.77 All Usage (July October) $5.70 $5.73 $7.77 Bimonthly Sewer Rates Single-Family Multi-Family Residential Residential Basic Charge Per Unit: $84.06 $92.82 Volume Included In Basic Charge 11 ccf Non-Residential Charge per ccf of Billable Volume $7.65 $9.17 Block 1 (0 50 ccf Bimonthly) $3.92 Block 2 (> 50 ccf Bimonthly) $5.06 Minimum Charge $ $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Bellevue Sample Median Page A-2

36 Covington Water District Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Bimonthly Water Rates Residential Non-Residential Irrigation Basic Charge: 5/8 Meter $46.50 $66.30 $ /4 Meter $56.65 $86.50 $ Meter $77.15 $ $ /2 Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $ $1, $1, Charges per ccf of Water Consumed Winter/Summer Block 1 (0-8 ccf Bimonthly) $2.80 Block 2 (9 14 ccf Bimonthly) $3.95 Block 3 (15 20 ccf Bimonthly) $5.10/$6.70 Block 4 (21 34 ccf Bimonthly) $5.90/$8.50 Block 5 (> 34 ccf Bimonthly) $6.90/$9.90 All Usage (Winter) $3.25 $3.40 All Usage (Summer) $5.70 $8.20 Monthly Sewer Rates 1 Residential Non-Residential Basic Charge Per Unit Soos Creek WSD $17.85 $17.85 Basic Charge Per Unit King County $42.03 $42.03 Total Basic Charge Per Unit $59.88 $59.88 Volume Included In Basic Charge 7.5 ccf Charge per ccf of Billable Volume Soos Creek WSD $2.38 King County $5.60 Total $ Covington WD does not provide sewer service; Soos Creek Water & Sewer District provides sewer service to its customers. $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Covington WD Sample Median Page A-3

37 City of Issaquah Utility Taxes (Not Included In Published Rates): 2016 Rates Water: 2.33% Sewer: (N/A) Bimonthly Water Rates Single-Family Residential Multi-Family Residential Commercial Irrigation Basic Charge: 3/4 Meter $26.97 $35.21 $35.21 $ Meter $58.57 $79.18 $79.18 $ /2 Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Meter $ $ $ $ Meter $1, $1, $1, $ Volume Charges Parks/Private Block One (0 4 ccf Bimonthly for SFR) $1.74 $ $ $3.51/$ Block Two (5 14 ccf Bimonthly for SFR) $4.14 $5.11 $5.42 $5.11/$10.27 Block Three (15 30 ccf Bimonthly for SFR) $7.70 Block Four (31 50 ccf Bimonthly for SFR) $12.54 Block Five (> 50 ccf Bimonthly for SFR) $ Max. Volume Included In Block One (Non-SFR) 3/4" 1 1-1/ (Increases With Water Meter Size) 8 ccf 20 ccf 40 ccf 64 ccf 128 ccf 200 ccf 400 ccf Monthly Sewer Rates Single-Family Multi-Family Residential Residential Commercial Basic Charge City of Issaquah $3.03 $3.03 $3.03 Basic Charge King County $ Total Basic Charge $45.06 $3.03 $3.03 Charge per ccf City of Issaquah $2.17 $2.17 $2.17 Charge per ccf King County - $5.61 $5.61 Total Charge per ccf $2.17 $7.78 $7.78 Minimum Monthly Charge $53.74 $50.49 $50.49 $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Issaquah Sample Median Page A-4

38 City of Kirkland Utility Taxes (Not Included In Published Rates): 2016 Rates Water: 11.80% Sewer: 9.50% Water Rates Single-Family Multi-Family Residential Residential Commercial Basic Charge: $ /4 Meter $32.42 $ Meter $55.76 $ /2 Meter $88.62 $ Meter $ $ Meter $ $ Meter $ $ Meter $ $ Meter $ $ Meter $1, $1, Sprinklers Charges per ccf of Water Consumed 1 $4.90 $4.90 $ ccf Bimonthly $4.72 > 24 ccf Bimonthly $6.20 Sewer Rates Single-Family Residential Multi-Family Residential Commercial Basic Charge: King County Wastewater Treatment $84.06 Kirkland Wastewater $26.88 Total $ $ $ Volume Included In Basic Charge 6 ccf 12 ccf 12 ccf Sprinklers Charge per ccf of Billable Volume 2 $4.48 $9.50 $ The single-family residential base rate includes 4 ccf of bimonthly water usage. 2 Billable volume is defined as average winter water consumption for single-family residential accounts and actual water use for other accounts. $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Kirkland Sample Median Page A-5

39 NE Sammamish SWD Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Bimonthly Water Rates 3/4 Meter 1 Meter 1-1/2 Meter 2 Meter 3 Meter Base Rate $37.34 $64.08 $ $ $ Volume Rate per 100 cubic feet (cf) Block One $2.60 $2.60 $2.60 $2.60 $2.60 Block Two $4.14 $4.14 $4.14 $4.14 $4.14 Block Three $5.99 $5.99 $5.99 $5.99 $5.99 Block Four $7.85 $7.85 $7.85 $7.85 $7.85 Bimonthly Volume Thresholds (cf): Block One 1 1, , , , ,000 Block Two 1,301 1,700 1,801 2,400 2,001 3,000 4,001 5,000 14,001 19,000 Block Three 1,701 2,600 2,401 3,600 3,001 5,000 5,001 8,000 19,001 29,000 Block Four > 2,600 > 3,600 > 5,000 > 8,000 > 29,000 Bimonthly Sewer Rates Rate per Equiv. Residential Unit: NE Sammamish SWD $47.84 King County $84.06 Total $ $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) NESSWD Sample Median Page A-6

40 City of Redmond (City Area) Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Monthly Water Rates Single-Family Residential Multi-Family Residential Commercial Irrigation Fixed Charge: 3/4 Meter $14.25 $18.70 $18.70 $ Meter $18.10 $33.30 $33.30 $ /2 Meter $21.90 $57.65 $57.65 $ Meter $32.50 $86.80 $86.80 $ Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $ $ $ Winter/Summer Winter/Summer Commodity Charges per ccf $2.29/$3.93 $2.29/$3.93 $6.30 Block One (0 4 ccf per Month) $1.75 Block Two (4 10 ccf per Month) $3.50 Block Three (10 20 ccf per Month) $5.25 Block Four (> 20 ccf per Month) $7.00 Monthly Sewer Rates Single-Family Multi-Family Residential Residential Commercial Fixed Charge City of Redmond 1 $14.15 $17.35 $17.35 Fixed Charge King County 1 $42.03 $42.03 $42.03 Total Fixed Charge $56.18 $59.38 $59.38 Charge per ccf of Billable Volume City of Redmond $1.700 $1.700 King County $5.604 $5.604 Total $7.304 $ MFR/commercial sewer fixed charges include 6.0 ccf/month of usage for the Redmond portion and 7.5 ccf/month for the King County portion. $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Redmond (City) Sample Median Page A-7

41 City of Redmond (Novelty Hill Area) Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Monthly Water Rates Single-Family Residential Multi-Family Residential Commercial Irrigation Basic Charge: 3/4 Meter $18.10 $22.20 $22.20 $ Meter $23.75 $43.55 $43.55 $ /2 Meter $29.40 $79.10 $79.10 $ Meter $45.10 $ $ $ Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $1, $1, $1, Winter/Summer Winter/Summer Commodity Charges per ccf $2.82/$4.09 $2.82/$4.09 $11.10 Block One (0 4 ccf per Month) $3.00 Block Two (4 9 ccf per Month) $6.00 Block Three (9 16 ccf per Month) $9.00 Block Four (> 16 ccf per Month) $12.00 Monthly Sewer Rates Single-Family Multi-Family Residential Residential Commercial Fixed Charge City of Redmond 1 $34.50 $42.10 $42.10 Fixed Charge King County 1 $42.03 $42.03 $42.03 Total Fixed Charge $76.53 $84.13 $84.13 Charge per ccf of Billable Volume City of Redmond $4.200 $4.200 King County $5.604 $5.604 Total $9.804 $ MFR/commercial sewer fixed charges include 6.0 ccf/month of usage for the Redmond portion and 7.5 ccf/month for the King County portion. $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Redmond (NH) Sample Median Page A-8

42 Skyway Water & Sewer District Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Monthly Water Rates Single-Family Residential Multi-Family Residential Commercial Irrigation Basic Charge: 3/4 Meter $17.79 $26.81 $26.81 $ Meter $41.86 $58.97 $58.97 $ /2 Meter $82.02 $ $ $ Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $1, $1, $1, Commodity Charges per ccf $5.51 $5.69 $10.95 Block One (0 8 ccf Bimonthly) $3.95 Block Two (9 12 ccf Bimonthly) $5.00 Block Three (13 24 ccf Bimonthly) $6.31 Block Four (> 24 ccf Bimonthly) $8.04 Monthly Sewer Rates Single-Family Residential Basic Charge: Skyway WSD $36.53 King County $42.03 Total $78.56 Multi-Family Residential Commercial Volume Charge per ccf $12.02 $12.02 $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Skyway WSD Sample Median Page A-9

43 City of Tukwila Utility Taxes (Not Included In Published Rates): 2016 Rates Water: 10.00% Sewer: 10.00% Monthly Water Rates Single-Family Multi-Family Residential Residential Commercial Fixed Charge: $16.00 $16.00 per Unit 3/4 Meter $ Meter $ /2 Meter $ Meter $ Meter $ Meter $ Meter $ Meter $ Meter $ Meter $ Commodity Charges per ccf October May $2.80 $3.21 $4.60 June September $3.90 $4.49 $6.30 Monthly Sewer Rates Single-Family Multi-Family Residential Residential Commercial Fixed Charge City of Tukwila $29.00 $ $53.50 Fixed Charge King County $42.03 $42.03 $42.03 Total Fixed Charge $71.03 $71.03 $71.03 Volume Charge per ccf of Billable Volume City of Tukwila $7.133 King County $5.604 Total $ $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Tukwila Sample Median Page A-10

44 Woodinville Water District Utility Taxes (Not Included In Published Rates): 2016 Rates Water: (N/A) Sewer: (N/A) Monthly Water Rates Residential Non-Residential Irrigation Meter Charge: 3/4 Meter $20.50 $20.50 $ Meter $51.55 $51.55 $ /2 Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $ $ $ Meter $1, $1, $1, Meter $1, $1, $1, Meter $2, $2, $2, Commodity Charges per ccf $8.26 Residential Winter / Summer $4.74 / $5.91 Non-Residential Usage Up to Winter Average $4.38 Non-Residential Usage Above Winter Average $4.80 Excess-Capacity Charge (> 25 ccf Bimonthly) $2.35 Monthly Sewer Rates Residential Non-Residential Basic Charge Woodinville Water District $27.15 $27.15 Basic Charge King County $ Total Basic Charge $69.18 $27.15 Volume Charge per ccf of Billable Volume Woodinville Water District $ King County $5.61 Total $ WWD volume charge applies to non-residential water usage over 7.5 ccf per month (King County s charge applies to all non-residential usage). $ Combined Monthly Water/Sewer Bill (Excluding King County & City Taxes) $ $ $ $ $ $ $50.00 $ Monthly Water Usage (ccf) Woodinville WD Sample Median Page A-11

45 Appendix B: Sample Monthly Bill Calculations

46 Rate Comparison & Benchmarking Analysis Appendix B - Sample Monthly Bill Calculations Single-Family Residential Combined Water/Sewer Bill (3/4" Meter, Excluding Utility Taxes & King County Treatment Charges) Note: Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High Usage % of SP Water Residential Bills SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (NH) Skyway WSD Tukwila Woodinville WD Sample Median 0 ccf $60.47 $21.14 $41.10 $25.20 $33.12 $42.59 $28.40 $52.60 $54.32 $40.91 $47.65 $ ccf $62.29 $28.38 $43.90 $26.94 $33.12 $45.19 $30.15 $55.60 $58.27 $43.79 $47.65 $ % 2 ccf $64.11 $35.62 $46.70 $28.68 $33.12 $47.79 $31.90 $58.60 $62.22 $46.67 $52.88 $ ccf $65.93 $42.86 $49.50 $32.82 $37.84 $50.39 $33.65 $61.60 $66.17 $49.55 $58.11 $ ccf $67.75 $50.10 $52.30 $36.96 $47.04 $52.99 $35.40 $64.60 $70.12 $52.44 $63.34 $ ccf 35% $69.57 $57.34 $56.25 $43.27 $56.24 $55.59 $38.90 $70.60 $75.12 $55.32 $68.57 $ ccf $71.39 $65.03 $60.20 $49.58 $65.44 $58.19 $42.40 $76.60 $80.12 $58.20 $73.80 $ ccf $73.61 $73.16 $64.15 $55.89 $74.64 $61.56 $45.90 $82.60 $86.43 $61.08 $79.03 $ ccf $75.83 $81.29 $69.78 $65.76 $83.84 $65.70 $49.40 $88.60 $92.74 $63.96 $84.26 $ % 9 ccf $78.05 $90.08 $75.41 $75.63 $93.04 $70.77 $52.90 $94.60 $99.05 $66.85 $89.49 $ ccf $80.27 $99.53 $81.04 $85.50 $ $76.76 $56.40 $ $ $69.73 $94.72 $ ccf $82.49 $ $87.81 $95.37 $ $82.75 $61.65 $ $ $72.61 $99.95 $ ccf $84.71 $ $94.58 $ $ $88.74 $66.90 $ $ $75.49 $ $ ccf 13% $88.29 $ $ $ $ $94.73 $72.15 $ $ $78.37 $ $ ccf $91.87 $ $ $ $ $ $77.40 $ $ $81.25 $ $ ccf $95.45 $ $ $ $ $ $82.65 $ $ $84.14 $ $ ccf $99.03 $ $ $ $ $ $87.90 $ $ $87.02 $ $ ccf $ $ $ $ $ $ $93.15 $ $ $89.90 $ $ ccf $ $ $ $ $ $ $98.40 $ $ $92.78 $ $ ccf $ $ $ $ $ $ $ $ $ $95.66 $ $ ccf $ $ $ $ $ $ $ $ $ $98.55 $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf 9% $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ Page B-1

47 Rate Comparison & Benchmarking Analysis Appendix B - Sample Monthly Bill Calculations Single-Family Residential Water Bill (3/4" Meter, Excluding Utility Taxes) Note: Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High Usage % of SP Water Residential Bills SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (NH) Skyway WSD Tukwila Woodinville WD Sample Median 0 ccf $27.31 $21.14 $23.25 $13.49 $19.68 $18.67 $14.25 $18.10 $17.79 $14.55 $20.50 $ ccf $29.13 $24.46 $26.05 $15.23 $19.68 $21.27 $16.00 $21.10 $21.74 $17.43 $20.50 $ % 2 ccf $30.95 $27.78 $28.85 $16.97 $19.68 $23.87 $17.75 $24.10 $25.69 $20.31 $25.73 $ ccf $32.77 $31.10 $31.65 $21.11 $24.40 $26.47 $19.50 $27.10 $29.64 $23.19 $30.96 $ ccf $34.59 $34.42 $34.45 $25.25 $29.12 $29.07 $21.25 $30.10 $33.59 $26.07 $36.19 $ ccf 35% $36.41 $37.74 $38.40 $29.39 $33.84 $31.67 $24.75 $36.10 $38.59 $28.95 $41.42 $ ccf $38.23 $41.51 $42.35 $33.53 $38.56 $34.27 $28.25 $42.10 $43.59 $31.84 $46.65 $ ccf $40.45 $45.72 $46.30 $37.67 $43.28 $37.64 $31.75 $48.10 $49.90 $34.72 $51.88 $ ccf $42.67 $49.93 $51.93 $45.37 $48.00 $41.78 $35.25 $54.10 $56.21 $37.60 $57.11 $ % 9 ccf $44.89 $54.80 $57.56 $53.07 $52.72 $46.85 $38.75 $60.10 $62.52 $40.48 $62.34 $ ccf $47.11 $60.33 $63.19 $60.77 $57.44 $52.84 $42.25 $69.10 $68.83 $43.36 $67.57 $ ccf $49.33 $65.86 $69.96 $68.47 $62.16 $58.83 $47.50 $78.10 $75.14 $46.25 $72.80 $ ccf $51.55 $71.39 $76.73 $76.17 $66.88 $64.82 $52.75 $87.10 $81.45 $49.13 $78.03 $ ccf 13% $55.13 $76.92 $83.50 $83.87 $73.08 $70.81 $58.00 $96.10 $89.49 $52.01 $84.44 $ ccf $58.71 $82.45 $90.27 $91.57 $79.28 $78.66 $63.25 $ $97.53 $54.89 $92.02 $ ccf $62.29 $87.98 $97.04 $99.27 $85.48 $86.51 $68.50 $ $ $57.77 $99.60 $ ccf $65.87 $93.51 $ $ $91.68 $94.36 $73.75 $ $ $60.65 $ $ ccf $69.45 $99.04 $ $ $97.88 $ $79.00 $ $ $63.54 $ $ ccf $73.03 $ $ $ $ $ $84.25 $ $ $66.42 $ $ ccf $76.61 $ $ $ $ $ $89.50 $ $ $69.30 $ $ ccf $80.19 $ $ $ $ $ $94.75 $ $ $72.18 $ $ ccf $83.77 $ $ $ $ $ $ $ $ $75.06 $ $ ccf $87.35 $ $ $ $ $ $ $ $ $77.95 $ $ ccf $90.93 $ $ $ $ $ $ $ $ $80.83 $ $ ccf $94.51 $ $ $ $ $ $ $ $ $83.71 $ $ ccf $98.09 $ $ $ $ $ $ $ $ $86.59 $ $ ccf $ $ $ $ $ $ $ $ $ $89.47 $ $ ccf $ $ $ $ $ $ $ $ $ $92.35 $ $ ccf $ $ $ $ $ $ $ $ $ $95.24 $ $ ccf $ $ $ $ $ $ $ $ $ $98.12 $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf 9% $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ ccf $ $ $ $ $ $ $ $ $ $ $ $ Page B-2

48 Rate Comparison & Benchmarking Analysis Appendix B - Sample Monthly Bill Calculations Single-Family Residential Sewer Bill (Excluding Utility Taxes & King County Treatment Charges) Note: Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High Usage % of SP Water Residential Bills SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (NH) Skyway WSD Tukwila Woodinville WD Sample Median 0 ccf $33.16 $0.00 $17.85 $11.71 $13.44 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $3.92 $17.85 $11.71 $13.44 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ % 2 ccf $33.16 $7.84 $17.85 $11.71 $13.44 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $11.76 $17.85 $11.71 $13.44 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $15.68 $17.85 $11.71 $17.92 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf 35% $33.16 $19.60 $17.85 $13.88 $22.40 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $23.52 $17.85 $16.05 $26.88 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $27.44 $17.85 $18.22 $31.36 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $31.36 $17.85 $20.39 $35.84 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ % 9 ccf $33.16 $35.28 $17.85 $22.56 $40.32 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $39.20 $17.85 $24.73 $44.80 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $43.12 $17.85 $26.90 $49.28 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $47.04 $17.85 $29.07 $53.76 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf 13% $33.16 $50.96 $17.85 $31.24 $58.24 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $54.88 $17.85 $33.41 $62.72 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $58.80 $17.85 $35.58 $67.20 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $62.72 $17.85 $37.75 $71.68 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $66.64 $17.85 $39.92 $76.16 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $70.56 $17.85 $42.09 $80.64 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $74.48 $17.85 $44.26 $85.12 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $78.40 $17.85 $46.43 $89.60 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $82.32 $17.85 $48.60 $94.08 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $86.24 $17.85 $50.77 $98.56 $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $90.16 $17.85 $52.94 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $94.08 $17.85 $55.11 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $98.00 $17.85 $57.28 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $59.45 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $61.62 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $63.79 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $65.96 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $68.13 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $70.30 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $72.47 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf 9% $33.16 $ $17.85 $74.64 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $76.81 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $78.98 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $81.15 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $83.32 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $85.49 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $87.66 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $89.83 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $92.00 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $94.17 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $96.34 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $98.51 $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $ ccf $33.16 $ $17.85 $ $ $23.92 $14.15 $34.50 $36.53 $26.36 $27.15 $33.16 Page B-3

49 Appendix C: Water Meter Inventory

50 Rate Comparison & Benchmarking Analysis Appendix C - Water Meter Inventory # of Meters Average No. of Total CERUs 5/8" 3/4" 1" 1-1/2" 2" 3" 4" 6" 8" 10" Total CERUs per Meter SP Water , ,393 22, Bellevue ,192 3,855 2, ,194 68, Covington WD 17, ,484 18, Issaquah 0 5, ,959 12, Kirkland 0 10,301 1, ,442 19, NE Sammamish WSD 0 3, ,292 3, Redmond (City) 0 11, , ,397 27, Redmond (NH) 0 3, ,430 4, Skyway WSD 0 3, ,341 3, Tukwila 0 1, ,134 7, Woodinville WD* 0 12, ,256 19, Number of CERUs per Meter *Woodinville WD's meter counts are estimated based on 2002 meter counts, adjusted for growth in accounts through Page C-1

51 Appendix D: Supplemental Labor Cost Calculations

52 Rate Comparison & Benchmarking Analysis Appendix D - Supplemental Labor Cost Calculations SP Water Budget Allocation FTEs Salaries & Benefits Water Sewer Total Water Share Sewer Share Total Water Share Sewer Share General Management Board of Commissioners 50% 50% $106,822 $53,411 $53,411 General Management 60% 40% $388,940 $233,364 $155,576 Human Resources 60% 40% $153,168 $91,901 $61,267 Planning/Protection 50% 50% $255,348 $127,674 $127,674 Public Outreach 70% 30% $52,639 $36,847 $15,792 IT/GIS 60% 40% $400,206 $240,124 $160,082 Financial Management 60% 40% $455,267 $273,160 $182,107 Customer Services 60% 40% $276,587 $165,952 $110,635 Field Services 80% 20% $366,214 $292,971 $73,243 Building & Grounds 60% 40% $153,394 $92,037 $61,358 General Expenditures 60% 40% $5,455 $3,273 $2,182 Total - General Management $2,614,040 $1,610,714 $1,003,326 Water Operations 100% 0% $1,272,721 $1,272,721 $0 Sewer Operations 0% 100% $877,012 $0 $877,012 Engineering Admin 50% 50% $656,974 $328,487 $328,487 DS Water 100% 0% $100,453 $100,453 $0 CIP Water 100% 0% $87,253 $87,253 $0 Asset Mgmt Water 100% 0% $30,190 $30,190 $0 DS Sewer 0% 100% $118,516 $0 $118,516 CIP Sewer 0% 100% $31,986 $0 $31,986 Asset Mgmt Sewer 0% 100% $4,870 $0 $4,870 Total - Engineering $1,030,243 $546,384 $483,859 Total $5,794,016 $3,429,818 $2,364,197 Issaquah Category 2014 FTEs 2015 Monthly Salary Range Estimated 2015 Monthly Salary Range Estimated Category 2014 FTEs Minimum Maximum Midpoint 2015 Salary Minimum Maximum Midpoint 2015 Salary Water Fund Sewer Fund Public Works Operations Public Works Operations Director Admin 0.25 $10,454 $13,341 $11,898 $35,693 Director Admin 0.10 $10,454 $13,341 $11,898 $14,277 Operations Managers Admin 1.00 $7,075 $9,030 $8,053 $96,630 Operations Managers Admin 0.50 $7,075 $9,030 $8,053 $48,315 Utility Maintenance Lead Direct O&M 1.42 $5,190 $6,958 $6,074 $103,501 Utility Maintenance Lead Direct O&M 0.30 $5,190 $6,958 $6,074 $21,866 Maintenance Workers (I, II, & III) Direct O&M 8.34 $3,095 $5,954 $4,525 $452,812 Maintenance Workers (I, II, & III) Direct O&M 1.74 $3,095 $5,954 $4,525 $94,472 Signal Technician Direct O&M 0.71 $4,639 $6,204 $5,422 $46,191 Signal Technician Direct O&M 0.15 $4,639 $6,204 $5,422 $9,759 Utility Technician Direct O&M 0.71 $4,742 $6,354 $5,548 $47,269 Utility Technician Direct O&M 0.15 $4,742 $6,354 $5,548 $9,986 Construction Technician Direct O&M 0.36 $4,863 $6,517 $5,690 $24,581 Construction Technician Direct O&M 0.07 $4,863 $6,517 $5,690 $4,780 CADD / Mapping Technician Direct O&M 0.36 $4,986 $6,680 $5,833 $25,199 CADD / Mapping Technician Direct O&M 0.07 $4,986 $6,680 $5,833 $4,900 Administrative Supervisor Admin 0.25 $5,027 $6,417 $5,722 $17,166 Administrative Supervisor Admin 0.10 $5,027 $6,417 $5,722 $6,866 Administrative Assistant Admin 0.25 $3,071 $5,814 $4,443 $13,328 Administrative Assistant Admin 0.10 $3,071 $5,814 $4,443 $5,331 Shop Aide Direct O&M 0.36 $2,796 $3,788 $3,292 $14,221 Shop Aide Direct O&M 0.07 $2,796 $3,788 $3,292 $2,765 Maintenance Worker - Non-Regular Direct O&M 0.22 $3,095 $4,191 $3,643 $9,618 Maintenance Worker - Non-Regular Direct O&M 0.05 $3,095 $4,191 $3,643 $2,186 Total - Public Works Operations $886,207 Total - Public Works Operations 3.40 $225,503 Total Estimated Salary 2015 Rates Total Estimated Salary 2015 Rates Admin 18.37% $162,816 Admin 33.17% $74,789 Direct O&M 81.63% $723,391 Direct O&M 66.83% $150,713 Total $886,207 Total $225,503 Estimated Distribution of 2014 Salary & Benefit Costs Estimated Distribution of 2014 Salary & Benefit Costs Admin % $336,741 Admin % $225,428 Direct O&M % $1,496,139 Direct O&M % $454,275 Total $1,832,880 Total 3.40 $679,703 Page D-1

53 Rate Comparison & Benchmarking Analysis Appendix D - Supplemental Labor Cost Calculations Bellevue Category 2014 FTEs 2015 Monthly Salary Range Estimated 2015 Monthly Salary Range Estimated Category 2014 FTEs Minimum Maximum Midpoint 2015 Salary Minimum Maximum Midpoint 2015 Salary Water Utility Fund Sewer Utility Fund Water Engineering Sewer Engineering Utility Engineer Direct O&M 1.00 $5,824 $8,035 $6,930 $83,154 Assistant Utilities Director Direct O&M 1.00 $8,239 $11,374 $9,807 $117,678 Utility Engineering Manager Direct O&M 1.00 $7,842 $10,821 $9,332 $111,978 Capital Project Coordinator Direct O&M 1.00 $5,824 $8,035 $6,930 $83,154 Engineering Tech Direct O&M 1.00 $4,544 $6,270 $5,407 $64,884 Senior Construction Project Inspector Direct O&M 2.00 $5,274 $7,277 $6,276 $150,612 Inspector / Supervisor Direct O&M 1.00 $6,120 $8,445 $7,283 $87,390 Senior Utility Engineer Direct O&M 4.00 $6,757 $9,326 $8,042 $385,992 Senior Construction Project Inspector Direct O&M 2.00 $5,274 $7,277 $6,276 $150,612 Total - Sewer Engineering 8.00 $737,436 Senior Utility Engineer Direct O&M 1.00 $6,757 $9,326 $8,042 $96,498 Senior Engineering Tech Direct O&M 1.00 $5,274 $7,277 $6,276 $75,306 Sewer Maintenance & Operations Total - Water Engineering 8.00 $669,822 Administrative Assistant Admin 1.00 $4,115 $5,677 $4,896 $58,752 Administrative Services Supervisor Admin 1.00 $5,018 $6,924 $5,971 $71,652 Water Maintenance & Operations Assistant Utilities Director Direct O&M 1.00 $8,239 $11,374 $9,807 $117,678 Accounting Associate Admin 1.00 $3,545 $4,894 $4,220 $50,634 Crew Leader Direct O&M 1.00 $4,933 $6,195 $5,564 $66,768 Crew Leader Direct O&M 1.00 $4,933 $6,195 $5,564 $66,768 Crew Leader, Technical Spec Direct O&M 1.00 $5,182 $6,395 $5,789 $69,462 Crew Leader, Tech Spec Direct O&M 1.00 $5,182 $6,395 $5,789 $69,462 Inventory Specialist II Direct O&M 1.00 $4,529 $5,692 $5,111 $61,326 Customer Service Representative Admin 1.00 $3,545 $4,894 $4,220 $50,634 Lead Worker Direct O&M 1.00 $4,469 $5,620 $5,045 $60,534 Inventory Specialist I Direct O&M 1.00 $4,102 $5,156 $4,629 $55,548 Lead Worker - Programs Direct O&M 1.00 $4,619 $5,789 $5,204 $62,448 Lead Worker Direct O&M 5.00 $4,469 $5,620 $5,045 $302,670 Maintenance Worker Direct O&M 1.00 $3,648 $4,583 $4,116 $49,386 Maintenance Worker Direct O&M 5.00 $3,648 $4,583 $4,116 $246,930 Skilled Worker Direct O&M $4,021 $5,054 $4,538 $544,500 Meter Reader Direct O&M 5.00 $3,683 $4,627 $4,155 $249,300 Senior Engineering Tech Direct O&M 2.00 $5,274 $7,277 $6,276 $150,612 Planning Manager Direct O&M 1.00 $7,102 $9,799 $8,451 $101,406 Technical Specialist Direct O&M 5.00 $4,903 $6,174 $5,539 $332,310 Skilled Worker Direct O&M 5.00 $4,021 $5,054 $4,538 $272,250 Telemetry Tech Direct O&M 1.00 $5,274 $7,277 $6,276 $75,306 Senior Engineering Tech Direct O&M 3.00 $5,274 $7,277 $6,276 $225,918 Utilities Superintendent Direct O&M 1.00 $6,120 $8,445 $7,283 $87,390 Technical Specialist Direct O&M 5.00 $4,903 $6,174 $5,539 $332,310 Total - Sewer Maintenance & Operations $1,808,124 Telemetry & Security System Analyst Direct O&M 1.00 $6,431 $8,873 $7,652 $91,824 Telemetry Tech Direct O&M 1.00 $5,274 $7,277 $6,276 $75,306 Sewer Business Administration Utility Administration & Operations Manager Admin 1.00 $6,431 $8,873 $7,652 $91,824 Administrative Assistant Admin 1.00 $4,115 $5,677 $4,896 $58,752 Utility Operations & Maintenance Manager Direct O&M 1.00 $7,102 $9,799 $8,451 $101,406 Assistant Utilities Director Admin 1.00 $8,239 $11,374 $9,807 $117,678 Utilities Superintendent Direct O&M 1.00 $6,120 $8,445 $7,283 $87,390 Planning Manager Admin 1.00 $7,102 $9,799 $8,451 $101,406 Water Quality Supervisor Direct O&M 1.00 $6,431 $8,873 $7,652 $91,824 Senior Budget Analyst Admin 1.00 $5,274 $7,277 $6,276 $75,306 Total - Water Maintenance & Operations $2,563,404 Total - Sewer Business Administration 4.00 $353,142 Water Business Administration Sewer Development Services Administrative Assistant Admin 1.00 $4,115 $5,677 $4,896 $58,752 Assistant Land Use Prof Direct O&M 2.00 $4,544 $6,270 $5,407 $129,768 Deputy Utilities Director Admin 1.00 $8,659 $11,950 $10,305 $123,654 Utilities Engineering Manager Direct O&M 1.00 $7,842 $10,821 $9,332 $111,978 Fiscal Manager Admin 1.00 $7,102 $9,799 $8,451 $101,406 Senior Construction Project Insp Direct O&M 2.00 $5,274 $7,277 $6,276 $150,612 Management Assistant to Director Admin 1.00 $6,120 $8,445 $7,283 $87,390 Total - Water Development Services 5.00 $392,358 Program Administrator Admin 2.00 $5,274 $7,277 $6,276 $150,612 Senior Administrative Assistant Admin 1.00 $4,323 $5,967 $5,145 $61,740 Sewer Customer Service & Systems Utilities Policy Advisor Admin 1.00 $7,463 $10,298 $8,881 $106,566 Customer Service Representative Admin 1.00 $3,545 $4,894 $4,220 $50,634 Total - Water Business Administration 8.00 $690,120 Senior Administrative Assistant Admin 1.00 $4,323 $5,967 $5,145 $61,740 Systems Analyst Admin 1.00 $5,544 $7,647 $6,596 $79,146 Water Development Services Utilities Billing Manager Admin 1.00 $5,544 $7,647 $6,596 $79,146 Senior Construction Project Inspector Direct O&M 1.00 $5,274 $7,277 $6,276 $75,306 Total - Sewer Customer Service & Systems 4.00 $270,666 Senior Utilities Rev Prof Direct O&M 1.00 $6,120 $8,445 $7,283 $87,390 Utility Rev Prof Direct O&M 2.00 $5,544 $7,647 $6,596 $158,292 Total Estimated Salary 2015 Rates Total - Water Development Services 4.00 $320,988 Admin 21.18% $754,212 Direct O&M 78.82% $2,807,514 Water Customer Service & Systems Total $3,561,726 Business Systems Manager Admin 1.00 $7,463 $10,298 $8,881 $106,566 Customer Service Representative Admin 2.56 $3,545 $4,894 $4,220 $129,623 Estimated Distribution of 2014 Salary & Benefit Costs Data Analyst Admin 1.00 $4,544 $6,270 $5,407 $64,884 Admin % $1,220,381 Systems Analyst Admin 1.00 $5,544 $7,647 $6,596 $79,146 Direct O&M % $4,542,802 Total - Water Customer Service & Systems 5.56 $380,219 Total $5,763,183 Total Estimated Salary 2015 Rates Admin 27.32% $1,263,431 Direct O&M 72.68% $3,361,122 Total $4,624,553 Estimated Distribution of 2014 Salary & Benefit Costs Admin % $1,899,730 Direct O&M % $5,053,878 Total $6,953,608 Page D-2

54 Appendix E: Reported Asset-Management Practices

55 Rate Comparison & Benchmarking Analysis Appendix E - Reported Asset-Management Practices SP Water Does the agency apply asset management principles for capital replacement and rate setting? Yes. The District is in the midst of phasing in capital reinvestment based on 80% of replacement cost depreciation, funded from rates. Does the agency have formal asset management plans or capital replacement schedules? Yes. The District has been working on one, and should be finalizing it within the next year or so. The targeted funding level considers a fairly detailed analysis of assets. Does the agency have credible asset replacement values (vs book values)? Do rates include a component for capital replacement reserves, and if so, how much? Does the agency have comprehensive asset useful life schedules for determining future capital replacement costs and rate allocation? Yes Yes: $4.0M in water; $1.4M in sewer Yes Bellevue Yes Yes (Modeled after USEPA asset management framework) Yes Yes. The reserve component is calculated based on a 75 year plan for Rehabilitation and Replacement. Water: $9,971,448; Sewer: $11,069,309 Yes. Data can and does change based on new condition assessment data. Covington WD Yes. The District is presently developing and implementing an asset management program and this focus will evolve as the program progresses. Additionally, the Board adopted several financial policies in 2009 to include ones pertaining to capital planning and acquisition, and user fees. Not yet (under development) Those are being developed in conjunction with the asset management program. Yes. Rates are set on a holistic basis with O&M, debt, and capital. Any amount for capital will vary from year to year within the 6-year planning period. Yes. Issaquah We look at 15 years on what assets need to be replaced We have our water comprehensive plan and then we are in the process of rate study that looks out 15 years We maintain our records as required on historical cost basis Includes a portion for depreciation - we are currently undergoing a rate study We have our historical asset useful life as required by accounting principles Kirkland Kirkland has system reinvestment goals for our infrastructure replacement based on a multiplier of depreciation expense. For Water we have a goal of funding our capital needs with rate revenue at 1.25 times depreciation expense. For 2016, our rates reflect a factor of 1.2 times depreciation expense. For sewer we have a goal of 1.65 times depreciation expense. For 2016, our rates reflect a factor of 1.3 times depreciation expense. In 2007, Karyn Johnson of FCS group did a report recommending this funding level. Yes, the City is implementing an Enterprise Asset Management program. Implementation of our EAM system began in 2015 and continues in Funding for the system is included in the Capital Improvement Program, adopted by Council in December Funding for the Water/Sewer Utility s portion was included in the 2016 rates and will be included when determining our rates. Yes, based on type and age. Yes, we have a replacement schedule by project. Useful lives are determined by accounting and the system reinvestment factor is determined by the impact on rates and the desired goal. Previous project costs are used to determine estimates and RH2 used an inflation formula to come up with numbers for projects in the future. Unit costing is used. NE Sammamish SWD Coupons for DI pipe tell us how much life is left in the pipe and gives us guidance for when to schedule replacement projects. If we have t.v. d lines for I&I or root intrusion it guides where/when we might need to focus main replacements etc. No No Yes. Not formal reserve acct. It goes in to maintenance fund. Strive for % of depreciation, net of debt principal. The payment of the principal frees up the amount of new debt we could incur. Yes Redmond The City funds 100% depreciation that allows us to have funding available to use toward the replacement of assets. We also do regular updates to the Water Comprehensive Plan and the Sewer Comprehensive Plan which identify assets that are nearing the end of their useful life and/or no longer have the amount of capacity that is needed. The City is in the process of implementing a comprehensive Asset Management Program that will likely inform stronger policies the future. Some Yes, we calculate each years depreciation and move that amount of cash into the construction fund. Some Skyway WSD There is no formal asset management plan. The District does have a capital replacement plan that is reviewed and updated annually. We have some asset replacement values based on staff or engineers' estimate. We do not have a unit cost breakdown. Yes rates were set based on capital reinvestment funding levels of $183,493 for the water utility and $115,877 for the sewer utility based on depreciation net of debt principal. There are exceptions, but we generally use the following assumptions based on discussion between the District manager and the District's financial consultant: years for buildings, 5-10 years for field equipment, 10 years for vehicles, 5 years for office furniture / equipment, 5 years for computers / software, 50 years for mains, years for service lines, 30 years for hydrants, 20 years for meters, 50 years for reservoirs, 30 years for pump stations, years for lift stations, years for wells, years for treatment facilities, and 25 years for telemetry. Tukwila Principles of Asset Management are used at the time of Comprehensive Plan Updates. Yes Yes. No Yes Woodinville WD The District s financial policies provide for funding capital projects from rates annual depreciation expense. As new (and more expensive) infrastructure replaces older infrastructure, depreciation expense also increases, thereby directly increasing the amount of capital transfer from rates. The capital plan is updated several time a year as necessary. It is created and updated based on lifespan, maintenance history, its criticality and financial considerations. We use GAAP to set accounting useful lives. Recent changes to those standards have allowed utility infrastructure useful life to increase to 75 years, however, we have not chosen to elect this new standard. 50 years is more conservative, results in higher depreciation expense, and therefore more funding of capital from rates, which allows the District higher cash for infrastructure improvement/replacement. No Policy summary: minimum funding of capital reserve should equal the average annual renewal and replacement for the utility; minimum capital balance should be total annual depreciation No Page E-1

56 Appendix F: Water / Sewer Service Area Maps

57 NAME Covington Water District (King County GIS Data) City of Bellevue Water Service Area (City of Bellevue) Woodinville Water District Service Area (King County GIS Data) Sammamish Plateau Water & Sewer District City of Redmond Water Service Area (City of Redmond) City of Kirkland Water Service Area (City of Kirkland) City of Issaquah Water Service Area (King County GIS Data) City of Tukwila Water Service Area (King County GIS Data) NE Sammamish Sewer and Water District Service Area (King County GIS Data) Skyway Water & Sewer District Service Area (King County GIS Data) Square Miles Woodinville Water District City of Redmond City of Kirkland Lake Washington Northeast Sammamish Sewer & Water District City of Bellevue Lake Sammamish Sammamish Plateau Water & Sewer District City of Issaquah Puget Sound Skyway Water & Sewer District City of Tukwila Covington Water District Source: Esri, DigitalGlobe, GeoEye, Earthstar Geographics, CNES/Airbus DS, USDA, USGS, AEX, Getmapping, Aerogrid, IGN, IGP, swisstopo, and the GIS User Community

58 Woodinville Water District City of Redmond City of Kirkland City of Redmond Lake Washington Northeast Sammamish Sewer & Water District Puget Sound City of Bellevue Lake Sammamish Sammamish Plateau Water and Sewer District City of Issaquah Skyway Water & Sewer District Puget Sound City of Tukwila NAME Square Miles City of Bellevue Sammamish Plateau Water City of Redmond City of Tukwila 9.59 City of Kirkland 8.80 City of Issaquah 8.49 Woodinville Water District 8.22 Northeast Sammamish Sewer and Water District 5.18 Skyway Water and Sewer District 2.44

59 Appendix G: Benchmarking Report Exhibits

60 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit ES-1: Summary of Relative Water Utility Rankings Monthly Water Bill Rank Rankings - Customers / Usage 1 Rankings - Infrastructure per Square Mile 1 Conn. Per CERUs Per 2014 Usage per Low User Average User High User Square Mi. Square Mi. Connection Booster Stations Mains Pressure Zones Reservoirs 3 ccf 6 ccf 15 ccf (n th Lowest) (n th Lowest) (n th Lowest) (n th Highest) (nth Highest) (nth Highest) (nth Highest) SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Rankings 1 Total O&M Cost per MG (n th Highest) Rankings - Capital 1 Debt Service as % of Rev. Cap. Reinvestment Per CERU (n th Highest) (n th Highest) Rankings - Revenue Avg. Revenue Per CERU % From Fixed Charges (n th Highest) (n th Highest) Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill Page G-1

61 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit ES-2: Summary of Relative Sewer Utility Rankings Monthly Sewer Bill Rank Rankings - Customers Rankings - Infrastructure Conn. Per RCEs Per RCEs Per Lift Stations Mains Per Force Mains as Conn. To Reg. Low User Average User High User Square Mi. Square Mi. Connection Per Square Mi. Square Mile % of Total System 3 ccf 6 ccf 15 ccf (n th Lowest) (n th Lowest) (n th Lowest) (n th Highest) (nth Highest) (nth Highest) (n th Lowest) SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD (N/A) 10 Tukwila (N/A) 6 Woodinville WD SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Rankings 1 Rankings - Capital 1 Rankings - Revenue Total O&M Cost per RCE Debt Service as % of Rev. Cap. Reinvestment Per RCE Avg. Revenue Per RCE % From Fixed Charges (n th Highest) (n th Highest) (n th Highest) (n th Highest) (n th Highest) Cell colors highlight how each metric might influence relative sewer bill rankings. Lower Bill Higher Bill Page G-2

62 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 1: Survey of Residential Bills Rates Monthly Water Usage Low User Average User High User 3 ccf 6 ccf 15 ccf Water Bill Sewer Bill Total Bill Water Bill Sewer Bill Total Bill Water Bill Sewer Bill Total Bill Monthly Residential Bill 1 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 Amount Rank 3 SP Water $ $ $ $ $ $ $ $ $ Bellevue $ $ $ $ $ $ $ $ $ Covington WD 2 $ $17.85 (N/A) $ $ $17.85 (N/A) $ $ $17.85 (N/A) $ Issaquah $ $ $ $ $ $ $ $ $ Kirkland $ $ $ $ $ $ $ $ $ NE Sammamish SWD $ $ $ $ $ $ $ $ $ Redmond (City) $ $ $ $ $ $ $ $ $ Redmond (Novelty Hill) $ $ $ $ $ $ $ $ $ Skyway WSD $ $ $ $ $ $ $ $ $ Tukwila $ $ $ $ $ $ $ $ $ Woodinville WD $ $ $ $ $ $ $ $ $ Excluding local utility taxes and charges for King County Wastewater Treatment. 2 Covington WD does not provide sewer service (and is not included in the sewer bill rankings); sewer bill shown reflects Soos Creek WSD's rates. 3 Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High SP Water % of Residential Bills By Usage Level Monthly Water Usage % of Residential Bills ccf 15% ccf 35% ccf 28% ccf 13% > 15.0 ccf 9% Page G-3

63 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 5: Water System Summary Monthly Water Bill Rank Water Service Connections Cascade Equivalent Res. Units (CERUs) 1 Service Area Low User Average User High User Number Per Sq. Rank 3 CERUs as of Avg. Number Rank 3 Avg. Number (Sq. Mi.) Rank 3 Number 3 ccf 6 ccf 15 ccf Mi. (n th Lowest) 12/31/14 Per Conn. (n th Lowest) Per Sq. Mi. (n th Lowest) SP Water , , Bellevue ,754 1, , ,843 9 Covington WD , , Issaquah , , ,268 6 Kirkland ,431 1, , , NE Sammamish SWD , , Redmond (City) , , ,752 8 Redmond (Novelty Hill) ,227 2, , , Skyway WSD ,341 1, , ,573 7 Tukwila , , Woodinville WD , , Water Production Booster Stations Water Mains Average Average per Rank 3 Rank 3 Rank 3 Rank 3 (n th Asset Age 2 Number Per Sq. Avg. Length per Avg. Length per Number Total Length Connection Lowest) Mi. (n th Highest) Sq. Mi. (n th Lowest) Conn. (n th Highest) SP Water 283 gpd 6 10 Years ,531,913 LF 52,302 LF 6 88 LF 4 Bellevue 401 gpd Years ,272,001 LF 88,218 LF 8 80 LF 6 Covington WD 208 gpd 3 11 Years ,447,287 LF 36,511 LF 2 82 LF 5 Issaquah 326 gpd 8 12 Years ,448 LF 49,634 LF 4 73 LF 7 Kirkland 289 gpd 7 19 Years ,166 LF 91,295 LF 9 72 LF 9 NE Sammamish SWD 204 gpd 2 13 Years ,687 LF 46,279 LF 3 60 LF 11 Redmond (City) 395 gpd 9 13 Years ,690,831 LF 106,494 LF LF 2 Redmond (Novelty Hill) 222 gpd 4 12 Years ,947 LF 180,962 LF LF 8 Skyway WSD 176 gpd 1 18 Years ,104 LF 86,928 LF 7 63 LF 10 Tukwila 854 gpd Years ,788 LF 25,838 LF LF 1 Woodinville WD 276 gpd 5 16 Years ,548,449 LF 51,996 LF LF 3 Pressure Zones Reservoirs Number Per Sq. Rank 3 Number Per Sq. Rank 3 Capacity per Rank 3 Number Total Number Total Capacity Mi. (n th Highest) Mi. (n th Highest) CERU (n th Highest) SP Water MG 1,027 gal 4 Bellevue MG 623 gal 9 Covington WD MG 1,105 gal 3 Issaquah MG 1,016 gal 5 Kirkland MG 810 gal 7 NE Sammamish SWD MG 1,143 gal 2 Redmond (City) MG 940 gal 6 Redmond (Novelty Hill) MG 1,656 gal 1 Skyway WSD MG 572 gal 10 Tukwila MG 252 gal 11 Woodinville WD MG 766 gal 8 1 CERUs are computed based on meter size using American Water Works Association (AWWA) flow equivalency ratios, and are not assigned to fire flow meters or exempt/deduct meters. 2 The "average asset age" is computed as the ratio of accumulated depreciation to annual depreciation expense. 3 Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill Page G-4

64 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 6: Sewer System Summary Monthly Sewer Bill Rank Sewer Service Connections Residential Customer Equivalents (RCEs) 1 Service Area Low User Average User High User Number Per Sq. Rank 3 RCEs as of Avg. Number Rank 3 Avg. Number Rank (Sq. Mi.) 3 Number 3 ccf 6 ccf 15 ccf Mi. (n th Lowest) 12/31/14 Per Conn. (n th Lowest) Per Sq. Mi. (n th Lowest) SP Water , , Bellevue , , ,689 9 Issaquah , , ,264 6 Kirkland ,434 1, , ,682 8 NE Sammamish SWD , , Redmond (City) , , ,615 7 Redmond (Novelty Hill) , , Skyway WSD ,051 1, , , Tukwila , , Woodinville WD , , Sewer Mains Lift Stations Length of Length of Force Total Length of Force Main % Rank 3 Avg. Length Rank 3 Avg. Length Rank 3 Number Per Sq. Rank 3 Number Gravity Mains Mains Mains of Total (n th Highest) Per Conn. (n th Highest) Per Sq. Mi. (n th Lowest) Mi. (n th Highest) SP Water 809,402 LF 105,601 LF 915,003 LF 11.5% 1 82 LF 3 43,120 LF Bellevue 2,771,685 LF 158,812 LF 2,930,497 LF 5.4% 3 79 LF 5 78,209 LF Issaquah 418,450 LF 23,020 LF 441,470 LF 5.2% 4 68 LF 6 51,999 LF Kirkland 604,447 LF 6,447 LF 610,894 LF 1.1% 7 59 LF 9 69,420 LF NE Sammamish SWD 277,992 LF 34,848 LF 312,840 LF 11.1% 2 65 LF 7 60,394 LF Redmond (City) 962,443 LF 17,022 LF 979,465 LF 1.7% 6 81 LF 4 60,852 LF Redmond (Novelty Hill) 171,200 LF 5,655 LF 176,855 LF 3.2% 5 51 LF 10 34,717 LF Skyway WSD 250,706 LF (NA) (N/A) 62 LF 8 102,748 LF Tukwila 202,743 LF (NA) (N/A) 115 LF 1 21,141 LF Woodinville WD 263,065 LF 2,139 LF 265,204 LF 0.8% 8 90 LF 2 32,263 LF # of Connections to Regional System Monthly O&M Cost per RCE Average Rank 3 Rank Asset Age 2 Number Per All Operating 3 Number Direct O&M 1,000 Acres (n th Lowest) Costs (n th Highest) SP Water 11 Years $50.45 $ Bellevue 20 Years $50.80 $ Issaquah 12 Years $51.79 $ Kirkland 16 Years $42.80 $ NE Sammamish SWD 23 Years $45.59 $ Redmond (City) 18 Years $44.79 $ Redmond (Novelty Hill) 10 Years $43.45 $ Skyway WSD 17 Years $44.08 $ Tukwila 18 Years $55.78 $ Woodinville WD 16 Years $65.38 $ RCEs are computed based on the number of single-family connections and multi-family / commercial water usage (1 RCE = 750 cubic feet per month). 2 The "average asset age" is computed as the ratio of accumulated depreciation to annual depreciation expense. 3 Cell colors are used to highlight how each metric might influence relative sewer bill rankings. Lower Bill Higher Bill Page G-5

65 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 7: Summary of 2014 Supply Source Utilization SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (NH) Skyway WSD Tukwila Woodinville WD 2014 Supply Costs Water Purchases $ 1,432,894 $ 18,353,836 $ 551,674 $ 1,123,582 $ 4,764,337 $ - $ 5,155,195 $ 932,032 $ 480,615 $ 2,310,175 $ 3,614,886 Wheeling 36,636 Electricity 315, , , ,433 25,600 20,756 Chemicals 95,605 27,653-18,891 Repair & Maintenance 47,193 9,965 Other 272,494 Total $ 1,927,567 $ 18,699,266 $ 824,168 $ 1,123,582 $ 4,764,337 $ 125,325 $ 5,366,628 $ 957,632 $ 520,262 $ 2,310,175 $ 3,614, Water Delivered Purchased 362 MG 5,962 MG 1,145 MG 290 MG 1,310 MG 1,272 MG 261 MG 182 MG 700 MG 1,438 MG Produced 1,429 MG 186 MG 498 MG 245 MG 953 MG 32 MG Total 1,791 MG 5,962 MG 1,332 MG 788 MG 1,310 MG 245 MG 2,225 MG 261 MG 214 MG 700 MG 1,438 MG Average Cost per MG Purchased $4,063 $3,136 $3,874 $4,053 $3,668 $2,638 $3,300 $2,513 Produced $321 $511 $222 $1,228 Total $1,077 $3,136 $619 $1,426 $3,637 $511 $2,412 $3,668 $2,426 $3,300 $2,513 Monthly Water Bill Rank Low User - 3 ccf Average User - 6 ccf High User - 15 ccf Cell colors are used to highlight how each metric might influence relative water bill rankings. Lower Bill Higher Bill Page G-6

66 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 8: Water O&M Costs Per Million Gallons Water Purchases 2014 Operating Expenses (Excluding City Utility Taxes) 1 Other O&M Administrative State Taxes Total Low User Average User High User Water 3 ccf/month Water 6 ccf/month SP Water $1,432,894 $1,535,520 $3,940,921 $590,657 $7,499,992 $4,189 $1, Bellevue $18,353,836 $8,135,704 $672,186 $2,020,962 $29,182,688 $4,894 $4, Covington WD $551,674 $2,332,382 $3,594,825 $524,993 $7,003,874 $5,259 $2, Issaquah $1,123,582 $3,524,127 $4,647,709 $5,898 (N/A) Kirkland $4,764,337 $1,419,788 $2,750,014 $8,934,139 $6,820 $4, NE Sammamish SWD $0 $462,316 $610,613 $93,819 $1,166,748 $4,759 $1, Redmond (City) $5,155,195 $2,918,948 $1,085,566 $573,238 $9,732,947 $4,375 $3, Redmond (Novelty Hill) $932,032 $406,524 $183,720 $117,146 $1,639,422 $6,280 $5, Skyway WSD $480,615 $385,112 $508,887 $96,042 $1,470,656 $6,858 $4, Tukwila $2,310,175 $1,204,879 $676,681 $213,256 $4,404,991 $6,293 $5, Woodinville WD $3,614,886 $2,073,010 $2,779,083 $584,830 $9,051,809 $6,293 $3, Based on the information provided, Issaquah's direct O&M costs were not separable from admin costs and taxes; Kirkland's tax expenses were not separable from other administrative costs. 2 Includes water purchase and other O&M costs; excludes administrative costs and taxes. Total Operating Cost per MG Direct O&M Cost per MG 2 Total O&M Cost per MG 3 Cell colors highlight relative water bill rankings and contributions to those rankings. Lower Bill Higher Bill Relative Rank 3 (n th Highest) Water 15 ccf/month Page G-7

67 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 9: Customer Base Profile Distribution of Water Service Connections By Customer Class 4.42% 5.53% 2.38% 5.39% 1.73% 0.08% 10.15% 9.69% 9.44% 6.44% 1.00% 8.22% 1.02% 3.80% 2.52% 2.51% 2.72% 38.43% 9.93% 7.21% 90.19% 92.74% 97.54% 80.41% 83.87% 99.00% 90.76% 93.68% 94.76% 90.07% 54.35% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) 90.19% 92.74% 97.54% 80.41% 83.87% 99.00% 90.76% 93.68% 94.76% 54.35% 90.07% Multi-Family (MFR) 5.39% 1.73% 0.08% 9.44% 6.44% 1.02% 2.52% 2.51% 7.21% % of Total Water Service Connections Non-Residential 4.42% 5.53% 2.38% 10.15% 9.69% 1.00% 8.22% 3.80% 2.72% 38.43% Combined MFR / Non-Res. 9.93% Unknown / Not Provided Total Page G-8

68 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 9: Customer Base Profile Distribution of Water Demand By Customer Class 13.90% 12.12% 28.73% 20.57% 0.85% 35.51% 26.05% 42.30% 22.21% 9.85% 8.19% 17.69% 25.62% 73.98% 22.99% 48.28% 78.59% 28.07% 36.42% 21.06% 52.89%? (NA) 25.66% 32.03% 67.94% 74.12% 80.13% 10.88% 74.38% 8.99% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Unknown / Not Provided SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) 73.98% 48.28% 78.59% 36.42% 52.89% 32.03% 67.94% 74.12% 8.99% 74.38% Multi-Family (MFR) 12.12% 22.99% 0.85% 28.07% 21.06% 25.66% 9.85% 17.69% 10.88% Non-Residential 13.90% 28.73% 20.57% 35.51% 26.05% 42.30% 22.21% 8.19% 80.13% % of Total Water Usage Combined MFR / Non-Res. Unknown / Not Provided Total 25.62% Page G-9

69 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 9: Customer Base Profile Distribution of Water Rate Revenue By Customer Class 19.98% 10.87% 69.15% 25.85% 15.33% 58.82% 20.72% 22.79% 0.64% 78.64%? (NA) 26.34% 50.87%? (NA) 44.75% 23.84% 28.84% 7.48% 63.69%? (NA) 78.21% 43.53% 56.47% 31.41% 13.05% 8.74% SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Unknown / Not Provided SP Water Bellevue Covington WD Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) 69.15% 58.82% 78.64% 50.87% 31.41% 63.69% 8.74% 56.47% Multi-Family (MFR) 10.87% 15.33% 0.64% 26.34% 23.84% 7.48% 13.05% Non-Residential 19.98% 25.85% 20.72% 22.79% 44.75% 28.84% 78.21% % of Total Water Revenue Combined MFR / Non-Res % Unknown / Not Provided Total Page G-10

70 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 9: Customer Base Profile Distribution of Sewer Service Connections By Customer Class 1.90% 4.61% 8.39% 1.76% 10.15% 5.84% 1.00% 8.05% 5.93% 1.00% 9.44% 0.73% 2.27% 0.48% 2.44% 36.36% 19.47% 9.19% 89.71% 93.63% 80.41% 88.23% 99.00% 90.95% 98.79% 95.29% 80.53% 54.45% SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Combined MFR / Non-Res. Unknown / Not Provided Total 89.71% 93.63% 80.41% 88.23% 99.00% 90.95% 98.79% 95.29% 54.45% 80.53% 8.39% 1.76% 9.44% 5.93% 1.00% 0.48% 2.44% 9.19% % of Total Sewer Service Connections 1.90% 4.61% 10.15% 5.84% 1.00% 8.05% 0.73% 2.27% 36.36% 19.47% Page G-11

71 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 9: Customer Base Profile Distribution of Sewer Rate Revenue By Customer Class 8.80% 21.35% 22.53% 18.70% 26.79% 4.51% 7.02% 10.23% 23.09% 69.85% 29.15% 48.32%? (NA) 22.54% 58.76%? (NA) 32.43% 40.78% 85.26% 69.89% 74.33% 15.01%? (NA) 10.66% SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Single-Family (SFR) Multi-Family (MFR) Non-Residential Unknown / Not Provided SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Single-Family (SFR) 69.85% 48.32% 58.76% Multi-Family (MFR) 21.35% 29.15% 22.54% Non-Residential 8.80% 22.53% Combined MFR / Non-Res. Unknown / Not Provided 40.78% 32.43% 26.79% 85.26% 10.23% 4.51% 69.89% 23.09% 7.02% 10.66% 15.01% 74.33% Woodinville WD 18.70% % of Total Sewer Revenue Total Page G-12

72 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 10: Unit Revenue Comparison Monthly SFR Water Bill Rank 4 Low User Average User High User Average Monthly Water Rate Revenue Per Connection Per CERU 2 3 ccf 6 ccf 15 ccf SFR MFR Non-Residential System Average Rank (nth Highest) System Average Rank (nth Highest) SP Water $41.58 $ $ $ $ Bellevue $65.85 $ $ $ $ Covington WD $44.50 $ $ $ $ Issaquah (NA) 1 (NA) 1 (NA) 1 $ $ Kirkland $46.61 $ $ $ $ NE Sammamish SWD (NA) 1 (NA) 1 (NA) 1 $ $ Redmond (City) $29.02 $1, $ $ $ Redmond (Novelty Hill) $45.12 $ $ $ $ Skyway WSD (NA) 1 (NA) 1 (NA) 1 $ $ Tukwila $33.18 $ $ $ $ Woodinville WD $46.77 (NA) 2 $ $ $ Monthly SFR Sewer Bill Rank 4 Low User Average User High User Average Monthly Sewer Rate Revenue Per Connection, Including King County Per Conn., Excluding King County Per RCE, Excluding King County 3 3 ccf 6 ccf 15 ccf SFR MFR Non-Residential System Average System Average Rank (nth Highest) System Average Rank (nth Highest) SP Water $72.50 $ $ $93.11 $ $ Bellevue $61.02 $1, $ $ $ $ Issaquah (NA) 1 (NA) 1 (NA) 1 $97.44 $ $ Kirkland $68.15 $ $ $ $ $ NE Sammamish SWD (NA) 1 (NA) 1 (NA) 1 $62.31 $ $ Redmond (City) $53.01 $3, $ $ $ $ Redmond (Novelty Hill) $70.82 $1, $ $82.05 $ $ Skyway WSD $67.63 $ $ $92.21 $ $ Tukwila $75.40 $ $ $ $ $ Woodinville WD (NA) 1 (NA) 1 (NA) 1 $ $ $ (NA): Not available; jurisdiction does not track or did not provide this information. 2 CERU = Cascade Equivalent Residential Unit. Defined by meter size, using American Water Works Association meter flow equivalency ratios. 3 RCE = Residential Customer Equivalent. Defined by King County as 750 cubic feet of water usage per month. 4 Cell colors are used to highlight relative bill rankings. Lower Bill Higher Bill Page G-13

73 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 11: Water Staffing Summary Low User Average User High User Admin 3 ccf 6 ccf 15 ccf Direct O&M Total Admin Direct O&M Total Admin Direct O&M Total SP Water $1,610,714 $1,819,105 $3,429,818 $98,768 $107,259 $103,097 Bellevue $1,899,730 $5,053,878 $6,953,608 $114,718 $103,140 $106,065 Covington WD $4,413,194 $116,137 Issaquah $336,741 $1,496,139 $1,832,880 $192,423 $119,883 $128,804 Kirkland $1,191,059 $92,402 NE Sammamish SWD $478,163 $123,986 Redmond (City) Redmond (Novelty Hill) Monthly Water Bill Rank # of FTEs Labor Cost $119,564 $2,205,530 $2,325,094 $109, Labor Cost per FTE Skyway WSD $449,055 $105,126 Tukwila $0 $784,722 $784,722 $112,103 $112,103 Woodinville WD $1,406,985 $1,984,165 $3,391,150 $116,833 $123,718 $120,765 $114,160 $113,936 SP Water Bellevue Covington WD Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD 2014 Production Per FTE Length of Mains Per FTE FTEs per 1,000 Conn MG 8.72 Miles MG 9.45 Miles MG 7.21 Miles MG 6.41 Miles MG Miles MG 9.66 Miles MG Miles MG MG MG 9.40 Miles 6.70 Miles Miles Mo. Labor Cost per CERU $12.64 $8.48 $19.73 $12.42 $5.07 $ $ $9.75 $8.24 $14.53 Labor Cost as % of Rev % 14.81% 38.67% 26.92% 10.39% 26.14% 14.64% 22.34% 13.14% 26.68% 1 Admin costs include general & administrative, customer service, and IT / finance; Direct O&M includes engineering / development review and other operating costs. Page G-14

74 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 12: Sewer Staffing Summary Low User Average User High User Admin Direct O&M Total Admin 3 ccf 6 ccf 15 ccf Direct O&M Total Admin Direct O&M Total SP Water $1,003,326 $1,360,871 $2,364,197 $95,810 $108,350 $102,648 Bellevue $1,220,381 $4,542,802 $5,763,183 $122,038 $116,482 $117,616 Issaquah $225,428 $454,275 $679,703 $281,785 $174,721 $199,913 Kirkland $951,047 $113,626 NE Sammamish SWD $513,722 $123,986 Redmond (City) Redmond (Novelty Hill) Monthly Sewer Bill Rank # of FTEs Labor Cost Labor Cost per FTE $119,352 $1,766,283 $1,885,635 $109,764 $110,147 $110,123 Skyway WSD $444,516 $104,063 Tukwila $0 $435,168 $435,168 $217,584 $217,584 Woodinville WD $343,906 $294,399 $638,305 $116,289 $305,981 $162,854 SP Water Bellevue Issaquah Kirkland NE Sammamish SWD Redmond (City) Redmond (Novelty Hill) Skyway WSD Tukwila Woodinville WD Length of Mains Per FTE 7.52 Miles Miles Miles Miles Miles Miles Miles Miles FTEs per 1,000 Conn. Mo. Labor Cost per RCE Labor Cost as % of Rev Miles $14.54 $7.59 $5.28 $5.35 $8.96 $5.24 $7.03 $4.74 $ % 26.49% 32.59% 17.24% 39.47% 32.60% 23.52% 10.00% 37.67% 1 Admin costs include general & administrative, customer service, and IT / finance; Direct O&M includes engineering / development review and other operating costs. 2 Excluding King County share of revenue. Page G-15

75 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 13: Estimated Main Replacement Values Water Utility Monthly Water Bill Rank Est Water Main Repl. Value Repl. Liability per Mile of Pipe Length of Water Low User Average User High User Rank Mains 4 Per Per SPW Unit Costs 1 Amount 3 ccf 6 ccf 15 ccf (n th Highest) SP Water Miles $513,487,224 $513,487,224 $1,769,822 6 Bellevue Miles $1,030,000,000 $1,074,412,711 $1,733,771 8 Covington WD Miles $49,743,328 $490,217,485 $1,788,414 4 Issaquah Miles (NA) 3 $163,048,978 $1,788,145 5 Kirkland Miles $40,550,108 $300,739,986 $1,764,016 7 NE Sammamish SWD Miles (NA) 3 $60,971,409 $1,636, Redmond (City) Miles (NA) 3 $587,318,046 $1,834,032 3 Redmond (Novelty Hill) Miles (NA) 3 $86,550,823 $1,953,384 1 Skyway WSD Miles (NA) 3 $65,308,188 $1,625, Tukwila Miles (NA) 3 $86,863,756 $1,850,940 2 Woodinville WD Miles $164,080,000 $507,909,463 $1,731,902 9 Sewer Utility Monthly Sewer Bill Rank Est Sewer Main Repl. Value Repl. Liability per Mile of Pipe Length of Sewer Low User Average User High User Rank Mains 4 Per Per SPW Unit Costs 1 Amount 3 ccf 6 ccf 15 ccf (n th Highest) SP Water Miles $274,808,236 $274,808,236 $1,585, Bellevue Miles $1,318,000,000 $907,792,091 $1,635,607 9 Issaquah Miles (NA) 3 $149,362,258 $1,786,379 3 Kirkland Miles $44,210,561 $203,647,494 $1,760,140 5 NE Sammamish SWD Miles (NA) 3 $103,156,997 $1,741,046 7 Redmond (City) Miles (NA) 3 $328,181,118 $1,769,125 4 Redmond (Novelty Hill) Miles (NA) 3 $66,082,390 $1,972,887 1 Skyway WSD Miles (NA) 3 $79,536,851 $1,675,088 8 Tukwila Miles (NA) 3 $70,859,519 $1,845,382 2 Woodinville WD Miles $52,500,000 $87,739,318 $1,746, SPW unit costs based on a 5-year study for utilities in the Puget Sound region using open-cut / trenchless methods. 2 Assumes that the replacement value of mains based on SPW unit costs is amortized over a useful life of 75 Years. 3 (NA): Not available; not tracked by the jurisdiction. Cell colors highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Page G-16

76 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 14: Rate-Funded Capital Per Customer Equivalent Per Month Monthly Water Bill Rank Repl. Liability Rate-Funded Capital Reinvestment Water Utility Low User Average User High User Per CERU Per Amt. Per CERU Rank 1 % of Mo. Repl. Rank 1 3 ccf 6 ccf 15 ccf Month 2014 Amount Per Month (n th Liability Funded Highest) (n th Highest) SP Water $25.22 $2,579,352 $ % 3 Bellevue $17.47 $10,160,463 $ % 1 Covington WD $29.22 $0 $ % 9 Issaquah $14.73 $0 $ % 9 Kirkland $17.08 $1,442,887 $ % 4 NE Sammamish SWD $19.36 $282,915 $ % 5 Redmond (City) $23.46 $2,300,758 $ % 7 Redmond (Novelty Hill) $22.75 $597,678 $ % 2 Skyway WSD $18.91 $183,493 $ % 8 Tukwila $12.17 $0 $ % 9 Woodinville WD $29.01 $2,012,000 $ % 6 Monthly Sewer Bill Rank Repl. Liability Rate-Funded Capital Reinvestment Sewer Utility Low User Average User High User Per RCE Per Amt. Per RCE Per Rank 1 % of Mo. Repl. Rank 1 3 ccf 6 ccf 15 ccf Month 2014 Amount Month (n th Liability Funded Highest) (n th Highest) SP Water $22.53 $688,183 $ % 6 Bellevue $15.94 $11,817,397 $ % 1 Issaquah $15.47 $0 $ % 9 Kirkland $15.29 $1,642,826 $ % 3 NE Sammamish SWD $23.98 $114,510 $ % 8 Redmond (City) $14.02 $871,977 $ % 5 Redmond (Novelty Hill) $18.41 $692,026 $ % 2 Skyway WSD $16.77 $115,877 $ % 7 Tukwila $10.30 $0 $ % 9 Woodinville WD $17.37 $444,500 $ % 4 1 Cell colors are used to highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Page G-17

77 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 15: 2014 Combined Water / Sewer Ending Balances Monthly Combined Water / Sewer Bill Rank 2 Low User Average User High User 3 ccf 6 ccf 15 ccf Operating Capital Replacement Other Capital 1 Debt / Other SP Water $15,229,634 $15,219,790 $15,349,613 $3,856,543 $49,655,580 Bellevue $18,389,904 $96,124,000 $114,513,904 Covington WD $1,300,000 $11,496,257 $3,265,637 $16,061,894 Issaquah $6,306,114 $8,698,413 $662,773 $15,667,300 Kirkland $5,091,468 $2,496,390 $7,587,858 NE Sammamish SWD $3,820,398 $1,400,241 $5,220,639 Redmond (City) $12,066,682 $9,384,312 $21,450,994 Redmond (Novelty Hill) $3,750,090 $12,422,938 $16,173,028 Skyway WSD $1,198,139 $4,658,648 $542,666 $6,399,453 Tukwila $8,017,808 $393,547 $8,411,355 Woodinville WD $4,908,756 $7,930,025 $1,107,209 $21,876,015 Total Avg. Capital Reserves Per Conn. Ratio of Cap. Reserves / Cap. Reinv. Cap. Reserves as % of Repl. Value Water Sewer Water Sewer Water Sewer SP Water $1,174 $ % 3.71% Bellevue $858 $1, % 6.74% Covington WD $655 (NA) (N/A) (NA) 2.35% (NA) Issaquah $745 $584 (N/A) (N/A) 3.02% 2.53% Kirkland NE Sammamish SWD $201 $ % 0.85% Redmond (City) $535 $ % 0.34% Redmond (Novelty Hill) $1,874 $1, % 9.65% Skyway WSD Tukwila $1,150 $ (N/A) 3.22% 0.00% Woodinville WD $366 $ % 3.10% 1 Woodinville WD indicated that its Water Construction Fund balance includes unspent proceeds from its 2012 revenue bonds, but did not specify the amount of proceeds included. 2 Cell colors are used to highlight relative bill rankings. Relatively Low Relatively High Page G-18

78 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 16: Summary of Water / Sewer Utility Debt (2014) Cap. Reinv. Ranking (n th Highest) Outstanding Debt Principal Water Sewer 12/31/14 Bal. Debt-Asset Ratio Rank (n th Highest) Bond Rating SP Water 3 5 $18,914, Aaa / AAA Bellevue 1 1 $ Aaa / AAA Covington WD 9 $49,773, Aa3 / AA- Issaquah 9 9 $3,850, Aa2 / AA Kirkland 7 3 $1,573, Aaa / AAA NE Sammamish SWD 6 7 $7,776, Aa1 / AA+ Redmond (City) 5 6 $7,980, Aaa / AAA Redmond (Novelty Hill) 2 2 $ Aaa / AAA Skyway WSD 8 8 $8,578, Aa3 / AA- Tukwila 9 9 $5,383, Aaa / AAA Woodinville WD 4 4 $11,182, Aaa / AAA Monthly Combined Water / Sewer Bill Rank Annual Water Utility Debt Service 1 Annual Sewer Utility Debt Service 1 Low User Average User High User % of Annual Rank 2 % of Annual Rank Payment 2014 Payment 3 ccf 6 ccf 15 ccf Revenue (n th Highest) Revenue (n th Highest) SP Water $859, % 7 $480, % 4 Bellevue $29, % 10 $0 0.00% 7 Covington WD $3,515, % 1 Issaquah $638, % 4 $0 0.00% 7 Kirkland $310, % 9 $533, % 3 NE Sammamish SWD $264, % 3 $244, % 2 Redmond (City) $1,082, % 6 $0 0.00% 7 Redmond (Novelty Hill) $0 0.00% 11 $0 0.00% 7 Skyway WSD $409, % 2 $572, % 1 Tukwila $554, % 5 $364, % 5 Woodinville WD $970, % 8 $26, % 6 1 Annual debt service funded from rates / operations. For SPW, this excludes debt service allocated to GFC / LFC funds. 2 Cell colors are used to highlight how each metric might influence relative bill rankings. Lower Bill Higher Bill Page G-19

79 Rate Comparison & Benchmarking Analysis Appendix G - Benchmarking Report Exhibits Exhibit 17: Summary of 2014 Utility Bill Breakdowns $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.23 $0.20 $0.08 $0.69 $0.80 $0.33 $0.67 SP Water Bellevue Covington WD Breakdown of $1.00 Water Bill (2014) $0.12 $0.88 $0.85 $0.12 $0.14 $0.09 $0.16 $0.03 $0.21 $0.07 $0.20 $0.35 $0.51 Issaquah Kirkland NESSWD Redmond (City) $0.77 $0.79 Redmond (NH) $0.71 Skyway WSD $0.10 $0.90 Tukwila $0.18 $0.08 $0.74 Woodinville WD O&M Debt Service 2014 Water Bill Breakdown Replacement Fund Contributions Other Rate-Funded Capital SP Water $0.69 $0.08 $0.23 $1.00 Bellevue $0.80 $0.20 $1.00 Covington WD $0.67 $0.33 $1.00 Issaquah $0.88 $0.12 $1.00 Kirkland $0.85 $0.03 $0.12 $1.00 NESSWD $0.51 $0.35 $0.14 $1.00 Redmond (City) $0.77 $0.07 $0.16 $1.00 Redmond (NH) $0.79 $0.21 $1.00 Skyway WSD $0.71 $0.20 $0.09 $1.00 Tukwila $0.90 $0.10 $1.00 Woodinville WD $0.74 $0.08 $0.18 $1.00 Total O&M Debt Service Replacement Fund Contributions Other Rate-Funded Capital $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $0.16 $0.11 $0.73 Breakdown of $1.00 Sewer Bill, Excluding King County (2014) $0.43 $0.57 $1.00 $0.30 $0.10 $0.60 $0.09 $0.24 $0.67 $0.25 $0.75 SP Water Bellevue Issaquah Kirkland NESSWD Redmond (City) $0.58 $0.42 Redmond (NH) $0.08 $0.41 $0.51 $0.11 $0.89 $0.32 $0.02 $0.66 Skyway WSD Tukwila Woodinville WD O&M Debt Service Replacement Fund Contributions Other Rate-Funded Capital O&M Debt Service 2014 Sewer Bill Breakdown Replacement Fund Contributions Other Rate-Funded Capital SP Water $0.73 $0.11 $0.16 $1.00 Bellevue $0.57 $0.43 $1.00 Issaquah $1.00 $1.00 Kirkland $0.60 $0.10 $0.30 $1.00 NESSWD $0.67 $0.24 $0.09 $1.00 Redmond (City) $0.75 $0.25 $1.00 Redmond (NH) $0.42 $0.58 $1.00 Skyway WSD $0.51 $0.41 $0.08 $1.00 Tukwila $0.89 $0.11 $1.00 Woodinville WD $0.66 $0.02 $0.32 $1.00 Total Page G-20