BODEGA BAY PUBLIC UTILITY DISTRICT Water and Wastewater Rate Study

Transcription

1 BODEGA BAY PUBLIC UTILITY DISTRICT Water and Wastewater Rate Study FINAL REPORT March 22, 2018 BARTLE WELLS ASSOCIATES Independent Public Finance Advisors 1889 Alcatraz Avenue Berkeley, CA Tel Fax

2 This page was intentionally left blank. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 1

3 March 22, 2018 Janet Ames General Manager Bodega Bay Public Utility District PO Box 70 Bodega Bay, CA Re: Water & Sewer Rate Study Bartle Wells Associates (BWA) is pleased to submit to the Bodega Bay Public Utility District (District) the attached Water and Wastewater Rate Study. This study presents BWA s analysis of the operating and non-operating expenses of the District s water and wastewater funds and provides five-year cash flow projections and rates. The primary purpose of this study was to analyze the District s enterprise funds and make recommendations that achieve financial sustainability. Another important purpose of this study was to review rates to ensure that they adhere to the State s legal requirements. The enclosed report recommends updating rates and charges to more accurately recover the costs of providing service to the District s water and wastewater customers. Recommendations were developed with substantial input from District staff and Board members. BWA finds that the rates and charges proposed in this report are based on the cost of service for each customer, follow generally accepted rate design criteria, and adhere to the substantive requirements of Proposition 218. BWA believes that the proposed rates are fair and reasonable to the District s customers. We have enjoyed working with the District on this rate study. Please contact us with any future questions about this study and the recommended rates. Sincerely, Doug Dove, CIPMA Principal Abigail Seaman Financial Analyst Bodega Bay Public Utility District Water and Wastewater Rate Study Page 2

4 This page was intentionally left blank. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 3

5 Table of Contents 1 Executive Summary Background Proposition Use of Generally Accepted Rate-Making Principles Water System Overview Factors Driving Water Rate Increases Current Water Rates Proposed Water Rates Wastewater System Overview Current Wastewater Rates Proposed Wastewater Rates Water Financial Projections and Rates Water Financial Overview Current Bi-Monthly Water Rates Current Water Accounts FY 2016 Water Consumption Water Financial Challenges/Key Drivers of Rate Increases Current Revenue Deficit, Ongoing Operating Cost Inflation Debt Obligations Water Capital Plan Water Enterprise Revenue Requirements Water Rate Structure Recommendations Fixed Service Charge Recommendations Volumetric Charge Recommendations Single Family Bill Impact Wastewater Financial Projections and Rates Wastewater Financial Overview Current Monthly Wastewater Rates Current Wastewater Accounts Current Wastewater Demand Factors Affecting 5-Year Financial Plan Bodega Bay Public Utility District Water and Wastewater Rate Study Page 4

6 3.5.1 Current Revenue Deficit, Ongoing Operating Cost Inflation Debt Obligations Current Wastewater Capital Plan Wastewater Enterprise Revenue Requirements Wastewater Rate Structure Recommendations Single Family Charge Recommendations All Other User Charge Recommendations Single Family Bill Impact Conclusion and Recommendations Conclusion Recommendations Bodega Bay Public Utility District Water and Wastewater Rate Study Page 5

7 1 Executive Summary 1.1 Background Bodega Bay Public Utility District (District) provides water supply and wastewater service to more than 1,000 accounts, serving a population of approximately 2,600. Key components of the utility system include water facilities and over 21 miles of water mains, as well as facilities for the collection, storage, treatment and disposal of wastewater with over 15 miles of sewer lines. Water is supplied from local groundwater wells. The District s water and wastewater systems are self-sustaining enterprises, meaning revenues (mostly sourced from water and wastewater rates) aim to recover the cost to operate and maintain the water system. Primary cost factors impacting water and wastewater rates include annual debt service obligations, increasing operating costs and significant capital improvement needs over the next 5 years. The District has contracted Bartle Wells Associates (BWA) to conduct a water and wastewater rate study which examines current and projected costs and the existing water and wastewater rate structures as they pertain to California legislation. Basic objectives of the rate study include: Identify rate setting principles. Develop long-term financial projections to determine future annual water enterprise revenue requirements. Evaluate rate alternatives and recommend water rates designed to equitably recover the costs of providing service. Based on input from District staff, key guiding principles included developing rates that: Are fair and equitable to all customer classes. Recover the costs of providing service and generate adequate funding for capital needs. Are easy to understand and implement. Comply with the legal requirements of Proposition 218 and other California laws. 1.2 Proposition 218 Utility rates are subject to the procedural and substantive requirements as set forth in Proposition 218. Proposition 218 was adopted by California voters in 1996 and added Articles 13C and 13D to the California Constitution. Article 13D, Section 6 governs property related charges, which the California Supreme Court subsequently ruled includes ongoing utility service charges such as water and wastewater. Article 13D, Section 6 establishes a) procedural requirements for imposing or increasing property related charges, and b) substantive requirements for those charges. Article 13D also requires voter approval for new or increased property related charges but exempts from this voting requirement rates for water and wastewater service. The substantive requirements of Article 13D, Section 6 require the District s utility rates to meet the following conditions: Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 6

8 Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed. The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. No fee or charge may be imposed for a service unless that service is used by, or immediately available to, the owner of the property in question. No fee or charge may be imposed for general governmental services, such as police or fire services, where the service is available to the public at large in substantially the same manner as it is to property owners. The procedural requirements of Proposition 218 for all utility rate increases are as follows: Noticing Requirement: The District must mail a notice of proposed rate increases to all affected property owners. The notice must specify the basis of the fee, the reason for the fee, and the date/time/location of a public rate hearing at which the proposed rates will be considered/adopted. Public Hearing: The District must hold a public hearing prior to adopting the proposed rate increases. The public hearing must be held not less than 45 days after the required notices are mailed. Rate Increases Subject to Majority Protest: At the public hearing, the proposed rate increases are subject to majority protest. If 50% plus one of affected property owners submit written protests of the proposed rate increases, the increases cannot be adopted. 1.3 Use of Generally Accepted Rate-Making Principles The rates developed in this study use a straightforward methodology to establish an equitable system of fixed and variable charges that recover the cost of providing service and fairly apportion costs to each rate component. The rates were developed using generally accepted cost-based principles and methodologies for establishing water and wastewater rates, charges, and fees. BWA used the following criteria when developing recommendations for the District s water and wastewater rates and finances: 1) Revenue Sufficiency: Rates should recover the annual cost of service and provide revenue stability. 2) Rate Impact: While rates are calculated to generate sufficient revenue to cover operating and capital costs, they should be designed to minimize, as much as possible, the impacts on ratepayers. 3) Equitability: Rates should be fairly allocated among all customer classes based on their estimated demand characteristics. Each user class only pays its proportionate share. 4) Practicality: Rates should be simple in form and, therefore, adaptable to changing conditions, easy to administer, and easy to understand. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 7

9 1.4 Water System Overview The District owns and operates a water system which collects, treats, and distributes potable water to 1,068 water connections. The District s main source of water revenue is bi-monthly water rates. Rates are not currently sufficient to fund necessary expenses and the current rate structure should be updated to accurately reflect the cost of water service. BWA recommends (1) increasing overall water rate revenue to better reflect the cost of service; (2) modifying the fixed rate structure to reflect meter demand factors set forth by the American Water Works Association (AWWA) 1 ; (3) modifying the volumetric rate structure by shifting from a complex multi-tiered structure to a two-tier system with a fixed component Factors Driving Water Rate Increases The primary cost factor affecting water rate increases is the Capital Improvement Plan established over the next 5 years to address aging infrastructure and state requirements to maintain and operate a water system. The plan totals $1.3 million with an average cost of $300,000 per year. Additionally, the District faces increasing operations costs and ongoing debt service obligations related to two debt issuances. The District s water revenues are not sufficient to cover current and projected costs Current Water Rates The District s current water rates include fixed charges by meter size and tiered volumetric charges per hundred cubic foot (hcf) units consumed in a bimonthly period. Rates are shown in Table 1 below. Table 1 Bodega Bay PUD - Water Rate Study Current Bi-Monthly Water Rates Fixed Meter Rates Volumetric Rates Meter Size $ / BiMonth 5/8" Ratio Tier Usage (hcf) $ / hcf 5/8" or 3/4" $ Tier hcf $0.00 1" $ Tier hcf $ " $ Tier hcf $7.43 2" $ " $ Additional Charges Hotel Motel Trailer Park Business w/ family unit Bus/Prof/Comml BackFlow device $0.75 per unit $1.50 per space $1.50 each $6.00 each $12.00 each The fixed monthly charge is determined by meter size plus an additional charge for some commercial classes. The meter-based charges are relatively close together and do not align with standard meter demand factors set by the AWWA. The District also charges volume-based rates according to a three-tier 1 AWWA Manual M1 Manual, Principles of Water Rates, Fees, and Charges, Seventh Edition, 2012, Appendix B Bodega Bay Public Utility District Water and Wastewater Rate Study Page 8

10 rate structure with the first 8 units included in the fixed charge. One unit of water is equal to one hcf, or 748 gallons Proposed Water Rates Proposed Water Rates are shown on Table 2. Table 2 Bodega Bay PUD - Water Rate Study Proposed Rate Summary FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 % Rate Revenue Increase 9% 6% 6% 6% 6% Bimonthly Fixed Charge - $/Meter 5/8" or 3/4" $61.82 $65.53 $69.46 $73.63 $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ Volumetric Rate - $/hcf Allowance (0-Included Units) $0.00 $0.00 $0.00 $0.00 $0.00 Volumetric Rate (>Included Units) $7.94 $8.41 $8.92 $9.45 $10.02 Units Included In Fixed Charge 5/8" or 3/4" " " " " BWA recommends frontloaded rate increases to address the current revenue deficit and gradually recover the costs necessary to fund operations costs and the Capital Improvement Plan. BWA also recommends that the District adjust the fixed meter charges to match AWWA standards and scale the number of units included in the first tiered water rate based on those meter demand factors. The proposed volumetric rates reflect the current volumetric costs through a single volumetric rate rather than a tiered rate structure. 1.5 Wastewater System Overview In addition to the water enterprise, the District also owns and operates a wastewater enterprise which serves 1,006 connections. The District s wastewater system includes: - Wastewater treatment facility - Holding ponds - 8 lift stations Bodega Bay Public Utility District Water and Wastewater Rate Study Page 9

11 - 15 miles of sewer lines - Secondary/tertiary wastewater treatment for irrigation The District s main source of wastewater revenue is bi-monthly wastewater rates which historically have been adjusted each year by the annual change in the Consumer Price Index (CPI) approximately 3% per year. Wastewater rates are sufficient to fund the next five years of projected expenses, but the current rate structure should be updated to accurately reflect the cost of wastewater service for each customer class. BWA recommends that the District re-align the current wastewater rates to reflect the cost of wastewater service for each customer class Current Wastewater Rates Wastewater rates were most recently increased by CPI at the start of the 2017/18 fiscal year and are shown on Table 3. Table 3 Bodega Bay PUD - Wastewater Rate Study Current Bi-Monthly Wastewater Rates (7/1/2017) Charge per RUE (Single Family = 1 RUE) $ Includes 40 HCF water use per 2 months Volumetric $ 5.58 $/HCF (in excess of 40HCF Bi-Monthly) RUE Assignments - Per Dwelling Unit 1.00 Per Motel Unit w/ Kitchen 0.75 Per Motel Unit w/o Kitchen 0.50 Per Cabin Unit 0.50 Per RV or Campsite 0.50 Per Gas Station Pump 0.50 Per Restaurant Seat Per Bar, Yacht Club or Snackbar Seat 0.05 RUE - Residential Unit Equivalent HCF - Hundred Cubic Feet Current wastewater rates are composed of a fixed charge per Residential Equivalent Unit (RUE) and a volumetric charge per unit of water over 40. RUEs were determined many years ago and have not recently been updated to reflect actual impact on the wastewater system. Volumetric rates are charged on usage above 40 units which likely reflects outdoor irrigation for residential customers and does not reflect actual impact on the wastewater system Proposed Wastewater Rates Proposed wastewater rates are shown on Table 4. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 10

12 Table 4 Bodega Bay PUD - Wastewater Rate Study Proposed Rate Summary - New Bimonthly Rate Structure Adoption Date 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 Fiscal Year 2018/ / / / /23 Single Family Residences - Flat Bimonthly Charge $ $ $ $ $ All Other Users - Volumetric Charge Volumetric Charge - $/unit (hcf) $14.72 $14.72 $14.72 $14.72 $14.72 Minimum Volumetric Charge Bi Monthly Minimum Charge AWWA Ratio 2018/ / / / /23 5/8" or 3/4" 1 $ $ $ $ $ " 1.67 $ $ $ $ $ " 3.33 $ $ $ $ $ " 5.33 $ $ $ $ $ " $1, $1, $1, $1, $1, Units Included in Minimum AWWA Ratio 5/8" or 3/4" " " " " BWA recommends that the District adopt wastewater rates that include a fixed charge per account for all single-family customers and a volumetric charge per unit for all other users with a minimum charge based on meter size. This new structure departs from the existing RUE structure and more closely reflects actual wastewater impact. The new structure reflects relatively stable single-family wastewater flow and varying multi-family/commercial flow. While no wastewater rate increases are recommended in this rate study, further studies are underway to more accurately determine the condition of the wastewater enterprise and may result in changes to capital cost estimates and require rate increases. 2 Water Financial Projections and Rates 2.1 Water Financial Overview Bartle Wells Associates conducted an independent evaluation of the District s water enterprise finances. Key observations include: Water rates have not been increased since FY Staff has strived to keep costs down, but the Water enterprise is experiencing a revenue deficit while operations and capital costs continue to rise. The water enterprise has debt service requirements totaling approximately $140,000 per year. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 11

13 The current Capital Improvement Plan which addresses aging infrastructure and other needed improvements will require additional funds to maintain prudent reserves. o Since rates will not be adopted until fiscal year 2018/19, the significant capital expenses in that year should be funded through a loan or deferred. For the purposes of this rate study, BWA has assumed a 10-year bank loan of $700,000 at 4% interest. The District has had to draw down fund reserves in recent years to support annual operating and capital funding needs. Projected water expenses were determined by using the annual change in the CPI approximately 3% per year. Projected expenses and minimum reserve fund targets were used to develop annual revenue requirements. The current water rate structure does not align with AWWA standards and imposes tiered water rates that can no longer be cost-justified. 2.2 Current Bi-Monthly Water Rates The District bills water service bi-monthly for all accounts. The current water rates (as shown on Table 1) include two components: 1) Fixed Base Charge: Customers pay a fixed fee (calculated monthly) based on meter size. Rates are higher as meter size increases but do not align with the meter factor ratios based on AWWA guidelines. There are also surcharges for some commercial classes. 2) Variable Charges: All customers are billed according to a 3-tier inclining rate structure. Water use is first billed in tier 1 and subsequently billed in higher, more expensive, tiers as water use increases in each billing period. Quantity Charges are billed per hundred cubic feet, with 1 hcf equal to approximately 748 gallons of water. In general, rates do not currently cover the cost of water service. The existing volumetric tier structure needs to be cost-justified, is complex from a billing perspective and is difficult to explain to customers. The current rate structure may lead to unstable revenue as consumption changes. 2.3 Current Water Accounts The District serves 1,068 water accounts, the majority of which are single family residential. Table 5 shows current number of meters (some of which are billed to the same account). Table 5: Water Accounts FY 2017 Water Meter Size: 3/4" or less 1" 1.5" 2" 3" & Over Total Current Meters ,068 Bodega Bay is a relatively slow-growth community and the District can conservatively expect no revenue growth per year as a result of new rate-payers. 2.4 FY 2016 Water Consumption The water rate study conservatively assumes consumption has remained static since FY Average bi-monthly water use is 7 units per month, which reflects considerable conservation efforts and is typical Bodega Bay Public Utility District Water and Wastewater Rate Study Page 12

14 for the Napa/Sonoma area. A number of customers are billed for bimonthly usage of 0 hcf, which reflects part-time residences and very low water users. These users only pay the fixed fee, which does not fully recover fixed costs that the water enterprise faces regardless of water usage. Table 6: Water Consumption FY 2017 T1 (hcf) T2 (hcf) T3 (hcf) Units in Tier Total Total Consumption Feb 16 Feb 17 34,333 21,906 45, , Water Financial Challenges/Key Drivers of Rate Increases The District s water enterprise will need to have front-loaded consistent water rate increases over the next five years to address the current and projected revenue deficit. Key drivers of future rate increases are summarized as follows Current Revenue Deficit, Ongoing Operating Cost Inflation The District s water operations budget totals approximately $900,000 for FY 2016/17 including costs for water distribution, treatment, and conservation. The District s largest expense is employee wages and benefits, totaling approximately $500,000. All other expenses are projected to increase 3% per year according to the average yearly percentage change CPI. FY 2016/17 budget revenue is projected to be $1.09 million, which creates a net revenue deficit when including capital expenses. This deficit will be compounded as these costs continue to rise if rates remain stagnant Debt Obligations In addition to operating costs, the District pays semi-annual debt service payments on two debt issuances according to the schedule shown on Table 7. Payments are split evenly between water and wastewater. Table 7: Water Debt Summary 2016/ / / / / /22 Loan $106,499 $106,499 $106,499 $106,499 $106,499 $106,499 Loan $170,135 $170,135 $170,135 $170,135 $170,135 $170,135 Total $276,634 $276,634 $276,634 $276,634 $276,634 $276,634 Water Share (50%) $138,317 $138,317 $138,317 $138,317 $138,317 $138, Water Capital Plan The District s Water Capital Improvement Plan addresses aging infrastructure and other necessary improvements. Water revenues are not sufficient to meet these needs. The Capital Plan is as follows: Bodega Bay Public Utility District Water and Wastewater Rate Study Page 13

15 Table 8: Water Capital Improvement Projects 2017/ / / / /22 Total Bay Flat Road Well Salmon Creek Water Treatment Plant Relocation ,000 20,000 Ropollo Well Water Treatment - 300, ,000 SCADA System Water Share (50%) 180, ,274 Highway 1-4" Water Main Abandonment ,000 76,000 Storage Tank Replacements 284, ,000 80, ,891 Total 573, ,000 80,000-96,000 1,341,528 Average Capital Funding for 2022/23 Estimate $319,228 Since rates will not be adopted until fiscal year 2018/19, the District will need an inflow of cash larger than a reasonable rate increase in that year, when capital expenses are at their highest of $700,000. BWA proposes that the water enterprise either defer these capital expenses or take out a loan to smooth costs over time. For the purposes of this rate study, BWA has assumed a 10-year bank loan of $700,000 at 4% interest. 2.6 Water Enterprise Revenue Requirements The water cash flow projections incorporate the latest information available as well as reasonable, prudently conservative assumptions. Key assumptions include: Growth & Water Demand Assumptions The District is a relatively slow-growth community and BWA has conservatively assumed no growth in new connections contributing to rate revenue. Seventy new homes have paid capacity fees and may develop at any time, but it is unlikely these homes will begin paying rates in the near future. Water consumption is assumed to stay constant from FY 2016/17 given the latest conservation trends following the 2015 drought. Revenue Assumptions Rate revenue will increase according to the proposed rate increases assuming stagnant number of customers and water consumption. Other revenues are projected to remain stagnant from 2016/17 budget amounts. Expense Assumptions Operations and maintenance costs are based on the budget and escalate at the annual rate of 3.0% to account for future cost inflation. Capital expenditures include $1.3 million in projects through FY 2021/22 Bodega Bay Public Utility District Water and Wastewater Rate Study Page 14

16 To address the needs outlined in Section 2.5, the District will need to increase water rates. Based on the assumptions above, BWA created a cash flow projection that determined revenue requirements for the next 5 years. The proposed rate increases are shown on Table 9. Table 9: Water Proposed Rate Increases Fiscal Year 2018/ / / / /23 Proposed Rate Increases 9% 6% 6% 6% 6% The proposed rates accomplish the following: Operations and Capital Improvement Plan funding (front-loaded for faster recovery from current deficit and minimized rate increase impact in outer years). Minimum debt service coverage of 1.25x net operating revenues over the next 5 years. Rates would be effective following a mailed Proposition 218 notice and successful public hearing. 2.7 Water Rate Structure Recommendations In addition to the proposed increases, BWA also recommends a rate structure change to align with requirements set forth in Proposition 218 and ensure greater security of revenue collection Fixed Service Charge Recommendations The proposed fixed rate aims to recover revenue for fixed expenses based on meter size. The current rates do not increase rates for higher meter sizes according to standards set forth by AWWA. BWA recommends that the District keep the meter charge constant for a 5/8 meter in the first year and collect additional revenue by increasing the fixed charges for higher meters according to AWWA meter factors. This will create an increase in the fixed charge beyond the proposed total revenue increase of 9% for most meter sizes in the first year. After the first year of increases, the rates will increase evenly according to the schedule on Table 9. The proposed meter charges include an allowance of volumetric water use in order to reflect those costs that occur from zero to baseline water usage, such as personnel, capital costs, and debt service. Proposed fixed charges are shown on Table 10. Table 10: Proposed Fixed Water Charges FY2018/19 FY2019/20 FY2020/21 FY2021/22 FY 2022/23 % Rate Revenue Increase 9% 6% 6% 6% 6% Bimonthly Fixed Charge - $/meter 5/8" or 3/4" $61.82 $65.53 $69.46 $73.63 $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ Bodega Bay Public Utility District Water and Wastewater Rate Study Page 15

17 Total revenue from fixed charges will increase in the first year more than the proposed total rate revenue increase when meter charges are aligned with AWWA meter factors. Variable revenue will increase less than the proposed rate increase to create a total rate revenue increase of 9% in the first year. Each subsequent year, the rate structure will stay the same and revenue will increase with the proposed total rate revenue increase as shown on Table 11. Increasing the portion of fixed water revenue relative to total variable revenue will create more stable water revenue collection in addition to creating compliance with legal standards for water rates. Table 11: Proposed Fixed Water Rate Revenues 2017/ / / / / /23 Fixed Revenues $404,842 $467,862 $495,934 $525,690 $557,231 $590, Volumetric Charge Recommendations The District s current volumetric rates include three usage tiers regardless of customer class or meter size. The first 8 units are included in the meter charge to reflect fixed expenses up to baseline water usage. Usage can vary widely for different customer types, so the first 8 units may not always reflect baseline water usage for all meter sizes. BWA recommends that the volumetric rates reflect this by escalating the number of units included in the fixed charge by the same factor as the AWWA meter charges as the basis for typical baseline water use for those meter sizes. Beyond the fixed meter charge, the District can only justify a single volumetric rate because it is bound by the requirements of Proposition 218 and recent San Juan Capistrano Court Decision which determined that tiered rates must be cost-justified. Revenue from volumetric rates will go toward the cost of volume-related expenses such as water treatment and delivery. Table 12: Proposed Water Volumetric Charges FY2018/19 FY2019/20 FY2020/21 FY2021/22 FY 2022/23 % Rate Revenue Increase 9% 6% 6% 6% 6% Volumetric Rate - $/unit (hcf) Allowance (0-Included Units) $0.00 $0.00 $0.00 $0.00 $0.00 Volumetric Rate (> Included Units) $7.94 $8.41 $8.92 $9.45 $10.02 Units Included with Minimum Charge 5/8" or 3/4" " " " " Total revenue from volume charges will increase in the first year less than the proposed total rate revenue increase in order to create a total rate revenue increase of 9% in the first year. Each subsequent year, the rate structure will stay the same and revenue will increase with the proposed total rate revenue increase as shown on Table 13. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 16

18 Table 13: Proposed Volumetric Water Rate Revenues 2017/ / / / / /23 Fixed Revenues $477,123 $513,138 $543,926 $576,561 $611,155 $647, Single Family Bill Impact Eliminating the current tiered rate structure will increase bills for low-use customers but more fairly represents the cost of service. Higher rates for higher tiers of water use can no longer be justified. As shown in Table 14, typical bills were calculated for each year of the proposed water rates based on average residential bi-monthly use of 20 units (8 of which would be included in the 3/4 meter charge to reflect baseline water usage). Table 14: Single Family Bill Impact, Proposed Water Rates Current Typical Single-Family Residence 2017/ / / / / /23 Fixed Charge $61.82 $61.82 $65.53 $69.46 $73.63 $ Units Billed Usage $78.12 $95.23 $ $ $ $ Total Typical Bill $ $ $ $ $ $ % bill increase 12% 6% 6% 6% 6% 3 Wastewater Financial Projections and Rates 3.1 Wastewater Financial Overview BWA conducted an independent evaluation of the District s wastewater enterprise finances. Key observations include the following: In the past, wastewater rates have increased each year according to the annual change in the Consumer Price Index (CPI) approximately 3% per year. The wastewater enterprise has debt service requirements totaling approximately $140,000 per year. The current Capital Improvement Plan attempts to address aging infrastructure and Regional Water Quality Control Board requirements fully funded using wastewater revenue. Further studies are underway to more accurately determine the condition of the infrastructure and may result in changes to repair estimates. Projected wastewater expenses were determined by developing projections based on the average annual change in CPI. Projected expenses and minimum reserve fund targets were used to develop annual revenue requirements. Current wastewater rate structure requires adjustments to comply with Proposition 218 requirements. 3.2 Current Monthly Wastewater Rates Current rates (as shown on Table 3) are determined by Residential Equivalent Unit (RUE) using an RUE assignment schedule based on customer class and size. Any water usage above 40 units (hcf) is billed a volumetric rate of $5.58/unit in addition to the fixed bimonthly charge. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 17

19 3.3 Current Wastewater Accounts The District serves 1,010 wastewater accounts, the majority of which are single family residential. Table 15 shows current number of meters (several of which are billed to the same account). Table 15: Current Wastewater Accounts Total Accounts 1,010 Total Wastewater RUEs 1,878 Bodega Bay is a relatively slow-growth community and the District can conservatively expect no wastewater revenue growth per year as a result of new rate-payers. 3.4 Current Wastewater Demand The wastewater rate study conservatively assumes consumption has remained static since FY 2017 as shown in Table 16 below. Single Family wastewater rates should reflect indoor water use only, as outdoor irrigation during the summer time does not impact the wastewater system. Any single-family usage over 40 units is likely outdoor irrigation usage. Table 16: Wastewater Consumption FY 2017 T1 (hcf) T2 (hcf) Units in Tier Total Total Consumption Feb 16 Feb 17 74,741 17,645 92, Factors Affecting 5-Year Financial Plan The District s wastewater enterprise can meet all projected expenses over the next five years using current annual rate revenue and existing fund balance, although further studies are underway to determine future capital costs and may require rate increases. Key cost components over the next five years are summarized as follows Current Revenue Deficit, Ongoing Operating Cost Inflation The District s wastewater operations budget totals approximately $930,000 for FY 2016/17 including costs for wastewater treatment and collection. The District s largest expense is employee wages and benefits, totaling approximately $500,000. All operations expenses are projected to increase 3% per year according to the average yearly percentage change CPI. FY 2016/17 budget revenue is projected to be $1.52 million, which creates a net revenue surplus of $300,000 when including capital expenses. As costs continue to rise, the District will still be able to meet projected expenses using rate revenue Debt Obligations In addition to operating costs, the District pays semi-annual debt service payments on two debt issuances according to the schedule shown on Table 7. Payments are split evenly between water and wastewater. Table 17: Wastewater Debt Summary 2017/ / / / / /23 Loan $106,499 $106,499 $106,499 $106,499 $106,499 $106,499 Loan $170,135 $170,135 $170,135 $170,135 $170,135 $170,135 Total $276,634 $276,634 $276,634 $276,634 $276,634 $276,634 Wastewater Share (50%) $138,317 $138,317 $138,317 $138,317 $138,317 $138,317 Bodega Bay Public Utility District Water and Wastewater Rate Study Page 18

20 3.5.3 Current Wastewater Capital Plan The District s Wastewater Capital Improvement Plan attempts to address aging infrastructure and other necessary improvements based on engineering estimates as of 2017/18. Wastewater revenues are sufficient to meet these needs. The Wastewater Capital Plan is as follows: Table 18: Current Wastewater Capital Plan 2017/ / / / /22 Total Sewer System Repairs 127, , , , , ,000 Defused Air for Aeration Tanks 12,000 82, ,000 SCADA System - Wastewater Share (50%) 180, ,637 Wastewater Treatment Plant Filters 0 325, ,000 Change in Disinfection 10, ,000 Clarifier Addition 0 30, , ,000 Total $329,637 $564,000 $397,000 $127,000 $127,000 $1,544,637 Average Capital Spending for 2022/23 Estimate $278, Wastewater Enterprise Revenue Requirements The wastewater cash flow projection incorporates the latest information available as well as reasonable, prudently conservative assumptions. Key assumptions include: Growth & Water Demand Assumptions The District is a relatively slow-growth community and BWA has conservatively assumed no growth in new connections contributing to rate revenue. Seventy new homes have paid capacity fees and may develop at any time, but it is unlikely these homes will begin paying rates in the near future. Wastewater use is assumed to stay constant from FY 2016/17 given the latest conservation trends following the 2015 drought. Revenue Assumptions Rate revenue will remain the same assuming a stagnant number of customers and water consumption. Other revenues are projected to remain stagnant from 2016/17 budget amounts. Expense Assumptions Operations and maintenance costs are based on the budget and escalate at the annual rate of 3.0% to account for future cost inflation. Capital expenditures include $1.4 million in projects through FY 2021/22 The District has already implemented a 3% wastewater rate increase for fiscal year 2017/18. Based on the assumptions above, BWA created a cash flow projection that determined there are no wastewater rate increases needed for the next 5 years. The proposed schedule is shown on Table 19 below. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 19

21 Table 19: Proposed Wastewater Rate Increases Fiscal Year 2018/ / / / /23 Proposed Rate Increases 0% 0% 0% 0% 0% The current wastewater rate revenue accomplishes the following without rate increases: Operations and estimated Capital Improvement Plan funding Minimum debt service coverage of 1.25x net operating revenues over the next 5 years The District would still need to mail a Proposition 218 notice to notify ratepayers of the proposed wastewater rate structure changes as outlined in the next section. Rates would be effective following a mailed Proposition 218 notice and successful public hearing. 3.7 Wastewater Rate Structure Recommendations Though there are no required rate increases needed to cover current cost projections, BWA recommends a wastewater rate structure change to align with requirements set forth in Proposition Single Family Charge Recommendations BWA recommends that the District not collect on water usage above 40 units for single family residential customers as this likely reflects outdoor water usage. Instead, the District should charge a fixed amount for all single-family wastewater customers since their flow tends to be predictable and consistent between accounts. Proposed single family charges are shown in Table 20 below. Table 20: Proposed Wastewater Rates, Single Family User FY2018/19 FY2019/20 FY2020/21 FY2021/22 FY2022/23 % Rate Revenue Increase 0% 0% 0% 0% 0% Single Family Residences Flat Bimonthly Charge $ $ $ $ $ All Other User Charge Recommendations The District s RUE system was established long ago, and RUE assessments have not been updated recently due to the complex billing and enforcement effort required to re-evaluate each customer s RUE. Since the original establishment of the RUEs, non-residential accounts have seen their actual wastewater impact deviate from their RUE assessment. BWA proposes that the District align wastewater rates with actual wastewater usage according to the rates in Table 21 below. Bodega Bay Public Utility District Water and Wastewater Rate Study Page 20

22 Table 21: Proposed Wastewater Rates, All Other Users Adoption Date 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 Fiscal Year 2018/ / / / /23 All Other Users - Volumetric Charge Volumetric Charge - $/unit (hcf) $14.72 $14.72 $14.72 $14.72 $14.72 Minimum Volumetric Charge Bi Monthly Minimum Charge AWWA Ratio 2018/ / / / /23 5/8" or 3/4" 1 $ $ $ $ $ " 1.67 $ $ $ $ $ " 3.33 $ $ $ $ $ " 5.33 $ $ $ $ $ " $1, $1, $1, $1, $1, Units Included in Minimum AWWA Ratio 5/8" or 3/4" " " " " The wastewater minimum charge will recover revenue required to meet fixed wastewater expenses such as personnel, debt service, and capital costs. Wastewater volumetric rates will recover all usage above the units included in minimum table to reflect volumetric costs such as the cost to treat wastewater. The minimum charge for the smallest meter is proposed to be equal to the current charge per RUE. As the meter sizes increase, the minimum charge increases because of the additional impact on the wastewater system caused by these larger meter sizes. As such, the units included in the minimum charge also increases. Wastewater revenue will neither increase or decrease from the 2017/18 budget using this new structure assuming static consumption and number of accounts. Revenue from single family users is 100% fixed based on the current number of single family accounts. Revenue from all other users is fixed based on number of accounts (for the minimum charge) and volumetric based on water consumption above the units above minimum. Total wastewater revenue projections are shown in Table 22 below: Table 22: Wastewater Revenue Projection 2018/ / / / /23 Total Fixed Revenue $825,570 $825,570 $825,570 $825,570 $825,570 Total Volumetric Revenue $542,488 $542,488 $542,488 $542,488 $542,488 TOTAL RATE REVENUE $1,368,059 $1,368,059 $1,368,059 $1,368,059 $1,368,059 % change 0.0% 0.0% 0.0% 0.0% Bodega Bay Public Utility District Water and Wastewater Rate Study Page 21

23 3.7.3 Single Family Bill Impact The new wastewater rate structure will provide a flat rate for all 1.0 RUE single family customers. All single-family customers with more than one RUE assessment or those consuming more than 40 units of water will see a wastewater bill decrease, which will help to offset the water rate increase caused by the proposed rate revenue increases and rate restructure. 4 Conclusion and Recommendations This water and wastewater rate study presents a comprehensive review of the Bodega Bay Public Utility District s water and wastewater revenue requirements, cost allocations, and rate structures. Since the last comprehensive cost of service review in 2012, the District has identified needed capital improvements and experienced significant water revenue shortfalls. Current rates are complex and do not accurately reflect the cost of service. These factors were considered in the rate study to fairly develop rates for customers. 4.1 Conclusion The District practices sound financial planning that has provided for the financial health of the wastewater enterprise given current cost estimates. Unfortunately, the District is facing a water revenue deficit while operations costs continue to increase, and the District has ongoing capital and debt service requirements. Water and wastewater rate structures need to be updated to maintain compliance with Proposition 218 and recover the cost of service equitably from each customer class. These factors have been considered in this comprehensive water and wastewater rate study and are reflected in the above proposed rates. Adoption of these rates reflect the District s commitment to stewarding financially sound utilities and providing reliable, high quality water and wastewater service that will benefit the community many years into the future. 4.2 Recommendations BWA recommends that the District adopt the rates shown in this report. Rates were developed as part of a collaborative process that included extensive review by Board members and Staff. At minimum, BWA recommends that the District review and update its water and wastewater rate study every five years and/or concurrent with Master Plan Updates. Proposition 218 allows public agencies to adopt rates over a five-year planning period. Any further rate increases must be supported by a comprehensive rate study. Please find the complete Final Tables as of 3/22/2018 attached following this report Bodega Bay Public Utility District Water and Wastewater Rate Study Page 22

24 Bodega Bay Public Utilities District Water Rate Study Final Tables 3/22/2018 BARTLE WELLS ASSOCIATES Independent Public Finance Advisors Appendix: Water and Wastewater Rate Study Tables Page 1

25 Table 1 Bodega Bay PUD - Water Rate Study Current Bi-Monthly Water Rates Fixed Meter Rates Volumetric Rates Meter Size $ / BiMonth 5/8" Ratio Tier Usage (hcf) $ / hcf 5/8" or 3/4" $ Tier hcf $0.00 1" $ Tier hcf $ " $ Tier hcf $7.43 2" $ " $ Additional Charges Hotel Motel Trailer Park Business w/ family unit Bus/Prof/Comml BackFlow device $0.75 per unit $1.50 per space $1.50 each $6.00 each $12.00 each Appendix: Water and Wastewater Rate Study Tables Page 2

26 Table 2 Bodega Bay PUD - Water Rate Study Water Customer Information Water Meter Size: 3/4" or less 1" 1.5" 2" 3" & Over Total Current Meters ,068 Flow Capacity (gpd) RUE Ratio [1] Water RUEs , Flow capacities and ratios from American Water Works Association Manual M22 Appendix: Water and Wastewater Rate Study Tables Page 3

27 Table 3 Bodega Bay PUD - Water Rate Study Bimonthly Billed Water Consumption Feb '16 - Feb '17 T1 (hcf) T2 (hcf) T3 (hcf) Total Feb 2, ,714 8,854 Mar 2,715 1,315 3,720 7,750 Apr 2, ,947 May 3,200 2,073 5,351 10,624 Jun 2,505 1, ,698 Jul 3,677 3,376 8,859 15,911 Aug 2,719 1,837 1,454 6,009 Sep 3,541 2,995 7,569 14,106 Oct 2,746 1,901 1,063 5,709 Nov 3,384 2,355 5,270 11,009 Dec 2,382 1, ,775 Jan 3,008 1,693 4,169 8,869 Total 34,333 21,906 45, ,262 Source: District billing data. Chart 1 Bodega Bay PUD Bimonthly Billed Water Consumption Feb '16 - Feb '17 20,000 BiMonthly Billed Water Consumption Feb '16 - Feb '17 (hcf) 15,000 10,000 June 14, ,000 - Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan T1 (hcf) T2 (hcf) T3 (hcf) Average Appendix: Water and Wastewater Rate Study Tables Page 4

28 Table 4 Bodega Bay PUD - Water Rate Study Estimated Revenues - Current Fixed Charges Rate # of Accounts 3/4" and below $ $ 357, " , " , " , " , Total Fixed Revenue $ 404, Appendix: Water and Wastewater Rate Study Tables Page 5

29 Chart 1 Bodega Bay PUD - Water Rate Study Bimonthly Billed Water Consumption Feb '16 - Feb '17 Appendix: Water and Wastewater Rate Study Tables Page 6

30 Table 5 Bodega Bay PUD - Water Rate Study 2016/17 Water Operating Expenses Allocation % Allocation $ 2016/17 Water Wastewater Water Wastewater Office Wages $112,000 50% 50% $56,000 $56,000 Field Wages 587,500 50% 50% 293, ,750 Employee Bens Retirement 35,000 50% 50% 17,500 17,500 Health 148,000 50% 50% 74,000 74,000 Retirement Health 72,500 50% 50% 36,250 36,250 Dental 9,000 50% 50% 4,500 4,500 Life 3,500 50% 50% 1,750 1,750 Vision 3,000 50% 50% 1,500 1,500 SSC 57,000 50% 50% 28,500 28,500 Retire Med 36,000 50% 50% 18,000 18,000 Directors Fees 6,000 50% 50% 3,000 3,000 Election Expense 2,000 50% 50% 1,000 1,000 Depreciation 330,000 50% 50% 165, ,000 Gas-Trucks 11,000 50% 50% 5,500 5,500 Gas-Equipment 2,000 50% 50% 1,000 1,000 Insurance 50,000 50% 50% 25,000 25,000 Membership 18,000 50% 50% 9,000 9,000 Office Supplies 30,000 50% 50% 15,000 15,000 Chemicals 40,000 20% 80% 8,000 32,000 Repairs-Truck 4,000 50% 50% 2,000 2,000 Repairs-Generator 2,000 50% 50% 1,000 1,000 Professional Services Salmon Creek 5,000 50% 50% 2,500 2,500 Other 115,000 50% 50% 57,500 57,500 Printing 5,000 50% 50% 2,500 2,500 Repairs and Maintenance 185,000 50% 50% 92,500 92,500 Safety Training & Equipment 15,000 50% 50% 7,500 7,500 Small Tools 4,000 50% 50% 2,000 2,000 Research & Monitoring 30,000 50% 50% 15,000 15,000 Professional Development 15,000 50% 50% 7,500 7,500 Permits, Licenses & Fees 40,000 50% 50% 20,000 20,000 Propane 1,000 50% 50% PG&E 165,000 50% 50% 82,500 82,500 Cell Phones 1,000 50% 50% Voice & Internet 8,500 50% 50% 4,250 4,250 Other 1,500 50% 50% Total $2,149,500 $1,062,750 $1,086,750 Total w/o Depreciation $1,819,500 $897,750 $921,750 Appendix: Water and Wastewater Rate Study Tables Page 7

31 Table 6 Bodega Bay PUD - Water Rate Study Water Capital Improvement Projects (NEW) FY18-FY22 FY 2016/ / / / / /22 Total WP-001 Bay Flat Road Well 573, WP-002 Salmon Creek Water Treatment Plant Relocation ,000 20,000 WP-003 Ropollo Well Water Treatment , ,000 WD-002 Scada System - Water Share - 180, ,637 WD-003 Highway 1-4" Water Main Abandonment (Tides-Smith Bros.) ,000 76,000 WS-002 Storage Tank Replacements - 284, ,000 80, ,891 Total 573, , ,000 80,000-96,000 1,341,528 Funding Sources: Average Capital Funding for 2022/23 Estimate 319,228 Pay Go 573, ,528 80,000-96, ,528 Debt financed , , , , ,000 80,000-96,000 1,341,528 Appendix: Water and Wastewater Rate Study Tables Page 8

32 Table 7 Bodega Bay PUD - Water Rate Study Water Debt Summary Debt Service Budget Projected 2016/ / / / / / /23 Existing Loan $106,499 $106,499 $106,499 $106,499 $106,499 $106,499 $106,499 Existing Loan $170,135 $170,135 $170,135 $170,135 $170,135 $170,135 $170,135 Total $276,634 $276,634 $276,634 $276,634 $276,634 $276,634 $276,635 Debt Service Allocation 2016/ / / / / / /23 Water Share $138,317 $138,317 $138,317 $138,317 $138,317 $138,317 $138,318 Wastewater Share $138,317 $138,317 $138,317 $138,317 $138,317 $138,317 $138,317 Total $276,634 $276,634 $276,634 $276,634 $276,634 $276,634 $276,635 Appendix: Water and Wastewater Rate Study Tables Page 9

33 Table 8 Bodega Bay PUD - Water Rate Study Other Water Revenues Allocation % Allocation $ BBPUD Total Other Revenues Water Wastewater Water Wastewater Permits and inspections $0 50% 50% 0 0 BHHO Effluent [1] 10,000 0% 100% 0 10,000 Late Charges 15,000 50% 50% 7,500 7,500 Interest 10,000 50% 50% 5,000 5,000 Taxes 337,000 50% 50% 168, ,500 Cell Site Lease Revenues 22,000 50% 50% 11,000 11,000 Total Water Other Rev. $192, Bodega Harbour Homeowners Assoc. Appendix: Water and Wastewater Rate Study Tables Page 10

34 Table 9 Bodega Bay PUD - Water Rate Study 2016/17 Fixed-Volumetric Water Cost Allocation Allocation % Allocation $ Fixed Volumetric Fixed Volumetric Office Wages $56,000 50% 50% $28,000 $28,000 Field Wages 293,750 50% 50% 146, ,875 Employee Bens Retirement 17,500 50% 50% 8,750 8,750 Health 74,000 50% 50% 37,000 37,000 Retirement Health 36,250 50% 50% 18,125 18,125 Dental 4,500 50% 50% 2,250 2,250 Life 1,750 50% 50% Vision 1,500 50% 50% SSC 28,500 50% 50% 14,250 14,250 Retire Med 18,000 50% 50% 9,000 9,000 Directors Fees 3,000 50% 50% 1,500 1,500 Election Expense 1,000 50% 50% Gas-Trucks 5,500 50% 50% 2,750 2,750 Gas-Equipment 1,000 50% 50% Insurance 25,000 50% 50% 12,500 12,500 Membership 9,000 50% 50% 4,500 4,500 Office Supplies 15,000 50% 50% 7,500 7,500 Chemicals 8,000 52% 48% 4,160 3,840 Repairs-Truck 2,000 50% 50% 1,000 1,000 Repairs-Generator 1,000 50% 50% Professional Services Salmon Creek 2, % 0% 2,500 0 Other 57,500 60% 40% 34,500 23,000 Printing 2,500 50% 50% 1,250 1,250 Repairs and Maintenan 92,500 50% 50% 46,250 46,250 Safety Training & Equip 7,500 50% 50% 3,750 3,750 Small Tools 2,000 50% 50% 1,000 1,000 Research & Monitoring 15,000 50% 50% 7,500 7,500 Professional Developm 7,500 50% 50% 3,750 3,750 Permits, Licenses & Fee 20,000 50% 50% 10,000 10,000 Propane % 50% PG&E 82,500 50% 50% 41,250 41,250 Cell Phones % 50% Voice & Internet 4,250 50% 50% 2,125 2,125 Other % 50% $897,750 $456,035 $441,715 Fixed Volumetric 51% 49% CIP $573,839 51% 50% $292,658 $286,920 Debt Service $138,317 51% 49% $70,542 $67,775 Total Cost Allocations $819,234 $796,410 Appendix: Water and Wastewater Rate Study Tables Page 11

35 Table 10 Bodega Bay PUD - Water Rate Study Water Cash Flow Projection (New CIP) Budget 2016/ / /19 Projected 2019/ / / /23 Beginning Fund Balance Opening Balance 1,186, , , , , ,411 Total Revenue Rate Adjustment 0% 9% 6% 6% 6% 6% Growth 0% 0% 0% 0% 0% 0% Operations Cost Escalation 3% 3% 3% 3% 3% 3% Revenues OLD - Residential Revenue* 520, ,000 OLD- Commercial Revenue* 380, ,000 New Rate Structure Revenue - Fixed* 467, , , , ,665 New Rate Structure Revenue - Variable* 513, , , , ,825 Late Charges 7,500 7,500 7,500 7,500 7,500 7,500 7,500 Interest 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Cell Site Lease Revenue 11,000 11,000 11,000 11,000 11,000 11,000 11,000 Taxes 168, , , , , , ,500 Total operating Revenues 1,092,000 1,092,000 1,173,000 1,231,860 1,294,252 1,360,387 1,430,490 Proposed Bank Loan Proceeds* - 700,000 Total Sources 1,092,000 1,092,000 1,873,000 1,231,860 1,294,252 1,360,387 1,430,490 Expenses Office Wages 56,000 57,680 59,410 61,193 63,028 64,919 66,867 Field Wages 293, , , , , , ,753 Employee Bens 182, , , , , , ,318 Directors Fees 3,000 3,090 3,183 3,278 3,377 3,478 3,582 Election Expense 1,000 1,030-1,061-1,093-1,126-1,159-1,194 - Gas-Trucks 5,500 5,665 5,835 6,010 6,190 6,376 6,567 Gas-Equipment 1,000 1,030 1,061 1,093 1,126 1,159 1,194 Insurance 25,000 25,750 26,523 27,318 28,138 28,982 29,851 Membership 9,000 9,270 9,548 9,835 10,130 10,433 10,746 Office Supplies 15,000 15,450 15,914 16,391 16,883 17,389 17,911 Chemicals 8,000 8,240 8,487 8,742 9,004 9,274 9,552 Repairs-Truck 2,000 2,060 2,122 2,185 2,251 2,319 2,388 Repairs-Generator 1,000 1,030 1,061 1,093 1,126 1,159 1,194 Professional Services 60,000 61,800 63,654 65,564 67,531 69,556 71,643 Printing 2,500 2,575 2,652 2,732 2,814 2,898 2,985 Repairs and Maintenance 92,500 95,275 98, , , , ,450 Safety Training & Equipment 7,500 7,725 7,957 8,195 8,441 8,695 8,955 Small Tools 2,000 2,060 2,122 2,185 2,251 2,319 2,388 Research & Monitoring 15,000 15,450 15,914 16,391 16,883 17,389 17,911 Professional Development 7,500 7,725 7,957 8,195 8,441 8,695 8,955 Permits, Licenses & Fees 20,000 20,600 21,218 21,855 22,510 23,185 23,881 Propane PG&E 82,500 84,975 87,524 90,150 92,854 95,640 98,509 Cell Phones Voice & Internet 4,250 4,378 4,509 4,644 4,783 4,927 5,075 Other Total Operating Expenses 897, , , ,996 1,010,426 1,040,738 1,071,960 Debt Service 138, , , , , , ,318 New Proposed Debt Service* 86,304 86,304 86,304 86,304 CIP Pay-go 573, ,528-80,000-96, ,228 CIP Debt Financed , Total Expenses 1,609,906 1,528,527 1,790,740 1,285,616 1,235,046 1,361,359 1,615,810 Net (517,906) (436,527) 82,260 (53,756) 59,206 (972) (185,320) Closing Fund Balance 1,186, , , , , , ,092 Debt Service Coverage % Annual Operating Expense in Reserves 81% 87% 79% 83% 80% 61% *Assumes bank loan with 4% interest repaid in 10 years Appendix: Water and Wastewater Rate Study Tables Page 12

36 Table 11 Bodega Bay PUD - Water Rate Study Fixed Water Rate (New CIP Cash Flow Projection) FY2017/18 FY2018/2019 FY2019/2020 FY2020/2021 FY2021/2022 FY2022/2023 Total Fixed Revenue increase 16% 6% 6% 6% 6% Fixed Revenues $ 404,842 $ 467,862 $ 495,934 $ 525,690 $ 557,231 $ 590,665 RUEs Annual $/RUE $ $ $ $ $ Bimonthly $/RUE $ $ $ $ $ $ /4" Rate increase 0% 6% 6% 6% 6% 3/4" and Below Fixed Rate Current Ratio AWWA Ratio 3/4" and below Equivalent 1.00 $ $61.82 $65.53 $69.46 $73.63 $78.05 % Increase # Users 0% 6% 6% 6% 6% Estimated Revenue 964 $357,567 $379,021 $401,762 $425,867 $451,420 1" Fixed Rate AWWA Ratio 1" Equivalent 1.15 $ $ $ $ $ $ % Increase # Users 45% 6% 6% 6% 6% Estimated Revenue 70 $43,274 $45,870 $48,623 $51,540 $54, " Fixed Rate AWWA Ratio 1.5" Equivalent 1.30 $ $ $ $ $ $ % Increase # Users 157% 6% 6% 6% 6% Estimated Revenue 19 $23,492 $24,901 $26,395 $27,979 $29,658 2" Fixed Rate AWWA Ratio 2" Equivalent 1.41 $ $ $ $ $ $ % Increase # Users 279% 6% 6% 6% 6% Estimated Revenue 8 $15,826 $16,775 $17,782 $18,849 $19,980 3" Fixed Rate AWWA Ratio 3" Equivalent 1.59 $ $ $ $ $ $ % Increase 320gpd # Users 570% 6% 6% 6% 6% Estimated Revenue 7 $27,704 $29,366 $31,128 $32,996 $34,976 Total Estimated Revenue $467,862 $495,934 $525,690 $557,231 $590,665 Appendix: Water and Wastewater Rate Study Tables Page 13

37 Table 12 Bodega Bay PUD - Water Rate Study Volumetric Water Rate (New CIP Cash Flow Projection) Current Bimonthly Volumetric Rates Tier Usage (ccf) $ / ccf Tier hcf $0.00 Tier hcf $6.51 Tier hcf $7.43 FY2017/18 FY2018/19 FY2019/20 FY2020/21 FY2021/22 FY2022/23 Rate increase 8% 6% 6% 6% 6% Volumetric Revenues $477,123 $513,138 $543,926 $576,562 $611,156 $647,825 Annual Tier 2 & 3 Consumption [1] HCF 66,928 66,928 66,928 66,928 66,928 Single Tier Option 1 (> 8 HCF) Tier 1 (0-8 HCF) $/HCF Tier 2 (> 8 HCF) $/HCF $7.67 $8.13 $8.61 $9.13 $9.68 Estimated Volumetric Revenue Option 1 $513,138 $543,926 $576,562 $611,156 $647,825 Single Tier Option 2 (> Included Units) Tier 1 (0-Included Units) $/HCF Tier 2 (> Included Units) $/HCF $7.94 $8.41 $8.92 $9.45 $10.02 Included Units (Option 2) Meter Size AWWA Ratio 5/8" or 3/4" " " " " Est Usage Above Included Units Meter Size Included Units Consumption [2] 5/8" or 3/4" 8 25,848 25,848 25,848 25,848 25,848 1" 14 16,896 16,896 16,896 16,896 16, " 28 9,013 9,013 9,013 9,013 9,013 2" 44 8,892 8,892 8,892 8,892 8,892 3" 89 4,009 4,009 4,009 4,009 4,009 Total 64,658 64,658 64,658 64,658 64,658 Est. Revenue Option 2 $513,138 $543,926 $576,562 $611,156 $647,825 [1] Table 3 [2] Residential and Commercial Consumption, does not include fireline usage Appendix: Water and Wastewater Rate Study Tables Page 14

38 Table 13 Bodega Bay PUD - Water Rate Study Proposed Rates and Bill Impacts (New CIP Cash Flow Projection) Typical Single Family Residence Bimonthly Usage[1] 20 HCF Proposed Bimonthly Fixed Rate Current Ratio 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 Fixed Rate 2016/17 Proposed Ratio 2018/ / / / /23 5/8" or 3/4" $ $61.82 $65.53 $69.46 $73.63 $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ " $ $ $ $ $ $ Current Bimonthly Volumetric Rates Proposed Bimonthly Volumetric Rate 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 Tier Usage (hcf) $ / hcf Usage 2018/ / / / /23 Tier hcf $ Included Units Tier hcf $ 6.51 > Included Units $7.94 $8.41 $8.92 $9.45 $10.02 Tier hcf $ 7.43 Proposed Bimonthly Included Units 5/8" or 3/4" " " " " Bimonthly Bill Impacts - Option 2 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 Typical Single Family Residence 2018/ / / / /23 Fixed Charge $61.82 $61.82 $65.53 $69.46 $73.63 $ HCF Billed Usage (20 total units) $78.12 $95.23 $ $ $ $ Bill Impacts $ $ $ $ $ $ % 6% 6% 6% 6% [1]Source: Billing Data 2017 Appendix: Water and Wastewater Rate Study Tables Page 15

39 Table 14 Bodega Bay PUD - Water Rate Study Proposed Rate Summary FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22 FY 2022/23 1-Jul-18 1-Jul-19 1-Jul-20 1-Jul-21 1-Jul-22 % Rate Revenue Increase 9% 6% 6% 6% 6% Bimonthly Fixed Charge - $/Meter 5/8" or 3/4" $61.82 $65.53 $69.46 $73.63 $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ " $ $ $ $ $ Volumetric Rate - $/hcf Allowance (0-Included Units) $0.00 $0.00 $0.00 $0.00 $0.00 Volumetric Rate (>Included Units) $7.94 $8.41 $8.92 $9.45 $10.02 Units Included In Fixed Charge 5/8" or 3/4" " " " " Appendix: Water and Wastewater Rate Study Tables Page 16

40 Bodega Bay Public Utilities District Wastewater Rate Study Final Tables 3/22/2018 BARTLE WELLS ASSOCIATES Independent Public Finance Advisors Appendix: Water and Wastewater Rate Study Tables Page 17