Santa Ynez River Water Conservation District, ID No. 1 Water Rates & Finances December 13, 2016
Presentation Overview Objectives & Process District Finances Current & Projected Rates 2
Rate Study Objectives Independent review of District finances and rates Developed long-term financial projections to: Determine annual revenue requirements Evaluate financial scenarios & rate increase alternatives Proposed water rates designed to: Restore and maintain financial health Provide adequate funding for operating and capital needs Be fair and equitable to all customer classes Comply with the legal requirements of Proposition 218 3
Rate Study Process 2015 Initiate Rate Study Sept 15 Board Meeting, preliminary findings & intro to rate study 2016 Develop Rate Recommendations Jan 6 Oct 17 Oct 18 Oct 25 Oct 27 Dec 13 Board/Public Workshop, discuss findings & obtain input Public Workshop, present recommendations & obtain input Board Meeting, receive direction to move forward Board Meeting accepting and approving the Water Rate Study Mailed Prop 218 Notices (min. 45 days prior to hearing) Public Rate Hearing, consider rate increases 2017 Rates Become Effective 4 Feb 1 New rates become effective
5 DISTRICT FINANCES
Background District historically maintained good financial health with steady gradual rate increases each year Financial health has deteriorated Tax assessments suspended after 2010/11 for 5 years (rev loss = $3.75M) California hit with severe drought Cutback in water sales resulted in substantial revenue loss District operating in deficit mode for third year in a row, even with cutbacks in operations and deferred maintenance Stringent new Chromium 6 drinking water regulations took effect July 2014 District facing financial challenges that will require rate increases 6
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Financial Challenges Eliminate budget deficits & restore financial stability Almost $1M deficit projected in current fiscal year (without rate increases) Chromium 6 project to address new regulations Capital costs: $8.5M to $12.7M (requires debt financing) Future O&M costs: $500,000 per year Maintenance & rehab/replacement of aging infrastructure Future capital investment projected at $500,000 per year Reduced water consumption = reduced revenues Water usage down almost 33% from 2013 benchmark year to 2015/16 Customer who are conserving have reduced their water bills Wholesale water supply costs increasing Need to comply with bond covenants (legal obligation) Ongoing operating cost inflation 8
Projected Rate Revenue Increases Projected overall level of rate increases Target level of rate increases excluding impact of changes in water sales Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 2017 2018 2019 2020 2021 Overall Rate Increases 15% 15% 5% 5% 5% Rate increases phased in as gradually as possible District can re-evaluate need for rate increases each year Rate impacts will vary by customer class due to rate structure modifications 9
10 CURRENT WATER RATES
CURRENT WATER RATES MONTHLY METER CHARGES Meter Size Domestic, RR/Ltd Ag Agricultural 5/8" $38.78-3/4" 46.42-1" 76.98-1-1/2" 153.62 62.40 2" 243.80 103.14 3" 490.60 207.56 4" 661.91 289.06 6" 1,543.43 645.61 8" 2,455.55 - CONSUMPTION CHARGES ($/hcf) Domestic $3.81 Rural Residential/Limited Agriculture First 125 units 3.81 Over 125 units 1.31 Agriculture (No Domestic Use) 0.50 On-Demand 6.08 Temporary 6.25 Cachuma Park 1.38 Domestic rates in middle range of regional agencies Agricultural rates are lowest in region Fixed meter charges generate about 45% of total rate revenues Rate increases in recent years were largely offset by decline in water sales $0.51 per 100 gallons $0.18 per 100 gallons $0.07 per 100 gallons 11
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Agricultural Rate Survey 15 Agency Ag Fixed Meter Charges Consumption Charges ($/hcf) SYRWCD ID#1 2" $103.14 Ag $0.50 (Ag Rates) 4" 289.06 Limited Ag 1.31 6" 645.61 Carpenteria VWD 2" 228.40 Irrigation 4" 713.75 Tier 1 (standard demand) 1.91 6" 1,427.50 Tier 2 2.50 Surcharge 345.00 (+ 0.26 to 0.44 in pressure zones) Montecito WD 2" 237.84 Ag <870 hcf/acre/year 3.00 4" 891.90 Ag >870 hcf/acre/year 5.40 6" 1,468.51 Santa Barbara 2" 164.03 Ag 3.42 4" 409.28 Over Budget 24.27 6" 819.79 Nipomo CSD 2" 128.42 Ag 3.41 4" 385.16 Supplemental Chg 1.00 6" 762.43 Total 4.41 Goleta WD 2" 204.82 Ag 1.86 4" 779.95 Drought Surcharge 2.68 6" 1,722.21 Total 4.54
16 PROPOSED RATES
Fixed Meter Charge Modifications Small inflationary increases to fixed meter charges No change to fixed meter charges in first year Meter charges re-aligned with meter capacity Domestic meter charges Base 5/8-inch meter charge increases roughly 14% over 5 years Impacts on most other meter sizes vary from 14% to 16% over next 5 years Ag meter charges Remain substantially lower than domestic meter charges Lower cost water supply (no Dept of Water Resources supply) Fewer accounts, less admin cost per account Interruptible supply Assumes ag customers pay 50% of standard rate during periods offline Private fire service charges set at 10% of domestic meter charges 17
Monthly Meter Charges Proposed Water Rates Meter Current Proposed Rates Effective on or After Number of Meter Capacity Water Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 Accounts Capacity Ratio Rates 2017 2018 2019 2020 2021 MONTHLY METER CHARGES Domestic, Commercial & Rural Res/Ltd Agriculture Meter Size 5/8" 780 25 1.0 $38.78 $38.78 $39.86 $41.40 $42.98 $44.19 3/4" 616 30 1.2 46.42 46.42 47.83 49.68 51.57 53.03 1" 592 50 2.0 76.98 76.98 79.72 82.80 85.96 88.38 1-1/2" 194 100 4.0 153.62 153.62 159.44 165.60 171.91 176.76 2" 229 160 6.4 243.80 243.80 255.10 264.97 275.06 282.82 3" 8 300 12.0 490.60 490.60 478.31 496.81 515.73 530.29 4" 1 500 20.0 691.91 691.91 797.18 828.02 859.56 883.81 6" 0 1,000 40.0 1,543.43 1,543.43 1,594.36 1,656.04 1,719.12 1,767.62 8" 0 1,600 64.0 2,455.55 2,455.55 2,550.98 2,649.66 2,750.59 2,828.19 18 Agricultural Meter Size 1-1/2" 3 100 4.0 $62.40 $62.40 $66.16 $68.72 $71.34 $73.35 2" 29 160 6.4 103.14 103.14 105.86 109.96 114.15 117.37 3" 5 300 12.0 207.56 207.56 209.71 211.87 214.02 220.06 4" 47 500 20.0 289.06 289.06 330.82 343.62 356.71 366.77 6" 27 1,000 40.0 645.61 645.61 661.64 687.24 713.41 733.54
Consumption Charge Modifications Domestic Water Rate Increases from $3.81 to $5.15 per hcf over next 5 years (approx. 35% increase) Larger increases in first 2 years to help eliminate budget deficit & restore stability Ag Water Rate Increase from $0.50 (below cost of water supply) to $1.87 per hcf over next 5 years Lower cost water supply (e.g. no Dept of Water Resources supply), however cost of USBR ag water supply is increasing Interruptible supply Ag rate to remain lowest compared to other regional agencies Limited Ag Water Rate Set at 25% Domestic rate and 75% Ag rate Supposed to be for commercial agriculture Some large lot properties benefitting by getting lower Limited Ag Rate for non-ag uses 19
Consumption Charge Modifications 20 On-Demand Water Rate 2x standard Domestic Rate includes partial cost recovery for system capacity Have own local service areas and require access to District water on demand to supplement local supplies (typically during periods of peak demand) District incurs substantial costs maintaining the operational and water supply capacity to serve these accounts, yet only minimal cost recovery due to low water sales Pay a fixed meter charge based on master meter connection, which does not fully reflect underlying demand Never paid an equitable capacity charge to buy in to District facilities like other customers Alternative: levy a reduced fixed monthly service charge on each parcel Temporary Water Rate 3x standard Domestic Rate Includes cost recovery for District infrastructure and water supply Cachuma Park Receives untreated water directly from Lake Cachuma
Water Consumption Charges CONSUMPTION CHARGES Charge per hundred cubic feet (hcf) of metered water consumption. Current Proposed Rates Effective on or After Water Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 Rates 2017 2018 2019 2020 2021 Domestic (Residential & Commercial) $3.81 $4.30 $4.80 $4.95 $5.05 $5.15 Rural Residential/Limited Agriculture First 125 units 3.81 4.30 4.80 4.95 5.05 5.15 Over 125 units 1.31 1.65 1.98 2.22 2.46 2.69 Agriculture (No Domestic Use) 0.50 0.77 1.04 1.31 1.59 1.87 On-Demand (2x Domestic Rate) 6.08 8.60 9.60 9.90 10.10 10.30 Temporary (3x Domestic Rate) 6.25 12.90 14.40 14.85 15.15 15.46 Cachuma Park 1.38 1.48 1.55 1.63 1.71 1.80 Note: One hundred cubic feet (hcf) = 748 gallons Proposed Water Rates 21
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23 Average Annual Increase Since 2010 Ranges from 2.4% to 3.4%
Conclusion 24 District facing a number of financial challenges Revenue shortfalls for three consecutive years Declining reserve funds for five years State of California Mandates Chromium 6 Increased Costs of Providing Service Near and long-term costs of water purchases Deferring Maintenance and Improvement Projects Rate increases needed Eliminate Budget deficit Restore Financial Stability Maintain Credit Rating Meet Debt Obligations Continue Operations Purchases and Production of Water supplies Fund Maintenance and Capital Projects
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