2013 Water Rate Study and Proposed Multi-Year Water Rate Adjustments 1

 Review the 2013 Water Rate Study and the proposed multi-year adjustments, and  Answer questions.

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 The Elk Grove Water District (District) periodically reviews its water rates to ensure coverage of its operational, debt service and capital expenses.  The last water rate study was adopted in April, 2007.  On November 14, 2011, Staff issued a Request for Proposals for a water rate services study to determine the District’s revenue and expenditure needs for the next five fiscal years. 3

      FY 2007-08 32% (implemented) FY 2008-09 20% (implemented) FY 2009-10 15% (12% implemented) FY 2010-11 3% (not implemented) FY 2011-12 3% (not implemented) FY 2012-13 0% 4

Staff accepted proposals from the following four firms on November 28, 2011: ◦ ◦ ◦ ◦ FCS Group HDR Engineering, Inc.

Raftelis Financial Consultants, Inc.

Willdan Financial Services 5

On January 25, 2012, the Board authorized the General Manager to execute a contract with Willdan to conduct a water rate study to determine the future water rates needed to meet the District’s needs over the next five fiscal years. The study incorporates three main elements: ◦ ◦ ◦ Revenue requirement analysis, Rate design and its impact to customers, and An Assembly Bill 1600 nexus study for establishing the new connection fees.

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This rate study has six phases:

◦ ◦ ◦ ◦ ◦ ◦ ◦ Phase 1: Data Collection Phase 2: Revenue Requirement Analysis Phase 3: Cost of Service Analysis Phase 4: Rate Design Phase 5: Connection Fees Phase 6: Study Recommendations and Presentation Phase 7: Proposition 218 Procedural Requirements 7

Willdan met with Staff in April 2012 to review the District’s current Budget (Fiscal Year 2011-12) and review components of the Draft FY 2012-13 Budget.

In May 2012, Willdan presented the first look at the revenue requirements to the Finance Committee of the Board of Directors.

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In June 2012, Willdan presented multiple scenarios that reflected a calendar year fiscal year implementation dates and various options for refunding the District’s existing debt obligations.

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In August 2012, the first meeting was held of the Community Advisory Committee (CAC). The CAC is a committee of citizens, who reside within the Elk Grove Water District service area, formed to review the development of the water rate study and provide input to the Board of Directors.

Willdan presented the various revenue requirements and fixed/variable percentages to the CAC.

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In September 2012, Willdan presented to both the CAC and the Finance Committee the following: ◦ ◦ ◦ ◦ Refined fixed/variable options Public and Private Fire Line allocations Preliminary Rates 2-tiered and 3-tiered residential rates 11

The water rate study was thorough and included many fundamental components.

After discussions with the Board and the CAC, Staff recommended that the process be slowed down to give the parties involved time to understand the various elements.

It was also decided to have additional public meetings to ensure that the District was providing transparency in this process.

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Meetings resumed in November 2012 Adjustments were made to the rate design ◦ ◦ ◦ Refinement to fixed/variable (i.e. revenue collected from monthly meter charge versus water consumption) Customer Classes    Residential Non-Residential Irrigation Private Fire Protection 13

In addition, the presentations in November discussed possible multi-family accounts as a separate customer class. (Currently not possible due to lack of unit data for each complex.) A revised timeline was set to reflect a possible July, 2013 implementation.

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In December, 2012 Staff recommended a contract revision to expand the scope of work for Willdan in the following areas: ◦ ◦ ◦ ◦ Revenue requirements Cost of service analysis Rate design analysis Public meetings and presentations Willdan was requested to collect additional data reflecting the summer water usage of 2012 to update the model with more current data .

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Willdan presented an updated water rate structure that reflected the following additional information: ◦ ◦ ◦ ◦ ◦ ◦ ◦ Updated consumption numbers (CY 2012) Revenue check Adjustments for all accounts being metered by April 2014 Updated reserve balances per audited financial statements Revised rates Impacts to customers based on new rates Revised implementation date of January 2014 16

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Revenue adjustments to begin January 2014 with increases as follows:

◦ ◦ ◦ ◦ ◦ January 2014 – 3% January 2015 – 3% January 2016 – 3% January 2017 – 4% January 2018 – 5% 17

The District has done the following to contain expenditures during the last two fiscal years: ◦ Frozen three positions  Operations Manager  Utility Billing Specialist  Water Distribution Operator ◦ Employee Cost Control Program  Employee’s contribution of 6% towards retirement by FY 2013-14  Capping of health benefits costs for current employees and future retirees 18

    Debt Service Salaries and Benefits Purchased Water Capital Improvements Five Year Program $3,680,913 $3,553,485 $2,895,481 $9,214,000 Adjustments are to keep up with inflation, and to help fund the capital projects 19

   Fixed revenue ◦ Costs either apportioned over accounts or based on meter size.  Billing costs are shared equally per account  Capital improvement costs are allocated according to meter size Variable revenue ◦ Costs equitably allocated between customer classes based on demand  Total water usage  Peak demand placed on utility system Customer Classes ◦ Residential ◦ Non – Residential ◦ Irrigation 20

Meter Charge

1" 1.5" 2" 3" 4" 6" 8" 10"

January 1, 2014 59.23

83.37

112.34

179.93

276.49

517.89

807.57

1,145.53

Existing 56.53

73.48

118.71

446.56

565.29

847.93

1,170.14

Difference $ 2.70

$ 9.89

$ (6.37) $ (266.63) $ (288.80) $ (330.04) $ (362.57) 21

    Existing Structure ◦ ◦ Tier 1=$1.46

Tier 2=$1.80

Proposed Residential ◦ Tier 1=$1.39

◦ Tier 2=$2.76

Proposed Non-Residential ◦ ◦ $1.57

Proposed Irrigation $1.70

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 ◦ Existing Structure $78.30 per month  ◦ Proposed Residential $70.22 per month 23

Meter Charge

1" 1.5" 2" 3" 4" 6" 8" 10"

January 1, 2014 59.23

83.37

112.34

179.93

276.49

517.89

807.57

1,145.53

January 1, 2015 61.01

85.87

115.71

185.33

284.79

533.43

831.80

1,179.90

January 1, 2016 62.84

88.45

119.18

190.89

293.33

549.43

856.75

1,215.29

January 1, 2017 65.04

91.55

123.36

197.59

303.62

568.70

886.80

1,257.92

January 1, 2018 67.98

95.68

128.93

206.50

317.31

594.35

926.80

1,314.65

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Commodity Charge

Residential Metered Tiered

Tier 1 Tier 2

Tier (HCF)

0 - 30 30.01 + January 1, 2014 January 1, 2015 January 1, 2016 January 1, 2017 January 1, 2018 $ 1.39

2.76

$ 1.44

2.85

$ 1.48

2.93

$ 1.53

3.04

$ 1.60

3.17

Non-Residential

Uniform

Irrigation

Uniform

Residential Flat

Monthly Charge 1.57

1.70

70.22

1.62

1.75

72.00

1.67

1.80

73.83

1.73

1.87

76.03

1.80

1.95

78.96

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(Connection Size, inches)

2" 3" 4" 6" 8" 9" 10" 11" 12"

FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 Demand Factor

6.19

17.98

38.32

111.31

237.21

323.34

426.58

548.10

689.04

2.71

7.87

16.78

48.73

103.85

186.75

301.65

2.79

8.11

17.28

50.19

106.96

310.70

2.88

8.35

17.80

51.70

110.17

192.35

198.12

320.02

2.98

8.64

18.42

53.51

114.03

205.07

331.25

3.11

9.03

19.25

55.92

119.18

214.32

346.19

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    2013 Water Rate Study Report Meeting Agenda, Minutes and Presentations Bill Calculator Public Hearing and Protest Notice 28

Public Notices mailed on May 10, 2013 Public Hearing to adopt future water rates to be held on June 26, 2013 at 6:30 PM at the Cosumnes Community Service District Administration Building 8820 Elk Grove Boulevard Written Protests can be submitted to the Board prior to the closing of the public hearing 29

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