HomeMy WebLinkAbout2019 Water & Sewer Rate Study Update
City of San Luis Obispo
Water & Wastewater
Rate Study Update
May 2019
DRAFT REPORT
hdrinc.com
900 108th Ave NE, Suite 1200, Bellevue, WA 98004
T 425-450-6200
May 6, 2019
Ms. Jennifer Metz
Utilities Project Manager
City of San Luis Obispo
879 Morro Street
San Luis Obispo, CA 93401
Subject: Water & Wastewater Rate Study Update Draft Report
Dear Ms. Metz:
HDR Engineering, Inc. (HDR) is pleased to present to the City of San Luis Obispo (City) the draft
report for the 2019 Water and Wastewater Rate Study Update (2019 Update). In 2018, the City
and HDR developed a comprehensive water and wastewater rate study (2018 Rate Study). Based
on the results of the 2018 Rate Study, the City Council adopted the proposed rates from the 2019
Study for FY 2018/19.
Given the development of the 2018 Rate Study, which proposed cost-based rates for the next
five-year period, the cost of service results from the 2018 Rate Study were used as the basis for
the proposed rates for the next two year period. Only the revenues and expense, both operating
and capital, of the water and wastewater utilities were updated in order to match the updated
customer characteristics and costs of providing water and wastewater services to the City’s
customers. The 2019 Update outlines the overall approach used to achieve these objectives,
along with our findings, conclusions, and recommendations.
The costs associated with providing water and wastewater services to the City’s customers was
developed based on the City’s specific information and is included within the development of the
proposed rates. This study was developed utilizing industry recognized generally accepted rate
setting principles and methodologies. This report provides the basis for developing and
implementing water and wastewater rates which are cost-based, equitable, and legally
defensible to the City’s customers.
We appreciate the assistance provided by the City’s project team in the development of this
study. More importantly, HDR appreciates the opportunity to provide these technical and
professional services to the City of San Luis Obispo.
Sincerely yours,
HDR Engineering, Inc.
Shawn Koorn
Associate Vice President
Table of Contents i
City of San Luis Obispo – Water & Wastewater Rate Study Update
Table of Contents
Introduction ........................................................................................................................ 1
Overview of the Rate Study Process .................................................................................... 1
Key Water & Wastewater Rate Study Results ...................................................................... 2
Summary of the Water Revenue Requirement Analysis....................................................... 3
Summary of the Water Cost of Service Analysis................................................................... 5
Summary of the Water Rate Design .................................................................................... 5
Summary of the Water Rate Study Update .......................................................................... 6
Summary of the Wastewater Revenue Requirement Analysis ............................................. 7
Summary of the Wastewater Cost of Service Analysis ......................................................... 9
Summary of the Wastewater Rate Design ......................................................................... 10
Summary of the Wastewater Rate Study Update .............................................................. 11
1.1 Introduction ............................................................................................................ 13
1.2 Water Revenue Requirement.................................................................................. 13
1.2.1 Determining the Water Revenue Requirement ............................................. 13
1.2.2 Projecting Rate and Other Miscellaneous Revenues ..................................... 13
1.2.3 Projecting Operation and Maintenance Expenses ......................................... 14
1.2.4 Projection of Transfers ................................................................................. 14
1.2.5 Projection of Debt Service ............................................................................ 14
1.2.6 Projecting Rate Funded Capital ..................................................................... 15
1.2.7 Summary of the Water Revenue Requirement ............................................. 16
1.2.8 Reserve Levels .............................................................................................. 18
1.2.9 Consultant’s Conclusion of the Revenue Requirement ................................. 18
1.3 Water Cost of Service Analysis Summary ................................................................ 18
1.4 Water Rate Design .................................................................................................. 19
1.4.1 Development of Cost-Based Water Rates ..................................................... 19
1.4.2 Overview of the Water Rate Structure .......................................................... 20
1.4.3 Present and Proposed Water Rates .............................................................. 20
1.5 Summary of the Water Rate Study Update ............................................................. 21
Table of Contents ii
City of San Luis Obispo – Water & Wastewater Rate Study Update
2.1 Introduction ............................................................................................................ 23
2.2 Wastewater Revenue Requirement ........................................................................ 23
2.2.1 Determining the Revenue Requirement ....................................................... 23
2.2.2 Projecting Rate and Other Miscellaneous Revenues ..................................... 23
2.2.3 Projecting Operation and Maintenance Expenses ......................................... 24
2.2.4 Projection of Transfers ................................................................................. 24
2.2.5 Projecting Capital Funding Needs ................................................................. 24
2.2.6 Projection of Debt Service ............................................................................ 26
2.2.7 Summary of the Wastewater Revenue Requirement .................................... 26
2.2.8 Reserve Levels .............................................................................................. 28
2.2.9 Consultant’s Conclusions .............................................................................. 28
2.3 Wastewater Cost of Service Analysis Summary ....................................................... 28
2.4 Wastewater Rate Design ......................................................................................... 29
2.4.1 Development of Cost-Based Water Rates ..................................................... 29
2.4.2 Overview of the Water Rate Structure .......................................................... 30
2.4.3 Present and Proposed Wastewater Rates ..................................................... 30
2.5 Summary of the Wastewater Rate Study Update .................................................... 31
Executive Summary 1
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Executive Summary
Introduction
HDR Engineering, Inc. (HDR) was retained by the City of San Luis Obispo (City) to conduct a
comprehensive water and wastewater rate study update (2019 Update). The main objectives of
the 2019 Update were:
Develop a projection of water and wastewater revenues to support the City’s operating
and capital costs
Proposed cost-based and equitable rates for a multi-year time period
For this update, the cost of service results from the 2018 Comprehensive Water and Wastewater
Rate Study (2018 Rate Study) were utilized. Only the revenues and expense of the water and
wastewater utilities were updated in order to match the updated customer characteristics and
costs of the utilities. It is important to note that the results shown in this report are based on
information available at ‘a point in time’. That is to say that if the information available at a later
date has changed then the results of the analysis would likely also change or differ from those
presented in this report.
The City owns, operates, and maintains the water and wastewater systems which provide
services to its customers. The costs associated with providing water and wastewater services to
City’s customers has been developed based on the provided information and is included within
the development of the proposed rates.
Overview of the Rate Study Process
A comprehensive rate study uses three interrelated analyses to address the adequacy and equity
of each utility’s rates. These three analyses are a revenue requirement analysis, a cost of service
analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES - 1.
Executive Summary 2
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Figure ES – 1
Overview of the Comprehensive Water & Wastewater Rate Analyses
Above is the basic framework that was utilized in the development of this study for reviewing
and evaluating the City’s water and wastewater rates. For the 2019 Update, and proposed rates,
the revenue requirement and rate design analysis was updated for each utility based on current
operating and capital expenses and recent customer characteristics. As noted previously, for the
2019 Update, the cost of service results from the 2018 Rate Study were utilized to establish the
equity and proportionality of the rates. This was done as the rates recommended for 2019
included cost of service adjustments and the future years were based on those rates.
Key Water & Wastewater Rate Study Results
The water and wastewater study’s technical analyses were developed based on the operating
and capital costs necessary to provide service to City’s customers. The analyses performed
resulted in the following findings, conclusions, and recommendations.
A revenue requirement analysis was developed for the water and wastewater utilities
over the projected time period of FY 2019-20 through FY 2023-24
The City’s adopted FY 2018-19 budget was used as the starting point of the analyses for
both utilities
Operation and maintenance expenses are projected to increase at inflationary levels with
no assumed changes to levels of service or anticipated extraordinary expenses
The proposed water revenue adjustment is 5.5% in FY 2019-20 and FY 2020-21
The proposed wastewater revenue adjustment is 5.5% in FY 2019-20 and 5.0% in FY 2020-
21
Proposed rates were developed, for each utility, for FY 2019-20 and FY 2020-21 that
reflected the equity and proportionality as developed in the 2018 comprehensive rate
study.
Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
Compares the revenues to the expenses
of the utility to determine the overall
rate adjustment required
Allocates the revenue requirement to the
various customer classes of service in a
“fair and equitable" manner
Considers both the level and
structure of the rate design to collect
the target level of revenues
Executive Summary 3
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Summary of the Water Revenue Requirement Analysis
A revenue requirement analysis is the first analytical step in the development of the water rate
study. This analysis determines the adequacy of the level of current water rates for the City. From
this analysis, a determination can be made as to the overall level of water revenue adjustments
needed to provide adequate and prudent funding for both operating and capital needs.
For the 2019 Update, the revenue requirement was developed from the adopted FY 2018-19
budget for a projected time period (FY 2019-20 – FY 2023-24). A multi-year time frame is
recommended to better anticipate future financial requirements and allow the City to begin
planning for these changes sooner, thereby minimizing short-term rate impacts and overall long-
term rates. For the revenue requirement analysis, a “cash basis” approach was utilized. The “cash
basis” approach is the most commonly used methodology by municipal utilities to establish the
revenue requirement and is the approach used in the 2018 Rate Study. The cash basis approach
includes an analysis of O&M expenses, transfers, debt service, rate funded capital, and to/from
reserve funding. The primary financial inputs in the development of the revenue requirement
analysis were the City’s 2018-19 adopted Water Fund budget, historical billed customer and
consumption data, and the current water system capital improvement plan.
Once the operating and maintenance expenses were developed for the projected time period,
based on budgeted expenses and historical inflationary factors, the next step was to develop the
capital project funding plan. The proper and adequate funding of capital projects is important to
help minimize rates over time. A general financial guideline states that, at a minimum, a utility
should fund an amount equal to or greater than annual depreciation expense through rates. For
this study, the City developed a capital improvement plan based on the needs of the water
system. This plan identified the projects necessary to maintain the water system as well as
projects necessary to meet new growth and expansion of the system. Provided below in Table ES
- 1 is a summary of the capital funding plan over the planning period based on the capital plan at
the time of the study development.
Table ES – 1
Summary of the Water Capital Improvement Plan[1]
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Total Capital Projects $9,114 $10,151 $11,778 $3,763 $9,393 $9,445
Other Funding Sources
Reserves $7,864 $10,151 $9,178 $963 $6,393 $6,245
Total Other Funding Sources $7,864 $10,151 $9,178 $963 $6,393 $6,245
Rate Funded Capital $1,250 $0 $2,600 $2,800 $3,000 $3,200
[1] – Table figures are in thousands of dollars ($)
Executive Summary 4
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
The financial plan developed for the City’s water utility has placed the rate funded capital level
at $1.3 million in FY 2018-19 increasing to $3.2 million by FY 2023-24. This level of funding was
calculated based on the long-term need to prudently fund replacement and repair of the existing
water system. As can be seen, the difference between annual capital needs and rate funded
capital, when apparent, is being funded through other funding sources. The City prioritizes “cash
financing” capital projects as evident through the level of annual rate funded capital. This level
of pay-as-you-go funding can create a more stable level of funding over time for capital projects,
more predictable rates for customers, and may also provide the City with financial flexibility in
the future. It should be noted that the reduced rate funded capital in FY 2019-20 is due to
additional source of supply capital being funded through the O&M budget. The other funding
sources include reserve funds and long-term debt issuance, however the City prefers to limit debt
issuances if at all possible. However, given the nature, and level, of the capital projects, additional
long-term debt is projected during the next five-year time period.
The revenue requirement analysis for the City’s water utility was developed to determine the
necessary revenues to meet the costs of providing water service to the customers based on the
specific costs of the water utility. Provided below, in Table ES – 2, is a summary of the water
revenue requirement analysis (financial plan). A more detailed analysis of the water revenue
requirements can be found in Section 2 of this report.
Table ES - 2
Summary of the Water Revenue Requirement Analysis[1]
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues $18,468 $18,615 $18,764 $18,914 $19,066 $19,218
Other Revenues 2,010 1,945 2,033 2,126 2,179 2,234
Total Revenues $20,477 $20,561 $20,797 $21,040 $21,245 $21,452
Expenses
Total O & M $10,475 $12,808 $11,051 $11,470 $11,706 $11,981
Transfers 2,368 2,079 2,117 2,155 2,195 2,234
Rate Funded Capital 1,250 0 2,600 2,800 3,000 3,200
Debt Service 6,364 6,835 6,847 7,412 7,823 7,255
Reserve Funding 21 (138) 303 498 515 1,505
Total Revenue Requirement $20,477 $21,584 $22,918 $24,336 $25,238 $26,175
Total Bal. / (Def.) of Funds $0 ($1,024) ($2,121) ($3,296) ($3,994) ($4,723)
Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 17.4% 20.9% 24.6%
Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.5% 3.0% 3.0%
Add'l Revenue with Rate Adj. $0 $1,024 $2,121 $3,296 $3,994 $4,723
Bal. / (Def.) After Rate Adj. $0 ($0) $0 $0 $0 $0
[1] – Table figures are in thousands of dollars ($)
Executive Summary 5
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
As can be seen, the water revenue requirement has summed O&M, transfers, rate funded capital,
debt service, and transfers to / (from) reserves. The total revenue requirement is then compared
to the total sources of funds which are the rate revenues, at present rate levels, and other
miscellaneous revenues. From this comparison a balance or deficiency of funds in each year can
be determined. This deficiency of funds is then compared to the projection of rate revenues, at
“normal” consumption levels, to determine the level of revenue adjustment needed to meet the
costs of providing water service. It is important to note the “Bal. / (Def.) of Funds” row is
cumulative. That is, any adjustments in the initial years will reduce the deficiency in the later
years. Over the five-year projected period, rate revenues will need to be adjusted to reflect the
projected operating and capital needs. For the two year rate setting period of FY 2019-20 and FY
2020-21 rate revenues need to be increased 5.5% in each year.
Summary of the Water Cost of Service Analysis
A cost of service analysis determines the equitable (proportional) allocation of the revenue
requirement to the various customer classes of service (e.g., residential, multi-family, non-
residential, irrigation). The objective of the cost of service analysis determines the fair and
equitable manner to collect that revenue requirement from each class.
Given the development of the cost of service for the 2018 Rate Study, and the implementation
of the cost of service results for the 2018-19 adopted rates, the cost of service analysis was not
updated. Based on the results of the 2018 Rate Study, the proposed rates maintain the results of
the 2018 rate Study and are cost-based and equitable between the customer classes of service.
Summary of the Water Rate Design
The final step of the 2019 Update is the development of proposed water rates to collect the
desired levels of revenue, based on the results of the previous tasks. The 2018 Rate Study
established specific customer classes of service and rates based on the cost of service results for
the residential, multi-family, non-residential, and irrigation customers. The rate structure
adopted by the City Council in FY 2018-19 includes a monthly fixed charge that varies by meter
size and a consumption charge established through the cost of service analysis for each customer
class of service.
Given the implementation of cost of service rates in the 2018 Rate Study, and the projection of
rates for the subsequent four-year period, the 2019 Update maintained the existing rate
structure and cost of service adjustments as outlined in the 2018 Rate Study. Provided in Table
ES - 3 is a summary of the present and proposed water rates for the next two rate setting years.
Executive Summary 6
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table ES - 3
Summary of the Present and Proposed Water Rates
Present
Rate
FY
2019-20
FY
2020-21
Proposed Rate Adjustment 5.5% 5.5%
Fixed Charge - $/Month
Residential $20.61 $21. 74 $22.94
MF / Non-Res / Irr
3/4" & Less $21.61 $21.75 $22.94
1" 34.40 36.29 38.29
1 1/2" 68.65 72.43 76.41
2" 109.85 115.89 122.26
3" 206.10 217.44 229.40
4" 343.55 362.45 382.38
6" 686.95 724.73 764.59
8" 1,099.15 1,159.60 1,223.38
Usage Charge – S/Unit
0 – 5 CCF $5.90 $6.22 $6.56
5 – 12 CCF 6.87 7.25 7.65
12 + CCF 12.59 13.28 14.01
Multi-Family $6.73 $7.10 $7.49
Non-Residential $8.17 $8.62 $9.09
Irrigation $10.02 $10.57 $11.15
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure was maintained and only the level of the rates was adjusted.
Again, the updated rates reflect the cost of service analysis completed in 2018, and are essentially
identical to the rates developed and proposed in the 2018 Rate Study. Minor rounding
differences and changes in consumption patterns have resulted in minor revisions.
Summary of the Water Rate Study Update
Based on the results of the 2019 Update, HDR developed the following conclusions and
recommendations.
Based on the revenue requirement, HDR concluded that the City will need to adjust the level of
water rate revenues. HDR reached this conclusion for the following reasons:
Revenue adjustments are necessary to meet the operating and capital costs of providing
water service to City’s customers
The proposed revenue adjustments maintain the City’s financial health and provide long-
term sustainable funding levels
Executive Summary 7
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Based on the results of the cost of service analysis, HDR made the following conclusions and
provided the following recommendations:
The 2018 Rate Study cost of service analysis reflects the current customer characteristics
The proposed cost of service adjustments from the 2018 Rate Study are maintained in the
development of the proposed FY 2019-20 and FY 2020-21 water rates
Finally, HDR reached the following conclusions and provided the following recommendations
for the proposed water rates:
The proposed rates reflect the overall costs of providing water service (i.e., cost-based)
The current rate structure reflects contemporary and industry standard approaches
City should review the water rates annually in order to assess sufficiency
In summary, HDR recommends the City adopt the proposed water rates for FY 2019-20 and FY
2020-21 as developed in this 2019 Update to provide to provide sufficient funding for the
operating expenses and capital improvement program needs for the water utility.
Summary of the Wastewater Revenue Requirement Analysis
As with the City’s water utility, the wastewater utility revenue requirement analysis is the first
analytical step in the process. The revenue requirement analysis determines the adequacy of the
current wastewater rates to fund current and future operating and capital needs. From this
analysis, a determination can be made as to the overall level of rate revenue adjustments needed
to provide adequate and prudent funding for the wastewater system.
For the 2019 Update, the revenue requirement was developed for the projected time period (FY
2018-19 – FY 2023-24). As a practical matter, a multi-year time framework is recommended in an
attempt to identify any major expenses that may be on the horizon. By anticipating future
financial requirements, the City can begin planning for these changes sooner, thereby minimizing
short-term rate impacts and overall long-term rates. However, the focus of the 2019 Update was
on the next five-year rate setting period.
For the revenue requirement analysis a “cash basis” approach was utilized. The “cash basis”
approach is the most commonly used methodology by municipal utilities to set their revenue
requirement and is composed of O&M expenses, transfers, debt service payments, rate funded
capital, and to/from reserve funding. The primary financial inputs in the development of the
revenue requirement were the City’s FY 2018-19 budget documents, historical billed customer
and water consumption data, and the capital improvement plan. Budgeted O&M expenses were
projected using inflationary factors for the City’s various expenses to provide collection and
treatment services over the projected time period.
The proper and adequate funding of capital projects is important to help minimize rate increases
over time. A general financial guideline states that, at a minimum, a utility should fund an amount
equal to or greater than annual depreciation expense through rates. Annual depreciation
expense reflects the current investment (wastewater collection system and Water Resource
Executive Summary 8
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Recovery Facility) being depreciated or “losing” its useful life. Therefore, this portion of
investment needs to be replaced to maintain the existing level of infrastructure (and service
levels). However, it must be kept in mind that, in theory, annual depreciation expense reflects an
investment in infrastructure that was placed in service an average of 15 years ago, assuming a
30-year useful, depreciable, life. Simply funding an amount equal to annual depreciation expense
will not be sufficient to fund the replacement of existing infrastructure. Therefore, consideration
should be given to funding within rates some amount greater than annual depreciation expense
for renewals and replacements.
As a part of the 2019 Update, and in keeping with the best practices for capital project funding
approach, a concerted effort was made to increase the overall level of “pay-as-you-go” (rate)
funding. Provided below in Table ES - 4 is a summary of the amount of rate funded capital over
the five-year rate setting period.
Table ES – 4
Summary of the Wastewater Capital Improvement Plan[1]
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Total Capital Projects $18,773 $66,911 $45,854 $20,141 $6,446 $2,600
Less: Other Funding Sources
Capital Reserves $16,173 $64,311 $43,254 $18,991 $4,546 $0
Rate Funded Capital $2,600 $2,600 $2,600 $1,150 $1,900 $2,600
[1] – Table figures are in thousands of dollars ($)
As a point of reference, the City’s annual depreciation expense is approximately $2.6 million (FY
2015-16). This financial plan has placed the City’s rate funding for capital at $2.6 million in FY
2018-19 and remains flat for two years, is reduced for two years as the additional long-term debt
payments are included for the Water Resource Recovery Facility project, and returns to target
levels in the final year. This level of rate funded capital over the projected time prudently funds
the planned capital replacement needs. Given the level of capital improvements for the
wastewater system the City has assumed the need for long-term debt issuances to fund capital
improvements. In developing this financial plan, HDR and the City have attempted to minimize
rate impacts while funding the capital replacement plan projects of the City over the long-term.
This approach has strengthened the City’s “pay-as-you-go” funding for capital projects.
Given a projection of operating and capital expenses, a summary of the revenue requirement
analysis was developed. Provided below in Table ES - 5 is a summary of the revenue requirement
analysis (financial plan) for the City’s wastewater utility.
Executive Summary 9
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table ES - 5
Summary of the Wastewater Revenue Requirement Analysis[1]
FY 2018-
19
FY 2019-
20
FY 2020-
21
FY 2021-
22
FY 2022-
23
FY 2023-
24
Revenues
Rate Revenues $14,632 $14,749 $14,867 $14,986 $15,106 $15,227
Other Revenues 1,341 1,349 1,356 1,363 1,371 1,378
Total Revenues $15,974 $16,098 $16,223 $16,350 $16,477 $16,605
Expenses
Total O & M $7,376 $7,258 $7,558 $7,960 $8,144 $8,335
Transfers 2,455 2,170 2,211 2,253 2,296 2,340
Rate Funded Capital 2,600 2,600 2,600 1,150 1,900 2,600
Debt Service 1,281 4,114 4,116 6,990 6,986 6,987
To / (From) Reserves 2,262 768 1,340 442 318 272
Total Revenue Requirement $15,974 $16,909 $17,825 $18,794 $19,644 $20,535
Total Bal. / (Def.) of Funds $0 ($811) ($1,602) ($2,445) ($3,167) ($3,929)
Balance a % of Rate Adj. Req'd 0.0% 5.5% 10.8% 16.3% 21.0% 25.8%
Proposed Rate Adjustment 0.0% 5.5% 5.0% 5.0% 4.0% 4.0%
Add'l Revenue with Rate Adj. $0 $811 $1,602 $2,445 $3,167 $3,929
Bal. / (Def.) After Rate Adj. $0 $0 $0 $0 $0 $0
[1] – Table figures are in thousands of dollars ($)
As can be seen, the revenue requirement has summed the O&M, transfers, rate funded capital,
net debt service, and reserve funding. The total revenue requirement is then compared to the
total revenues which include the rate revenues - at present rate levels - and other miscellaneous
revenues. From this comparison a balance or deficiency of funds in each year can be determined.
This balance or deficiency of funds is then compared to the rate revenues to determine the level
of rate adjustment needed to meet the revenue requirement. It is important to note the “Bal. /
(Def.) of Funds” row is cumulative. For the two year rate setting period of FY 2019-20 and FY
2020-21, rate revenues need to be increased 5.5% and 5.0% respectively. As a point of reference,
this level of overall revenue adjustment is less than projected in the 2018 Rate Study given the
results of the most recent winter water average consumption and the City’s ability to maintain
overall costs.
Summary of the Wastewater Cost of Service Analysis
A cost of service analysis determines the equitable allocation of the revenue requirement to the
various customer classes of service (i.e., residential, multi-family, non-residential). The objective
of the cost of service analysis is different from determining the revenue requirement. A revenue
requirement analysis determines the utility’s overall financial needs, while the cost of service
Executive Summary 10
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
analysis determines the fair and equitable manner to collect that revenue requirement based on
each customer class’s wastewater characteristics.
Given the development of the cost of service for the 2018 Rate Study, and the implementation
of the cost of service results for the FY 2018-19 adopted rates, the cost of service analysis was
not updated. Based on the results of the 2018 Rate Study, the proposed FY 2019-20 rates
maintain the results of the study and are cost-based and equitable.
Summary of the Wastewater Rate Design
The final step of the 2019 Update is the development of proposed wastewater rates to collect
the desired levels of revenue, based on the results of the previous tasks. The 2018 Rate Study
established specific customer classes of service and rates based on the cost of service results for
the residential, multi-family, and non-residential customers. The rate structure adopted by the
City Council in FY 2018-19 includes a monthly fixed charge that varies by meter size and a
consumption charge established through the cost of service analysis. Residential and multi-family
customers are billed the usage charge up to the customer’s average winter water use. Non-
residential customers are billed the usage charge on all metered water consumption. This
difference in billing for winter water or all consumption is, in part, due to the non-residential
customers consumption is generally “indoor” use given the ability to have a separate irrigation
meter or no outdoor watering needs.
Given the implementation of cost of service rates in the 2018 Rate Study, and the projection of
rates for the subsequent four-year period, the 2019 Update maintained the existing rate
structure and cost of service adjustments as outlined in the 2018 Rate Study. Provided in Table
ES - 6 is a summary of the present and proposed wastewater rates for the next two rate setting
years.
Executive Summary 11
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table ES – 6
Summary of the Present and Proposed Wastewater Rates
Present Rates FY 2019-20 FY 2020-21
Proposed Rate Adjustment 5.5% 5.0%
Fixed Charge - $/Month
Residential $18.69 $19.72 $20.71
MF / Non-Res
3/4" & Less $18.69 $19.72 $20.71
1" 31.21 32.93 34.58
1 1/2" 62.24 65.66 68.94
2" 99.62 105.10 110.36
3" 186.90 197.18 207.04
4" 311.56 328.70 345.14
6" 622.93 657.19 690.05
8" 996.72 1,051.54 1,104.12
10" 1,432.94 1,511.75 1,587.34
Usage Charge - $/Unit
Res / MF / Non-Res $7.85 $8.28 $8.69
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure has been maintained and only the level of the rates has been
adjusted. Again, the updated rates reflect the cost of service analysis completed in 2018, and
maintain the relationships as developed in the 2018 Rate Study. The primary difference is the
lower overall revenue adjustment necessary to fund operating and capital needs for the next two
year period.
Summary of the Wastewater Rate Study Update
Based on the results of the 2019 Update, HDR developed the following conclusions and
recommendations.
Based on the revenue requirement, HDR concluded that the City will need to adjust the level of
wastewater rate revenues. HDR reached this conclusion based on the following:
Revenue adjustments are necessary to meet the operating and capital costs of providing
water service to City’s customers, of which a large portion is driven by the funding of
capital projects related to the WRRF upgrade
Revenue adjustments are necessary to provide adequate funding of the City’s capital
projects on a pay-as-you-go basis for renewal and replacement needs
The proposed revenue adjustments maintain the City’s financial health and provide long-
term sustainable funding levels
Executive Summary 12
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Based on the results of the cost of service analysis, HDR made the following conclusions and
provided the following recommendations:
The 2018 study cost of service analysis reflects the current customer characteristics
The proposed cost of service adjustments from the 2018 Rate Study are maintained in the
development of the proposed FY 2019-20 and FY 2020-21 wastewater rates
Finally, HDR has reached the following conclusions and provided the following
recommendations for the proposed wastewater rates:
The proposed rates reflect the overall costs of providing wastewater service (i.e., cost-
based)
The current rate structure reflects contemporary and industry standard approaches
City should review the wastewater rates annually in order to assess sufficiency
In summary, HDR recommends the City adopt the proposed wastewater rates for FY 2019-20 and
FY 2020-21 as developed in this report to provide to provide sufficient funding for the operating
expenses and capital improvement program needs for the wastewater utility.
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Development of the Water Rate Study Update
1.1 Introduction
This section describes the development of the City’s water utility rate study update (2019
Update). The basis for the study was the City’s adopted budget (FY 2018-19), current capital
improvement plan, historical customer consumption data, system operating characteristics, and
the 2018 comprehensive water rate study. Based on the City’s specific costs, and customer
characteristics, cost-based rates were developed to prudently fund the water utility. Provided in
this section is the detailed summary of the City’s water rate study update and proposed water
rates for FY 2019-20 and FY 2020-21.
1.2 Water Revenue Requirement
The City provided detailed revenue and expenses data for the water system that allowed for the
development of the revenue requirement. The revenue requirement analysis is the first analytical
step in the comprehensive rate study process. This analysis determines the adequacy of the City’s
overall water rates at current rate levels. From this analysis, a determination can be made as to
the overall level of revenue (rate) adjustment needed to provide adequate and prudent funding
for both operating and capital needs over the long-term. HDR developed an independent analysis
based on information provided by the City to develop the Study conclusions and
recommendations.
1.2.1 Determining the Water Revenue Requirement
In developing the City’s water revenue requirement, the water utility, must financially “stand on
its own” and be properly funded. That is, no rate revenues are being transferred from other City
funds or enterprises in order to support the water utility. As a result, the water revenue
requirement analysis assumes the full and proper funding needed to operate and maintain the
water system on a financially sound and prudent basis.
1.2.2 Projecting Rate and Miscellaneous Revenues
The City receives revenue from two primary sources, water rates and other revenues. Water rate
revenues are based on the current water rate structure and the current customer data. Other
revenue includes items such as interest, recycled water sales, fees, and miscellaneous revenues.
The City is projected to receive approximately $18.5 million in water rate revenues in FY 2018-
19. The projection of revenue is based on the recent customer consumption levels and current
adopted rates. HDR worked with the City to update the consumption levels of each customer
class of service. Over the planning horizon of the 2019 Update, customer growth is expected to
be around 0.8% resulting in a slight increase in the projection of water rate revenues to
approximately $19.2 million by FY 2023-24.
In addition to rate revenues, the City also receives a variety of other revenues. Other revenues
are projected to be approximately $2.0 million in FY 2018-19. Miscellaneous revenues are
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
expected to remain relatively flat over the review and are projected to be approximately $2.2
million by FY 2023-24.
On a combined basis, taking into account both rate revenues and miscellaneous revenues, the
City’s total projected water revenues are projected to be approximately $20.5 million in FY 2018-
19, increasing gradually to $21.5 million by FY 2023-24. It is important to note that these revenue
projections do not include any revenue adjustments and the increase is the result of assumed
customer growth on the water system as well as interest earned on cash reserves.
1.2.3 Projecting Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses are incurred by the City to operate and maintain
the water system. The costs incurred in this area are expensed during the current year and are
not capitalized or depreciated. In general, operation and maintenance (O&M) expenses are
grouped into a number of different functional categories. To begin the process of projecting O&M
expenses over the planning horizon, escalation factors were developed. Escalation factors were
developed for the basic types of expenses incurred: labor, benefits, materials & supplies,
chemicals, etc. The City’s escalation factors were projected based upon recent inflationary
trends. For the 2019 Update planning period, the escalation factors were assumed to be
approximately 2.0% - 4.8% per year, depending upon the specific cost and expense year.
Given the adopted FY 2018-19 budgeted O&M expenses, HDR then projected the O&M expenses
based on the previously mentioned escalation factors over the projected time period. Total water
operation and maintenance expenses for the City are projected to be approximately $10.5 million
in FY 2018-19. Water O&M expenses are projected to increase to approximately $12.0 million by
FY 2023-24 as a result of estimated inflation over the time period.
1.2.4 Projection of Transfers
The City’s water utility pays the general fund based on the cost allocation plan for indirect costs
and for the cost of services provided. For FY 2018-19, it is budgeted at $2.4 million which
decreases the following year due to a one-time expense and then after that increases annually
by 1.8% and reaches $2.2 million by FY 2023-24.
1.2.5 Projection of Debt Service
Debt can serve a variety of functions for the utility. For example, long-term debt can provide
intergenerational equity as the assets purchased with the debt are paid for by the current
customers utilizing the services. Additionally, issuing long-term debt can help to moderate rate
impacts over time lessening the impact of capital projects by spreading the cost out over a longer
time period. As a note, HDR is not providing municipal advice as it relates to bonds, terms, or
structures of debt issuance. Rather, this study is simply aims to identify the existing annual debt
service payments and projection future funding needs based on the City’s projection of long-term
borrowing terms and conditions.
The City’s water utility currently has six existing long-term debt issuances and the annual debt
service for FY 2018-19 is $6.8 million in total. Over the review period of FY 2018-19 through FY
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
2023-24, two of the issuances are retired. However, the City has estimated the need to issue
additional long-term debt issuances totaling $28.1 million. The debt is related to the WTP Energy
Efficiency Project, the water utilities’ share of the WRRF debt, and the Reservoir 2 Replacement
project. The total debt service increases in FY 2019-20 to $7.2 million, in FY 2021-22 to $7.8, and
to $8.2 million in FY 2022-23 but is then decreased in the following years (FY 2023-24) via debt
retirement to a total annual debt service of $7.7 million. The 2019 Update assumes that $400,000
of development impact fees are used annually to pay debt service in order to offset the impact
of new customer growth on the water resources, treatment plant, and distribution system.
1.2.6 Projecting Rate Funded Capital
A key component in the development of the water revenue requirement was properly and
adequately funding capital replacement needs. One of the major issues facing many utilities
across the U.S. is the amount of deferred capital projects and the funding pressure from
growth/expansion-related improvements. The proper and adequate funding of capital projects
is an important issue for all water utilities and is not just a local issue or concern of the City.
In general, there are three types of capital projects that a utility may need to fund. These include
the following types:
Renewal and replacement projects
Growth / capacity expansion projects
Regulatory-related projects
A renewal and replacement project is essentially a project required for maintaining the existing
system that is in place today. As the existing plant or pipelines become worn out, obsolete, etc.,
the utility should be making continuous investments to maintain the integrity of the facilities. To
address these needs, the City developed a capital improvement plan (CIP) which aides in
identifying and prioritizing capital replacement on the system. The CIP also includes projects to
expand the capacity of facilities to accommodate future capacity needs (customers). Finally,
certain projects may be a function of a regulatory requirement in which the Federal or State
government mandates the need for an improvement to the system to meet a regulatory
standard. Understanding these different types of capital projects is important because the way
in which projects are funded may vary by the type of capital project. For example, renewal and
replacement projects may be paid for via rates and funded on a “pay-as-you-go basis”. In contrast
to this, growth or capacity expansion projects may be funded via the collection of development
impact fees (i.e. growth-related charges) in which new development pays a proportional and
equitable share of the cost of facilities necessary to serve their development (impact). Finally,
regulatory projects may be funded by a variety of different means, which may include rates, long-
term debt, grants, etc.
Provided in Table 1 - 1 is the detail of the capital funding plan for the City’s water system that is
included within the development of the proposed revenue requirement.
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table 1 – 1
Summary of the Water Capital Improvement Plan[1]
FY 2018-
19
FY 2019-
20
FY 2020-
21
FY 2021-
22
FY 2022-
23
FY 2023-
24
Total Capital Improv. Projects $9,114 $10,151 $11,778 $3,763 $9,393 $9,445
Less: Other Funding Sources
Capital Fund Reserves $7,864 $10,151 $9,178 $963 $6,393 $6,245
Total Other Funding Sources $7,864 $10,151 $9,178 $963 $6,393 $6,245
Rate Funded Capital $1,250 $0 $2,600 $2,800 $3,000 $3,200
[1] – Table figures are in thousands of dollars ($)
As can be seen in Table 1 - 1, the funding level for projects vary from year-to-year. While the total
amount required to fund a project may vary from year to year, the rate study capital funding plan
has attempted to provide a consistent funding source for capital improvements. In this case, rates
will annually fund an amount ranging from $1.3 million to $2.7 million (as shown in Table 2 - 1).
As a point of reference, the City’s annual depreciation expense is approximately $2.6 million for
FY 2015-16. A desirable and recommended minimum funding target for rate funded capital is an
amount equal to or greater than annual depreciation expense. The level of capital funding
through rates has been developed to reflect the capital replacement needs of the City over the
review period balanced with the use of available reserves and the issuance of approximately
$28.1 million of long-term debt. As a note, in FY 2019-20, where rate funded capital is $0, this is
due to approximately $2 million of capital related expenses for source of supply that is included
in the O&M expense category. In developing this financial plan, HDR and the City have attempted
to minimize rate impacts while funding the planned capital replacement projects of the water
system.
1.2.7 Summary of the Water Revenue Requirement
Given the above projections of revenues and expenses, a summary of the City’s water revenue
requirement analysis can be developed. In developing the revenue requirement analysis,
consideration was given to the financial planning considerations of the City. In particular,
emphasis was placed on minimizing rates, yet still having adequate funds to support the
operational activities and capital replacement needs throughout the projected time period.
Detailed exhibits of this analysis can be found in the Water Technical Appendix Exhibits 1 - 5.
Provided in Table 1 – 2 is a summary of the revenue requirement analysis performed for the City’s
water utility.
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table 1 - 2
Summary of the Water Revenue Requirement Analysis[1]
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues $18,468 $18,615 $18,764 $18,914 $19,066 $19,218
Other Revenues 2,010 1,945 2,033 2,126 2,179 2,234
Total Revenues $20,477 $20,561 $20,797 $21,040 $21,245 $21,452
Expenses
Total O & M $10,475 $12,808 $11,051 $11,470 $11,706 $11,981
Transfers 2,368 2,079 2,117 2,155 2,195 2,234
Rate Funded Capital 1,250 0 2,600 2,800 3,000 3,200
Debt Service 6,364 6,835 6,847 7,412 7,823 7,255
Reserve Funding 21 (138) 303 498 515 1,505
Total Revenue Requirement $20,477 $21,584 $22,918 $24,336 $25,238 $26,175
Total Bal. / (Def.) of Funds $0 ($1,024) ($2,121) ($3,296) ($3,994) ($4,723)
Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 17.4% 20.9% 24.6%
Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.5% 3.0% 3.0%
Add'l Revenue with Rate Adj. $0 $1,024 $2,121 $3,296 $3,994 $4,723
Bal. / (Def.) After Rate Adj. $0 ($0) $0 $0 $0 $0
[1] – Table figures are in thousands of dollars ($)
The revenue requirement for the City’s water utility has summed the O&M, transfers, rate funded
capital, and debt service. The total revenue requirement is then compared to the total revenues
which are the rate revenues, at present rate levels, and other miscellaneous revenues. From this
comparison a balance or deficiency of funds in each year can be determined. This balance or
deficiency of funds is then compared to the rate revenues to determine the level of rate revenue
adjustment needed to meet the revenue requirement.
As shown in Table 1-2, the overall level of rate revenues should be increased to prudently fund
the water system operating and capital needs. As a point of reference, the results of the water
revenue requirement for the 2019 Update are the same as the results developed in the 2018
Rate Study.
The revenue requirements developed in Table 1 - 2 was developed to meet financial planning
objectives of the City. More specifically, the City desires to adequately and prudently fund its
water operating and capital needs. Table 1 - 2 also includes a set of proposed rate revenue
adjustments (blue band) which are sufficient to meet the total revenue requirement over the
projected time period. Over the next two year period, the period for which rates are being
proposed, the total deficiency of revenues is 11.3%. The proposed revenue adjustments are a
function of assumed inflation over this time period, coupled with the need to increase the capital
Water Rate Study Update 18
City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
improvement funding from rates (renewal and replacement funding), and meet minimum
reserve and debt service coverage ratio levels. If water revenue adjustments are not
implemented, the City will not have sufficient funding to prudently operate and maintain the
water system.
1.2.8 Reserve Levels
A key component of determining the financial health and long-term sustainability of the City’s
water utility is to review the level of available reserve levels after the proposed rate adjustments.
Reserves play many different purposes. For the City’s water utility, the reserve funds are in place
to meet the City’s ongoing cash flow needs as well as accomplishing a number of target
minimums. For the operating fund, a target of 90 days of annual O&M expenses is utilized and is
approximately $2.6 million in FY 2018-19. There is currently no capital component of the target,
however, a general rule of thumb is to set a minimum equal to the average annual capital project
funding needs, excluding “one-time” major projects (e.g., water treatment plant upgrade). For
the review period, the average annual capital is approximately $8.9 million. Over the same time
period, the capital fund reserve averages an ending balance of $12.8 million. The final component
of the target for the reserve funds is the rate stabilization component which is 5% of rate
revenues and for FY 2018-19 is $924,000. Over the projected time period the City meets the
minimum target reserve fund balances. It is important for the City to review the reserve funds
annually and maintain the target minimums.
1.2.9 Consultant’s Conclusion of the Revenue Requirement
HDR concludes that the City will need to adjust the level of water rate revenues as noted in Table
2-2. HDR reached this conclusion for the following reasons:
Revenue adjustments are necessary to meet the operating and capital costs of providing
water service to City’s customers
The proposed revenue adjustments maintain the City’s financial health and provide long-
term, sustainable funding levels
The City should review the level of water rate revenues annually in order to assess
sufficiency
The revenue requirement developed above has indicated the need for annual revenue increases
to adequately fund the City’s operating and capital needs for the water utility. The proposed
increases are necessary to adequately and prudently fund the City’s water system operating and
capital expenses.
1.3 Water Cost of Service Analysis Summary
The next step in the 2019 Update is the review of the cost of service analysis. A cost of service
analysis equitably and proportionally allocates the costs of providing water service between the
various customer classes of service based on the approaches outlined in the American Water
Works M1 Manual. The 2018 Rate Study resulted in the establishment of customer classes of
service and the City Council adopted rates that included cost of service adjustments.
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Given the completion of the comprehensive analysis in the 2018 Rate Study, and the 2018-19
rates adopted by the City Council being based on the cost of service results, the 2019 Update
maintained the prior cost of service relationships for the development of proposed rates for FY
2019-20 and FY 2020-21.
1.4 Water Rate Design
The final step of the 2019 Update is the development of proposed water rates to collect the
desired levels of revenue, based on the results of the previous tasks. The 2018 Rate Study
established specific customer classes of service and rates based on the cost of service results for
the residential, multi-family, non-residential, and irrigation customers. The 2019 Update is a
continuation of the 2018 Rate Study and reflects the updated customer consumption
characteristics and projection of revenue needs. Provided below is a discussion of the
development of the proposed water rates for FY 2019-20 and FY 2020-21.
1.4.1 Development of Cost-Based Water Rates
Developing cost-based and equitable rates is of paramount importance in the development of
the proposed water rates. While always a key consideration in developing rates, meeting the
legal requirements, and documenting the steps taken to meet the requirements, has been in the
forefront with the recent legal challenges in the State of California on utility rates. Given this, the
City’s proposed water rates have been developed to meet the legal requirements of California
constitution article XIII D, section 6 (Article XIII D), or Proposition 218. A key component of Article
XIII D is the development of rates which reflect the cost of providing service and are
proportionally allocated among the various customer classes of service. The American Water
Works Association (AWWA) M1 Manual clearly delineates various methodologies which may be
used to establish cost-based rates. HDR reviewed the City’s proposed water rates based on the
methodologies provided in the AWWA M1 Manual to meet the requirements of Article XIII D and
recent legal decisions to provide an administrative record of the steps taken to establish the City’s
water rates.
HDR is of the opinion that the noticed rates comply with legal requirements of Article XIII D. HDR
reached this conclusion based upon the following:
x The revenue derived from water rates does not exceed the funds required to provide the
property related service (i.e., water service). The proposed rates are designed to collect the
overall revenue requirements of the City’s water utility.
x The revenues derived from water rates shall not be used for any purpose other than that
for which the fee or charge is imposed. The revenues derived from the City’s water rates are
used exclusively to operate and maintain the City’s water system.
x The amount of a fee or charge imposed upon a parcel or person as an incident of property
ownership shall not exceed the proportional costs of the service attributable to the parcel.
The cost of service analysis in the 2018 Rate Study was specifically developed to focus on the
issue of proportional assignment of costs to customer classes of service, and this study
maintains the cost of service relationships and proportionality. The proposed rates have
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
appropriately grouped customers into customer classes of service (residential, multi-family,
commercial, irrigation) that reflect the varying consumption patterns and system
requirements of each customer class of service. The grouping of customers and rates into
these classes of service creates the equity and proportionality expected under Article XIII D
by having differing rates by customer classes of service which reflect both the level of revenue
to be collected by the utility, but also the manner in which these costs are incurred and
equitably assigned to customer classes of service based upon their proportional impacts and
burdens on the City’s water system and/or water resources.
1.4.2 Overview of the Water Rate Structure
As mentioned, the 2018 Rate Study established the current rate structure based on the customer
classes of service and cost of service results. The rate structure is based on the customer classes
of service with each having a unique rate structure.
For residential customers, the structure includes a monthly flat fixed charge and a three-tier
charge. As part of this study, the tiers were reviewed and compared to recent consumption
patterns. It was determined the tiers established in the 2018 Rate Study continue to reflect
current consumption patterns. Given this, the sizing of the tiers was maintained and only the
pricing of the tiers was adjusted to reflect the overall revenue needs.
The multi-family rate structure includes a monthly fixed based on meter size and a uniform
consumption charge. This rate structure reflects the customer characteristics of the multi-family
customers.
Similarly, the non-residential customers will have a fixed charge that varies by meter size and a
uniform consumption charge. However, the consumption charge specifically reflects the
characteristics of the non-residential customers and will vary from the multi-family and irrigation
customer consumption charges.
Finally, the irrigation customers will have the same fixed meter charge by meter size as multi-
family and non-residential but again, the uniform consumption charge will be unique to the
irrigation customer class and consumption characteristics.
1.4.3 Present and Proposed Water Rates
Given the implementation of cost of service rates in the 2018 Rate Study, and the study
projection of rates for the subsequent four year period (FY 2019-20 through FY 2022-23), the
2019 Update maintains the existing rate structure and cost of service adjustments as outlined in
the 2018 Rate Study. Provided in Table 1 - 3 is a summary of the present and proposed water
rates for the next two rate setting years.
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Table 1 - 3
Summary of the Present and Proposed Water Rates
Present
Rate
FY
2019-20
FY
2020-21
Proposed Rate Adjustment 5.5% 5.5%
Fixed Charge - $/Month
Residential $20.61 $21. 74 $22.94
MF / Non-Res / Irr
3/4" & Less $21.61 $21.75 $22.94
1" 34.40 36.29 38.29
1 1/2" 68.65 72.43 76.41
2" 109.85 115.89 122.26
3" 206.10 217.44 229.40
4" 343.55 362.45 382.38
6" 686.95 724.73 764.59
8" 1,099.15 1,159.60 1,223.38
Usage Charge – S/Unit
0 – 5 CCF $5.90 $6.22 $6.56
5 – 12 CCF 6.87 7.25 7.65
12 + CCF 12.59 13.28 14.01
Multi-Family $6.73 $7.10 $7.49
Non-Residential $8.17 $8.62 $9.09
Irrigation $10.02 $10.57 $11.15
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure was maintained and only the level of the rates were adjusted.
Again, the updated rates reflect the cost of service analysis completed in 2018, and are essentially
identical to the rates developed and proposed in the 2018 Rate Study. Minor rounding
differences and changes in consumption patterns have resulted in minor revisions.
1.5 Summary of the Water Rate Study Update
Based on the results of the 2019 Update, HDR developed the following conclusions and
recommendations.
Based on the revenue requirement, HDR concludes that the City will need to adjust the level of
water rate revenues. HDR reached this conclusion for the following reasons:
Revenue adjustments are necessary to meet the operating and capital costs of providing
water service to City’s customers
The proposed revenue adjustments maintain the City’s financial health and provide long-
term sustainable funding levels
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City of San Luis Obispo - 2019 Water & Wastewater Rate Study Update
Based on the results of the cost of service analysis, HDR made the following conclusions and
recommends:
The 2018 study cost of service analysis reflects the current customer characteristics
The proposed cost of service adjustments from the 2018 Rate Study are maintained in the
development of the proposed FY 2019-20 and FY 2020-21 water rates
Finally, HDR reached the following conclusions and recommends the proposed water rates:
The proposed rates reflect the overall costs of providing water service (i.e., cost-based)
The current rate structure reflects contemporary and industry standard approaches
City should review the water rates annually in order to assess sufficiency
In summary, HDR recommends the City adopt the proposed water rates for FY 2019-20 and FY
2020-21 as developed in this 2019 Update to provide to provide sufficient funding for the
operating expenses and capital improvement program needs for the water utility.
Wastewater Rate Study Update 23
City of San Luis Obispo –Water & Wastewater Rate Study Update
Development of the Wastewater Rate Study Update
2.1 Introduction
This section describes the development of the City’s wastewater utility 2019 Update. The basis
for the study was the City’s adopted budget, current capital improvement plan, historical
customer data, system operation characteristics, and 2018 Rate Study. Based on the City’s
specific costs, and customer characteristics, cost-based rates were developed to prudently fund
the wastewater utility. Provided in this section is the detailed summary of the City’s wastewater
rate study update.
2.2 Wastewater Revenue Requirement
This section describes the development of the revenue requirement analysis for the City’s
wastewater utility. The revenue requirement analysis is the first analytical step in the 2019
Update process. From this analysis, a determination can be made as to the overall level of rate
adjustments needed to provide adequate and prudent funding for both the operating and capital
needs of the wastewater utility. The primary objective of the 2019 Update is to develop cost-
based and equitable rates while attempting to minimize the impacts to the utility’s customers.
2.2.1 Determining the Revenue Requirement
In developing the City’s wastewater revenue requirement, the utility, must financially “stand on
its own” and be properly funded. That is, revenues are not being transferred from other City
enterprise or general funds in order to support the wastewater utility. As a result, the revenue
requirement analysis assumes the full and proper funding needed to operate and maintain the
wastewater system on a financially sound and prudent basis.
2.2.2 Projecting Rate and Other Miscellaneous Revenues
In total, the City’s wastewater utility is projected to receive approximately $14.6 million in rate
revenue in FY 2018-19. Over the review period, the study has assumed 0.8% annual customer
growth. Based on current rates, and estimated customer growth, the FY 2023-24 rate revenues
are projected to be approximately $15.2 million.
In addition to rate revenues, the City also receives miscellaneous revenues. These are revenues
related to interest income, fees, permits, etc. In total, the City is projected to receive
approximately $1.3 in FY 2018-19 in miscellaneous revenues. The 2019 Update assumes no
growth of other or miscellaneous revenues, however, other revenues do increase slightly over
the review period as the revenues from Cal Poly increase as a result of the proposed rate
adjustments. In FY 2023-24, it is projected that the City will receive approximately $1.4 million in
miscellaneous revenues.
On a combined basis - taking into account the rate revenues and the miscellaneous revenues -
the City’s wastewater utility has total projected revenues of approximately $16.0 million in FY
2018-19, increasing to approximately $16.6 million by FY 2023-24 as a result of estimated growth
Wastewater Rate Study Update 24
City of San Luis Obispo –Water & Wastewater Rate Study Update
as noted above. The assumptions used for growth can be found in Exhibit 2 of the Technical
Appendix.
2.2.3 Projecting Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses are incurred by the City to maintain the wastewater
collection and treatment system. The starting point of the projection of O&M expenses was the
adopted FY 2018-19 budget. Budgeted O&M expenses were projected over the 2019 Update time
period based on historical inflationary factors. These factors took into consideration the City’s
historical cost increases and projected increases. The factors ranged from 2.0% to 12.5% annually
for the various types of expenses (e.g., salaries, benefits, materials & supplies, etc.). In total, O&M
expenses were projected at an annual inflation rate of approximately 2.5% over the rate study
time period. The total operation and maintenance expenses budgeted for the wastewater utility
are projected to be $7.4 million in FY 2018-19. Over the review period, the total O&M expenses
are projected to increase to approximately $8.3 million by FY 2023-24 with the expected
inflationary impacts.
2.2.4 Projection of Transfers
Similarly to the water utility, the City’s wastewater utility pays the general fund for benefits it
receives based on the cost allocation plan as well as any costs of services provided. For FY 2018-
19, the transfers are budgeted at $2.5 million. There is a one-time expense for the ERP
implementation and then the transfers decrease to $2.2 million in FY 2019-20. Thereafter, it
increases annually based on the escalations and reaches $2.3 million by FY 2023-24.
2.2.5 Projecting Capital Funding Needs
A key component in the development of the wastewater revenue requirement was properly and
adequately funding capital improvement needs. One of the major issues facing many utilities
across the U.S. is the amount of deferred capital projects and the funding pressure from
growth/expansion-related improvements. The proper and adequate funding of capital projects
is an important issue for all utilities and is not just a local issue or concern of the City.
In general, there are three types of capital projects that the City may need to fund. These include
the following types:
Renewal and replacement projects
Growth/capacity expansion projects
Regulatory-related projects
A renewal and replacement project is essentially maintaining the existing system that is in place
today. As the City’s existing wastewater collection system and Water Resource Recovery Facility
(WRRF) reaches the end of its useful life, becomes obsolete, etc., the City should be making
continuous investments to maintain the integrity of its facilities. Currently, the City has developed
capital improvement plan which will help guide and prioritize capital projects over time.
Additionally, the City may make capital investments to expand the capacity of facilities to
accommodate future customers. The capital improvement plan will also address these needs and
Wastewater Rate Study Update 25
City of San Luis Obispo –Water & Wastewater Rate Study Update
utilizes close relationships to developers so that timing and necessity of improvements can be
planned appropriately for. Finally, certain projects may be a function of a regulatory requirement
in which the Federal or State government mandates the need for an improvement to the system
to meet a regulatory standard. Understanding these different types of capital projects is
important because it may help to explain why costs are increasing and the cost drivers for any
needed rate adjustment. In addition, and more importantly, the way in which projects are funded
may vary by the type of capital project. For example, renewal and replacement projects may be
paid for via rates and funded on a “pay-as-you-go basis”. In contrast to this, growth or capacity
expansion projects may be funded through the collection of connection fees (i.e., growth-related
charges) in which new development pays a proportional and equitable share of the cost of
improvements required as a result of their connection (impact). Finally, regulatory projects may
be funded by a variety of different means, which may include rates, long-term debt, grants, etc.
While the above discussion appears to neatly divide capital projects into three clearly defined
categories, the reality of working with specific capital projects may be more complex. For
example, a pump may be replaced, but while being replaced, it is up-sized to accommodate
greater capacity. There are many projects that share these “joint” characteristics. At the same
time, projects may not be “replacement” related, but rather “improvement” related. Provided
below in Table 2 - 1 is a summary of the wastewater capital funding analysis.
Table 2 – 1
Summary of the Wastewater Capital Improvement Plan[1]
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Total CIP $18,773 $66,911 $45,854 $20,141 $6,446 $2,600
Less: Other Funding $16,173 $64,311 $43,254 $18,991 $4,546 $0
Rate Funded Capital $2,600 $2,600 $2,600 $1,150 $1,900 $2,600
[1] – Table figures are in thousands of dollars ($)
A large component of the City’s wastewater capital improvement plan is the WRRF Project with
a current estimated cost of $138.4 million over the review period. Although the project is
financed via long-term debt and does not utilize annual rate funding, it does significantly impact
the annual debt service and borrowing capacity. While the total amount of a project may vary
from year to year, this wastewater capital funding plan has attempted to provide a consistent
funding source for the replacement fund. In this case, the utility’s rates will annually fund an
amount ranging from $1.2 million to $2.6 million. The timing and level of annual debt service has
resulted in a decrease in rate funded capital in FY 2021-22 and FY 2022-23, yet still provides
adequate funding for renewal and replacement capital during those time periods while utilizing
available reserves to fund the difference. As a point of reference, the City’s annual depreciation
expense is approximately $2.6 million in FY 2015-16. A desirable funding target for rate funded
capital is an amount equal to or greater than annual depreciation expense. It is important to note
and understand that depreciation expense is not the same as replacement cost. Thus, funding an
Wastewater Rate Study Update 26
City of San Luis Obispo –Water & Wastewater Rate Study Update
amount which exceeds depreciation expense is both prudent and appropriate. As noted, to help
establish a prudent level of annual replacement funding through rates, HDR worked with City
staff to develop a funding plan for the capital projects. In developing this financial plan, HDR and
the City have attempted to minimize rate impacts while funding the planned capital replacement
projects of the City.
2.2.6 Projection of Debt Service
The City’s wastewater utility currently has five outstanding long-term debt issuances and one is
retired in FY 2019-20. The existing debt service for FY 2018-19 is $1.4 million. With the retirement
of the radio system upgrade debt in FY 2019-20 and the addition of the WRRF Project issuance,
debt service is expected to increase, and reach $7.1 million by FY 2023-24. No additional long-
term debt issuance, other than for the WRRF upgrade, are assumed over the review period.
2.2.7 Summary of the Wastewater Revenue Requirement
Given the above projections of revenues and expenses, a summary of the wastewater revenue
requirement analysis can be developed. In developing the revenue requirement analysis,
consideration was given to the financial planning considerations of the City. In particular,
emphasis was placed on attempting to minimize rates, yet still have adequate funds to support
the operational activities and capital projects throughout the projected time period. Presented
below in Table 2 – 2 is a summary of the City’s projected wastewater revenue requirement.
Detailed exhibits of this analysis can be found in the Technical Appendix (Exhibits 1 – 5).
Wastewater Rate Study Update 27
City of San Luis Obispo –Water & Wastewater Rate Study Update
Table 2 - 2
Summary of the Wastewater Revenue Requirement Analysis[1]
FY 2018-
19
FY 2019-
20
FY 2020-
21
FY 2021-
22
FY 2022-
23
FY 2023-
24
Revenues
Rate Revenues $14,632 $14,749 $14,867 $14,986 $15,106 $15,227
Other Revenues 1,341 1,349 1,356 1,363 1,371 1,378
Total Revenues $15,974 $16,098 $16,223 $16,350 $16,477 $16,605
Expenses
Total O & M $7,376 $7,258 $7,558 $7,960 $8,144 $8,335
Transfers 2,455 2,170 2,211 2,253 2,296 2,340
Rate Funded Capital 2,600 2,600 2,600 1,150 1,900 2,600
Debt Service 1,281 4,114 4,116 6,990 6,986 6,987
To / (From) Reserves 2,262 768 1,340 442 318 272
Total Revenue Requirement $15,974 $16,909 $17,825 $18,794 $19,644 $20,535
Total Bal. / (Def.) of Funds $0 ($811) ($1,602) ($2,445) ($3,167) ($3,929)
Balance a % of Rate Adj. Req'd 0.0% 5.5% 10.8% 16.3% 21.0% 25.8%
Proposed Rate Adjustment 0.0% 5.5% 5.0% 5.0% 4.0% 4.0%
Add'l Revenue with Rate Adj. $0 $811 $1,602 $2,445 $3,167 $3,929
Bal. / (Def.) After Rate Adj. $0 $0 $0 $0 $0 $0
[1] – Table figures are in thousands of dollars ($)
As can be seen, the revenue requirement has summed the O&M, transfers, rate funded capital,
net debt service and the reserve funding. The total revenue requirement is then compared to the
total sources of funds which include the rate revenues, at present rate levels, and other
miscellaneous revenues. From this comparison a balance or deficiency of funds in each year can
be determined. This balance or deficiency of funds is then compared to the rate revenues to
determine the level of rate adjustment needed to meet the revenue requirement. It is important
to note the “Bal. / (Def.) of Funds” row is cumulative. That is, any adjustments in the initial years
will reduce the deficiency in the later years.
As shown in Table 2-2, the overall level of wastewater rate revenues should be increased to
prudently fund the wastewater system operating and capital needs. As a point of reference, the
results of the wastewater revenue requirement for this Study are slightly lower than the results
developed in the 2018 Rate Study. This is due to a change in the overall revenues and expenses
over the last year.
The revenue requirements developed in Table 2 - 2 has been developed to meet financial
planning objectives of the City. More specifically, the City desires to adequately and prudently
fund its wastewater operating and capital needs. Table 2 - 2 has also included a set of proposed
Wastewater Rate Study Update 28
City of San Luis Obispo –Water & Wastewater Rate Study Update
rate revenue adjustments (blue band) which are sufficient to meet the total revenue requirement
over the projected time period. Over the next two year period, the period for which rates are
being proposed, the total deficiency of revenues is 10.8%. The proposed revenue adjustments
are a function of assumed inflation over this time period, coupled with the need to increase the
capital improvement funding from rates (renewal and replacement funding), fund the WRRF
Project, and meet minimum reserve and debt service coverage ratio levels. If wastewater
revenue adjustments are not implemented, the City will not have sufficient funding to prudently
operate and maintain the system or meet the financial requirements of issuing long-term debt
for the WRRF Project.
2.2.8 Reserve Levels
As with the water utility, a key element of determining the financial health and sustainability of
the City’s wastewater utility is to review the level of available reserve levels after the proposed
revenue adjustments. The reserve funds are in place to meet the City’s annual cash flow needs
as well as accomplishing a number of target minimums. For the operating fund, a target of 90
days of annual O&M expenses and is approximately $1.8 million in FY 2018-19. The capital fund
component of the target is the average annual capital projects and for FY 2018-19 is $3.7 million.
The final component is the rate stabilization fund which has a target of 5.0% of rate revenues and
for FY 2018-19 is approximately $732,000. Over the projected time period the City is meeting the
minimum target levels for each of the reserve funds.
2.2.9 Consultant’s Conclusions
Based on the revenue requirement, HDR concluded that the City will need to adjust the level of
wastewater rate revenues over the next two-year period. HDR reached this conclusion for the
following reasons:
Revenue adjustments are necessary to meet the operating and capital costs of providing
wastewater service to City’s customers, of which a large portion is driven by the funding
of capital projects related to the WRRF Project
Revenue adjustments are necessary to provide adequate funding of the City’s capital
projects on a pay-as-you-go basis for renewal and replacement needs
The proposed revenue adjustments maintain the City’s financial health and provide long-
term sustainable funding levels
In reaching this conclusion, HDR recommends that the City adjust revenue levels in FY 2019-20
and FY 2020-21 in order to provide sufficient funding for annual O&M and the capital
improvement program.
2.3 Wastewater Cost of Service Analysis Summary
The next step in the 2019 Update is the review of the cost of service analysis. A cost of service
analysis equitably and proportionally allocates the costs of providing wastewater service
between the various customer classes of service based on the approaches outlined in the Water
Environment Federation Manual of Practice No. 27 (WEF MOP #27). The 2018 Rate Study resulted
in the establishment of customer classes of service and the City Council adopted rates that
included cost of service adjustments.
Wastewater Rate Study Update 29
City of San Luis Obispo –Water & Wastewater Rate Study Update
Given the completion of the 2018 Rate Study, and the rates adopted by the City Council being
based on the cost of service results, this Study maintained the prior cost of service relationships
for the development of proposed rates for FY 2019-20 and FY 2020-21.
2.4 Wastewater Rate Design
The final step of the 2019 Update is the development of proposed wastewater rates to collect
the desired levels of revenue, based on the results of the previous tasks. The 2018 Rate Study
established specific customer classes of service and rates based on the cost of service results for
the residential, multi-family, and non-residential customers. This study is a continuation of the
2018 Rate Study and reflects the updated customer consumption characteristics and projection
of revenue needs. Provided below is a discussion of the development of the proposed
wastewater rates for FY 2019-20 and FY 2020-21.
2.4.1 Development of Cost-Based Wastewater Rates
Developing cost-based and equitable rates is of paramount importance in the development of
the proposed wastewater rates. While always a key consideration in developing rates, meeting
the legal requirements, and documenting the steps taken to meet the requirements, has been in
the forefront with the recent legal challenges in the State of California on utility rates. Given this,
the City’s proposed wastewater rates have been developed to meet the legal requirements of
California constitution article XIII D, section 6 (Article XIII D), or Proposition 218. A key component
of Article XIII D is the development of rates which reflect the cost of providing service and are
proportionally allocated among the various customer classes of service. The Water Environment
Federation Manual of Practice No. 27 outlines various methodologies which may be used to
establish cost-based rates. HDR reviewed the City’s proposed wastewater rates based on the
methodologies provided in the WEF MOP #27 to meet the requirements of Article XIII D and
recent legal decisions to provide an administrative record of the steps taken to establish the City’s
wastewater rates.
HDR is of the opinion that the noticed rates comply with legal requirements of Article XIII D. HDR
reaches this conclusion based upon the following:
x The revenue derived from wastewater rates does not exceed the funds required to provide
the property related service (i.e., wastewater service). The proposed rates are designed to
collect the overall revenue requirement of the City’s wastewater utility.
x The revenues derived from wastewater rates shall not be used for any purpose other than
that for which the fee or charge is imposed. The revenues derived from the City’s wastewater
rates are used exclusively to operate and maintain the City’s wastewater system.
x The amount of a fee or charge imposed upon a parcel or person as an incident of property
ownership shall not exceed the proportional costs of the service attributable to the parcel.
The cost of service analysis in the 2018 Rate Study was specifically developed to focus on the
issue of proportional assignment of costs to customer classes of service, and this study
maintains the cost of service relationships and proportionality. The proposed rates have
Wastewater Rate Study Update 30
City of San Luis Obispo –Water & Wastewater Rate Study Update
appropriately grouped customers into customer classes of service (residential, multi-family,
non-residential) that reflect the varying consumption patterns and system requirements of
each customer class of service. The grouping of customers and rates into these classes of
service creates the equity and proportionality expected under Article XIII D by having which
reflect both the level of revenue to be collected by the utility, but also the manner in which
these costs are incurred and equitably assigned to customer classes of service based upon
their proportional impacts and burdens on the City’s wastewater system.
2.4.2 Overview of the Wastewater Rate Structure
As mentioned, the 2018 Rate Study established the current rate structure based on the customer
classes of service and cost of service results. The rate structure was based on the characteristics
of each customer classes of service.
For residential customers, the structure includes a monthly flat fixed charge and a volume charge
up to each individual customer’s average winter water use. As part of this study, the average
winter water use for each customer was updated to determine the projected billing units for the
rate setting time period. Since wastewater volumes are not metered, average winter water use
is used to reflect the volumes, or amounts, of wastewater contributed to the wastewater system
for collection and treatment. In this way, customers are billed for the contributions to the
wastewater system and not for outdoor watering amounts in the summer. Annually, in April of
each year, the City updates the average winter water consumption for each customer. These
values are then used for the subsequent rate year to develop the customer bill.
The multi-family and non-residential rate structure includes a monthly fixed charge that varies
based on meter size and a uniform consumption charge based on all metered water
consumption. For multi-family and non-residential customers, separate irrigation meters are, or
can be, installed so that the metered water consumption reflects the contributions to the
wastewater system similar to the use of average winter water for residential customers.
2.4.3 Present and Proposed Wastewater Rates
Given the implementation of cost of service rates in the 2018 Rate Study, and the study
projection of rates for the subsequent four year period (FY 2019-20 through FY 2022-23), the
2019 Update maintained the existing rate structure and cost of service adjustments as outlined
in the 2018 Rate Study. Provided in Table 2 - 3 is a summary of the present and proposed water
rates for the next two rate setting years.
Wastewater Rate Study Update 31
City of San Luis Obispo –Water & Wastewater Rate Study Update
Table 2 – 3
Summary of the Present and Proposed Wastewater Rates
Present Rates FY 2019-20 FY 2020-21
Proposed Rate Adjustment 5.5% 5.0%
Fixed Charge - $/Month
Residential $18.69 $19.72 $20.71
MF / Non-Res
3/4" & Less $18.69 $19.72 $20.71
1" 31.21 32.93 34.58
1 1/2" 62.24 65.66 68.94
2" 99.62 105.10 110.36
3" 186.90 197.18 207.04
4" 311.56 328.70 345.14
6" 622.93 657.19 690.05
8" 996.72 1,051.54 1,104.12
10" 1,432.94 1,511.75 1,587.34
Usage Charge - $/Unit
Res / MF / Non-Res $7.85 $8.28 $8.69
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure has been maintained and only the level of the rates has been
adjusted for the 2019 Update. Again, the updated rates reflect the cost of service analysis
completed in the 2018 Rate Study, and continue the results of the 2018 cost of service results.
For the wastewater rates, the update resulted in slightly lower rates in FY 2019-20 and FY 2020-
21 than what was projected in the 2018 Rate Study.
2.5 Summary of the Wastewater Rate Study Update
Based on the results of the 2019 Update, HDR developed the following conclusions and
recommendations.
Based on the revenue requirement, HDR concluded that the City will need to adjust the level of
wastewater rate revenues. HDR reached this conclusion for the following reasons:
Revenue adjustments are necessary to meet the operating and capital costs of providing
wastewater service to City’s customers, of which a large portion is driven by the funding
of capital projects related to the WRRF Project
Revenue adjustments are necessary to provide adequate funding of the City’s capital
projects on a pay-as-you-go basis for renewal and replacement needs
The proposed revenue adjustments maintain the City’s financial health and provide long-
term sustainable funding levels
Wastewater Rate Study Update 32
City of San Luis Obispo –Water & Wastewater Rate Study Update
Based on the results of the cost of service analysis, HDR has made the following conclusions
and recommendations:
The 2018 study cost of service analysis reflects the current customer characteristics
The proposed cost of service adjustments from the 2018 are maintained in the
development of the proposed FY 2019-20 and FY 2020-21 wastewater rates
Finally, HDR reached the following conclusions and recommendations for the proposed
wastewater rates:
The proposed rates reflect the overall costs of providing wastewater service (i.e., cost-
based)
The current rate structure reflects contemporary and industry standard approaches
City should review the wastewater rates annually in order to assess sufficiency
In summary, HDR would recommend that the City adopt the proposed wastewater rates for FY
2019-20 and FY 2020-21 as developed in this 2019 Update to provide to provide sufficient funding
for the operating expenses and capital improvement program needs for the wastewater utility.
Technical Appendix A
City of San Luis Obispo –Water & Wastewater Rate Study Update
Technical Appendix A – Water Analysis
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues $18,467,690 $18,615,431 $18,764,355 $18,914,469 $19,065,785 $19,218,311
Miscellaneous Revenues 2,009,794 1,945,158 2,033,002 2,125,677 2,179,007 2,233,937------------------------------------------------------------------------------------------------------Total Revenues $20,477,484 $20,560,589 $20,797,356 $21,040,146 $21,244,792 $21,452,249
Expenses
Salaries $2,802,197 $2,800,377 $2,842,192 $2,899,036 $2,957,017 $3,016,157
Retirement Contribution 272,372 206,592 220,371 253,769 258,844 294,183
Health & Disability Insurance 346,408 349,244 376,028 377,908 379,797 381,696
ISF Benefit Charges - PERS 545,569 545,569 545,569 765,373 827,873 896,118
All Other Benefits 197,953 190,127 191,127 194,949 198,848 202,825
Non-Staffing 6,310,306 8,716,094 6,875,722 6,978,857 7,083,540 7,189,793
Total Operations & Maintenance $10,474,805 $12,808,004 $11,051,009 $11,469,892 $11,705,920 $11,980,773
Transfers $2,367,739 $2,079,348 $2,117,018 $2,155,409 $2,194,532 $2,234,402
Rate Funded Capital 1,250,000 0 2,600,000 2,800,000 3,000,000 3,200,000
Net Debt Service 6,364,267 6,834,766 6,846,733 7,412,063 7,822,938 7,255,136
Total To / (From) Reserves 20,672 (137,680)303,437 498,466 515,086 1,504,890
Total Revenue Requirement $20,477,484 $21,584,438 $22,918,198 $24,335,830 $25,238,476 $26,175,200
Bal. / (Def.) of Funds $0 ($1,023,849)($2,120,841)($3,295,683)($3,993,684)($4,722,951)
Balance a % of Rate Adj. Req'd 0.0%5.5%11.3%17.4%20.9%24.6%
Proposed Rate Adjustment 0.0%5.5%5.5%5.5%3.0%3.0%
Add'l Revenue with Rate Adj.$0 $1,023,849 $2,120,841 $3,295,683 $3,993,684 $4,722,951
Bal. / (Def.) After Rate Adj.$0 ($0)$0 ($0)$0 $0
Additional Rate Adjustment Required 0.0%0.0%0.0%0.0%0.0%0.0%
Average Residential Customer Bill $56.01 $59.09 $62.34 $65.77 $67.74 $69.77
Total Ending Balance $18,428,901 $22,839,934 $14,365,524 $14,300,571 $22,622,375 $18,282,320
Projected
Exhibit 1
Summary of the Water Revenue Requirement
Comprehensive Water Rate Study
City of San Luis Obispo
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Comprehensive Water Rate Study
Escalations
Exhibit 2
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Revenues
As Customer GrowthCustomer Growth Budget 0.8% 0.8% 0.8% 0.8% 0.8%
As Rate AdjustmentRate Adjustment 0.0% 5.5% 5.5% 5.5% 3.0% 3.0%
As Miscellaneous RevenuesMiscellaneous Revenues Budget 0.0% 0.0% 0.0% 0.0% 0.0%
As
Expenses
As SalariesSalaries Budget Budget 2.0% 2.0% 2.0% 2.0%
As BenefitsBenefits Budget Budget 2.0% 2.0% 2.0% 2.0%
As Benefits - MedicalBenefits - Medical Budget Budget 4.8% 4.8% 4.8% 4.8%
As Benefits - PERSBenefits - PERS Budget Budget 11.8% 10.2%8.2% 8.2%
As Materials & SuppliesMaterials & Supplies Budget Budget 2.0% 2.0% 2.0% 2.0%
As EquipmentEquipment Budget Budget 2.0% 2.0% 2.0% 2.0%
As MiscellaneousMiscellaneous Budget Budget 2.0% 2.0% 2.0% 2.0%
As UtilitiesUtilities Budget Budget 4.0% 4.0% 4.0% 4.0%
As FlatFlat 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
As InsuranceInsurance Budget Budget 4.5% 4.5% 3.5% 3.5%
As
Interest 0.5% 0.5% 0.5% 0.8% 1.0% 1.0%
New Debt Service
Low Interest Loans
Term in Years 20 20 20 20 20 20
Rate 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Revenue Bond
Term in Years 30 30 30 30 30 30
Rate 4.5% 4.5% 4.5% 4.5% 4.5% 4.5%
Projected
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City of San Luis Obispo Page 1 of 5
Comprehensive Water Rate Study
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues
Residential $8,284,294 $8,350,568 $8,417,373 $8,484,712 $8,552,589 $8,621,010 As Customer Growth
Multi Family 2,996,237 3,020,207 3,044,369 3,068,724 3,093,274 3,118,020 As Customer Growth
Non-Residential 5,259,211 5,301,285 5,343,695 5,386,445 5,429,536 5,472,972 As Customer Growth
Irrigation 1,927,947 1,943,371 1,958,918 1,974,589 1,990,386 2,006,309 As Customer Growth------------------------------------------------------------------------------------------------------Total Rate Revenues $18,467,690 $18,615,431 $18,764,355 $18,914,469 $19,065,785 $19,218,311
Other Revenues
Investment and Property Revenues $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 As Miscellaneous Revenues
Late Charges 118,000 118,000 118,000 118,000 118,000 118,000 As Miscellaneous Revenues
AB 939 Reimbursement 147,900 0 0 0 0 0
Account Set-up Fees 156,000 156,000 156,000 156,000 156,000 156,000 As Miscellaneous Revenues
Connection Charges and Meter Sales 61,000 61,000 61,000 61,000 61,000 61,000 As Miscellaneous Revenues
Credit Card Fees (95,000)(95,000) (95,000) (95,000) (95,000)(95,000) As Miscellaneous Revenues
Returned Check Fees 1,000 1,000 1,000 1,000 1,000 1,000 As Miscellaneous Revenues
Bank Account Analysis Fee (2,000)(2,000) (2,000) (2,000) (2,000)(2,000) As Miscellaneous Revenues
Credit Collections 14,000 14,000 14,000 14,000 14,000 14,000 As Miscellaneous Revenues
Development Review Related Revenue 25,000 25,000 25,000 25,000 25,000 25,000 As Miscellaneous Revenues
Other Revenues 20,000 20,000 20,000 20,000 20,000 20,000 As Miscellaneous Revenues
Cal Poly 913,894 964,158 1,017,187 1,073,132 1,105,326 1,138,486 As Rate Adjustment
Recycled Water Sales 600,000 633,000 667,815 704,545 725,681 747,452 As Rate Adjustment
Future Unidentified Other Revenue 0 0 0 0 0 0 As Miscellaneous Revenues------------------------------------------------------------------------------------------------------Total Other Revenues $2,009,794 $1,945,158 $2,033,002 $2,125,677 $2,179,007 $2,233,937
Total Revenues $20,477,484 $20,560,589 $20,797,356 $21,040,146 $21,244,792 $21,452,249
Salaries
Water Admin $438,881 $425,458 $435,173 $443,877 $452,754 $461,809 Fund Analysis
Source of Supply 60,733 61,905 64,681 65,974 67,294 68,640 Fund Analysis
Water Treatment 1,020,534 1,096,607 1,091,332 1,113,159 1,135,422 1,158,130 Fund Analysis
Water Distribution 1,017,838 1,024,077 1,047,315 1,068,262 1,089,627 1,111,419 Fund Analysis
Utilities Services 264,211 192,332 203,691 207,765 211,920 216,159 Fund Analysis------------------------------------------------------------------------------------------------------Total Salaries $2,802,197 $2,800,377 $2,842,192 $2,899,036 $2,957,017 $3,016,157
Notes
Projected
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City of San Luis Obispo Page 2 of 5
Comprehensive Water Rate Study
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Retirement Contribution
Water Admin $45,605 $31,869 $28,890 $33,907 $34,585 $39,894 Fund Analysis
Source of Supply 6,106 4,536 4,782 5,537 5,648 6,447 Fund Analysis
Water Treatment 99,990 77,048 86,425 99,285 101,271 114,878 Fund Analysis
Water Distribution 100,204 84,142 90,929 103,430 105,499 118,723 Fund Analysis
Utilities Services 20,466 8,998 9,345 11,610 11,842 14,240 Fund Analysis
------------------------------------------------------------------------------------------------------Total Retirement Contribution $272,372 $206,592 $220,371 $253,769 $258,844 $294,183
Health & Disability Insurance
Water Admin $33,568 $36,043 $37,461 $37,648 $37,837 $38,026 Fund Analysis
Source of Supply 8,292 9,092 9,625 9,673 9,722 9,770 Fund Analysis
Water Treatment 131,148 137,105 152,465 153,227 153,993 154,763 Fund Analysis
Water Distribution 155,337 156,170 164,936 165,760 166,589 167,422 Fund Analysis
Utilities Services 18,062 10,834 11,541 11,599 11,657 11,715 Fund Analysis
------------------------------------------------------------------------------------------------------Total Health & Disability Insurance $346,408 $349,244 $376,028 $377,908 $379,797 $381,696
ISF Benefit Charges - PERS
Water Admin $97,302 $97,302 $97,302 $113,640 $122,935 $133,083 Fund Analysis
Source of Supply 11,501 11,501 11,501 17,246 18,667 20,218 Fund Analysis
Water Treatment 188,327 188,327 188,327 307,203 332,275 359,653 Fund Analysis
Water Distribution 188,731 188,731 188,731 255,422 276,319 299,132 Fund Analysis
Utilities Services 59,708 59,708 59,708 71,861 77,676 84,032 Fund Analysis
------------------------------------------------------------------------------------------------------Total ISF Benefit Charges - PERS $545,569 $545,569 $545,569 $765,373 $827,873 $896,118
All Other Benefits
Water Admin $49,270 $45,084 $45,225 $46,130 $47,052 $47,993 Fund Analysis
Source of Supply 3,127 3,061 3,104 3,166 3,230 3,294 Fund Analysis
Water Treatment 84,523 83,633 83,948 85,627 87,340 89,087 Fund Analysis
Water Distribution 47,460 46,560 46,897 47,835 48,792 49,768 Fund Analysis
Utilities Services 13,572 11,788 11,952 12,191 12,434 12,683 Fund Analysis
------------------------------------------------------------------------------------------------------Total All Other Benefits $197,953 $190,127 $191,127 $194,949 $198,848 $202,825
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City of San Luis Obispo Page 3 of 5
Comprehensive Water Rate Study
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Non-Staffing
Water Admin $97,600 $135,580 $135,730 $137,766 $139,832 $141,930 Fund Analysis
Source of Supply 4,633,931 6,800,339 4,900,791 4,974,302 5,048,917 5,124,651 Fund Analysis
Water Treatment 1,095,150 1,262,720 1,323,046 1,342,892 1,363,035 1,383,481 Fund Analysis
Water Distribution 361,105 386,725 390,425 396,281 402,226 408,259 Fund Analysis
Utilities Services 122,520 130,730 125,730 127,616 129,530 131,473 Fund Analysis
------------------------------------------------------------------------------------------------------Total Non-Staffing $6,310,306 $8,716,094 $6,875,722 $6,978,857 $7,083,540 $7,189,793
Total Operations & Maintenance $10,474,805 $12,808,004 $11,051,009 $11,469,892 $11,705,920 $11,980,773
Transfers
Cost Allocation Plan (CAP)$1,326,787 $1,352,117 $1,377,930 $1,404,236 $1,431,044 $1,458,364 Fund Analysis
Cost of Services 609,492 621,128 632,986 645,070 657,385 669,935 Fund Analysis
Erp Implementation Cost - One-Time 336,871 0 0 0 0 0
Erp Implementation Cost - Ongoing 94,589 106,103 106,103 106,103 106,103 106,103 Fund Analysis------------------------------------------------------------------------------------------------------Total Transfers $2,367,739 $2,079,348 $2,117,018 $2,155,409 $2,194,532 $2,234,402
Rate Funded Capital $1,250,000 $0 $2,600,000 $2,800,000 $3,000,000 $3,200,000 $2,608,348 FY 2015-16 Dep. Exp.
Debt Service
Nacimiento Debt $4,703,440 $4,663,137 $4,666,205 $4,663,496 $4,665,787 $4,668,675 Debt Schedule
2012 Revenue Refunding Bonds 571,600 567,800 568,400 573,200 572,000 0 Debt Schedule
2018 Revenue Refunding Bonds 898,802 883,900 892,300 889,700 886,500 888,000 Debt Schedule
Reuse - SRF Funding 525,457 525,457 525,457 525,457 525,457 525,457 Debt Schedule
Radio System Upgrade 36,408 0 0 0 0 0 Debt Schedule
WTP Upgrade 0 489,972 489,972 979,943 979,943 979,943 Debt Schedule
Reservoir 2 Replacement 0 0 0 0 412,808 412,808 Debt Schedule
WRRF Upgrade - Water Share 0 76,005 76,005 152,010 152,010 152,010 Debt Schedule
Dispatch Center 28,560 28,496 28,394 28,256 28,433 28,243 Debt Schedule
Assumed New Long-Term Debt 0 0 0 0 0 0 Calculated @ 2% for 20 yrs
Additional Long-Term Debt 0 0 0 0 0 0 Calculated @ 4.5% for 30 yrs
------------------------------------------------------------------------------------------------------Total Debt Service $6,764,267 $7,234,766 $7,246,733 $7,812,063 $8,222,938 $7,655,136
LESS: Development Impact Fees $400,000 $400,000 $400,000 $400,000 $400,000 $400,000------------------------------------------------------------------------------------------------------Net Debt Service $6,364,267 $6,834,766 $6,846,733 $7,412,063 $7,822,938 $7,255,136
5 of 13 05/30/2019
City of San Luis Obispo Page 4 of 5
Comprehensive Water Rate Study
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
To / (From) Reserves
To / (From) Operating Reserve $20,672 ($137,680)$28,437 $23,466 $15,086 $29,890
To / (From) Capital Reserve 0 0 275,000 475,000 500,000 1,475,000
To / (From) Rate Stabilization 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------Total To / (From) Reserves $20,672 ($137,680)$303,437 $498,466 $515,086 $1,504,890
Total Revenue Requirement $20,477,484 $21,584,438 $22,918,198 $24,335,830 $25,238,476 $26,175,200
Bal. / (Def.) of Funds $0 ($1,023,849) ($2,120,841) ($3,295,683) ($3,993,684) ($4,722,951)
Balance a % of Rate Adj. Req'd 0.0% 5.5%11.3% 17.4% 20.9% 24.6%
Proposed Rate Adjustment 0.0%5.5% 5.5% 5.5% 3.0% 3.0%
Months of Adjustment 12 12 12 12 12 12
Add'l Revenue with Rate Adj.$0 $1,023,849 $2,120,841 $3,295,683 $3,993,684 $4,722,951
Bal. / (Def.) After Rate Adj.$0 ($0)$0 ($0)$0 $0
Add'l Rate Adj. Req'd 0.0%0.0%0.0%0.0%0.0%0.0%
Average Residential Customer Bill $56.01 (Current rates; Base Charge + 6 CCF)
Customer Bill on Proposed Adjustment $59.09 $62.34 $65.77 $67.74 $69.77
Bill Difference - Monthly 3.08 3.25 3.43 1.97 2.03
Cumulative Bill Difference 3.08 6.33 9.76 11.73 13.76
Debt Service Coverage Ratio (all debt)
Before Rate Adjustment 1.48 1.07 1.34 1.23 1.16 1.24
After Proposed Rate Adjustment 1.48 1.21 1.64 1.65 1.65 1.85
6 of 13 05/30/2019
City of San Luis Obispo Page 5 of 5
Comprehensive Water Rate Study
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Reserve Funds
Total Beginning Balance $25,872,692 $18,428,901 $22,839,934 $14,365,524 $14,300,571 $22,622,375
Operating Fund
Beginning Balance $3,824,672 $3,845,344 $3,707,664 $3,736,102 $3,759,568 $3,774,654
Plus: Additions 20,672 0 28,437 23,466 15,086 29,890
Less: Uses of Funds 0 (137,680)0 0 0 0
Ending Balance $3,845,344 $3,707,664 $3,736,102 $3,759,568 $3,774,654 $3,804,544
Minimum Fund Balance - 90 days O&M $2,582,829 $3,158,138 $2,724,906 $2,828,193 $2,886,391 $2,954,163
Capital Fund
Beginning Balance $20,176,507 $12,712,044 $17,260,757 $8,757,909 $8,669,490 $16,976,208
Plus: Additions 0 0 275,000 475,000 500,000 1,475,000
Development Impact Fees 800,000 800,000 800,000 800,000 800,000 800,000 As Miscellaneous Revenues
Debt Proceeds 0 14,300,000 0 0 13,800,000 0
Less: Reservoir Debt Payment 0 0 0 0 0 0
Less: Capital Project Funding (8,264,463) (10,551,287) (9,577,848) (1,363,419) (6,793,282) (6,644,945)
Ending Balance $12,712,044 $17,260,757 $8,757,909 $8,669,490 $16,976,208 $12,606,263
Rate Stabilization
Beginning Balance $1,871,513 $1,871,513 $1,871,513 $1,871,513 $1,871,513 $1,871,513
Plus: Additions 0 0 0 0 0 0
Less: Capital Project Funding 0 0 0 0 0 0
Ending Balance $1,871,513 $1,871,513 $1,871,513 $1,871,513 $1,871,513 $1,871,513
5% of Rate Revenues $923,384 $981,964 $1,044,260 $1,110,508 $1,152,973 $1,197,063
Total Ending Balance $18,428,901 $22,839,934 $14,365,524 $14,300,571 $22,622,375 $18,282,320
7 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 1 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total Notes
Source of Supply
NOI Engineering Report $100,000 $0 $0 $0 $0 $0 $100,000
SGMA GSP 150,000 150,000 150,000 150,000 150,000 150,000 900,000
Groundwater Well 101 Project 1,219,165 0 0 0 0 0 1,219,165
Water Reuse Automation Improvements 33,385 50,000 0 0 0 0 83,385
----------------------------------------------------------------------------------------------------------------Total Source of Supply $1,502,550 $200,000 $150,000 $150,000 $150,000 $150,000 $2,302,550
Water Treatment
Majority Facilty Maintenance $308,212 $0 $0 $0 $0 $0 $308,212
Ozone System Maintenance 0 113,000 119,000 125,000 40,000 40,000 437,000
Chemical System Maintenance 0 30,000 31,000 33,000 33,000 33,000 160,000
Air Compressor and Dryer Maintenance 0 36,000 36,000 36,000 36,000 36,000 180,000
EIM Actuator Replacement-Filter Effluent Valves 0 54,000 0 0 0 0 54,000
Sodium Hydroxide Storage Tank Replacement 0 94,000 0 0 0 0 94,000
Res 1 and 2 covers 0 250,000 0 0 0 0 250,000
Stenner Canyon Waterline Replacement 136,719 0 0 0 0 0 136,719
Package Thickener and Res 2 Covers 0 150,000 0 0 50,000 0 200,000
Wash Water Tank #1 0 0 275,000 0 0 0 275,000
Reservoir 2 Replacement 317,424 800,000 0 0 6,500,000 7,300,000 14,917,424
Energy Efficiency Project (SST)846,000 5,500,000 8,800,000 0 0 0 15,146,000
THM Removal 200,000 1,650,000 0 0 0 0 1,850,000
Forebay and Culvert Rehab 0 0 0 0 990,000 0 990,000
Public Works 1,900 0 175,000 0 0 0 176,900
LAN Tablet System 34,100 0 0 0 0 0 34,100
----------------------------------------------------------------------------------------------------------------Total Water Treatment $1,844,355 $8,677,000 $9,436,000 $194,000 $7,649,000 $7,409,000 $35,209,355
Water Distribution
Waterline Replacement $3,637,878 $690,000 $1,830,000 $2,980,000 $1,127,000 $1,497,000 $11,761,878----------------------------------------------------------------------------------------------------------------Total Water Distribution $3,637,878 $690,000 $1,830,000 $2,980,000 $1,127,000 $1,497,000 $11,761,878
8 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 2 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total Notes
Recycled Water
UV Bulb Replacement (annual replacement)$0 $0 $0 $0 $0 $10,000 $10,000
Trench Repairs 339,345 200,000 200,000 200,000 200,000 200,000 1,339,345
Raise Valve Covers 37,665 50,000 30,000 30,000 30,000 30,000 207,665
Water Meters and Boxes 180,000 180,000 180,000 180,000 180,000 180,000 1,080,000
Water Meters and Boxes (from sewer)(90,000) (90,000) (90,000) (90,000) (90,000) (90,000)(540,000)
Fire Hydrants 47,802 40,000 40,000 40,000 40,000 40,000 247,802
Water Model Maintenance 20,000 0 0 50,000 0 0 70,000
Foothill/Chorro PRV Replacement 86,950 0 0 0 0 0 86,950
Slack Tank Consolidation 0 0 0 0 0 0 0
Tank Maintenance 48,578 0 0 0 0 0 48,578
Terrace Hill Tank Maintenance 888,919 0 0 0 0 0 888,919
Telemetry System Improv. - Ind/Tanglewood PRV 50,000 0 0 0 0 0 50,000
Telemetry System Upgrade (SCADA)388,782 0 0 0 0 0 388,782
Pickup 78,192 0 0 0 35,000 0 113,192
Medium duty truck with bed & crane 0 180,000 0 0 0 0 180,000
Trailer 0 0 0 0 7,500 0 7,500
----------------------------------------------------------------------------------------------------------------Total Recycled Water $2,076,233 $560,000 $360,000 $410,000 $402,500 $370,000 $4,178,733
Utilities Services
Fleet replacement: Compact Pickup $1,297 $0 $0 $0 $0 $0 $1,297----------------------------------------------------------------------------------------------------------------Total Utilities Services $1,297 $0 $0 $0 $0 $0 $1,297
Administration & Engineering
Roofing Project $0 $0 $0 $0 $2,500 $10,000 $12,500
Sedan 0 0 0 0 35,000 0 35,000----------------------------------------------------------------------------------------------------------------Total Administration & Engineering $0 $0 $0 $0 $37,500 $10,000 $47,500
9 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 3 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total Notes
Shared Information Technology
MS Office Replacement $9,620 $0 $0 $0 $0 $0 $9,620
Network Firewalls 0 15,259 0 0 0 0 15,259
Network Switch Infrastructure Repl. 0 0 0 0 3,000 0 3,000
Radio Handhelds Repl. 0 0 0 0 24,282 0 24,282
S.Hill Radio Site Upgrade 16,363 0 0 0 0 0 16,363
Server Operating System 0 0 1,848 0 0 0 1,848
Tait Radio System 24,282 0 0 0 0 0 24,282
UPS Battery Replacement 1,885 0 0 1,885 0 0 3,770
Virtual Private Network Replacment 0 9,028 0 0 0 0 9,028
VM Infrastructure 0 0 0 0 0 8,945 8,945
VoIP 0 0 0 20,360 0 0 20,360
Wireless System Citywide 0 0 0 7,174 0 0 7,174
----------------------------------------------------------------------------------------------------------------Total Shared Information Technology $52,150 $24,287 $1,848 $29,419 $27,282 $8,945 $143,931
Unidentified Future Capital Projects $0 $0 $0 $0 $0 $0 $0
Transfer to Cash Reserve $0 $0 $0 $0 $0 $0 $0
Total Capital Improvement Projects $9,114,463 $10,151,287 $11,777,848 $3,763,419 $9,393,282 $9,444,945 $53,645,244
Less: Outside Funding Sources
Operating Fund Reserves $0 $0 $0 $0 $0 $0 $0
Capital Fund Reserves 7,864,463 10,151,287 9,177,848 963,419 6,393,282 6,244,945 40,795,244
Developer Contributions 0 0 0 0 0 0 0
Assumed New Long-Term Debt 0 0 0 0 0 0 0
Additional Revenue Bonds 0 0 0 0 0 0 0----------------------------------------------------------------------------------------------------------------Total Funding Sources $7,864,463 $10,151,287 $9,177,848 $963,419 $6,393,282 $6,244,945 $40,795,244
Rate Funded Capital $1,250,000 $0 $2,600,000 $2,800,000 $3,000,000 $3,200,000 $12,850,000
10 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 1 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Residential
$ / Acct. / Mo.
Base Fee $20.61 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232-----------------------------------------------------------------------------------------------------------------------------------------------11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232
Volume Charge $ / CCF
0 - 5 CCF $5.90 39,491 39,461 37,099 40,914 43,422 45,941 45,220 43,465 45,039 44,534 45,745 43,218 513,549
5 - 12 CCF 6.87 10,708 10,413 7,531 11,510 17,579 24,854 24,762 23,318 27,038 21,821 24,552 15,840 219,926
12 + CCF 12.59 2,326 1,794 1,306 2,575 4,887 9,150 10,587 10,419 14,013 7,456 8,473 3,707 76,693-------------------------------------------------------------------------------------------------------------------------------------------------52,525 51,668 45,936 54,999 65,888 79,945 80,569 77,202 86,090 73,811 78,770 62,765 810,168
Revenues
Base Fee $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $231,492 $2,777,898
Volume Charge 335,845 326,944 287,065 352,886 438,485 556,997 570,203 547,813 627,905 506,532 545,243 410,478 5,506,396----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total Residential Revenues $567,337 $558,435 $518,556 $584,377 $669,976 $788,489 $801,695 $779,305 $859,396 $738,023 $776,734 $641,970 $8,284,294
Multi Family
Base Fee $ / Acct. / Mo.
3/4" & Less $20.61 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096 1,096
1"34.40 515 515 515 515 515 515 515 515 515 515 515 515 515
1.5"68.65 130 130 130 130 130 130 130 130 130 130 130 130 130
2"109.85 102 102 102 102 102 102 102 102 102 102 102 102 102
3"206.10 3 3 3 3 3 3 3 3 3 3 3 3 3
4"343.55 7 7 7 7 7 7 7 7 7 7 7 7 7
6"686.95 3 3 3 3 3 3 3 3 3 3 3 3 3
8"1,099.15 0 0 0 0 0 0 0 0 0 0 0 0 0
10"1,580.15 0 0 0 0 0 0 0 0 0 0 0 0 0-----------------------------------------------------------------------------------------------------------------------------------------------1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856
Volume Charge $ / CCF
All Usage $6.73 24,054 27,183 24,925 25,652 27,276 30,525 27,261 25,099 27,775 28,688 32,540 27,406 328,384-------------------------------------------------------------------------------------------------------------------------------------------------24,054 27,183 24,925 25,652 27,276 30,525 27,261 25,099 27,775 28,688 32,540 27,406 328,384
Revenues
Base Fee $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $65,518 $786,213
Volume Charge 161,883 182,942 167,745 172,638 183,567 205,433 183,467 168,916 186,926 193,070 218,994 184,442 2,210,024----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total Multi Family Revenues $227,401 $248,459 $233,263 $238,156 $249,085 $270,951 $248,984 $234,434 $252,444 $258,588 $284,512 $249,960 $2,996,237
11 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 2 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Non-Residential
Base Fee $ / Acct. / Mo.
3/4" & Less $20.61 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023 1,023
1"34.40 360 360 360 360 360 360 360 360 360 360 360 360 360
1.5"68.65 161 161 161 161 161 161 161 161 161 161 161 161 161
2"109.85 171 171 171 171 171 171 171 171 171 171 171 171 171
3"206.10 19 19 19 19 19 19 19 19 19 19 19 19 19
4"343.55 17 17 17 17 17 17 17 17 17 17 17 17 17
6"686.95 6 6 6 6 6 6 6 6 6 6 6 6 6
8"1,099.15 2 2 2 2 2 2 2 2 2 2 2 2 2
10"1,580.15 0 0 0 0 0 0 0 0 0 0 0 0 0-----------------------------------------------------------------------------------------------------------------------------------------------1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759
Volume Charge $ / CCF
All Usage $8.17 41,492 39,300 35,685 39,627 41,417 47,008 48,412 48,043 53,279 44,928 47,354 40,583 527,128-------------------------------------------------------------------------------------------------------------------------------------------------41,492 39,300 35,685 39,627 41,417 47,008 48,412 48,043 53,279 44,928 47,354 40,583 527,128
Revenues
Base Fee $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $79,381 $952,575
Volume Charge 338,990 321,081 291,546 323,753 338,377 384,055 395,526 392,511 435,289 367,062 386,882 331,563 4,306,636----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total Non-Residential Revenues $418,371 $400,462 $370,928 $403,134 $417,758 $463,437 $474,907 $471,893 $514,671 $446,443 $466,263 $410,944 $5,259,211
Irrigation
Base Fee $ / Acct. / Mo.
3/4" & Less $20.61 202 202 202 202 202 202 202 202 202 202 202 202 202
1"34.40 142 142 142 142 142 142 142 142 142 142 142 142 142
1.5"68.65 97 97 97 97 97 97 97 97 97 97 97 97 97
2"109.85 69 69 69 69 69 69 69 69 69 69 69 69 69
3"206.10 3 3 3 3 3 3 3 3 3 3 3 3 3
4"343.55 4 4 4 4 4 4 4 4 4 4 4 4 4
6"686.95 2 2 2 2 2 2 2 2 2 2 2 2 2
8"1,099.15 0 0 0 0 0 0 0 0 0 0 0 0 0
10"1,580.15 0 0 0 0 0 0 0 0 0 0 0 0 0-----------------------------------------------------------------------------------------------------------------------------------------------519 519 519 519 519 519 519 519 519 519 519 519 519
Volume Charge $ / CCF
All Usage $10.02 4,652 2,462 1,991 4,947 10,509 19,547 21,517 21,444 25,233 19,065 17,812 11,311 160,490-------------------------------------------------------------------------------------------------------------------------------------------------4,652 2,462 1,991 4,947 10,509 19,547 21,517 21,444 25,233 19,065 17,812 11,311 160,490
Revenues
Base Fee $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $26,653 $319,837
Volume Charge 46,613 24,669 19,950 49,569 105,300 195,861 215,600 214,869 252,835 191,031 178,476 113,336 1,608,110----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total Irrigation Revenues $73,266 $51,322 $46,603 $76,222 $131,953 $222,514 $242,253 $241,522 $279,488 $217,684 $205,129 $139,989 $1,927,947
12 of 13 05/30/2019
City of San Luis Obispo
Comprehensive Water Rate Study Page 3 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Summary
Customers
Residential 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232 11,232
Multi Family 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856 1,856
Non-Residential 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759 1,759
Irrigation 519 519 519 519 519 519 519 519 519 519 519 519 519-----------------------------------------------------------------------------------------------------------------------------------------------Total Number of Customers 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366 15,366
Consumption
Residential 52,525 51,668 45,936 54,999 65,888 79,945 80,569 77,202 86,090 73,811 78,770 62,765 810,168
Multi Family 24,054 27,183 24,925 25,652 27,276 30,525 27,261 25,099 27,775 28,688 32,540 27,406 328,384
Non-Residential 41,492 39,300 35,685 39,627 41,417 47,008 48,412 48,043 53,279 44,928 47,354 40,583 527,128
Irrigation 4,652 2,462 1,991 4,947 10,509 19,547 21,517 21,444 25,233 19,065 17,812 11,311 160,490--------------------------------------------------------------------------------------------------------------------------------------------------------------Total Consumption 122,723 120,613 108,537 125,225 145,090 177,025 177,759 171,788 192,377 166,492 176,476 142,065 1,826,170
Revenues
Residential $567,337 $558,435 $518,556 $584,377 $669,976 $788,489 $801,695 $779,305 $859,396 $738,023 $776,734 $641,970 $8,284,294
Multi Family 227,401 248,459 233,263 238,156 249,085 270,951 248,984 234,434 252,444 258,588 284,512 249,960 2,996,237
Non-Residential 418,371 400,462 370,928 403,134 417,758 463,437 474,907 471,893 514,671 446,443 466,263 410,944 5,259,211
Irrigation 73,266 51,322 46,603 76,222 131,953 222,514 242,253 241,522 279,488 217,684 205,129 139,989 1,927,947----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Total Revenues $1,286,375 $1,258,679 $1,169,350 $1,301,889 $1,468,773 $1,745,391 $1,767,840 $1,727,154 $1,905,998 $1,660,739 $1,732,639 $1,442,864 $18,467,690
FY 2018-19 Budget $18,521,279
Difference ($53,589)
Percent -0.3%
CY 2018 Actual $19,030,236
Difference ($562,547)
Percent -3.0%
13 of 13 05/30/2019
Technical Appendix B
City of San Luis Obispo –Water & Wastewater Rate Study Update
Technical Appendix B – Wastewater Analysis
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues $14,632,327 $14,749,386 $14,867,381 $14,986,320 $15,106,211 $15,227,060
Miscellaneous Revenues 1,341,250 1,348,516 1,355,840 1,363,223 1,370,665 1,378,166------------------------------------------------------------------------------------------------Total Revenues $15,973,577 $16,097,902 $16,223,221 $16,349,543 $16,476,875 $16,605,226
Expenses
Total Salaries $2,943,108 $2,874,188 $3,003,636 $3,063,709 $3,124,983 $3,187,483
Total Retirement Contributions 293,892 228,788 233,095 299,031 305,012 311,112
Total Health & Disablility Insurance 372,490 390,416 404,104 406,125 408,155 410,196
Total ISF Benefit Charges - PERS 535,682 535,682 535,682 757,464 819,449 887,116
Total All Other Benefits 241,690 224,435 226,049 230,570 235,182 239,885
Total Non-Staffing 2,988,754 3,004,155 3,155,502 3,202,835 3,250,877 3,299,640
Total O&M Expenses $7,375,616 $7,257,663 $7,558,069 $7,959,733 $8,143,658 $8,335,433
Transfers $2,454,822 $2,169,932 $2,211,210 $2,253,313 $2,296,258 $2,340,062
Rate Funded Capital 2,600,000 2,600,000 2,600,000 1,150,000 1,900,000 2,600,000
Net Debt Service 1,281,005 4,113,754 4,115,858 6,989,514 6,985,953 6,987,365
To / (From) Reserves 2,262,134 767,769 1,340,045 441,813 318,219 271,702
Total Revenue Requirement $15,973,577 $16,909,118 $17,825,181 $18,794,374 $19,644,089 $20,534,562
Bal. / (Def.) of Funds $0 ($811,216) ($1,601,960) ($2,444,831) ($3,167,213) ($3,929,336)
Balance a % of Rate Adj. Req'd 0.0% 5.5% 10.8% 16.3% 21.0% 25.8%
Proposed Rate Adjustment 0.0% 5.5% 5.0% 5.0% 4.0% 4.0%
Add'l Revenue with Rate Adj.$0 $811,216 $1,601,960 $2,444,831 $3,167,213 $3,929,336
Bal. / (Def.) After Rate Adj.$0 $0 $0 $0 $0 $0
Additional Rate Adjustment Required 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Average Residential Customer Bill $50.09 (Current rates; Base Charge + 4 CCF)
Customer Bill on Proposed Adjustment $52.84 $55.49 $58.26 $60.59 $63.02
Bill Difference - Monthly 2.75 2.64 2.77 2.33 2.42
Cumulative Bill Difference 2.75 5.40 8.17 10.50 12.93
Ending Balance $27,857,794 $28,925,562 $30,411,347 $28,083,027 $24,582,179 $25,153,882
Projected
Exhibit 1
Summary of the Revenue Requirement
Comprehensive Wastewater Rate Study
City of San Luis Obispo
1 of 14 05/30/2019
City of San Luis Obispo
Comprehensive Wastewater Rate Study
Escalation Factors
Exhibit 2
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Revenues
As Customer GrowthCustomer Growth Budget 0.8%0.8%0.8%0.8%0.8%
As Cal PolyCal Poly Budget 0.8%0.8%0.8%0.8%0.8%
As Miscellaneous RevenuesMiscellaneous Revenues Budget 0.0%0.0%0.0%0.0%0.0%
As
Expenses
As SalariesSalaries Budget Budget 2.0%2.0%2.0%2.0%
As BenefitsBenefits Budget Budget 2.0%2.0%2.0%2.0%
As Benefits - MedicalBenefits - Medical Budget Budget 4.8%4.8%4.8%4.8%
As Benefits - PERSBenefits - PERS Budget Budget 12.5%7.3%7.2%5.5%
As Materials & SuppliesMaterials & Supplies Budget Budget 2.0%2.0%2.0%2.0%
As EquipmentEquipment Budget Budget 2.0%2.0%2.0%2.0%
As MiscellaneousMiscellaneous Budget Budget 2.0%2.0%2.0%2.0%
As UtilitiesUtilities Budget Budget 4.0%4.0%4.0%4.0%
As FlatFlat 0.0%0.0%0.0%0.0%0.0%0.0%
As InsuranceInsurance Budget Budget 4.5%4.5%3.5%3.5%
As
Interest 0.5%0.5%0.5%0.8%1.0%1.0%
New Debt Service
Low Interest Loans
Term in Years 20 20 20 20 20 20
Rate 2.0%2.0%2.0%2.0%2.0%2.0%
Revenue Bond
Term in Years 20 20 20 20 20 20
Rate 4.5%4.5%4.5%4.5%4.5%4.5%
Projected
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Comprehensive Wastewater Rate Study Page 1 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Revenues
Rate Revenues
Residential $6,510,302 $6,562,384 $6,614,883 $6,667,802 $6,721,145 $6,774,914 As Customer Growth
Multi-Family 3,436,384 3,463,875 3,491,586 3,519,519 3,547,675 3,576,056 As Customer Growth
Non-Residential 4,685,641 4,723,126 4,760,911 4,798,999 4,837,391 4,876,090 As Customer Growth
------------------------------------------------------------------------------------------------------Total Rate Revenues $14,632,327 $14,749,386 $14,867,381 $14,986,320 $15,106,211 $15,227,060
Other Revenues
Investment and Property Revenues $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 As Miscellaneous Revenues
Industrial User Charges 85,000 85,000 85,000 85,000 85,000 85,000 As Miscellaneous Revenues
Late Charges 118,000 118,000 118,000 118,000 118,000 118,000 As Miscellaneous Revenues
Account Set-up Fees 156,000 156,000 156,000 156,000 156,000 156,000 As Miscellaneous Revenues
Connection Charges and Meter Sales 61,000 61,000 61,000 61,000 61,000 61,000 As Miscellaneous Revenues
Credit Card Fees (95,000)(95,000) (95,000) (95,000) (95,000)(95,000) As Miscellaneous Revenues
Returned Check Fees 1,000 1,000 1,000 1,000 1,000 1,000 As Miscellaneous Revenues
Bank Account Analysis Fee (2,000)(2,000) (2,000) (2,000) (2,000)(2,000) As Miscellaneous Revenues
Credit Collections 14,000 14,000 14,000 14,000 14,000 14,000 As Miscellaneous Revenues
Development Review Related Revenue 25,000 25,000 25,000 25,000 25,000 25,000 As Miscellaneous Revenues
Other Revenues 20,000 20,000 20,000 20,000 20,000 20,000 As Miscellaneous Revenues
Cal Poly 908,250 915,516 922,840 930,223 937,665 945,166 As Cal Poly
Future Unidentified Other Revenue 0 0 0 0 0 0 As Miscellaneous Revenues
------------------------------------------------------------------------------------------------Total Other Revenues $1,341,250 $1,348,516 $1,355,840 $1,363,223 $1,370,665 $1,378,166
Total Revenues $15,973,577 $16,097,902 $16,223,221 $16,349,543 $16,476,875 $16,605,226
Notes
Projected
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Comprehensive Wastewater Rate Study Page 2 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Salaries
Wastewater Admin $539,201 $478,950 $545,344 $556,251 $567,376 $578,723 Fund Analysis
Wastewater Collection 574,722 573,906 588,763 600,538 612,549 624,800 Fund Analysis
Environmental Compliance 147,954 145,809 154,254 157,339 160,486 163,696 Fund Analysis
Water Resource Recovery 1,206,541 1,189,135 1,218,034 1,242,395 1,267,242 1,292,587 Fund Analysis
Utilities Revenue 112,118 116,157 121,288 123,714 126,188 128,712 Fund Analysis
Water Quality Lab 362,572 370,230 375,954 383,473 391,142 398,965 Fund Analysis
Sewer Customer Service 0 0 0 0 0 0 Fund Analysis
------------------------------------------------------------------------------------------------Total Salaries $2,943,108 $2,874,188 $3,003,636 $3,063,709 $3,124,983 $3,187,483
Retirement Contributions
Wastewater Admin $56,083 $34,056 $35,524 $47,359 $48,307 $49,273 Fund Analysis
Wastewater Collection 56,693 48,033 51,450 64,490 65,780 67,095 Fund Analysis
Environmental Compliance 15,249 11,321 11,653 15,033 15,334 15,640 Fund Analysis
Water Resource Recovery 119,333 93,311 95,270 122,023 124,464 126,953 Fund Analysis
Utilities Revenue 11,667 10,123 11,155 13,852 14,129 14,412 Fund Analysis
Water Quality Lab 34,868 31,944 28,043 36,273 36,999 37,739 Fund Analysis
Sewer Customer Service 0 0 0 0 0 0 Fund Analysis
------------------------------------------------------------------------------------------------Total Retirement Contributions $293,892 $228,788 $233,095 $299,031 $305,012 $311,112
Health & Disablility Insurance
Wastewater Admin $47,835 $49,328 $52,160 $52,421 $52,683 $52,946 Fund Analysis
Wastewater Collection 94,501 100,500 105,177 105,703 106,232 106,763 Fund Analysis
Environmental Compliance 25,992 30,660 32,664 32,828 32,992 33,157 Fund Analysis
Water Resource Recovery 128,445 143,781 144,212 144,933 145,658 146,386 Fund Analysis
Utilities Revenue 25,584 27,148 28,924 29,069 29,214 29,360 Fund Analysis
Water Quality Lab 50,134 38,998 40,966 41,171 41,377 41,584 Fund Analysis
Sewer Customer Service 0 0 0 0 0 0 Fund Analysis
------------------------------------------------------------------------------------------------Total Health & Disablility Insurance $372,490 $390,416 $404,104 $406,125 $408,155 $410,196
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Comprehensive Wastewater Rate Study Page 3 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
ISF Benefit Charges - PERS
Wastewater Admin $100,795 $100,795 $100,795 $137,199 $148,462 $160,753 Fund Analysis
Wastewater Collection 106,779 106,779 106,779 149,127 161,283 174,558 Fund Analysis
Environmental Compliance 28,721 28,721 28,721 38,871 42,050 45,520 Fund Analysis
Water Resource Recovery 224,759 224,759 224,759 307,233 332,396 359,863 Fund Analysis
Utilities Revenue 8,957 8,957 8,957 28,985 31,351 33,935 Fund Analysis
Water Quality Lab 65,672 65,672 65,672 96,048 103,907 112,487 Fund Analysis
------------------------------------------------------------------------------------------------Total ISF Benefit Charges - PERS $535,682 $535,682 $535,682 $757,464 $819,449 $887,116
All Other Benefits
Wastewater Admin $82,463 $76,819 $77,782 $79,338 $80,925 $82,543 Fund Analysis
Wastewater Collection 35,220 34,572 34,790 35,486 36,195 36,919 Fund Analysis
Environmental Compliance 17,066 8,025 8,154 8,317 8,483 8,653 Fund Analysis
Water Resource Recovery 74,030 72,870 73,017 74,478 75,967 77,487 Fund Analysis
Utilities Revenue 5,302 5,340 5,415 5,523 5,633 5,746 Fund Analysis
Water Quality Lab 27,608 26,808 26,891 27,429 27,978 28,537 Fund Analysis
Sewer Customer Service 0 0 0 0 0 0 Fund Analysis
------------------------------------------------------------------------------------------------Total All Other Benefits $241,690 $224,435 $226,049 $230,570 $235,182 $239,885
Non-Staffing
Wastewater Admin $74,340 $107,990 $109,470 $111,112 $112,779 $114,470 Fund Analysis
Wastewater Collection 259,647 249,250 247,292 251,001 254,766 258,588 Fund Analysis
Environmental Compliance 43,450 42,150 42,150 42,782 43,424 44,075 Fund Analysis
Water Resource Recovery 2,031,117 2,046,765 2,192,190 2,225,073 2,258,449 2,292,326 Fund Analysis
Utilities Revenue 328,100 302,750 306,850 311,453 316,125 320,866 Fund Analysis
Water Quality Lab 252,100 255,250 257,550 261,413 265,334 269,314 Fund Analysis
Sewer Customer Service 0 0 0 0 0 0 Fund Analysis
------------------------------------------------------------------------------------------------Total Non-Staffing $2,988,754 $3,004,155 $3,155,502 $3,202,835 $3,250,877 $3,299,640
Total O&M Expenses $7,375,616 $7,257,663 $7,558,069 $7,959,733 $8,143,658 $8,335,433
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Comprehensive Wastewater Rate Study Page 4 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Transfers
Cost Allocation Plan (CAP)$1,554,446 $1,585,535 $1,617,246 $1,649,591 $1,682,582 $1,716,234 Fund Analysis
Cost Of Services 468,916 478,294 487,860 497,617 507,570 517,721 Fund Analysis
Erp Implementation Cost - One-Time 336,871 0 0 0 0 0 Fund Analysis
Erp Implementation Cost - Ongoing 94,589 106,103 106,104 106,105 106,106 106,107 Fund Analysis
------------------------------------------------------------------------------------------------Total Transfers $2,454,822 $2,169,932 $2,211,210 $2,253,313 $2,296,258 $2,340,062
Rate Funded Capital $2,600,000 $2,600,000 $2,600,000 $1,150,000 $1,900,000 $2,600,000 $2,608,348 FY 2015-16 Dep. Exp.
Debt Service
WRRF Energy Efficiency Project $618,177 $617,985 $617,787 $617,584 $617,375 $617,160 Debt Schedule
Tank Farm Lift Station - I Bank 556,512 555,511 554,478 553,411 552,310 551,173 Debt Schedule
Tank Farm Lift Station - Green Campus 182,695 181,500 184,990 183,165 181,130 183,780 Debt Schedule
Radio System Upgrade 41,298 0 0 0 0 0 Debt Schedule
Dispatch Center 32,324 32,208 32,052 32,253 32,037 32,151 Debt Schedule
WRRF Upgrade 0 2,876,551 2,876,551 5,753,101 5,753,101 5,753,101 Debt Schedule
Additional Long-Term Debt 0 0 0 0 0 0 Calculated @ 4.46% for 20 yrs
------------------------------------------------------------------------------------------------Total Debt Service $1,431,005 $4,263,754 $4,265,858 $7,139,514 $7,135,953 $7,137,365
LESS: Other Funding
Development Impact Fees $150,000 $150,000 $150,000 $150,000 $150,000 $150,000
------------------------------------------------------------------------------------------------Net Debt Service $1,281,005 $4,113,754 $4,115,858 $6,989,514 $6,985,953 $6,987,365
6 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 5 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
To / (From) Reserves
To / (From) Operating Reserve $62,134 $42,769 $20,045 $16,813 $18,219 $21,702
To / (From) Capital Reserve 2,200,000 725,000 1,275,000 375,000 250,000 200,000
To / (From) Rate Stabilization Reserve 0 0 45,000 50,000 50,000 50,000
------------------------------------------------------------------------------------------------Total To / (From) Reserves $2,262,134 $767,769 $1,340,045 $441,813 $318,219 $271,702
Total Revenue Requirement $15,973,577 $16,909,118 $17,825,181 $18,794,374 $19,644,089 $20,534,562
Bal. / (Def.) of Funds $0 ($811,216)($1,601,960) ($2,444,831) ($3,167,213) ($3,929,336)
Balance a % of Rate Adj. Req'd 0.0%5.5%10.8% 16.3% 21.0% 25.8%
Proposed Rate Adjustment 0.0%5.5%5.0%5.0%4.0%4.0%
Months of Adjustment 12 12 12 12 12 12
Add'l Revenue with Rate Adj.$0 $811,216 $1,601,960 $2,444,831 $3,167,213 $3,929,336
Bal. / (Def.) After Rate Adj.$0 $0 $0 $0 $0 $0
Add'l Rate Adj. Req'd 0.0%0.0%0.0%0.0%0.0%0.0%
Average Residential Customer Bill $50.09 (Current rates; Base Charge + 4 CCF)
Customer Bill on Proposed Adjustment $52.84 $55.49 $58.26 $60.59 $63.02
Bill Difference - Monthly 2.75 2.64 2.77 2.33 2.42
Cumulative Bill Difference 2.75 5.40 8.17 10.50 12.93
Debt Service Coverage Ratio (all debt, not including DIF)
Before Rate Adjustment 6.01 2.07 2.03 1.18 1.17 1.16
After Proposed Rate Adjustment 6.01 2.26 2.41 1.52 1.61 1.71
7 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 6 of 6
Revenue Requirement
Exhibit 3
Budgeted
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Notes
Projected
Reserve Funds
Beginning Balance $27,141,278 $27,857,794 $28,925,562 $30,411,347 $28,083,027 $24,582,179
Operating Fund
Beginning Balance $2,252,289 $2,314,423 $2,357,192 $2,377,236 $2,394,050 $2,412,269
Plus: Additions 62,134 42,769 20,045 16,813 18,219 21,702
Less: Uses of Funds 0 0 0 0 0 0
Ending Balance $2,314,423 $2,357,192 $2,377,236 $2,394,050 $2,412,269 $2,433,971
Minimum Fund Balance - 90 days O&M $1,818,645 $1,789,561 $1,863,633 $1,962,674 $2,008,025 $2,055,312
Capital Fund
Beginning Balance $24,101,667 $24,756,049 $25,781,049 $27,201,789 $24,806,655 $21,237,589
Plus: Additions 2,200,000 725,000 1,275,000 375,000 250,000 200,000
Development Impact Fees 300,000 300,000 300,000 300,000 300,000 300,000 As Miscellaneous Revenues
Debt Proceeds 14,327,203 64,310,573 43,099,819 15,920,563 426,625 0
Less: Capital Project Funding (16,172,821) (64,310,573) (43,254,079) (18,990,697) (4,545,691)0
Ending Balance $24,756,049 $25,781,049 $27,201,789 $24,806,655 $21,237,589 $21,737,589
Minimum Target Balance - Avg Annual CIP $3,725,000 $3,755,000 $3,785,000 $3,815,000 $3,845,000 $3,875,000 As Customer Growth
Rate Stabilization
Beginning Balance $787,322 $787,322 $787,322 $832,322 $882,322 $932,322
Plus: Additions 0 0 45,000 50,000 50,000 50,000
Less: Capital Project Funding 0 0 0 0 0 0
Ending Balance $787,322 $787,322 $832,322 $882,322 $932,322 $982,322
5% of Rate Revenues $731,616 $778,030 $823,467 $871,558 $913,671 $957,820
Ending Balance $27,857,794 $28,925,562 $30,411,347 $28,083,027 $24,582,179 $25,153,882
8 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 1 of 3
Capital Improvement Plan
Exhibit 4
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total Notes
Wastewater Collection
Collection System Improvements $2,721,129 $0 $0 $0 $0 $0 $2,721,129
Sewer Lining Project 4,412 0 0 0 0 0 4,412
Walnut, Morro, etc cured in place 0 0 0 0 0 0 0
Albert, Slack, etc cured in place 0 0 0 0 0 0 0
Foothill, etc trench & pipe bursting 0 170,000 0 0 0 0 170,000
Murray, Chorro, Meinecke, etc trench/sewer repl 0 0 0 0 0 0 0
Westmont, Cerro Romaldo, etc trench/pipe bursting 0 110,000 1,210,000 0 0 0 1,320,000
Verde, Luneta, etc trench/pipe bursting 0 0 110,000 1,270,000 0 0 1,380,000
Johnson, Buchon, etc trench & pipe bursting 0 0 0 135,000 1,485,000 0 1,620,000
Serrano, Bressi, etc trench & pipe bursting 0 0 0 0 0 75,000 75,000
Inflow/Infiltration Reduction 200,000 200,000 200,000 200,000 200,000 200,000 1,200,000
Trench Repair 25,000 25,000 25,000 25,000 25,000 25,000 150,000
Raise Manholes 25,000 30,000 25,000 25,000 25,000 25,000 155,000
Flow Study 0 0 0 0 100,000 100,000 200,000
Infrastructure Renewal Strategy Update 0 0 0 0 80,000 0 80,000
Laguna Lift Station Coating Project 0 0 0 0 0 0 0
Calle Joaquin Lift Station 0 0 700,000 0 0 0 700,000
Margarita Lift Station 228,334 0 0 0 0 0 228,334
Foothill Lift Station 50,079 0 0 180,000 1,980,000 0 2,210,079
Airport Lift Station 9,600 0 0 1,980,000 0 0 1,989,600
Silver City Lift Station 0 0 0 0 70,000 100,000 170,000----------------------------------------------------------------------------------------------------------------Total Wastewater Collection $3,263,554 $535,000 $2,270,000 $3,815,000 $3,965,000 $525,000 $14,373,554
Public Works
Concrete St / Access 18 $2,400 $0 $0 $0 $0 $0 $2,400
Marsh St Siphon 261,328 0 0 0 0 0 261,328
Wastewater Collections Flow Study 0 0 0 0 250,000 0 250,000
Water Meters and Boxes 90,000 90,000 180,000 180,000 180,000 180,000 900,000
Telemetry System Improvements 140,113 0 0 0 0 0 140,113
Cityworks Upgrade 0 0 0 0 250,000 0 250,000
Vac-Con Hydro-Cleaner 0 0 0 0 500,000 0 500,000----------------------------------------------------------------------------------------------------------------Total Public Works $493,841 $90,000 $180,000 $180,000 $1,180,000 $180,000 $2,303,841
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Comprehensive Wastewater Rate Study Page 2 of 3
Capital Improvement Plan
Exhibit 4
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total Notes
Water Resource Recovery Facility
Major Maintenance $200,470 $200,000 $300,000 $15,000 $175,000 $400,000 $1,290,470
WRRF Upgrade 14,608,176 64,310,573 43,099,819 15,920,563 426,625 0 138,365,756
WRRF Membrance System 75,000 0 0 0 0 0 75,000
iFix Replacement 0 250,000 0 0 0 0 250,000
HachWims 0 30,000 0 0 0 0 30,000
MP2 Replacement 0 0 0 0 30,000 0 30,000
Sedan 0 0 0 0 35,000 0 35,000
Compact Pick-up 0 0 0 0 0 0 0
Club Cars-Electric 60,000 10,000 0 0 0 0 70,000
Forklift 0 0 0 40,000 0 0 40,000
---------------------------------------------------------------------------------------------------------Total Water Resource Recovery Facility $14,943,646 $64,800,573 $43,399,819 $15,975,563 $666,625 $400,000 $140,186,226
Environmental Compliance
Prius $0 $35,000 $0 $0 $0 $0 $35,000--------------------------------------------------------------------------------------------------Total Environmental Compliance $0 $35,000 $0 $0 $0 $0 $35,000
Administration
Roofing Project $0 $0 $0 $0 $2,500 $10,000 $12,500
Prius 0 0 0 0 35,000 0 35,000
General Assumption for Future Planning 0 0 0 0 500,000 500,000 1,000,000
--------------------------------------------------------------------------------------------------Total Administration $0 $0 $0 $0 $537,500 $510,000 $1,047,500
10 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 3 of 3
Capital Improvement Plan
Exhibit 4
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Total
Shared Information Technology
South Hills Radio Site Upgrade & Radio Enhancement $10,775 $0 $0 $0 $0 $0 $10,775
Wireless System Citywide 0 0 0 0 5,739 0 5,739
Server Operating System 0 0 4,260 0 0 0 4,260
VoIP 0 0 0 15,789 0 0 15,789
UB System Upgrade 0 0 0 150,000 0 0 150,000
Network Firewalls 0 8,918 0 0 0 0 8,918
Virtual Private Network Replacment 0 14,564 0 0 0 0 14,564
Network Switch Infrastructure Repl. 0 0 0 0 27,252 0 27,252
Radio Handhelds Repl. 0 0 0 0 42,960 0 42,960
Tait Radio System 42,960 0 0 0 0 0 42,960
MS Office Replacement 13,700 0 0 0 0 0 13,700
VM Infrastructure 0 0 0 0 20,615 0 20,615
UPS Battery Replacement 4,345 0 0 4,345 0 0 8,690----------------------------------------------------------------------------------------------------------------Total Shared Information Technology $71,780 $23,482 $4,260 $170,134 $96,566 $0 $366,222
Unidentified Future Capital Projects $0 $1,426,518 $0 $0 $0 $985,000 $2,411,518
Transfer to Cash Reserve $0 $0 $0 $0 $0 $0 $0
Total Capital Improvement Projects $18,772,821 $66,910,573 $45,854,079 $20,140,697 $6,445,691 $2,600,000 $160,723,861
Less: Outside Funding Sources
Operating Fund Reserves $0 $0 $0 $0 $0 $0 $0
Capital Fund Reserves 16,172,821 64,310,573 $43,254,079 $18,990,697 $4,545,691 $0 147,273,861
Developer Contributions 0 0 0 0 0 0 0
Assumed New Low Interest Loan 0 0 0 0 0 0 0
Additional Revenue Bonds 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------Total Funding Sources $16,172,821 $64,310,573 $43,254,079 $18,990,697 $4,545,691 $0 $147,273,861
Rate Funded Capital $2,600,000 $2,600,000 $2,600,000 $1,150,000 $1,900,000 $2,600,000 $13,450,000
11 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 1 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Residential
$ / Acct.
Base Fee $18.69 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235
Total Base Fee Revenue $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $2,519,786
Volume Charge $ / CCF
Usage up to avg WW $7.85 0 0 396,099 112,247 0 0 0 0 0 0 0 0 508,346
Total Volume Charge Revenue $0 $0 $3,109,377 $881,139 $0 $0 $0 $0 $0 $0 $0 $0 $3,990,516
Total Residential Revenue $209,982 $209,982 $3,319,359 $1,091,121 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $209,982 $6,510,302
Multi-Family
Base Fee $ / Acct.
3/4" & Less $18.69 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137 1,137
1"31.21 553 553 553 553 553 553 553 553 553 553 553 553 553
1.5"62.24 126 126 126 126 126 126 126 126 126 126 126 126 126
2"99.62 92 92 92 92 92 92 92 92 92 92 92 92 92
3"186.90 2 2 2 2 2 2 2 2 2 2 2 2 2
4"311.56 6 6 6 6 6 6 6 6 6 6 6 6 6
6"622.93 1 1 1 1 1 1 1 1 1 1 1 1 1
8"996.72 0 0 0 0 0 0 0 0 0 0 0 0 0
10"1,432.94 0 0 0 0 0 0 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------------------------------------
1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917
Total Base Fee Revenue $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $700,596
Volume Charge $ / CCF
Usage up to avg WW $7.85 0 0 265,762 82,746 0 0 0 0 0 0 0 0 348,508------------------------------------------------------------------------------------------------------------------------------------------------------------
0 0 265,762 82,746 0 0 0 0 0 0 0 0 348,508
Total Volume Charge Revenue $0 $0 $2,086,232 $649,556 $0 $0 $0 $0 $0 $0 $0 $0 $2,735,788
Total Multi-Family Revenue $58,383 $58,383 $2,144,615 $707,939 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $58,383 $3,436,384
12 of 14 05/30/2019
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Comprehensive Wastewater Rate Study Page 2 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Non-Residential
Base Fee $ / Acct.
3/4" & Less $18.69 992 992 992 992 992 992 992 992 989 989 989 989 991
1"31.21 325 325 325 325 325 325 325 325 325 325 325 325 325
1.5"62.24 166 166 166 166 166 166 166 166 166 166 166 166 166
2"99.62 179 179 179 179 179 179 179 179 179 179 179 179 179
3"186.90 19 19 19 19 19 19 19 19 19 19 19 19 19
4"311.56 17 17 17 17 17 17 17 17 17 17 17 17 17
6"622.93 6 6 6 6 6 6 6 6 6 6 6 6 6
8"996.72 2 2 2 2 2 2 2 2 2 2 2 2 2
10"1,432.94 0 0 0 0 0 0 0 0 0 0 0 0 0---------------------------------------------------------------------------------------------------------------------------------------------------------------
1,706 1,706 1,706 1,706 1,706 1,706 1,706 1,706 1,703 1,703 1,703 1,703 1,705
Total Base Fee Revenue $71,426 $71,426 $71,426 $71,426 $71,426 $71,426 $71,426 $71,426 $71,370 $71,370 $71,370 $71,370 $856,890
Volume Charge $ / CCF
All Consumption $7.85 0 0 370,554 117,185 0 0 0 0 0 0 0 0 487,739
-------------------------------------------------------------------------------------------------------------------------------------------------------------
0 0 370,554 117,185 0 0 0 0 0 0 0 0 487,739
Total Volume Charge Revenue $0 $0 $2,908,849 $919,902 $0 $0 $0 $0 $0 $0 $0 $0 $3,828,751
Total Non-Residential Revenue $71,426 $71,426 $2,980,275 $991,328 $71,426 $71,426 $71,426 $71,426 $71,370 $71,370 $71,370 $71,370 $4,685,641
13 of 14 05/30/2019
City of San Luis Obispo
Comprehensive Wastewater Rate Study Page 3 of 3
Revenues at Present Rates
Exhibit 5
Effective 8.1.18 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Summary
Customers
Residential 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235 11,235
Multi-Family 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917 1,917
Non-Residential 1,706 1,706 1,706 1,706 1,706 1,706 1,706 1,706 1,703 1,703 1,703 1,703 1,705------------------------------------------------------------------------------------------------------------------------------------------------
Total Number of Customers 14,858 14,858 14,858 14,858 14,858 14,858 14,858 14,858 14,855 14,855 14,855 14,855 14,857
Consumption
Residential 0 0 396,099 112,247 0 0 0 0 0 0 0 0 508,346
Multi-Family 0 0 265,762 82,746 0 0 0 0 0 0 0 0 348,508
Non-Residential 0 0 370,554 117,185 0 0 0 0 0 0 0 0 487,739
---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Consumption 0 0 1,032,415 312,178 0 0 0 0 0 0 0 0 1,344,593
Revenues
Base Fee $339,791 $339,791 $339,791 $339,791 $339,791 $339,791 $339,791 $339,791 $339,735 $339,735 $339,735 $339,735 $4,077,272
Volume Charge 0 0 8,104,458 2,450,597 0 0 0 0 0 0 0 0 10,555,055
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Revenues $339,791 $339,791 $8,444,249 $2,790,389 $339,791 $339,791 $339,791 $339,791 $339,735 $339,735 $339,735 $339,735 $14,632,327
FY 2018-19 Budget $14,838,195
Difference ($205,868)
Percent -1.39%
CY 2018 Actual $14,922,170
Difference ($289,843)
Percent -1.94%
14 of 14 05/30/2019