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6.a Water Rate Update - memo and model
4ROSEMOUNTEXECUTIVE SUMMARY UTILITY COMMISSION Utility Commission Meeting: September 16, 2019 AGENDA ITEM: Water Rate Model Update AGENDA SECTION: Old Business PREPARED BY: Christine Watson, Public Works Coordinator AGENDA NO. 6.a. ATTACHMENTS: Rate Model APPROVED BY: BILE RECOMMENDED ACTION: Motion to Recommend City Council Approval of Water Rate Changes for 2020 BACKGROUND At the August 19, 2019 Utility Commission meeting, staff presented the rate models for water, sewer and stormwater to the Commission. Upon review, it was requested by the Commission that staff explore how the following changes would impact the water rates for residential customers: • Reduce the number of tiers from 4 to 3 • Change the tier parameters to include more users in the lower tiers • Increase the difference between the tiers so the highest tier is significantly higher than the base tier Staff has completed these changes and will present the updated model at the meeting (a copy is attached for review before the meeting). The rates shown in the model are the rates needed to keep the revenue and year-end balances as close as possible to the existing model. A summary of the changes to the tiers and rates is shown in Table 1. Table 2 on the following page shows how the proposed changes will impact various users. Table 1: Rate Comparison Existing Model Updated Model Residential Tier 1 (0 - 12,000 gal) $1.54 $1.40 Residential Tier 1 (0 - 15,000 gal) Residential Tier 2 (13,000 - 24,000 gal) $1.93 $2.11 Residential Tier 2 (16,000 - 48,000 gal) Residential Tier 3 (25,000 - 48,000 gal) $2.41 $4.21 Residential Tier 3 (> 48,000 gal) Residential Tier 4 (> 48,000 gal) $3.62 Residential Tier 4 - REMOVE The Commission also requested that staff explore the impact of billing all residential second meters at the highest rate. Staff explored this option and will briefly discuss the results at the meeting. GAUtilities\RATE MODELS\2019\20190916 UC Water Rates Update.docx Table 2 - Impacts Water Bill Only Total Water Charges 2018 2019 2020 % 2020 Actual Actual Proposed Change Updated Change Low User $115.92 $93.80 $82.88 -11.6% $80.08 -14.6% Average User $199.14 $191.90 $190.64 -0.7% $178.28 -7.1% High User with NO $483.02 $526.54 $558.72 6.1% $565.98 7.5% Second Meter High User with $483.02 $526.54 $558.72 6.1% $565.98 7.5% Second Meter Total Utility Bill Total Utility Bill 2018 2019 2020 % 2020 Charges Actual Actual Proposed Change Updated Change Low User $325.60 $272.24 $250.32 -8.1% $247.52 -9.1% Average User $530.02 $538.34 $568.08 5.5% $555.72 3.2% High User with NO $1,076.50 $1,236.98 $1,391.16 12.5% $1,398.42 13.1% Second Meter High User with $813.90 $872.98 $936.16 7.2% $943.42 8.1% Second Meter SUMMARY Although staff is supportive of the changes in the updated water rate model, we do not recommend implementing these changes for 2020 due to other significant changes that will be occurring (i.e., phasing out the fixed rates, and adding a street light utility fee). The updated model may be discussed again next year and considered for implementation in 2021. At this time, staff is requesting Utility Commission recommendation to the City Council to approve the water rate changes from the existing model. G:\Utilities\RATE MODELS\2019\20190916 UC Water Rates Update.docx Water Rate Analysis 3.00% 3.00% 18.00% 0.00% 0.00% 2.00% 4.00% 5.25% 5.50°% 5.50 % 4 75% 475% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 Description 2018 Projected 2018 Actual 2019 Projected 2020 Budgeted 2021 2022 2023 2024 2025 2026 2027 2028 2029 Water Demand MG 966.770 871.274 800.000 820.000 840.500 861.513 883.050 905.127 927.755 950.949 974.722 999.090 1,024.068 Estimated Growth 2.5% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Projected Demands Residential Accounts(excluding association irrigation) 6,885 6,886 7,058 7,235 7,415 7,601 7,791 7,986 8,185 8,390 8,600 8,815 9,035 and Connections Commercial Accounts (excluding irrigation) 131 126 129 132 136 139 143 146 150 154 157 161 165 Institutional / Industrial Accounts(excluding irrigation) 48 47 48 49 51 52 53 55 56 57 59 60 62 Irrigation -only Accounts (excluding single family) 126 125 128 131 135 138 141 145 149 152 156 160 164 Water Fixed Charge ($/account/quarter $ 13.15 $ 13.15 $ 6.50 $ 3.00 $ - $ - $ - $ - $ - $ - $ - $ - $ Residential Tier 1 (0 - 15,000 gal) $ 1.19 $ 1.19 $ 1.40 $ 1.40 $ 1.40 $ 1.43 $ 1.49 $ 1.57 $ 1.65 $ 1.74 $ 1.83 $ 1.91 $ 2.01 Residential Tier 2 16,000 - 48,000 al $ 1.49 $ 1.49 $ 1.76 $ 2.11 $ 2.11 $ 2.15 $ 2.23 $ 2.35 $ 2.48 $ 2.62 $ 2.74 $ 2.87 $ 3.01 Residential Tier 3 (> 48,000 gal) $ 1.86 $ 1.86 $ 2.19 $ 4.21 $ 4.21 $ 4.30 $ 4.47 $ 4.70 $ 4.96 $ 5.23 $ 5.48 $ 5.74 $ 6.02 Residential Tier 4 - REMOVE $ 2.79 $ 2.79 $ 3.29 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Irrigation Meters Multi Fam / Comm / Ind / Inst $ 2.79 $ 2.79 $ 3.29 $ 4.21 $ 4.21 $ 4.30 $ 4.47 $ 4.70 $ 4.96 $ 5.23 $ 5.48 $ 5.74 $ 6.02 Comm / Ind / Inst Tier 1 0 - 80,000 al $ 1.38 $ 1.38 $ 1.63 $ 1.63 $ 1.63 $ 1.66 $ 1.73 $ 1.82 $ 1.92 $ 2.02 $ 2.12 $ 2.22 $ 2.33 Proposed Rates Comm / Ind / Inst Tier 2 81,000 - 160,000 al $ 1.73 $ 1.73 $ 2.04 $ 2.44 $ 2.44 $ 2.49 $ 2.59 $ 2.73 $ 2.88 $ 3.04 $ 3.18 $ 3.33 $ 3.49 and Fixed Comm / Ind / Inst Tier 3 161,000 - 250,000 al $ 2.16 $ 2.16 $ 2.54 $ 3.66 $ 3.66 $ 3.74 $ 3.89 $ 4.09 $ 4.32 $ 4.55 $ 4.77 $ 5.00 $ 5.23 Charges Comm / Ind / Inst Tier 4 > 250,000 al $ 2.79 $ 2.79 $ 3.29 $ 4.21 $ 4.21 $ 4.30 $ 4.47 $ 4.70 $ 4.96 $ 5.23 $ 5.48 $ 5.74 $ 6.02 Surcharge - Single Family 3/4"($/account) $ 8.88 $ 8.88 $ 8.93 $ 8.97 $ 9.02 $ 9.06 $ 9.11 $ 9.15 $ 9.20 $ 9.25 $ 9.29 $ 9.34 $ 9.39 Surcharge - Multi Family 3/4"($/account) $ 6.86 $ 6.86 $ 6.90 $ 6.93 $ 6.97 $ 7.00 $ 7.04 $ 7.07 $ 7.11 $ 7.14 $ 7.18 $ 7.22 $ 7.25 Surcharge - 1"($/account) $ 13.64 $ 13.64 $ 13.71 $ 13.77 $ 13.84 $ 13.91 $ 13.98 $ 14.05 $ 14.12 $ 14.19 $ 14.26 $ 14.34 $ 14.41 Surcharge - 1.5"($/account) $ 28.28 $ 28.28 $ 28.42 $ 28.56 $ 28.71 $ 28.85 $ 28.99 $ 29.14 $ 29.29 $ 29.43 $ 29.58 $ 29.73 $ 29.88 Meter Maintenance - 3/4" ($/meter/quarter 3% annual inc $ 1.00 $ 1.00 $ 1.02 $ 1.05 $ 1.08 $ 1.11 $ 1.15 $ 1.18 $ 1.22 $ 1.25 $ 1.29 $ 1.33 $ 1.37 Meter Maintenance - 1" ($/meter/quarter 0.5% annual inc $ 6.31 $ 6.31 $ 6.34 $ 6.37 $ 6.41 $ 6.44 $ 6.47 $ 6.50 $ 6.54 $ 6.57 $ 6.60 $ 6.63 $ 6.67 Meter Maintenance - 1.5" ($/meter/quarter)(0.5% annual inc) $ 11.37 $ 11.37 $ 11.42 $ 11.48 $ 11.54 $ 11.60 $ 11.65 $ 11.71 $ 11.77 $ 11.83 $ 11.89 $ 11.95 $ 12.01 601 49400 Water Utility Fund Beginning Balance $ 7,546,474.50 $ 7,546,474.50 $ 8,061,199.67 $ 7,784,744.99 $ 8,624,026.24 $ 9,382,877.02 $ 8,231,326.55 $ 7,239,476.37 $ 6,330,027.09 $ 5,583,741.91 $ 4,141,474.29 $ 2,833,447.88 $ 2,447,305.14 Calculated Fixed Charges $ 378,283.16 $ 191,453.60 $ 90,572.28 $ - $ - $ - $ - $ - $ - $ - $ - $ Residential Tier 1 (0 - 15,000 gal) $ 104,872.32 $ 137,803.30 $ 215,407.84 $ 220,793.04 $ 230,839.12 $ 246,074.51 $ 265,468.25 $ 287,070.73 $ 310,431.11 $ 333,306.00 $ 357,866.49 $ 384,236.78 Residential Tier 2 16,000-48,000 al $ 230,391.38 $ 249,362.12 $ 422,404.18 $ 432,964.28 $ 452,664.15 $ 482,539.99 $ 520,570.17 $ 562,931.57 $ 608,740.13 $ 653,596.66 $ 701,758.57 $ 753,469.40 Residential Tier 3 (> 48,000 gal) $ 174,944.24 $ 244,183.60 $ 524,683.28 $ 537,800.36 $ 562,270.28 $ 599,380.12 $ 646,618.76 $ 699,237.37 $ 756,137.81 $ 811,855.71 $ 871,679.33 $ 935,911.20 Residential Tier 4 - REMOVE $ 404,547.02 $ 442,429.46 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Irrigation Meters Multi Fam / Comm / Ind / Inst $ 278,906.25 $ 329,109.38 $ 421,260.00 $ 421,260.00 $ 429,685.20 $ 446,872.61 $ 470,333.42 $ 496,201.76 $ 523,492.85 $ 548,358.77 $ 574,405.81 $ 601,690.08 Comm / Ind / Inst Tier 1 0 - 80,000 al $ 16,799.79 $ 19,927.05 $ 20,306.82 $ 20,814.49 $ 21,761.55 $ 23,197.82 $ 25,026.09 $ 27,062.59 $ 29,264.81 $ 31,421.26 $ 33,736.61 $ 36,222.58 Revenue Comm / Ind / Inst Tier 2 81,000 - 160,000 al $ 14,675.11 $ 18,771.86 $ 18,933.30 $ 19,406.63 $ 20,289.63 $ 21,628.75 $ 23,333.37 $ 25,232.12 $ 25,237.70 $ 29,295.97 $ 31,454.72 $ 33,772.54 Comm / Ind /Inst Tier 3 161,000-250,000 al $ 24,118.82 $ 25,374.50 $ 31,024.15 $ 31,799.75 $ 33,246.64 $ 35,440.92 $ 38,234.11 $ 41,345.41 $ 38,566.84 $ 48,004.45 $ 51,541.78 $ 55,339.76 Comm / Ind / Inst Tier 4 > 250,000 al $ 217,229.96 $ 232,923.37 $ 330,112.72 $ 338,365.54 $ 353,761.17 $ 377,109.40 $ 406,830.34 $ 439,936.16 $ 467,008.37 $ 510,791.76 $ 548,430.72 $ 588,843.21 Meter Maintenance Revenue - 3/4" $ 27,400.00 $ 28,690.56 $ 30,299.30 $ 31,987.41 $ 33,771.82 $ 35,657.47 $ 37,649.51 $ 39,753.34 $ 41,974.61 $ 44,319.22 $ 46,793.34 $ 49,403.44 Meter Maintenance Revenue-1" $ 20,524.67 $ 21,033.25 $ 21,342.40 $ 21,654.12 $ 21,968.43 $ 22,311.22 $ 22,656.89 $ 23,005.45 $ 23,356.94 $ 23,711.37 $ 24,068.75 $ 24,429.12 Meter Maintenance Revenue - 1.5" $ 9,957.10 $ 10,006.88 $ 10,148.76 $ 10,291.81 $ 10,436.03 $ 10,581.44 $ 10,728.04 $ 10,875.85 $ 11,024.86 $ 11,175.09 $ 11,326.55 $ 11,479.24 Meter Maintenance Revenue - All Other Sizes $ 10,109.76 $ 10,381.39 $ 10,507.36 $ 10,634.33 $ 10,762.31 $ 10,891.30 $ 11,021.31 $ 11,152.35 $ 11,284.42 $ 11,417.54 $ 11,551.71 $ 11,686.93 Misc Water Revenues antenna, interest, new meter sales $ 331,500.00 $ 341,995.00 $ 368,338.85 $ 380,139.02 $ 392,403.19 $ 405,039.28 $ 418,055.46 $ 431,560.12 $ 445,461.93 $ 459,869.79 $ 474,692.88 $ 490,040.67 Total Usage Revenue (excluding surcharge) $ 2,244,259.58 $ 2,381,577.00 $ 2,303,445.32 $ 2,515,341.25 $ 2,477,910.78 $ 2,573,859.53 $ 2,716,724.82 $ 2,896,525.73 $ 3,095,364.82 $ 3,291,982.38 $ 3,517,123.59 $ 3,739,307.26 $ 3,976,524.96 100's - Salaries & Benefits (4%) (add FTE in 2021, 2022) $ 534,000.00 $ 562,407.00 $ 514,500.00 $ 578,700.00 $ 641,900.00 $ 787,600.00 $ 819,200.00 $ 852,000.00 $ 886,100.00 $ 921,600.00 $ 958,500.00 $ 996,900.00 $ 1,036,800.00 200's - Office Materials and Supplies $ 36,700.00 $ 33,642.00 $ 32,600.00 $ 45,600.00 $ 47,000.00 $ 48,500.00 $ 50,000.00 $ 51,500.00 $ 53,100.00 $ 54,700.00 $ 56,400.00 $ 58,100.00 $ 59,900.00 216.00 - Chemicals subject to growth and price increases $ 75,000.00 $ 43,035.00 $ 75,000.00 $ 75,000.00 $ 78,000.00 $ 81,100.00 $ 84,300.00 $ 87,700.00 $ 91,200.00 $ 94,800.00 $ 98,600.00 $ 102,500.00 $ 106,600.00 220.01 - Water Meter Purchases (replacements) $ 65,000.00 $ 71,822.00 $ 67,000.00 $ 75,000.00 $ 77,300.00 $ 79,700.00 $ 82,100.00 $ 84,600.00 $ 87,200.00 $ 89,900.00 $ 92,600.00 $ 95,400.00 $ 98,300.00 220.02 - Water Meter Purchases new homes $ 55,000.00 $ 47,296.00 $ 57,200.00 $ 75,000.00 $ 78,000.00 $ 81,200.00 $ 84,500.00 $ 87,900.00 $ 91,500.00 $ 95,200.00 $ 99,100.00 $ 103,100.00 $ 107,300.00 300's - GIS, Legal, Office, Computer, En , Prof Svcs $ 210,600.00 $ 147,740.00 $ 205,600.00 $ 225,900.00 $ 232,700.00 $ 239,700.00 $ 246,900.00 $ 254,400.00 $ 262,100.00 $ 270,000.00 $ 278,100.00 $ 286,500.00 $ 295,100.00 400's - Training, Conferences, Contracted Repair $ 101,600.00 $ 99,233.00 $ 86,300.00 $ 107,200.00 $ 110,500.00 $ 113,900.00 $ 117,400.00 $ 121,000.00 $ 124,700.00 $ 128,500.00 $ 132,400.00 $ 136,400.00 $ 140,500.00 500's - Buildings, Office Equip, Furniture, Misc Improvements $ 161,100.00 $ 82,348.00 $ 81,100.00 $ 51,500.00 $ 53,100.00 $ 54,700.00 $ 56,400.00 $ 58,100.00 $ 59,900.00 $ 61,700.00 $ 63,600.00 $ 65,600.00 $ 67,600.00 Expenses 530.03 - CRP of Water Main $ 50,000.00 $ 50,000.00 $ 50,000.00 $ 55,000.00 $ 50,000.00 $ 60,000.00 $ 60,000.00 $ 60,000.00 $ 50,000.00 $ 60,000.00 $ 65,000.00 $ 50,000.00 530.04 - Well and Tower Maintenance (long-term schedule $ 715,000.00 $ 12,835.00 $ 845,000.00 $ 100,000.00 $ 40,000.00 $ 190,000.00 $ 40,000.00 $ 115,000.00 $ 75,000.00 $ 900,000.00 $ 900,000.00 $ 110,000.00 $ 165,000.00 540, 548, 550, 580 - Equipment Purchase & Lease from CIP $ 68,600.00 $ 41,738.00 $ 168,800.00 $ 11,360.00 $ 16,360.00 $ 16,110.00 $ 69,375.00 $ 19,375.00 $ 19,950.00 $ 19,950.00 $ 20,450.00 $ 22,450.00 $ 23,000.00 611.00 - Interest $ - $ 476.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 710.00 - Transfers for Other Improvements $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Well and Tower Expenses combined $ 287,100.00 $ 256,427.00 $ 396,800.00 $ 280,800.00 $ 289,200.00 $ 297,900.00 $ 306,800.00 $ 316,000.00 $ 325,500.00 $ 335,300.00 $ 345,400.00 $ 355,800.00 $ 366,500.00 WTP Operating Expenses $ - $ - $ - $ - $ 220,000.00 $ 226,600.00 $ 233,400.00 $ 240,400.00 $ 247,600.00 $ 255,000.00 $ 262,700.00 $ 270,600.00 WTP Debt $22M 15 years @ 4.0% 75% share of $1,953,000 $ $ $ $ $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 $ 1,465,000.00 Future PW/PD Facility $ - $ $ $ $ - $ - $ - $ - $ - $ - $ - $ Total Expenses $ 2,359,700.00 $ 1,398,999.00 $ 2,579,900.00 $ 1,676,060.00 $ 1,719,060.00 $ 3,725,410.00 $ 3,708,575.00 $ 3,805,975.00 $ 3,841,650.00 $ 4,734,250.00 $ 4,825,150.00 $ 4,125,450.00 $ 4,252,200.00 Year End Balance before debt service $ 7,431,034.08 $ 8,529,052.50 $ 7,784,744.99 $ 8,624,026.24 $ 9,382,877.02 $ 8,231,326.55 $ 7,239,476.37 $ 6,330,027.09 $ 5,583,741.91 $ 4,141,474.29 $ 2,833,447.88 $ 2,447,305.14 $ 2,171,630.10 Balance change amount $ 115,440.42 $ 982,578.00 $ 276,454.68 $ 839,281.25 $ 758,850.78 $ 1,151,550.47 $ 991,850.18 $ 909,449.27 $ 746,285.18 $ 1,442,267.62 $ 1,308,026.41 $ 386,142.74 $ 275,675.04 Balance change % -1.53%1 13.02% -3.43%1 10.78%1 8.80% -12.27% -12.05% -12.56% -11.79% -25.83% -31.58% -13.63% -11.26% GAUtilities\RATE MODELS\2019\Rate Model Water 20190801 - with changes 2