pasadena water and power public hearing water capital improvement charge pasadena city council...
DESCRIPTION
Pasadena Water and Power Projected Financial Impact of State Mandated 28% Reduction in Water Usage 3 Water Fund (Numbers shown in $ millions) 2016 Adopted Budget 2016 Revised Projections Difference Gross Operating Revenues$59.0$46.9($12.1) Operating Expenses$55.1$49.0($6.1) Net Income$3.9($2.1)($6.0)TRANSCRIPT
Pasadena Water and Power
Public Hearing Water Capital Improvement Charge
Pasadena City Council MeetingJanuary 11, 2016
Item #12
Pasadena Water and Power
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Recommendation
1. California Environmental Quality Act (“CEQA”) exemption2. Public Hearing to receive public comment on CIC
recommendation:a) Approve the implementation of the CIC formula and,b) Adopt the recommended system average increase of $0.45
per billing unit and, c) Authorize use of the CIC formula for FY 2017 based upon
adoption of the CIP budget and updated forecast of water sales volumes;
3. City Clerk to report on timely written protests received;4. Close the Public Hearing;5. Approve the proposed CIC formula implementation and rate
increase effective January 18, 2016 or as soon as practical thereafter; and
6. Direct the City Attorney to prepare an amendment to the Water Rate Ordinance to reflect the proposed CIC formula implementation.
Pasadena Water and Power
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Projected Financial Impact of State Mandated 28% Reduction in Water Usage
Water Fund(Numbers shown in
$ millions)
2016 Adopted Budget
2016 Revised
Projections
Differenc
eGross Operating Revenues $59.0 $46.9 ($12.1)Operating Expenses $55.1 $49.0 ($6.1)Net Income $3.9 ($2.1) ($6.0)
Pasadena Water and Power
Water Rate Components
Water Rate Components
Distribution and Customer (D&C) Charge• fixed charge• generates revenues to recover maintenance and
operations costs• Includes Fire Protection Surcharge which covers the
cost of fire hydrant replacements and upgrades that are not directly related to new development
Commodity Charge • 100% volumetric charge • generates revenues to cover the costs of actual
water • both groundwater and purchased water Purchased Water Adjustment Charge (PWAC)• 100% volumetric charge • mechanism to recover the increased cost of water
purchased from the Metropolitan Water District (“MWD”)
• Also applied to increased groundwater production costs
Capital Improvement Charge (CIC)• 100% volumetric charge • generates revenues dedicated to long-term
capital improvements to water infrastructure• Revenues also cover debt service of bonds
issued for investment in the water infrastructure.
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
SYSTEM AVERAGE RATE*Per Billing Unit
Pro-posed$5.21
Commodity$2.20
D&C$1.92
Proposed CIC In-crease$0.45
CIC$0.64
Current$4.76
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* System average rate based on 9.6 million billing units of sales
Pasadena Water and Power
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Water Capital Projects Funded by the current CIC
Project Types Included Project Types Not IncludedDistribution main replacements Meters and Services – customer
requestedFire protection system improvements
Water Telemetry System (SCADA)
Well and Booster Pump Switchgear Upgrades
Facility Security SystemsRecycled Water construction costs
Reservoir Improvements Water IRP updatePermanent infrastructure expansion/replacement
Customer Billing System replacementRadio replacementsVehicle replacements
• Water Master Plan approved by City Council in 2002• CIC formula and rate approved as part of funding plan for
Master Plan• Formula provides for annual adjustments based on adopted
budget
Pasadena Water and Power
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FY2016 Major Water Capital Projects
CIP Project Type FY2016 Work PlanDistribution Mains Replacement, Fire Protection System Improvements
$3.8 million
Monk Hill Perchlorate Treating System $1.9 millionArroyo Spreading Basins $1.8 millionReservoir Improvements $1.1 millionUpgrade Well and Booster Pump Switchgear
$650,000
Sunset Chloramination Facility $500,000
Pasadena Water and Power
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CIC Rate Adjustment Formula
Capital Improvement Charge =((Funding Target Ratio x Capital Expenditure) + Debt
Service)Water Sales
Where:
Funding Target Ratio
Ideal debt to equity (cash from pay-go) funding
Capital Expenditure
Five-year average annual capital expenditure
Debt Service Five-year average annual CIC-related debt service
Water Sales Projected water sales volume for next 12 months
$1.09 = [(30% x $10.9M) / $7.18M] /9.6M billing units
Pasadena Water and Power
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Water Sales (million BU/year)20
03
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Last
12
mo
28%
Ta.
..02468
1012141618
Fiscal Year
Pasadena Water and Power
Sample Bill Impact on Monthly Charges (no reduction of water usage)
Meter Size
Monthly Usage
Existing Monthly Charges
Impact of Proposed Increase
Revised Monthly Charges
% Change
5/8" 5 $27.19 $2.09 $29.28 7.7% 3/4" 12 $46.95 $5.01 $51.96 10.7% 1" 25 $101.80 $10.45 $112.25 10.3%
1 1/2" 100 $389.65 $41.78 $431.43 10.7%
2" 125 $518.99 $52.23 $571.22 10.1%
3” 300 $1,251.03 $125.34 $1,376.37 10.0%
4" 600 $2,334.85 $250.68 $2,585.53 10.7%
6" 1,400 $5,017.95 $584.92 $5,602.87 11.7%
8" 2,400 $9,075.38 $1,002.72 $10,078.10 11.0%
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Pasadena Water and Power
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Bill Impact with 25% Reduced Usage
Bill Comparisons Based on Reduced Water Consumption
Historical Usage Reduced UsageMonthly Usage(in billing units) 12 9
Existing Monthly Bill $46.95 $36.50
Impact of CIC Increase $5.04 $3.78
Revised Monthly Bill $51.99 $40.28
% Change 10.7% (14.2%)
Pasadena Water and Power
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Alternative Sales Volume Forecast Scenarios
Sales Forecast (Billing Units) 9,600,000 10,000,000 10,400,000
Reduction in sales from CY 2013 (%) 28% 25% 22%
Formula CIC Rate Increase ($/Billing Unit) $0.45 $0.41 $0.36
Overall System-Average Rate Increase 10% 9% 8%
Full CIC Rate ($/Billing Unit) $1.09 $1.05 $1.00
FY2016 CIC Revenue at Current Rate($0.64/Billing Unit) $ 6,144,000 $ 6,400,000 $ 6,656,000
New Revenue from CIC Increase(February - June 2016) $ 1,512,000 $ 1,435,000 $ 1,310,400
Projected FY2016 CIC Revenue $ 7,654,000 $ 7,835,000 $ 7,966,000
Projected Annual Revenue at Full CIC Rate $ 10,464,000 $ 10,500,000 $ 10,400,000
Pasadena Water and Power
Revised Draft Schedule:Water Cost of Service and Rate Redesign
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Date ActionMarch 2016 MSC info item – rate structure discussionApril 2016 City Council – workshop discussionMay and June 2016 Customer outreach and feedback
July 2016 MSC and City Council Action – rate recommendation and set public hearing
September 2016 Public Hearing and City Council Rate Action
October 2016 Rate action effective
Pasadena Water and Power
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Pasadena Water and Power
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City Council Actions That Could Reduce CIC Rate
1. Reduce level of capital improvement budget More “deferred maintenance” May result in more water main breaks and higher water losses Higher future rate increases
2. Consider additional debt issuance Maintains higher level of capital investment Increased debt service costs Impacts funding target ratio of pay-go to long-term debt
funding3. Revise formula based on higher projected unit
sales4. Importance of taking current action
Mitigate part of FY 2016 net income reduction Provide coverage of debt service requirements and some
pay-go Encourage additional conservation
Pasadena Water and Power
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Other Agency Water Rate Actions
Agency Name Rate Action When Effective Riverside Customer charge Pending January 2017Anaheim Customer charge Pending February
2016Glendale Drought surcharge Spring 2015Irvine Ranch Water District
Multi-year rate action from cost of service update
Beginning July 2015
LADWP Four-year rate plan, cost of service update
Pending - Approved by Board October 2015, to be effective April 2016
Santa Monica Five annual consecutive increases
Annual beginning January 2014
Santa Margarita Water District
Rate action of cost of service update
January 2016
Pasadena Water and Power
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Existing & Proposed CIC Rates ($ per Billing Unit)
Existing Rates
Proposed Rates
Increase
SummerArea A $0.62429 $1.06715 $0.4428
6Area B $0.84274 $1.44056 $0.5978
2Winter
Area A $0.58896 $1.00676 $0.41780
Area B $0.79504 $1.35902 $0.56398These are the specific rates that would go into
effect if the staff recommendation is approved.
Pasadena Water and Power
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Existing and Proposed Rates28% Sales Reduction and 25% rate differential
Existing Rates Proposed Rates Increase
Summer Area A $0.62429 $1.08109 $0.45680 Area B $0.84274 $1.35136 $0.50862
Winter Area A $0.58896 $1.01990 $0.43094 Area B $0.79504 $1.27487 $0.47983
Same sales units as in AR recommendation 9.6 million 28% reduction Reduced the Inside/Outside rate differential from 35% to 25%. Since we kept the revenue requirement and sales volumes the same as in the AR, the System Average increase is still 45¢ .
Pasadena Water and Power
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Existing and Proposed Rates25% Sales Reduction and 25% rate differential
Existing Rates Proposed Rates IncreaseSummer
Area A $0.62429 $1.03785 $0.41356 Area B $0.84274 $1.29731 $0.45457
Winter Area A $0.58896 $0.97910 $0.39014 Area B $0.79504 $1.22388 $0.42884
Sales forecast is 10.0 million BU (this is the “25% alternative” in Table IV of AR)Reduced the Inside/Outside rate differential from 35% to 25%. We kept the revenue requirement the same as in the AR ($10.452 million), the System Average increase is 41¢ per BU.
Pasadena Water and Power
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Existing and Proposed Rates22% Sales Reduction and 25% rate differential
Existing Rates Proposed Rates Increase
Summer Area A $0.62429 $0.99793 $0.37364 Area B $0.84274 $1.24741 $0.40467
Winter Area A $0.58896 $0.94144 $0.35248 Area B $0.79504 $1.17680 $0.38176
Sales forecast is 10.4 million BU (this is the 22% alternative in Table IV of AR)Reduced the Inside/Outside rate differential from 35% to 25%. the System Average increase is 36¢ per BU for a system average rate of $1.00
Pasadena Water and Power
Annual Debt Service
20
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,000
Water System – Direct Debt Service by Fiscal Year
Series 2003 Series 2007 2010A (BABs) 2010B 2011A
Fiscal Year
Pasadena Water and Power
Annual Debt ServiceIncluding Projected 2016 Issuance
21
[comment]
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000
10,000,000Water System – Direct Debt Service After 2016
Issuance
Series 2003 Series 2007 2010A (BABs) 2010B 2011AProjected Bonds (FY16)
Fiscal Year
Pasadena Water and Power
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Projected Financial Impact of State Mandated 28% Reduction in Water Usage
Water Fund(Numbers shown in
$ millions)
2016 Adopted Budget
2016 Revised
Projections
Differenc
eGross Operating Revenues $59.0 $46.9 ($12.1)Operating Expenses $55.1 $49.0 ($6.1)Net Income $3.9 ($2.1) ($6.0)
Pasadena Water and Power
Projected Financial Impact of State Mandated 25% Reduction in Water Usage
23
Water Fund(Numbers shown in
$ millions)
2016 Adopted Budget
2016 Revised
Projections
Differenc
eGross Operating Revenues $59.0 $48.3 ($10.7)Operating Expenses $55.1 $49.2 ($5.9)Net Income $3.9 ($0.9) ($4.8)
Pasadena Water and Power
Projected Financial Impact of State Mandated 22% Reduction in Water Usage
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Water Fund(Numbers shown in
$ millions)
2016 Adopted Budget
2016 Revised
Projections
Differenc
eGross Operating Revenues $59.0 $49.7 ($9.3)Operating Expenses $55.1 $49.8 ($5.3)Net Income $3.9 ($0.1) ($4.0)