water rates & finances · based on the district’s 2016/17 budget future cost inflation...

Santa Ynez River Water Conservation District, ID No. 1

Water Rates & Finances

October 17, 2016

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Presentation Overview

Objectives

District Finances

Water Consumption

Financial Plan

Current & Projected Rates

Next Steps

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Objectives Independent review of District finances and rates

Develop long-term financial projections to:

Determine annual revenue requirements

Evaluate financial scenarios & rate increase alternatives

Evaluate and recommend water rates designed to: Restore and maintain financial health

Provide adequate funding for operating and capital needs

Be fair and equitable to all customer classes

Comply with the legal requirements of Proposition 218

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DISTRICT FINANCES

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District Finances District historically maintained good financial health

Long history of steady gradual rate increases every year

Tax assessments suspended after 2010/11 Loss of $750,000 per year, changed balance of revenue recovery

California hit with severe drought State declared a “drought state of emergency” in January 2014

Water usage declined almost 33% from 2013 to prior fiscal year 2015/16

Stringent new Chromium 6 drinking water regulations took effect July 2014

Financial health has deteriorated

District operating in deficit mode for third year in a row

District facing financial challenges that will require rate increases

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Financial Challenges Eliminate budget deficits and restore financial stability

$932K deficit in FY2014/15; $768K deficit in FY2015/16 Over $900K deficit projected in current fiscal year (without rate increases)

Chromium 6 project to address new regulations Capital costs: $8.5M to $12.7M (requires debt financing) Future O&M costs: $500,000 per year

Maintenance & rehab/replacement of aging infrastructure Future capital investment projected at $500,000 per year

Reduced water consumption = reduced revenues Water usage down almost 33% from 2013 benchmark year to 2015/16

Wholesale water supply costs increasing

Need to comply with bond covenants (legal obligation)

Ongoing operating cost inflation

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Financial Projections

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Financial Projections BWA developed 10-year financial projections Evaluate financial scenarios

Determine revenue requirements

Project rate increases

Key assumptions: Based on the District’s 2016/17 Budget

Future cost inflation projected at 4% for financial planning purposes

Based on 2015/16 water use, assumes 3% rebound in water consumption in each of next 4 years

Ad Valorem Special Assessment for payment obligations and bond financing (below appropriations limit, roughly inflation adjustment)

Assumes low growth with $50,000 per year of Capital Facilities Fees

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Financial Projections Key assumptions continued:

CCWA charges based on latest CCWA financial projections included in their 2016/17 budget

Infrastructure maintenance costs projected at $200,000 per year

General Admin staffing costs excludes costs for a conservation coordinator that had previously been budgeted

Assumes initial $8.5M of Chrome 6 facilities financed by 30-year bonds, additional future project costs funded on a pay-as-you-go cash basis

Bonds structured around outstanding debt, assumes refi of 2004 Bonds

Chrome 6 O&M expenses projected at $500,000 per year starting 2019/20

Capital rehab/replacement projected at $500,000 per year

CCWA bond debt ends after 2021/22 (District share ~$330,000 per year)

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Projected Rate Increases

Projected rate increases

Rate increases phased in as gradually as possible

Rate impacts will vary by customer class due to rate structure modifications

Feb-1 Jan-1 Jan-1 Jan-1 Jan-12017 2018 2019 2020 2021

Overall Rate Increases 15% 15% 5% 5% 5%

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CURRENT WATER RATES

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51 cents per 100 gallons

MONTHLY METER CHARGESMeter Size Domestic, RR/Ltd Ag Agricultural

5/8" $38.78 - 3/4" 46.42 - 1" 76.98 - 1-1/2" 153.62 62.402" 243.80 103.143" 490.60 207.564" 661.91 289.066" 1,543.43 645.618" 2,455.55 -

CONSUMPTION CHARGES ($/hcf)Domestic $3.81Rural Residential/Limited Agriculture First 125 units 3.81 Over 125 units 1.31Agriculture (No Domestic Use) 0.50On-Demand 6.08Temporary 6.25Cachuma Park 1.38

CURRENT WATER RATES



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Rates & Bills Domestic rates in middle range compared to other regional agencies

Agricultural rates are lowest compared to other regional agencies

Fixed meter charges currently generate about 45% of total rate revenues

Rate increases since 2005 Domestic consumption charges increased by $1.79 per hcf ($0.24 / 100 gallons)

Ag consumption charges increased by $0.18 per hcf

Limited Ag rate applied from use over 125 hcf to use over 70 hcf starting 2014

Rate increases over past few years have been largely offset by decline in water consumption

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Agricultural Rate Survey AgencySYRWCD ID#1 2" $103.14 Ag $0.50(Ag Rates) 4" 289.06 Limited Ag 1.31

6" 645.61Carpenteria VWD 2" 228.40 Irrigation

4" 713.75 Tier 1 (standard demand) 1.916" 1,427.50 Tier 2 2.50

Surcharge 345.00 (+ 0.26 to 0.44 in pressure zones)

Montecito WD 2" 237.84 Ag <870 hcf/acre/year 3.004" 891.90 Ag >870 hcf/acre/year 5.406" 1,468.51

Santa Barbara 2" 164.03 Ag 3.424" 409.28 Over Budget 24.276" 819.79

Nipomo CSD 2" 128.42 Ag 3.414" 385.16 Supplemental Chg 1.006" 762.43 Total 4.41

Goleta WD 2" 204.82 Ag 1.864" 779.95 Drought Surcharge 2.686" 1,722.21 Total 4.54

Ag Fixed Meter Charges Consumption Charges ($/hcf)

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PROPOSED WATER RATES

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Rate Derivation

■ BWA derived new water rates for all customer classes

■ Developed rates designed to fund costs of service in 2020/21

■ Phased in rates in intervening years (to the extent possible)

Target Revenue RequirementFrom Water Rates

(Goal: Fund cost of service 2020/21)

Fixed Rate Cost Allocation

Consumption ChargeCost Allocation

DomesticCost Recovery

AgriculturalCost Recovery

Divided byDomestic Meter

Equivalents

Divided byAg Meter

Equivalents

Domestic Meter Charges basedon mtr capacity

Ag Meter Charges basedon mtr capacity

DomesticCost Recovery

AgriculturalCost Recovery

Divided byDomestic

Water Use

Divided byAgricuturalWater Use

DomesticRate per Unit

AgricuturalRate per Unit

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Fixed Meter Charge Modifications ■ Small inflationary increases to fixed meter charges

No change to fixed meter charges in first year Meter charges re-aligned with meter capacity

■ Domestic meter charges Base 5/8-inch meter charge increases roughly 14% over 5 years Equivalent to an average annual increase of 2.5% per year over next 5 years Impacts on most other meter sizes vary from 14% to 16% over next 5 years

■ Ag meter charges Remain substantially lower than domestic meter charges Lower cost water supply (no Dept of Water Resources supply) Fewer accounts, less admin cost per account Interruptible supply Assumes ag customers pay 50% of standard rate during periods offline

■ Private fire service charges set at 10% of domestic meter charges

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Monthly Meter Charges Meter Current

Number of Meter Capacity Water Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 Accounts Capacity Ratio Rates 2017 2018 2019 2020 2021

MONTHLY METER CHARGESDomestic, Commercial & Rural Res/Ltd Agriculture

Meter Size5/8" 780 25 1.0 $38.78 $38.78 $39.86 $41.40 $42.98 $44.193/4" 616 30 1.2 46.42 46.42 47.83 49.69 51.58 53.031" 592 50 2.0 76.98 76.98 79.72 82.81 85.96 88.391-1/2" 194 100 4.0 153.62 153.62 159.45 165.62 171.93 176.782" 229 160 6.4 243.80 243.80 255.12 264.99 275.08 282.843" 8 300 12.0 490.60 490.60 478.35 496.85 515.78 530.334" 1 500 20.0 691.91 691.91 797.25 828.09 859.63 883.886" 0 1,000 40.0 1,543.43 1,543.43 1,594.50 1,656.18 1,719.26 1,767.778" 0 1,600 64.0 2,455.55 2,455.55 2,551.19 2,649.89 2,750.82 2,828.43

AgriculturalMeter Size1-1/2" 3 100 4.0 $62.40 $62.40 $66.13 $68.69 $71.30 $73.312" 29 160 6.4 103.14 103.14 105.80 109.90 114.08 117.303" 5 300 12.0 207.56 207.56 209.67 211.79 213.90 219.944" 47 500 20.0 289.06 289.06 330.64 343.43 356.51 366.576" 27 1,000 40.0 645.61 645.61 661.27 686.85 713.01 733.13

Proposed Water RatesProposed Rates Effective on or After

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Private Fire Protection Charges

Meter Current Number of Meter Capacity Water Feb-1 Jan-1 Jan-1 Jan-1 Jan-1

Accounts Capacity Ratio Rates 2017 2018 2019 2020 2021

PRIVATE FIRE PROTECTIONService Connection or Meter Size

Up to 1" 22 50 2.0 $19.40 $7.70 $8.00 $8.30 $8.60 $8.801-1/2" 7 100 4.0 19.40 15.40 15.90 16.60 17.20 17.702" 7 160 6.4 19.40 24.40 25.50 26.50 27.50 28.303" - 300 12.0 29.10 39.20 38.30 39.70 41.30 42.404" 29 500 20.0 38.80 55.40 63.80 66.20 68.80 70.706" 16 1,000 40.0 97.00 123.50 127.60 132.50 137.50 141.408" 11 1,600 64.0 194.00 196.40 204.10 212.00 220.10 226.30


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Consumption Charge Modifications

■ Domestic Water Rate Increase from $3.81 to $5.15 per hcf over next 5 years (approx. 35% increase) Larger increases in first 2 years to help eliminate budget deficit & restore stability

■ Ag Water Rate Remain substantially lower than domestic quantity charges Increase from $0.50 (below cost of water supply) to $1.87 per hcf over next 5 years Lower cost water supply (e.g. no Dept of Water Resources supply) Interruptible supply Ag rate to remain lowest compared to other regional agencies

■ Limited Ag Water Rate Set at 25% Domestic rate and 75% Ag rate Supposed to be for commercial agriculture Some large lot properties benefitting by getting lower Limited Ag Rate for non-ag uses

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Consumption Charge Modifications

■ On-Demand Water Rate 2x standard Domestic Rate includes partial cost recovery for system capacity Have own local service areas and require access to District water on demand to

supplement local supplies (typically during periods of peak demand) District incurs substantial costs maintaining the operational and water supply capacity

to serve these accounts, yet only minimal cost recovery due to low water sales Pay a fixed meter charge based on “master meter” connection, which does not fully

reflect underlying demand Never paid an equitable capacity charge to buy in to District facilities like other

customers Alternative: levy a reduced fixed monthly service charge on each parcel

■ Temporary Water Rate 3x standard Domestic Rate Includes cost recovery for District infrastructure and water supply

■ Cachuma Park Receives untreated water directly from Lake Cachuma

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Water Consumption Charges

Current Water Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 Rates 2017 2018 2019 2020 2021

CONSUMPTION CHARGESCharge per hundred cubic feet (hcf) of metered water consumption.

Domestic (Residential & Commercial) $3.81 $4.30 $4.80 $4.95 $5.05 $5.15

Rural Residential/Limited Agriculture First 125 units 3.81 4.30 4.80 4.95 5.05 5.15 Over 125 units 1.31 1.75 2.14 2.33 2.50 2.69

Agriculture (No Domestic Use) 0.50 0.90 1.25 1.45 1.65 1.87

On-Demand (2x Domestic Rate) 6.08 8.60 9.60 9.90 10.10 10.30Temporary (3x Domestic Rate) 6.25 12.90 14.40 14.85 15.15 15.46

Cachuma Park 1.38 1.48 1.55 1.63 1.71 1.80

Note: One hundred cubic feet (hcf) = 748 gallons


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Rate Impacts

Monthly Current Feb-1 Jan-1 Jan-1 Jan-1 Jan-1 Use (hcf) Rates 2017 2018 2019 2020 2021

DOMESTIC 5/8" Meter 5 $57.83 $60.28 $63.86 $66.15 $68.23 $69.95

10 76.88 81.78 87.86 90.90 93.48 95.7120 114.98 124.78 135.86 140.40 143.98 147.2330 153.08 167.78 183.86 189.90 194.48 198.75

3/4" Meter 5 65.47 67.92 71.83 74.44 76.83 78.7910 84.52 89.42 95.83 99.19 102.08 104.5520 122.62 132.42 143.83 148.69 152.58 156.0730 160.72 175.42 191.83 198.19 203.08 207.59

1" Meter 10 115.08 119.98 127.72 132.31 136.46 139.9120 153.18 162.98 175.72 181.81 186.96 191.4350 267.48 291.98 319.72 330.31 338.46 345.99

Monthly Bills with Proposed Rates

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Average Annual Increase Since 2010 Ranges from 2.4% to 3.4%

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Rate Impacts


RURAL RESIDENTIAL/LTD AG 1-1/2" Meter 10 191.72 196.62 207.45 215.12 222.43 228.30

50 344.12 368.62 399.45 413.12 424.43 434.38100 534.62 583.62 639.45 660.62 676.93 691.97200 728.12 822.37 919.95 959.12 990.68 1,022.52

2" Meter 10 281.90 286.80 303.12 314.49 325.58 334.3650 434.30 458.80 495.12 512.49 527.58 540.44

100 624.80 673.80 735.12 759.99 780.08 798.04200 818.30 912.55 1,015.62 1,058.49 1,093.83 1,128.59300 949.30 1,087.55 1,229.62 1,291.49 1,343.83 1,397.59


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Rate Impacts


AGRICULTURAL (INTERRUPTIBLE) 2" Meter 200 203.14 283.14 355.80 399.90 444.08 491.96

500 353.14 553.14 730.80 834.90 939.08 1,053.95 1,000 603.14 1,003.14 1,355.80 1,559.90 1,764.08 1,990.59

4" Meter 500 539.06 739.06 955.64 1,068.43 1,181.51 1,303.21 1,000 789.06 1,189.06 1,580.64 1,793.43 2,006.51 2,239.86 2,000 1,289.06 2,089.06 2,830.64 3,243.43 3,656.51 4,113.15 4,000 2,289.06 3,889.06 5,330.64 6,143.43 6,956.51 7,859.73


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PROCESS

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Rate Study Process

2015 Initiate Rate Study ■ Sept 15 Board Meeting, preliminary findings & intro to rate study

2016 Develop Rate Recommendations ■ Jan 6 Board/Public Workshop, discuss findings & obtain input

■ Oct 17 Public Workshop, present recommendations & obtain input

■ Oct 25 Board Meeting, receive direction to move forward

■ Oct 28 Last day to mail Prop 218 Notices (min. 45 days prior to hearing)

■ Dec 13 Public Rate Hearing, consider rate increases

2017 Rates Become Effective ■ Feb 1 New rates become effective

water rates & finances · based on the district’s 2016/17 budget future cost inflation...

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