water and wastewater rate study

Draft Report

Water and Wastewater Rate Study

May 2017

OFFICE LOCATIONS:

Temecula – Corporate Headquarters

32605 Temecula Parkway, Suite 100

Temecula, CA 92592

San Francisco – Regional Office

870 Market Street, Suite 1223

San Francisco, CA 94102

California Satellite Offices

Atascadero, Davis

Huntington Beach,

Joshua Tree, Riverside

Sacramento, San Jose

www.nbsgov.com

Prepared by:

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Mountain House Community Service District Water and Sewer Rate Study TOF

TABLE OF CONTENTS Section 1. Purpose and Overview of the Study ..............................................................................1

A. Purpose ............................................................................................................................................. 1

B. Overview of the Study....................................................................................................................... 1

C. Rate Alternatives ............................................................................................................................... 3

Section 2. Water Rate Study .........................................................................................................4

A. Financial Plan .................................................................................................................................... 4

B. Cost of Service Analysis ..................................................................................................................... 5

C. Rate Design Analysis ....................................................................................................................... 11

D. Current and Proposed Water Rates ................................................................................................ 13

E. Comparison of Current and Proposed Water Bills .......................................................................... 14

Section 3. Sewer Rate Study ....................................................................................................... 16

A. Financial Plan .................................................................................................................................. 16

B. Cost of Service Analysis ................................................................................................................... 17

C. Rate Design Analysis ....................................................................................................................... 23

D. Current and Proposed Sewer Rates ................................................................................................ 24

E. Comparison of Current and Proposed Sewer Bills .......................................................................... 25

Section 4. Consultant Recommendations .................................................................................... 27

Appendix A – Detailed Water Study Tables ........................................................................................ A

Appendix B – Detailed Sewer Study Tables ........................................................................................ B

Mountain House Community Service District Water and Sewer Rate Study TOF

TABLE OF FIGURES Figure 1. Primary Components of a Rate Study ............................................................................................ 1

Figure 2. Summary of Water Revenue Requirements .................................................................................. 5

Figure 3. Summary of Water Reserve Funds ................................................................................................ 5

Figure 4. Cost Classification Summary .......................................................................................................... 6

Figure 5. Allocation of Water Revenue Requirements ................................................................................. 7

Figure 6. Annual Water Consumption by Customer Class ............................................................................ 8

Figure 7. Peaking Factors by Customer Class ................................................................................................ 8

Figure 8. Number of Meters by Customer Class ........................................................................................... 8

Figure 9. Cost Allocation Methodology......................................................................................................... 9

Figure 10. Allocation of Capacity Costs to Customer Classes ....................................................................... 9

Figure 11. Allocation of Customer Costs to Customer Classes ................................................................... 10

Figure 12. Allocation of Fire Protection Costs Fire Meter .......................................................................... 10

Figure 13. Allocation of Volumetric Costs to Customer Classes ................................................................. 11

Figure 14. Water Rates by Customer Class ................................................................................................. 11

Figure 15. Fixed Rate Calculation ................................................................................................................ 13

Figure 16. Commodity Rate Calculation ..................................................................................................... 13

Figure 17. Current and Proposed Water Rates ........................................................................................... 14

Figure 18. Water Bills for Residential Low Density ..................................................................................... 15

Figure 19. Water Bills for Residential Medium Density .............................................................................. 15

Figure 20. Summary of Sewer Revenue Requirements .............................................................................. 17

Figure 21. Summary of Sewer Reserve Funds ............................................................................................. 17

Figure 22. Classification of Expenses .......................................................................................................... 18

Figure 23. Strength Factor Allocation ......................................................................................................... 18

Figure 24. Residential Flow by Dwelling Unit.............................................................................................. 19

Figure 25. Non-Residential Flow by Account .............................................................................................. 19

Figure 26. Allocation Factors for Flow by Customer Class .......................................................................... 19

Figure 27. Allocation Factors for BOD Costs by Customer Class ................................................................. 20

Figure 28. Allocation Factors for TSS Costs by Customer Class .................................................................. 20

Figure 29. Number of Accounts by Customer Class .................................................................................... 20

Figure 30. Cost Allocation Methodology .................................................................................................... 21

Figure 31. Allocated Flow by Costs Customer Class .................................................................................... 21

Figure 32. Allocated BOD Costs by Customer Class .................................................................................... 22

Figure 33. Allocated TSS Costs by Customer Class ...................................................................................... 22

Figure 34. Allocated Customer Costs by Customer Class............................................................................ 22

Figure 35. Rates by Customer Classes ......................................................................................................... 23

Figure 36. Calculation of Residential Customer Fixed Charges................................................................... 23

Figure 37. Calculation of Non-Residential Customer Charges .................................................................... 24

Figure 38. Non-Residential Fixed Monthly and Volumetric Rates .............................................................. 24

Figure 39. Current and Proposed Sewer Rates ........................................................................................... 24

Figure 40. Sewer Bills for Residential Low Density ..................................................................................... 25

Figure 41. Sewer Bills for Residential Medium Density .............................................................................. 26

Mountain House Community Service District Water and Sewer Rate Study 1

SECTION 1. PURPOSE AND OVERVIEW OF THE STUDY

A. Purpose

Mountain House Community Services District (District) retained NBS in early 2015 to begin conducting a

water and sewer rate study for several reasons. In addition to the normal reasons for a rate study, such

as meeting revenue requirements, providing adequate funding for capital improvements, and

maintaining appropriate reserves, this study carefully evaluated the District’s rate structure design. Also,

after review by the District Board of Directors, the Board decided to phase out the general fund

subsidies for water and sewer rates over a five-year period. This rate study was also undertaken to

ensure rates comply with recent laws, particularly Proposition 218 (Prop 218)1 and other legal concerns.

The rates resulting from this study were developed in a manner that is consistent with industry standard

cost of service principles. This report documents the rate study methodology and is part of the District’s

effort to maintain transparent communications with its residents and businesses.

In developing new water rates, NBS worked cooperatively with District staff and the District’s Board in

selecting appropriate rate alternatives. Based on input from District staff and the Board, the proposed

water rates are summarized in this report along with proposed sewer rates.

B. Overview of the Study

Comprehensive rate studies such as this one typically include the following three components, as

outlined in Figure 1:

1. Financial Plan – identifies the net revenue requirements for the utility.

2. Cost of Service Analysis – determines the cost of providing service to each customer class.

3. Rate Design Analysis – evaluates different rate design alternatives.

Figure 1. Primary Components of a Rate Study

1 FINANCIAL PLAN

2 COST-OF-SERVICE ANALYSIS

3 RATE DESIGN ANALYSIS

Compares current sources and

uses of funds and determines

the revenue needed from rates

and projects rate adjustments.

Proportionately allocates the

revenue requirements to the

customer classes in compliance

with industry standards and State

Law.

Considers what rate structure will

best meet the District’s need to

collect rate revenue from each

customer class.

These steps are intended to follow industry standards and reflect the fundamental principles of cost-of-

service ratemaking embodied in the American Water Works Association (AWWA) Principles of Water

1 California Constitution article XIII D, section 6.


Rates, Fees, and Charges2, also referred to as the M1 Manual. They also address requirements under

Proposition 218 that rates not exceed the cost of providing the service, and that they be proportionate

to the cost of providing service for all customers. In terms of the chronology of the study, these three

steps represent the order they were performed in this Study. Detailed tables and figures documenting

the development of the proposed water and sewer rates are provided in Appendix A (Water) and

Appendix B (Sewer).

FINANCIAL PLAN

As a part of this rate study, NBS projected revenues and expenditures on a cash flow basis for both

utilities for the next twenty years3. The amount of rate revenue required to fund annual expenditures

and maintain reserves at the appropriate levels, is known as the net revenue requirement. The District

currently subsidizes both utilities with General Fund revenue. After discussions in public meetings, the

Board directed staff and NBS to phase out these subsidies over a 5-year period. Sections 2 and 3 present

overviews of the water and sewer financial plans developed in this study4.

COST OF SERVICE ANALYSIS

The cost of service analysis proportionately distributes the revenue requirements to each of the

customer classes, and consists of two major components: (1) the classification of expenses, and (2) the

allocation of costs to customer classes. For both utilities, costs were classified based on their function.

Costs are proportionally allocated based on the level of service provided, which ensures that rates are

fair and equitable for the various customer classes.

RATE DESIGN ANALYSIS

Rate Design is where NBS, District staff and the Board worked closely to evaluate which rate alternatives

best meet the District’s objectives. In designing water rates, it is important for the water utility to not

only send proper price signals to its customers about the actual cost of their water usage, but to do so in

a manner that complies with Prop 218 requirements. This is done by examining the fairness and equity

of rates and how they impact customers through both the magnitude of the rates and the rate structure

design, such as the amount of revenue collected from fixed and variable charges. In other words, both

the amount of revenue collected, and the way in which the revenue is collected from customers are

important.

Several criteria are typically considered in setting rates and developing sound rate structures. The

fundamentals of this process have been documented in a number of rate-setting manuals, such as the

AWWA Manual M1. The foundation for evaluating rate structures is generally credited to James C.

Bonbright in the Principles of Public Utility Rates5 that outlines pricing policies, theories, and economic

concepts along with various rate designs. The following is a simplified list of the attributes of a sound

structure:

2 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, M1, AWWA, seventh edition, 2017. 3 Debt Service & Pledge Revenue have been excluded from this analysis (i.e., the initial funding for the water and sewer treatment plants, which is collected via a separate fee). 4 The complete financial plan is set forth in the Appendices. 5 James C. Bonbright; Albert L. Danielsen and David R. Kamerschen, Principles of Public Utility Rates, (Arlington, VA: Public

Utilities Report, Inc., Second Edition, 1988), p. 383-384.


Rates should be easy to understand from the customer’s perspective.

Rates should be easy to administer from the utility’s perspective.

Rates should promote the efficient allocation of the resource (e.g., conservation).

Rates should be equitable and non-discriminating (that is, cost based).

There should be continuity in the ratemaking philosophy over time.

Rates should address other utility policies (such as encouraging conservation, economic

development, and minimizing financial impacts on customers).

Rates should provide month-to-month and year-to-year revenue stability.

WATER CONSERVATION

On January 17, 2014, Governor Jerry Brown declared a State of Emergency throughout California due to

severe drought conditions. On April 1, 2015, the Governor issued Executive Order B-29-15 mandating

statewide water conservation of 25 percent. The specific conservation mandate for each community in

California varied from 4 to 36 percent. The District initial mandate was for 25 percent and this was later

adjusted to 21 percent in March 2016. In June of 2016, the District was able to “self-certify” and the

mandate was lifted. However, in general, District customers continue to conserve, and appear to be

maintaining a conservation level that nearly matches the 21-percent adjusted target.

While the level of conservation the District is achieving helps keep the District within its supply

constraints, it places financial pressure on the utility. Consumption has an impact on both revenue and

expenses. For this analysis, February 2016 through January 2017 consumption is used as the base

consumption, and is assumed to be the “new normal,” with approximately 1,067,460 hundred cubic feet

(hcf) or 2,450 AF of water consumed. No increase in consumption is assumed over the five-year rate

period (beyond customer growth).

C. Rate Alternatives

NBS developed various water and sewer rate alternatives as requested by District staff and the Board

over the course of this Study. All rate structure alternatives relied on industry standards and cost-of-

service principles. The fixed and volume-based charges were calculated based on the net revenue

requirements, number of customer accounts, water consumption, and other District-provided

information. Thus, all rate alternatives were “revenue neutral” in that they were all intended to collect

exactly the same amount of rate revenue from customers. Which rate alternatives are implemented is

ultimately the decision of the Board.


SECTION 2. WATER RATE STUDY

A. Financial Plan

It is important for municipal utilities to adopt rates that provide adequate funding but also allow them

to maintain reasonable reserves in order to handle emergencies, fund working capital, maintain a good

credit rating, and generally follow sound financial management practices. Rate adjustments are,

therefore, largely governed by the need to meet operating and capital costs, maintain adequate debt

coverage, and build reasonable reserve funds. The following is a more detailed description of the

District’s financial status with regard to these objectives:

Meeting Net Revenue Requirements: As noted above, the proposed rates are designed to

phase out the General Fund subsidy over the 5-year rate period.

Building and Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with

fiscal emergencies such as revenue shortfalls, asset failure, and natural disasters, among other

events. Reserve policies provide guidelines for sound financial management, with an overall

long-range perspective to maintain financial solvency and mitigate financial risks associated with

revenue instability, volatile capital costs, and emergencies. NBS recommends that the District

consider increasing its minimum reserve fund targets to the metrics described below:

Operating Reserve – a reserve equal to approximately 45 days (or about 12 percent) of

annual operating costs, which is lower than a more typical operating reserve target of

90 days (or 25 percent). The District can use General Fund reserves for emergency

assistance if necessary.

Rate Stabilization and Drought Contingency Reserve – the Board approved this new

reserve which is required as part of the Districts agreement to seek alternative water

supplies. This reserve began the year with a balance of $200,000 and is expected to

grow by $200,000 annually in FY 2016/17 through FY 2019/20 and by $250,000 annually

in FY 2020/21 and FY 2021/22. The final target (approved by the Board) is $2 million,

which is scheduled to be met in FY 2023/24.

Funding Capital Improvement Projects: The District must also be able to fund necessary capital

improvements in order to maintain current service levels. District staff has identified roughly

$1.6 million in expected capital expenditures for FY 2017/18 through 2021/22. Even with the

recommended rate adjustments, to complete these projects on the recommended timeline,

some General Fund subsidy will be required.

Inflation and Growth Projections: Assumptions regarding cost inflation were made in order to

project future revenues and expenses for the study period. The following inflation factors were

used in the analysis:

325 new connections are expected annually, about a 6-7 percent annual growth rate.

General cost inflation is 2.5 percent annually.

Labor cost inflation is 3.5 percent annually.

Rate adjustments of 16 percent in FY 2017/18, 15 percent in 2018/19, 8 percent in 2019/20 and 5

percent in FY 2020/21 through FY 2021/22, will be needed in order to phase out the General Fund

subsidy and keep the reserves at the recommended targets in FY 2021/22. Figure 2 summarizes the


sources and uses of funds, net revenue requirements, and the recommended annual percent

adjustments in total rate revenue recommended for the next 5 years for the District.

Figure 2. Summary of Water Revenue Requirements

Figure 3 summarizes the projected reserve fund balances and reserve targets. A summary of the utility’s

proposed 5-year financial plan is included in Tables 1 and 3 of Appendix A. The appendix tables include

revenue requirements, reserve funds, revenue sources, proposed rate adjustments, and the District’s

capital improvement program.

Figure 3. Summary of Water Reserve Funds

B. Cost of Service Analysis

Once the net revenue requirements are determined, the cost of service analysis proportionally

distributes the revenue requirements to each of the customer classes. The cost of service analysis

consists of two major components: (1) the classification of costs, and (2) the allocation of costs to

customer classes. Costs were classified corresponding to the function they serve. All costs in the

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Sources of Water Funds

Rate Revenue Under Prevailing Rates (1) 1,640,000$ 1,752,447$ 1,864,895$ 1,977,342$ 2,089,789$ 2,202,236$

Additional Revenue from Rate Increases (2) - 280,392 622,875 871,454 1,071,552 1,295,782

Transfer from General Fund 988,715 1,022,429 802,327 630,498 408,906 179,807

Other Operating Revenue 382,500 408,726 434,953 461,179 487,405 513,631

Interest Earnings - 3,032 4,948 6,716 7,901 8,003

Total Sources of Funds 3,011,215$ 3,467,027$ 3,729,997$ 3,947,188$ 4,065,553$ 4,199,460$

Uses of Water Funds

Operating Expenses 3,011,215$ 3,152,173$ 3,296,906$ 3,446,912$ 3,602,366$ 3,763,445$

Rate-Funded Capital Expenses - - - - 3,793 150,166

Total Use of Funds 3,011,215$ 3,152,173$ 3,296,906$ 3,446,912$ 3,606,159$ 3,913,611$

Projected Annual Rate Increase 0.00% 16.00% 15.00% 8.00% 5.00% 5.00%

Cumulative Rate Increases 0.00% 16.00% 33.40% 44.07% 51.28% 58.84%

Net Revenue Requirement (3) 1,640,000$ 1,717,985$ 2,054,678$ 2,348,520$ 2,701,947$ 3,212,169$ 1. FY 2016/17 revenues and expenses are per the Dis trict's Annual Operating Budget and use the Current Total Budget numbers .

Source fi le: Budget Workbook FINAL.xlsx

2. Assumes new rates are implemented July 1, 2017 and each July 1 each year thereafter.

3. Total Use of Funds less non-rate revenues and interest earnings . This i s the annual amount needed from water rates .

Summary of Sources and Uses of Funds and

Net Revenue Requirements

Projected

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Un-Restricted Reserves

Operating Reserve

Ending Balance 376,402$ 394,022$ 412,113$ 430,864$ 450,296$ 470,431$

Recommended Minimum Target 376,402 394,022 412,113 430,864 450,296 470,431

Rate Stabilization and Drought Contingency Reserve

Ending Balance 400,000$ 600,000$ 800,000$ 1,000,000$ 1,250,000$ 1,500,000$

Recommended Minimum Target (1) 400,000 600,000 800,000 1,000,000 1,250,000 1,500,000

Capital Rehabilitation & Replacement Reserve

Ending Balance 686,542$ 495,201$ 432,423$ 357,952$ 188,692$ 14,427$

Recommended Minimum Target - - - - - -

Total Ending Balance 1,462,943$ 1,489,222$ 1,644,536$ 1,788,816$ 1,888,987$ 1,984,858$

Total Recommended Minimum Target 776,402$ 994,022$ 1,212,113$ 1,430,864$ 1,700,296$ 1,970,431$ 1. The Target Minimum for the Rate Stablization increases annually to the Board approved target of $2 million in FY 2023/24.

Beginning Reserve Fund Balances and

Recommended Reserve Targets

Projected


District’s budget are allocated to each component of the rate structure in proportion to the level of

service required by customers. The levels of service include peak and average annual demand and

number of customer accounts, and allocation factors include average water consumption, peaking

factors, and number of accounts by meter size. Ultimately, a cost-of-service analysis is designed to result

in rates that are proportional to the cost of providing service to each customer.

CLASSIFICATION OF COSTS

Most costs are not typically allocated 100 percent to fixed or variable categories and, therefore, are

allocated to multiple functions of water service. For the Cost of Service Analysis (COSA) costs were

classified using the commodity-demand method found in the AWWA M1 Manual6. In accordance with

this method, budgeted costs were “classified” into four categories: commodity, capacity, customer and

fire protection. The classification process provides the basis for allocating costs to various customer

classes based on the cost causation (classification) components described below:

Commodity related costs are those that change as the volume of water produced and delivered changes, such as the costs of chemicals used in the treatment process, energy related to pumping for transmission and distribution, and water supply costs.

Capacity related costs are costs associated with system infrastructure, which is sized based on the maximum (or peak) system demands.

Customer related costs are associated with meter reading, postage, billing, and other related customer services.

Fire Protection related costs are associated with providing sufficient capacity in the system for fire meters and other operations and maintenance costs of providing water to properties for private fire service protection.

The District’s budgeted costs were reviewed and allocated to these cost causation components which

are used as the basis for establishing new water rates, which are composed of fixed and variable

charges. The “Funct. & Classification” section of Appendix A shows how the District’s expenses were

classified and allocated to these cost causation components. Additionally, each cost causation

component is considered fixed or variable, as summarized in Figure 5.

Figure 4. Cost Classification Summary

Ideally, utilities should recover all of their fixed costs from fixed charges and all of their variable costs

from volumetric charges. This means that the percentage of fixed and variable costs would match the

percentage of estimated fixed and variable rate revenue. When this is the case, fluctuations in water

sales revenues would be directly offset by reductions or increases in variable expenses. When rates are

6 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, M1, AWWA, seventh edition, 2017, p. 83.

Revenue RequirementsFixed Costs

Capacity Costs Customer Costs Fire Protection Costs

Variable Costs

Commodity Costs


set in this manner, they provide greater financial stability for the utility. However, other factors are

often considered when designing water rates such as water conservation goals, ease of understanding,

ease of administration, and other community values such as economic development.

The COSA resulted in a distribution that is approximately 67 percent fixed and 33 percent variable. This

is very close to the District’s current rate structure, which collects approximately 70 percent of revenue

from fixed charges and 30 percent from variable charges. After reviewing several options, the Board of

Directors decided to adjust this target slightly and approved an alternative that should collect 65

percent of revenue from fixed charges and 35 percent from variable rates7. While allowing for slightly

more revenue from variable charges, this maintains financial stability as a priority in this rate setting

process. As a result of this rate design choice, a small share of the District’s capacity costs (2.2 percent)

be collected from the variable rates.

Figure 5 summarizes the allocation of the net revenue requirements to each cost causation component.

Figure 5. Allocation of Water Revenue Requirements

CUSTOMER CLASSES

Customer classes are determined by grouping customers with similar characteristics, such as the types

of customers (residential, commercial, irrigation, etc.) and average and peak demands, into categories

that best reflect the cost of serving each type of customer. These factors are also used to allocate costs

to each customer class. The District’s most recent annual consumption is summarized in Figure 6,

peaking factors in Figure 7 and number of customers by customer class is shown in Figure 8.

7 The California Urban Water Conservation Council recommends recovering at least 70 percent of rate revenue through volume-based rates. However, water utilities are allowed to develop their own allocations that accurately reflect their actual cost allocations.

Classification Components

Capacity-Related Costs

(fixed allocation)1,116,284$ 54.9%

Customer-Related Costs 203,842 10.0%

Fire Protection-Related Costs 1,219 0.1%

Subtotal: Fixed-Related Costs 1,321,345$ 65.0%

Volumetric-Related Costs1 711,494$ 35.0%

Net Revenue Requirement 2,032,839$ 100%

1. Volumetric-Related Costs are a lmost enterly commodity costs (32.8% of a l l costs )

but a lso includes a smal l a l location of capacity-related costs (2.2% of a l l costs ).

Adjusted Net Revenue Requirements

(2017/18)


Figure 6. Annual Water Consumption by Customer Class

Figure 7. Peaking Factors by Customer Class

Figure 8. Number of Meters by Customer Class

COSTS ALLOCATED TO CUSTOMER CLASSES

The costs allocated to each customer class (from Figure 5) reflect the cost differentials to serve each

type of customer. Figure 9 summarizes these cost causation components, from Figures 6 through 8,

which are used in this process. This process is shown in the following sections, in Figure 10 through

Figure 13.

Customer ClassFeb '16 - Jan '17

Volume (hcf)1

Percent of

Total Volume

Single Family Res Low Den 366,539 34%

Single Family Res Med Den 421,726 40%

All Other Meters 279,195 26%

Total 1,067,460 100%

1. Source of consumption: newConsumptionData.xlsx

Customer ClassAverage Monthly

Use (hcf)

Peak Monthly

Use (hcf)

Peaking

Factor

Percent of

Peak Use

Single Family Res Low Den 30,545 50,586 1.66 30%

Single Family Res Med Den 35,144 54,662 1.56 32%

All Other Standard Meters 23,256 65,540 2.82 38%

Fire Meters 10 41 4.17 0%

Total 88,955 170,829 -- 100%

1. Based on peak monthly data.

Customer Class AccountsPercent of

Accounts



All Other Standard Meters 191 4%

Fire Meters 6 0%

Total 4,740 100%1. Source of meters counts : newConsumptionData.xlsx


1. This allocation is due to rate design and only represents 2.2% of all costs.

Figure 9. Cost Allocation Methodology

Capacity Related Costs

The capacity related costs allocation is summarized in Figure 10. Capacity related costs are those costs

associated with constructing and operating the water system to ensure there is sufficient capacity in the

system to meet the demand of each meter connected. First, the capacity costs (from Figure 5) are

allocated to each customer class as shown in Figure 10.

Figure 10. Allocation of Capacity Costs to Customer Classes

For the “All Other Standard Meter” and “Fire Meter” classes, larger meters are allocated larger

proportional share of the costs. This is because larger meters have the potential to use more of the

system’s capacity, compared to smaller meters. The potential capacity demanded is proportional to the

maximum safe meter capacity each meter size as established by the AWWA8.

Customer Related Costs

The customer related cost allocation is summarized in Figure 11. Customer related costs relate to

reading and maintaining meters, customer billing and collection, and related customer service costs. For

8 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, M1, AWWA, seventh edition, 2017, p. 338.

•Allocated based on peak consumption by customer class

•Allocated based on the hydraulic capacity of each meter sizeCapacity Related Costs

(fixed)

•Allocated based on the total number of metersCustomer Related

Costs (fixed)

•Allocated based on the hydraulic capacity of fire metersFire Protection Related

Costs (fixed)

•Allocated based on water consumption by customer classCommodity RelatedCosts (volumetric)

•Allocated based on peak consumption by customer classCapacity Related Costs

(volumetric)1

Customer ClassPercent of

Peak Use

Allocated

Capacity Costs1

Single Family Res Low Den 29.6% 330,556$

Single Family Res Med Den 32.0% 357,190

All Other Standard Meters 38.4% 428,270

Fire Meters 0.02% 268

Total 100% 1,116,284$

1. From Figure 5.


the “Other Standard Meters” and “Fire Meter” customer classes, the customer service costs do not

differ among the various meter sizes; therefore, these costs are spread equally among all meters. Each

customer class is allocated costs based on the percentage of total customers in each class.

Figure 11. Allocation of Customer Costs to Customer Classes

Fire Protection Related Costs

The fire protection cost allocation is summarized in Figure 12. Only Fire Protection meters are allocated

this cost component. A direct allocation is made in the functionalization and classification step in the

cost of service analysis to represent their share of system capacity and other related operations and

maintenance costs.

Figure 12. Allocation of Fire Protection Costs Fire Meter

Volumetric Costs

The volumetric cost allocation is summarized in Figure 13. This is mostly commodity related costs which

are costs related to the amount of water sold and commonly include the costs of chemicals used in the

treatment process, energy related to pumping for transmission and distribution, and source of supply9.

Each customer class is allocated commodity related costs based upon the percentage of total

consumption by that class.

9 2.2 percent of costs are from the allocation of some capacity costs to the volumetric rate due to rate design decision. The details of this allocation and the impact on allocated costs are be found in Appendix A.


Customers

Allocated

Customer Costs1



All Other Standard Meters 4.0% 8,214

Fire Meters 0.1% 258

Total 100% 203,842$

1. From Figure 5.

Customer ClassEquivalency to

3/4 Inch MeterMeters

Equivalent

Meters

% of

Equivalent

Meters

Allocated

Capacity & Fire

Protection

Costs

Fire Meters

5/8 inch (Displacement Meters) 0.67 3 2 1% 9$

8 inch (Fire Meters - Type I & II) 93.33 3 280 99% 1,210

Total 6 282 100% 1,219$


Figure 13. Allocation of Volumetric Costs to Customer Classes

C. Rate Design Analysis

The following are the basic rate design criteria that were considered in this study:

Fixed Monthly Service Charges – Fixed charges can be called base charges, minimum monthly charges,

customer charges, fixed meter charges, etc. Fixed charges for water utilities typically increase by meter

size in order to reflect the proportional share of system capacity costs for various meter sizes.

Commodity Charges – In contrast to fixed charges, variable costs such as purchased water, the cost of

electricity used in pumping water, and the cost of chemicals for treatment are assumed to change in

proportion to the quantity of water produced. For a water utility, variable charges are generally based

on metered consumption and charged on a dollar-per-unit cost (for example, per 100 cubic feet, or hcf).

The customer classes for fixed and volumetric rates are summarized in Figure 14.

Figure 14. Water Rates by Customer Class

The process of evaluating the water rate structure provides the opportunity to incorporate a number of

rate-design objectives and policies, including revenue stability, equity among customer classes, and

water conservation. NBS discussed several water rate alternatives and methodologies with District Staff

over the course of this study, such as the percentage of revenue collected from fixed vs. variable charges

and differentiating rates by customer class. Based on input provided by District staff, the Board of

Directors, and the District’s legal counsel, the proposed rate structure shown in Figure 16 was

developed.

To implement this rate design, NBS recommends that the District make the following modifications to

the current water rate structure:


Total Volume

Allocated

Commodity Costs1

Single Family Res Low Den 34% 242,229$

Single Family Res Med Den 39% 277,787

All Other Customers 27% 191,478

Total 100% 711,494$

1. From Figure 5.

Water Rate Customer Classes

Fixed Charges

Low Density Fixed Charge Single Family Res Low Density

Med Density Fixed Charge Single Family Res Med Density

Fire Protection Charge by Meter Size Fire Protection

Fixed Charge by Meter Size All Other Customer classes

Variable Rates

Residential Variable Rate Single Family Res Low & Med Density

Commercial Variable Rate All Other Customer classes (including Fire meters)


1. For the Fixed Charge:

a. Remove assigned EDUs and Acreage from monthly water fee and update monthly fixed

meter charges to be consistent with AWWA standards.

b. In light of the fact that nearly 96% of all District customers are Single Family Residential

and the substantial differences in use between Low- and Medium-Density residential

customers, fixed costs were separately allocated to Low- and Medium-Density Single

Family Customers, with no distinction by meter size.

c. Use hydraulic capacity factors to develop the fixed charges for each meter size for all

Non-Single Family Residential customers.

2. For the Variable Charge:

a. While a tiered rate was considered, based upon a number of factors, including the

District’s single source of supply, a single-tier (uniform) volumetric rate should be used.

b. Normally, a uniform volumetric rate would apply to all customers. Because of the rate

design used (i.e., the percent of revenue collected from fixed and variable charges) the

volumetric rate includes a small portion of fixed costs, which are allocated differently for

residential vs. all other customer classes, resulting in slightly different uniform rates for

residential vs. other customers.

The following sections describe the rate design process in more detail.

FIXED CHARGES

The fixed meter charge recognizes that the water utility incurs fixed costs regardless of whether

customers actually use water. As previously described above and in Figure 9, the three components that

comprise the fixed meter charge are: the customer component, the capacity component and the fire

protection. Figure 15 calculates the monthly charges.


Figure 15. Fixed Rate Calculation

VARIABLE CHARGES

Using the costs allocated to each customer class in Figure 13, Figure 16 calculates the per unit

volumetric charges.

Figure 16. Commodity Rate Calculation

D. Current and Proposed Water Rates

The COSA is used to establish the rates for FY 2016/17. In the subsequent four years of the rate study,

proposed charges are simply adjusted by the proposed adjustment in total rate revenue needed to meet

projected revenue requirements. Figure 17 provides a comparison of the current and proposed rates for

FY 2016/17 through FY 2020/21. More detailed tables on the development of the proposed charges are

documented in Appendix A.

Customer ClassNumber

of Meters

Allocated

Capacity & Fire

Protection

Costs

Allocated

Customer

Costs

Allocated

Costs

Monthly

Rate

a b c d = b+c e = d / a / 12

Single Family Res Low Den 1,779 330,556$ 76,505$ 407,061$ $19.07

Single Family Res Med Den 2,764 357,190 118,865 476,055 $14.35

All Other Standard Meters

5/8 inch 5 1,266 215 1,481 $24.68

3/4 inch 1 380 43 423 $35.23

1 inch 18 11,394 774 12,168 $56.33

1.5 inch 18 22,787 774 23,561 $109.08

2 inch 137 277,496 5,892 283,387 $172.38

3 inch 4 16,204 172 16,376 $341.17

4 inch 4 25,319 172 25,491 $531.06

6 inch 1 12,659 43 12,702 $1,058.54

8 inch 3 60,765 129 60,894 $1,691.51

Fire Meters

5/8 inch 3 11 129 140 $3.88

8 inch 3 1,476 129 1,605 $44.59

Total 4,740 1,117,503$ 203,842$ 1,321,345$ --

Customer ClassVolume

(hcf)

Allocated

Volumetric Costs

Commodity

Rate

a b c = b / a

Single Family Res 788,265 520,016$ $0.6597

All Other Customers 279,195 191,478 $0.6858

Total 1,067,460 711,494$


Figure 17. Current and Proposed Water Rates

E. Comparison of Current and Proposed Water Bills

Figure 18 and Figure 19 compare a range of monthly water bills for the current and proposed water

rates as a result of the initial rate adjustment for single-family residential customers. These monthly bills

are based on typical meter sizes and the average consumption levels for each customer class are

highlighted.

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Monthly Fixed Service Charges

Single Family Residential:

Low Density $18.59 $19.07 $21.93 $23.68 $24.87 $26.11

Medium Density $14.08 $14.35 $16.51 $17.83 $18.72 $19.65

Non-Residential:

Current Rate (per EDU per Acre) $14.08 N.A. N.A. N.A. N.A. N.A.

5/8 inch meter meter -- $24.68 $28.39 $30.66 $32.19 $33.80

3/4 inch meter -- $35.23 $40.52 $43.76 $45.95 $48.24

1 inch meter -- $56.33 $64.78 $69.96 $73.46 $77.14

1.5 inch meter -- $109.08 $125.44 $135.48 $142.25 $149.36

2 inch meter -- $172.38 $198.23 $214.09 $224.80 $236.04

3 inch meter -- $341.17 $392.35 $423.73 $444.92 $467.17

4 inch meter -- $531.06 $610.72 $659.58 $692.56 $727.19

6 inch meter -- $1,058.54 $1,217.32 $1,314.71 $1,380.44 $1,449.46

8 inch meter -- $1,691.51 $1,945.24 $2,100.86 $2,205.90 $2,316.20

Fire Meters:

5/8 inch meter -- $3.88 $4.46 $4.81 $5.06 $5.31

8 inch meter -- $44.59 $51.28 $55.38 $58.15 $61.06

Commodity Charges for All Water Consumed (in $/hcf) (1)

Single Family Residential $0.4507 $0.6597 $0.7587 $0.8193 $0.8603 $0.9033

All Non-Residential/Fire Accounts $0.4507 $0.6858 $0.7887 $0.8518 $0.8944 $0.9391

1. HCF = hundred cubic feet (748 gallons).

Water Rate ScheduleCurrent

Rates

Proposed Water Rates


Figure 18. Water Bills for Residential Low Density

Figure 19. Water Bills for Residential Medium Density

$2

0.8

4

$2

3.0

9

$2

6.2

5 $3

0.3

0

$3

6.6

1

$2

2.3

7

$2

5.6

6 $3

0.2

8

$3

6.2

2

$4

5.4

6

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

5 10 17 26 40

Water Consumption (HCF)

Mo

nth

ly B

ill

Residential Water Bill ComparisonCurrent vs. Proposed 2017/18 Rates (Low Density)

SFR Bill - Current Rates

SFR Bill - Proposed Rates

$1

5.8

8

$1

7.6

9

$1

9.4

9

$2

2.1

9

$2

5.3

5

$1

6.9

9

$1

9.6

3

$2

2.2

7 $2

6.2

3 $3

0.8

5

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

4 8 12 18 25


Mo

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Residential Water Bill ComparisonCurrent vs. Proposed 2017/18 Rates (Med Density)




SECTION 3. SEWER RATE STUDY

A. Financial Plan

Many of the issues driving the financial plan for the sewer utility are similar to those in the water utility.

Therefore, some items are repeated here as they apply to the sewer utility. As with the water utility,

rate adjustments are governed by the need to meet operating and capital costs, maintain adequate debt

coverage, and build reasonable reserve funds. The current state of the sewer rates, with regard to these

objectives, is as follows:

Meeting Net Revenue Requirements: As noted in Section 1 and with the water utility, the

proposed rates are designed to phase out the General Fund subsidy over the 5-year rate period.

Building and Maintaining Reserve Funds: NBS recommends that the District consider

establishing a minimum reserve fund target for the sewer utility to the metrics described below:

Operating Reserve – a reserve equal to approximately 45 days (or about 12 percent) of

annual operating costs is used, which is lower than a more typical operating reserve

target of 90 days (or 25 percent). The District can use General Fund reserves for

emergency assistance if necessary.

Funding Capital Improvement Projects: The District must also be able to fund necessary capital

improvements in order to maintain current service levels. District staff has identified roughly

$3.5 million in expected capital expenditures for FY 2017/18 through 2021/22. Even with the

recommended rate adjustments, to complete these projects on the recommended timeline,

some General Fund subsidy will be required.

Inflation and Growth Projections – Assumptions regarding cost inflation were made in order to

project future revenues and expenses for the study period. The following inflation factors were

used in the analysis (and match those in the water utility):

325 new connections are expected annually.

General cost inflation is 2.5 percent annually.

Labor cost inflation is 3.5 percent annually.

Rate adjustments of 7 percent in FY 2017/18, 6.5 percent in 2018/19 and 5 percent in 2019/20 through

FY 2021/22, will be needed in order to phase out the General Fund subsidy and keep the reserves at the

recommended targets by FY 2021/22. Figure 20 summarizes the sources and uses of funds, net revenue

requirements, and the recommended annual percent adjustments in total rate revenue recommended

for the next 5 years for the District.


Figure 20. Summary of Sewer Revenue Requirements

Figure 21 summarizes the projected reserve fund balances and reserve targets. A summary of the

utility’s proposed 5-year financial plan is included in Tables 1 and 3 of Appendix B. The appendix tables

include revenue requirements, reserve funds, revenue sources, proposed rate adjustments, and the

District’s capital improvement program.

Figure 21. Summary of Sewer Reserve Funds

B. Cost of Service Analysis

Similar to what was described above for water rates, the sewer Cost of Service Analysis is performed in

two steps, (1) the classification of costs, and (2) the allocation of costs to customer classes.

CLASSIFICATION OF COSTS

The sewer expense classifications used for allocating costs to various customer classes includes the four

components described below:

Flow related costs are those that related solely to the amount of effluent generated.

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Sources of Wastewater Funds

Rate Revenue Under Prevailing Rates (1) 1,525,000$ 1,629,562$ 1,734,124$ 1,838,687$ 1,943,249$ 2,047,811$

Additional Revenue from Rate Increases (2) - 114,069 241,997 361,353 498,159 653,603

General Fund Subsidy 664,448 1,998,874 1,718,889 628,388 335,962 200,931



Uses of Wastewater Funds

Operating Expenses 2,189,448$ 2,341,452$ 2,415,477$ 2,491,856$ 2,570,665$ 2,651,981$

Rate-Funded Capital Expenses - 1,334,426 1,187,331 293,435 130,670 259,145

Total Use of Funds 2,189,448$ 3,675,878$ 3,602,808$ 2,785,292$ 2,701,335$ 2,911,126$

Projected Annual Rate Increase 0.00% 7.00% 6.50% 5.00% 5.00% 5.00%

Cumulative Rate Increases 0.00% 7.00% 13.96% 19.65% 25.64% 31.92%

Net Revenue Requirement (3) 1,525,000$ 1,673,654$ 1,879,075$ 2,149,612$ 2,355,611$ 2,697,937$

1. FY 2016/17 revenues and expenses are per the District's Annual Operating Budget and use the Current Total Budget numbers.

Source file: Budget Workbook FINAL.xlsx

2. Assumes new rates are implemented July 1, 2017 and July 1 each year thereafter.

3. Total Use of Funds less non-rate revenues and interest earnings. This is the annual amount needed from Sewer Rates.

Summary of Sources and Uses of Funds and

Net Revenue Requirements

Projected

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Un-Restricted Reserves

Operating Reserve

Ending Balance 274,000$ 293,000$ 302,000$ 311,000$ 321,000$ 331,000$

Recommended Minimum Target 274,000 293,000 302,000 311,000 321,000 331,000


Ending Balance 29,925$ 50,984$ 89,432$ 44,789$ 81,069$ 571$

Recommended Minimum Target - - - - - -

Total Ending Balance 303,925$ 343,984$ 391,432$ 355,789$ 402,069$ 331,571$

Total Recommended Minimum Target 274,000$ 293,000$ 302,000$ 311,000$ 321,000$ 331,000$

Beginning Reserve Fund Balances and

Recommended Reserve Targets

Projected


Strength-BOD related costs are associated with the treatment of the Biochemical-Oxygen Demand (BOD).

Strength-TSS related costs are related to the treatment of the Total Suspended Solids (TSS). Customer related costs are associated with meter reading, postage, billing, and similar

customer related costs. Figure 22 below summarizes the classification of revenue requirements for the sewer utility. The

“Funct. & Classification” section of Appendix B provides the detail on how costs were allocated to each

classification component.

Figure 22. Classification of Expenses

CUSTOMER CLASSES

Given the components used for the classification of costs, customers are grouped based upon having

similar flow and effluent strength (BOD & TSS) characteristics. The first differentiation is Residential vs

Non-Residential; all residential customers are assumed to have the same strength effluent while Non-

Residential customers typically do not. Because testing of effluent from each customer class was not

available, BOD and TSS strength factors assigned in Figure 23 come from the State Water Resources

Control Board Revenue Program Guidelines (Appendix G). Commercial customers are assumed to be

professional offices. Factors are listed in Appendix G in terms of milligrams per liter but are also shown

in terms of pounds per hcf, which are the units used in this analysis.

Figure 23. Strength Factor Allocation

To estimate annual flow, winter consumption is used because it approximates indoor consumption

(outdoor irrigation is minimal during the winter). As noted in the water rate section, single family low-

and medium-density customers have different consumption patterns and, because of this, they are

separated for the sewer analysis. Further, multi-family and the fire station (both with residential

strength effluent) are separated. Figure 24 shows average winter consumption based upon the number

of dwelling units and calculates approximate effluent flow by customer class. Figure 25 does the same

for non-residential customer classes, using average winter flow by account. Figure 26 shows the

combined annualized flow and the percentage of such flow allocated to each customer class.


Flow 873,513$ 50%

Strength - BOD 343,166 20%

Strength - TSS 343,166 20%

Customer 183,787 11%

Net Revenue Requirement 1,743,632$ 100%

Net Revenue

Requirements

(mg/l) (lbs/hcf) (mg/l) (lbs/hcf)

Residential 250 1.5596 250 1.5596

Commercial 130 0.8110 80 0.4991

Schools 250 1.5596 250 1.5596

Average BOD Factor Average TSS FactorCustomer Class


Figure 24. Residential Flow by Dwelling Unit

Figure 25. Non-Residential Flow by Account

Figure 26. Allocation Factors for Flow by Customer Class

Figure 27 and Figure 28 show the percentage of the strength-based allocation factors. Figure 27 shows

the BOD and Figure 28 the TSS. For both BOD & TSS, estimated pounds per customer class are calculated

using the flow in Figure 26 (column a) and the strength factors from Figure 23 (column b).

Customer Class Dwelling Units

Average Monthly

Winter

Consumpiton by

Dwelling Unit (hcf)

Annualized

Flow

(hcf)

a b c = a*b*12

Single Family Res Low Den 1,779 10 219,028

Single Family Res Med Den 2,764 8 280,143

Fire Station 1 9 108

Multi-Family Res 255 5 13,852

Total 4,799 513,131

Customer Class Accounts

Average Monthly

Winter

Consumpiton by

Account (hcf)

Annualized

Flow

(hcf)

a b c = a*b*12

Commercial 3 21 756

Schools 7 53 4,440

Total 10 5,196

Customer Class

Annualized

Flow

(hcf)

Percent of

Total Flow



Fire Station 108 0%

Multi-Family Res 13,852 3%

Commercial 756 0%

Schools 4,440 1%

Total 518,327 100%


Figure 27. Allocation Factors for BOD Costs by Customer Class

Figure 28. Allocation Factors for TSS Costs by Customer Class

The allocation factors for each customer class (the number of accounts) is shown in Figure 29.

Figure 29. Number of Accounts by Customer Class

COSTS ALLOCATED TO CUSTOMER CLASSES

Costs are allocated to each customer class based on these allocation factors for each type of customer.

Figure 30 summarizes how the costs for each cost causation component from Figure 22 are allocated to

each customer class.

Customer Class

Annualized

Flow

(hcf)

Average BOD

Factor

(lbs/hcf)

BOD

(lbs)

Percent

of

Total BOD

a b c = a*b

Single Family Res Low Den 219,028 1.560 341,592 42%

Single Family Res Med Den 280,143 1.560 436,906 54%

Fire Station 108 1.560 168 0%

Multi-Family Res 13,852 1.560 21,603 3%

Commercial 756 0.811 613 0%

Schools 4,440 1.560 6,925 1%

Total 518,327 807,807 100%

Customer Class

Annualized

Flow

(hcf)

Average TSS

Factor

(lbs/hcf)

TSS

(lbs)

Percent

of

Total TSS

a b c = a*b

Single Family Res Low Den 219,028 1.560 341,592 42%

Single Family Res Med Den 280,143 1.560 436,906 54%

Fire Station 108 1.560 168 0%

Multi-Family Res 13,852 1.560 21,603 3%

Commercial 756 0.499 377 0%

Schools 4,440 1.560 6,925 1%

Total 518,327 807,571 100%

Customer ClassNumber of

Accounts

Percent of

Total Accounts



Fire Station 1 0%

Multi-Family Res 53 1%

Commercial 3 0%

Schools 7 0%

Total 4,607 100%


Figure 30. Cost Allocation Methodology

Figure 31, Figure 32, Figure 33 and Figure 34 allocate the costs shown in Figure 22 via the percentages

developed in Figure 26 through Figure 29.

Figure 31. Allocated Flow by Costs Customer Class

• Allocated based on annual flow by customer classFlow Costs

• Allocated based on estimated pounds of BOD by customer classBOD Costs

• Allocated based on estimated pounds of TSS by customer classTSS Costs

• Allocated based number of accounts by customer classCustomer Costs


Total Flow

Allocated Flow

Costs1



Fire Station 0.02% 182

Multi-Family Res 2.7% 23,344

Commercial 0.15% 1,274

Schools 0.9% 7,483

Total 100% 873,513$

1. From Figure 22


Figure 32. Allocated BOD Costs by Customer Class

Figure 33. Allocated TSS Costs by Customer Class

Figure 34. Allocated Customer Costs by Customer Class

Customer Class

Percent

of

Total BOD

Allocated BOD

Costs1





Commercial 0.08% 260

Schools 0.9% 2,942

Total 100% 343,166$

1. From Figure 22

Customer Class

Percent

of

Total TSS

Allocated TSS

Costs1






Schools 0.9% 2,942

Total 100% 343,166$

1. From Figure 22


Total Accounts

Allocated

Customer

Costs1






Schools 0.15% 279

Total 100% 183,787$

1. From Figure 22


C. Rate Design Analysis

NBS recommends the following modifications to the sewer rate structure:

1. Eliminate the use of assigned EDUs and Acreage as the basis for monthly fixed fees.

2. Use separate fixed charges for each customer classes due to their flow differences.

3. Add a volumetric rate to allocate strength-related variable costs for non-residential customers

(commercial and school classes) as consumption within those classes is less uniform and using a

volumetric component is more equitable.

The types of applicable rates by customer classes are summarized below in Figure 35.

Figure 35. Rates by Customer Classes

Figure 38 summarizes the calculation of Residential fixed charges based on the allocated costs shown

above. Figures 39 and 40 summarize the fixed and volumetric rate calculations for commercial and

school customers.

Figure 36. Calculation of Residential Customer Fixed Charges

Customer ClassFixed

Charge

Volumetric

Charge

Residential

Single Family Res Low Den N.A.

Single Family Res Med Den N.A.

Fire Station N.A.

Multi-Family Res N.A.

Non-Residential

Commercial

Schools

Customer ClassDwelling

Units

Allocated

Flow Costs

Allocated

BOD Costs

Allocated

TSS Costs

Allocated

Customer

Costs

Total

Fixed Charge

Per Dwelling

Unit

a b c d ef =

b + c + d + e

g =

f / a / 12

Single Family Res Low Den 1,779 369,118$ 145,112$ 145,155$ 70,970$ 730,354$ $34.21

Single Family Res Med Den 2,764 472,112 185,603 185,657 110,264 953,636 $28.75

Fire Station 1 182 72 72 40 365 $30.42

Multi-Family Res 255 23,344 9,177 9,180 2,114 43,816 $14.32

Total 4,799 864,756$ 339,964$ 340,063$ 183,388$ 1,728,171$


Figure 37. Calculation of Non-Residential Customer Charges

Figure 38. Non-Residential Fixed Monthly and Volumetric Rates

D. Current and Proposed Sewer Rates

The Cost of Service analysis is used to establish the rates for FY 2017/18. In the subsequent four years of

the rate study, proposed charges are simply adjusted by the proposed adjustment in total rate revenue

needed, to meet projected revenue requirements. Figure 39 provides a comparison of the current and

prosed rates for FY 2017/18 through FY 2020/21. More detailed tables on the development of the

proposed charges are documented in Appendix B.

Figure 39. Current and Proposed Sewer Rates

Customer Class AccountsWinter

Consumption

Allocated

Flow Costs

Allocated

BOD Costs

Allocated

TSS Costs

Allocated

Customer

Costs

Total

a b c d e fh =

c + d + e + f

Commercial 3 756 1,274 260 160 120 1,815$

Schools 7 4,440 7,483 2,942 2,942 279 13,646$

Total 10 5,196 8,757$ 3,202$ 3,103$ 399$ 15,460$

Customer ClassFixed

Charge

Winter

Consumption

i =

h / 2 / a / 12

j =

h / 2 / b

Commercial $25.20 $1.20

Schools $81.23 $1.54

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Residential Monthly Fixed Service Charges

Single Family Residential Low Den $29.22 $34.21 $36.44 $38.26 $40.17 $42.18

Single Family Residential Med Den $25.41 $28.75 $30.62 $32.15 $33.76 $35.45

Fire House -- $30.42 $32.40 $34.02 $35.72 $37.50

Multi-Family Residential -- $14.32 $15.25 $16.01 $16.81 $17.65

Non-Residential Monthly Fixed Service Charge

Commercial $25.41 $25.20 $26.84 $28.18 $29.59 $31.07

Schools $25.41 $81.23 $86.51 $90.83 $95.37 $100.14

Non-Residential Volumetric Charge ($/hcf) (3)

Commercial N.A. $1.20 $1.28 $1.34 $1.41 $1.48

Schools N.A. $1.54 $1.64 $1.72 $1.80 $1.89

1. Sew er customers are currently charged on the basis of their number of Equivalent Dw elling Units (EDUs) and per Acre.

2. Proposed rates are based on charges to each customer account; volumetric rates for Commercial and School

customers are per hcf of average w inter w ater use from the previous w inter period.

3. hcf = hundred cubic feet (748 gallons).

Current

Rates (1)

Proposed Sewer Rates (2)Sewer Rate Schedule


E. Comparison of Current and Proposed Sewer Bills

Figure 40 and Figure 41 compare a current and proposed sewer rates through FY 20121/22 as a result of

the rate adjustment for single family residential customers (both low and medium density).

Figure 40. Sewer Bills for Residential Low Density

$2

9.2

2

$2

9.2

2

$2

9.2

2

$2

9.2

2

$2

9.2

2$3

4.2

1

$3

6.4

4

$3

8.2

6

$4

0.1

7

$4

2.1

8

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Mo

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ill

Monthly Water Consumption (HCF)

Residential Low Density Sewer Bill ComparisonCurrent vs. Proposed Rates

SFR Bill - Current Rates (Current)



Figure 41. Sewer Bills for Residential Medium Density

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

8.7

5

$3

0.6

2

$3

2.1

5

$3

3.7

6

$3

5.4

5

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Mo

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ly B

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Residential Medium Density Sewer Bill ComparisonCurrent vs. Proposed Rates




SECTION 4. CONSULTANT RECOMMENDATIONS NBS recommends the District take the following actions:

Accept this Study Report: NBS recommends the Board of Directors adopt the recommendations

made in this report and then proceed with the next steps to implement the proposed rates.

Adopt Reserve Fund Targets: NBS also recommends the Board of Directors adopt the

recommended reserve fund targets described in this memorandum. The District should

periodically evaluate these reserve fund levels in an attempt to maintain the levels

recommended for the Operating Reserve and Rate Stabilization and Drought Contingency

Reserve.

Implement Proposed Rates: This rate study demonstrates the District’s need to begin increasing

rates in the next fiscal year, and to begin phasing out the General Fund Subsidy. Assuming the

District successfully completes the Proposition 218 process, NBS recommends that the Board of

Directors implement the annual water and sewer rate adjustments presented herein.

Next Steps

Annually Review Rates and Revenue: Any time an agency adopts new utility rates or rate

structures, those new rates should be closely monitored over the next several years to ensure

the revenue generated is sufficient to meet the annual revenue requirements. Changing

economic and water consumption patterns underscore the need for this review, as well as

potential and unseen changing revenue requirements—particularly those related to

environmental regulations that can significantly affect capital improvements and repair and

replacement costs.

NBS’ PRINCIPAL ASSUMPTIONS AND CONSIDERATIONS

In preparing this technical memorandum and the opinions and recommendations included herein, NBS

has relied on a number of principal assumptions and considerations with regard to financial matters,

conditions, and events that may occur in the future. This information and these assumptions, including

the District’s budgets, capital improvement costs, and information from the District staff were provided

by sources we believe to be reliable, although NBS has not independently verified this data.

While we believe NBS’ use of such information and assumptions is reasonable for the purpose of this

report and its recommendations, some assumptions will invariably not materialize as stated herein and

may vary significantly due to unanticipated events and circumstances. Therefore, the actual results can

be expected to vary from those projected to the extent that actual future conditions differ from those

assumed by us or provided to us by others.

Mountain House Community Service District Water and Sewer Rate Study A

APPENDIX A – DETAILED WATER STUDY TABLES

MOUNTAIN HOUSE COMMUNITY SERVICES DISTRICT Financial Plan & Reserve Summary

WATER RATE STUDY

Financial Plan and Reserve Projections

Preliminary Draft - Do Not Cite or Distribute

TABLE 1

FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Sources of Water Funds (1)

Rate Revenue:

Water Rate Revenue 1,640,000$ 1,752,447$ 1,864,895$ 1,977,342$ 2,089,789$ 2,202,236$

General Fund Subsidy (2) 988,715 1,022,429 802,327 630,498 408,906 179,807

Other 382,500 408,726 434,953 461,179 487,405 513,631



Uses of Water Funds

Operating Expenses:

Administration 40,083$ 41,520$ 42,819$ 44,157$ 45,537$ 46,960$

Legal Services 180,000 184,500 189,113 193,840 198,686 203,653

Finance 69,884 72,330 74,500 76,735 79,037 81,408

Customer Services 320,278 337,646 355,140 373,301 392,151 411,713

Engineering 108,310 111,350 114,305 117,340 120,456 123,655

Development 8,885 9,196 9,472 9,756 10,049 10,351

Regulatory - Compliance 419,962 430,649 441,513 452,652 464,071 475,780

O&M 1,863,814 1,964,982 2,070,043 2,179,130 2,292,377 2,409,925

Subtotal: Operating Expenses 3,011,215$ 3,152,173$ 3,296,906$ 3,446,912$ 3,602,366$ 3,763,445$

Other Expenditures:

Repayment of General Fund - - - - - -

Existing Debt Service - - - - - -

Future Debt Service - - - - - -

Rate-Funded Capital Expenses - - - - 5,051 151,437

Subtotal: Other Expenditures -$ -$ -$ -$ 5,051$ 151,437$

Total Uses of Water Funds 3,011,215$ 3,152,173$ 3,296,906$ 3,446,912$ 3,607,417$ 3,914,882$

plus: Revenue from Rate Increases (3) - 280,392 622,875 871,454 1,071,552 1,295,782

Increase/Decrease to Reserves 0$ 314,479$ 432,590$ 499,894$ 458,123$ 284,562$

Net Revenue Reqt. (Total Uses less Non-Rate Revenue) 1,640,000$ 1,718,360$ 2,055,180$ 2,348,902$ 2,703,218$ 3,213,456$

Total Rate Revenue After Rate Increases 1,640,000$ 2,032,839$ 2,487,769$ 2,848,796$ 3,161,341$ 3,498,018$

Projected Annual Rate Revenue Increase 0.00% 16.00% 15.00% 8.00% 5.00% 5.00%

Cumulative Increase from Annual Revenue Increases 0.00% 16.00% 33.40% 44.07% 51.28% 58.84%

Debt Coverage After Rate Increase N/A N/A N/A N/A N/A N/A

1. FY 2016/17 revenues and expenses are per the District's Annual Operating Budget and use the Current Total Budget numbers. Source file: Budget Workbook FINAL.xlsx

2. While Enterprise Utilities are intended to be self-sufficient, at this time, the Water Utility is receiving an annual subsidy from the General Fund.

3. Assumes new rates are implemented July 1, 2017.

RATE REVENUE REQUIREMENTS SUMMARY Projected

Prepared by NBS

www.nbsgov.com | 800.676.7516

Financial Plan, 1 of 24


WATER RATE STUDY



TABLE 2

EXCLUDED PLEDGE SUMMARY (1)

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

WATER PLEDGED REVENUE

UTILITY SERVICE FEE-PLEDGED FACILITY 1,277,889$ 1,365,508$ 1,453,127$ 1,540,746$ 1,628,365$ 1,715,984$

UTILITY PLEDGE DISTRICT USE 200,000 205,000 210,125 215,378 220,763 226,282

UTILITY SERVICE FEE-PLEDGED FACILITY 1,147,111 1,149,234 1,148,529 1,145,265 1,145,787 1,144,937

TOTAL PLEDGE REVENUE 2,625,000$ 2,719,742$ 2,811,781$ 2,901,389$ 2,994,915$ 3,087,203$

WATER PLEDGED EXPENSES

FACILITY PLEDGED PAYMENT 1,477,889$ 1,570,508$ 1,663,252$ 1,756,124$ 1,849,127$ 1,942,266$

MHCSD PLEDGED PRINCIPAL PAYMENT 430,000 450,000 470,000 490,000 515,000 540,000

INTEREST ON BONDS 714,391 696,446 675,671 652,336 627,785 601,860

PROFESSIONAL SVS 1,620 1,661 1,702 1,745 1,788 1,833

FINANCIAL/ MGT SVS 1,100 1,128 1,156 1,185 1,214 1,245

TOTAL PLEDGE EXPENSES 2,625,000$ 2,719,742$ 2,811,781$ 2,901,389$ 2,994,915$ 3,087,203$

NET -$ -$ -$ -$ -$ -$

1. Pledge revenue is a separate fee which is collected to pay back the original developers for putting the infrastructure into place. As such, it is used to pay both debt service on debt issued to pay the developer and the developer directly.

As all debt is paid via the restricted pledge revenue, debt payments and funding are excluded from this analysis.

Pledged Revenue &

Expenses Excluded from Analysis

Projected

Prepared by NBS




WATER RATE STUDY



TABLE 3

RESERVE FUND SUMMARY

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Total Beginning Cash (1) 1,462,943$

Operating Reserve

Beginning Reserve Balance 1,262,943$ 376,402$ 394,022$ 412,113$ 430,864$ 450,296$

Plus: Net Cash Flow (After Rate Increases) 0 314,479 432,590 499,894 458,123 284,562

Plus: Transfer of Debt Reserve Surplus - - - - - -

(200,000) (200,000) (200,000) (200,000) (250,000) (250,000)

Less: Transfer Out to Capital Replacement Reserve (686,542) (96,859) (214,498) (281,143) (188,692) (14,427)

Ending Operating Reserve Balance 376,402$ 394,022$ 412,113$ 430,864$ 450,296$ 470,431$

Target Ending Balance (45-days of O&M) 376,402$ 394,022$ 412,113$ 430,864$ 450,296$ 470,431$


Beginning Reserve Balance 200,000$ 400,000$ 600,000$ 800,000$ 1,000,000$ 1,250,000$

Plus: Transfer of Operating Reserve Surplus 200,000 200,000 200,000 200,000 250,000 250,000

Less: Use of Reserves Water Purchases - - - - - -

Ending Capital Improvement & Depreciation Reserve Balance 400,000$ 600,000$ 800,000$ 1,000,000$ 1,250,000$ 1,500,000$

Target Ending Balance ($2 million) 400,000$ 600,000$ 800,000$ 1,000,000$ 1,250,000$ 1,500,000$


Beginning Reserve Balance -$ 686,542$ 495,201$ 432,423$ 357,952$ 188,692$

Plus: Transfer of Operating Reserve Surplus 686,542 96,859 214,498 281,143 188,692 14,427

Less: Use of Reserves for Capital Projects - (288,200) (277,276) (355,614) (357,952) (188,692)

Ending Capital Improvement & Depreciation Reserve Balance 686,542$ 495,201$ 432,423$ 357,952$ 188,692$ 14,427$

Target Ending Balance (0.0% of Assets) (2) -$ -$ -$ -$ -$ -$

Ending Balance - Excl. Restricted Reserves 1,462,943$ 1,489,222$ 1,644,536$ 1,788,816$ 1,888,987$ 1,984,858$

Minimum Target Ending Balance - Excl. Restricted Reserves 776,402$ 994,022$ 1,212,113$ 1,430,864$ 1,700,296$ 1,970,431$

Ending Surplus/(Deficit) Compared to Minimum Reserve Targets 686,542$ 495,201$ 432,423$ 357,952$ 188,692$ 14,427$

Annual Interest Earnings Rate (3) 0.35% 0.35% 0.50% 0.75% 1.00% 1.25%

1. Beginning cash balance is for 47858-Water Operation as of June 30, 2016. Source: Staff Email

2. The Capital Rehab & Replacement reserve target is set to zero per direction of the District Board.

3. Historical interest earning rates were referenced on the California Treasurer's Office website for funds invested in LAIF. Future years earnings were conservatively

estimated through 2021 and phase into the historical 10 year average interest earnings rate.

Less: Transfer Out to


SUMMARY OF CASH ACTIVITYProjected

Prepared by NBS



MOUNTAIN HOUSE COMMUNITY SERVICES DISTRICT Charts

WATER RATE STUDY

Rate Adjustment Charts and Report Tables


CHART 1

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

2017 2018 2019 2020 2021 2022

An

nu

al

Ob

lig

ati

on

s

Fiscal Year Ending June 30

Water Revenue Requirements vs.Revenue Under Existing and Increased Rates

Reserve Funded Capital Expenses

Rate Funded Capital Expenses

Debt Service

O&M Expenses

Revenues under Existing Rates

Revenues under Increased Rates

Prepared by NBS


Charts and Tables, 4 of 24


WATER RATE STUDY



CHART 2

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2017 2018 2019 2020 2021 2022


Ending Cash Balances vs.Recommended Reserve Targets

Un-Restricted

Ending Cash Balance Minimum Target Reserve Balance

Prepared by NBS




WATER RATE STUDY



CHART 3

0.00%

16.00%

15.00%

8.00%

5.00% 5.00%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2017 2018 2019 2020 2021 2022


Projected Increases to Rate Revenue

Prepared by NBS




WATER RATE STUDY



CHART 4

$0

$288,200$277,276

$355,614$363,004

$340,129

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2017 2018 2019 2020 2021 2022

An

nu

al

Cap

ital

Imp

rov

em

en

t P

rog

ram

Exp

en

dit

ure

s


Annual Capital Improvement Program ExpendituresFiscal Years 2016/17 - 2020/21

Prepared by NBS



MOUNTAIN HOUSE COMMUNITY SERVICES DISTRICT EXHIBIT 1

WATER RATE STUDY

Operating Revenue and Expenses


REVENUE FORECAST (1, 2):

FUND OBJECT DESCRIPTION

Inflation

Basis2017 2018 2019 2020 2021 2022

WATER REVENUE47858 440000-0000 INTEREST INCOME Cal'd -$ -$ -$ -$ -$ -$

47858 463200-0000 UTILITY SERVICE FEE-OPER 1 1,575,000 1,682,991 1,790,981 1,898,972 2,006,962 2,114,953

47858 463251-0000 UTILITY SERVICE FEE-CHRGS TO MHCSD 1 65,000 69,457 73,914 78,370 82,827 87,284

47858 470700-0000 MISCELLANOUS REVENUE 1 2,500 2,671 2,843 3,014 3,186 3,357

47858 470700-0036 DEPOSITS 1 170,000 181,656 193,312 204,968 216,624 228,281

47858 470700-3000 OTHER-PENALTIES 1 210,000 224,399 238,797 253,196 267,595 281,994

47858 480000-0000 OPERATING TRANSFER IN 1 988,715 782,263 617,477 452,691 287,905 123,119

47858 480006-0000 TRANSFER FOR CAPITAL PROJECTS 1 - 240,167 184,851 177,807 121,001 56,688

TOTAL: REVENUE 3,011,215$ 3,183,603$ 3,102,174$ 3,069,018$ 2,986,100$ 2,895,675$

REVENUE SUMMARY:

WATER REVENUE

RATE REVENUE

WATER REVENUE 1,640,000$ 1,752,447$ 1,864,895$ 1,977,342$ 2,089,789$ 2,202,236$

OTHER REVENUE

INTEREST INCOME - - - - - -

TRANSFER INCOME 988,715 1,022,429 802,327 630,498 408,906 179,807

ALL OTHER OPERATING REVENUE 382,500 408,726 434,953 461,179 487,405 513,631

TOTAL: REVENUE 3,011,215$ 3,183,603$ 3,102,174$ 3,069,018$ 2,986,100$ 2,895,675$

OPERATING EXPENSE FORECAST (1):


Inflation

Basis

Custome

r Growth2017 2018 2019 2020 2021 2022

WATER OPERATIONS EXPENSES47858 Administration47858 Personnel 3 N 36,483$ 37,760$ 38,892$ 40,059$ 41,261$ 42,499$

47858 6221000000 Professional Services 2 N 2,600 2,665 2,732 2,800 2,870 2,942

47858 6202000000 Office Expense - Postage 2 Y 1,000 1,095 1,195 1,298 1,407 1,519

47858 Legal Services47858 Personnel 3 N - - - - - -

47858 6221401000 Legal Services 2 N 180,000 184,500 189,113 193,840 198,686 203,653

47858 Finance47858 Personnel 3 N 69,884 72,330 74,500 76,735 79,037 81,408

47858 Customer Services47858 Personnel 3 N 106,760 110,496 113,811 117,225 120,742 124,364

47858 6110899000 Refund Payments 2 Y 45,000 49,288 53,761 58,428 63,295 68,368

47858 6201005100 Printing 2 Y 700 767 836 909 985 1,063

47858 6201100500 Office Expense-Supplies 2 Y 400 438 478 519 563 608

47858 6202000000 Office Expense - Postage 2 Y 12,408 13,590 14,824 16,111 17,452 18,851

47858 6221415000 Mhcsd Utility Billing/Metering 2 Y 59,500 65,169 71,085 77,255 83,690 90,397

47858 Overhead 2 N 95,510 97,898 100,345 102,854 105,425 108,061

SUBTOTAL: EXPENSES 610,245$ 635,996$ 661,571$ 688,034$ 715,412$ 743,735$

Prepared by NBS


Exhibit 1 (O&M), 8 of 24


WATER RATE STUDY



OPERATING EXPENSE FORECAST (1):


Inflation

Basis

Custome

r Growth2017 2018 2019 2020 2021 2022

47858 Engineering47858 Personnel 3 N 33,231 34,394 35,426 36,489 37,584 38,711

47858 6221420000 GIS Monitoring 2 N 30,000 30,750 31,519 32,307 33,114 33,942

47858 Overhead 2 N 45,078 46,205 47,360 48,544 49,758 51,002

47858 Development47858 Personnel 3 N 8,885 9,196 9,472 9,756 10,049 10,351

47858 Regulatory - Compliance47858 Personnel 3 N 18,869 19,530 20,115 20,719 21,340 21,981

47858 6201100600 Office Exp-Shipping 2 N - - - - - -

47858 6209000000 Memberships 2 N - - - - - -

47858 6221423000 State Health Department 2 N 15,000 15,375 15,759 16,153 16,557 16,971

47858 6221408000 Engineering-Misc 2 N 100,000 102,500 105,063 107,689 110,381 113,141

47858 6226008600 Permits & Fees 2 N 80,000 82,000 84,050 86,151 88,305 90,513

47858 Overhead 2 N 206,092 211,245 216,526 221,939 227,487 233,175

47858 O&M47858 Personnel 2 N 56,130 57,533 58,971 60,445 61,956 63,505

47858 6206000000 Communications 2 N 3,000 3,075 3,152 3,231 3,311 3,394

47858 6221000000 Professional Svs 2 N 577,400 591,835 606,631 621,797 637,342 653,275

47858 6221004900 Refuse Disposal Charges 2 N - - - - - -

47858 6221064600 Security Services 2 N 50,000 51,250 52,531 53,845 55,191 56,570

47858 6226001100 Chemicals 2 N 180,000 184,500 189,113 193,840 198,686 203,653

47858 6249010100 Utilities-Water 2 Y 500,000 547,640 597,349 649,201 703,273 759,643

47858 6249100100 Utilities-Electricity 2 Y 276,510 302,856 330,346 359,021 388,924 420,098

47858 6260000000 Maint-Structures & Grounds 2 N 80,000 82,000 84,050 86,151 88,305 90,513

47858 6260106600 Landscaping 2 N 3,779 3,873 3,970 4,070 4,171 4,276

47858 6260005300 Maint & Repair - Collection Systems 2 N 50,000 51,250 52,531 53,845 55,191 56,570

47858 Overhead 2 N 86,995 89,170 91,399 93,684 96,026 98,427

SUBTOTAL: EXPENSES 2,400,970$ 2,516,177$ 2,635,334$ 2,758,878$ 2,886,954$ 3,019,711$

TOTAL: EXPENSES 3,011,215$ 3,152,173$ 3,296,906$ 3,446,912$ 3,602,366$ 3,763,445$

FORECASTING ASSUMPTIONS:

ECONOMIC VARIABLES Basis 2017 2018 2019 2020 2021 2022

Customer Growth 1 -- 6.86% 6.42% 6.03% 5.69% 5.38%

General Cost Inflation 2 -- 2.50% 2.50% 2.50% 2.50% 2.50%

Labor Cost Inflation 3 -- 3.50% 3.00% 3.00% 3.00% 3.00%

1. FY 2016/17 Revenues and expenses are per the District's Annual Operating Budget and use the Current Total Budget numbers. Source file: Budget Workbook Final.xlsx

Prepared by NBS




WATER RATE STUDY

Capital Improvement Plan Expenditures


CAPITAL FUNDING SUMMARY

CAPITAL FUNDING FORECAST Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Grants -$ -$ -$ -$ -$ -$

Use of Connection Fee Reserves - - - - - -

SRF Loan Funding - - - - - -

Use of Future Revenue Bond Proceeds - - - - - -

Use of Capital Rehabilitation and Replacement Reserve (1) - 288,200 277,276 355,614 357,952 188,692

Rate Revenue - - - - 5,051 151,437

Total Sources of Capital Funds -$ 288,200$ 277,276$ 355,614$ 363,004$ 340,129$

Uses of Capital Funds:

Total Project Costs -$ 288,200$ 277,276$ 355,614$ 363,004$ 340,129$

Capital Funding Surplus (Deficiency) -$ -$ -$ -$ -$ -$

SRF Loan Funding -$ -$ -$ -$ -$ -$

Future Revenue Bond Proceeds -$ -$ -$ -$ -$ -$

Funding Sources:

Projected

Prepared by NBS


Exhibit 2 (CIP), 10 of 24


WATER RATE STUDY



CAPITAL IMPROVEMENT PROGRAM

Capital Improvement Program Costs (in Current-Year Dollars ) (1):

Project Description 2017 2018 2019 2020 2021 2022

On-Site WTP CIP

MISCL. PUMPS AND MIXERS

Replace low lift pump -$ -$ -$ -$ 15,000$ -$

Replace Booster Pump & Motor - - - 60,000 - -

Replace smart pump at Westside - - - 8,000 - -

Replace College Park pump - - - - 15,000 -

Replace various submersibles around plant - - 8,000 - - -

ULTRA VIOLET TREATMENT SYSTEM

UV UPS Batteries - 10,000 - - 12,000 16,000

OS/COMPUTER HARDWARE

Replace PLC - 7,000 - - 9,000 11,000

SCADA Software Upgrades - 20,000 20,000 20,000 20,000 24,000

METER /PROBES/SAMPLERS

Update the Ammonia RMP - - - - 20,000 -

STRUCTURE AND GROUNDS

Replace office HVAC - - - 6,000 - -

Replace electrical room cooling coil - - - - - 10,000

Pond Slug Removal - 10,000 - - - -

Off-Site WTP Assets

ASR Well Research and Development - 72,000 72,000 72,000 72,000 72,000

Los Vaqueros Reservoir Study - 7,200 7,200 7,200 7,200 7,200

Orion Water Meter Endpoint Installations - 162,000 162,000 162,000 162,000 162,000

Placeholder for Future Year Capital Projects CIP - - - - - -

Total: Capital Improvement Program Costs (Current-Year Dollars) -$ 288,200$ 269,200$ 335,200$ 332,200$ 302,200$

Prepared by NBS




WATER RATE STUDY



Capital Improvement Program Costs (in Future-Year Dollars ) (2):


On-Site WTP CIP

MISCL. PUMPS AND MIXERS -$ -$ -$ -$ -$ -$

Replace low lift pump - - - - 16,391 -

Replace Booster Pump & Motor - - - 63,654 - -

Replace smart pump at Westside - - - 8,487 - -

Replace College Park pump - - - - 16,391 -

Replace various submersibles around plant - - 8,240 - - -

ULTRA VIOLET TREATMENT SYSTEM - - - - - -

UV UPS Batteries - 10,000 - - 13,113 18,008

OS/COMPUTER HARDWARE - - - - - -

Replace PLC - 7,000 - - 9,835 12,381

SCADA Software Upgrades - 20,000 20,600 21,218 21,855 27,012

METER /PROBES/SAMPLERS - - - - - -

Update the Ammonia RMP - - - - 21,855 -

STRUCTURE AND GROUNDS - - - - - -

Replace office HVAC - - - 6,365 - -

Replace electrical room cooling coil - - - - - 11,255

Pond Slug Removal - 10,000 - - - -

-- - - - - - -

Off-Site WTP Assets - - - - - -

ASR Well Research and Development - 72,000 74,160 76,385 78,676 81,037

Los Vaqueros Reservoir Study - 7,200 7,416 7,638 7,868 8,104

Orion Water Meter Endpoint Installations - 162,000 166,860 171,866 177,022 182,332

Placeholder for Future Year Capital Projects CIP - - - - - -

Total: Capital Improvement Program Costs (Future-Year Dollars) -$ 288,200$ 277,276$ 355,614$ 363,004$ 340,129$


Economic Variables 2017 2018 2019 2020 2021 2022

Annual Construction Cost Inflation, Per Engineering News Record (2, 3) 0.00% 0.00% 3.00% 3.00% 3.00% 3.00%

Cumulative Construction Cost Multiplier from 2017 1.00 1.00 1.03 1.06 1.09 1.13

Prepared by NBS



MOUNTAIN HOUSE COMMUNITY SERVICES DISTRICT

WATER RATE STUDY

Cost of Service Analysis


Classification of Expenses Volumetric

FY 2017/18 COM CAP CA FP COM CAP CA FP

Water Fund

Administration

Personnel 37,760$ -$ 35,834$ 1,888$ 38$ 0% 95% 5% 0.1%

Professional Services 2,665 - 2,529 133 3 0% 95% 5% 0.1%

Office Expense - Postage 1,095 - 1,039 55 1 0% 95% 5% 0.1%

Legal Services

Personnel - - - - - 0% 95% 5% 0.1%

Legal Services 184,500 - 175,091 9,225 185 0% 95% 5% 0.1%

Finance

Personnel 72,330 - 68,641 3,617 72 0% 95% 5% 0.1%

Customer Services

Personnel 110,496 - 104,861 5,525 110 0% 95% 5% 0.1%

Refund Payments 49,288 - - 49,288 - 0% 0% 100% 0.0%

Printing 767 - - 767 - 0% 0% 100% 0.0%

Office Expense-Supplies 438 - - 438 - 0% 0% 100% 0.0%

Office Expense - Postage 13,590 - - 13,590 - 0% 0% 100% 0.0%

Mhcsd Utility Billing/Metering 65,169 - - 65,169 - 0% 0% 100% 0.0%

Overhead 97,898 - - 97,898 - 0% 0% 100% 0.0%

Engineering

Personnel 34,394 - 34,360 - 34 0% 100% 0% 0.1%

GIS Monitoring 30,750 - 30,719 - 31 0% 100% 0% 0.1%

Overhead 46,205 - 46,159 - 46 0% 100% 0% 0.1%

Development

Personnel 9,196 - 8,727 460 9 0% 95% 5% 0.1%

Regulatory - Compliance

Personnel 19,530 - 18,534 976 20 0% 95% 5% 0.1%

Office Exp-Shipping - - - - - 0% 95% 5% 0.1%

Memberships - - - - - 0% 95% 5% 0.1%

State Health Department 15,375 - 14,591 769 15 0% 95% 5% 0.1%

Engineering-Misc 102,500 - 97,273 5,125 103 0% 95% 5% 0.1%

Permits & Fees 82,000 - 77,818 4,100 82 0% 95% 5% 0.1%

Overhead 211,245 - 200,471 10,562 211 0% 95% 5% 0.1%

O&M

Personnel 57,533 - 54,599 2,877 58 0% 95% 5% 0.1%

Communications 3,075 - 2,918 154 3 0% 95% 5% 0.1%

Professional Svs 591,835 - 561,651 29,592 592 0% 95% 5% 0.1%

Refuse Disposal Charges - - - - - 0% 95% 5% 0.1%

Security Services 51,250 - 48,636 2,563 51 0% 95% 5% 0.1%

Chemicals 184,500 184,500 - - - 100% 0% 0% 0.0%

Utilities-Water 547,640 547,640 - - - 100% 0% 0% 0.0%

Utilities-Electricity 302,856 302,856 - - - 100% 0% 0% 0.0%

Maint-Structures & Grounds 82,000 - 77,818 4,100 82 0% 95% 5% 0.1%

Landscaping 3,873 - 3,676 194 4 0% 95% 5% 0.1%

Maint & Repair - Collection Systems 51,250 - 48,636 2,563 51 0% 95% 5% 0.1%

Overhead 89,170 - 84,622 4,459 89 0% 95% 5% 0.1%

Grand Total: Water Fund Operations 3,152,173$ 1,034,996$ 1,799,204$ 316,083$ 1,890$ 33% 57% 10% 0.1%

Basis of Classification

Budget Categories

Total

Revenue Commodity Capacity

FixedFire

ProtectionCustomer

Prepared by NBS


Funct. & Classification, 13 of 24


WATER RATE STUDY



Classification of Expenses, continued Volumetric

FY 2017/18 COM CAP CA FP COM CAP CA FP

Capital Expenditures

Rate Funded Capital Expenses -$ -$ -$ -$ -$ 0% 100% 0% 0%

TOTAL REVENUE REQUIREMENTS 3,152,173$ 1,034,996$ 1,799,204$ 316,083$ 1,890$ 33% 57% 10% 0%

Less: Non-Rate Revenues

INTEREST INCOME (2,657)$ (873)$ (1,517)$ (266)$ (2)$ 33% 57% 10% 0%

TRANSFER INCOME (1,022,429) (335,708) (583,584) (102,524) (613) 33% 57% 10% 0%

ALL OTHER OPERATING REVENUE (408,726) (134,203) (233,294) (40,985) (245) 33% 57% 10% 0%

NET REVENUE REQUIREMENTS 1,718,360$ 564,212$ 980,809$ 172,308$ 1,030$

Allocation of Revenue Requirements 100.0% 32.8% 57.1% 10.0% 0.1%

check to FY 17/18 in Financial Plan -$

Classification of Expenses, continued

Adjustments to Classification of Expenses

Adjustment for Current Rate Level: Total COM CAP CA FP

Target Rate Rev. After Rate Increases** $2,032,839

Projected Rate Revenue at Current Rates $1,752,447

Rate Increase (FY 2017/18) 16.0%

Adjusted Net Revenue Req'ts 2,032,839$ 667,469$ 1,160,308$ 203,842$ 1,219$

Percent of Revenue 32.8% 57.1% 10.0% 0.1%

** Proposed rates are effective July 1st each year.

Budget Categories

Total

Revenue

Basis of ClassificationCommodity Capacity

Fire

Protection

Fixed

Customer

Prepared by NBS




WATER RATE STUDY

Water Cost of Service Analysis


Development of the BASE COMMODITY Allocation Factor Development of the PEAK CAPACITY (MAX MONTH) Allocation Factors

Customer ClassFeb '16 - Jan '17

Volume (1)

Percent of

Total VolumeCustomer Class

Average

Monthly Use

(hcf)

Peak Monthly

Use (1) (hcf)

Peak Month

Factor

Max Month

Capacity

Factor

Single Family Res Low Den 366,539 34.3% Single Family Res Low Den 30,545 50,586 1.66 29.6%

Single Family Res Med Den 421,726 39.5% Single Family Res Med Den 35,144 54,662 1.56 32.0%

All Other Standard Meters 279,077 26.1% All Other Standard Meters 23,256 65,540 2.82 38.4%

Fire 118 0.0% Fire 10 41 4.17 0.0%

Grand Total 1,067,460 100% Grand Total 23,266 170,829 7.34 100%

1. Consumption rates and customer class from Source file: newConsumptionData.xlsx 1. Based on peak monthly data (peak day data not available).

Commodity Related Costs: These costs are associated with the total

consumption (flow) of water over a specified period of time (e.g. annual). the maximum size of facilities required to meet this demand.

Development of the Customer Allocation Factor


Meters (1)

Percent

of Total

Single Family Res Low Den 1,779 37.5%

Single Family Res Med Den 2,764 58.3%

All Other Standard Meters 191 4.0%

Fire 6 0.1%

Grand Total 4,740 100%

Customer Related Costs : Costs associated with having a customer on the water system. These costs vary

with the addition or deletion of customers on the system. Examples: Meter-reading, Postage and billing.

Capacity Related Costs: Costs associated with the maximum demand required at one point in time

1. Number of meters and customer class from Source file: consumptionData.xlsx

Prepared by NBS


Allocation Factors, 15 of 24


WATER RATE STUDY

Water Cost of Service Analysis/Rate Design


ALLOCATION OF WATER REVENUE REQUIREMENTS:

Volumetric-Related Costs

Commodity 667,469$ 32.8% 667,469$ 32.8%

Capacity-Related Costs (variable allocation)

- 0.0% 44,024 2.2%

Subtotal: Volumetric-Related Costs 667,469$ 32.8% 711,494$ 35.0%

Capacity-Related Costs (fixed allocation)

1,160,308$ 57.1% 1,116,284$ 54.9%

Customer-Related Costs 203,842 10.0% 203,842 10.0%

Fire Protection-Related Costs 1,219 0.1% 1,219 0.1%

Subtotal: Fixed-Related Costs 1,365,369$ 67.2% 1,321,345$ 65.0%

Net Revenue Requirement 2,032,839$ 100% 2,032,839$ 100%

total variable 33% total variable 35%

total fixed 67% total fixed 65%

Single Family Res Low Den 649,290$ 31.9%

Single Family Res Med Den 753,842 37.1%

All Other Standard Meters 627,877 30.9%

Fire 1,829 0.1%

Total 2,032,839$ 100%

Proposed Rates

% of COS

Rev. Req't.


COS Allocated Costs

FY 2017/18

Proposed Rates

Adjusted Net Revenue

Requirements (2017/18)

Adjusted Net Rev. Req'ts.Unadjusted Net Rev. Req'ts.

COS

Rev. Req't

Customer Class

Unadjusted Net Revenue

Requirements (2017/18)

Prepared by NBS


Proposed Fixed Charges, 16 of 24


WATER RATE STUDY



Meter Equivalency Factors Used in Fixed Charges Calculations:

Meter

Capacity

(gpm) (1)

Equivalency

to 3/4 inch

Meter

Capacity

(gpm) (2)

Equivalency

to 3/4 inch

5/8 inch 20 0.67 20 0.67

3/4 inch 30 1.00 30 1.00

1 inch 50 1.67 50 1.67

1.5 inch 100 3.33 100 3.33

2 inch 160 5.33 160 5.33

3 inch 320 10.67 350 11.67

4 inch 500 16.67 700 23.33

6 inch 1,000 33.33 1,600 53.33

8 inch 1,600 53.33 2,800 93.33

10 inch 4,200 140.00 4,400 146.67

12 inch 5,300 176.67 N/A --

1. Per AWWA M-1, Table VII.2-5.

2. Per AWWA M-6, Table 5-3.

Allocation of Adjusted Net Revenue Requirements - FY 2017/18:

Proposed Rates - Adjusted Net Revenue Requirements (65% fixed / 35% variable)

CommodityCapacity(variable

allocation)

Capacity(fixed allocation)

CustomerFire

Protection

Single Family Res Low Den 229,192$ 13,036$ 330,556$ 76,505$ -$ 649,290$ 31.9%

Single Family Res Med Den 263,700 14,087 357,190 118,865 - 753,842 37.1%

All Other Standard Meters 174,503 16,890 428,270 8,214 - 627,877 30.9%

Fire 74 11 268 258 1,219 1,829 0.1%

Total 667,469$ 44,024$ 1,116,284$ 203,842$ 1,219$ 2,032,839$ 100.0%

Total Volumetric

and Fixed Rate Rev.2,032,839$ 100.0%

32.8% 2.2% 54.9% 10.0% 0.1% 100.0%

Turbine Class II Meters

Displacement Meters

Cost Classification Components

$1,321,345

Cost of

Service Net

Rev. Reqts

% of COS

Net

Revenue

Reqts

Fire Service Type I & II Meters

Displacement Meters

Compound Class I Meters

$711,494

Standard Meters

Customer Class

Fire Meters

Meter Size

Prepared by NBS




WATER RATE STUDY



CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2017/18: Proposed Rates

Number of Meters By ClassNumber of

Meters

Capacity

(fixed

allocation)

Customer

Target Rev.

Req't from

Fixed

Charges

Fixed

Monthly

Rate

Single Family Res Low Den 1,779 330,556$ 76,505$ $ 407,061 $19.07

Single Family Res Med Den 2,764 357,190$ 118,865$ $ 476,055 $14.35

CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2017/18: Proposed Rates - Adjusted Net Revenue Requirements (65% fixed / 35% variable)

5/8 inch 3/4 inch 1 inch 1.5 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch

All Other Standard Meters 5 1 18 18 137 4 4 1 3 - 191

Total Meters/Accounts 5 1 18 18 137 4 4 1 3 - 191

Hydraulic Capacity Factor (2) 0.67 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00

Total Equivalent Meters 3 1 30 60 731 43 67 33 160 - 1,128


Customer Costs ($/Acct/mo.) (3) $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58

Capacity Costs ($/Acct/mo.) (4) $21.10 $31.65 $52.75 $105.50 $168.79 $337.59 $527.48 $1,054.96 $1,687.93 $4,430.82

Total Monthly Meter Charge $24.68 $35.23 $56.33 $109.08 $172.38 $341.17 $531.06 $1,058.54 $1,691.51 $4,434.40

Annual Fixed Costs Allocated to Monthly Meter Charges

Customer Costs $ 8,214

Capacity Costs 428,270

Total Fixed Meter Costs 436,484$

Annual Revenue from Monthly Meter Charges

Customer Charges 215$ 43$ 774$ 774$ 5,892$ 172$ 172$ 43$ 129$ -$ 8,214$

Capacity Charges 1,266$ 380$ 11,394$ 22,787$ 277,496$ 16,204$ 25,319$ 12,659$ 60,765$ -$ 428,270

Total Revenue from Monthly Meter Charges 1,481$ 423$ 12,168$ 23,561$ 283,387$ 16,376$ 25,491$ 12,702$ 60,894$ -$ 436,484$

1. Number of meters by size and class are from: consumptionData.xlsx.

2. Source: AWWA Manual M1, "Principles of Water Rates, Fees and Charges", Table VII.2-5. Assumes displacement meters for 5/8 through 2 inch meters, Compound 3 - 8 inch meters, Turbine for 10 & 12 inch, unless noted otherwise.

3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.

4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.

Total FY 2017/18Number of Meters

by Class and Size (1)

A “Hydraulic Capacity Factor” is calculated by dividing the maximum capacity or flow of large meters by the capacity of the base meter size, which is typically the most common residential meter size (in this case a 3/4-inch meter). For example, Figure 42 shows the hydraulic capacity of a two-inch meter is 5.33 times that of a 3/4-inch meter and therefore, the capacity component of the fixed meter charge is 5.33 times that of the 3/4- inch meter. The actual number of meters by size is multiplied by the corresponding capacity ratios to calculate the total number of equivalent meters. The number of equivalent meters is used as a proxy for the potential demand that each customer can place on the water system and the percentage of capacity related costs (fixed share) distributed to each meter size by the Percent of Equivalent Meters.

Prepared by NBS




WATER RATE STUDY



CALCULATION OF MONTHLY FIRE METER SERVICE CHARGES FOR FY 2017/18: Proposed Rates - Adjusted Net Revenue Requirements (65% fixed / 35% variable)

5/8 inch 3/4 inch 1 inch 1.5 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch

Fire 3 - - - - - - - 3 - 6

Total Meters/Accounts 3 - - - - - - - 3 - 6

Hydraulic Capacity Factor (2) 0.67 1.00 1.67 3.33 5.33 11.67 23.33 53.33 93.33 146.67

Total Equivalent Meters 2 - - - - - - - 280 - 282


Customer Costs ($/Acct/mo.) (3) $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58 $3.58

Capacity Costs ($/Acct/mo.) (4) $0.29 $0.44 $0.73 $1.46 $2.34 $5.13 $10.25 $23.43 $41.01 $64.44

Total Monthly Meter Charge $3.88 $4.02 $4.32 $5.05 $5.93 $8.71 $13.84 $27.02 $44.59 $68.02

Annual Fixed Costs Allocated to Monthly Meter Charges

Customer Costs $ 258

Capacity and Fire Protection Costs 1,487

Total Fixed Meter Costs 1,745$

Annual Revenue from Monthly Meter Charges

Customer Charges 129$ -$ -$ -$ -$ -$ -$ -$ 129$ -$ 258$

Capacity and Fire Protection Charges 11$ -$ -$ -$ -$ -$ -$ -$ 1,476$ -$ 1,487

Total Revenue from Monthly Meter Charges 140$ -$ -$ -$ -$ -$ -$ -$ 1,605$ -$ 1,745$

1. Number of meters by size and class are from: consumptionData.xlsx.

2. Source: AWWA Manual M1, "Principles of Water Rates, Fees and Charges", Table VII.2-5. Assumes displacement meters for 5/8 through 2 inch meters, Compound 3 - 8 inch meters, Turbine for 10 & 12 inch, unless noted otherwise.

3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.

4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.

Number of Meters

by Class and Size (1)

FY 2017/18Total

Prepared by NBS




WATER RATE STUDY



PROPOSED VOLUMETRIC CHARGES FOR FY 2017/18:


Rate Structure TypeNumber of

Meters (1)

Water

Consumptio

n (hcf/yr.)

Commodity

Assigned

Costs

Capacity

Assigned

Costs

Target Rev.

Req't from

Vol. Charges

Uniform

Commodity

Rates ($/hcf)

Single Family Res Low Den 1,779 366,539 229,192$ 13,036$ $ 242,229

Single Family Res Med Den 2,764 421,726 263,700 14,087 277,787

All Other Meters 197 279,195 174,577$ 16,901$ $ 191,478 $0.6858

Total 4,740 1,067,460 667,469$ 44,024$ 711,494$ --

1. Meter counts, and customer class from Source files: newConsumptionData

$0.6597

Prepared by NBS


Proposed Volume Charges, 20 of 24


WATER RATE STUDY



CURRENT VS. PROPOSED WATER RATES:


FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22


Single Family Residential:

Low Density $18.59 $19.07 $21.93 $23.68 $24.87 $26.11

Medium Density $14.08 $14.35 $16.51 $17.83 $18.72 $19.65

Non-Residential:

Current Rate (per EDU per Acre) $14.08 N.A. N.A. N.A. N.A. N.A.

5/8 inch meter meter -- $24.68 $28.39 $30.66 $32.19 $33.80

3/4 inch meter -- $35.23 $40.52 $43.76 $45.95 $48.24

1 inch meter -- $56.33 $64.78 $69.96 $73.46 $77.14

1.5 inch meter -- $109.08 $125.44 $135.48 $142.25 $149.36

2 inch meter -- $172.38 $198.23 $214.09 $224.80 $236.04

3 inch meter -- $341.17 $392.35 $423.73 $444.92 $467.17

4 inch meter -- $531.06 $610.72 $659.58 $692.56 $727.19

6 inch meter -- $1,058.54 $1,217.32 $1,314.71 $1,380.44 $1,449.46

8 inch meter -- $1,691.51 $1,945.24 $2,100.86 $2,205.90 $2,316.20

Fire Meters:

5/8 inch meter -- $3.88 $4.46 $4.81 $5.06 $5.31

8 inch meter -- $44.59 $51.28 $55.38 $58.15 $61.06

Commodity Charges for All Water Consumed (in $/hcf) (1)

Single Family Residential $0.4507 $0.6597 $0.7587 $0.8193 $0.8603 $0.9033All Non-Residential/Fire Accounts $0.4507 $0.6858 $0.7887 $0.8518 $0.8944 $0.9391


Water Rate ScheduleCurrent

Rates

Proposed Water Rates

Prepared by NBS


Current & Proposed Rates, 21 of 24

Prepared by NBS

www.nbsgov.com | 800.676.7516 SFR Low Density Bill Comp, Page 22 of 24

$20.84$23.09

$26.25

$30.30

$36.61

$22.37

$25.66

$30.28

$36.22

$45.46

$0

$10

$20

$30

$40

$50

$60

5 10 17 26 40


Mo

nth

ly B

ill

Residential Water Bill ComparisonCurrent vs. Proposed 2017/18 Rates (Low Density)



Prepared by NBS

www.nbsgov.com | 800.676.7516 SFR Med Density Bill Comp, Page 23 of 24

$15.88$17.69

$19.49

$22.19

$25.35

$16.99

$19.63

$22.27

$26.23

$30.85

$0

$10

$20

$30

$40

$50

$60

4 8 12 18 25


Mo

nth

ly B

ill

Residential Water Bill ComparisonCurrent vs. Proposed 2017/18 Rates (Med Density)



Prepared by NBS

www.nbsgov.com | 800.676.7516 Commercial Bill Comp, Page 24 of 24

$101.94 $108.70$124.48

$162.79

$230.39

$119.37$129.65

$153.66

$211.95

$314.83

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

15 30 65 150 300


Mo

nth

ly B

ill

Commercial Water Bill Comparison Current vs. Proposed 2017/18 Rates (1.5" Meter)

Commercial Bill - Current Rates

Commercial Bill - Proposed Rates

Mountain House Community Service District Water and Sewer Rate Study B

APPENDIX B – DETAILED SEWER STUDY TABLES


WASTEWATER RATE STUDY


Preliminary Draft Subject to Material Revision, Do Not Cite or Distribute

TABLE 1

FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Sources of Funds (1)

Rate Revenue:

Sewer Rate Revenue 1,525,000$ 1,629,562$ 1,734,124$ 1,838,687$ 1,943,249$ 2,047,811$

General Fund Subsidy 664,448$ 1,998,874$ 1,718,889$ 628,388$ 335,962$ 200,931$

Interest Earnings -$ 3,350$ 4,844$ 7,292$ 9,762$ 12,258$


Uses of Water Funds

Operating Expenses:

Administration 35,425$ 36,665$ 37,968$ 39,318$ 40,718$ 42,168$

Legal Services 5,000 5,125 5,279 5,437 5,600 5,768

Finance 60,963 62,487 64,362 66,292 68,281 70,330

Customer Services 239,872 246,800 254,686 262,825 271,226 279,898

Engineering 74,273 76,420 78,863 81,384 83,986 86,672

Development 7,751 7,945 8,183 8,429 8,682 8,942

Regulatory - Compliance 318,843 326,979 336,873 347,068 357,571 368,392

O&M 1,447,320 1,579,032 1,629,264 1,681,103 1,734,601 1,789,811

Water Bond Expenses

Subtotal: Operating Expenses 2,189,448$ 2,341,452$ 2,415,477$ 2,491,856$ 2,570,665$ 2,651,981$

Other Expenditures:

Refund to General Fund - - - - - -

Future Debt Service - - - - - -

Rate-Funded Capital Expenses - 1,334,426 1,187,331 293,435 130,670 259,145

Subtotal: Other Expenditures -$ 1,334,426$ 1,187,331$ 293,435$ 130,670$ 259,145$

Total Uses of Water Funds 2,189,448$ 3,675,878$ 3,602,808$ 2,785,292$ 2,701,335$ 2,911,126$

plus: Revenue from Rate Increases (2) - 114,069 241,997 361,353 498,159 653,603

Annual Surplus/(Deficit) 0$ 69,977$ 97,046$ 50,428$ 85,797$ 3,477$

Net Revenue Reqt. (Total Uses less Non-Rate Revenue) 1,525,000$ 1,673,654$ 1,879,075$ 2,149,612$ 2,355,611$ 2,697,937$

Total Rate Revenue After Rate Increases 1,525,000$ 1,743,632$ 1,976,122$ 2,200,039$ 2,441,408$ 2,701,414$

Projected Annual Rate Revenue Increase 0.00% 7.00% 6.50% 5.00% 5.00% 5.00%

Cumulative Increase from Annual Revenue Increases 0.00% 7.00% 13.96% 19.65% 25.64% 31.92%

1. FY 2016/17 Revenues and expenses are per the District's Annual Operating Budget and use the Current Total Budget numbers. Source file: Budget Workbook FINAL.xlsx

2. Assumes new rates are implemented July 1st of each year.

ProjectedRATE REVENUE REQUIREMENTS SUMMARY

Prepared by NBS







TABLE 2

EXCLUDED PLEDGE SUMMARY

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

WATER PLEDGED REVENUE

UTILITY SERVICE FEE-PLEDGED F 987,646$ 987,646$ 987,646$ 987,646$ 987,646$ 987,646$

UTILITY SERVICE FEE-PLEDGED F 882,354$ 882,354$ 882,354$ 882,354$ 882,354$ 882,354$

TOTAL PLEDGE REVENUE 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$

WATER PLEDGED EXPENSES

FACILITY PLEDGED PAYMENT 987,646$ 986,886$ 988,106$ 986,551$ 990,867$ 991,111$

MHCSD PLEDGED PRINCIPAL PAYMENT 330,000 345,000 360,000 380,000 395,000 415,000

INTEREST ON BONDS 550,454 536,214 519,994 501,549 482,233 461,989

PROFESSIONAL SVS 1,200 1,200 1,200 1,200 1,200 1,200

FINANCIAL/ MGT SVS 700 700 700 700 700 700

TOTAL PLEDGE EXPENSES 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$ 1,870,000$

NET -$ -$ -$ -$ -$ -$

ProjectedPledged Revenue & Expenses Excluded from Analysis

Prepared by NBS







TABLE 3

RESERVE FUND SUMMARY, UN-RESTRICTED RESERVES

Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Total Beginning Cash (1) 300,575$

Un-Restricted Reserves:

Operating Reserve

Beginning Reserve Balance 300,575$ 274,000$ 293,000$ 302,000$ 311,000$ 321,000$

Plus: Net Cash Flow (After Rate Increases) 0 69,977 97,046 50,428 85,797 3,477

Plus: Transfer of Debt Reserve Surplus 3,350 6 1,385 3,362 5,272 7,094

Plus: Interest Earnings - - - - - -

Less: Transfer Out to Capital Replacement Reserve (29,925) (50,984) (89,432) (44,789) (81,069) (571)

Ending Operating Reserve Balance 274,000$ 293,000$ 302,000$ 311,000$ 321,000$ 331,000$

Target Ending Balance (45-days of O&M) 274,000$ 293,000$ 302,000$ 311,000$ 321,000$ 331,000$


Beginning Reserve Balance -$ 29,925$ 50,984$ 89,432$ 44,789$ 81,069$

Plus: Grant Proceeds - - - - - -

Plus: Transfer of Operating Reserve Surplus 29,925 50,984 89,432 44,789 81,069 571

Less: Use of Reserves for Capital Projects - (29,925) (50,984) (89,432) (44,789) (81,069)

Ending Capital Rehab & Replacement Reserve Balance 29,925$ 50,984$ 89,432$ 44,789$ 81,069$ 571$

Target Ending Balance (.%% of Assets) (2) -$ -$ -$ -$ -$ -$

Ending Cash Balance - Excl. Restricted Reserves 303,925$ 343,984$ 391,432$ 355,789$ 402,069$ 331,571$

Min. Target Ending Cash Balance - Excl. Restricted Reserves 274,000$ 293,000$ 302,000$ 311,000$ 321,000$ 331,000$

Ending Surplus/(Deficit) Compared to Reserve Targets 29,925$ 50,984$ 89,432$ 44,789$ 81,069$ 571$

Days Cash on Hand 51 54 60 53 58 46

Annual Interest Earnings Rate (3) 0.35% 0.35% 0.50% 0.75% 1.00% 1.25%

1. Beginning cash balance is for 47858-Wastewater Operation as of June 30, 2016. Source: Staff Email

2. The Capital Rehab & Replacement reserve target is set to zero per direction of the District Board.

3. Historical interest earning rates were referenced on the California Treasurer's Office website for funds invested in LAIF. Future years earnings were conservatively

estimated through 2021 and phase into the historical 10 year average interest earnings rate.

ProjectedSUMMARY OF CASH ACTIVITY

GENERAL WATER FUND RESERVES

Prepared by NBS





Financial Plan Charts


CHART 1

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

2017 2018 2019 2020 2021 2022

An

nu

al

Ob

lig

ati

on

s


Wastewater Revenue Requirements vs.Revenue Under Existing and Increased Rates

Reserve Funded CapitalExpenses

Rate Funded Capital Expenses

O&M Expenses

Revenues under Existing Rates

Prepared by NBS







CHART 2

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

2017 2018 2019 2020 2021 2022


Ending Cash Balances vs.Recommended Reserve Targets

Wastewater Fund - Un-Restricted Reserves

Ending Cash Balance

Prepared by NBS







CHART 3

0.00%

7.00%

6.50%

5.00% 5.00% 5.00%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2017 2018 2019 2020 2021 2022


Projected Increases to Rate Revenue

Prepared by NBS







REVENUE FORECAST (1,2):

FUND OBJECTDESCRIPTION

Inflation

Basis2017 2018 2019 2020 2021 2022

SEWER REVENUE

47862 440000-0000 INTEREST INCOME Cal'd -$ -$ -$ -$ -$ -$

47862 463200-0000 UTILITY SERVICE FEE-OPER 1 1,525,000$ 1,629,562$ 1,734,124$ 1,838,687$ 1,943,249$ 2,047,811$

47862 480000-0000 OPERATING TRANSFER IN 1 664,448$ 664,448$ 531,558$ 398,668$ 265,778$ 132,888$

47862 480006-0000 TRANSFER FOR CAPITAL PROJECTS 1 -$ 1,334,426$ 1,187,331$ 229,720$ 70,184$ 68,043$

TOTAL: REVENUE 2,189,448$ 3,628,436$ 3,453,013$ 2,467,075$ 2,279,211$ 2,248,742$

REVENUE SUMMARY:

RATE REVENUE

SEWER RATE REVENUE 1,525,000$ 1,629,562$ 1,734,124$ 1,838,687$ 1,943,249$ 2,047,811$

OTHER REVENUE

INTEREST INCOME -$ -$ -$ -$ -$ -$

GENERAL FUND SUBSIDY 664,448$ 1,998,874$ 1,718,889$ 628,388$ 335,962$ 200,931$

TOTAL: REVENUE 2,189,448$ 3,628,436$ 3,453,013$ 2,467,075$ 2,279,211$ 2,248,742$

Prepared by NBS







OPERATING EXPENSE FORECAST (1,2):


Inflation

Basis

Custome

r Growth2017 2018 2019 2020 2021 2022

WASTEWATER OPERATIONS EXPENSES

47862 Administration47862 Personnel 3 N 31,825$ 32,939$ 34,092$ 35,285$ 36,520$ 37,799$

47862 6221000000 Professional Services 2 N 2,600$ 2,665$ 2,745$ 2,827$ 2,912$ 2,999$

47862 6202000000 Office Expense - Postage 2 Y 1,000$ 1,061$ 1,131$ 1,206$ 1,285$ 1,370$

47862 Legal Services47862 Personnel 3 N -$ -$ -$ -$ -$ -$

47862 6221401000 Legal Services 2 N 5,000$ 5,125$ 5,279$ 5,437$ 5,600$ 5,768$

47862 Finance47862 Personnel 2 N 60,963$ 62,487$ 64,362$ 66,292$ 68,281$ 70,330$

47862 Customer Services47862 Personnel 3 N 93,131$ 96,390$ 99,764$ 103,256$ 106,870$ 110,610$

47862 6110899000 Refund Payments 2 Y -$ -$ -$ -$ -$ -$

47862 6201005100 Printing 2 Y 400$ 410$ 422$ 435$ 448$ 461$

47862 6201100500 Office Expense-Supplies 2 Y 200$ 205$ 211$ 217$ 224$ 231$

47862 6202000000 Office Expense - Postage 2 Y 10,824$ 11,095$ 11,427$ 11,770$ 12,123$ 12,487$

47862 6221415000 Mhcsd Utility Billing/Metering 2 Y 52,000$ 53,300$ 54,899$ 56,546$ 58,242$ 59,990$

47862 Overhead 2 Y 83,317$ 85,400$ 87,962$ 90,601$ 93,319$ 96,119$

47862 Engineering47862 Personnel 3 N 28,991$ 30,005$ 31,056$ 32,142$ 33,267$ 34,432$

47862 6221420000 Gis Monitoring 2 N 5,000$ 5,125$ 5,279$ 5,437$ 5,600$ 5,768$

47862 Overhead 2 N 40,283$ 41,290$ 42,529$ 43,804$ 45,119$ 46,472$

47862 Development47862 Personnel 2 N 7,751$ 7,945$ 8,183$ 8,429$ 8,682$ 8,942$

47862 Regulatory - Compliance47862 Personnel 3 N 16,460$ 17,036$ 17,633$ 18,250$ 18,889$ 19,550$

47862 6201100600 Office Exp-Shipping 2 N 100$ 103$ 106$ 109$ 112$ 115$

47862 6209000000 Memberships 2 N 12,500$ 12,813$ 13,197$ 13,593$ 14,001$ 14,421$

47862 6221423000 State Health Department 2 N 25,000$ 25,625$ 26,394$ 27,186$ 28,001$ 28,841$

47862 6221408000 Engineering-Misc 2 N 80,000$ 82,000$ 84,460$ 86,994$ 89,604$ 92,292$

47862 6226008600 Permits & Fees 2 N 5,000$ 5,125$ 5,279$ 5,437$ 5,600$ 5,768$

47862 Overhead 2 N 179,783$ 184,277$ 189,806$ 195,500$ 201,365$ 207,406$

SUBTOTAL: 742,128$ 762,421$ 786,214$ 810,753$ 836,064$ 862,170$

Prepared by NBS








Inflation

Basis

Custome

r Growth2017 2018 2019 2020 2021 2022

47862 O&M47862 Personnel 3 N 48,964$ 50,678$ 52,452$ 54,287$ 56,187$ 58,154$

47862 6206000000 Communications 2 N 650$ 666$ 686$ 707$ 728$ 750$

47862 6221000000 Professional Svs 3 N 503,900$ 521,537$ 539,790$ 558,683$ 578,237$ 598,475$

47862 6221004900 Refuse Disposal Charges 2 N 100,000$ 102,500$ 105,575$ 108,742$ 112,005$ 115,365$

47862 6221064600 Security Services 2 N 7,000$ 7,175$ 7,390$ 7,612$ 7,840$ 8,076$

47862 6226001100 Chemicals 2 Y 54,000$ 55,350$ 57,011$ 58,721$ 60,482$ 62,297$

47862 6249010100 Utilities-Water 2 Y -$ -$ -$ -$ -$ -$

47862 6249100100 Utilities-Electricity 2 Y 231,000$ 236,775$ 243,878$ 251,195$ 258,730$ 266,492$

47862 6260000000 Maint-Structures & Grounds 2 N 381,800$ 391,345$ 403,085$ 415,178$ 427,633$ 440,462$

47862 6260106600 Landscaping 2 N 2,041$ 2,092$ 2,155$ 2,219$ 2,286$ 2,355$

47862 6260005300 Maint & Repair - Collection Systems 2 N 50,000$ 51,250$ 52,788$ 54,371$ 56,002$ 57,682$

47862 Overhead 2 N 67,965$ 69,664$ 71,754$ 73,907$ 76,124$ 78,408$

Additional Full Time Employee 2 N 90,000$ 92,700$ 95,481$ 98,345$ 101,296$

SUBTOTAL: 1,447,320$ 1,579,032$ 1,629,264$ 1,681,103$ 1,734,601$ 1,789,811$

TOTAL: WASTEWATER OPERATIONS EXPENSES 2,189,448$ 2,341,452$ 2,415,477$ 2,491,856$ 2,570,665$ 2,651,981$


COST INFLATION FACTORS

Inflation

Basis2017 2018 2019 2020 2021 2022

Customer Growth 1 -- 6.86% 6.42% 6.03% 5.69% 5.38%

General Cost Inflation 2 -- 2.50% 3.00% 3.00% 3.00% 3.00%

Labor Cost Inflation 3 -- 3.50% 3.50% 3.50% 3.50% 3.50%

1. FY 2016/17 Revenues and expenses are per the District's Annual Operating Budget and use the Current Total Budget numbers. Source file: Budget Workbook FINAL.xlsx

Prepared by NBS







CAPITAL FUNDING SUMMARY

CAPITAL FUNDING FORECAST Budget

FY 2016/17 FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Grants -$ -$ -$ -$ -$ -$

Use of Capacity Fee Reserves - - - - - -

SRF Loan Funding - - - - - -

Use of Future Revenue Bond Proceeds - - - - - -

Use of Capital Rehabilitation and Replacement Reserve - 29,925 50,984 89,432 44,789 81,069

Rate Revenue - 1,334,426 1,187,331 293,435 130,670 259,145

Total Sources of Capital Funds -$ 1,364,351$ 1,238,315$ 382,867$ 175,459$ 340,214$

Uses of Capital Funds:

Total Project Costs -$ 1,364,351$ 1,238,315$ 382,867$ 175,459$ 340,214$

Capital Funding Surplus (Deficiency) -$ -$ -$ -$ -$ -$

SFR Loan Funding -$ -$ -$ -$ -$ -$

Future Revenue Bond Proceeds -$ -$ -$ -$ -$ -$

Funding Sources:

Projected

Prepared by NBS







CAPITAL IMPROVEMENT PROGRAM

Capital Improvement Program Costs (1):


SINGLE BATCH REACTOR PROJECTS

Decanters SBR #2 -$ 300,000$ -$ -$ -$ -$

Decanters SBR #1 -$ -$ 300,000$ -$ -$ -$

Aeration System Diffuser Units SBR #2 -$ 110,000$ -$ -$ -$ -$

Aeration System Diffuser Units SBR #1 -$ -$ 110,000$ -$ -$ -$

SBR#1 and #2 Manifold Redesign -$ 50,000$ -$ -$ -$ -$

RBI NPDES Old River Temperature Study -$ 200,000$ -$ -$ -$ -$

INFLUENT/EFFLUENT SYSTEMS

Complete Barscreen Headworks Rebuild -$ 220,000$ 180,000$ -$ 105,000$ -$

Influent rag removal system -$ -$ -$ -$ -$ 30,000$

Influent bar screen upgrade -$ -$ -$ -$ -$ 75,000$

Influent back up bar screen rebuild -$ 14,000$ -$ -$ -$ -$

Grit removal system -$ -$ 25,000$ -$ -$ -$

Oder control system motor replacement -$ 10,000$ -$ -$ -$ -$

Oder control, SBR blowers & digester belts -$ 13,000$ -$ -$ -$ -$

Calgon scrubber -$ 85,000$ -$ -$ -$ -$

Drum thickener Vogelsong Rebuild -$ 10,000$ -$ -$ -$ -$

Centrifuge Vogelsong rebuild -$ 10,000$ -$ -$ -$ -$

New Centrifuge system -$ -$ 400,000$ -$ -$ -$

Old Centrifuge system complete overhaul -$ -$ -$ 75,000$ -$ -$

Sludge pump wear plates -$ -$ -$ 14,400$ -$ -$

Sludge pump motors -$ -$ 4,000$ -$ -$ -$

Polymer skid systems -$ -$ -$ 20,000$ -$ -$

Muffin monster -$ -$ -$ 5,500$ -$ -$

Tertiary filter cloth replace -$ -$ -$ 50,000$ -$ -$

MISCL. PUMPS AND MIXERS

Filter feed pumps -$ 40,000$ -$ -$ 5,000$ -$

Submersible Banana mixer, SBR #1 -$ 28,000$ -$ -$ -$ 13,000$


Submersible Banana mixer, Anoxic Reactor -$ 30,000$ -$ -$ -$ -$


WAS pump replacement SBR #2 -$ -$ 6,000$ -$ -$ -$

WAS pump replacement SBR #1 -$ -$ -$ 6,000$ -$ -$

SBR #2 flygt submersible fill pump -$ -$ -$ -$ 6,000$ -$

SBR #1 flygt submersible fill pump -$ -$ 6,000$ -$ -$ -$

Digester #1 flygt submersible pump -$ -$ -$ 36,000$ -$ -$

Digester #2 flygt submersible pump -$ -$ 36,000$ -$ -$ -$

Influent pump #1 -$ -$ 12,000$ -$ -$ -$

Influent pump #2 -$ 12,000$ -$ -$ -$ -$

Influent pump #3 -$ -$ -$ 12,000$ -$ -$

Influent pump #4 -$ -$ -$ -$ 12,000$ -$

Influent pump VFD #1 -$ -$ 10,000$ -$ -$ -$


Effluent pump #1 -$ -$ -$ -$ -$ 12,000$

Effluent pump #2 -$ -$ -$ -$ -$ -$

Effluent pump #3 -$ -$ -$ -$ -$ -$

Reclaimed water pump #1 -$ -$ 8,000$ -$ -$ -$

Reclaimed water pump #2 -$ -$ -$ 4,000$ -$ -$

Subtotal: CIP Program Costs -$ 1,158,000$ 1,107,000$ 222,900$ 128,000$ 143,000$

Prepared by NBS









ULTRA VIOLET TREATMENT SYSTEM -$ -$ -$ -$ -$ -$

UV lamps, channel 1 -$ 17,000$ -$ 17,000$ -$ 17,000$

UV lamps, channel 2 -$ -$ 17,000$ -$ 17,000$ -$

UV lamp quartz enclosures -$ -$ -$ -$ -$ -$

UV fans -$ 5,400$ -$ -$ -$ 5,400$

UV ballasts + harnesses -$ 7,500$ 7,500$ 7,500$ 7,500$ 7,500$

UV LCA Boards -$ 25,000$ -$ -$ -$ -$

OS/COMPUTER HARDWARE

PLC UPS Back up system (Rio cabinet for filter feed pump control SOLA S4K2U 1000C) -$ 30,000$ -$ -$ -$ -$

Allen Bradley PLC-5/40E CPU -$ 15,000$ -$ -$ -$ -$

Allen Bradley SLC-5/05 (L522) CPU -$ 30,000$ -$ -$ -$ -$

SCADA License Annual Fee Wonderware -$ 4,000$ 4,000$ 4,000$ 4,000$ 4,000$

Server upgrade, SCADA -$ -$ 4,000$ -$ -$ -$

Workstation upgrade, SCADA -$ 2,000$ -$ -$ -$ -$

Wonderware upgrade covered at line 60 -$ -$ -$ -$ -$ -$

METER /PROBES/SAMPLERS

Anoxic reactor TSS/DO meter & probe -$ -$ 6,000$ -$ -$ -$

Influent composite sampler -$ -$ -$ -$ -$ -$

Effluent composite sampler -$ 8,000$ -$ -$ -$ -$

UVT Meter -$ -$ -$ -$ -$ 8,000$

Turbidity Meter -$ -$ 8,000$ -$ -$ -$

SBR #2 TSS/DO meter & probe -$ 6,000$ -$ -$ -$ -$

SBR #1 TSS/DO meter & probe -$ -$ 6,000$ -$ -$ -$

STRUCTURE AND GROUNDS

Facility light pole LED upgrade -$ -$ -$ 25,000$ -$ 25,000$

landscaping renovation -$ -$ -$ 75,000$ -$ 75,000$

replace pond valves -$ 18,000$ -$ -$ -$ -$

paint building -$ -$ 10,000$ -$ -$ 10,000$

-$ -$ -$ -$ -$ -$

Placeholder for Future Year Capital Projects -$ -$ -$ -$ -$ -$

Subtotal: CIP Program Costs -$ 167,900$ 62,500$ 128,500$ 28,500$ 151,900$

Total: CIP Program Costs -$ 1,325,900$ 1,169,500$ 351,400$ 156,500$ 294,900$

Prepared by NBS







Capital Improvement Program Costs (in Future-Year Dollars ) (2):


SINGLE BATCH REACTOR PROJECTS

Decanters SBR #2 -$ 308,700$ -$ -$ -$ -$

Decanters SBR #1 -$ -$ 317,652$ -$ -$ -$

Aeration System Diffuser Units SBR #2 -$ 113,190$ -$ -$ -$ -$

Aeration System Diffuser Units SBR #1 -$ -$ 116,473$ -$ -$ -$

SBR#1 and #2 Manifold Redesign -$ 51,450$ -$ -$ -$ -$

RBI NPDES Old River Temperature Study -$ 205,800$ -$ -$ -$ -$

INFLUENT/EFFLUENT SYSTEMS -$ -$ -$ -$ -$ -$

Complete Barscreen Headworks Rebuild -$ 226,380$ 190,591$ -$ 117,720$ -$

Influent rag removal system -$ -$ -$ -$ -$ 34,610$

Influent bar screen upgrade -$ -$ -$ -$ -$ 86,524$

Influent back up bar screen rebuild -$ 14,406$ -$ -$ -$ -$

Grit removal system -$ -$ 26,471$ -$ -$ -$

Oder control system motor replacement -$ 10,290$ -$ -$ -$ -$

Oder control, SBR blowers & digester belts -$ 13,377$ -$ -$ -$ -$

Calgon scrubber -$ 87,465$ -$ -$ -$ -$

Drum thickener Vogelsong Rebuild -$ 10,290$ -$ -$ -$ -$

Centrifuge Vogelsong rebuild -$ 10,290$ -$ -$ -$ -$

New Centrifuge system -$ -$ 423,536$ -$ -$ -$

Old Centrifuge system complete overhaul -$ -$ -$ 81,716$ -$ -$

Sludge pump wear plates -$ -$ -$ 15,689$ -$ -$

Sludge pump motors -$ -$ 4,235$ -$ -$ -$

Polymer skid systems -$ -$ -$ 21,791$ -$ -$

Muffin monster -$ -$ -$ 5,993$ -$ -$

Tertiary filter cloth replace -$ -$ -$ 54,477$ -$ -$

MISCL. PUMPS AND MIXERS -$ -$ -$ -$ -$ -$

Filter feed pumps -$ 41,160$ -$ -$ 5,606$ -$





WAS pump replacement SBR #2 -$ -$ 6,353$ -$ -$ -$

WAS pump replacement SBR #1 -$ -$ -$ 6,537$ -$ -$

SBR #2 flygt submersible fill pump -$ -$ -$ -$ 6,727$ -$

SBR #1 flygt submersible fill pump -$ -$ 6,353$ -$ -$ -$

Digester #1 flygt submersible pump -$ -$ -$ 39,224$ -$ -$

Digester #2 flygt submersible pump -$ -$ 38,118$ -$ -$ -$

Influent pump #1 -$ -$ 12,706$ -$ -$ -$

Influent pump #2 -$ 12,348$ -$ -$ -$ -$

Influent pump #3 -$ -$ -$ 13,075$ -$ -$

Influent pump #4 -$ -$ -$ -$ 13,454$ -$



Effluent pump #1 -$ -$ -$ -$ -$ 13,844$

Effluent pump #2 -$ -$ -$ -$ -$ -$

Effluent pump #3 -$ -$ -$ -$ -$ -$

Reclaimed water pump #1 -$ -$ 8,471$ -$ -$ -$

Reclaimed water pump #2 -$ -$ -$ 4,358$ -$ -$

Subtotal: CIP Program Costs -$ 1,191,582$ 1,172,137$ 242,860$ 143,506$ 164,973$

Prepared by NBS









ULTRA VIOLET TREATMENT SYSTEM -$ -$ -$ -$ -$ -$

UV lamps, channel 1 -$ 17,493$ -$ 18,522$ -$ 19,612$

UV lamps, channel 2 -$ -$ 18,000$ -$ 19,059$ -$

UV lamp quartz enclosures -$ -$ -$ -$ -$ -$

UV fans -$ 5,557$ -$ -$ -$ 6,230$

UV ballasts + harnesses -$ 7,718$ 7,941$ 8,172$ 8,409$ 8,652$

UV LCA Boards -$ 25,725$ -$ -$ -$ -$

OS/COMPUTER HARDWARE -$ -$ -$ -$ -$ -$

PLC UPS Back up system (Rio cabinet for filter feed pump control SOLA S4K2U 1000C) -$ 30,870$ -$ -$ -$ -$

Allen Bradley PLC-5/40E CPU -$ 15,435$ -$ -$ -$ -$

Allen Bradley SLC-5/05 (L522) CPU -$ 30,870$ -$ -$ -$ -$

SCADA License Annual Fee Wonderware -$ 4,116$ 4,235$ 4,358$ 4,485$ 4,615$

Server upgrade, SCADA -$ -$ 4,235$ -$ -$ -$

Workstation upgrade, SCADA -$ 2,058$ -$ -$ -$ -$

Wonderware upgrade covered at line 60 -$ -$ -$ -$ -$ -$

METER /PROBES/SAMPLERS -$ -$ -$ -$ -$ -$

Anoxic reactor TSS/DO meter & probe -$ -$ 6,353$ -$ -$ -$

Influent composite sampler -$ -$ -$ -$ -$ -$

Effluent composite sampler -$ 8,232$ -$ -$ -$ -$

UVT Meter -$ -$ -$ -$ -$ 9,229$

Turbidity Meter -$ -$ 8,471$ -$ -$ -$

SBR #2 TSS/DO meter & probe -$ 6,174$ -$ -$ -$ -$

SBR #1 TSS/DO meter & probe -$ -$ 6,353$ -$ -$ -$

STRUCTURE AND GROUNDS -$ -$ -$ -$ -$ -$

Facility light pole LED upgrade -$ -$ -$ 27,239$ -$ 28,841$

landscaping renovation -$ -$ -$ 81,716$ -$ 86,524$

replace pond valves -$ 18,522$ -$ -$ -$ -$

paint building -$ -$ 10,588$ -$ -$ 11,537$

-- -$ -$ -$ -$ -$ -$

Placeholder for Future Year Capital Projects -$ -$ -$ -$ -$ -$

Subtotal: CIP Program Costs -$ 172,769$ 66,178$ 140,007$ 31,953$ 175,241$

Total: Capital Improvement Program Costs (Future-Year Dollars) -$ 1,364,351$ 1,238,315$ 382,867$ 175,459$ 340,214$


Economic Variables 2017 2018 2019 2020 2021 2022

Annual Construction Cost Inflation, Per Engineering News Record (2,3) 0.00% 2.90% 2.90% 2.90% 2.90% 2.90%

Cumulative Construction Cost Multiplier from 2017 1.00 1.03 1.06 1.09 1.12 1.15

1. Capital project costs for 2015/16 were provided by staff and the same costs were projected forward for FY 2017-2035. Source file: Sewer & Water 5 year CIP projection DL_Rev-1-26-17.xls

2. Project costs are inflated by 2.9% per year, Engineering News Record estimates of construction cost inflation.

3. For reference purposes, the annual Construction Cost Inflation percentage is the 10 year average change in the Construction Cost Index for 2006-2016. Source: Engineering News Record website (http://enr.construction.com).

Prepared by NBS







Classification of Expenses

FY 2017/18 (VOL) (BOD) (TSS) (CA) (VOL) (BOD) (TSS) (CA)

WASTEWATER OPERATIONS EXPENSES

Administration

Personnel 32,939$ 18,446$ 7,247$ 7,247$ -$ 56% 22% 22% 0%

Professional Services 2,665$ 1,492$ 586$ 586$ -$ 56% 22% 22% 0%

Office Expense - Postage 1,061$ 594$ 233$ 233$ -$ 56% 22% 22% 0%

Legal Services

Personnel -$ -$ -$ -$ -$ 56% 22% 22% 0%

Legal Services 5,125$ 2,870$ 1,128$ 1,128$ -$ 56% 22% 22% 0%

Finance

Personnel 62,487$ 34,993$ 13,747$ 13,747$ -$ 56% 22% 22% 0%

Customer Services

Personnel 96,390$ -$ -$ -$ 96,390$ 0% 0% 0% 100%

Refund Payments -$ -$ -$ -$ -$ 0% 0% 0% 100%

Printing 410$ -$ -$ -$ 410$ 0% 0% 0% 100%

Office Expense-Supplies 205$ -$ -$ -$ 205$ 0% 0% 0% 100%

Office Expense - Postage 11,095$ -$ -$ -$ 11,095$ 0% 0% 0% 100%

Mhcsd Utility Billing/Metering 53,300$ -$ -$ -$ 53,300$ 0% 0% 0% 100%

Overhead 85,400$ -$ -$ -$ 85,400$ 0% 0% 0% 100%

Engineering

Personnel 30,005$ 16,803$ 6,601$ 6,601$ -$ 56% 22% 22% 0%

Gis Monitoring 5,125$ 2,870$ 1,128$ 1,128$ -$ 56% 22% 22% 0%

Overhead 41,290$ 23,122$ 9,084$ 9,084$ -$ 56% 22% 22% 0%

Development

Personnel 7,945$ 4,449$ 1,748$ 1,748$ -$ 56% 22% 22% 0%

Regulatory - Compliance

Personnel 17,036$ 9,540$ 3,748$ 3,748$ -$ 56% 22% 22% 0%

Office Exp-Shipping 103$ 57$ 23$ 23$ -$ 56% 22% 22% 0%

Memberships 12,813$ 7,175$ 2,819$ 2,819$ -$ 56% 22% 22% 0%

State Health Department 25,625$ 14,350$ 5,638$ 5,638$ -$ 56% 22% 22% 0%

Engineering-Misc 82,000$ 45,920$ 18,040$ 18,040$ -$ 56% 22% 22% 0%

Permits & Fees 5,125$ 2,870$ 1,128$ 1,128$ -$ 56% 22% 22% 0%

Overhead 184,277$ 103,195$ 40,541$ 40,541$ -$ 56% 22% 22% 0%

O&M

Personnel 50,678$ 28,380$ 11,149$ 11,149$ -$ 56% 22% 22% 0%

Communications 666$ 373$ 147$ 147$ -$ 56% 22% 22% 0%

Professional Svs 521,537$ 292,060$ 114,738$ 114,738$ -$ 56% 22% 22% 0%

Refuse Disposal Charges 102,500$ 57,400$ 22,550$ 22,550$ -$ 56% 22% 22% 0%

Security Services 7,175$ 4,018$ 1,579$ 1,579$ -$ 56% 22% 22% 0%

Chemicals 55,350$ 30,996$ 12,177$ 12,177$ -$ 56% 22% 22% 0%

Utilities-Water -$ -$ -$ -$ -$ 56% 22% 22% 0%

Utilities-Electricity 236,775$ 132,594$ 52,091$ 52,091$ -$ 56% 22% 22% 0%

Maint-Structures & Grounds 391,345$ 219,153$ 86,096$ 86,096$ -$ 56% 22% 22% 0%

Landscaping 2,092$ 1,172$ 460$ 460$ -$ 56% 22% 22% 0%

Maint & Repair - Collection Systems 51,250$ 28,700$ 11,275$ 11,275$ -$ 56% 22% 22% 0%

Overhead 69,664$ 39,012$ 15,326$ 15,326$ -$ 56% 22% 22% 0%

Additional Full Time Employee 90,000$ 50,400$ 19,800$ 19,800$ -$ 56% 22% 22% 0%

TOTAL: WASTEWATER OPERATIONS EXPENSES 2,341,452$ 1,173,005$ 460,824$ 460,824$ 246,800$ 50% 20% 20% 11%

Budget Categories

Total Revenue

RequirementsFlow CustomerStrength Basis of Classification

Prepared by NBS








FY 2017/18 (VOL) (BOD) (TSS) (CA) (VOL) (BOD) (TSS) (CA)

Capital Expenditures

Rate Funded Capital Expenses 1,334,426$ 668,512$ 262,630$ 262,630$ 140,655$ 50% 20% 20% 11%

TOTAL REVENUE REQUIREMENTS 3,675,878$ 1,841,517$ 723,453$ 723,453$ 387,455$ 50% 20% 20% 11%

Less: Non-Rate Revenues

Rate Revenue:

Sewer Rate Revenue -$ -$ -$ -$ -$ 50% 20% 20% 11%

General Fund Subsidy (1,998,874)$ (1,001,383)$ (393,400)$ (393,400)$ (210,691)$ 50% 20% 20% 11%

Interest Earnings (3,350)$ (1,678)$ (659)$ (659)$ (353)$ 50% 20% 20% 11%

NET REVENUE REQUIREMENTS 1,673,654$ 838,456$ 329,394$ 329,394$ 176,411$

Allocation of Revenue Requirements 100.0% 50.1% 19.7% 19.7% 10.5%

Net Revenue Reqt. Check from Financial Plan -$


Adjustments to Classification of Expenses

Adjustment to Current Rate Level: Total (VOL) (BOD) (TSS) (CA)

FY 2017/18 Target Rate Rev. After Rate Increases $1,743,632

Projected Rate Revenue at Current Rates $1,629,562

FY 2017/18 Projected Rate Increase 7.00%

Adjusted Net Revenue Req'ts 1,743,632$ 873,513$ 343,166$ 343,166$ 183,787$

Percent of Revenue 50.1% 19.7% 19.7% 10.5%

Flow Budget Categories

Total Revenue

RequirementsStrength Customer Basis of Classification

Prepared by NBS





Wastewater Cost of Service Analysis


Development of the Flow Allocation Factor

Customer Class

Number of

Dwelling Units /

Accounts (2)

Monthly

Average

Consumption by

DU (HCF)

Winter Average

Consumption by

DU / Account

(HCF)

Annual Volume

Total (gallons)

(3)

Percentage

of Adjusted

Volume

SINGLE FAMILY RESIDENTIAL - Low Density 1,779 17 10 163,832,926 42.26%

SINGLE FAMILY RESIDENTIAL - Med Density 2,764 13 8 209,547,027 54.05%

FIRE STATION 1 41 9 80,784 0.02%

MULTI-FAMILY RESIDENTIAL 255 5 5 10,361,296 2.67%

COMMERCIAL 3 52 21 565,488 0.15%

SCHOOLS 7 322 53 3,321,120 0.86%

Total: 4,809 387,708,641 100.0%

1. Consumption data is based on the Mountain House CSD's customer data for Feb 2016 through Jan 2017. Source file: newConsumptionData

2. Residential classes are by number of dwelling units while commercial is by number of accounts.

3. Annual consumption for all customer classes based upon Winter Consumption.

Development of the Strength Allocation Factor

Customer Class

Average

Strength Factor

(mg/l) (1)

Calculated

BOD (lbs./yr.)

Percent

of Total

Average

Strength Factor

(mg/l) (1)

Calculated

TSS (lbs./yr.)

Percent

of Total

SINGLE FAMILY RESIDENTIAL - 202 163,832,926 250 341,592 42.3% 250 341,592 42.3%

SINGLE FAMILY RESIDENTIAL - 203 209,547,027 250 436,906 54.1% 250 436,906 54.1%

FIRE STATION 80,784 250 168 0.0% 250 168 0.0%

MULTI-FAMILY RESIDENTIAL 10,361,296 250 21,603 2.7% 250 21,603 2.7%

COMMERCIAL 565,488 130 613 0.1% 80 377 0.0%

SCHOOLS 3,321,120 250 6,925 0.9% 250 6,925 0.9%

Total: 387,708,641 807,807 100% 807,571 100%

1. Average strength factors for BOD and TSS are from the CA State Water Resources Control Board Revenue Program Guidelines Appendix G.

Average strength factor assumptions for Single family, Multi-family, Fire Station and Schools based upon residential factors

Average strength factor assumptions for commerical based upon profession office factors

Development of the Customer Allocation Factor


Accounts

Percent

of Total

SINGLE FAMILY RESIDENTIAL - 202 1,779 38.62%

SINGLE FAMILY RESIDENTIAL - 203 2,764 60.00%

FIRE STATION 1 0.02%

MULTI-FAMILY RESIDENTIAL 53 1.15%

COMMERCIAL 3 0.07%

SCHOOLS 7 0.15%

Total: 4,607 100.00%

1. Consumption data is based on the Mountain House CSD's customer data for Feb 2016 through Jan 2017. Source files: newConsumptionData

Biochemical Oxygen Demand (BOD) Total Suspended Solids (TSS)

Annual Flow

(gallons)

Prepared by NBS


Allocation Factors, 17 of 23



Sewer Cost of Service AnalysisPreliminary Draft - Do Not Cite or Distribute

Allocation of FY 2017/18 Revenue Requirements by Customer Class

BOD TSS

Net Revenue Requirements (1) 873,513$ 343,166$ 343,166$ 183,787$ 1,743,632$ --

50.1% 19.7% 19.7% 10.5% 100.0%

Single Family Res Low Den 369,118$ 145,112$ 145,155$ 70,970$ 730,354$ 41.9%

Single Family Res Med Den 472,112 185,603 185,657 110,264 953,636 54.7%

Fire Station 182 72 72 40 365 0.0%

Multi-Family Res 23,344 9,177 9,180 2,114 43,816 2.5%

Commercial 1,274 260 160 120 1,815 0.1%

Schools 7,483 2,942 2,942 279 13,646 0.8%

Total 873,513$ 343,166$ 343,166$ 183,787$ 1,743,632$ 100%

1. Revenue requirement for each customer class is determined by multiplying the revenue requirement from each cost classification by the allocation factors for each customer class.

Proposed Sewer Rates for FY 2017/18:

Total Fixed (2, 3) Volumetric

Residential

Single Family Res Low Den 1,779 219,028 730,354$ 730,354$ -$ $34.21 $0.00

Single Family Res Med Den 2,764 280,143 953,636 953,636 - $28.75 $0.00

Fire Station 1 108 365 365 - $30.42 $0.00

Multi-Family Res 255 13,852 43,816 43,816 - $14.32 $0.00

Subtotal 4,799 513,131 1,728,171 1,728,171 -$ -$ -$

Total Fixed (2, 3) Volumetric

Commercial & Schools

Commercial 3 756 1,815$ 907$ 907$ $25.20 $1.20

Schools 7 4,440 13,646 6,823 6,823 $81.23 $1.54

Subtotal 10 5,196 15,460 7,730 7,730$ -$ 3$

Total 4,809 518,327 1,743,632$ 1,735,901$ 7,730$ -- --

Percent of Revenue from Fixed vs. Volumetric Charges 100.0% 99.6% 0.4%

1. Data is based on the Mountain House CSD's Feb 2016 through Jan 2017 customer data.

2. Fixed charges are set at 100% of revenue requirement for residential customers.

3. Fixed charges are set at 50% of revenue requirement for commercial & school customers. As winter consumption is used to allocate costs due to mixed meter use.

Volumetric

Charge Per hcfCustomer Class

No. of

Dwelling

Units (1)

Annualized

Winter

Consumpiton

(hcf)

Annual Rev. Req'tMonthly Fixed

Charge Per

Dwelling Unit

Customer Class

Cost Classification Components Cost-of-Service

Net Revenue

Reqts.

% of COS Net

Revenue Reqts. VolumeTreatment Customer

Related

Volumetric

Charge Per hcfCustomer Class

No. of

Accounts (1)

Annualized

Winter

Consumption

(hcf)

Annual Rev. Req'tMonthly Fixed

Charge Per

Account

Prepared by NBS


COSA - Sewer Rates, 18 of 23



Sewer Cost of Service Analysis/Rate Design


Current vs. Proposed Sewer Rates (Monthly )

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22Residential Monthly Fixed Service Charges

Single Family Residential Low Den $29.22 $34.21 $36.44 $38.26 $40.17 $42.18

Single Family Residential Med Den $25.41 $28.75 $30.62 $32.15 $33.76 $35.45

Fire House -- $30.42 $32.40 $34.02 $35.72 $37.50

Multi-Family Residential -- $14.32 $15.25 $16.01 $16.81 $17.65

Non-Residential Monthly Fixed Service Charge

Commercial $25.41 $25.20 $26.84 $28.18 $29.59 $31.07

Schools $25.41 $81.23 $86.51 $90.83 $95.37 $100.14

Non-Residential Volumetric Charge ($/hcf) (3)

Commercial N.A. $1.20 $1.28 $1.34 $1.41 $1.48

Schools N.A. $1.54 $1.64 $1.72 $1.80 $1.891. Sewer customers are currently charged on the basis of their number of Equivalent Dwelling Units (EDUs) and per Acre.

2. Proposed rates are based on charges to each customer account; volumetric rates for Commercial and School customers are per hcf of average

winter water use from the previous winter period.


Sewer Rate ScheduleProposed Sewer Rates (2)Current

Rates (1)

Prepared by NBS


Current & Proposed Rates, 19 of 23



Wastewater Cost of Service Analysis/Rate Design


Monthly Bill Comparisons - Current vs. Proposed Rates for 5 Years

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22SFR Bill - Current Rates (Current) $29.22 $29.22 $29.22 $29.22 $29.22

SFR Bill - Proposed Rates $34.21 $36.44 $38.26 $40.17 $42.18

Difference (in $) Alternative #1A vs. Current Rates $4.99 $7.21 $9.04 $10.95 $12.96

Difference (in %) Alternative #1A vs. Current Rates 17% 25% 31% 37% 44%Note: Average winter consumption for a low density residential customer is 9 HCF/month.

Monthly Bill Comparisons - Current vs. Proposed Rates for 5 Years

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22SFR Bill - Current Rates (Current) $25.41 $25.41 $25.41 $25.41 $25.41

SFR Bill - Proposed Rates $28.75 $30.62 $32.15 $33.76 $35.45

Difference (in $) Alternative #1A vs. Current Rates $3.34 $5.21 $6.74 $8.35 $10.04

Difference (in %) Alternative #1A vs. Current Rates 13% 21% 27% 33% 40%Note: Average winter consumption for a low density residential customer is 8 HCF/month.

Bill Comparisons - Current vs. Proposed Rates for 5 Years:

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22Commercial Bill - Current Rates $322.20 $322.20 $322.20 $322.20 $322.20

Commercial Proposed Rate $103.21 $109.91 $115.41 $121.18 $127.24

Difference (in $) Commercial High Bill vs. Current Rates -$218.99 -$212.28 -$206.79 -$201.02 -$194.96

Difference (in %) Commercial High Bill vs. Current Rates -68% -66% -64% -62% -61%Note: Average consumption for a commercial customer is 65 HCF/month.

Commercial

Residential

Residential

Prepared by NBS for the City of Victorville

Wastewater Rate Study

Bill Comps, 20 of 23

Prepared by NBS

www.nbsgov.com | 800.676.7516 SFR Low Density Bill Comp, Page 21 of 23

$2

9.2

2

$2

9.2

2

$2

9.2

2

$2

9.2

2

$2

9.2

2$3

4.2

1

$3

6.4

4

$38.2

6

$4

0.1

7

$4

2.1

8

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Mo

nth

ly B

ill


Residential Low Density Sewer Bill ComparisonCurrent vs. Proposed Rates



Prepared by NBS

www.nbsgov.com | 800.676.7516 SFR Med Density Bill Comp, Page 22 of 23

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

5.4

1

$2

8.7

5

$3

0.6

2

$3

2.1

5

$33.7

6

$3

5.4

5

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Mo

nth

ly B

ill


Residential Medium Density Sewer Bill ComparisonCurrent vs. Proposed Rates



Prepared by NBS

www.nbsgov.com | 800.676.7516 Commercial Bill Comp, Page 23 of 23

$3

22

.20

$3

22

.20

$3

22

.20

$3

22

.20

$3

22

.20

$1

03

.21

$1

09

.91

$11

5.4

1

$1

21

.18

$1

27

.24

$0

$50

$100

$150

$200

$250

$300

$350

$400

FY 2017/18 FY 2018/19 FY 2019/20 FY 2020/21 FY 2021/22

Mo

nth

ly B

ill

Commercial Sewer Bill Comparison Current vs. Proposed 2017/18 Rate Alternative

Commercial Bill - Current Rates

Commercial Proposed Rate

water and wastewater rate study

Documents