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Western Hills Water DistrictWater Rate Update Board Meeting HF&H Consultants, LLC 2November 4, 2015 Purpose of the Meeting Present revised rate alternatives based on feedback from September Town Hall meeting Elicit input from rate payers and Board members Authorize staff to draft and mail notices to rate payers
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Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 1
November 4, 2015
HF&H Consultants, LLC
Western Hills Water DistrictWater Rate Update
Board MeetingNovember 4, 2015
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 2
November 4, 2015
Agenda
• Purpose of the meeting• Study Process & Background• Revenue Requirements• Cost of Service Analysis• Rate Structure Recommendation• Bill Impacts (current vs proposed rates)• Summary• Questions & Discussion
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 3
November 4, 2015
Purpose of the Meeting
• Present revised rate alternatives based on feedback from September Town Hall meeting
• Elicit input from rate payers and Board members• Authorize staff to draft and mail notices to rate
payers
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 4
November 4, 2015
Study Process• Kickoff meeting – October 6, 2014
– Preliminary analysis: Revenue requirements, cost of service analysis, rate design
• Town Hall meeting – May 20, 2015– Received public input; developed additional alternatives
• 2nd Town Hall meeting – September 27, 2015– Received public input; developed additional alternatives
• Board Meeting – November 4, 2015– Present rate alternatives– Board authorizes mailing notices to rate payers
• Protest Hearing – At least 45 days after November 4 Board Meeting– Board adopts rates if no majority protest
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 5
November 4, 2015
Background• Ad Hoc Water Committee completed review of usage and cost
data – February 2011• District adopted water rate increases – June 2011
FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY15-16**
Treated – Residential
Service charge $51.67 $68.34 $85.00 $87.55 $89.56
Usage charge $/750 gals $1.25 $1.25 $1.25 $1.29 $1.32
Treated – Commercial
Service charge None None None None None
Usage charge $/750 gals $1.65 $3.30 $4.95 $5.10 $5.22
Raw Water
Service charge None None None None None
Usage charge $/AF* $1,075.00 $1,275.00 $1,475.00 $1,519.25 $1,554.19* AF = 435.6 HCF = 325,851 gallons** 2.3% CPI increase over FY 14-15
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 6
November 4, 2015
FY 2014-15 Rate Structure
Observations:• Industry standard: revenue from service charges should be ~30%.• Industry standard: all services should pay service charges.• Industry standard: service charges should be proportionate to size of
connection.• Current rates do not allow for contributions to operating or capital reserves• Current revenue < cost of service.
Per Month % of Revenue Per ccf/mo. % of Revenue
Treated WaterResidential $87.55 80% $1.29 20%HOA $0.00 0% $5.10 100%Non-residential $0.00 0% $5.10 100%Combined 76% 24%
Raw Water $0.00 0% $3.49 100%= $1,519.25/AF
Service Charge Usage ChargeRate Structure
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 7
November 4, 2015
Projected Revenue Requirements
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 8
November 4, 2015
Cost of Service Analysis
• Total Revenue Requirement allocated to customer classes based on their proportionate share of costs.
• For example:– Water treatment costs allocated to residential and non-
residential customer classes based on their percentage share of water used
– Raw water customers are not allocated any water treatment costs
– Pump station costs are allocated based on each customer classes share of water used (including raw water customers)
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 9
November 4, 2015
FY2015-16 Estimated# of % of Cost of Revenue at % of
Customer Class Customers Customers Service FY2015-16 Rates $ Current Rev
Treated Water Cost of Service - Residential $1,503,209
Current Residents 437 54.6% $820,752 $592,590 ($228,162) 38.5%Residential Growth 363 45.4% $682,457 $0 ($682,457)
800 $1,503,209 $592,590 ($910,619) 153.7%
Allocate Resi COS Revenue Surplus/(Shortfall)
Cost of Service Allocation Summary
Current annual shortfall covered by Developer
Breakout of Residential $910k Revenue Shortfall
FY2015-16 EstimatedCost of Revenue at % of
Customer Class Service FY2015-16 Rates $ Current Rev
Treated WaterResidential $1,503,209 $592,590 ($910,619) 154%Non-Residential $294,478 $26,838 ($267,640) 997%
$1,797,687 $619,428 ($1,178,259) 190%
Raw Water $1,415,355 $1,230,473 ($184,882) 15%Total $3,213,042 $1,849,901 ($1,363,141) 74%
Revenue Surplus/(Shortfall)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Cost of Service Allocation Summary
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Bridging the $228k Gap• Alternatives discussed at the September
Town Hall meeting, included:– Timing of revenue increases
• Immediate or over 3-year period– With and without contributions to operating
and capital reserves for existing infrastructure only; not for growth-related expenses
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Bridging the $228k Gap• Revised alternatives include:
– 4-year phase-in period– Reserve contributions
• 45-day (six week) operating reserve• 5-year annual average for capital projects• $46,000 annually for operations and capital• Capital reserves for existing infrastructure
only; not for growth-related capital expenses
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate Alternatives
• Alternative 1: Phase-in over 4-year period w/o contribution to Reserves– Fixed charges reduced from $89.56/mo to $62.00/mo by FY2018-19– Per-unit usage charges increase from $1.32 per hcf ($0.00176/gal.) to
$7.53 per hcf ($0.01004/gal.) by FY2018-19– No contribution towards reserves during phase-in; revisit after phase-in
period is complete
• Alternative 2: Phase-in over 4-year period w/ contribution to Reserves– Fixed charges reduced from $89.56/mo to $62.00/mo by FY2018-19– Per-unit usage charges increase from $1.32 per hcf ($0.00176/gal.) to
$8.19 per hcf ($0.01092/gal.) by FY2018-19– $46,000 annual contribution to reserves
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate Alternatives• Both alternatives:
– Shifts revenue from the fixed service charge to the usage charges• Reduces fixed revenue from 80% to 40%• Increases usage revenue from 20% to 60%• Improves balance between rate payer equity and revenue
stability– Requires the developer to contribute revenue so that current
residents are not covering the costs of future customers (approx. $3M over the 4-year phase-in period)
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Revised Rate AlternativesPhase-in Rate Increases over a 4-year Period
Increased Revenue By
Year 4Alt. 1 – No Reserve
Contribution
10.3% per year $228,000
Incremental Increase For
Reserves
1.5% per year $46,000
Alt. 2 – With Reserve
Contribution
11.8% per year $274,000
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Rates and Sample Bills (Water Only): Alt. #1
• No contribution to reserves
• Reduced fixed service charge phased-in over 4 years
• Usage rate increase phased-in over 4 years
• Note: In addition, residents pay a monthly storm drain and sewer charge
• Sewer = $55.79/mo• Storm Drain = $5.00/mo
A B C D E F1 Alt. # 1: 4-Year Phase-in WITHOUT Contribution to Reserves2 Rates Current FY2015-16 FY2016-17 FY2017-18 FY2018-193 Fixed Charge ($/Month) $89.56 $84.00 $77.00 $70.00 $62.004 Usage Charge ($/hcf) $1.32 $2.64 $4.14 $5.74 $7.535 Usage Charge ($/gal) $0.00176 $0.00352 $0.00552 $0.00765 $0.0100467 Sample Bill Impacts (monthly) Current FY2015-16 FY2016-17 FY2017-18 FY2018-198 Low Water User - 4,500 gal./mo.9 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.00
10 Usage Charge $7.92 $15.84 $24.84 $34.44 $45.1811 Total Monthly Water Bill $97.48 $99.84 $101.84 $104.44 $107.1812 $ incr $2.36 $2.00 $2.60 $2.7413 % incr 2.4% 2.0% 2.6% 2.6%1415 Med. Water User - 9,750 gal./mo.16 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0017 Usage Charge $17.16 $34.32 $53.82 $74.62 $97.8918 Total Monthly Water Bill $106.72 $118.32 $130.82 $144.62 $159.8919 $ incr $11.60 $12.50 $13.80 $15.2720 % incr 10.9% 10.6% 10.5% 10.6%2122 High Water User - 22,500 gal./mo.23 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0024 Usage Charge $39.60 $79.20 $124.20 $172.20 $225.9025 Total Monthly Water Bill $129.16 $163.20 $201.20 $242.20 $287.9026 $ incr $34.04 $38.00 $41.00 $45.7027 % incr 26.4% 23.3% 20.4% 18.9%28
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Range of Bill Impacts: Alt #1• FY2015-16 average bill impacts
• Bills vary month-to-month based on actual usage• 52.4% of bills will see no more than a $5 increase• When any resident uses less than 3,150 gallons in a month,
their bill will be less
• Similar $/mo. Increases: effective July 1, 2016; July 1, 2017; and, July 1, 2018
Cumulative% of bills
0.1 to 4.2 50 to 3,150 22.8% 22.8% ($5.43) to ($0.02) -6.1% to 0.0%4.3 to 7.9 3,151 to 5,925 29.6% 52.4% $0.12 to $4.87 0.1% to 4.9%8.0 to 11.9 5,926 to 8,925 18.0% 70.4% $5.00 to $10.15 5.0% to 9.6%
12.0 to 19.9 8,926 to 14,925 18.3% 88.8% $10.28 to $20.44 9.8% to 17.7%20.0 to 29.9 14,926 to 22,425 6.5% 95.3% $21.10 to $33.25 18.2% to 25.9%30.0 to 39.9 22,426 to 29,925 2.7% 97.9% $34.17 to $44.73 26.4% to 32.0%40.0 to 60.0 29,926 to 45,000 2.1% 100.0% $56.74 to $70.21 37.4% to 42.5%
100.0%
hcf/mo gallons per month $ Impact % ImpactRange of Usage (monthly) %
of billsMonthly Bill Increase/(Decrease)
Western Hills Water District Water Rate UpdateBoard Meeting
HF&H Consultants, LLC 18
November 4, 2015
Rates and Sample Bills (Water Only): Alt. #2
• $46,000 annual contribution to reserves
• Reduced fixed service charge phased-in over 4 years
• Usage rate increase phased-in over 4 years
• Note: In addition, residents pay a monthly storm drain and sewer charge
• Sewer = $55.79/mo• Storm Drain = $5.00/mo
A B C D E F1 Alt. # 2: 4-Year Phase-in WITH Contribution to Reserves2 Rates Current FY2015-16 FY2016-17 FY2017-18 FY2018-193 Fixed Charge ($/Month) $89.56 $84.00 $77.00 $70.00 $62.004 Usage Charge ($/hcf) $1.32 $2.76 $4.41 $6.19 $8.195 Usage Charge ($/gal) $0.00176 $0.00367 $0.00588 $0.00825 $0.0109267 Sample Bill Impacts (monthly) Current FY2015-16 FY2016-17 FY2017-18 FY2018-198 Low Water User - 4,500 gal./mo.9 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.00
10 Usage Charge $7.92 $16.53 $26.44 $37.12 $49.1511 Total Monthly Water Bill $97.48 $100.53 $103.44 $107.12 $111.1512 $ incr $3.05 $2.91 $3.68 $4.0213 % incr 3.1% 2.9% 3.6% 3.8%1415 Med. Water User - 9,750 gal./mo.16 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0017 Usage Charge $17.16 $35.82 $57.29 $80.44 $106.4818 Total Monthly Water Bill $106.72 $119.82 $134.29 $150.44 $168.4819 $ incr $13.10 $14.47 $16.15 $18.0520 % incr 12.3% 12.1% 12.0% 12.0%2122 High Water User - 22,500 gal./mo.23 Fixed Charge $89.56 $84.00 $77.00 $70.00 $62.0024 Usage Charge $39.60 $82.67 $132.21 $185.62 $245.7325 Total Monthly Water Bill $129.16 $166.67 $209.21 $255.62 $307.7326 $ incr $37.51 $42.54 $46.42 $52.1127 % incr 29.0% 25.5% 22.2% 20.4%28
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Range of Bill Impacts: Alt #2• FY2015-16 average bill impacts
• Bills vary month-to-month based on actual usage• 48.2% of bills will see no more than a $5 increase• When any resident uses less than 2,850 gallons in a month,
their bill will be less
• Similar $/mo. Increases: effective July 1, 2016; July 1, 2017; and, July 1, 2018
Cumulative% of bills
0.1 to 3.8 50 to 2,850 19.8% 19.8% ($5.42) to ($0.10) -6.0% to 0.5%3.9 to 7.3 2,851 to 5,475 28.4% 48.2% $0.04 to $4.92 0.6% to 5.8%7.4 to 11.9 5,476 to 8,925 22.2% 70.4% $5.06 to $11.52 5.9% to 10.9%
12.0 to 19.9 8,926 to 14,925 18.3% 88.8% $11.67 to $22.72 11.1% to 19.7%20.0 to 29.9 14,926 to 22,425 6.5% 95.3% $23.44 to $36.65 20.2% to 28.5%30.0 to 39.9 22,426 to 29,925 2.7% 97.9% $37.65 to $49.14 29.1% to 35.1%40.0 to 60.0 29,926 to 45,000 2.1% 100.0% $62.20 to $76.84 41.0% to 46.5%
100.0%
Range of Usage (monthly) % of bills
Monthly Bill Increase/(Decrease)hcf/mo gallons per month $ Impact % Impact
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
Summary
• Current rate revenue is less than the cost of service.• Current rate structure does not reflect industry standards.
– Service and usage charges could be aligned closer to cost structure
• Rate structure modifications can be gradually made in conjunction with rate increases over a period of time.
Western Hills Water District Water Rate UpdateBoard Meeting
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November 4, 2015
QUESTIONS & DISCUSSION
HF&H Consultants, LLC
201 N. Civic Drive, Suite 230, Walnut Creek, CA 94596 925-977-6950
John Farnkopf Rick Simonson
Senior Vice President Vice President