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Home My WebLink AboutStaff Report 10.A 01/22/200710.A January 22, 2007 CITY OF PETALUMA, CALIFORNIA AGENDA BILL Agenda Title: Public Hearing on Wastewater and Water Service Charges: A) A Resolution of the City Council of the City of Petaluma Adopting A New Rate Schedule for Water Service and Rescinding Resolution No. 2002- 191, B) A Resolution of the City Council of the City of Petaluma Adopting A New Rate Schedule For Wastewater Service and Rescinding Resolution No. 2002-189 Meeting Date: January 22, 2007 Meeting Time: 3:00 PM 7:00 PM Category: Presentation Consent Calendar Public Hearing Unfinished Business New Business Department: Water Resources & Conservation Director: Michael Ban, P.E. Contact Person: Michael Ban, P.E. Phone Number: 778-4487 Cost of Proposal: N/A Amount Budgeted: N/A Account Number: N/A Name of Fund: Water and Wastewater Enterprise Funds Attachments to Agenda Packet Item: ⋅ Agenda Report ⋅ Resolution Adopting Water Revenue Program ⋅ Resolution Adopting Wastewater Revenue Program ⋅ Attachment A – Alternative 1A 1-Year Program Model Runs ⋅ Attachment B – Alternative 1B 2-Year Program Model Runs ⋅ Attachment C – Alternative 2 5-Year Program Model Runs ⋅ Attachment D – Agenda Report for Public Hearing of December 18, 2006 Summary Statement: Significant investment in the City’s infrastructure is necessary to address the deterioration of the City’s water and wastewater utilities, to comply with increasing strict regulatory requirements, and to continue providing water quality and protection of the environment. A comprehensive analysis of the City’s Water and Wastewater Funds determined the current revenue programs do not sufficiently support needed investment in the utilities. The City Council considered and discussed the proposed water and wastewater revenue programs on October 16, December 4 and 18, 2006. In response to the Council discussion on December 18th, this Agenda Report presents three alternative revenue programs: Alternative 1A – 1 Year Program, Alternative 1B – 2 Year Program, and Alternative 2 – 5 Year Program. Recommended City Council Action/Suggested Motion: City Management recommends the City Council fully fund the utility investment programs effective February 1, 2007, as described in Alternative 2 – 5 Year Program. This investment program will support continued protection of public health and the environment, will remain competitive with nearby communities, and will support the City’s ability to meet governmental regulatory requirements. The General Fund CIP overhead for this program is set at $0 for FY 06-07 through FY 13-14. Reviewed by Admin Svs. Dir. Reviewed by City Attorney: 2 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc CITY OF PETALUMA, CALIFORNIA JANUARY 22, 2007 AGENDA REPORT FOR PUBLIC HEARING ON WASTEWATER AND WATER SERVICE CHARGES: A) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA ADOPTING A NEW RATE SCHEDULE FOR WATER SERVICE AND RESCINDING RESOLUTION NO. 2002-191 B) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA ADOPTING A NEW RATE SCHEDULE FOR WASTEWATER SERVICE AND RESCINDING RESOLUTION NO. 2002-189 1. EXECUTIVE SUMMARY: Significant investment in the City’s infrastructure is necessary to address the deterioration of the City’s water and wastewater utilities, to comply with increasing strict regulatory requirements, and to continue providing water quality and protection of the environment. A comprehensive analysis of the City’s Water and Wastewater Funds determined the current revenue programs do not sufficiently support needed investment in the utilities. The City Council considered and discussed the proposed water and wastewater revenue programs on October 16, December 4 and 18, 2006. In response to the Council discussion on December 18th, this Agenda Report presents three alternative revenue programs: Alternative 1A – 1 Year Program, Alternative 1B – 2 Year Program, and Alternative 2 – 5 Year Program. City Management recommends the City Council fully fund the utility investment programs effective February 1, 2007, as described in Alternative 2 – 5 Year Program. This investment program will support continued protection of public health and the environment, will remain competitive with nearby communities, and will support the City’s ability to meet governmental regulatory requirements. The General Fund CIP overhead for this program is set at $0 for FY 06-07 through FY 13-14. 2. BACKGROUND: INTRODUCTION 3 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc As in most cities, the City of Petaluma’s Water Resources & Conservation Department is operated on an enterprise basis with expenses and revenues accounted for separately from the City’s general and other funds. The wastewater and water utility enterprises must receive sufficient total revenue to ensure the proper operation and maintenance of the department as well as preserve the financial integrity of the utility and the fund. The City conducted an extensive analysis of the utility’s revenue programs and presented the results of the analysis at the October 16, 2006 Petaluma City Council meeting. On October 19, 2006 the City sent notices of the proposed revenue programs and the public hearing to record owners of properties that would be impacted by the proposed changes in accordance with Proposition 218. In some cases, tenants are responsible for the water bill, not the property owner. To inform these customers, the City also sent notices to all customers who receive a utility bill from the City. This notification is not required by Proposition 218. The City published a notice on the proposed revenue programs and the public hearing in the November 1, 2006 edition of the Petaluma Argus Courier, and posted a notice on the City’s website. The City Council conducted public hearings on December 4th and 18th. WATER UTILITY FINANCIAL ANALYSIS The following factors were considered in the revenue program analysis: ⋅ Operating Expenses. Total operating expenses (before debt service) for the year ending June 30, 2006 were $7.4 million, with another $1.7 million in intragovernmental transfers to the General Fund. Capital improvement expenses were $2,860,000, and $46,000 in General Fund CIP overhead, for a total expense of $2.9 million1. General Fund CIP overhead was set at $0 for FY 06-07 through FY 13-14. ⋅ Agency Water Purchases. The City of Petaluma’s cost to purchase water from the Sonoma County Water Agency comprises 40% of the cost of water the City charges to the average single family residential customer. The cost of Agency water has increased an average of 5% per year over the last six years. 1 Includes non-replacement capital improvement expenditures of $860,000, and replacement, or maintenance related, capital expenditures of $2 million. 4 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc ⋅ Reserves. It is recommended the City maintain a prudent operations and maintenance reserve of approximately $1.6 million, as well as a capital replacement and improvement reserve of approximately $600,000. ⋅ Capital Improvements. Planned capital improvements include the 1.7 million gallon Paula Lane Storage Reservoir No. 2 to boost the City’s storage capacity, with an estimated construction cost of $2 million, and installation of automatic read meters (ARM). Installation of ARM will support monthly utility billing, reduce lost water due to customer leakage, identify customer leaks in a more timely manner, reduce delinquent bills, and improve the City’s ability to provide immediate and accurate responses to meter reading and customer billing questions. ⋅ Maintenance. The plan includes boosting investment in the City’s annual water main and service replacement program from the current spending level of $500,000 per year to $1 million per year. This is necessary to keep up with the rate of system deterioration. ⋅ Financing. The City anticipates selling water revenue bonds in early 2007 to fund construction of the Paula Lane Reservoir No. 2, increase water main and service replacement investments, and the installation of automatic read meters. The size of the issue would be approximately $6.5 million. The sale of these bonds is contingent on passing new rates effective February 1, 2007. WASTEWATER FINANCIAL ANALYSIS The following factors were considered in the wastewater revenue program analysis: ⋅ Operating and Capital Expenses. Total operating expenses (before debt service) for the year ending June 30, 2006, were $7.1 million, and intragovernmental transfers to the General Fund totaled $1.2 million. Capital expenses were $26.8 million, and $1.3 million in General Fund CIP overhead, for a total expense of $28.1 million2. General Fund CIP overhead was set at $0 for FY 06-07 through FY 13-14. ⋅ Reserves. It is recommended the City maintain a prudent operating reserve of approximately $1.6 million and a capital reserve of $1 million. 2 Includes non-replacement capital expenses of $26.2 million, and replacement, or maintenance-related capital expenses, of $647,000. 5 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc ⋅ Capital Improvements. The wastewater enterprise is currently in the midst of an extensive capital improvement program. Construction of the Ellis Creek Water Recycling Facility (WRF) began in October 2005 and is scheduled to be completed in 2009. Total project costs are expected to approach $150 million during that time. The addition of SCADA for the Ellis Creek WRF, further recycled water improvements (Phase II) and demolition of the Hopper Wastewater Treatment Facility in 2009/10 will add another $20 million in project costs. All told, the city plans to invest upwards of $170 million in non-replacement capital projects between 2005/2006 and 2010/2011. ⋅ Financing. The City is expecting to finance almost 100% of the planned capital improvements. The City has funding from its State Revolving Fund (SRF) loan available for approximately $125 million of the Ellis Creek project costs3. This funding can be drawn on at a rate of $25 million per year. The balance of capital project costs above this amount will be paid (at least in the interim) by a variable rate line of credit secured in 2005. The City expects to issue two different series of revenue bonds over the next five years. The first, in late fiscal 2006/07 and the second in 2010/11, will be sized at $9.9 and $30.5 million respectively. By 2011/12, when SRF payments are first due, the total combined debt service for these three new issues will total approximately $11.3 million. Additionally, as a condition of its SRF loan, the City must also form a replacement and rehabilitation reserve for the Ellis Creek facility, and fund that with approximately $690,000 per year4. All told, the City can expect to meet no less than $12.0 million in new debt service by 2011/12. Put in perspective, the wastewater enterprise will be required to almost double its total revenues by that time. 3. ALTERNATIVES: Alternatives available for investment in the water and wastewater utilities include: 1. Alternative 1 – Initiate Utility Investment Program 2. Alternative 2 – Fully Fund Utility Investment Program The rates proposed for each alternative become effective February 1, 2007. Should funding of the proposed utility investment program be delayed beyond February 1, 2007, it will require future rate adjustments to be higher than proposed in this Agenda Report, and are dependent on when the programs become effective. 3 The State Revolving Fund (SRF) loan will save the City $60 million in interest costs versus conventional private financing. Another benefit is loan repayments do not begin until 1 year after construction is finished. 4 This fund is not an annual recurring fund, and is not designed to fund replacement of the Ellis Creek Water Recycling Facility. It is designed to establish a prudent equipment replacement and maintenance fund. 6 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Alternative 1 – Initiate Utility Investment Program There are two sub-alternatives for this program Alternative 1A – 1 Year Program Alternative 1B – 2 Year Program Alternative 1A - Water Utility (1 Year Program) This alternative provides the water revenue necessary to fund the first year of the proposed utility investment program. The proposed water rates are shown in Table 1. The first rate adjustment would become effective February 1, 2007. Table 1: Proposed Water Rates - 1 Year Program Type of Charge 1-Feb-07 Monthly Service Charges ($/mo) 5/8” 4.47 ¾” 4.47 1” (residential) 5.37 1” 5.55 1.5" 9.24 2” 13.84 3” 26.73 4” 36.00 6” 52.00 Consumption Charges ($/hcf) Single Family Residential (monthly) Tier 1 (0-9 hcf) $2.31 Tier 2 (10-18 hcf) $2.61 Tier 3 ( 19-24 hcf) $3.00 Tier 4 (25+ hcf) $3.24 Multi-Unit Residential, Business, Industrial, Public $2.44 The water fund projections for this alternative are illustrated in Chart 1. This chart shows the City would not be able to meet its debt covenant by FY 07-085. This chart also shows the fund balance would be less than $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. 5 The City’s debt agreement stipulates that the net revenues of the utility be sufficient to yield at least 125 percent of the principal of and interest on the outstanding bonds payable from the net revenues of the utility during each fiscal year. 7 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 1: Water Fund Projections 1 Year Program -5,000,000 0 5,000,000 10,000,000 15,000,000 20,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 (D e b t C o v e r a g e ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Debt Agreement Violated Alternative 1A – Wastewater Utility (1 Year Program) This alternative provides the wastewater revenue necessary to fund the first year of the proposed utility investment program. The proposed wastewater rates are shown in Table 2. The first rate adjustment would become effective February 1, 2007. 8 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 2: Proposed Wastewater Rates – 1 Year Program Type of Charge 1-Feb-07 Fixed monthly charge ($/mo.) Single-Family Residential $10.29 Multi-Unit Residential, per dwelling unit $10.29 Unmetered Residential, per dwelling unit $49.96 Commercial Low-Strength $10.29 Medium-Strength $10.29 High-Strength $10.29 Metered Industrial Users $10.29 Variable charge ($/hcf) Single-Family Residential $4.88 Multi-Unit Residential $4.88 Commercial Low-Strength $4.86 Medium-Strength $5.78 High-Strength $7.48 Metered Industrial Users Flow ($/hcf) $3.62 BOD ($/lb) $0.35 TSS ($/lb) $0.38 The wastewater fund projections are illustrated in Chart 2. This chart shows the City would not be able to meet its debt covenant by FY 09-10. This chart also shows the fund balance would be less than $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. The water and wastewater model runs for Alternative 1A are provided in Attachment A. 9 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 2: Wastewater Fund Projections 1 Year Program (5,000,000) - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 (D e b t C o v e r a g e ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Debt Agreement Violated Alternative 1B - Water Utility (2 Year Program) This alternative provides the revenue program necessary to fund the first two years of the proposed utility investment. The proposed water rates are shown in Table 3. The first rate adjustment would become effective February 1, 2007, followed by a second rate adjustment in January 2008. 10 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 3: Proposed Water Rates - 2 Year Program Type of Charge 1-Feb-07 1-Jan-08 Monthly Service Charges ($/mo) 5/8” 4.47 4.92 ¾” 4.47 4.92 1” (residential) 5.37 5.91 1” 5.55 6.11 1.5" 9.24 10.72 2” 13.84 16.05 3” 26.73 33.14 4” 36.00 44.64 6” 52.00 64.48 Consumption Charges ($/hcf) Single Family Residential (monthly) Tier 1 (0-9 hcf) $2.31 $2.50 Tier 2 (10-18 hcf) $2.61 $2.87 Tier 3 ( 19-24 hcf) $3.00 $3.39 Tier 4 (25+ hcf) $3.24 $3.75 Multi-Unit Residential, Business, Industrial, Public $2.44 $2.64 The water fund projections are illustrated in Chart 3. This chart shows the City would not be able to meet its debt covenant by FY 10-11. This chart also shows the fund balance would be less than $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. 11 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 3: Water Fund Projections 2 Year Program -5,000,000 0 5,000,000 10,000,000 15,000,000 20,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) 0.00 0.50 1.00 1.50 2.00 2.50 (D e b t C o v e r a g e ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Debt Agreement Violated Alternative 1B – Wastewater Utility (2 Year Program) This alternative provides the wastewater revenue necessary to fund the first two years of the proposed utility investment program. The proposed wastewater rates are shown in Table 4. The first rate adjustment would become effective February 1, 2007, followed by a second adjustment in January 2008. 12 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 4: Proposed Wastewater Rates - 2 Year Program Type of Charge 1-Feb-07 1-Jan-08 Fixed monthly charge ($/mo.) Single-Family Residential $10.29 $11.63 Multi-Unit Residential, per dwelling unit $10.29 $11.63 Unmetered Residential, per dwelling unit $49.96 $56.45 Commercial Low-Strength $10.29 $11.63 Medium-Strength $10.29 $11.63 High-Strength $10.29 $11.63 Metered Industrial Users $10.29 $11.63 Variable charge ($/hcf) Single-Family Residential $4.88 $5.51 Multi-Unit Residential $4.88 $5.51 Commercial Low-Strength $4.86 $5.49 Medium-Strength $5.78 $6.53 High-Strength $7.48 $8.45 Metered Industrial Users Flow ($/hcf) $3.62 $4.09 BOD ($/lb) $0.35 $0.40 TSS ($/lb) $0.38 $0.43 The wastewater fund projections are illustrated in Chart 4. This chart shows the City would not be able to meet its debt covenant by FY 09-10. This chart also shows the fund balance would be less than $0 in FY 10-11. Additional revenue would be necessary to prevent these consequences from occurring. The water and wastewater model runs for Alternative 1B are provided in Attachment B. 13 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 4: Wastewater Fund Projections 2 Year Program (5,000,000) - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 (D e b t C o v e r a g e ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Debt Agreement Violated Alternative 2 – Fully Fund Utility Investment Program Water Utility (5 Year Program) This alternative provides the water revenue necessary to fully fund the proposed utility investment program. The proposed water rates are shown in Table 5. The first rate adjustment would become effective February 1, 2007. 14 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 5: Proposed Water Rates Type of Charge 1-Feb-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11 Monthly Service Charges ($/mo) 5/8” 4.47 4.92 5.17 5.42 5.69 ¾” 4.47 4.92 5.17 5.42 5.69 1” (residential) 5.37 5.91 6.20 6.51 6.84 1” 5.55 6.11 6.41 6.73 7.07 1.5" 9.24 10.72 11.25 11.81 12.40 2” 13.84 16.05 17.65 18.54 19.46 3” 26.73 33.14 36.45 38.27 40.19 4” 36.00 44.64 49.10 51.55 54.13 6” 52.00 64.48 70.92 74.47 78.19 Consumption Charges ($/hcf) Single Family Residential (monthly) Tier 1 (0-9 hcf) $2.31 $2.50 $2.70 $2.83 $2.94 Tier 2 (10-18 hcf) $2.61 $2.87 $3.10 $3.25 $3.41 Tier 3 ( 19-24 hcf) $3.00 $3.39 $3.73 $4.07 $4.35 Tier 4 (25+ hcf) $3.24 $3.75 $4.13 $4.50 $4.82 Multi-Unit Residential, Business, Industrial, Public $2.44 $2.64 $2.80 $2.96 $3.14 The water fund projections are illustrated in Chart 5. This chart shows the revenue program adequately provides for ongoing costs and debt service. 15 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 5: Water Fund Projections 5 Year Program 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 (D e b t C o v e r a g e ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Actual Debt Coverage Required Debt Coverage Wastewater Utility (5 Year Program) This alternative provides the revenue necessary to fully fund the proposed utility investment program. The proposed wastewater rates are shown in Table 6. The first rate adjustment would become effective February 1, 2007. 16 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 6: Proposed Wastewater Rates - 5 Year Program Type of Charge 1-Feb- 07 1-Jan- 08 1-Jan- 09 1-Jan- 10 1-Jan-11 Fixed monthly charge ($/mo.) Single-Family Residential $10.29 $11.63 $13.14 $14.85 $16.78 Multi-Unit Residential, per dwelling unit $10.29 $11.63 $13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit $49.96 $56.45 $63.79 $72.08 $81.45 Commercial Low-Strength $10.29 $11.63 $13.14 $14.85 $16.78 Medium-Strength $10.29 $11.63 $13.14 $14.85 $16.78 High-Strength $10.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users $10.29 $11.63 $13.14 $14.85 $16.78 Variable charge ($/hcf) Single-Family Residential $4.88 $5.51 $6.23 $7.04 $7.96 Multi-Unit Residential $4.88 $5.51 $6.23 $7.04 $7.96 Commercial Low-Strength $4.86 $5.49 $6.20 $7.01 $7.92 Medium-Strength $5.78 $6.53 $7.38 $8.34 $9.42 High-Strength $7.48 $8.45 $9.55 $10.79 $12.19 Metered Industrial Users Flow ($/hcf) $3.62 $4.09 $4.62 $5.22 $5.90 BOD ($/lb) $0.35 $0.40 $0.45 $0.51 $0.57 TSS ($/lb) $0.38 $0.43 $0.49 $0.55 $0.63 The wastewater fund projections are illustrated in Chart 6. This chart shows the revenue program adequately provides for ongoing costs and debt service. The water and wastewater model runs for Alternative 2 are provided in Attachment C. 17 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 6: Wastewater Fund Projections 5 Year Program - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ($ D o l l a r s ) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 (D e b t C o v e r a g e R a t i o ) Total Operating Expenses CIP/Debt Service Expenses Operating Revenue (using rate increases) Actual Debt Coverage Required Debt Coverage 4. FINANCIAL IMPACTS: An increase in annual water revenues of approximately $800,000 is necessary to support needed investments in the water utility. Over the next five years, the City will make significant, long-term investments in its wastewater utility, including construction of the Ellis Creek Water Recycling Facility. To support these investments, annual wastewater revenues need to increase by approximately $2.4 million. 5. CONCLUSION: The current utility revenue programs are not sufficient to support needed long-term investments in the City’s water utilities. 6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR COMPLETION: Continued prudent investment in the City’s water utilities. 18 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc 7. RECOMMENDATION: Alternative 1 – Initiate Utility Investment Program gets the City on the path towards prudent utility investment, but is not sufficient to meet the needed program. The 1 Year Program envisioned in Alternative 1A is particularly problematic in that it places the City at risk for not meeting its expenditures and its debt obligations. For these reasons, City Management does not recommend Alternative 1A. City Management recommends the City Council fully fund the utility investment program as described in Alternative 2. This alternative provides the following benefits: 1. Provides 60-day operations and maintenance reserve fund. 2. Meets the target capital replacement and reserve fund. 3. Meets the debt obligation which requires the City to maintain net revenues of the utility sufficient to yield at least 125 percent of the principal of and interest on the outstanding bonds payable from the net revenues of the utility during each fiscal year. 4. Adequately provides for ongoing costs and debt service. The water and wastewater resolutions supporting this recommendation are attached. Charts 7 and 8 illustrate the proposed rates for Petaluma in relation to the rates of nearby cities and special purpose districts. This comparison is a useful resource for benchmarking the City’s current and proposed revenue programs with those of surrounding agencies. It should be noted, however, that the rates of the neighboring communities are expected to increase during the study period, which is not reflected on these charts. In order to better understand how the recommended revenue program will impact water and wastewater bills, we have calculated projected charges for sample customers to show how the bills may change from one year to the next. We developed three hypothetical residential customers: a “low” user; an “average” user; and a “high” user. We also calculated projected charges for an apartment building, an office building and a restaurant. The water bill projections are illustrated in Table 7. The wastewater projections are provided in Table 8. 19 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 7: Monthly Water Residential Rate Comparison $47.39 $42.37 $40.74 $38.95$38.72$37.76 $35.99$34.70 $33.09 $30.13 $27.20 $19.91 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 Windsor North Marin Petaluma (2006) 2007 Santa Rosa 2008 Cotati 2009 Sonoma R. Park (4/07) MMWD H-burg 20 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Chart 8: Monthly Wastewater Residential Rate Comparison $70.81 $67.88 $65.19$64.38$63.00 $55.75 $49.34 $45.75$43.66$43.06 $28.50 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 Novato Windsor Petaluma (2006) Sonoma 2007 2008 2009 R. Park S. Rosa Healdsburg Cotati 21 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Table 7: Projected Water Charges for Sample Customers (5-Year Program) Estimated Monthly Bill Amount Type of Customer Average Annual Monthly Water Use (hcf) Current Monthly Water Bill Feb-07 Jan-08 Jan-09 Jan-10 Jan-11 Low - Single Family Residential 8 $21.07 $22.96 $24.89 $26.73 $28.07 $29.25 Avg. - Single Family Residential 12 $30.13 $33.09 $35.99 $38.72 $40.65 $42.43 High - Single Family Residential 18 $44.35 $48.73 $53.19 $57.30 $60.17 $62.92 Very High - Single Family Residential 50 $125.95 $150.89 $171.15 $187.06 $201.60 $214.25 20-unit Apartment Building - 2" meter 65 $145.53 $172.61 $187.52 $199.41 $211.20 $223.69 Office Building - 2" meter 58 $131.04 $155.51 $169.05 $179.84 $190.45 $201.69 Restaurant - 1" meter 55 $124.83 $148.18 $161.14 $171.45 $181.56 $192.27 Table 8: Projected Wastewater Charges For Sample Customers (5-Year Program) Estimated Monthly Bill Amount Type of Customer Average Monthly Wastewater Use (hcf) Current Monthly Wastewater Bill Feb-07 Jan-08 Jan-09 Jan-10 Jan-11 Low - Single Family Residential 5 $30.71 $34.70 $39.21 $44.30 $50.06 $56.57 Avg. - Single Family Residential 8 $43.66 $49.34 $55.75 $63.00 $71.19 $80.44 High - Single Family Residential 13 $65.26 $73.74 $83.33 $94.16 $106.40 $120.23 20-unit Apartment Building - 2" meter 65 $462.94 $523.12 $591.12 $667.97 $754.80 $852.93 Office Building - 2" meter 58 $258.39 $291.99 $329.94 $372.84 $421.30 $476.07 Restaurant - 1" meter 55 $372.99 $421.48 $476.27 $538.19 $608.15 $687.21 22 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc RESOLUTION ADOPTING WATER REVENUE PROGRAM 23 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA ADOPTING A NEW RATE SCHEDULE FOR WATER SERVICE AND RESCINDING RESOLUTION NO. 2002-191 WHEREAS, the Petaluma Municipal Code Title 15 provides for the establishment and operation of a water system and the charging of certain fees and charges; and WHEREAS, Chapter 15.16 provides the setting of certain fees and charges by resolution; and WHEREAS, water services provided by the City include, but are not limited to, pumping, storage, and distribution of water purchased from the Sonoma County Water Agency and pumping, storage and distribution of groundwater; and WHEREAS, the City retained Bartle Wells Associates to develop a Wastewater and Water Rate Study and Financial Plan (“Study”); and WHEREAS, the Petaluma City Council conducted a public meeting on the proposed rates pursuant to the Study on October 16, 2006; and WHEREAS, notices of proposed rate increases and the public hearing were sent to record owners of properties that would be impacted by the proposed increases on October 19, 2006; and WHEREAS, a notice on the proposed rates increases and the public hearing was published in the Petaluma Argus Courier on November 1, 2006; and WHEREAS, the Petaluma City Council conducted public hearings on the proposed rate increases on December 4, 2006, December 18, 2006, and January 22, 2007, and received testimony and considered all evidence presented regarding the proposed rate increases; and WHEREAS, a majority of the record owners of properties that would be impacted by the rate increases did not protest the increases; and WHEREAS, after due consideration, the Petaluma City Council finds based on the Study that: (1) That the proposed rates as presented herein are necessary to achieve full recovery of the costs of providing water services to residents and businesses in Petaluma; (2) That the proposed rates as presented herein will not generate revenue in excess of the cost of providing water services; 24 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc (3) That the proposed rates as presented herein will not be used for purposes other than providing water services; (4) That the rates or charges imposed on any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel; (5) That proper notice of the proposed rate increases were given to record owners of properties that would be impacted by the proposed increases, as prescribed by law; and (6) That a majority of record owners of properties that would be impacted by the proposed increases did not protest the proposed rate increases; and WHEREAS, adoption of revised rates and charges pursuant to this resolution involves the establishment, modification, restructuring or approval of rates and charges, as identified and analyzed in the Study, including rates and charges to obtain funds for meeting operating expenses, purchasing or leasing supplies, equipment or materials, meeting financial reserve needs and requirements and/or obtaining funds for capital projects necessary to maintain service within existing service areas. Therefore, adoption of this resolution setting rates and charges is not a project under the California Environmental Quality Act pursuant to California Public Resources Code Section 21080(b)(8)(D) and 14 Cal. Code Regs. Section 15273. NOW, THEREFORE, BE IT RESOLVED, that the Petaluma City Council hereby rescinds Resolution 2002-191 and adopts this resolution in its stead, effective February 1, 2007. ARTICLE I GENERAL SECTION 1.1 PURPOSE. (A) Findings. The above recitals are hereby declared to be true and correct and to be findings of the City Council of the City of Petaluma and are made a part of this resolution. (B) Revenue. The purpose of the water service charge is to raise revenue for the cost of operation and maintenance of the City of Petaluma’s water utility used for the distribution, pumping and storage of water and for payment of principal and interest on bonds and capital recovery costs. (C) Resolution. The purpose of this resolution is to establish a method of sharing the cost of the operation and maintenance of the City’s water utility among the users of water service. (D) Study. This resolution and the water charges established in this resolution are based on the Wastewater and Water Rate Study and Financial Plan prepared by Bartle Wells Associates (“Study”). The Study is attached to and made a part of this resolution as Exhibit A. ARTICLE II RATES SECTION 2.1 WATER SERVICE CHARGE. (A) Potable and Recycled Water. The monthly service charge for potable and recycled water6 shall be as set forth in Table 1. Table 1. Monthly Water Service Charges 6 This charge does not apply if superseded by a recycled water user agreement. 25 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Monthly Service Charge on Billings Rendered On or After the Dates Indicated Below Meter Size Feb. 1, 2007 January 1, 2008 January 1, 2009 January 1, 2010 January 1, 2011 5/8” $4.47 $4.92 $5.17 $5.42 $5.69 ¾” $4.47 $4.92 $5.17 $5.42 $5.69 1” (residential) $5.37 $5.91 $6.20 $6.51 $6.84 1” $5.55 $6.11 $6.41 $6.73 $7.07 1.5" $9.24 $10.72 $11.25 $11.81 $12.40 2” $13.84 $16.05 $17.65 $18.54 $19.46 3” $26.73 $33.14 $36.45 $38.27 $40.19 4” $36.00 $44.64 $49.10 $51.55 $54.13 6” $52.00 $64.48 $70.92 $74.47 $78.19 (B) Monthly Service Charge Annual Increases. Beginning January 1, 2012 and each January 1 thereafter, fixed monthly service charges shall increase by three and one-half percent (3.5%). Section 2.2 POTABLE WATER COMMODITY CHARGES. (A) Potable water commodity charges shall be as set forth in Table 2. Table 2. Potable Water Commodity Charges Commodity Charge on Billings Rendered On or After the Dates Indicated Below (per hcf) Tier or Customer Class Feb. 1, 2007 January 1, 2008 January 1, 2009 January 1, 2010 January 1, 2011 Single Family Residential (monthly) Tier 1 (0-9 hcf) $2.31 $2.50 $2.70 $2.83 $2.94 Tier 2 (10-18 hcf) $2.61 $2.87 $3.10 $3.25 $3.41 Tier 3 ( 19-24 hcf) $3.00 $3.39 $3.73 $4.07 $4.35 Tier 4 (25+ hcf) $3.24 $3.75 $4.13 $4.50 $4.82 Multi-Unit Residential, Business, Industrial, Public $2.44 $2.64 $2.80 $2.96 $3.14 (B) Potable Water Commodity Charges Annual Increases. Beginning January 1, 2012 and each January 1 thereafter, commodity charges shall increase by three and one-half percent (3.5%). SECTION 2.3 RECYCLED WATER COMMODITY CHARGES. The commodity charge for recycled water use shall be as shown in Table 3. Table 3. Recycled Water Commodity Charge 26 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Commodity Charge on Billings Rendered On or After the Dates Indicated Below (per hcf) Feb. 1, 2007 January 1, 2008 January 1, 2009 January 1, 2010 January 1, 2011 $1.46 $1.58 $1.68 $1.77 $1.88 SECTION 2.4 PRIVATE FIRE PROTECTION. (A) Private Fire Protection Services. For services used exclusively for fire protection, including sprinklers, private hydrants and other fire lines, the service charge shall be as follows: Connection Size (inches) Monthly Service Charge 1 ½ $3.90 2 $5.64 3 $8.40 4 $11.22 6 $16.80 8 $22.44 (B) Water Consumed for Fire Protection. In addition, all water consumed for private fire hydrant testing or fire suppression or other uses shall be charged to the property owner at the “business” commodity rate in Table 2. ARTICLE III OTHER CHARGES SECTION 3.1 DELINQUENCY AND SERVICE RESTORATION CHARGES. (A) Delinquency Charges. If payment is not made within thirty (30) days after mailing, it is delinquent, and a late charge of $10 will be levied. (B) Restoration Charges. When service is discontinued because of delinquency in payment of water bill, the service shall not be restored until all charges, including a restoration charge, have been paid. (1) Restoration Charge During Normal Working Hours (8:00 AM – 4:30 PM, Monday through Friday, excepting City holidays). The restoration charge applicable for work requested to be performed during normal working hours of the Department of Water Resources and Conservation will be $40. (2) Restoration Charge After Normal Working Hours. The restoration charge applicable for work requested to be performed after normal working hours will be $60. SECTION 3.2 CHARGE FOR RETURNED CHECKS. A fee of $25 shall be charged for each check tendered as a payment to the City that is returned from the bank for non-sufficient funds. SECTION 3.3 TURN-ON CHARGE FOR NEW ACCOUNTS. A charge of $15.00 shall be paid for turning on a service for new accounts during normal working hours. A charge of $60 shall be paid for turning on a service for new accounts after normal working hours. 27 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc SECTION 3.4 TEMPORARY WATER SERVICE CONNECTION. Wherever feasible, recycled water shall be used for temporary construction uses. (A) Meter Deposit. Deposits are required at the time of application. Lost meters will result in forfeiture of deposit. The deposit may be applied to the closing bill and any remaining amount refunded to the customer. (1) 1” or Smaller Service Meter. A deposit of $100 shall be required for a 1-inch or smaller service meter set at curb stop. (2) Bridge Meter. Bridge meters are used to “bridge” from the City’s water system to a project’s water system for the purpose of testing buried water infrastructure and for providing site water. A deposit of $600 shall be required for a bridge meter. (3) Fire Hydrant Meter. A deposit of $1,000 shall be required for a fire hydrant meter. (B) Service Charges. (1) 1” or Smaller Service Meter. A $1.00 per day service charge shall be applied for water service, irrespective of the quantity used. (2) Bridge Meter or Hydrant Meter. A $2.00 per day service charge shall be applied for water service, irrespective of the quantity used. (C) Commodity Charge. The potable water commodity charge shall be the same as the “business” class in Table 2. The recycled water commodity charge shall be as shown in Table 3. (D) Fees. Fees associated with temporary city meters are shown below. Description Fee First time meter set $45 Unable to set/test meter $30 Relocate meter $45 Rush meter set/relocate (if set/relocate request is within 24 hours of permit issuance or relocation request) $80 ARTICLE IV CITY PROVIDE SERVICES SECTION 4.1 CITY PROVIDED SERVICES. (A) Hot Taps. Hot tap fees shall be paid prior to service. Hot taps will be charged as follows: Size of Hot Tap (inches) Hot Tap Fee ¾ - 2 $200 4 – 6 $400 8 $500 10 – 12 $750 (B) Other Services. The City may install domestic or fire services, or provide other related services, upon request. The cost for each service will be based on an estimate prepared by the City. The requestor will provide a written request accompanied by a drawing to show the location of the proposed service. The City will provide an estimate to the requestor. When the check for the service is received from the requestor the work order will be forwarded to City crews for installation and coordination. Final costs will be based on actual time and materials costs plus a 20% administrative charge. 28 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc ARTICLE V PENALTY CHARGES SECTION 5.1 TAMPERING WITH CITY METERS. The charge for tampering with City meters or operating a meter valve is $50. SECTION 5.2 ILLEGAL OR UNAUTHORIZED USE OF FIRE HYDRANT. The fee for any illegal or unauthorized use of a City hydrant shall be $500 for each occurrence plus $50 for each additional day that such use occurs. ARTICLE VI SECURITY DEPOSITS SECTION 6.1 AMOUNT. The City may impose a security deposit of $100 to open an account or for instances of delinquent payments. SECTION 6.2 APPLICATION OF DEPOSIT. The City may apply the security deposit to an account owing to the City, which is delinquent for more than thirty days. SECTION 6.3 REFUND. Any amounts remaining in the security deposit will be returned to the customer without interest, upon termination of the service and payment of all charges, fees and indebtedness owed to the City by the customer. ARTICLE VII ADJUSTMENT OF BILLS SECTION 7.1 GENERAL. The City may, upon written request of a customer, supported by repair bills or other appropriate documentation, adjust such customer’s bill in the case of loss of water due to circumstances beyond the reasonable control of such customer, such as mechanical malfunction, blind leak, theft of water, vandalism, unexplained water loss or other unusual or emergency conditions. (A) Determination. A determination of whether an adjustment is granted shall be made at the sole discretion of the City. In making the determination, the City may take into account the cause of water loss, the customer’s opportunity, if any, to detect it, any negligence or fault of the customer in connection therewith, and the promptness with which the water loss was discovered, stopped and repairs made. SECTION 7.2 WATER BILL ADJUSTMENT. The customer’s adjusted bill shall be calculated as follows. (A) AVERAGE USAGE. The “average usage” shall equal the average used during the same period in the previous one or two years, whichever is available. If the applicant has not been a customer for a sufficient length of time to make such determination, then the amount of water used shall be at the discretion of the City. (B) EXCESS USAGE. From the total water consumption shown on the bill submitted for correction, the “average usage” will be deducted. The resulting amount is the “excess usage.” (C) APPLICABLE RATES. (1) Single Family Residential Customers. The regular rates will apply to the “average usage” and 50% of the Tier 1 rate will apply to the “excess usage.” The customer’s bill shall then be the total of the bill for the “average usage” amount plus the bill for the “excess usage” amount. The total of these two amounts will be the amount the customer must pay for water usage during the period covered by the adjusted bill. (2) Multi-Family Residential and Non-Residential Customers. The regular rates will apply to the “average usage” and 50% of the regular rate will apply to the “excess usage.” The 29 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc customer’s bill shall then be the total of the bill for the “average usage” amount plus the bill for the “excess usage” amount. The total of these two amounts will be the amount the customer must pay for water usage during the period covered by the adjusted bill. (D) LIMITATIONS. Water loss adjustments will be limited to two billing periods, and will also be limited to one adjustment every thirty-six months. The thirty-six month period begins the first month of the billing period following the last billing period for which the loss water adjustment was prepared. No adjustments will be made for water delivered after sixty days after the City issues the water bill with excessive use. (E) ADJUSTMENTS UNDER $10. No adjustments shall be made for an amount less than ten dollars ($10). SECTION 7.3 WASTEWATER BILL ADJUSTMENT. This section addresses adjustments to wastewater bills due to water loss. (A) SINGLE FAMILY RESIDENTIAL CUSTOMERS. Because wastewater charges for single family residential customers are based on average winter time water usage, water losses will not affect the wastewater charge unless they occur during the winter averaging period. If the adjustment to the water bill occurs during the wastewater winter average period, the wastewater winter average will be adjusted to the prior year’s winter average. If the customer has not established a wastewater winter average for the previous year, the winter average amount shall be as determined by the City. (B) Multi-Family Residential and Non-Residential Customers. (1) For Water Leaks That Occur Outdoors. If an adjustment is deemed appropriate for a water leak that occurs outdoors, the wastewater portion of the bill will be adjusted as follows: (i) First, the City will calculate “average usage.” The “average usage” shall equal the average used during the same period in the previous one or two years, whichever is available. If the applicant has not been a customer for a sufficient length of time to make such determination, then the amount of water used shall be at the discretion of the City. (ii) Then the “excess usage” portion of the wastewater bill will be calculated based on the customer’s water usage during leak period less “average usage.” The wastewater bill will then be reduced by the “excess usage” amount. (2) For Water Leaks That Occur Indoors. If an adjustment is deemed appropriate for a water leak that occurs indoors, the wastewater portion of the bill will be adjusted as follows: (i) First, the City will calculate “average usage.” The “average usage” shall equal the average used during the same period in the previous one or two years, whichever is available. If the applicant has not been a customer for a sufficient length of time to make such determination, then the amount of water used shall be at the discretion of the City. (ii) Then the “excess usage” portion of the wastewater bill will be calculated based on the customer’s water usage during leak period less “average usage.” The wastewater bill will then be reduced by 50% of the “excess usage” amount. For example, if the wastewater bill with excess usage is $150, and the wastewater bill based on prior use is $100, the difference is $50. 50% of the difference is $25. This example customer’s wastewater bill would then be reduced by $25. 30 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc EXHIBIT A TO RESOLUTION ADOPTING WATER REVENUE PROGRAM WATER & WASTEWATER RATE STUDY AND FINANCIAL PLAN 31 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc The City’s water resources rate structures were previously analyzed in 2001. The information from the 2001 analysis resulted in the following key changes to the rate structure: ⋅ To encourage water conservation, water rates were converted from a flat per unit rate structure to increasing block or tiered rates. ⋅ To encourage water conservation and provide better equity, residential wastewater charges were converted from a fixed monthly flat fee to a consumption charge, based on average winter-time water usage. The Department of Water Resources and Conservation engaged the services of Bartle Wells Associates (Berkeley, CA)7 to develop a wastewater and water rate study and financial plan. The rate study analyzed the approved budgets for FY 06-07, prior year revenue and expenditures, projected future revenue, and the projected future costs of operations and maintenance. The water and wastewater models are attached. Water Analysis Our goal was to build a comprehensive financial model along with water rate recommendations that allow the City to: • Meet current and future operating expenses of the utility; • Support the replacement and rehabilitation of existing infrastructure; • Support the construction of new capital facilities required for growth and expansion of the system; and • Where possible, minmize the impact of required rate adjustments on the City’s utility customers. Existing Rates and Charges The water enterprise bills customers bi-monthly. There are two components to water service charges. The City assesses a fixed, bi-monthly charge based on the size of the meter in service. For a typical single family dwelling with a 5/8” meter, this charge is currently $7.58 for two months of service. The City also assesses a variable, consumption-based charge for all water consumed by the customer. Customers are billed a quantity rate for each hundred cubic feet (hcf) consumed. For residential customers, these rates are “tiered” such that the cost of the first twenty units of water 7 BWA is a public finance consulting firm with over 40 years’ experience providing independent, objective financial advice to public agencies throughout California. 32 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc in a two month period are currently $2.16 per hcf, while the unit cost of the next thirty two units of water (up to 52 total hcf in two months) are billed at a quantity rate of $2.37 per hcf. All consumption above 52 hcf in a two month period is billed at a rate of $2.61 per hcf. Commercial customers pay one flat rate for all water consumed ($2.07). The City also assesses a one-time capacity charge (also known as a connnection fee) to new customers connecting to the water system. This fee is variable and is calculated seperately for each new connection. They vary based on whether or not the water infrastructure was City- or developer-provided. Water Enterprise Finances Revenues The City’s water enterprise generates the vast majority of its revenues from service charges and water sales. For the year ending June 30, 2006, the City collected approximately $8.5 million in water sales revenue and $900,000 in fixed monthly service charges. During the same time period, the City also collected approximately $1.1 million in water connection fees. This is significantly above the five-year average annual connection fee revenue collected, which is approximately $620,000. The balance of the water enterprise’s revenue comes from interest earnings and other miscellenous revenues. Expenses Operating expenses for the water enterprise include salaries and benefits for City staff, the cost of purchasing water, maintenance on water lines and connnections, and utilities for pumping and delivery of the water. The water enterprise also transfers a portion of its revenue to the City of Petaluma’s General Fund to cover its share of administrative and billing costs incurred by other city staff (such as in the utility billing office). Total operating expenses (before debt service) for the year ending June 30, 2006 were $7.4 million, with another $1.7 million in intragovernmental transfers to the General Fund. Debt The water enterprise issued bonds in 20018. Annual debt service on this issue is approximately $650,000, and there is approximately $9 million in principal outstanding. Debt covenants require that the City generate operating revenues in excess of expenses at least 1.25 this amount. The City is permitted to maintain a rate stabilization and debt service reserve fund for the purposes of meeting this coverage requirement. 8 Proceeds from the 2001 bonds were used for payment of prior bonds ($4.6 million), which had an uncompetitive interest rate, acquisition of property for the Paula Lane Reservoir No. 2 ($424,000), water main replacement projects ($2.2 million), and construction of the Water Field Office ($2.6 million). 33 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Notably, the City has been very close to missing its debt coverage requirements over the past two fiscal years. Net operating revenues have been insufficient to meet debt service, with coverage being met by the existence of sufficient operating reserves. Should the City wish to issue more debt in early 2007, rates would certainly have to be increased to meet this shortfall. Fund Reserves As of July 1, 2006, the water enterprise had approximately $2.6 million in its operating fund. This amount includes a 60-day operating and maintenance reserve of approximately $1.6 million and an emergency capital replacement and improvement reserve of approximately $600,000. The City does not, as of Oct 1, 2006, maintain a rate stabilization or debt service reserve, but there are plans to form one. Capital Program The water enterprise will incur capital costs associated with the construction of the Paula Lane Reservoir No. 2 in late 2006/07. Total design and construction costs are estimated at $2 million. The City is also planning to install automatic read meters for all customers over the next 5 to 7 years. It is estimated that this project will cost approximately $500,000 per year during that time. Additional capital costs include the annual repair and replacement of aging water mains. The City currently invests about $500,000 per year in its water main and service replacement program. In order to adequately maintain the City’s water infrastructure, this investment will increase to $1,000,000 per year. Future Debt The City anticipates selling water revenue bonds in early calendar year 2007 to fund construction of the reservoir, increase water main and service replacement investments, and the installation automatic read meters. The size of the issue would be approximately $6.5 million. The sale of these bonds is contingent on passing new rates effective January 1, 2007. Cash Flow Projection Bartle Wells developed a ten-year cash flow projection for the water enterprise. The projection allows us to determine if rate increases are needed to meet future operating expenses as well as the capital program, and if so, what the size of these rate increases would be. Our projections are built on a number of assumptions. Among them: 34 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc • Operating expenses are projected to increase 3.5% per year; • The City is expected to grow at an annual rate of .5%. This would add approximately 100 new water customers to the enterprise annually; • Annual connection fee revenue was estimated using the 5-year annual average; • The City is interested in increasing the number of water tiers from three to four in order to increase the conservation incentive of the rate structure. We have proposed that the City set these tiers at 0 – 18 hcf, 19 - 36 hcf, 37 – 48 hcf, and all use above 48 hcf for bi- monthly use, or 0 – 9 hcf, 10 – 18 hcf, 19 – 24 hcf, and all use above 24 hcf for monthly use. This effectively lowers the first tier by a small amount (from 20 hcf to 18 hcf) and ensures that more customers will be billed for water consumption in the third tier (for water use above 36 hcf). Additionally, the City is interested in “steepening” the tiers, that is, making the differences between each new tier larger. This would make the top tier water more expensive (relative to the lowest tier) than it is now. Taken together, both of these changes to the tier structures should serve to increase the incentive to conserve water. • Analysis of the fixed meter charge indicates that they are not currently in proportion with AWWA recommended meter ratios and demand factors. New meter charges should be phased in over three years to reduce or, if possible, eliminate these improper ratios. • With such a large portion (about 90%) of the water enterprises revenues coming from variable consumption water sales, it is particualrly important to verify estimates of the amount of water sold. Our revenue projections are based on total water use of 3.8 million hcf. This number is below the three-year average annual water sales and is chosen so as not to overestimate water sales revenue. • Our cash flow projection does not take into account a projected increase in the water connection fee that could take place in the next six to twelve months. The increase in this capacity fee is predicated on approval of the general plan and the projects included in it. While this plan would also require significant capital improvements above and beyond those currently included in this plan, the increased connection fee revenues would offset these additonal projects. Rate Recommendations Residential Our analysis demonstrates that the City will require a series of moderate, incremental rate increases for its residential customers over the next five years. These increases are needed to meet rising costs of operation, increased capital spending on the replacement of aging water mains (which will be funded by rates), and new debt service projected at $485,000 annually, starting in fiscal 2007/2008. 35 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Taken as a whole, the City needs to increase overall operating revenues somewhere between 14% and 16% between now and July 1, 2008. BWA has developed a rate schedule that allows the City to meet these revenue requirements while minimizing the impact of the increases on residents. It is recommended that the City pass two rate increases, one on January 1, 2007, and the second one year later, and that these rate increases be followed by a series of three smaller annual rate increases designed to allow the utility to keep up with cost inflation. The proposed water rate changes are illustrated in Table 1. Because the City uses a tiered water rate structure for its residential customers, the proposed rate increases will not affect all users uniformly. In fact, there is no way to put an exact percentage increase on each users bill. It will, by definition, vary according to how much water a consumer uses. However, because we have “steepened” the tiers, in general the highest residential water users will see the highest percentage increases. Low water users will see comparatively small increases. In order to better understand how these recommended rate increases will impact water bills, we have developed “composite” rate increase numbers to show how “average” single family residential bills will change from one year to the next. We developed three hypothetical customers: a “low” user who uses 8 hcf per monthly; an “average” user who uses 12 hcf per month; and a “high” user who uses 18 hcf per month. As illustrated in Table 2, in no year will an “average” customer of water experience more than a 10% rate increase. For the “average” customer, the annual water rate increases for the next 5 years would be 10%, 9%, 8%, 5%, and 4%. The impact of adding the fourth tier is evident in the “very high” customer’s bill, which will increase by 20% in 2007, as compared to the “low” customer’s anticipated increase of 9%. Commercial Commercial and mult-family residential customers are not billed in tiered rates; in addition to their bi-monthly meter charge, they pay one flat rate for all water consumed. This rate is currently $2.07, an amount below the first tier water price for residential customers ($2.16). City Management recommends that this quantity rate be increased to eliminate this “discounted” water; the proposed rate schedule includes an 18% increase for the quantity rate on January 1, 2007 for commercial customers. This puts commercial water between the first and second tier for single family residential users. City Management recommends that the commerical quantity rate stay between the first and second tier rate for residential users from this point forward. Sample commercial and multi-family water bills are illustrated in Table 2. Residential Charge Comparison 36 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc How do Petaluma’s current and proposed water service charges compare to other communities? This comparison is provided in Table 3. As shown in Table 3, Petaluma’s proposed rate for 2007 will remain less than average for the agencies included in the comparison. Wastewater Analysis The City engaged Bartle Wells Associates (BWA) to also develop a wastewater rate study and financing plan. The goal was to build a comprehensive financial model with rate recommendations that allow the City to: • Meet current and future operating expenses of the wastewater utility; • Support the replacement and rehabilitation of existing infrastructure; • Support the construction of new capital facilities, including the Ellis Creek Water Recycling Facility; and • Where possible, minimize the impact of required rate adjustments on rate payers. Existing Rates and Charges The wastewater enterprise bills customers bi-monthly. There are two components to each bill. The City assesses a fixed, monthly charge based on customer class (residential, commerical, industrial). This fixed charge is currently the same for all classes at $9.11 per month. The City also assesses a consumption-based charge for wastewater discharged to the collection and treatment system. Because wastewater connections themselves are not metered, this charge is based on water consumption. Customers are billed one fixed consumption amount for the entire year. The amount is set each July to equal the average winter usage of a customer during the past year. In this way, the utility is adjusting for water used for irrigation and other outdoor purposes that is not discharged to the sewer system. All residential users are billed a flat quantity rate for their wastewater discharge. These rates are not tiered. The current quantity rate is $4.32 per hundred cubic feet (hcf). Under the current rate structure, a single family residence that discharges 15 hcf per bi-monthly billing cycle to the sewer system would be billed $83.01 (2 x $9.11 + 15 x $4.32). Commercial customers are grouped into three classes, based on the strength of the wastewater discharged to the sewer system. Low strength users are billed at a quantity rate of $4.30 per hcf; medium strength users at a quantity rate of $5.11 per hcf; and high strength users are billed at a rate of $6.62 per hcf. 37 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc Industrial users are billed according to their specific discharges to the sewer system. Their flows are sampled by the City, and they are charged according to their flow, biochemical oxygen demand (BOD), and total suspended solids (TSS). The City also assesses a one-time capacity charge (also known as a connnection fee) to new customers connecting to the wastewater system. This charge is set to recover the costs of providing existing infrastructure to new users, as well as future capital improvements and expansions to meet new growth. In 2005/06, a new single family dwelling paid $3,506 to connect to the system Wastewater Enterprise Finances Revenues The City’s wastewater enterprise generates the vast majority of its revenues from user charges. For the year ending June 30, 2006, the City generated approximately $12.1 million in user charges. During the same time period, the City collected $1.4 million in connection fee revenues. Smaller amounts of income were generated by investment earnings and miscellaneous fees and charges. Expenses Operating expenses for the wastewater enterprise include salaries and benefits for City staff, the cost of treatment, maintenance on collection lines and connections, and utilities for pumping and delivery of the wastewater flows to the treatment plant. Expenses for operation and maintenance of the surface water system are also included in the wastewater enterprise. The wastewater enterprise also transfers a portion of its revenue to the City of Petaluma’s General Fund to cover its share of administrative and billing costs incurred by other city staff (such as in the utility billing office). Total operating expenses (before debt service) for the year ending June 30, 2006, were $7.1 million, and intragovernmental transfers to the General Fund totaled $1.2 million. Debt The wastewater enterprise issued revenue bonds in 20009. Annual debt service on this issue is approximately $720,000, and there is approximately $7.4 million in principal outstanding. Debt covenants require that the City generate operating revenues in excess of expenses at least 1.25 this amount. The City is permitted to maintain a rate stabilization and debt 9 The proceeds from this debt service were used for construction of the Pond Influent Pump Station Upgrade Project ($4.6 million), Lindberg Lane Sewer Main Replacement Project ($1.7 million), Disinfection Facility Upgrade Project ($300,000), and early planning and environmental documentation for the Ellis Creek Water Recycling Facility Project ($2 million). 38 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc service reserve fund for the purposes of meeting this coverage requirement. The City currently exceeds its debt coverage requirements for its wastewater revenue bonds by a significant margin. Fund Reserves As of July 1, 2006, the wastewater enterprise had approximately $6.0 million in fund reserves. BWA recommends that the City always maintain at least a 60-day O&M reserve (or approximately $1.5 million) for emergency repairs or expenses. Capital Program The wastewater enterprise is currently in the midst of an extensive capital improvement program. Construction of the Ellis Creek Water Recycling Facility began in October 2005 and is scheduled to be completed in 2009. Total project costs are expected to approach $150 million during that time. The addition of SCADA for the Ellis Creek WRF, further recycled water improvements (Phase II) and demolition of the Hopper WWTF in 2009/10 will add another $20 million in project costs. All told, the city plans to invest upwards of $170 million in non-replacement capital projects between 2005/2006 and 2010/2011. Through FY 05-06, the City levied a 5% administrative charge for its role in managing capital projects for the utility. For the purposes of this study, it was assumed this fee would not be applied for FY 06-07 through FY 13-14. Future Debt With only $6 million in available reserves, the City is expecting to finance almost 100% of the planned capital improvements. The City has SRF funding available for approximately $125 million of the Ellis Creek project costs. This funding can be drawn on at a rate of $25 million per year. The balance of capital project costs above this amount will be paid (at least in the interim) by a variable rate line of credit secured in 2005. The City expects to issue two different series of revenue bonds over the next five years. The first, in late fiscal 2006/07, will be used to fund the Phase II Recycled Water Improvements. The second, in 2010/11, will be used to refund the remaining balance on the line of credit. These two issues are currently sized at $12.5 and $26.2 million respectively. By 2010/11, when SRF payments are first due, the total combined debt service for these three new issues will total approximately $11.3 million. Additionally, as a condition of its SRF loan, the City must also form a replacement and rehabilitation reserve for the Ellis Creek facility, and fund that with approximately $690,000 per year. All told, the City can expect to meet no less 39 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc than $12.0 million in new debt service by 2010/11. Put in perspective, the wastewater enterprise will be required to almost double its total revenues by that time. Cash Flow Projection Bartle Wells developed a ten-year cash flow projection for the wastewater enterprise. The projection allows us to determine if rate increases are needed to meet future revenue requirements, and if so, what the size of these rate increases would be. Our projections are built on a number of assumptions. Among them: • Operating expenses are projected to increase 3.5% per year; • The City is expected to grow at an annual rate of .5%. This would add approximately 100 new wastewater customers to the enterprise annually; • Annual connection fee revenue was estimated by multiplying the estimated 100 new connections by the existing capacity fee; • Any proposed rate increases are applied uniformly to both fixed monthly charges and quantity charges. All customer classes are increased uniformly as well; and • The line of credit is used to fund the General Fund capital administrative transfer of $3.9 million in 2007/08. Rate Recommendations As stated above, future capital expenditures and the resulting debt service will effectively double the revenue requirement of the utility by 2010/11. BWA investigated a number of rate increase scenarios that would allow the City to meet this target. It was determined that steady, level increases are an important policy consideration. As such, our analysis has concluded that a series of five 13% annual rate increases, applied uniformly to both fixed monthly charges and variable consumption rates, would allow the wastewater enterprise to meet ongoing operating expenses and future debt service requirements. City Management recommends that these rates be put in place by January 1, 2007. The recommended wastewater rates are illustrated in Table 4. In order to better understand how these recommended rate increases will impact wastewater customers, we have developed “composite” rate increase numbers to show how “average” single family residential bills will change from one year to the next. We developed three hypothetical customers: a “low” user who discharges 5 hcf to the sewer every month: an “average” user who discharges 8 hcf per month; and a “high” user who discharges 12 hcf per month. Table 5 40 C:\Documents and Settings\ccooper.COFP\Desktop\10AWaterWastewaterRates.doc outlines how these three sample residential users would see their total wastewater bill change from one year to the next as a result of these recommend rate changes. Similar calculations are provided for non-residential customers. Residential Charge Comparison How do Petaluma’s current and proposed wastewater service charges compare to other communities? Table 6 presents a comparison of Petaluma’s monthly residential wastewater service charges with other communities. It should be noted that charges are dependent on a number of factors, including age of facilities, level of wastewater treatment provided, regulatory conditions, and type of services provided. Many communities listed in Table 6 have made or are in the process of making significant improvements to their facilities. As shown in Table 6, Petaluma’s wastewater rate for 2007 will remain less than the average for the agencies included in the co 41 TABLES 42 Table 1 Recommended Water Rates Current Rates Recommended Water Rates Type of Charge 1-Jan- 06 1-Jan- 07 1-Jan- 08 1-Jan- 09 1-Jan-10 1-Jan- 11 Monthly Service Charges ($/mo) 5/8” $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 ¾” $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 1” (residential) $4.55 $5.37 $5.91 $6.20 $6.51 $6.84 1” $4.55 $5.55 $6.11 $6.41 $6.73 $7.07 1.5" $7.57 $9.24 $10.72 $11.25 $11.81 $12.40 2” $10.98 $13.84 $16.05 $17.65 $18.54 $19.46 3” $21.21 $26.73 $33.14 $36.45 $38.27 $40.19 4” $27.27 $36.00 $44.64 $49.10 $51.55 $54.13 6” $39.39 $52.00 $64.48 $70.92 $74.47 $78.19 Consumption Charges ($/hcf) Single Family Residential (monthly) Tier 1 (0-10 hcf) 2.16 Tier 2 (11-26 hcf) 2.37 Tier 3 (27+ hcf) 2.61 Tier 1 (0-9 hcf) $2.31 $2.50 $2.70 $2.83 $2.94 Tier 2 (10-18 hcf) $2.61 $2.87 $3.10 $3.25 $3.41 Tier 3 ( 19-24 hcf) $3.00 $3.39 $3.73 $4.07 $4.35 Tier 4 (25+ hcf) $3.24 $3.75 $4.13 $4.50 $4.82 Multi-Unit Residential, Business, Industrial, Public $2.07 $2.44 $2.64 $2.80 $2.96 $3.14 43 Ta b l e 2 Ch a n g e s o f P r o p o s e d W a t e r R a t e s Fo r S a m p l e C u s t o m e r s Es t i m a t e d M o n t h l y B i l l A m o u n t Ja n - 0 7 J a n - 0 8 J a n - 0 9 J a n - 1 0 J a n - 1 1 Ty p e o f C u s t o m e r Av e r a g e An n u a l Mo n t h l y Wa t e r U s e (h c f ) Cu r r e n t Mo n t h l y Wa t e r Bi l l Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Amount % Increase Lo w 8 $ 2 1 . 0 7 $ 2 2 . 9 6 9 % $ 2 4 . 8 9 8 % $ 2 6 . 7 3 7 % $ 2 8 . 0 7 5 % $ 2 9 . 2 5 4 % Si n g l e F a m i l y R e s i d e n t i a l Av e r a g e 1 2 $ 3 0 . 1 3 $ 3 3 . 0 9 1 0 % $ 3 5 . 9 9 9 % $ 3 8 . 7 2 8 % $ 4 0 . 6 5 5 % $ 4 2 . 4 3 4 % Si n g l e F a m i l y R e s i d e n t i a l Hi g h 1 8 $ 4 4 . 3 5 $ 4 8 . 7 3 1 0 % $ 5 3 . 1 9 9 % $ 5 7 . 3 0 8 % $ 6 0 . 1 7 5 % $ 6 2 . 9 2 5 % Si n g l e F a m i l y R e s i d e n t i a l Ve r y H i g h 5 0 $ 1 2 5 . 9 5 $ 1 5 0 . 8 9 2 0 % $ 1 7 1 . 1 5 1 3 % $ 1 8 7 . 0 6 9 % $ 2 0 1 . 6 0 8 % $ 2 1 4 . 2 5 6 % Si n g l e F a m i l y R e s i d e n t i a l 20 - u n i t A p a r t m e n t B u i l d i n g 6 5 $ 1 4 5 . 5 3 $ 1 7 2 . 6 1 1 9 % $ 1 8 7 . 5 2 9 % $ 1 9 9 . 4 1 6 % $ 2 1 1 . 2 0 6 % $ 2 2 3 . 6 9 6 % 2" m e t e r Of f i c e B u i l d i n g 5 8 $ 1 3 1 . 0 4 $ 1 5 5 . 5 1 1 9 % $ 1 6 9 . 0 5 9 % $ 1 7 9 . 8 4 6 % $ 1 9 0 . 4 5 6 % $ 2 0 1 . 6 9 6 % 2" m e t e r Re s t a u r a n t 5 5 $ 1 2 4 . 8 3 $ 1 4 8 . 1 8 1 9 % $ 1 6 1 . 1 4 9 % $ 1 7 1 . 4 5 6 % $ 1 8 1 . 5 6 6 % $ 1 9 2 . 2 7 6 % 1" m e t e r 44 Table 3 Comparison of Monthly Water Charges for Average Single Family Residential Customer Agency Average Monthly Water Bill (12 hcf/month) Windsor $19.91 North Marin $27.20 Petaluma (current) $30.13 Petaluma (proposed for 2007) $33.09 Santa Rosa (2007) $34.70 Average of all agencies $35.57 Cotati $37.76 Rohnert Park $38.75 Sonoma $38.95 Marin Municipal $42.37 Healdsburg $47.39 45 Table 4 Recommended Wastewater Rates Current Rates Recommended Wastewater Rates Type of Charge 1-Jan- 06 1-Jan- 07 1-Jan- 08 1-Jan- 09 1-Jan- 10 1-Jan- 11 Fixed monthly charge ($/mo) Single-Family Residential $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Multi-Unit Residential, per dwelling unit $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit $44.21 $49.96 $56.45 $63.79 $72.08 $81.45 Commercial Low-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Medium-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 High-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Variable charge ($/hcf) Single-Family Residential $4.32 $4.88 $5.51 $6.23 $7.04 $7.96 Multi-Unit Residential $4.32 $4.88 $5.51 $6.23 $7.04 $7.96 Commercial Low-Strength $4.30 $4.86 $5.49 $6.20 $7.01 $7.92 Medium-Strength $5.11 $5.78 $6.53 $7.38 $8.34 $9.42 High-Strength $6.62 $7.48 $8.45 $9.55 $10.79 $12.19 Metered Industrial Users Flow ($/hcf) $3.20 $3.62 $4.09 $4.62 $5.22 $5.90 BOD ($/lb) $0.31 $0.35 $0.40 $0.45 $0.51 $0.57 TSS ($/lb) $0.34 $0.38 $0.43 $0.49 $0.55 $0.63 46 Ta b l e 5 Ch a n g e s o f P r o p o s e d W a s t e w a t e r R a t e s Fo r S a m p l e W a s t e w a t e r C u s t o m e r s Es t i m a t e d M o n t h l y B i l l A m o u n t Ja n - 0 7 J a n - 0 8 J a n - 0 9 J a n - 1 0 J a n - 1 1 Ty p e o f C u s t o m e r Av e r a g e Mo n t h l y Wa s t e w a t e r Us e ( h c f ) Cu r r e n t Mo n t h l y Wa s t e w a t e r Bi l l Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % Increase Amount % Increase Lo w 5 $ 3 0 . 7 1 $ 3 4 . 7 0 1 3 % $ 3 9 . 2 1 1 3 % $ 4 4 . 3 0 1 3 % $ 5 0 . 0 6 1 3 % $ 5 6 . 5 7 1 3 % Si n g l e F a m i l y R e s i d e n t i a l Av e r a g e 8 $ 4 3 . 6 6 $ 4 9 . 3 4 1 3 % $ 5 5 . 7 5 1 3 % $ 6 3 . 0 0 1 3 % $ 7 1 . 1 9 1 3 % $ 8 0 . 4 4 1 3 % Si n g l e F a m i l y R e s i d e n t i a l Hi g h 1 3 $ 6 5 . 2 6 $ 7 3 . 7 4 1 3 % $ 8 3 . 3 3 1 3 % $ 9 4 . 1 6 1 3 % $ 1 0 6 . 4 0 1 3 % $ 1 2 0 . 2 3 1 3 % Si n g l e F a m i l y R e s i d e n t i a l 20 - u n i t A p a r t m e n t Bu i l d i n g 6 5 $ 4 6 2 . 9 4 $ 5 2 3 . 1 2 1 3 % $ 5 9 1 . 1 2 1 3 % $ 6 6 7 . 9 7 1 3 % $ 7 5 4 . 8 0 1 3 % $ 8 5 2 . 9 3 1 3 % 2" m e t e r Of f i c e B u i l d i n g 5 8 $ 2 5 8 . 3 9 $ 2 9 1 . 9 9 1 3 % $ 3 2 9 . 9 4 1 3 % $ 3 7 2 . 8 4 1 3 % $ 4 2 1 . 3 0 1 3 % $ 4 7 6 . 0 7 1 3 % 2" m e t e r Re s t a u r a n t 5 5 $ 3 7 2 . 9 9 $ 4 2 1 . 4 8 1 3 % $ 4 7 6 . 2 7 1 3 % $ 5 3 8 . 1 9 1 3 % $ 6 0 8 . 1 5 1 3 % $ 6 8 7 . 2 1 1 3 % 1" m e t e r 47 Table 6 Comparison of Monthly Wastewater Charges for Average Single Family Residential Customer Agency Average Monthly Single Family Residential Wastewater Bill (8 hcf/month) Novato Sanitary District $28.50 Windsor $43.06 Petaluma (current) $43.66 Sonoma $45.75 Petaluma (proposed for 2007) $49.34 Average of all agencies $53.33 Rohnert Park $56.10 Santa Rosa (2007) $65.19 Healdsburg $67.88 Cotati $70.81 48 MODEL RUNS 49 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance1 $10,729,443 $4,541,726 $2,441,000 $5,552,000 $4,629,000 $4,293,000 $4,450,000 $5,025,000 $5,983,000 $6,737,000 Rate Stabilization Fund $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225,000 $240,000 $255,000 Revenues Operating Charges for sales5 9,174,000 8,551,000 8,655,000 9,727,000 10,591,000 11,364,000 12,063,000 12,717,000 13,283,000 13,795,000 Charges for services6 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 Investment earnings7 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 Other 881,200 0 200,000 207,000 214,000 221,000 229,000 237,000 245,000 254,000 Subtotal Operating 10,160,200 9,560,000 10,004,000 11,286,000 12,207,000 13,050,000 13,835,000 14,592,000 15,273,000 15,900,000 Capital Connection fees 447,603 1,063,319 619,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Debt proceeds 0 0 6,364,000 0 0 0 0 0 0 0 Subtotal Capital 447,603 1,063,319 6,983,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Transfers & Adjustments Transfer In/(Out) 49,000 0 0 0 0 0 0 0 0 0 S u b t o t a l T r a n s f e r s & A d j u s t m e n t s 4 9 , 0 0 000000 0 0 0 0 Total Revenue, Transfers, and Adjustments $10,656,803 $10,623,319 $16,987,000 $11,924,000 $12,864,000 $13,727,000 $14,532,000 $15,310,000 $16,013,000 $16,662,000 Expenditures Operating Cost of sales8 4,800,000 4,332,370 4,484,000 4,641,000 4,803,000 4,971,000 5,145,000 5,325,000 5,511,000 5,704,000 Cost of services8 3,391,350 3,023,515 3,800,000 3,933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,671,000 4,834,000 Intragovernmental Transfers (General Fund) 1,311,300 1,706,000 1,561,000 1,616,000 1,673,000 1,732,000 1,793,000 1,856,000 1,921,000 1,988,000 Subtotal Operating 9,502,650 9,061,885 9,845,000 10,190,000 10,547,000 10,916,000 11,298,000 11,694,000 12,103,000 12,526,000 Capital Non-replacement capital improvement projects 3,919,048 836,000 2,000,000000 0 0 0 0 Replacement capital improvement projects 1,205,000 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Capital outlays 212,75000000 0 0 0 0 Existing Debt Service 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 Projected Debt Service I 0 0 0 485,000 485,000 485,000 485,000 485,000 485,000 485,000 Subtotal Capital 5,994,550 2,023,503 3,656,000 2,642,000 2,638,000 2,639,000 2,644,000 2,643,000 3,141,000 3,144,000 Transfers & Adjustments Projects - City Departments - Transfers 1,139,214 1,448,587 360,000000 0 0 0 0 Capital admin/other/5% GF overhead 208,106 40,0000000 0 0 0 0 Subtotal Transfers & Adjustments 1,347,320 1,488,587 360,000 0 0 0 0 0 0 0 Total Expenditures, Transfers, and Adjustments $16,844,520 $12,573,975 $13,861,000 $12,832,000 $13,185,000 $13,555,000 $13,942,000 $14,337,000 $15,244,000 $15,670,000 Net operating revenue (before debt service) 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 Net total revenue (6,187,717) (1,950,656) 3,126,000 (908,000) (321,000) 172,000 590,000 973,000 769,000 992,000 Ending Fund Balance 4,541,726 2,591,070 5,567,000 4,644,000 4,308,000 4,465,000 5,040,000 5,998,000 6,752,000 7,729,000 Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510,000 1,641,000 1,698,000 1,758,000 1,819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580,000 597,000 615,000 633,000 652,000 672,000 692,000 713,000 734,000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES YES YES YES YES YES Debt Service Coverage (Min 1.25 x)9 1.68 2.37 1.41 1.66 2.19 2.64 3.01 3.36 3.64 3.84 Projected 50 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total Non-Replacement Capital C501100 New Wells $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 C501200 Property Site Improvements 800,000 - - - - - 800,000 C500105 Reservoir Seismic Upgrades 15,000 - - - - - 15,000 C500101 Paula Lane Reservoir #2 21,000 2,000,000 - - - - 2,021,000 C501004 E. Wash. St. Water Main - - - - - - 0 Phase 2 Recycled Water - 0 Phase 3 Recycled Water - - - - - 0 Phase 4 Recycled Water 0 Phase 5 Recycled Water 0 Wellhead Treatment - - - - - - - - - 0 Total 836,000 2,000,000 0 0 0 0 0 0 0 2,836,000 5% GF transfer 40,000 95,000 0 0 0 0 0 0 0 135,000 Enhanced Water Conservation Water Conservation - - - - - - - - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Pay-as-you-go Contribution 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,500,000 Amount to be Financed 364,000 2,500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2006/2007 Bond1 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 51 Table 3 City of Petaluma - Water Utility Fund Petaluma Water Revenue 2001 Bonds Annual Debt Service November 1 Principal Interest Total 2004 $220,000 $437,753 $657,753 2005 230,000 429,503 659,503 2006 235,000 420,878 655,878 2007 245,000 412,065 657,065 2008 250,000 402,878 652,878 2009 260,000 393,503 653,503 2010 275,000 383,623 658,623 2011 285,000 372,623 657,623 2012 295,000 361,223 656,223 2013 310,000 349,054 659,054 2014 320,000 335,414 655,414 2015 335,000 321,014 656,014 2016 355,000 305,604 660,604 2017 270,000 289,185 559,185 2018 280,000 276,360 556,360 2019 295,000 262,920 557,920 2020 310,000 248,613 558,613 2021 325,000 233,500 558,500 2022 340,000 217,250 557,250 2023 360,000 200,250 560,250 2024 380,000 182,250 562,250 2025 400,000 163,250 563,250 2026 420,000 143,250 563,250 2027 440,000 122,250 562,250 2028 465,000 100,250 565,250 2029 485,000 77,000 562,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961,208 52 Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 U/W discount and bond insurance at 1.5% 107,848 Contingency/Rounding 33,000 Total Issue Size 7,189,848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485,000 Debt Issue II - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 U/W discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 *Based on current rates - subject to change 53 Table 1 City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projections - Ellis Creek Water Recyclin Actual Actual Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning All Fund Balance1 $4,808,070 $5,120,000 $6,010,000 $4,400,000 $7,910,000 $10,600,000 $10,520,000 $14,220,000 $15,280,000 $16,270,000 Average Single Family Residential Rate Increase2 13.0% 13.0% 13.0% 13.0% 13.0% 2.0% 0.0% 0.0% Capacity Fee3 3,329 3,409 3,506 3,629 3,756 3,887 4,023 4,164 4,310 4,461 No. of New Connections4 210 414 100 100 100 100 100 100 100 100 Revenues Operating Charges for services- Fixed Service Charges5 5,016,800 3,110,613 2,684,000 3,047,000 3,458,000 3,925,000 4,457,000 4,798,000 4,868,000 5,026,000 Charges for services- Wastewater Consumption Charges6 7,525,200 8,978,716 11,950,000 13,550,000 15,365,000 17,425,000 19,765,000 21,260,000 21,550,000 22,238,000 Connection fees 747,309 1,413,000 350,000 360,000 380,000 390,000 400,000 420,000 430,000 450,000 Intergovernmental/grants and other funds 842,302 - - 2,233,000 - - - - - - Investment earnings7 79,018 14,500 150,000 110,000 200,000 270,000 260,000 360,000 380,000 410,000 Other 143,000 - - - - - - - - - Subtotal Operating 14,353,629 13,516,829 15,134,000 19,300,000 19,403,000 22,010,000 24,882,000 26,838,000 27,228,000 28,124,000 Capital SRF Treatment Plant Proceeds - - 50,000,000 25,000,000 25,000,000 25,000,000 964,254 - - - Interim Financing Proceeds/(Adjustment) - 27,192,739 31,331,950 2,404,000 - - - - - - Projected Debt Proceeds - - - 9,067,000 - - 24,417,000 - - - Subtotal Debt - 27,192,739 81,331,950 36,471,000 25,000,000 25,000,000 25,381,254 - - - Total Revenues 14,353,629 40,709,568 96,465,950 55,771,000 44,403,000 47,010,000 50,263,254 26,838,000 27,228,000 28,124,000 Expenditures Operating8 Cost of services 6,050,442 7,095,239 7,516,120 7,780,000 8,050,000 8,330,000 8,620,000 8,920,000 9,230,000 9,550,000 Cost Allocation transfers (Intergovernmental Transfers) 946,950 1,218,750 1,359,050 1,410,000 1,460,000 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 Other - 250,000 200,000 - - - - - - - Subtotal Operating 6,997,392 8,563,989 9,075,170 9,190,000 9,510,000 9,840,000 10,180,000 10,530,000 10,900,000 11,280,000 Capital9 Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 - - Non-replacement capital improvement projects 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 - - - - Replacement capital improvement projects - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 1,457,000 1,508,000 1,561,000 Minor capital outlays 116,750 - - - - - - - - - Bank Line of Credit - Principal payment - - - - 11,842,000 24,670,000 24,417,000 - Debt Service 10 Series 2000 - Existing Debt Service 714,300 715,059 714,929 718,954 716,704 718,374 723,694 722,488 724,738 725,738 SRF Wastewater Capital Replacement Fund - - - - - - 689,141 689,141 689,141 689,141 Projected SRF Debt Service, 2.4%, 20 years - - - - - - 4,379,000 8,758,000 8,758,000 8,758,000 Bank Lines of Credit - Interest - 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 - - - Series 2007 Debt Service - - - 312,137 624,000 624,000 624,000 624,000 624,000 624,000 Series 2011 Debt Service - - - - - - 829,000 1,658,000 1,658,000 1,658,000 Subtotal Capital 4,535,000 28,581,000 87,835,000 41,854,000 30,961,000 35,974,000 35,076,000 13,909,000 13,962,000 14,016,000 Transfer and Adjustments Projects - City Departments - Transfers10 1,584,000 646,700 334,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Capital admin/other 177,000 1,341,000 - - - - - - - - Surfacewater O&M 746,000 691,478 835,050 864,000 894,000 925,000 957,000 990,000 1,025,000 1,061,000 Subtotal Transfers & Adjustments 2,507,000 2,679,178 1,169,050 1,214,000 1,244,000 1,275,000 1,307,000 1,340,000 1,375,000 1,411,000 Total Expenditures 14,039,392 39,824,167 98,079,220 52,258,000 41,715,000 47,089,000 46,563,000 25,779,000 26,237,000 26,707,000 Total Revenue less Total Expenditures 314,237 885,401 (1,613,270) 3,513,000 2,688,000 (79,000) 3,700,254 1,059,000 991,000 1,417,000 Ending Fund Balance $5,122,307 $6,005,401 $4,396,730 $7,913,000 $10,598,000 $10,521,000 $14,220,254 $15,279,000 $16,271,000 $17,687,000 Reserve Fund Targets O&M (60 days) Reserve 1,166,232 1,427,332 1,512,528 1,531,667 1,585,000 1,640,000 1,696,667 1,755,000 1,816,667 1,880,000 Capital Replacement & Improvement Reserve (Note) 934,000 962,000 991,000 1,021,000 1,052,000 1,084,000 1,117,000 1,151,000 1,186,000 1,222,000 Total Minimum Reserve Fund Targets 2,100,232 2,389,332 2,503,528 2,552,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Total Minimum Reserve Fund Targets Met Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Debt Service Coverage (Min 1.25 x) 7.39 3.50 1.85 2.35 2.09 2.80 1.64 1.29 1.29 1.33 Projected 54 Table 2 Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Non-Replacement Capital C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 $80,334,450 $26,555,000 $12,738,000 $330,000 $242,000 $150,126,201 C500AAA SCADA for Ellis Creek WRF 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - C501400 Wilmington Pump Station - - - 197,000 - - - 197,000 C500205 C Street Pump Station Upgrade 394,000 27,910 773,000 1,327,000 - - - 2,521,910 C500302 Recycled Water Pipeline - - - - - - - - C500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C500BBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper WWTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - C500403 River Access Improvements - - - - - - - - C500605 Petaluma Marsh Soil Remediation - - - - - - - - Total $3,704,000 $27,478,000 $83,813,000 $36,668,000 $13,526,000 $5,955,000 $242,000 $171,386,000 Admin and other 177,000 1,308,000 3,991,000 1,747,000 645,000 284,000 12,000 8,164,000 Total non-replacement CIP less admin/other 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 230,000 163,222,000 Replacement Capital 8221-54151 Sewer Main Repairs - - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 C500DDD 2nd St. Trunk Sewer Replace - - - - - - - - 8221-54110 Integrated Collection System - - 250,000 258,000 266,000 274,000 282,000 1,330,000 Total - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 152,968,689 Total Non-Ellis Creek Project Costs 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 0 18,417,189 Total replacement capital 0 0 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total CIP 3,704,000 27,478,000 85,063,000 37,956,000 14,853,000 7,322,000 1,650,000 178,026,000 (1) Certain projects receive grant funding which is shown on Table 2 as intergovernmental revenues. (2) Line of credit borrowing will be used based on an approval for retroactive funding from the SRF City of Petaluma - Wastewater Utility Fund 55 Table 3 Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $402,608 $712,608 2005 325,000 389,278 714,278 2006 340,000 375,059 26,616,751 715,059 2007 355,000 359,929 575,988 714,929 2008 375,000 343,954 718,954 2009 390,000 326,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 244,738 3,110,613 724,738 2014 505,000 220,738 8,978,716 725,738 2015 530,000 194,983 1,413,000 724,983 2016 560,000 167,423 727,423 2017 595,000 138,023 14,500 733,023 2018 625,000 106,488 731,488 2019 650,000 73,050 723,050 2020 690,000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 City of Petaluma - Wastewater Utility Fund 56 Table 4 Estimated Future Annual Debt Service for SRF and Interim Financing for Ellis Creek Water Recycling Facility 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Ellis Creek Water Recycling Project Cost $3,310,000 $27,192,739 $81,331,950 $27,404,000 $13,158,000 $330,000 $242,000 SRF Borrowing 0 0 50,000,000 25,000,000 25,000,000 25,000,000 964,254 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr)0 0 50,000,000 76,200,000 103,029,000 130,502,000 134,598,254 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829,000 2,473,000 3,132,000 3,230,000 Assumed Average Interest Rate 2.40%2.40% 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,978,716 Assumed Line of Credit Interest Payment Es 2004/05 2005/06 1413000 2007/08 2008/09 2009/10 2010/11 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 $0 $0 Outstanding Line (Current + Prior)27,192,739 58,524,689 60,928,689 60,928,689 49,086,689 24,416,689 Repayment of Line - - - - (11,842,000) (24,670,000) (24,416,689) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49,086,689 24,416,689 0 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 City of Petaluma - Wastewater Utility Fund 57 RESOLUTION ADOPTING WASTEWATER REVENUE PROGRAM 58 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA ADOPTING A NEW RATE SCHEDULE FOR WASTEWATER SERVICE AND RESCINDING RESOLUTION NO. 2002-189 WHEREAS, the City of Petaluma operates and maintains a wastewater collection, treatment, disposal and recycling system; and WHEREAS, on August 4, 2006, the City entered into a loan Agreement with the State of California and as part of the Agreement made contractual assurances that it would adopt a system of charges to assure reasonable recovery of costs from recipients of the service; and WHEREAS, wastewater services currently provided by the City include collection, treatment, and discharge of treated wastewater, treatment and distribution of recycled water, and collection and disposal of storm water, and use of the term “wastewater services” herein refers to all of those services; and WHEREAS, the City retained Bartle Wells Associates to develop a Wastewater and Water Rate Study and Financial Plan (“Study”); and WHEREAS, the Petaluma City Council conducted a public meeting on the proposed rates pursuant to the Study on October 16, 2006; and WHEREAS, the Petaluma City Council conducted a public meeting on the proposed rates on October 16, 2006; and WHEREAS, notices of proposed rate increases and the public hearing were sent to record owners of properties that would be impacted by the proposed increases on October 19, 2006; and WHEREAS, a notice on the proposed rates increases and the public hearing was published in the Petaluma Argus Courier on November 1, 2006; and WHEREAS, the Petaluma City Council conducted public hearings on the proposed rate increases on December 4, 2006, December 18, 2006, and January 22, 2007, and received testimony and considered all evidence presented regarding the proposed rate increases; and WHEREAS, a majority of the record owners of properties that would be impacted by the rate increases did not protest the increases; and WHEREAS, after due consideration, the Petaluma City Council finds based on the Study that:: 1. That the proposed rates as presented herein are necessary to achieve full recovery of the costs of providing wastewater services to residents and businesses in Petaluma; 59 2. That the proposed rates as presented herein will not generate revenue in excess of the cost of providing wastewater services; 3. That the proposed rates as presented herein will not be used for purposes other than providing wastewater services; 4. That the rates or charges imposed on any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel; 5. That proper notice of the proposed rate increases were given to record owners of properties that would be impacted by the proposed increases, as prescribed by law; and 6. That a majority of record owners of properties that would be impacted by the proposed increases did not protest the proposed rate increases; and WHEREAS, adoption of revised rates and charges pursuant to this resolution involves the establishment, modification, restructuring or approval of rates and charges, as identified and analyzed in the Study, including rates and charges to obtain funds for meeting operating expenses, purchasing or leasing supplies, equipment or materials, meeting financial reserve needs and requirements and/or obtaining funds for capital projects necessary to maintain service within existing service areas. Therefore, adoption of this resolution setting rates and charges is not a project under the California Environmental Quality Act pursuant to California Public Resources Code Section 21080(b)(8)(D) and 14 Cal. Code Regs. Section 15273. NOW, THEREFORE, BE IT RESOLVED, that the Petaluma City Council hereby rescinds Resolution 2002-189 and adopts this resolution in its stead, effective February 1, 2007. ARTICLE I GENERAL SECTION 1.1 PURPOSE. (A) Findings. The above recitals are hereby declared to be true and correct and to be findings of the City Council of the City of Petaluma and are made a part of this resolution. (B) Revenue. The purpose of the wastewater service charge is to raise revenue for the cost of operation and maintenance of the City of Petaluma’s wastewater utility used for the collection, treatment, disposal, and recycling of domestic wastewater, industrial wastewater, commercial wastewater, and for payment of principal and interest on bonds and capital recovery costs, and for collection and disposal of storm water. (C) Resolution. The purpose of this resolution is to establish a method of sharing the cost of the operation and maintenance of the City’s wastewater utility among the users of wastewater service. (D) Study. This resolution and the wastewater charges established in this resolution are based on the Wastewater and Water Rate Study and Financial Plan prepared by Bartle Wells Associates (“Study”). The Study is attached to and made a part of this resolution as Exhibit A. ARTICLE II DEFINITIONS SECTION 2.1 DEFINITIONS. 60 “Accessory Dwelling” means as specified in Article 21 of the Petaluma Zoning Ordinance. “BOD” means biochemical oxygen demand. “Director” means the Director of Water Resources and Conservation, or his/her designee. “Dwelling Unit” means: (a) Any single-family residential dwelling or mobile home designed for occupancy by one family, each of which shall be deemed equivalent to one dwelling unit, and (b) Any duplex, triplex, fourplex, townhouse or condominium, apartment house, lofts, mobile home park or other multi-residential establishment, designed for occupancy for living purposes by more than one family, which is divided into separate residential units, each of which is designed for occupancy by one family only, each resident unit shall be deemed equivalent to one dwelling unit. For example, an apartment complex with 10 apartments shall be considered to have 10 dwelling units. “hcf” means hundred cubic feet. One hcf is equivalent to 748 gallons. “Low Strength” means Non-residential User wastewater with a BOD concentration of less than or equal to 350 mg/L and a TSS concentration of less than or equal to 300 mg/L. “High Strength” means Non-residential User wastewater with a BOD concentration of greater than or equal to 701 mg/L and a TSS concentration of greater than or equal to 451 mg/L. “Medium Strength” means Non-residential User wastewater with a BOD concentration of 351 to 700 mg/L and a TSS concentration of 301 to 450 mg/L. “Metered Industrial Users” means a Non-residential User whose wastewater discharge is metered and whose wastewater service charge is based on laboratory analysis of the user’s wastewater. Users placed in this category shall be as determined by the Director. “Non-residential User” includes, but is not limited to, any commercial, industrial or institutional customer. “Residential User” means any single-family residential dwelling or mobile home designed for occupancy by one family, and any duplex, triplex, fourplex, townhouse or condominium, apartment house, mobile home park or other multi-residential establishment, designed for occupancy for living purposes by more than one family, which is divided into separate residential units, each of which is designed for occupancy by one family only. “TSS” means total suspended solids. “Unmetered Residential” means Residential Users whose potable water is provided in part or in whole by a water source other than the City of Petaluma. ARTICLE III RATES SECTION 3.1 FIXED MONTHLY FEES. (A) Residential Users. The fixed monthly fee for Residential Users, per dwelling unit, shall be as set forth in Table 1. i. Non-residential Users. The fixed monthly fee for Non-residential Users shall be as set forth in Table 1. Table 1. Fixed Monthly Wastewater Charges Wastewater Customer Classification Fixed Monthly Charge For Billings Rendered On Or After the Dates Indicated Below 61 Feb. 1, 2007 January 1, 2008 January 1, 2009 January 1, 2010 January 1, 2011 Single-Family Residential ($/mo) $10.29 $11.63 $13.14 $14.85 $16.78 Multi-Unit Residential, per dwelling unit ($/mo) $10.29 $11.63 $13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit ($/mo) $49.96 $56.45 $63.79 $72.08 $81.45 Commercial ($/mo) Low-Strength $10.29 $11.63 $13.14 $14.85 $16.78 Medium-Strength $10.29 $11.63 $13.14 $14.85 $16.78 High-Strength $10.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users ($/mo) $10.29 $11.63 $13.14 $14.85 $16.78 (C) Fixed Monthly Fee Annual Increases. Beginning January 1, 2012 and each January 1 thereafter, fixed monthly fees shall increase by three and one-half percent (3.5%). SECTION 3.2 USER CHARGES. (A) Residential Users. In addition to the fixed monthly fee set forth in Section 3.1, there shall be a user charge for Residential Users as set forth in Table 2, based on the amount of wastewater discharged. The amount of wastewater discharged shall be established based on the average amount of water used each month during the winter months. The winter months shall generally be December, January and February, but actual winter months used for this determination may vary depending individual billing cycles, as determined by the Director. The average becomes effective each July and is based on the most recent average winter water usage. (B) Non-residential Users. In additional to the fixed monthly fee set forth in Section 3.1, there shall be a user charge for Non-residential Users, based on the amount of water used or discharged, as set forth in Table 2. (1) User Charge For Non-Residential Users with Shared Water Meters. If a water meter is used by Non-residential Users in different customer classes, the user charge shall be based on the Non-residential User with the higher wastewater strength. For example, if a Low Strength user and a High Strength user use the same water meter, the wastewater user charge shall be based on the High Strength user rate. (2) Commercial Customers. Commercial customers shall be assessed a variable user charge based on the strength of the wastewater, Low, Medium, or High. Assignment to Low, Medium, or High strength shall be as determined by the Director, or based on laboratory analyses of the Non-residential User’s wastewater. A State of California Certified laboratory must conduct the laboratory analysis. (C) User Charges Annual Increases. Beginning January 1, 2012 and each January 1 thereafter, user charges shall increase by three and one-half percent (3.5%). 62 Table 2. Variable Wastewater User Charges Variable User Charge For Billings Rendered On Or After the Dates Indicated Below Wastewater Customer Classification Feb. 1, 2007 January 1, 2008 January 1, 2009 January 1, 2010 January 1, 2011 Single-Family Residential ($/hcf) $4.88 $5.51 $6.23 $7.04 $7.96 Multi-Unit Residential ($/hcf) $4.88 $5.51 $6.23 $7.04 $7.96 Commercial ($/hcf) Low-Strength $4.86 $5.49 $6.20 $7.01 $7.92 Medium-Strength $5.78 $6.53 $7.38 $8.34 $9.42 High-Strength $7.48 $8.45 $9.55 $10.79 $12.19 Metered Industrial Users Flow ($/hcf) $3.62 $4.09 $4.62 $5.22 $5.90 BOD ($/lb) $0.35 $0.40 $0.45 $0.51 $0.57 TSS ($/lb) $0.38 $0.43 $0.49 $0.55 $0.63 SECTION 3.3 SPECIAL CHARGES AND FEES. (A) Sample Collection and Laboratory Analysis. The City shall charge for samples collected by the City and analyzed by the City or an outside laboratory for the purpose of determining wastewater charges. Charges shall be assessed for collecting the sample and for laboratory analysis of the sample. (1) Collection Charges. (a) For the Purpose of Determining Wastewater Charges. The charge for collecting a “grab” sample shall be $75. The charge for collecting a “composite” sample shall be $250. (b) For Violation Follow-Up Sampling. The charge for collecting a “grab” sample shall be $100. The charge for collecting a composite sample shall be $350. (2) Laboratory Analysis Charges. (a) Outside Laboratories. Samples analyzed by outside laboratories shall be charged at cost per sample. (b) City Laboratory. Samples analyzed by the City’s laboratory for conventional pollutants shall be $125 per sample. (B) Septic Waste. Discharge of septic waste shall be charged at $0.25 per gallon of discharge. Discharge may not occur without a permit. (C) Short-Term Discharge. A short-term discharge fee is hereby established at $0.06 per gallon, with a $500.00 minimum fee, plus a permit fee of $200.00. These fees shall apply to direct temporary discharges from a point of discharge for which a City connection charge is inapplicable or for which connection charges sufficient to address the temporary discharge have not been paid, including, but not limited to, temporary discharges of groundwater. Discharge may not occur without a permit and may not continue for more than one year from the effective date of permit. If the discharge period does continue beyond one year, discharger will be assessed applicable and then-current wastewater service and connection fees. The decision to accept any such temporary discharge and all requirements pertaining to the 63 acceptance of such temporary discharge, wastewater service charges, shall be based on an evaluation of the effect on capacity, compliance with regulations, and any other factors that could affect the overall operations of the wastewater treatment facility. Such discharges shall fully comply with all applicable federal, state and local laws, regulations and orders, including, but not limited to, the City’s sewer use regulations as described in Sections 15.48 through 15.76 of the Petaluma Municipal Code. SECTION 3.4 RATES FOR WASTEWATER USERS OUTSIDE OF THE CITY LIMITS. (A) Residential Users. Residential users outside of the City limits shall be charged $0.80 per month for each dwelling unit in addition to the charge set forth in Section 3.1. (B) Non-Residential Users. Non-residential users outside of the City limits shall be charged $0.80 per month for each account in additional to the charge set forth in Section 3.1. 64 EXHIBIT A TO RESOLUTION ADOPTING WATER REVENUE PROGRAM WATER & WASTEWATER RATE STUDY AND FINANCIAL PLAN 65 The City’s water resources rate structures were previously analyzed in 2001. The information from the 2001 analysis resulted in the following key changes to the rate structure: ⋅ To encourage water conservation, water rates were converted from a flat per unit rate structure to increasing block or tiered rates. ⋅ To encourage water conservation and provide better equity, residential wastewater charges were converted from a fixed monthly flat fee to a consumption charge, based on average winter-time water usage. The Department of Water Resources and Conservation engaged the services of Bartle Wells Associates (Berkeley, CA)1 to develop a wastewater and water rate study and financial plan. The rate study analyzed the approved budgets for FY 06-07, prior year revenue and expenditures, projected future revenue, and the projected future costs of operations and maintenance. The water and wastewater models are attached. Water Analysis Our goal was to build a comprehensive financial model along with water rate recommendations that allow the City to: • Meet current and future operating expenses of the utility; • Support the replacement and rehabilitation of existing infrastructure; • Support the construction of new capital facilities required for growth and expansion of the system; and • Where possible, minmize the impact of required rate adjustments on the City’s utility customers. Existing Rates and Charges The water enterprise bills customers bi-monthly. There are two components to water service charges. The City assesses a fixed, bi-monthly charge based on the size of the meter in service. For a typical single family dwelling with a 5/8” meter, this charge is currently $7.58 for two months of service. The City also assesses a variable, consumption-based charge for all water consumed by the customer. Customers are billed a quantity rate for each hundred cubic feet (hcf) consumed. For residential customers, these rates are “tiered” such that the cost of the first twenty units of water 1 BWA is a public finance consulting firm with over 40 years’ experience providing independent, objective financial advice to public agencies throughout California. 66 in a two month period are currently $2.16 per hcf, while the unit cost of the next thirty two units of water (up to 52 total hcf in two months) are billed at a quantity rate of $2.37 per hcf. All consumption above 52 hcf in a two month period is billed at a rate of $2.61 per hcf. Commercial customers pay one flat rate for all water consumed ($2.07). The City also assesses a one-time capacity charge (also known as a connnection fee) to new customers connecting to the water system. This fee is variable and is calculated seperately for each new connection. They vary based on whether or not the water infrastructure was City- or developer-provided. Water Enterprise Finances Revenues The City’s water enterprise generates the vast majority of its revenues from service charges and water sales. For the year ending June 30, 2006, the City collected approximately $8.5 million in water sales revenue and $900,000 in fixed monthly service charges. During the same time period, the City also collected approximately $1.1 million in water connection fees. This is significantly above the five-year average annual connection fee revenue collected, which is approximately $620,000. The balance of the water enterprise’s revenue comes from interest earnings and other miscellenous revenues. Expenses Operating expenses for the water enterprise include salaries and benefits for City staff, the cost of purchasing water, maintenance on water lines and connnections, and utilities for pumping and delivery of the water. The water enterprise also transfers a portion of its revenue to the City of Petaluma’s General Fund to cover its share of administrative and billing costs incurred by other city staff (such as in the utility billing office). Total operating expenses (before debt service) for the year ending June 30, 2006 were $7.4 million, with another $1.7 million in intragovernmental transfers to the General Fund. Debt The water enterprise issued bonds in 20012. Annual debt service on this issue is approximately $650,000, and there is approximately $9 million in principal outstanding. Debt covenants require that the City generate operating revenues in excess of expenses at least 1.25 this amount. The City is permitted to maintain a rate stabilization and debt service reserve fund for the purposes of meeting this coverage requirement. 2 Proceeds from the 2001 bonds were used for payment of prior bonds ($4.6 million), which had an uncompetitive interest rate, acquisition of property for the Paula Lane Reservoir No. 2 ($424,000), water main replacement projects ($2.2 million), and construction of the Water Field Office ($2.6 million). 67 Notably, the City has been very close to missing its debt coverage requirements over the past two fiscal years. Net operating revenues have been insufficient to meet debt service, with coverage being met by the existence of sufficient operating reserves. Should the City wish to issue more debt in early 2007, rates would certainly have to be increased to meet this shortfall. Fund Reserves As of July 1, 2006, the water enterprise had approximately $2.6 million in its operating fund. This amount includes a 60-day operating and maintenance reserve of approximately $1.6 million and an emergency capital replacement and improvement reserve of approximately $600,000. The City does not, as of Oct 1, 2006, maintain a rate stabilization or debt service reserve, but there are plans to form one. Capital Program The water enterprise will incur capital costs associated with the construction of the Paula Lane Reservoir No. 2 in late 2006/07. Total design and construction costs are estimated at $2 million. The City is also planning to install automatic read meters for all customers over the next 5 to 7 years. It is estimated that this project will cost approximately $500,000 per year during that time. Additional capital costs include the annual repair and replacement of aging water mains. The City currently invests about $500,000 per year in its water main and service replacement program. In order to adequately maintain the City’s water infrastructure, this investment will increase to $1,000,000 per year. Future Debt The City anticipates selling water revenue bonds in early calendar year 2007 to fund construction of the reservoir, increase water main and service replacement investments, and the installation automatic read meters. The size of the issue would be approximately $6.5 million. The sale of these bonds is contingent on passing new rates effective January 1, 2007. Cash Flow Projection Bartle Wells developed a ten-year cash flow projection for the water enterprise. The projection allows us to determine if rate increases are needed to meet future operating expenses as well as the capital program, and if so, what the size of these rate increases would be. Our projections are built on a number of assumptions. Among them: 68 • Operating expenses are projected to increase 3.5% per year; • The City is expected to grow at an annual rate of .5%. This would add approximately 100 new water customers to the enterprise annually; • Annual connection fee revenue was estimated using the 5-year annual average; • The City is interested in increasing the number of water tiers from three to four in order to increase the conservation incentive of the rate structure. We have proposed that the City set these tiers at 0 – 18 hcf, 19 - 36 hcf, 37 – 48 hcf, and all use above 48 hcf for bi- monthly use, or 0 – 9 hcf, 10 – 18 hcf, 19 – 24 hcf, and all use above 24 hcf for monthly use. This effectively lowers the first tier by a small amount (from 20 hcf to 18 hcf) and ensures that more customers will be billed for water consumption in the third tier (for water use above 36 hcf). Additionally, the City is interested in “steepening” the tiers, that is, making the differences between each new tier larger. This would make the top tier water more expensive (relative to the lowest tier) than it is now. Taken together, both of these changes to the tier structures should serve to increase the incentive to conserve water. • Analysis of the fixed meter charge indicates that they are not currently in proportion with AWWA recommended meter ratios and demand factors. New meter charges should be phased in over three years to reduce or, if possible, eliminate these improper ratios. • With such a large portion (about 90%) of the water enterprises revenues coming from variable consumption water sales, it is particualrly important to verify estimates of the amount of water sold. Our revenue projections are based on total water use of 3.8 million hcf. This number is below the three-year average annual water sales and is chosen so as not to overestimate water sales revenue. • Our cash flow projection does not take into account a projected increase in the water connection fee that could take place in the next six to twelve months. The increase in this capacity fee is predicated on approval of the general plan and the projects included in it. While this plan would also require significant capital improvements above and beyond those currently included in this plan, the increased connection fee revenues would offset these additonal projects. Rate Recommendations Residential Our analysis demonstrates that the City will require a series of moderate, incremental rate increases for its residential customers over the next five years. These increases are needed to meet rising costs of operation, increased capital spending on the replacement of aging water mains (which will be funded by rates), and new debt service projected at $485,000 annually, starting in fiscal 2007/2008. 69 Taken as a whole, the City needs to increase overall operating revenues somewhere between 14% and 16% between now and July 1, 2008. BWA has developed a rate schedule that allows the City to meet these revenue requirements while minimizing the impact of the increases on residents. It is recommended that the City pass two rate increases, one on January 1, 2007, and the second one year later, and that these rate increases be followed by a series of three smaller annual rate increases designed to allow the utility to keep up with cost inflation. The proposed water rate changes are illustrated in Table 1. Because the City uses a tiered water rate structure for its residential customers, the proposed rate increases will not affect all users uniformly. In fact, there is no way to put an exact percentage increase on each users bill. It will, by definition, vary according to how much water a consumer uses. However, because we have “steepened” the tiers, in general the highest residential water users will see the highest percentage increases. Low water users will see comparatively small increases. In order to better understand how these recommended rate increases will impact water bills, we have developed “composite” rate increase numbers to show how “average” single family residential bills will change from one year to the next. We developed three hypothetical customers: a “low” user who uses 8 hcf per monthly; an “average” user who uses 12 hcf per month; and a “high” user who uses 18 hcf per month. As illustrated in Table 2, in no year will an “average” customer of water experience more than a 10% rate increase. For the “average” customer, the annual water rate increases for the next 5 years would be 10%, 9%, 8%, 5%, and 4%. The impact of adding the fourth tier is evident in the “very high” customer’s bill, which will increase by 20% in 2007, as compared to the “low” customer’s anticipated increase of 9%. Commercial Commercial and mult-family residential customers are not billed in tiered rates; in addition to their bi-monthly meter charge, they pay one flat rate for all water consumed. This rate is currently $2.07, an amount below the first tier water price for residential customers ($2.16). City Management recommends that this quantity rate be increased to eliminate this “discounted” water; the proposed rate schedule includes an 18% increase for the quantity rate on January 1, 2007 for commercial customers. This puts commercial water between the first and second tier for single family residential users. City Management recommends that the commerical quantity rate stay between the first and second tier rate for residential users from this point forward. Sample commercial and multi-family water bills are illustrated in Table 2. Residential Charge Comparison 70 How do Petaluma’s current and proposed water service charges compare to other communities? This comparison is provided in Table 3. As shown in Table 3, Petaluma’s proposed rate for 2007 will remain less than average for the agencies included in the comparison. Wastewater Analysis The City engaged Bartle Wells Associates (BWA) to also develop a wastewater rate study and financing plan. The goal was to build a comprehensive financial model with rate recommendations that allow the City to: • Meet current and future operating expenses of the wastewater utility; • Support the replacement and rehabilitation of existing infrastructure; • Support the construction of new capital facilities, including the Ellis Creek Water Recycling Facility; and • Where possible, minimize the impact of required rate adjustments on rate payers. Existing Rates and Charges The wastewater enterprise bills customers bi-monthly. There are two components to each bill. The City assesses a fixed, monthly charge based on customer class (residential, commerical, industrial). This fixed charge is currently the same for all classes at $9.11 per month. The City also assesses a consumption-based charge for wastewater discharged to the collection and treatment system. Because wastewater connections themselves are not metered, this charge is based on water consumption. Customers are billed one fixed consumption amount for the entire year. The amount is set each July to equal the average winter usage of a customer during the past year. In this way, the utility is adjusting for water used for irrigation and other outdoor purposes that is not discharged to the sewer system. All residential users are billed a flat quantity rate for their wastewater discharge. These rates are not tiered. The current quantity rate is $4.32 per hundred cubic feet (hcf). Under the current rate structure, a single family residence that discharges 15 hcf per bi-monthly billing cycle to the sewer system would be billed $83.01 (2 x $9.11 + 15 x $4.32). Commercial customers are grouped into three classes, based on the strength of the wastewater discharged to the sewer system. Low strength users are billed at a quantity rate of $4.30 per hcf; medium strength users at a quantity rate of $5.11 per hcf; and high strength users are billed at a rate of $6.62 per hcf. 71 Industrial users are billed according to their specific discharges to the sewer system. Their flows are sampled by the City, and they are charged according to their flow, biochemical oxygen demand (BOD), and total suspended solids (TSS). The City also assesses a one-time capacity charge (also known as a connnection fee) to new customers connecting to the wastewater system. This charge is set to recover the costs of providing existing infrastructure to new users, as well as future capital improvements and expansions to meet new growth. In 2005/06, a new single family dwelling paid $3,506 to connect to the system Wastewater Enterprise Finances Revenues The City’s wastewater enterprise generates the vast majority of its revenues from user charges. For the year ending June 30, 2006, the City generated approximately $12.1 million in user charges. During the same time period, the City collected $1.4 million in connection fee revenues. Smaller amounts of income were generated by investment earnings and miscellaneous fees and charges. Expenses Operating expenses for the wastewater enterprise include salaries and benefits for City staff, the cost of treatment, maintenance on collection lines and connections, and utilities for pumping and delivery of the wastewater flows to the treatment plant. Expenses for operation and maintenance of the surface water system are also included in the wastewater enterprise. The wastewater enterprise also transfers a portion of its revenue to the City of Petaluma’s General Fund to cover its share of administrative and billing costs incurred by other city staff (such as in the utility billing office). Total operating expenses (before debt service) for the year ending June 30, 2006, were $7.1 million, and intragovernmental transfers to the General Fund totaled $1.2 million. Debt The wastewater enterprise issued revenue bonds in 20003. Annual debt service on this issue is approximately $720,000, and there is approximately $7.4 million in principal outstanding. Debt covenants require that the City generate operating revenues in excess of expenses at least 1.25 this amount. The City is permitted to maintain a rate stabilization and debt 3 The proceeds from this debt service were used for construction of the Pond Influent Pump Station Upgrade Project ($4.6 million), Lindberg Lane Sewer Main Replacement Project ($1.7 million), Disinfection Facility Upgrade Project ($300,000), and early planning and environmental documentation for the Ellis Creek Water Recycling Facility Project ($2 million). 72 service reserve fund for the purposes of meeting this coverage requirement. The City currently exceeds its debt coverage requirements for its wastewater revenue bonds by a significant margin. Fund Reserves As of July 1, 2006, the wastewater enterprise had approximately $6.0 million in fund reserves. BWA recommends that the City always maintain at least a 60-day O&M reserve (or approximately $1.5 million) for emergency repairs or expenses. Capital Program The wastewater enterprise is currently in the midst of an extensive capital improvement program. Construction of the Ellis Creek Water Recycling Facility began in October 2005 and is scheduled to be completed in 2009. Total project costs are expected to approach $150 million during that time. The addition of SCADA for the Ellis Creek WRF, further recycled water improvements (Phase II) and demolition of the Hopper WWTF in 2009/10 will add another $20 million in project costs. All told, the city plans to invest upwards of $170 million in non-replacement capital projects between 2005/2006 and 2010/2011. Through FY 05-06, the City levied a 5% administrative charge for its role in managing capital projects for the utility. For the purposes of this study, it was assumed this fee would not be applied for FY 06-07 through FY 13-14. Future Debt With only $6 million in available reserves, the City is expecting to finance almost 100% of the planned capital improvements. The City has SRF funding available for approximately $125 million of the Ellis Creek project costs. This funding can be drawn on at a rate of $25 million per year. The balance of capital project costs above this amount will be paid (at least in the interim) by a variable rate line of credit secured in 2005. The City expects to issue two different series of revenue bonds over the next five years. The first, in late fiscal 2006/07, will be used to fund the Phase II Recycled Water Improvements. The second, in 2010/11, will be used to refund the remaining balance on the line of credit. These two issues are currently sized at $12.5 and $26.2 million respectively. By 2010/11, when SRF payments are first due, the total combined debt service for these three new issues will total approximately $11.3 million. Additionally, as a condition of its SRF loan, the City must also form a replacement and rehabilitation reserve for the Ellis Creek facility, and fund that with approximately $690,000 per year. All told, the City can expect to meet no less 73 than $12.0 million in new debt service by 2010/11. Put in perspective, the wastewater enterprise will be required to almost double its total revenues by that time. Cash Flow Projection Bartle Wells developed a ten-year cash flow projection for the wastewater enterprise. The projection allows us to determine if rate increases are needed to meet future revenue requirements, and if so, what the size of these rate increases would be. Our projections are built on a number of assumptions. Among them: • Operating expenses are projected to increase 3.5% per year; • The City is expected to grow at an annual rate of .5%. This would add approximately 100 new wastewater customers to the enterprise annually; • Annual connection fee revenue was estimated by multiplying the estimated 100 new connections by the existing capacity fee; • Any proposed rate increases are applied uniformly to both fixed monthly charges and quantity charges. All customer classes are increased uniformly as well; and • The line of credit is used to fund the General Fund capital administrative transfer of $3.9 million in 2007/08. Rate Recommendations As stated above, future capital expenditures and the resulting debt service will effectively double the revenue requirement of the utility by 2010/11. BWA investigated a number of rate increase scenarios that would allow the City to meet this target. It was determined that steady, level increases are an important policy consideration. As such, our analysis has concluded that a series of five 13% annual rate increases, applied uniformly to both fixed monthly charges and variable consumption rates, would allow the wastewater enterprise to meet ongoing operating expenses and future debt service requirements. City Management recommends that these rates be put in place by January 1, 2007. The recommended wastewater rates are illustrated in Table 4. In order to better understand how these recommended rate increases will impact wastewater customers, we have developed “composite” rate increase numbers to show how “average” single family residential bills will change from one year to the next. We developed three hypothetical customers: a “low” user who discharges 5 hcf to the sewer every month: an “average” user who discharges 8 hcf per month; and a “high” user who discharges 12 hcf per month. Table 5 outlines how these three sample residential users would see their total wastewater bill change 74 from one year to the next as a result of these recommend rate changes. Similar calculations are provided for non-residential customers. Residential Charge Comparison How do Petaluma’s current and proposed wastewater service charges compare to other communities? Table 6 presents a comparison of Petaluma’s monthly residential wastewater service charges with other communities. It should be noted that charges are dependent on a number of factors, including age of facilities, level of wastewater treatment provided, regulatory conditions, and type of services provided. Many communities listed in Table 6 have made or are in the process of making significant improvements to their facilities. As shown in Table 6, Petaluma’s wastewater rate for 2007 will remain less than the average for the agencies included in the comparison. 75 TABLES 76 Table 1 Recommended Water Rates Current Rates Recommended Water Rates Type of Charge 1-Jan- 06 1-Jan- 07 1-Jan- 08 1-Jan- 09 1-Jan-10 1-Jan- 11 Monthly Service Charges ($/mo) 5/8” $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 ¾” $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 1” (residential) $4.55 $5.37 $5.91 $6.20 $6.51 $6.84 1” $4.55 $5.55 $6.11 $6.41 $6.73 $7.07 1.5" $7.57 $9.24 $10.72 $11.25 $11.81 $12.40 2” $10.98 $13.84 $16.05 $17.65 $18.54 $19.46 3” $21.21 $26.73 $33.14 $36.45 $38.27 $40.19 4” $27.27 $36.00 $44.64 $49.10 $51.55 $54.13 6” $39.39 $52.00 $64.48 $70.92 $74.47 $78.19 Consumption Charges ($/hcf) Single Family Residential (monthly) Tier 1 (0-10 hcf) 2.16 Tier 2 (11-26 hcf) 2.37 Tier 3 (27+ hcf) 2.61 Tier 1 (0-9 hcf) $2.31 $2.50 $2.70 $2.83 $2.94 Tier 2 (10-18 hcf) $2.61 $2.87 $3.10 $3.25 $3.41 Tier 3 ( 19-24 hcf) $3.00 $3.39 $3.73 $4.07 $4.35 Tier 4 (25+ hcf) $3.24 $3.75 $4.13 $4.50 $4.82 Multi-Unit Residential, Business, Industrial, Public $2.07 $2.44 $2.64 $2.80 $2.96 $3.14 77 Ta b l e 2 Ch a n g e s o f P r o p o s e d W a t e r R a t e s Fo r S a m p l e C u s t o m e r s Es t i m a t e d M o n t h l y B i l l A m o u n t Ja n - 0 7 J a n - 0 8 J a n - 0 9 J a n - 1 0 J a n - 1 1 Ty p e o f C u s t o m e r Av e r a g e An n u a l Mo n t h l y Wa t e r U s e (h c f ) Cu r r e n t Mo n t h l y Wa t e r Bi l l Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Amount % Increase Lo w 8 $ 2 1 . 0 7 $ 2 2 . 9 6 9 % $ 2 4 . 8 9 8 % $ 2 6 . 7 3 7 % $ 2 8 . 0 7 5 % $ 2 9 . 2 5 4 % Si n g l e F a m i l y R e s i d e n t i a l Av e r a g e 1 2 $ 3 0 . 1 3 $ 3 3 . 0 9 1 0 % $ 3 5 . 9 9 9 % $ 3 8 . 7 2 8 % $ 4 0 . 6 5 5 % $ 4 2 . 4 3 4 % Si n g l e F a m i l y R e s i d e n t i a l Hi g h 1 8 $ 4 4 . 3 5 $ 4 8 . 7 3 1 0 % $ 5 3 . 1 9 9 % $ 5 7 . 3 0 8 % $ 6 0 . 1 7 5 % $ 6 2 . 9 2 5 % Si n g l e F a m i l y R e s i d e n t i a l Ve r y H i g h 5 0 $ 1 2 5 . 9 5 $ 1 5 0 . 8 9 2 0 % $ 1 7 1 . 1 5 1 3 % $ 1 8 7 . 0 6 9 % $ 2 0 1 . 6 0 8 % $ 2 1 4 . 2 5 6 % Si n g l e F a m i l y R e s i d e n t i a l 20 - u n i t A p a r t m e n t B u i l d i n g 6 5 $ 1 4 5 . 5 3 $ 1 7 2 . 6 1 1 9 % $ 1 8 7 . 5 2 9 % $ 1 9 9 . 4 1 6 % $ 2 1 1 . 2 0 6 % $ 2 2 3 . 6 9 6 % 2" m e t e r Of f i c e B u i l d i n g 5 8 $ 1 3 1 . 0 4 $ 1 5 5 . 5 1 1 9 % $ 1 6 9 . 0 5 9 % $ 1 7 9 . 8 4 6 % $ 1 9 0 . 4 5 6 % $ 2 0 1 . 6 9 6 % 2" m e t e r Re s t a u r a n t 5 5 $ 1 2 4 . 8 3 $ 1 4 8 . 1 8 1 9 % $ 1 6 1 . 1 4 9 % $ 1 7 1 . 4 5 6 % $ 1 8 1 . 5 6 6 % $ 1 9 2 . 2 7 6 % 1" m e t e r 78 Table 3 Comparison of Monthly Water Charges for Average Single Family Residential Customer Agency Average Monthly Water Bill (12 hcf/month) Windsor $19.91 North Marin $27.20 Petaluma (current) $30.13 Petaluma (proposed for 2007) $33.09 Santa Rosa (2007) $34.70 Average of all agencies $35.57 Cotati $37.76 Rohnert Park $38.75 Sonoma $38.95 Marin Municipal $42.37 Healdsburg $47.39 79 Table 4 Recommended Wastewater Rates Current Rates Recommended Wastewater Rates Type of Charge 1-Jan- 06 1-Jan- 07 1-Jan- 08 1-Jan- 09 1-Jan- 10 1-Jan- 11 Fixed monthly charge ($/mo) Single-Family Residential $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Multi-Unit Residential, per dwelling unit $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit $44.21 $49.96 $56.45 $63.79 $72.08 $81.45 Commercial Low-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Medium-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 High-Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Variable charge ($/hcf) Single-Family Residential $4.32 $4.88 $5.51 $6.23 $7.04 $7.96 Multi-Unit Residential $4.32 $4.88 $5.51 $6.23 $7.04 $7.96 Commercial Low-Strength $4.30 $4.86 $5.49 $6.20 $7.01 $7.92 Medium-Strength $5.11 $5.78 $6.53 $7.38 $8.34 $9.42 High-Strength $6.62 $7.48 $8.45 $9.55 $10.79 $12.19 Metered Industrial Users Flow ($/hcf) $3.20 $3.62 $4.09 $4.62 $5.22 $5.90 BOD ($/lb) $0.31 $0.35 $0.40 $0.45 $0.51 $0.57 TSS ($/lb) $0.34 $0.38 $0.43 $0.49 $0.55 $0.63 80 Ta b l e 5 Ch a n g e s o f P r o p o s e d W a s t e w a t e r R a t e s Fo r S a m p l e W a s t e w a t e r C u s t o m e r s Es t i m a t e d M o n t h l y B i l l A m o u n t Ja n - 0 7 J a n - 0 8 J a n - 0 9 J a n - 1 0 J a n - 1 1 Ty p e o f C u s t o m e r Av e r a g e Mo n t h l y Wa s t e w a t e r Us e ( h c f ) Cu r r e n t Mo n t h l y Wa s t e w a t e r Bi l l Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % In c r e a s e Am o u n t % Increase Amount % Increase Lo w 5 $ 3 0 . 7 1 $ 3 4 . 7 0 1 3 % $ 3 9 . 2 1 1 3 % $ 4 4 . 3 0 1 3 % $ 5 0 . 0 6 1 3 % $ 5 6 . 5 7 1 3 % Si n g l e F a m i l y R e s i d e n t i a l Av e r a g e 8 $ 4 3 . 6 6 $ 4 9 . 3 4 1 3 % $ 5 5 . 7 5 1 3 % $ 6 3 . 0 0 1 3 % $ 7 1 . 1 9 1 3 % $ 8 0 . 4 4 1 3 % Si n g l e F a m i l y R e s i d e n t i a l Hi g h 1 3 $ 6 5 . 2 6 $ 7 3 . 7 4 1 3 % $ 8 3 . 3 3 1 3 % $ 9 4 . 1 6 1 3 % $ 1 0 6 . 4 0 1 3 % $ 1 2 0 . 2 3 1 3 % Si n g l e F a m i l y R e s i d e n t i a l 20 - u n i t A p a r t m e n t Bu i l d i n g 6 5 $ 4 6 2 . 9 4 $ 5 2 3 . 1 2 1 3 % $ 5 9 1 . 1 2 1 3 % $ 6 6 7 . 9 7 1 3 % $ 7 5 4 . 8 0 1 3 % $ 8 5 2 . 9 3 1 3 % 2" m e t e r Of f i c e B u i l d i n g 5 8 $ 2 5 8 . 3 9 $ 2 9 1 . 9 9 1 3 % $ 3 2 9 . 9 4 1 3 % $ 3 7 2 . 8 4 1 3 % $ 4 2 1 . 3 0 1 3 % $ 4 7 6 . 0 7 1 3 % 2" m e t e r Re s t a u r a n t 5 5 $ 3 7 2 . 9 9 $ 4 2 1 . 4 8 1 3 % $ 4 7 6 . 2 7 1 3 % $ 5 3 8 . 1 9 1 3 % $ 6 0 8 . 1 5 1 3 % $ 6 8 7 . 2 1 1 3 % 1" m e t e r 81 Table 6 Comparison of Monthly Wastewater Charges for Average Single Family Residential Customer Agency Average Monthly Single Family Residential Wastewater Bill (8 hcf/month) Novato Sanitary District $28.50 Windsor $43.06 Petaluma (current) $43.66 Sonoma $45.75 Petaluma (proposed for 2007) $49.34 Average of all agencies $53.33 Rohnert Park $56.10 Santa Rosa (2007) $65.19 Healdsburg $67.88 Cotati $70.81 82 MODEL RUNS 83 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance1 $10,729,443 $4,541,726 $2,441,000 $5,552,000 $4,629,000 $4,293,000 $4,450,000 $5,025,000 $5,983,000 $6,737,000 Rate Stabilization Fund $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225,000 $240,000 $255,000 Revenues Operating Charges for sales5 9,174,000 8,551,000 8,655,000 9,727,000 10,591,000 11,364,000 12,063,000 12,717,000 13,283,000 13,795,000 Charges for services6 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 Investment earnings7 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 Other 881,200 0 200,000 207,000 214,000 221,000 229,000 237,000 245,000 254,000 Subtotal Operating 10,160,200 9,560,000 10,004,000 11,286,000 12,207,000 13,050,000 13,835,000 14,592,000 15,273,000 15,900,000 Capital Connection fees 447,603 1,063,319 619,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Debt proceeds 0 0 6,364,000 0 0 0 0 0 0 0 Subtotal Capital 447,603 1,063,319 6,983,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Transfers & Adjustments Transfer In/(Out) 49,000 0 0 0 0 0 0 0 0 0 S u b t o t a l T r a n s f e r s & A d j u s t m e n t s 4 9 , 0 0 000000 0 0 0 0 Total Revenue, Transfers, and Adjustments $10,656,803 $10,623,319 $16,987,000 $11,924,000 $12,864,000 $13,727,000 $14,532,000 $15,310,000 $16,013,000 $16,662,000 Expenditures Operating Cost of sales8 4,800,000 4,332,370 4,484,000 4,641,000 4,803,000 4,971,000 5,145,000 5,325,000 5,511,000 5,704,000 Cost of services8 3,391,350 3,023,515 3,800,000 3,933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,671,000 4,834,000 Intragovernmental Transfers (General Fund) 1,311,300 1,706,000 1,561,000 1,616,000 1,673,000 1,732,000 1,793,000 1,856,000 1,921,000 1,988,000 Subtotal Operating 9,502,650 9,061,885 9,845,000 10,190,000 10,547,000 10,916,000 11,298,000 11,694,000 12,103,000 12,526,000 Capital Non-replacement capital improvement projects 3,919,048 836,000 2,000,000000 0 0 0 0 Replacement capital improvement projects 1,205,000 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Capital outlays 212,75000000 0 0 0 0 Existing Debt Service 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 Projected Debt Service I 0 0 0 485,000 485,000 485,000 485,000 485,000 485,000 485,000 Subtotal Capital 5,994,550 2,023,503 3,656,000 2,642,000 2,638,000 2,639,000 2,644,000 2,643,000 3,141,000 3,144,000 Transfers & Adjustments Projects - City Departments - Transfers 1,139,214 1,448,587 360,000000 0 0 0 0 Capital admin/other/5% GF overhead 208,106 40,0000000 0 0 0 0 Subtotal Transfers & Adjustments 1,347,320 1,488,587 360,000 0 0 0 0 0 0 0 Total Expenditures, Transfers, and Adjustments $16,844,520 $12,573,975 $13,861,000 $12,832,000 $13,185,000 $13,555,000 $13,942,000 $14,337,000 $15,244,000 $15,670,000 Net operating revenue (before debt service) 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 Net total revenue (6,187,717) (1,950,656) 3,126,000 (908,000) (321,000) 172,000 590,000 973,000 769,000 992,000 Ending Fund Balance 4,541,726 2,591,070 5,567,000 4,644,000 4,308,000 4,465,000 5,040,000 5,998,000 6,752,000 7,729,000 Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510,000 1,641,000 1,698,000 1,758,000 1,819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580,000 597,000 615,000 633,000 652,000 672,000 692,000 713,000 734,000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES YES YES YES YES YES Debt Service Coverage (Min 1.25 x)9 1.68 2.37 1.41 1.66 2.19 2.64 3.01 3.36 3.64 3.84 Projected 84 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total Non-Replacement Capital C501100 New Wells $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 C501200 Property Site Improvements 800,000 - - - - - 800,000 C500105 Reservoir Seismic Upgrades 15,000 - - - - - 15,000 C500101 Paula Lane Reservoir #2 21,000 2,000,000 - - - - 2,021,000 C501004 E. Wash. St. Water Main - - - - - - 0 Phase 2 Recycled Water - 0 Phase 3 Recycled Water - - - - - 0 Phase 4 Recycled Water 0 Phase 5 Recycled Water 0 Wellhead Treatment - - - - - - - - - 0 Total 836,000 2,000,000 0 0 0 0 0 0 0 2,836,000 5% GF transfer 40,000 95,000 0 0 0 0 0 0 0 135,000 Enhanced Water Conservation Water Conservation - - - - - - - - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Pay-as-you-go Contribution 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,500,000 Amount to be Financed 364,000 2,500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2006/2007 Bond1 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 85 Table 3 City of Petaluma - Water Utility Fund Petaluma Water Revenue 2001 Bonds Annual Debt Service November 1 Principal Interest Total 2004 $220,000 $437,753 $657,753 2005 230,000 429,503 659,503 2006 235,000 420,878 655,878 2007 245,000 412,065 657,065 2008 250,000 402,878 652,878 2009 260,000 393,503 653,503 2010 275,000 383,623 658,623 2011 285,000 372,623 657,623 2012 295,000 361,223 656,223 2013 310,000 349,054 659,054 2014 320,000 335,414 655,414 2015 335,000 321,014 656,014 2016 355,000 305,604 660,604 2017 270,000 289,185 559,185 2018 280,000 276,360 556,360 2019 295,000 262,920 557,920 2020 310,000 248,613 558,613 2021 325,000 233,500 558,500 2022 340,000 217,250 557,250 2023 360,000 200,250 560,250 2024 380,000 182,250 562,250 2025 400,000 163,250 563,250 2026 420,000 143,250 563,250 2027 440,000 122,250 562,250 2028 465,000 100,250 565,250 2029 485,000 77,000 562,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961,208 86 Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 U/W discount and bond insurance at 1.5% 107,848 Contingency/Rounding 33,000 Total Issue Size 7,189,848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485,000 Debt Issue II - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 U/W discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 *Based on current rates - subject to change 87 Table 1 City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projections - Ellis Creek Water Recyclin Actual Actual Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning All Fund Balance1 $4,808,070 $5,120,000 $6,010,000 $4,400,000 $7,910,000 $10,600,000 $10,520,000 $14,220,000 $15,280,000 $16,270,000 Average Single Family Residential Rate Increase2 13.0% 13.0% 13.0% 13.0% 13.0% 2.0% 0.0% 0.0% Capacity Fee3 3,329 3,409 3,506 3,629 3,756 3,887 4,023 4,164 4,310 4,461 No. of New Connections4 210 414 100 100 100 100 100 100 100 100 Revenues Operating Charges for services- Fixed Service Charges5 5,016,800 3,110,613 2,684,000 3,047,000 3,458,000 3,925,000 4,457,000 4,798,000 4,868,000 5,026,000 Charges for services- Wastewater Consumption Charges6 7,525,200 8,978,716 11,950,000 13,550,000 15,365,000 17,425,000 19,765,000 21,260,000 21,550,000 22,238,000 Connection fees 747,309 1,413,000 350,000 360,000 380,000 390,000 400,000 420,000 430,000 450,000 Intergovernmental/grants and other funds 842,302 - - 2,233,000 - - - - - - Investment earnings7 79,018 14,500 150,000 110,000 200,000 270,000 260,000 360,000 380,000 410,000 Other 143,000 - - - - - - - - - Subtotal Operating 14,353,629 13,516,829 15,134,000 19,300,000 19,403,000 22,010,000 24,882,000 26,838,000 27,228,000 28,124,000 Capital SRF Treatment Plant Proceeds - - 50,000,000 25,000,000 25,000,000 25,000,000 964,254 - - - Interim Financing Proceeds/(Adjustment) - 27,192,739 31,331,950 2,404,000 - - - - - - Projected Debt Proceeds - - - 9,067,000 - - 24,417,000 - - - Subtotal Debt - 27,192,739 81,331,950 36,471,000 25,000,000 25,000,000 25,381,254 - - - Total Revenues 14,353,629 40,709,568 96,465,950 55,771,000 44,403,000 47,010,000 50,263,254 26,838,000 27,228,000 28,124,000 Expenditures Operating8 Cost of services 6,050,442 7,095,239 7,516,120 7,780,000 8,050,000 8,330,000 8,620,000 8,920,000 9,230,000 9,550,000 Cost Allocation transfers (Intergovernmental Transfers) 946,950 1,218,750 1,359,050 1,410,000 1,460,000 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 Other - 250,000 200,000 - - - - - - - Subtotal Operating 6,997,392 8,563,989 9,075,170 9,190,000 9,510,000 9,840,000 10,180,000 10,530,000 10,900,000 11,280,000 Capital9 Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 - - Non-replacement capital improvement projects 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 - - - - Replacement capital improvement projects - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 1,457,000 1,508,000 1,561,000 Minor capital outlays 116,750 - - - - - - - - - Bank Line of Credit - Principal payment - - - - 11,842,000 24,670,000 24,417,000 - Debt Service 10 Series 2000 - Existing Debt Service 714,300 715,059 714,929 718,954 716,704 718,374 723,694 722,488 724,738 725,738 SRF Wastewater Capital Replacement Fund - - - - - - 689,141 689,141 689,141 689,141 Projected SRF Debt Service, 2.4%, 20 years - - - - - - 4,379,000 8,758,000 8,758,000 8,758,000 Bank Lines of Credit - Interest - 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 - - - Series 2007 Debt Service - - - 312,137 624,000 624,000 624,000 624,000 624,000 624,000 Series 2011 Debt Service - - - - - - 829,000 1,658,000 1,658,000 1,658,000 Subtotal Capital 4,535,000 28,581,000 87,835,000 41,854,000 30,961,000 35,974,000 35,076,000 13,909,000 13,962,000 14,016,000 Transfer and Adjustments Projects - City Departments - Transfers10 1,584,000 646,700 334,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Capital admin/other 177,000 1,341,000 - - - - - - - - Surfacewater O&M 746,000 691,478 835,050 864,000 894,000 925,000 957,000 990,000 1,025,000 1,061,000 Subtotal Transfers & Adjustments 2,507,000 2,679,178 1,169,050 1,214,000 1,244,000 1,275,000 1,307,000 1,340,000 1,375,000 1,411,000 Total Expenditures 14,039,392 39,824,167 98,079,220 52,258,000 41,715,000 47,089,000 46,563,000 25,779,000 26,237,000 26,707,000 Total Revenue less Total Expenditures 314,237 885,401 (1,613,270) 3,513,000 2,688,000 (79,000) 3,700,254 1,059,000 991,000 1,417,000 Ending Fund Balance $5,122,307 $6,005,401 $4,396,730 $7,913,000 $10,598,000 $10,521,000 $14,220,254 $15,279,000 $16,271,000 $17,687,000 Reserve Fund Targets O&M (60 days) Reserve 1,166,232 1,427,332 1,512,528 1,531,667 1,585,000 1,640,000 1,696,667 1,755,000 1,816,667 1,880,000 Capital Replacement & Improvement Reserve (Note) 934,000 962,000 991,000 1,021,000 1,052,000 1,084,000 1,117,000 1,151,000 1,186,000 1,222,000 Total Minimum Reserve Fund Targets 2,100,232 2,389,332 2,503,528 2,552,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Total Minimum Reserve Fund Targets Met Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Debt Service Coverage (Min 1.25 x) 7.39 3.50 1.85 2.35 2.09 2.80 1.64 1.29 1.29 1.33 Projected 88 Table 2 Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Non-Replacement Capital C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 $80,334,450 $26,555,000 $12,738,000 $330,000 $242,000 $150,126,201 C500AAA SCADA for Ellis Creek WRF 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - C501400 Wilmington Pump Station - - - 197,000 - - - 197,000 C500205 C Street Pump Station Upgrade 394,000 27,910 773,000 1,327,000 - - - 2,521,910 C500302 Recycled Water Pipeline - - - - - - - - C500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C500BBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper WWTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - C500403 River Access Improvements - - - - - - - - C500605 Petaluma Marsh Soil Remediation - - - - - - - - Total $3,704,000 $27,478,000 $83,813,000 $36,668,000 $13,526,000 $5,955,000 $242,000 $171,386,000 Admin and other 177,000 1,308,000 3,991,000 1,747,000 645,000 284,000 12,000 8,164,000 Total non-replacement CIP less admin/other 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 230,000 163,222,000 Replacement Capital 8221-54151 Sewer Main Repairs - - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 C500DDD 2nd St. Trunk Sewer Replace - - - - - - - - 8221-54110 Integrated Collection System - - 250,000 258,000 266,000 274,000 282,000 1,330,000 Total - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 152,968,689 Total Non-Ellis Creek Project Costs 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 0 18,417,189 Total replacement capital 0 0 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total CIP 3,704,000 27,478,000 85,063,000 37,956,000 14,853,000 7,322,000 1,650,000 178,026,000 (1) Certain projects receive grant funding which is shown on Table 2 as intergovernmental revenues. (2) Line of credit borrowing will be used based on an approval for retroactive funding from the SRF City of Petaluma - Wastewater Utility Fund 89 Table 3 Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $402,608 $712,608 2005 325,000 389,278 714,278 2006 340,000 375,059 26,616,751 715,059 2007 355,000 359,929 575,988 714,929 2008 375,000 343,954 718,954 2009 390,000 326,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 244,738 3,110,613 724,738 2014 505,000 220,738 8,978,716 725,738 2015 530,000 194,983 1,413,000 724,983 2016 560,000 167,423 727,423 2017 595,000 138,023 14,500 733,023 2018 625,000 106,488 731,488 2019 650,000 73,050 723,050 2020 690,000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 City of Petaluma - Wastewater Utility Fund 90 Table 4 Estimated Future Annual Debt Service for SRF and Interim Financing for Ellis Creek Water Recycling Facility 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Ellis Creek Water Recycling Project Cost $3,310,000 $27,192,739 $81,331,950 $27,404,000 $13,158,000 $330,000 $242,000 SRF Borrowing 0 0 50,000,000 25,000,000 25,000,000 25,000,000 964,254 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr)0 0 50,000,000 76,200,000 103,029,000 130,502,000 134,598,254 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829,000 2,473,000 3,132,000 3,230,000 Assumed Average Interest Rate 2.40%2.40% 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,978,716 Assumed Line of Credit Interest Payment Es 2004/05 2005/06 1413000 2007/08 2008/09 2009/10 2010/11 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 $0 $0 Outstanding Line (Current + Prior)27,192,739 58,524,689 60,928,689 60,928,689 49,086,689 24,416,689 Repayment of Line - - - - (11,842,000) (24,670,000) (24,416,689) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49,086,689 24,416,689 0 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 City of Petaluma - Wastewater Utility Fund 91 ATTACHMENT A ALTERNATIVE 1A – 1 YEAR PROGRAM WATER & WASTEWATER MODEL RUNS 92 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance1 $10,729,443 $4,541,726 $2,441,000 $5,456,000 $4,068,000 $2,370,000 $340,000 -$2,047,000 -$4,806,000 -$8,459,000 Rate Stabilization Fund $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225,000 $240,000 $255,000 Revenues Operating Charges for sales5 9,174,000 8,551,000 8,559,000 9,384,000 9,430,000 9,478,000 9,525,000 9,573,000 9,620,000 9,668,000 Charges for services6 0 909,000 1,088,000 1,094,000 1,099,000 1,105,000 1,110,000 1,116,000 1,121,000 1,127,000 Investment earnings7 105,000 100,000 61,000 136,000 102,000 59,000 9,000 -51,000 -120,000 -211,000 Other 881,200 0 200,000 207,000 214,000 221,000 229,000 237,000 245,000 254,000 Subtotal Operating 10,160,200 9,560,000 9,908,000 10,821,000 10,845,000 10,863,000 10,873,000 10,875,000 10,866,000 10,838,000 Capital Connection fees 447,603 1,063,319 619,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Debt proceeds 0 0 6,364,000 0 0 0 0 0 0 0 Subtotal Capital 447,603 1,063,319 6,983,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Transfers & Adjustments Transfer In/(Out) 49,000 0 0 0 0 0 0 0 0 0 Subtotal Transfers & Adjustments 49,000 0 0 0 0 0 0 0 0 0 Total Revenue, Transfers, and Adjustments $10,656,803 $10,623,319 $16,891,000 $11,459,000 $11,502,000 $11,540,000 $11,570,000 $11,593,000 $11,606,000 $11,600,000 Expenditures Operating Cost of sales8 4,800,000 4,332,370 4,484,000 4,641,000 4,803,000 4,971,000 5,145,000 5,325,000 5,511,000 5,704,000 Cost of services8 3,391,350 3,023,515 3,800,000 3,933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,671,000 4,834,000 Intragovernmental Transfers (General Fund) 1,311,300 1,706,000 1,561,000 1,616,000 1,673,000 1,732,000 1,793,000 1,856,000 1,921,000 1,988,000 Subtotal Operating 9,502,650 9,061,885 9,845,000 10,190,000 10,547,000 10,916,000 11,298,000 11,694,000 12,103,000 12,526,000 Capital Non-replacement capital improvement projects 3,919,048 836,000 2,000,000 0 0 0 0 0 0 0 Replacement capital improvement projects 1,205,000 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Capital outlays 212,750 0 0 0 0 0 0 0 0 0 Existing Debt Service 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 Projected Debt Service I 0 0 0 485,000 485,000 485,000 485,000 485,000 485,000 485,000 Subtotal Capital 5,994,550 2,023,503 3,656,000 2,642,000 2,638,000 2,639,000 2,644,000 2,643,000 3,141,000 3,144,000 Transfers & Adjustments Projects - City Departments - Transfers 1,139,214 1,448,587 360,000 0 0 0 0 0 0 0 Capital admin/other/5% GF overhead 208,106 40,000 0 0 0 0 0 0 0 0 Subtotal Transfers & Adjustments 1,347,320 1,488,587 360,000 0 0 0 0 0 0 0 Total Expenditures, Transfers, and Adjustments $16,844,520 $12,573,975 $13,861,000 $12,832,000 $13,185,000 $13,555,000 $13,942,000 $14,337,000 $15,244,000 $15,670,000 Net operating revenue (before debt service) 657,550 498,115 63,000 631,000 298,000 -53,000 -425,000 -819,000 -1,237,000 -1,688,000 Net total revenue (6,187,717) (1,950,656) 3,030,000 (1,373,000) (1,683,000) (2,015,000) (2,372,000) (2,744,000) (3,638,000) (4,070,000) Ending Fund Balance 4,541,726 2,591,070 5,471,000 4,083,000 2,385,000 355,000 (2,032,000) (4,791,000) (8,444,000) (12,529,000) Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510,000 1,641,000 1,698,000 1,758,000 1,819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580,000 597,000 615,000 633,000 652,000 672,000 692,000 713,000 734,000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES NO NO NO NO NO Debt Service Coverage (Min 1.25 x)9 1.68 2.37 1.27 1.26 1.00 0.72 0.42 0.11 -0.23 -0.59 Projected 93 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total Non-Replacement Capital C501100 New Wells $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 C501200 Property Site Improvements 800,000 - - - - - 800,000 C500105 Reservoir Seismic Upgrades 15,000 - - - - - 15,000 C500101 Paula Lane Reservoir #2 21,000 2,000,000 - - - - 2,021,000 C501004 E. Wash. St. Water Main - - - - - - 0 Phase 2 Recycled Water - 0 Phase 3 Recycled Water - - - - - 0 Phase 4 Recycled Water 0 Phase 5 Recycled Water 0 Wellhead Treatment - - - - - - - - - 0 Total 836,000 2,000,000 0 0 0 0 0 0 0 2,836,000 5% GF transfer 40,000 95,000 0 0 0 0 0 0 0 135,000 Enhanced Water Conservation Water Conservation - - - - - - - - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Pay-as-you-go Contribution 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,500,000 Amount to be Financed 364,000 2,500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2006/2007 Bond1 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 94 Table 3 City of Petaluma - Water Utility Fund Petaluma Water Revenue 2001 Bonds Annual Debt Service November 1 Principal Interest Total 2004 $220,000 $437,753 $657,753 2005 230,000 429,503 659,503 2006 235,000 420,878 655,878 2007 245,000 412,065 657,065 2008 250,000 402,878 652,878 2009 260,000 393,503 653,503 2010 275,000 383,623 658,623 2011 285,000 372,623 657,623 2012 295,000 361,223 656,223 2013 310,000 349,054 659,054 2014 320,000 335,414 655,414 2015 335,000 321,014 656,014 2016 355,000 305,604 660,604 2017 270,000 289,185 559,185 2018 280,000 276,360 556,360 2019 295,000 262,920 557,920 2020 310,000 248,613 558,613 2021 325,000 233,500 558,500 2022 340,000 217,250 557,250 2023 360,000 200,250 560,250 2024 380,000 182,250 562,250 2025 400,000 163,250 563,250 2026 420,000 143,250 563,250 2027 440,000 122,250 562,250 2028 465,000 100,250 565,250 2029 485,000 77,000 562,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961,208 95 Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 U/W discount and bond insurance at 1.5% 107,848 Contingency/Rounding 33,000 Total Issue Size 7,189,848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485,000 Debt Issue II - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 U/W discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 96 Table 1 City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projections - Ellis Creek Water Recyclin Actual Actual Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning All Fund Balance1 $4,808,070 $5,120,000 $6,010,000 $4,250,000 $6,750,000 $6,220,000 $380,000 -$4,630,000 -$14,170,000 -$24,100,000 Average Single Family Residential Rate Increase2 13.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Capacity Fee3 3,329 3,409 3,506 3,629 3,756 3,887 4,023 4,164 4,310 4,461 No. of New Connections4 210 414 100 100 100 100 100 100 100 100 Revenues Operating Charges for services- Fixed Service Charges5 5,016,800 3,110,613 2,657,000 2,859,000 2,872,000 2,885,000 2,899,000 2,912,000 2,926,000 2,949,000 Charges for services- Wastewater Consumption Charges6 7,525,200 8,978,716 11,830,000 12,721,000 12,766,800 12,811,000 12,861,000 12,906,800 12,951,000 13,045,000 Connection fees 747,309 1,413,000 350,000 360,000 380,000 390,000 400,000 420,000 430,000 450,000 Intergovernmental/grants and other funds 842,302 - - 2,233,000 - - - - - - Investment earnings7 79,018 14,500 150,000 110,000 170,000 160,000 10,000 - - - Other 143,000 - - - - - - - - - Subtotal Operating 14,353,629 13,516,829 14,987,000 18,283,000 16,188,800 16,246,000 16,170,000 16,238,800 16,307,000 16,444,000 Capital SRF Treatment Plant Proceeds - - 50,000,000 25,000,000 25,000,000 25,000,000 964,254 - - - Interim Financing Proceeds/(Adjustment) - 27,192,739 31,331,950 2,404,000 - - - - - - Projected Debt Proceeds - - - 9,067,000 - - 24,417,000 - - - Subtotal Debt - 27,192,739 81,331,950 36,471,000 25,000,000 25,000,000 25,381,254 - - - Total Revenues 14,353,629 40,709,568 96,318,950 54,754,000 41,188,800 41,246,000 41,551,254 16,238,800 16,307,000 16,444,000 Expenditures Operating8 Cost of services 6,050,442 7,095,239 7,516,120 7,780,000 8,050,000 8,330,000 8,620,000 8,920,000 9,230,000 9,550,000 Cost Allocation transfers (Intergovernmental Transfers) 946,950 1,218,750 1,359,050 1,410,000 1,460,000 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 Other - 250,000 200,000 - - - - - - - Subtotal Operating 6,997,392 8,563,989 9,075,170 9,190,000 9,510,000 9,840,000 10,180,000 10,530,000 10,900,000 11,280,000 Capital9 Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 - - Non-replacement capital improvement projects 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 - - - - Replacement capital improvement projects - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 1,457,000 1,508,000 1,561,000 Minor capital outlays 116,750 - - - - - - - - - Bank Line of Credit - Principal payment - - - - 11,842,000 24,670,000 24,417,000 - Debt Service 10 Series 2000 - Existing Debt Service 714,300 715,059 714,929 718,954 716,704 718,374 723,694 722,488 724,738 725,738 SRF Wastewater Capital Replacement Fund - - - - - - 689,141 689,141 689,141 689,141 Projected SRF Debt Service, 2.4%, 20 years - - - - - - 4,379,000 8,758,000 8,758,000 8,758,000 Bank Lines of Credit - Interest - 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 - - - Series 2007 Debt Service - - - 312,137 624,000 624,000 624,000 624,000 624,000 624,000 Series 2011 Debt Service - - - - - - 829,000 1,658,000 1,658,000 1,658,000 Subtotal Capital 4,535,000 28,581,000 87,835,000 41,854,000 30,961,000 35,974,000 35,076,000 13,909,000 13,962,000 14,016,000 Transfer and Adjustments Projects - City Departments - Transfers10 1,584,000 646,700 334,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Capital admin/other 177,000 1,341,000 - - - - - - - - Surfacewater O&M 746,000 691,478 835,050 864,000 894,000 925,000 957,000 990,000 1,025,000 1,061,000 Subtotal Transfers & Adjustments 2,507,000 2,679,178 1,169,050 1,214,000 1,244,000 1,275,000 1,307,000 1,340,000 1,375,000 1,411,000 Total Expenditures 14,039,392 39,824,167 98,079,220 52,258,000 41,715,000 47,089,000 46,563,000 25,779,000 26,237,000 26,707,000 Total Revenue less Total Expenditures 314,237 885,401 (1,760,270) 2,496,000 (526,200) (5,843,000) (5,011,746) (9,540,200) (9,930,000) (10,263,000) Ending Fund Balance $5,122,307 $6,005,401 $4,249,730 $6,746,000 $6,223,800 $377,000 -$4,631,746 -$14,170,200 -$24,100,000 -$34,363,000 Reserve Fund Targets O&M (60 days) Reserve 1,166,232 1,427,332 1,512,528 1,531,667 1,585,000 1,640,000 1,696,667 1,755,000 1,816,667 1,880,000 Capital Replacement & Improvement Reserve (Note) 934,000 962,000 991,000 1,021,000 1,052,000 1,084,000 1,117,000 1,151,000 1,186,000 1,222,000 Total Minimum Reserve Fund Targets 2,100,232 2,389,332 2,503,528 2,552,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Total Minimum Reserve Fund Targets Met Yes Yes Yes Yes Yes No No No No No Debt Service Coverage (Min 1.25 x) 7.39 3.50 1.80 2.09 1.33 1.35 0.59 0.39 0.36 0.34 Projected 97 Table 2 Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Non-Replacement Capital C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 $80,334,450 $26,555,000 $12,738,000 $330,000 $242,000 $150,126,201 C500AAA SCADA for Ellis Creek WRF 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - C501400 Wilmington Pump Station - - - 197,000 - - - 197,000 C500205 C Street Pump Station Upgrade 394,000 27,910 773,000 1,327,000 - - - 2,521,910 C500302 Recycled Water Pipeline - - - - - - - - C500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C500BBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper WWTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - C500403 River Access Improvements - - - - - - - - C500605 Petaluma Marsh Soil Remediation - - - - - - - - Total $3,704,000 $27,478,000 $83,813,000 $36,668,000 $13,526,000 $5,955,000 $242,000 $171,386,000 Admin and other 177,000 1,308,000 3,991,000 1,747,000 645,000 284,000 12,000 8,164,000 Total non-replacement CIP less admin/other 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 230,000 163,222,000 Replacement Capital 8221-54151 Sewer Main Repairs - - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 C500DDD 2nd St. Trunk Sewer Replace - - - - - - - - 8221-54110 Integrated Collection System - - 250,000 258,000 266,000 274,000 282,000 1,330,000 Total - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 152,968,689 Total Non-Ellis Creek Project Costs 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 0 18,417,189 Total replacement capital 0 0 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total CIP 3,704,000 27,478,000 85,063,000 37,956,000 14,853,000 7,322,000 1,650,000 178,026,000 (1) Certain projects receive grant funding which is shown on Table 2 as intergovernmental revenues. (2) Line of credit borrowing will be used based on an approval for retroactive funding from the SRF City of Petaluma - Wastewater Utility Fund 98 Table 3 Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $402,608 $712,608 2005 325,000 389,278 714,278 2006 340,000 375,059 26,616,751 715,059 2007 355,000 359,929 575,988 714,929 2008 375,000 343,954 718,954 2009 390,000 326,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 244,738 3,110,613 724,738 2014 505,000 220,738 8,978,716 725,738 2015 530,000 194,983 1,413,000 724,983 2016 560,000 167,423 727,423 2017 595,000 138,023 14,500 733,023 2018 625,000 106,488 731,488 2019 650,000 73,050 723,050 2020 690,000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 City of Petaluma - Wastewater Utility Fund 99 Table 4 Estimated Future Annual Debt Service for SRF and Interim Financing for Ellis Creek Water Recycling Facility 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Ellis Creek Water Recycling Project Cost $3,310,000 $27,192,739 $81,331,950 $27,404,000 $13,158,000 $330,000 $242,000 SRF Borrowing 0 0 50,000,000 25,000,000 25,000,000 25,000,000 964,254 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr)0 0 50,000,000 76,200,000 103,029,000 130,502,000 134,598,254 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829,000 2,473,000 3,132,000 3,230,000 Assumed Average Interest Rate 2.40%2.40% 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,978,716 Assumed Line of Credit Interest Payment Es 2004/05 2005/06 1413000 2007/08 2008/09 2009/10 2010/11 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 $0 $0 Outstanding Line (Current + Prior)27,192,739 58,524,689 60,928,689 60,928,689 49,086,689 24,416,689 Repayment of Line - - - - (11,842,000) (24,670,000) (24,416,689) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49,086,689 24,416,689 0 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 City of Petaluma - Wastewater Utility Fund 100 ATTACHMENT B ALTERNATIVE 1B – 2-YEAR PROGRAM WATER & WASTEWATER MODEL RUNS 101 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance1 $10,729,443 $4,541,726 $2,441,000 $5,456,000 $3,959,000 $2,695,000 $1,115,000 -$806,000 -$3,083,000 -$6,236,000 Rate Stabilization Fund $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225,000 $240,000 $255,000 Revenues Operating Charges for sales5 9,174,000 8,551,000 8,559,000 9,639,000 10,230,000 10,282,000 10,333,000 10,385,000 10,437,000 10,489,000 Charges for services6 0 909,000 1,088,000 1,230,000 1,236,000 1,243,000 1,249,000 1,255,000 1,261,000 1,268,000 Investment earnings7 105,000 100,000 61,000 136,000 99,000 67,000 28,000 -20,000 -77,000 -156,000 Other 881,200 0 200,000 207,000 214,000 221,000 229,000 237,000 245,000 254,000 Subtotal Operating 10,160,200 9,560,000 9,908,000 11,212,000 11,779,000 11,813,000 11,839,000 11,857,000 11,866,000 11,855,000 Capital Connection fees 447,603 1,063,319 619,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Debt proceeds 0 0 6,364,000 0 0 0 0 0 0 0 Subtotal Capital 447,603 1,063,319 6,983,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Transfers & Adjustments Transfer In/(Out) 49,000 0 0 0 0 0 0 0 0 0 S u b t o t a l T r a n s f e r s & A d j u s t m e n t s 4 9 , 0 0 000000 0 0 0 0 Total Revenue, Transfers, and Adjustments $10,656,803 $10,623,319 $16,891,000 $11,850,000 $12,436,000 $12,490,000 $12,536,000 $12,575,000 $12,606,000 $12,617,000 Expenditures Operating Cost of sales8 4,800,000 4,332,370 4,484,000 4,641,000 4,803,000 4,971,000 5,145,000 5,325,000 5,511,000 5,704,000 Cost of services8 3,391,350 3,023,515 3,800,000 3,933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,671,000 4,834,000 Intragovernmental Transfers (General Fund) 1,311,300 1,706,000 1,561,000 1,616,000 1,673,000 1,732,000 1,793,000 1,856,000 1,921,000 1,988,000 Subtotal Operating 9,502,650 9,061,885 9,845,000 10,190,000 10,547,000 10,916,000 11,298,000 11,694,000 12,103,000 12,526,000 Capital Non-replacement capital improvement projects 3,919,048 836,000 2,000,000000 0 0 0 0 Replacement capital improvement projects 1,205,000 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Capital outlays 212,75000000 0 0 0 0 Existing Debt Service 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 Projected Debt Service I 0 0 0 485,000 485,000 485,000 485,000 485,000 485,000 485,000 Subtotal Capital 5,994,550 2,023,503 3,656,000 2,642,000 2,638,000 2,639,000 2,644,000 2,643,000 3,141,000 3,144,000 Transfers & Adjustments Projects - City Departments - Transfers 1,139,214 1,448,587 360,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 Capital admin/other/5% GF overhead 208,106 40,0000000 0 0 0 0 Subtotal Transfers & Adjustments 1,347,320 1,488,587 360,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 Total Expenditures, Transfers, and Adjustments $16,844,520 $12,573,975 $13,861,000 $13,332,000 $13,685,000 $14,055,000 $14,442,000 $14,837,000 $15,744,000 $16,170,000 Net operating revenue (before debt service) 657,550 498,115 63,000 1,022,000 1,232,000 897,000 541,000 163,000 -237,000 -671,000 Net total revenue (6,187,717) (1,950,656) 3,030,000 (1,482,000) (1,249,000) (1,565,000) (1,906,000) (2,262,000) (3,138,000) (3,553,000) Ending Fund Balance 4,541,726 2,591,070 5,471,000 3,974,000 2,710,000 1,130,000 (791,000) (3,068,000) (6,221,000) (9,789,000) Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510,000 1,641,000 1,698,000 1,758,000 1,819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580,000 597,000 615,000 633,000 652,000 672,000 692,000 713,000 734,000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES NO NO NO NO NO Debt Service Coverage (Min 1.25 x)9 1.68 2.37 1.27 1.60 1.82 1.55 1.27 0.97 0.65 0.30 Projected 102 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total Non-Replacement Capital C501100 New Wells $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 C501200 Property Site Improvements 800,000 - - - - - 800,000 C500105 Reservoir Seismic Upgrades 15,000 - - - - - 15,000 C500101 Paula Lane Reservoir #2 21,000 2,000,000 - - - - 2,021,000 C501004 E. Wash. St. Water Main - - - - - - 0 Phase 2 Recycled Water - 0 Phase 3 Recycled Water - - - - - 0 Phase 4 Recycled Water 0 Phase 5 Recycled Water 0 Wellhead Treatment - - - - - - - - - 0 Total 836,000 2,000,000 0 0 0 0 0 0 0 2,836,000 5% GF transfer 40,000 95,000 0 0 0 0 0 0 0 135,000 Enhanced Water Conservation Water Conservation - - - - - - - - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Pay-as-you-go Contribution 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,500,000 Amount to be Financed 364,000 2,500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2006/2007 Bond1 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 103 Table 3 City of Petaluma - Water Utility Fund Petaluma Water Revenue 2001 Bonds Annual Debt Service November 1 Principal Interest Total 2004 $220,000 $437,753 $657,753 2005 230,000 429,503 659,503 2006 235,000 420,878 655,878 2007 245,000 412,065 657,065 2008 250,000 402,878 652,878 2009 260,000 393,503 653,503 2010 275,000 383,623 658,623 2011 285,000 372,623 657,623 2012 295,000 361,223 656,223 2013 310,000 349,054 659,054 2014 320,000 335,414 655,414 2015 335,000 321,014 656,014 2016 355,000 305,604 660,604 2017 270,000 289,185 559,185 2018 280,000 276,360 556,360 2019 295,000 262,920 557,920 2020 310,000 248,613 558,613 2021 325,000 233,500 558,500 2022 340,000 217,250 557,250 2023 360,000 200,250 560,250 2024 380,000 182,250 562,250 2025 400,000 163,250 563,250 2026 420,000 143,250 563,250 2027 440,000 122,250 562,250 2028 465,000 100,250 565,250 2029 485,000 77,000 562,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961,208 104 Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 U/W discount and bond insurance at 1.5% 107,848 Contingency/Rounding 33,000 Total Issue Size 7,189,848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485,000 Debt Issue II - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 U/W discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 *Based on current rates - subject to change 105 Table 1 City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projections - Ellis Creek Water Recyclin Actual Actual Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning All Fund Balance1 $4,808,070 $5,120,000 $6,010,000 $4,250,000 $7,600,000 $9,120,000 $5,390,000 $2,540,000 -$4,880,000 -$12,740,000 Average Single Family Residential Rate Increase2 13.0% 13.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Capacity Fee3 3,329 3,409 3,506 3,629 3,756 3,887 4,023 4,164 4,310 4,461 No. of New Connections4 210 414 100 100 100 100 100 100 100 100 Revenues Operating Charges for services- Fixed Service Charges5 5,016,800 3,110,613 2,657,000 3,016,000 3,245,000 3,260,000 3,275,000 3,291,000 3,306,000 3,332,000 Charges for services- Wastewater Consumption Charges6 7,525,200 8,978,716 11,830,000 13,414,000 14,421,000 14,475,200 14,531,000 14,585,200 14,641,000 14,743,000 Connection fees 747,309 1,413,000 350,000 360,000 380,000 390,000 400,000 420,000 430,000 450,000 Intergovernmental/grants and other funds 842,302 - - 2,233,000 - - - - - - Investment earnings7 79,018 14,500 150,000 110,000 190,000 230,000 130,000 60,000 - - Other 143,000 - - - - - - - - - Subtotal Operating 14,353,629 13,516,829 14,987,000 19,133,000 18,236,000 18,355,200 18,336,000 18,356,200 18,377,000 18,525,000 Capital SRF Treatment Plant Proceeds - - 50,000,000 25,000,000 25,000,000 25,000,000 964,254 - - - Interim Financing Proceeds/(Adjustment) - 27,192,739 31,331,950 2,404,000 - - - - - - Projected Debt Proceeds - - - 9,067,000 - - 24,417,000 - - - Subtotal Debt - 27,192,739 81,331,950 36,471,000 25,000,000 25,000,000 25,381,254 - - - Total Revenues 14,353,629 40,709,568 96,318,950 55,604,000 43,236,000 43,355,200 43,717,254 18,356,200 18,377,000 18,525,000 Expenditures Operating8 Cost of services 6,050,442 7,095,239 7,516,120 7,780,000 8,050,000 8,330,000 8,620,000 8,920,000 9,230,000 9,550,000 Cost Allocation transfers (Intergovernmental Transfers) 946,950 1,218,750 1,359,050 1,410,000 1,460,000 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 Other - 250,000 200,000 - - - - - - - Subtotal Operating 6,997,392 8,563,989 9,075,170 9,190,000 9,510,000 9,840,000 10,180,000 10,530,000 10,900,000 11,280,000 Capital9 Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 - - Non-replacement capital improvement projects 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 - - - - Replacement capital improvement projects - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 1,457,000 1,508,000 1,561,000 Minor capital outlays 116,750 - - - - - - - - - Bank Line of Credit - Principal payment - - - - 11,842,000 24,670,000 24,417,000 - Debt Service 10 Series 2000 - Existing Debt Service 714,300 715,059 714,929 718,954 716,704 718,374 723,694 722,488 724,738 725,738 SRF Wastewater Capital Replacement Fund - - - - - - 689,141 689,141 689,141 689,141 Projected SRF Debt Service, 2.4%, 20 years - - - - - - 4,379,000 8,758,000 8,758,000 8,758,000 Bank Lines of Credit - Interest - 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 - - - Series 2007 Debt Service - - - 312,137 624,000 624,000 624,000 624,000 624,000 624,000 Series 2011 Debt Service - - - - - - 829,000 1,658,000 1,658,000 1,658,000 Subtotal Capital 4,535,000 28,581,000 87,835,000 41,854,000 30,961,000 35,974,000 35,076,000 13,909,000 13,962,000 14,016,000 Transfer and Adjustments Projects - City Departments - Transfers10 1,584,000 646,700 334,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Capital admin/other 177,000 1,341,000 - - - - - - - - Surfacewater O&M 746,000 691,478 835,050 864,000 894,000 925,000 957,000 990,000 1,025,000 1,061,000 Subtotal Transfers & Adjustments 2,507,000 2,679,178 1,169,050 1,214,000 1,244,000 1,275,000 1,307,000 1,340,000 1,375,000 1,411,000 Total Expenditures 14,039,392 39,824,167 98,079,220 52,258,000 41,715,000 47,089,000 46,563,000 25,779,000 26,237,000 26,707,000 Total Revenue less Total Expenditures 314,237 885,401 (1,760,270) 3,346,000 1,521,000 (3,733,800) (2,845,746) (7,422,800) (7,860,000) (8,182,000) Ending Fund Balance $5,122,307 $6,005,401 $4,249,730 $7,596,000 $9,121,000 $5,386,200 $2,544,254 -$4,882,800 -$12,740,000 -$20,922,000 Reserve Fund Targets O&M (60 days) Reserve 1,166,232 1,427,332 1,512,528 1,531,667 1,585,000 1,640,000 1,696,667 1,755,000 1,816,667 1,880,000 Capital Replacement & Improvement Reserve (Note) 934,000 962,000 991,000 1,021,000 1,052,000 1,084,000 1,117,000 1,151,000 1,186,000 1,222,000 Total Minimum Reserve Fund Targets 2,100,232 2,389,332 2,503,528 2,552,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Total Minimum Reserve Fund Targets Met Yes Yes Yes Yes Yes Yes No No No No Debt Service Coverage (Min 1.25 x) 7.39 3.50 1.80 2.30 1.81 1.88 0.85 0.57 0.54 0.52 Projected 106 Table 2 Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Non-Replacement Capital C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 $80,334,450 $26,555,000 $12,738,000 $330,000 $242,000 $150,126,201 C500AAA SCADA for Ellis Creek WRF 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - C501400 Wilmington Pump Station - - - 197,000 - - - 197,000 C500205 C Street Pump Station Upgrade 394,000 27,910 773,000 1,327,000 - - - 2,521,910 C500302 Recycled Water Pipeline - - - - - - - - C500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C500BBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper WWTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - C500403 River Access Improvements - - - - - - - - C500605 Petaluma Marsh Soil Remediation - - - - - - - - Total $3,704,000 $27,478,000 $83,813,000 $36,668,000 $13,526,000 $5,955,000 $242,000 $171,386,000 Admin and other 177,000 1,308,000 3,991,000 1,747,000 645,000 284,000 12,000 8,164,000 Total non-replacement CIP less admin/other 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 230,000 163,222,000 Replacement Capital 8221-54151 Sewer Main Repairs - - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 C500DDD 2nd St. Trunk Sewer Replace - - - - - - - - 8221-54110 Integrated Collection System - - 250,000 258,000 266,000 274,000 282,000 1,330,000 Total - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 152,968,689 Total Non-Ellis Creek Project Costs 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 0 18,417,189 Total replacement capital 0 0 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total CIP 3,704,000 27,478,000 85,063,000 37,956,000 14,853,000 7,322,000 1,650,000 178,026,000 (1) Certain projects receive grant funding which is shown on Table 2 as intergovernmental revenues. (2) Line of credit borrowing will be used based on an approval for retroactive funding from the SRF City of Petaluma - Wastewater Utility Fund 107 Table 3 Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $402,608 $712,608 2005 325,000 389,278 714,278 2006 340,000 375,059 26,616,751 715,059 2007 355,000 359,929 575,988 714,929 2008 375,000 343,954 718,954 2009 390,000 326,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 244,738 3,110,613 724,738 2014 505,000 220,738 8,978,716 725,738 2015 530,000 194,983 1,413,000 724,983 2016 560,000 167,423 727,423 2017 595,000 138,023 14,500 733,023 2018 625,000 106,488 731,488 2019 650,000 73,050 723,050 2020 690,000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 City of Petaluma - Wastewater Utility Fund 108 Table 4 Estimated Future Annual Debt Service for SRF and Interim Financing for Ellis Creek Water Recycling Facility 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Ellis Creek Water Recycling Project Cost $3,310,000 $27,192,739 $81,331,950 $27,404,000 $13,158,000 $330,000 $242,000 SRF Borrowing 0 0 50,000,000 25,000,000 25,000,000 25,000,000 964,254 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr)0 0 50,000,000 76,200,000 103,029,000 130,502,000 134,598,254 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829,000 2,473,000 3,132,000 3,230,000 Assumed Average Interest Rate 2.40%2.40% 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,978,716 Assumed Line of Credit Interest Payment Es 2004/05 2005/06 1413000 2007/08 2008/09 2009/10 2010/11 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 $0 $0 Outstanding Line (Current + Prior)27,192,739 58,524,689 60,928,689 60,928,689 49,086,689 24,416,689 Repayment of Line - - - - (11,842,000) (24,670,000) (24,416,689) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49,086,689 24,416,689 0 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 City of Petaluma - Wastewater Utility Fund 109 ATTACHMENT C ALTERNATIVE 2 – 5-YEAR PROGRAM WATER & WASTEWATER MODEL RUNS 110 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance1 $10,729,443 $4,541,726 $2,441,000 $5,552,000 $4,629,000 $4,293,000 $4,450,000 $5,025,000 $5,983,000 $6,737,000 Rate Stabilization Fund $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225,000 $240,000 $255,000 Revenues Operating Charges for sales5 9,174,000 8,551,000 8,655,000 9,727,000 10,591,000 11,364,000 12,063,000 12,717,000 13,283,000 13,795,000 Charges for services6 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 Investment earnings7 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 Other 881,200 0 200,000 207,000 214,000 221,000 229,000 237,000 245,000 254,000 Subtotal Operating 10,160,200 9,560,000 10,004,000 11,286,000 12,207,000 13,050,000 13,835,000 14,592,000 15,273,000 15,900,000 Capital Connection fees 447,603 1,063,319 619,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Debt proceeds 0 0 6,364,000 0 0 0 0 0 0 0 Subtotal Capital 447,603 1,063,319 6,983,000 638,000 657,000 677,000 697,000 718,000 740,000 762,000 Transfers & Adjustments Transfer In/(Out) 49,000 0 0 0 0 0 0 0 0 0 S u b t o t a l T r a n s f e r s & A d j u s t m e n t s 4 9 , 0 0 000000 0 0 0 0 Total Revenue, Transfers, and Adjustments $10,656,803 $10,623,319 $16,987,000 $11,924,000 $12,864,000 $13,727,000 $14,532,000 $15,310,000 $16,013,000 $16,662,000 Expenditures Operating Cost of sales8 4,800,000 4,332,370 4,484,000 4,641,000 4,803,000 4,971,000 5,145,000 5,325,000 5,511,000 5,704,000 Cost of services8 3,391,350 3,023,515 3,800,000 3,933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,671,000 4,834,000 Intragovernmental Transfers (General Fund) 1,311,300 1,706,000 1,561,000 1,616,000 1,673,000 1,732,000 1,793,000 1,856,000 1,921,000 1,988,000 Subtotal Operating 9,502,650 9,061,885 9,845,000 10,190,000 10,547,000 10,916,000 11,298,000 11,694,000 12,103,000 12,526,000 Capital Non-replacement capital improvement projects 3,919,048 836,000 2,000,000000 0 0 0 0 Replacement capital improvement projects 1,205,000 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Capital outlays 212,75000000 0 0 0 0 Existing Debt Service 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 Projected Debt Service I 0 0 0 485,000 485,000 485,000 485,000 485,000 485,000 485,000 Subtotal Capital 5,994,550 2,023,503 3,656,000 2,642,000 2,638,000 2,639,000 2,644,000 2,643,000 3,141,000 3,144,000 Transfers & Adjustments Projects - City Departments - Transfers 1,139,214 1,448,587 360,000000 0 0 0 0 Capital admin/other/5% GF overhead 208,106 40,0000000 0 0 0 0 Subtotal Transfers & Adjustments 1,347,320 1,488,587 360,000 0 0 0 0 0 0 0 Total Expenditures, Transfers, and Adjustments $16,844,520 $12,573,975 $13,861,000 $12,832,000 $13,185,000 $13,555,000 $13,942,000 $14,337,000 $15,244,000 $15,670,000 Net operating revenue (before debt service) 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 Net total revenue (6,187,717) (1,950,656) 3,126,000 (908,000) (321,000) 172,000 590,000 973,000 769,000 992,000 Ending Fund Balance 4,541,726 2,591,070 5,567,000 4,644,000 4,308,000 4,465,000 5,040,000 5,998,000 6,752,000 7,729,000 Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510,000 1,641,000 1,698,000 1,758,000 1,819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580,000 597,000 615,000 633,000 652,000 672,000 692,000 713,000 734,000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES YES YES YES YES YES Debt Service Coverage (Min 1.25 x)9 1.68 2.37 1.41 1.66 2.19 2.64 3.01 3.36 3.64 3.84 Projected 111 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Total Non-Replacement Capital C501100 New Wells $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 C501200 Property Site Improvements 800,000 - - - - - 800,000 C500105 Reservoir Seismic Upgrades 15,000 - - - - - 15,000 C500101 Paula Lane Reservoir #2 21,000 2,000,000 - - - - 2,021,000 C501004 E. Wash. St. Water Main - - - - - - 0 Phase 2 Recycled Water - 0 Phase 3 Recycled Water - - - - - 0 Phase 4 Recycled Water 0 Phase 5 Recycled Water 0 Wellhead Treatment - - - - - - - - - 0 Total 836,000 2,000,000 0 0 0 0 0 0 0 2,836,000 5% GF transfer 40,000 95,000 0 0 0 0 0 0 0 135,000 Enhanced Water Conservation Water Conservation - - - - - - - - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 528,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Total 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 2,000,000 Pay-as-you-go Contribution 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,500,000 1,500,000 Amount to be Financed 364,000 2,500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2006/2007 Bond1 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 112 Table 3 City of Petaluma - Water Utility Fund Petaluma Water Revenue 2001 Bonds Annual Debt Service November 1 Principal Interest Total 2004 $220,000 $437,753 $657,753 2005 230,000 429,503 659,503 2006 235,000 420,878 655,878 2007 245,000 412,065 657,065 2008 250,000 402,878 652,878 2009 260,000 393,503 653,503 2010 275,000 383,623 658,623 2011 285,000 372,623 657,623 2012 295,000 361,223 656,223 2013 310,000 349,054 659,054 2014 320,000 335,414 655,414 2015 335,000 321,014 656,014 2016 355,000 305,604 660,604 2017 270,000 289,185 559,185 2018 280,000 276,360 556,360 2019 295,000 262,920 557,920 2020 310,000 248,613 558,613 2021 325,000 233,500 558,500 2022 340,000 217,250 557,250 2023 360,000 200,250 560,250 2024 380,000 182,250 562,250 2025 400,000 163,250 563,250 2026 420,000 143,250 563,250 2027 440,000 122,250 562,250 2028 465,000 100,250 565,250 2029 485,000 77,000 562,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961,208 113 Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 U/W discount and bond insurance at 1.5% 107,848 Contingency/Rounding 33,000 Total Issue Size 7,189,848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485,000 Debt Issue II - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 U/W discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 *Based on current rates - subject to change 114 Table 1 City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projections - Ellis Creek Water Recyclin Actual Actual Budget 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning All Fund Balance1 $4,808,070 $5,120,000 $6,010,000 $4,400,000 $7,910,000 $10,600,000 $10,520,000 $14,220,000 $15,280,000 $16,270,000 Average Single Family Residential Rate Increase2 13.0% 13.0% 13.0% 13.0% 13.0% 2.0% 0.0% 0.0% Capacity Fee3 3,329 3,409 3,506 3,629 3,756 3,887 4,023 4,164 4,310 4,461 No. of New Connections4 210 414 100 100 100 100 100 100 100 100 Revenues Operating Charges for services- Fixed Service Charges5 5,016,800 3,110,613 2,684,000 3,047,000 3,458,000 3,925,000 4,457,000 4,798,000 4,868,000 5,026,000 Charges for services- Wastewater Consumption Charges6 7,525,200 8,978,716 11,950,000 13,550,000 15,365,000 17,425,000 19,765,000 21,260,000 21,550,000 22,238,000 Connection fees 747,309 1,413,000 350,000 360,000 380,000 390,000 400,000 420,000 430,000 450,000 Intergovernmental/grants and other funds 842,302 - - 2,233,000 - - - - - - Investment earnings7 79,018 14,500 150,000 110,000 200,000 270,000 260,000 360,000 380,000 410,000 Other 143,000 - - - - - - - - - Subtotal Operating 14,353,629 13,516,829 15,134,000 19,300,000 19,403,000 22,010,000 24,882,000 26,838,000 27,228,000 28,124,000 Capital SRF Treatment Plant Proceeds - - 50,000,000 25,000,000 25,000,000 25,000,000 964,254 - - - Interim Financing Proceeds/(Adjustment) - 27,192,739 31,331,950 2,404,000 - - - - - - Projected Debt Proceeds - - - 9,067,000 - - 24,417,000 - - - Subtotal Debt - 27,192,739 81,331,950 36,471,000 25,000,000 25,000,000 25,381,254 - - - Total Revenues 14,353,629 40,709,568 96,465,950 55,771,000 44,403,000 47,010,000 50,263,254 26,838,000 27,228,000 28,124,000 Expenditures Operating8 Cost of services 6,050,442 7,095,239 7,516,120 7,780,000 8,050,000 8,330,000 8,620,000 8,920,000 9,230,000 9,550,000 Cost Allocation transfers (Intergovernmental Transfers) 946,950 1,218,750 1,359,050 1,410,000 1,460,000 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 Other - 250,000 200,000 - - - - - - - Subtotal Operating 6,997,392 8,563,989 9,075,170 9,190,000 9,510,000 9,840,000 10,180,000 10,530,000 10,900,000 11,280,000 Capital9 Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 - - Non-replacement capital improvement projects 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 - - - - Replacement capital improvement projects - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 1,457,000 1,508,000 1,561,000 Minor capital outlays 116,750 - - - - - - - - - Bank Line of Credit - Principal payment - - - - 11,842,000 24,670,000 24,417,000 - Debt Service 10 Series 2000 - Existing Debt Service 714,300 715,059 714,929 718,954 716,704 718,374 723,694 722,488 724,738 725,738 SRF Wastewater Capital Replacement Fund - - - - - - 689,141 689,141 689,141 689,141 Projected SRF Debt Service, 2.4%, 20 years - - - - - - 4,379,000 8,758,000 8,758,000 8,758,000 Bank Lines of Credit - Interest - 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 - - - Series 2007 Debt Service - - - 312,137 624,000 624,000 624,000 624,000 624,000 624,000 Series 2011 Debt Service - - - - - - 829,000 1,658,000 1,658,000 1,658,000 Subtotal Capital 4,535,000 28,581,000 87,835,000 41,854,000 30,961,000 35,974,000 35,076,000 13,909,000 13,962,000 14,016,000 Transfer and Adjustments Projects - City Departments - Transfers10 1,584,000 646,700 334,000 350,000 350,000 350,000 350,000 350,000 350,000 350,000 Capital admin/other 177,000 1,341,000 - - - - - - - - Surfacewater O&M 746,000 691,478 835,050 864,000 894,000 925,000 957,000 990,000 1,025,000 1,061,000 Subtotal Transfers & Adjustments 2,507,000 2,679,178 1,169,050 1,214,000 1,244,000 1,275,000 1,307,000 1,340,000 1,375,000 1,411,000 Total Expenditures 14,039,392 39,824,167 98,079,220 52,258,000 41,715,000 47,089,000 46,563,000 25,779,000 26,237,000 26,707,000 Total Revenue less Total Expenditures 314,237 885,401 (1,613,270) 3,513,000 2,688,000 (79,000) 3,700,254 1,059,000 991,000 1,417,000 Ending Fund Balance $5,122,307 $6,005,401 $4,396,730 $7,913,000 $10,598,000 $10,521,000 $14,220,254 $15,279,000 $16,271,000 $17,687,000 Reserve Fund Targets O&M (60 days) Reserve 1,166,232 1,427,332 1,512,528 1,531,667 1,585,000 1,640,000 1,696,667 1,755,000 1,816,667 1,880,000 Capital Replacement & Improvement Reserve (Note) 934,000 962,000 991,000 1,021,000 1,052,000 1,084,000 1,117,000 1,151,000 1,186,000 1,222,000 Total Minimum Reserve Fund Targets 2,100,232 2,389,332 2,503,528 2,552,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Total Minimum Reserve Fund Targets Met Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Debt Service Coverage (Min 1.25 x) 7.39 3.50 1.85 2.35 2.09 2.80 1.64 1.29 1.29 1.33 Projected 115 Table 2 Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Total Non-Replacement Capital C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 $80,334,450 $26,555,000 $12,738,000 $330,000 $242,000 $150,126,201 C500AAA SCADA for Ellis Creek WRF 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - C501400 Wilmington Pump Station - - - 197,000 - - - 197,000 C500205 C Street Pump Station Upgrade 394,000 27,910 773,000 1,327,000 - - - 2,521,910 C500302 Recycled Water Pipeline - - - - - - - - C500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C500BBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper WWTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - C500403 River Access Improvements - - - - - - - - C500605 Petaluma Marsh Soil Remediation - - - - - - - - Total $3,704,000 $27,478,000 $83,813,000 $36,668,000 $13,526,000 $5,955,000 $242,000 $171,386,000 Admin and other 177,000 1,308,000 3,991,000 1,747,000 645,000 284,000 12,000 8,164,000 Total non-replacement CIP less admin/other 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 230,000 163,222,000 Replacement Capital 8221-54151 Sewer Main Repairs - - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 C500DDD 2nd St. Trunk Sewer Replace - - - - - - - - 8221-54110 Integrated Collection System - - 250,000 258,000 266,000 274,000 282,000 1,330,000 Total - - 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total Ellis Creek Project Costs 3,310,000 27,192,739 81,331,950 27,404,000 13,158,000 330,000 242,000 152,968,689 Total Non-Ellis Creek Project Costs 394,000 284,839 2,481,350 9,264,000 368,000 5,625,000 0 18,417,189 Total replacement capital 0 0 1,250,000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 Total CIP 3,704,000 27,478,000 85,063,000 37,956,000 14,853,000 7,322,000 1,650,000 178,026,000 (1) Certain projects receive grant funding which is shown on Table 2 as intergovernmental revenues. (2) Line of credit borrowing will be used based on an approval for retroactive funding from the SRF City of Petaluma - Wastewater Utility Fund 116 Table 3 Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $402,608 $712,608 2005 325,000 389,278 714,278 2006 340,000 375,059 26,616,751 715,059 2007 355,000 359,929 575,988 714,929 2008 375,000 343,954 718,954 2009 390,000 326,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 288,694 723,694 2012 455,000 267,488 722,488 2013 480,000 244,738 3,110,613 724,738 2014 505,000 220,738 8,978,716 725,738 2015 530,000 194,983 1,413,000 724,983 2016 560,000 167,423 727,423 2017 595,000 138,023 14,500 733,023 2018 625,000 106,488 731,488 2019 650,000 73,050 723,050 2020 690,000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 City of Petaluma - Wastewater Utility Fund 117 Table 4 Estimated Future Annual Debt Service for SRF and Interim Financing for Ellis Creek Water Recycling Facility 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Ellis Creek Water Recycling Project Cost $3,310,000 $27,192,739 $81,331,950 $27,404,000 $13,158,000 $330,000 $242,000 SRF Borrowing 0 0 50,000,000 25,000,000 25,000,000 25,000,000 964,254 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr)0 0 50,000,000 76,200,000 103,029,000 130,502,000 134,598,254 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829,000 2,473,000 3,132,000 3,230,000 Assumed Average Interest Rate 2.40%2.40% 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,978,716 Assumed Line of Credit Interest Payment Es 2004/05 2005/06 1413000 2007/08 2008/09 2009/10 2010/11 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 $0 $0 Outstanding Line (Current + Prior)27,192,739 58,524,689 60,928,689 60,928,689 49,086,689 24,416,689 Repayment of Line - - - - (11,842,000) (24,670,000) (24,416,689) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49,086,689 24,416,689 0 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2,867,000 2,925,000 2,640,000 1,764,000 City of Petaluma - Wastewater Utility Fund 118 ATTACHMENT D AGENDA REPORT FOR CITY COUNCIL MEETING OF DECEMBER 18, 2006 (also includes information from City Council meetings of October 16, 2006 and December 4, 2006)