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Staff Report 10.A 01/22/2007
I Me CITY OF PETALUMA, CALIFORNIA AGENDA BILL Agenda Title: Public Hearing on Wastewater and Water Service Charges: Meeting Date: January 22, 2007 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- Meeting Time: ❑ 3:00 PM 191, B) A Resolution of the City Council of the City of Petaluma Adopting ® 7:00 PM A New Rate Schedule For Wastewater Service and Rescinding Resolution No. 2002-189 Cate2orv: ❑ Presentation ❑ Consent Calendar ® Public Hearing ❑ Unfinished Business ❑ New Business Department: Water Resources & Conservation Cost of Proposal: N/A Amount Budueted: N/A Director: Contact Person: Phone Number: Michael Ban, P.E. Michael Ban, P.E. 778-4487 Attachments to Agenda Packet Item: Agenda Report Resolution Adopting Water Revenue Program Resolution Adopting Wastewater Revenue Program Attachment A — Alternative 1 A 1-Year Program Model Runs Attachment B — Alternative I B 2-Year Program Model Runs Attachment C — Alternative 2 5-Year Program Model Runs Account Number: N/A Name of Fund: Water and Wastewater Enterprise Funds • 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 IA — 1 Year Program, Alternative I B — 2 Year Program, and Alternative 2 — 5 Year Program. Recommended Citv Council Action/SuLmyested 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 Attornev: plaroved City Manai er: CITY OF PETALUMA, CALIFORNIA JANUARY 22, 2007 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 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 1 A — 1 Year Program, Alternative I B — 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 2 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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 41h and 18th. WATER UTILITY FINANCIAL ANALYSIS The following factors were considered in the revenue program analysis: Operatin4 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 million'. General Ftind CIP overhead ivas set at $0 for FY 06-07 through FY 13-14. Agencv 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. ' Includes non -replacement capital improvement expenditures of $860,000, and replacement, or maintenance related, capital expenditures of $2 million. C:\Docuinents and Settings\ccooper.COFP\Desktop\IOAWaterWastewaterRates.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 million'. General Fund CIP overhead u'as 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. `' Includes non -replacement capital expenses of $26.2 million, and replacement, or maintenance -related capital expenses, of $647,000. 4 C:\Documents and Settings\ecooper.COFP\Desktop\IOAWaterWastewaterRates.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. Financinz. 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 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 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 I — 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 $60 million in interest costs versus conventional private financing. Another benefit is loan repayments do not begin until 1 year after construction is finished. d This fund is not an annual recurring fund, and is not designed to fund replacement of the Ellis Creek Water Recycling Facility. it is designed to establish a prudent equipment replacement and maintenance fund. 5 C:\Docmnents and Settings\ccooper.COFP\Desktop\1 OAWaterWastewaterRates.doc Alternative 1— Initiate Utility Investment Program There are two sub -alternatives for this program Alternative 1 A — 1 Year Program Alternative 1 B — 2 Year Program Alternative 1 A - Water Utility 0 Year Program) This alternative provides the water revenue necessary to fund the first year of the proposed utility investment program. The proposed water rates are shown in Table 1. The first rate adjustment would become effective February 1, 2007. Table 1: Proposed Water Rates - 1 Year Program TVDe of Charge 1-Feb-07 Monthly Service Charges ($/mo) 5/8" 4.47 5" 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 hct) S2.31 Tier 2 (10-18 hct) S2.61 Tier 3 ( 19-24 hct) S3.00 Tier 4 (25+ heft S3.24 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 $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. 5 The City's debt agreement stipulates that the net revenues of the utility be sufficient to yield at least 125 percent of the principal of and interest on the outstanding bonds payable from the net revenues of the utility during each fiscal year. 6 C:\Documents and Settings\ccooper.COFP\Desktop\IOAWaterWastewaterRates.doc R 0 O 20,000,000 15,000,000 - 10,000,000 5,000,000 0- -5,000,000 Chart 1: Water Fund Projections 1 Year Program Debt Agreement Violated 3.00 ME 2.00 rc 1.50 d rn d 1.00 0 U r, p i 0.50 v 0.00 10/11 11/12 12/13 " 13/14 -0.50 IIMM Total Operating Expenses 0 CIP/Debt Service Expenses — Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Alternative 1 A — Wastewater Utilitv (1 Year Promm) -1.00 This alternative provides the wastewater revenue necessary to fund the first year of the proposed utility investment program. The proposed wastewater rates are shown in Table 2. The first rate adjustment would become effective February 1, 2007. 7 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc Table 2: Proposed Wastewater Rates — 1 Year Program Type of Charge 1-Feb-07 Fixed monthly charge ($/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 S 10.29 High -Strength $10.29 Metered Industrial Users S10.29 Variable charge ($/hef) Single -Family Residential $4.88 Multi -Unit Residential S4.88 Commercial Low -Strength $4.86 Medium -Strength $5.78 High -Strength S7.48 Metered Industrial Users Flow ($/hcf) $3.62 BOD ($/lb) $0.35 TSS ($/Ib) $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 $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. The water and wastewater model runs for Alternative I are provided in Attachment A. M C:\Documents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.doc 30,000,000 25,000,000 20,000,000 - 15,000,000 N N O 0 t» 10,000,000 - 5,000,000 - (5,000,000) Chart 2: Wastewater Fund Projections 1 Year Program Debt Agreement Violated 4.0 - 3.5 3.0 2.5 d m W 2.0 O U � 1.0 0.5 12113 ., 1,3/14 0.0 Total Operating Expenses t CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Alternative 1 B - Water Utilitv (2 Year Program) This alternative provides the revenue program necessary to fund the first two years of the proposed utility investment. The proposed water rates are shown in Table 3. The first rate adjustment would become effective February 1, 2007, followed by a second rate adjustment in January 2008. E C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc Table 3: Proposed Water Rates - 2 Year Program Tvpe of Charge 1-Feb-07 l-Jan-08 Monthly Service Charges ($Imo) 5/8" 4.47 4.92 3/4" 4.47 4.92 1" (residential) 5.37 5.91 1" 5.55 6.11 1.5" 9.24 10.72 2" 13.94 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 S2.50 Tier 2 (10-18 hcf) $2.61 S2.87 Tier 3 ( 19-24 hcf) $3.00 S3.39 Tier 4 (25+ hef) S3.24 S3.75 Multi -Unit Residential, Business, Industrial, Public $2.44 S2.64 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 $0 in FY 09-10. Additional revenue would be necessary to prevent these consequences from occurring. 10 C:\Documents and Settings\ecooper.COFP\Desktop\1 OAWaterWastewaterRates.doc 20,000,000 15,000,000 10,000,000 N f6 O 69 5,000,000 0 -5,000,000 Chart 3: Water Fund Projections 2 Year Program Total Operating Expenses CIP/Debt Service Expenses Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Alternative I — Wastewater Utilitv (2 Year Program) 2.50 2.00 1.00 0.50 0.00 This alternative provides the wastewater revenue necessary to fund the first two years of the proposed utility investment program. The proposed wastewater rates are shown in Table 4. The first rate adjustment would become effective February 1, 2007, followed by a second adjustment in January 2008. 11 C:\Documents and Settings\ccooper.00FP\Desktop\I0AWaterWastewaterRates.doc Table 4: Proposed Wastewater Rates - 2 Year Program Type of Charge 1-Feb-07 1-Jan-08 Fixed monthly charge ($/mo.) Single -Family Residential S 10.29 S 1 L63 Multi -Unit Residential, per dwelling unit $10.29 $11.63 Unmetered Residential, per dwelling unit $49.96 S56.45 Commercial Low -Strength $10.29 $11.63 Medium -Strength $10.29 $11.63 High -Strength $10.29 $11.63 Metered Industrial Users $10.29 $11.63 Variable charge ($/hef) 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 $4.09 BOD ($/Ib) $0.35 $0.40 TSS ($/Ib) $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 $0 in FY 10-11. Additional revenue would be necessary to prevent these consequences from occurring. The water and wastewater model runs for Alternative I are provided in Attachment B. 12 C:\Docmnents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.doc 30,000,000 25,000,000 20,000,000 15,000,000 N 16 O O 10,000,000 5,000,000 (5,000,000) Chart 4: Wastewater Fund Projections 2 Year Program Debt Aareement Total Operating Expenses CIP/Debt Service Expenses ° " Operating Revenue Fund Balance Actual Debt Coverage Required Debt Coverage Alternative 2 — Fully Fund Utility Investment Program Water Utility (5 Year Program) 4.0 3.5 3.0 2.5 d rn m N 2.0 O U sr 0 1.5 1.0 0.5 0.0 This alternative provides the water revenue necessary to fully fund the proposed utility investment program. The proposed water rates are shown in Table 5. The first rate adjustment would become effective February 1, 2007. 13 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc Table 5: Proposed Water Rates Tvue of Charlie i-Feb-07 l-Jan-OS l-Jan-09 l-Jan-10 l-Jan-11 Monthly Service Charges ($/mo) 5/8" 4.47 4.92 5.17 5.42 5.69 /4" 4.47 4.92 5.17 5.42 5.69 1" (residential) 5.37 5.91 6.20 6.51 6.94 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) 52.31 52.50 $2.70 52.83 52.94 Tier 2 (10-18 hef) 52.61 $2.87 $3.10 S3 25 $3.41 Tier 3 ( 19-24 hef) $3.00 53.39 53.73 54.07 $4.35 Tier 4 (25+ hef) 53.24 S3.75 S4.13 S4.50 $4.82 Multi -Unit Residential, Business, Industrial, Public $2.44 52.64 52.80 52.96 $3.14 The water fund projections are illustrated in Chart 5. This chart shows the revenue program adequately provides for ongoing costs and debt service. 14 C:\Documents and Settings\ecooper.COFP\Desktop\IOAWaterWastewaterRates.doc 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 R O 0 8,000,000 - 6,000,000 4,000,000 2,000,000 0 Chart 5: Water Fund Projections 5 Year Program 05106 06/07 07/08 08/09 09/10 10111 11112 12/13 13114 Total Operating Expenses CIP/Debt Service Expenses - -- Operating Revenue Actual Debt Coverage Required Debt Coverage Wastewater Utilitv (5 Year Program) 4.50 4.00 3.50 3.00 m rn 2.50 m d O V 2.00 c W 1.50 1.00 0.50 0.00 This alternative provides the revenue necessary to fully fund the proposed utility investment program. The proposed wastewater rates are shown in Table 6. The first rate adjustment would become effective February 1, 2007. 15 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc Table 6: Proposed Wastewater Rates - 5 Year Program Type of Charge 1-Feb- 1-Jan- 1-Jan- 1-Jan- 07 08 09 10 1-Jan-11 Fixed monthly charge ($/mo.) Single -Family Residential $10.29 $11.63 $13.14 $14.85 $16.78 Multi -Unit Residential, per dwelling unit $10 29 $11.63 S 13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit $49.96 $56.45 $63.79 $72.08 $81.45 Commercial Low -Strength 510.29 $11.63 $13.14 $14.85 $16.78 Medium -Strength $1029 $11.63 $13.14 $14.95 $16.78 High -Strength 510.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users $10 29 $11.63 $13.14 $14,85 $16.78 Variable charge ($/hct) Single -Family Residential $4.88 $5.51 $6.23 $7.04 $7.96 Multi -Unit Residential $4.88 $5.51 56.23 57.04 $7.96 Commercial Low -Strength $4.86 $5.49 S6 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 $5.90 BOD ($/Ib) $0.35 $0.40 50.45 $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. 16 C:\Documents and Settings\ccooper.COFP\Desktop\IOAWaterWastewaterRates.doc 30,000,000 25,000,000 20,000,000 2 N c 15,000,000 0 w 10,000,000 5,000,000 Chart 6: Wastewater Fund Projections 5 Year Program 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Total Operating Expenses C CIP/Debt Service Expenses Operating Revenue (using rate increases) Actual Debt Coverage Required Debt Coverage 4. FINANCIAL IMPACTS: 4.0 3.5 3.0 2.5 1.5 0 1.0 0.5 0.0 13114 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. 17 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc 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 1 A 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 IA. 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. V. C:\Documents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.doc Chart 7: Monthly Water Residential Rate Comparison $50.00 $45.00 - $40.00 - ... $35.99 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 - $0.00 Windsor North Marin Petaluma 2007 Santa Rosa 2008 (2006) 19 $37.76 $ Cotati $47.39 2009 Sonoma R. Park MMWD H-burg (4107) C:\Documents and Settings\ccooper.COFP\Desktop\IOAWaterWastewaterRates.doc $80.00 $70.00 - $60.00 Chart 8: Monthly Wastewater Residential Rate Comparison $49.34 $50.00 $45.75 $43.06 $43.66 '' r �0 $40.00 $28.50 $30.00 r, $20.00 - $10.00 8 $0.00 i Novato Windsor Petaluma Sonoma 2007 (2006) $63.00 $55.75 $70.81 SUM 2008 2009 R. Park S. Rosa Healdsburg Cotati 20 C:\Documents and Settings\ecooper.COFP\Desktop\IOAWaterWastewaterRates.doc Table 7: Projected Water Charges for Sample Customers (5-Year Program) Average Estimated Monthly Bill Amount Annual Current Monthly Monthly Water Water Type of Customer Use (hef) 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 $33.09 535.99 $39.72 $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 5150.89 $171.15 $187.06 $201.60 $214.25 20-unit Apartment Building - 2" meter 65 S 145.53 $172.61 $187.52 S 199.41 $211 20 $223.69 Office Building - 2" meter 58 S 131.04 $155.51 $169.05 S 179.84 S 190.45 $201.69 Restaurant - I" meter 55 $124.83 $148.18 $161.14 S 171.45 $181.56 $192 27 Table 8: Projected Wastewater Charges For Sample Customers (5-Year Program) Average Current Estimated Monthly Bill Amount Monthly Monthly Wastewater Wastewater Type of Customer Use (hef) Bill Feb-07 Jan-08 Jan-09 Jan-10 Jan-11 Low - Single Family Residential 5 $30.71 534.70 $39.21 $44.30 $50.06 $56.57 Avg. - Single Family Residential 8 $43.66 $49.34 $55.75 $63.00 $71.19 $80A4 High - Single Family Residential 13 $65.26 $73.74 $83.33 $94.16 $106.40 $120.23 20-unit Apartment Building - 2" meter 65 5462.94 $523.12 $591.12 $667.97 $754.80 $852.93 Office Building - 2" meter 58 5258.39 $291.99 $329.94 $372.84 $421.30 $476.07 Restaurant - I" meter 55 $372.99 $421.48 $476 27 $538.19 $608.15 $687.21 21 C:\Documents and Settings\ccooper.COFP\Desktop\1 OAWaterWastewaterRates.doc RESOLUTION ADOPTING WATER REVENUE PROGRAM 22 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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; 23 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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 Recvcled 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. 24 C:\Documents and Settings\ecooper.COFP\Desktop\IOAWaterWastewaterRates.doc Meter Size Monthly Service Charge on Billings Rendered On or After the Dates Indicated Below Feb. 1, 2007 January 1, January 1, January 1, January 1, 2008 2009 2010 2011 5/8" $4.47 ( $4.92 $5.17 $5.42 $5.69 3/4" $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 Charze 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 Tier or Customer Below (per hef) Class Feb. 1, January 1, January 1, January 1, January 1, 2007 2008 2009 2010 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, $2.44 $2.64 $2.80 $2.96 $3.14 Industrial, Public (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 25 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.doc Commodity Charge on Billings Rendered On or After the Dates Indicated Below (per bet) Feb. 1, January 1, January 1, January 1, January 1, 2007 2008 2009 2010 2011 $1.46 I $1.58 I $1.68 I $1.77 I $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 '/2 $3.90 2 I $5.64 3 $8.40 4 $11.22 6 $16.80 8 I $22.44 (13) 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. (13) Restoration Charles. 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 Durinz Normal Working Hours (8:00 AM — 4:30 PM, Monday through Friday, excebtinj� 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. 26 C:\Documents and Settings\ecooper.00FP\Desktop\1 OAWaterWastewaterRates.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 Hvdrant 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 Hvdrant 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 $80 24 hours of permit issuance or relocation request) 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 3/4 - 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. 27 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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 I 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 C:\Documents and Settings\ecooper.COFP\Desktop\IOAWaterWastewaterRates.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. 29 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.doc EXHIBIT A TO RESOLUTION ADOPTING WATER REVENUE PROGRAM WE C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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. 31 C:\Docuinents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.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. x 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). 32 C:\Docmnents and Settings\ccooper.COFP\Desktop\IOAWaterWastewaterRates.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 Proiection 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: 33 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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. 34 C:\Docuinents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.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 11040MORM 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%. Cornrnercial 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 35 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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 Charles 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. 36 C:\Docuinents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.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 intragovemmental 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). 37 C:\Docuinents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.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 Resei-i,es 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 k C:\Docuinents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.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 39 C:\Documents and Settings\ecooper.COFP\Desktop\I OAWaterWastewaterRates.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 Char,2e 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 .O C:\Docmnents and Settings\ccooper.COFP\Desktop\ I OAWaterWastewaterRates.doc TABLES 41 Table 1 Recommended Water Rates Type of Charge Current Recommended Water Rates Rates 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan-10 1-Jan- 06 07 08 09 11 Monthly Service Charges ($/mo) 5/8" $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 ' g/4e> $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+ heft 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, $2.07 $2.44 $2.64 $2.80 $2.96 $3.14 Public 42 Type of Customer Low Single Family Residential Average Single Family Residential High Single Family Residential Very High Single Family Residential 20-unit Apartment Building 2" meter Office Building 2" meter Restaurant I " meter Table 2 Changes of Proposed Water Rates For Sample Customers Estimated Monthly Bill Amount Average Jan-07 Jan-08 Annual Current Monthly Monthly Water Use Water % % (hcf) Bill Amount Increase Amount Increase 8 $21.07 $22.96 9% $24.89 8% 12 $30.13 $33.09 10% $35.99 9% 18 $44.35 $48.73 10% $53.19 9% 50 $125.95 $150.89 20% $171.15 13% 65 $145.53 $172.61 19% $187.52 9% 58 $131.04 $155.51 19% $169.05 9% 55 $124.83 $148.18 19% $161.14 ( 9% 43 Jan-09 I Jan-10 Amount Increase $26.73 7% $38.72 8% $57.30 8% $187.06 9% $199.41 6% $179.84 6% $171.45 ( 6% Amount Increase $28.07 5% $40.65 5% $60.17 5% $201.60 8% $21 1.20 6% $190.45 6% $181.56 ( 6% Jan-11 Amount Increase $29.25 4% $42.43 4% $62.92 5% $214.25 6% $223.69 6% $201.69 6% $192.27 ( 6% Table 3 Comparison of Monthly Water Charges for Average Single Family Residential Customer Average Monthly Water Bill Agency (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 $47.39 Table 4 Recommended Wastewater Rates Type of Charge Current Recommended Wastewater Rates Rates 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan- 06 07 08 09 10 11 Fixed monthly charge ($/mo) Single -Family Residential $9.11 $10.29 $11.63 $13.14 S 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 S 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 55.51 $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 $0.51 50.57 TSS ($/lb) $0.34 $0.38 $0.43 $0.49 $0.55 $0.63 45 Table 5 Changes of Proposed Wastewater Rates For Sample Wastewater Customers Estimated Monthly Bill Amount Jan-07 Jan-08 Jan-09 Jan-10 Jan-I1 Average Current Monthly Monthly Wastewater Wastewater % % % % % Type of Customer Use (hcf) Bill Amount Increase Amount Increase Amount Increase Amount Increase Amount Increase Low 5 $30.71 $34.70 13% $39.21 13% $44.30 13% $50.06 13% $56.57 13% Single Family Residential Average 8 $43.66 $49.34 13% $55.75 13% $63.00 13% $71.19 13% $80.44 13% Single Family Residential High 13 $65.26 $73.74 13% $83.33 13% $94.16 13% $106.40 13% $120.23 13% Single Family Residential 20-unit Apartment Building 65 $462.94 $523.12 13% $591.12 13% $667.97 13% $754.80 13% $852.93 13% 2" meter Office Building 58 $258.39 $291.99 13% $329.94 13% $372.84 13% $421.30 13% $476.07 13% 2" meter Restaurant 55 $372.99 $421.48 13% $476.27 13% $538.19 13% $608.15 13% $687.21 13% 1" meter in Table 6 Comparison of Monthly Wastewater Charges for Average Single Family Residential Customer Average Monthly Single Family Residential Wastewater Bill Agency (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 47 MODEL RUNS M. Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Beginning Fund Balance' Rate Stabilization Fund Revenues Operating Charges for sales' Charges for services" Investment earnings' Other Subtotal Operating Capital Connection fees Debt proceeds Subtotal Capital Transfers & Adjustments Transfer In/(Out) Subtotal Transfers & Adjustments Total Revenue, Transfers, and Adjustments Expenditures Operating Cost of sales" Cost of services" Intragovernmental Transfers (General Fund) Subtotal Operating Capital Non -replacement capital improvement projects Replacement capital improvement projects Capital outlays Existing Debt Service Projected Debt Service I Subtotal Capital Transfers & Adustments Projects - City Departments - Transfers Capital admin/other/5% OF overhead Subtotal Transfers & Adjustments Total Expenditures. Transfers, and Adjustments Net operating revenue (before debt service) Net total revenue Ending Fund Balance Transfer to rate stabilization Reserve Fund Targets O&M (60 days) Reserve Capital Replacement & Improvement Reserve Total Minimum Reserve Fund Targets Total Minimum Reserve Fund Targets Met Debt Service Coverage (Min 1.25 x)' Actual Estimate Budget Projected 2004/05 2005106 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 $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 $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225.000 $240.000 $255,000 9,174.000 8.551,000 8,655,000 9.727,000 10,591,000 11,364,000 12,063,000 12,71T000 13,283,000 13T95,000 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 881 200200 0 200 000000 207 000 214 000000 221 000000 229 000000 237 000 245 000 254,000 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 44T603 1,063,319 619,000 638,000 657,000 677,000 69T000 718.000 740,000 762,000 0 0 6,364,000 0 0 0 0 0 0 0 447.603 1.063,319 6,983.000 638,000 657,000 677,000 697.000 718,000 740,000 762,000 49 000 0 0 0 0 0 0 0 0 0 49.000 0 0 0 0 0 0 0 0 0 $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 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 5704,000 3,391.350 3.023,515 3,800.000 3.933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,67L000 4,834,000 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 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 3,919,048 836,000 2,000,000 0 0 0 0 0 0 0 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 2,000,000 212,750 0 0 0 0 0 0 0 0 0 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 0 0 0 485 000000 485 000 485 000 485 000 485 000 485 000 485,000 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 3144,000 1,139,214 1,448,587 360,000 0 0 0 0 0 0 0 208,106 40,000 0 0 0 0 0 0 0 0 1,347.320 1,488,587 360.000 0 0 0 0 0 0 0 $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 $15,670,000 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 (6,187.717) (1,950,656) 3,126.000 (908,000) (321,000) 172,000 590,000 973.000 769.000 992,000 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 0 0 (15.000) (15,000) (15.000) (15,000) 115,000) (15,000) (15,000) (15,000) 1,584,000 1,510,000 1,641,000 1.698,000 1,758,000 1,8%000 1,883,000 1,949.000 2,017.000 2,088,000 580 000000 597 000 615 000000 63�_000 652 000000 672 000000 69�000 71J_000 7377>J_000 756,000 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 YES YES YES YES YES YES YES YES YES YES 1.68 2,37 1.41 1.66 2.19 2,64 3.01 3.36 3.64 3.84 / m 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 Bond' 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters all 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 51 Table City ofPetaluma 'VVaber Utility Fund Estimated Future Annual Debt Service I and 11 Debt Issue |-2008/07 25yearu Projects $6.364.000 Issuance costs 200.000 Reserve (1year Debt Service) 485.000 U/Wdiscount and bond insurance at1.5Y6 107'848 Contingency/Rounding 33,0KI0 Total Issue Size 7.189.848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485.000 Projects $O Issuance costs O Reserve (1year Debt Service) 0 U/Wdiscount and bond insurance ot1.596 0 Contingency/Rounding 8 Total Issue Size 0 Assumed Average Interest Rate* 5.0096 Estimated Annual Payment for Reserve Sizing $0 °Baaedonournentroteo-oubjeothoohango 52 \\ \� � \ � \\ \ \\ ( \ } \ \\}\��\ 1\\f� \}\ \ \ \ \ \ \\ }\ } \ \()\\ \ }}\} / (}10 \ \ zi0, ,_�,:_� \\\}(\( ...• ,:., ( \\ _ \ \\ \ } ( } ) \ { \ ) \\!!:/>|<\\ f\/}// ! Table 2 City of Petaluma - Wastewater Utility Fund 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 WIRE 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - 0501400 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 - - - - - - - - 0500505 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 W WTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - 0500403 River Access Improvements - - - - - - - - 0500605 Petaluma Marsh Soil Remediation - - Total $3,704,000 $27A78,000 $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 1.091000 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 54 Table 3 City of Petaluma - Wastewater Utility Fund 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 55 Table 4 City of Petaluma - Wastewater Utility Fund 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 E! 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 56 RESOLUTION ADOPTING 57 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; W. 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. 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. SECTION 2.1 DEFINITIONS. ARTICLE II DEFINITIONS 59 "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 Fixed Monthly Charge For Billings Rendered On Or After the Classification Dates Indicated Below CCi17 Feb. 1, January 1, January 1, January 1, January 1, 2007 2008 2009 2010 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 $16.78 Metered Industrial Users ($/]no) $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%). 61 Table 2. Variable Wastewater User Charges Wastewater Customer Variable User Charge For Billings Rendered On Or After the Dates Classification Indicated Below January 1, January 1, January 1, January 1, Feb. 1, 2007 2008 2009 2010 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 Analvsis Charges. (a) Outside Laboratories. Samples analyzed by outside laboratories shall be charged at cost per sample. (b) City Laboratorv. 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 pen -nit. (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 62 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. 63 EXHIBIT A TO RESOLUTION ADOPTING WATER REVENUE PROGRAM 64 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)' 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 ' BWA is a public finance consulting finn with over 40 years' experience providing independent, objective financial advice to public agencies throughout California. 65 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 200 12 . 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. ' 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). 66 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 Proiection 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: 67 • 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. M. 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 11040MORM 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%. Cornrnercial 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 69 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 Charles 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. Of 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 intragovemmental 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). 71 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 Resei-i,es 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 72 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 73 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. 74 F 75 Table 1 Recommended Water Rates Type of Charge Current Recommended Water Rates Rates 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan-10 1-Jan- 06 07 08 09 11 Monthly Service Charges ($/mo) 5/8" $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 ' g/4e> $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+ heft 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, $2.07 $2.44 $2.64 $2.80 $2.96 $3.14 Public 76 Type of Customer Low Single Family Residential Average Single Family Residential High Single Family Residential Very High Single Family Residential 20-unit Apartment Building 2" meter Office Building 2" meter Restaurant I " meter Table 2 Changes of Proposed Water Rates For Sample Customers Estimated Monthly Bill Amount Average Jan-07 Jan-08 Annual Current Monthly Monthly Water Use Water % % (hcf) Bill Amount Increase Amount Increase 8 $21.07 $22.96 9% $24.89 8% 12 $30.13 $33.09 10% $35.99 9% 18 $44.35 $48.73 10% $53.19 9% 50 $125.95 $150.89 20% $171.15 13% 65 $145.53 $172.61 19% $187.52 9% 58 $131.04 $155.51 19% $169.05 9% 55 $124.83 $148.18 19% $161.14 ( 9% 77 Jan-09 I Jan-10 Amount Increase $26.73 7% $38.72 8% $57.30 8% $187.06 9% $199.41 6% $179.84 6% $171.45 ( 6% Amount Increase $28.07 5% $40.65 5% $60.17 5% $201.60 8% $21 1.20 6% $190.45 6% $181.56 ( 6% Jan-11 Amount Increase $29.25 4% $42.43 4% $62.92 5% $214.25 6% $223.69 6% $201.69 6% $192.27 ( 6% Table 3 Comparison of Monthly Water Charges for Average Single Family Residential Customer Average Monthly Water Bill Agency (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 $47.39 Table 4 Recommended Wastewater Rates Type of Charge Current Recommended Wastewater Rates Rates 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan- 1-Jan- 06 07 08 09 10 11 Fixed monthly charge ($/mo) Single -Family Residential $9.11 $10.29 $11.63 $13.14 S 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 S 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 55.51 $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 $0.51 50.57 TSS ($/lb) $0.34 $0.38 $0.43 $0.49 $0.55 $0.63 79 Table 5 Changes of Proposed Wastewater Rates For Sample Wastewater Customers Estimated Monthly Bill Amount Jan-07 Jan-08 Jan-09 Jan-10 Jan-I1 Average Current Monthly Monthly Wastewater Wastewater % % % % % Type of Customer Use (hcf) Bill Amount Increase Amount Increase Amount Increase Amount Increase Amount Increase Low 5 $30.71 $34.70 13% $39.21 13% $44.30 13% $50.06 13% $56.57 13% Single Family Residential Average 8 $43.66 $49.34 13% $55.75 13% $63.00 13% $71.19 13% $80.44 13% Single Family Residential High 13 $65.26 $73.74 13% $83.33 13% $94.16 13% $106.40 13% $120.23 13% Single Family Residential 20-unit Apartment Building 65 $462.94 $523.12 13% $591.12 13% $667.97 13% $754.80 13% $852.93 13% 2" meter Office Building 58 $258.39 $291.99 13% $329.94 13% $372.84 13% $421.30 13% $476.07 13% 2" meter Restaurant 55 $372.99 $421.48 13% $476.27 13% $538.19 13% $608.15 13% $687.21 13% 1" meter .N Table 6 Comparison of Monthly Wastewater Charges for Average Single Family Residential Customer Average Monthly Single Family Residential Wastewater Bill Agency (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 RIM MODEL RUNS M. Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Beginning Fund Balance' Rate Stabilization Fund Revenues Operating Charges for sales' Charges for services" Investment earnings' Other Subtotal Operating Capital Connection fees Debt proceeds Subtotal Capital Transfers & Adjustments Transfer In/(Out) Subtotal Transfers & Adjustments Total Revenue, Transfers, and Adjustments Expenditures Operating Cost of sales" Cost of services" Intragovernmental Transfers (General Fund) Subtotal Operating Capital Non -replacement capital improvement projects Replacement capital improvement projects Capital outlays Existing Debt Service Projected Debt Service I Subtotal Capital Transfers & Adustments Projects - City Departments - Transfers Capital admin/other/5% OF overhead Subtotal Transfers & Adjustments Total Expenditures. Transfers, and Adjustments Net operating revenue (before debt service) Net total revenue Ending Fund Balance Transfer to rate stabilization Reserve Fund Targets O&M (60 days) Reserve Capital Replacement & Improvement Reserve Total Minimum Reserve Fund Targets Total Minimum Reserve Fund Targets Met Debt Service Coverage (Min 1.25 x)' Actual Estimate Budget Projected 2004/05 2005106 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 $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 $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225.000 $240.000 $255,000 9,174.000 8.551,000 8,655,000 9.727,000 10,591,000 11,364,000 12,063,000 12,71T000 13,283,000 13T95,000 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 881 200200 0 200 000000 207 000 214 000000 221 000000 229 000000 237 000 245 000 254,000 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 44T603 1,063,319 619,000 638,000 657,000 677,000 69T000 718.000 740,000 762,000 0 0 6,364,000 0 0 0 0 0 0 0 447.603 1.063,319 6,983.000 638,000 657,000 677,000 697.000 718,000 740,000 762,000 49 000 0 0 0 0 0 0 0 0 0 49.000 0 0 0 0 0 0 0 0 0 $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 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 5704,000 3,391.350 3.023,515 3,800.000 3.933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,67L000 4,834,000 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 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 3,919,048 836,000 2,000,000 0 0 0 0 0 0 0 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 2,000,000 212,750 0 0 0 0 0 0 0 0 0 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 0 0 0 485 000000 485 000 485 000 485 000 485 000 485 000 485,000 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 3144,000 1,139,214 1,448,587 360,000 0 0 0 0 0 0 0 208,106 40,000 0 0 0 0 0 0 0 0 1,347.320 1,488,587 360.000 0 0 0 0 0 0 0 $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 $15,670,000 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 (6,187.717) (1,950,656) 3,126.000 (908,000) (321,000) 172,000 590,000 973.000 769.000 992,000 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 0 0 (15.000) (15,000) (15.000) (15,000) 115,000) (15,000) (15,000) (15,000) 1,584,000 1,510,000 1,641,000 1.698,000 1,758,000 1,8%000 1,883,000 1,949.000 2,017.000 2,088,000 580 000000 597 000 615 000000 63�_000 652 000000 672 000000 69�000 71J_000 7377>J_000 756,000 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 YES YES YES YES YES YES YES YES YES YES 1.68 2,37 1.41 1.66 2.19 2,64 3.01 3.36 3.64 3.84 RN 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 Bond' 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters •E 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 M. Table City ofPetaluma 'VVaber Utility Fund Estimated Future Annual Debt Service I and 11 Debt Issue |-2008/07 25yearu Projects $6.364.000 Issuance costs 200.000 Reserve (1year Debt Service) 485.000 U/Wdiscount and bond insurance at1.5Y6 107'848 Contingency/Rounding 33,0KI0 Total Issue Size 7.189.848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485.000 Projects $O Issuance costs O Reserve (1year Debt Service) 0 U/Wdiscount and bond insurance ot1.596 0 Contingency/Rounding 8 Total Issue Size 0 Assumed Average Interest Rate* 5.0096 Estimated Annual Payment for Reserve Sizing $0 °Baaedonournentroteo-oubjeothoohango �� \\ \� � \ � \\ \ \\ ( \ } \ \\}\��\ 1\\f� \}\ \ \ \ \ \ \\ }\ } \ \()\\ \ }}\} / (}10 \ \ zi0, ,_�,:_� \\\}(\( ...• ,:., ( \\ _ \ \\ \ } ( } ) \ { \ ) \\!!:/>|<\\ f\/}// ! I. Table 2 City of Petaluma - Wastewater Utility Fund 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 WIRE 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - 0501400 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 - - - - - - - - 0500505 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 W WTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - 0500403 River Access Improvements - - - - - - - - 0500605 Petaluma Marsh Soil Remediation - - Total $3,704,000 $27A78,000 $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 1.091000 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 • • Table 3 City of Petaluma - Wastewater Utility Fund 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 M. Table 4 City of Petaluma - Wastewater Utility Fund 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 E! 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 E, ATTACHMENT A ALTERNATIVE I A - I YEAR PROGRAM 91 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget Projected 20G4105 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance' $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-$8A59,000 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 sales' 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 services' 0 909,000 1,088,000 1,094,000 1,099,000 T105,000 1,110,000 1,116,000 1.121,000 1,127,000 Investment earnings' 105,000 100,000 61,000 136,000 102,000 59,000 9,000 -51,000 -120,000 -211,000 Other 881 200200 0 200000 207 000000 214000 221 000000 229 000000 237 000000 245 000000 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 & Adiustments 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 sales' 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 services" 3,391,350 3,023,515 3,800,000 3.933,000 4,071,000 4,213,000 4360,000 4,513,000 4,671,000 4,834,000 Intragovemmental Transfers (General Fund) 1,311,300 1.706.000 1,56L000 1.616,000 1,673.000 1,732,000 1.7 33.000 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 1 0 0 0 484�000 485 000000 485 000 485 000 485 000 485 000 48�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 $15,670,000 Net operating revenue (before debt service) 657,550 498,115 63,000 631,000 298.000 -53,000 -425,000 -819,000 -1,237,000 -1.688,000 Net total revenue (6,187,717) (1.950,656) 3,030,000 (1.373,000) (1,683,000) (2,015,000) (2,372,000) (2,744,000) (3,638,000) (4,070,000) Ending Fund Balance 4,541,726 2,591,070 5,471,000 4,083,000 2,385,000 355,000 (2,032,000) (4,791,000) (8,444,000) (12,529,000) Transfer to rate stabilization 0 0 (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) (15,000) Reserve Fund Targets O&M (60 days) Reserve 1,584,000 1,510.000 1,641.000 1.698,000 1,758,000 1.819,000 1,883,000 1,949,000 2,017,000 2,088,000 Capital Replacement & Improvement Reserve 580 000000 597 000000 615000 633 000 652000 672 000 692 000 713 000 734 000 756,000 Total Minimum Reserve Fund Targets 2,164,000 2,107,000 2,256,000 2,331,000 2,410,000 2,491,000 2,575,000 2,662,000 2,751,000 2,844,000 Total Minimum Reserve Fund Targets Met YES YES YES YES YES x"Z " ':.� ����� � ��������, � � "IgCY"' ""$q,L1 Debt Service Coverage (Min 1 25 x)" 1 68 237 127 1.26 1% 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 Bond' 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 93 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 r'' Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and II Debt Issue 1- 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 11 - 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 95 !I I I -:_ !;!!!2 ;=:2r - -- * !}, ET ET m � Table 2 City of Petaluma - Wastewater Utility Fund 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 WIRE 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - 0501400 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 - - - - - - - - 0500505 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 W WTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - 0500403 River Access Improvements - - - - - - - - 0500605 Petaluma Marsh Soil Remediation - - Total $3,704,000 $27A78,000 $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 1.091000 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 97 Table 3 City of Petaluma - Wastewater Utility Fund 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 .• Table 4 City of Petaluma - Wastewater Utility Fund 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 E! 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 M ATTACHMENT B ALTERNATIVE I B - 2-YEAR PROGRAM 100 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget Projected 2004/05 2005106 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Beginning Fund Balance' $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 sales' 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 10A89,000 Charges for services" 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 earnings' 105,000 100,000 61,000 136,000 99,000 67,000 28,000 -20,000 -77,000 -156,000 Other 881 200200 0 200 000000 207 000 214 000000 221 000000 229 000000 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 44T603 1,063,319 619,000 638,000 657,000 677,000 69T000 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 $11,850,000 $12,436,000 $12,490,000 $12,536,000 $12,575,000 $12,606,000 $12,617,000 Expenditures Operating Cost of sales" 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 5704,000 Cost of servrnces" 3,391.350 3.023,515 3,800.000 3.933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,67L000 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 000000 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 & Adustments 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 40,000 0 0 0 0 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 5K000 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 2591,070 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) 115,000) (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 1,8%000 1,883.000 1,949.000 2,017.000 2,088,000 Capital Replacement & Improvement Reserve 580 000000 597 000 615 000000 63�_000 652 000000 672 000000 69�000 71J_000 7377>J_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 Debt Service Coverage (Min 1.25 x)' 1.68 2,37 1.27 1,60 1.82 1,55 127 Ovill Aot; 101 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 Bond' 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters 102 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 16,961,208 103 Table City ofPetaluma 'VVaber Utility Fund Estimated Future Annual Debt Service I and 11 Debt Issue |-2008/07 25yearu Projects $6.364.000 Issuance costs 200.000 Reserve (1year Debt Service) 485.000 U/Wdiscount and bond insurance at1.5Y6 107'848 Contingency/Rounding 33,0KI0 Total Issue Size 7.189.848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485.000 Projects $O Issuance costs O Reserve (1year Debt Service) 0 U/Wdiscount and bond insurance ot1.596 0 Contingency/Rounding 8 Total Issue Size 0 Assumed Average Interest Rate* 5.0096 Estimated Annual Payment for Reserve Sizing $0 °Baaedonournentroteo-oubjeothoohango 104 ar - -- * !}, \ 0 y Table 2 City of Petaluma - Wastewater Utility Fund 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 WIRE 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - 0501400 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 - - - - - - - - 0500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C50OBBB Lakeville Highway Improvements - - - - - 0 C500405 Oxidation Pond Dike Repair - 256,929 - - - - - 256,929 C500305 Demolition of Hopper W WTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - 0500403 River Access Improvements - - - - - - - - 0500605 Petaluma Marsh Soil Remediation - - Total $3,704,000 $27A78,000 $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 1.091000 1,126,000 5,310,000 C50ODDD 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 106 Table 3 City of Petaluma - Wastewater Utility Fund 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 12,275,475 107 Table 4 City of Petaluma - Wastewater Utility Fund 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 E! 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 ATTACHMENT C ALTERNATIVE 2 - 5-YEAR PROGRAM 109 Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Beginning Fund Balance' Rate Stabilization Fund Revenues Operating Charges for sales' Charges for services" Investment earnings' Other Subtotal Operating Capital Connection fees Debt proceeds Subtotal Capital Transfers & Adjustments Transfer In/(Out) Subtotal Transfers & Adjustments Total Revenue, Transfers, and Adjustments Expenditures Operating Cost of sales" Cost of services" Intragovernmental Transfers (General Fund) Subtotal Operating Capital Non -replacement capital improvement projects Replacement capital improvement projects Capital outlays Existing Debt Service Projected Debt Service I Subtotal Capital Transfers & Adustments Projects - City Departments - Transfers Capital admin/other/5% OF overhead Subtotal Transfers & Adjustments Total Expenditures. Transfers, and Adjustments Net operating revenue (before debt service) Net total revenue Ending Fund Balance Transfer to rate stabilization Reserve Fund Targets O&M (60 days) Reserve Capital Replacement & Improvement Reserve Total Minimum Reserve Fund Targets Total Minimum Reserve Fund Targets Met Debt Service Coverage (Min 1.25 x)' Actual Estimate Budget Projected 2004/05 2005106 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 $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 $0 $0 $150,000 $165,000 $180,000 $195,000 $210,000 $225.000 $240.000 $255,000 9,174.000 8.551,000 8,655,000 9.727,000 10,591,000 11,364,000 12,063,000 12,71T000 13,283,000 13T95,000 0 909,000 1,088,000 1,213,000 1,286,000 1,358,000 1,432,000 1,512,000 1,595,000 1,683,000 105,000 100,000 61,000 139,000 116,000 107,000 111,000 126,000 150,000 168,000 881 200200 0 200 000000 207 000 214 000000 221 000000 229 000000 237 000 245 000 254,000 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 44T603 1,063,319 619,000 638,000 657,000 677,000 69T000 718.000 740,000 762,000 0 0 6,364,000 0 0 0 0 0 0 0 447.603 1.063,319 6,983.000 638,000 657,000 677,000 697.000 718,000 740,000 762,000 49 000 0 0 0 0 0 0 0 0 0 49.000 0 0 0 0 0 0 0 0 0 $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 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 5704,000 3,391.350 3.023,515 3,800.000 3.933,000 4,071,000 4,213,000 4,360,000 4,513,000 4,67L000 4,834,000 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 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 3,919,048 836,000 2,000,000 0 0 0 0 0 0 0 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 2,000,000 212,750 0 0 0 0 0 0 0 0 0 657,753 659,503 656,000 657,000 653,000 654,000 659,000 658,000 656,000 659,000 0 0 0 485 000000 485 000 485 000 485 000 485 000 485 000 485,000 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 3144,000 1,139,214 1,448,587 360,000 0 0 0 0 0 0 0 208,106 40,000 0 0 0 0 0 0 0 0 1,347.320 1,488,587 360.000 0 0 0 0 0 0 0 $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 $15,670,000 657,550 498,115 159,000 1,096,000 1,660,000 2,134,000 2,537,000 2,898,000 3,170,000 3,374,000 (6,187.717) (1,950,656) 3,126.000 (908,000) (321,000) 172,000 590,000 973.000 769.000 992,000 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 0 0 (15.000) (15,000) (15.000) (15,000) 115,000) (15,000) (15,000) (15,000) 1,584,000 1,510,000 1,641,000 1.698,000 1,758,000 1,8%000 1,883,000 1,949.000 2,017.000 2,088,000 580 000000 597 000 615 000000 63�_000 652 000000 672 000000 69�000 71J_000 7377>J_000 756,000 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 YES YES YES YES YES YES YES YES YES YES 1.68 2,37 1.41 1.66 2.19 2,64 3.01 3.36 3.64 3.84 110 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 Bond' 6,364,000 1 - Bond to finance Paula Lane Reservoir and $500,000 per year for automatic read meters III 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 16,961,208 112 Table City ofPetaluma 'VVaber Utility Fund Estimated Future Annual Debt Service I and 11 Debt Issue |-2008/07 25yearu Projects $6.364.000 Issuance costs 200.000 Reserve (1year Debt Service) 485.000 U/Wdiscount and bond insurance at1.5Y6 107'848 Contingency/Rounding 33,0KI0 Total Issue Size 7.189.848 Assumed Average Interest Rate* 4.50% Estimated Annual Payment for Reserve Sizing $485.000 Projects $O Issuance costs O Reserve (1year Debt Service) 0 U/Wdiscount and bond insurance ot1.596 0 Contingency/Rounding 8 Total Issue Size 0 Assumed Average Interest Rate* 5.0096 Estimated Annual Payment for Reserve Sizing $0 °Baaedonournentroteo-oubjeothoohango 113 \\ \� � \ � \\ \ \\ ( \ } \ \\}\��\ 1\\f� \}\ \ \ \ \ \ \\ }\ } \ \()\\ \ }}\} / (}10 \ \ zi0, ,_�,:_� \\\}(\( ...• ,:., ( \\ _ \ \\ \ } ( } ) \ { \ ) \\!!:/>|<\\ f\/}// ! Table 2 City of Petaluma - Wastewater Utility Fund 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 WIRE 575,988 997,500 849,000 420,000 - - 2,842,488 C500EEE Pump Station SCADA - - - - - - 0501400 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 - - - - - - - - 0500505 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 W WTF - - - - 368,000 5,625,000 - 5,993,000 C501104 Biosolids Mgmt Program - - - - - - - - 0500403 River Access Improvements - - - - - - - - 0500605 Petaluma Marsh Soil Remediation - - Total $3,704,000 $27A78,000 $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 1.091000 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 115 Table 3 City of Petaluma - Wastewater Utility Fund 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 12,275,475 116 Table 4 City of Petaluma - Wastewater Utility Fund 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 E! 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 1,764,000 117 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) 118 1 o.A January 22, 2007 City of Petaluma, California Memorandum City Rlmiager's Office, 11 English street, Petuluuui, CA 94952 (707) 778-4345 Fax (707) 778-4419 E-mail: citrmutfulci.Petaluma. cit. us DATE: January 16, 2007 TO: Mayor and Members of the City Cou FROM: Michael Bierman, City Manager SUBJECT: Indirection Cost Allocation Recommendations Item. #10A — Public Hearing on Wastewater & Water Service Charges Attached is an updated report from Tom Sinclair of Sinclair & Associates concerning the 5% capital improvement administrative fee. In his report, Mr. Sinclair points out that there are two methods of calculating these costs. In an effort to address Council's immediate question, he used an OMB Circular A-87 simplified report to arrive at his current calculation. He also recommends that a full OMB Circular A-87 Study be performed_ We will add this to the study being done by Maximus for our other indirect cost allocation plans. The calculation recommended by Mr. Sinclair is 3.68% for indirect costs against capital projects for this fiscal year. In the rate study that is before you, we eliminated the entire 5%, but because of the debt service needed for water and wastewater, the rates recommended remain the same. SINCLAIR & ASSOCIATES LOCAL GOVER. _ALEN'S' CONSULTING SERVICES TO: Steven Carmichael, Administrative Services Director, City of Petaluma FROM: Tom Sinclair, Principal Consultant RE: Indirect Cost Allocation Recommendations DATE: January.16, 2007 BACKGROUND: The Petaluma City Council is considering an adjustment to the City's sewer collection and treatment rates. One topic under review is the City's policy and practice of charging five per cent to all major capital project accounts to reimburse the City's General Fund for administrative support and other direct and indirect costs associated with such projects. It is under review because the City has issued debt for the construction of the waste water treatment' plant, and the City has reimbursed the General Fund for the administrative support and other direct and indirect costs from the proceeds of the debt. Since the principal and interest payments on the debt are a component of the proposed sewer collection and treatment rates, the City has sought to confirm that the charges have a reasonable basis. In a memorandum dated December 15, 2006, we prepared a compilation of the actual and expected administrative staff costs, City Attorney contract costs, temporary asphalt repair, insurance and expected street reconstruction costs associated with the waste water treatment plant construction project. At its meeting on December 20, the City Council deferred action on the proposed rate adjustment to the January 22 meeting. The City has requested additional research and recommendations on a reasonable basis for administrative support and other costs generally charged to capital projects. This memorandum is in response to the City's request. ANALYSIS AND RECOMMENDATIONS: The United States Office of Management and Budget (OMB) issued Circular A-87 describing the principles, standards and a uniform approach for allowable charges for indirect cost recovery from federal grants. Cities and counties typically prepare an "A-87 Cost Allocation Plan" in accordance with OMB Circular A-87 to assure reimbursement of indirect costs from federal (and state) grants. Under such A-87 plans, indirect costs are allocated to direct cost departments or programs based on reasonable allocation factors, such as the number of employees, number of staff reports, percentage of operating budgets,. or other factors. For example, City Clerk office costs are typically allocated to operating departments based on the percentage of staff reports generated by each department during a year. All support department costs are similarly allocated on a rational basis to operating departments and programs. Complex models have been created and certified by OMB as complying with Circular A-87. Because OMB Circular A-87 does not permit reimbursement of a few indirect costs from federal grants (such as City Council legislative costs), cities and counties typically prepare a second cost allocation plan for their internal use, to fully allocate all indirect costs bidireet Cost Allocati+rh Recommen&tioiis 2 Sinclair and Asociatcs for budget and other purposes. Similarly, since OMB Circular A-87 does not pen -nit capital costs (except depreciation) to be included for federal grant reimbursement purposes, cities and counties often prepare this second cost allocation plan for their own use to allocate indirect costs to capital projects. Such plans are sometimes referred to as "full cost allocation plans," to distinguish them from OMB A-87 certified Cost Allocation Plans. While full cost allocation plans are not certified by OMB for recovery of indirect costs from federal grants, they are commonly used by cities and counties in their own full cost budgeting, funding and accounting systems. The City of Petaluma has recently contracted with Maximus for the preparation of an A-87 Cost Allocation Plan, but it will not be completed for several months. Our first recommendation is that the contract with Maximus be amended to include a "full cost allocation plan" in addition to the A-87 Cost Allocation Plan, so that a comprehensive model will be in place to allocate all indirect costs, including those that are related to capital projects. This full cost allocation plan, when prepared, should become the basis for the allocation of indirect costs to operating departments and capital projects in the future. In the absence of an existing full cost allocation plan, we would recommend an interim alternative approach, which is also identified in OMB Circular A-87. OMB Circular A-87 describes a "simplified method," which is usually applicable to single purpose governmental units, but also applicable to Petaluma on an interim basis, pending the completion of the more complex A-87 Cost Allocation Plan and a full cost allocation plan. An A-87 "simplified plan" sets forth a generally accepted principle and a simple method for allocating indirect costs for non-federal grant purposes. A "simplified plan" calculates an indirect cost allocation percentage, using indirect costs (i.e. general government costs) as the numerator, and an equitable distribution base (i.e. operating department costs and capital costs) as the denominator. We recommend that this method be used on an interim basis for allocating indirect costs for capital projects, pending receipt of a full cost allocation plan. We reviewed the audited general. government expenditures, operating department expenditures and capital project expenditures for the fiscal year 2005-06, and calculated a simplified method cost allocation percentage. The data is provided in the following chart. FY 2005-06 a. General government expenditures $ 3,741,534 J b. Operating department and capital expenditures $101,673,094 J Simplified method indirect cost allocation percentage (a. divided by b.) 3.68% J We recommend that the City charge 3.68% for indirect costs against capital projects for fiscal year 2006-07. In future years, a full cost allocation plan should be used as the basis for allocating indirect costs to capital projects. PQ Box 4982 Auburn, CA 95604-4982 Telephone: 530-878-9100 Fax: 530-878-0900 LSinclairousamcdiav . IO.A EXHIBIT D-1 CITY OF PETAL.UMA, CALIFORNIA AGENDA BILL Agen�,_in 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 (Information from December 18, 2006 Council Meeting) Meeting Date: December 18, 2006 Meeting Time: ❑ 3:00 PM ® 7:00 PM Category: ❑ Presentation ❑ Consent Calendar ® Public Hearing ❑ Unfinished Business ❑ New Business Department: Director: Contact Person: Water Resources & Michael Ban, P.E. Michael Ban, P.E. Conservation Air Cost of Proposal: NIA Amount Budgeted: NIA Attachments to Agenda Packet Item: Phone Number: 778-4487 Account Number: NIA Name of Fund: Water and Wastewater Enterprise Funds Agenda Report Attachment A — Agenda Report for City Council Meeting of October 16, 2006 Attachment B — Notice on Public Hearing and Rates Attachment C — Public Comment Letters Received As of November 14"' Resolution Adopting New Water Rates • Resolution Adopting New Wastewater Rates Summary Statement. A comprehensive analysis of the City's Water and Wastewater Funds determined the revenue necessary to support continued operation and maintenance of the City's water, wastewater and stormwater utilities exceeds the revenue generated by the current rate structures. The need for prudent investment in the City's water and wastewater utilities is being driven by deterioration of aging infrastructure and equipment, construction of the Ellis Creek Water Recycling Facility, increasingly strict regulatory requirements, and :inflationary increases. The City is scheduled to invest over $145 million in capital improvements to the wastewater utility over the next five years. The City Council considered and discussed proposed changes to the water and wastewater rates on October 16, 2006. Public notices on the proposed rates and public hearings were sent to property owners and utility customers, published in the Petaluma Argus Courier, and posted on the City's website. The proposed rates 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. Recommended Citv Council Action/Suggested Motion: City Management recommends the City Council approve the attached resolutions to support the operation and maintenance of the City's water, wastewater, and stormwater systems and implement needed capital projects. R-tviewed by Admin. Svcs. Dir: Reviewed by City Attornev: ApproveOv. Citv Manager: .. 0,44 Date: �t ��i� �� Date: Date: 1 SAwater resources & conservationWateslfinancial plan - 20041city counci€ldecember 4lagenda report.draft Ldne CITY OF PETALUMA, CALIFORNIA DECEMBER 4, 2006 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: A comprehensive analysis of the City's Water and Wastewater Funds determined the revenue necessary to support continued operation and maintenance of the City's water, wastewater and stormwater utilities exceeds the revenue generated by the current rate structures. The need for prudent investment in the City's water and wastewater utilities is being driven by deterioration of aging infrastructure and equipment, construction of the Ellis Creek Water Recycling Facility, increasingly strict regulatory requirements, and inflationary increases. The City is scheduled to invest over $145 million in capital improvements to the wastewater utility over the next five years. The City Council considered and discussed proposed changes to the water and wastewater rates on October 16, 2006. Public notices on the proposed rates and public hearings were sent to property owners and utility customers, published in the Petaluma Argus Courier, and posted on the City's website. The proposed rates 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. City Management recommends the City Council approve the attached resolutions to support the operation and maintenance of the City's water, wastewater, and stormwater systems and implement needed capital projects. 2 S:\water resources & conservation\RatesVinancial plan - 20041city counciMccember 4lagenda report.draft Ldoc 2. BACKGROUND: INTRODUCTION The City's water utility rate study analyzed approved operations, maintenance and capital improvement budgets for FY 06-07, prior year revenues and expenditures, projected costs of future operations, capital improvement projects, and projected revenues. City Management presented the results of the rate study at the October 16, 2006 Petaluma City Council meeting. A copy of the October 16a' Agenda Bill is provided in Attachment A. The results of the rate study are summarized as follows. WATER UTILITY FINANCIAL ANALYSIS The following factors were considered in the rate analysis: ODeratin2 Exucnses. 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 millions. ARencv 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. Reserves. The proposed rate increases will support 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 Immovements. Planned capital improvements include the 1.5 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). It is estimated this project will cost approximately $500,000 per year during that time. 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 ' Includes non -replacement capital improvement expenditures of $860,000, and replacement, or maintenance related, capital expenditures of $2 million. 3 Sawater resources & consmation\Rateslfinancial plan - 20041city councilldecember 4lagenda report.dmft l.doc 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 January 1, 2007, Tiered Rates. To provide a further incentive for water conservation, City Management recommends a fourth tier be added to the residential customer rate structure. The proposed tiers on a bimonthly basis are illustrated in Table 1, along with an estimate of the percentage of customers using water in each tier. Table 1. Proposed Tiers Tier Range (hef) 1 I 0-18 2 I 19 — 36 3 I 37-48 4 Above 48 Percent of Customers With Water Use in Tier Winter Summer 66.6% 33.5% 273% 37.5% 3.9% 14.2% 2.2% 14.8% In winter, we expect about 2/3 of residential customers will only see water use in Tier 1. Another 27% will see some water use in Tier 2, and a small portion of customers will see use in the top two tiers (about 6% total). In summer, about 1/3 of customers will see use only in Tier 1. Another 1/3 will see some use in Tier 2. About 30% of our customers will see water use in the top two tiers. Proposed Rates. For the "average" single family residential customer, the annual water rate increases for the next 5 years would be 1 Ob/o, 9%, 8%, 5%, and 4%. This will increase the average residential customer's bill by $3.00 per month in 2007. The impact of adding the 4 SAwater resources & cortservation\11ateslCnancial plan - 20041city counciRdecember 4\agenda report.draft Ldoc 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%. As discussed at the October 16, 2006 council meeting, 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 a 19% increase for the quantity rate on January 1, 2007 for commercial customers and multi -family residential customers. Annual future increases would be 9%, 6%, 6% and 6%, respectively. Petaluma's water rates are anticipated to remain competitive with other nearby agencies. WASTEWATER FINANCIAL ANALYSIS The following factors were considered in the wastewater rate analysis: ODeratinla 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 million'. Reserves. The proposed increases support a prudent operating reserve of approximately $1.6 million and a capital reserve of $1 million. . 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 Creels 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. In addition, the City levies an administrative charge for its role in managing capital projects for the utility. This fee amounts to roughly 5% of total project costs, or $1.3 million in 2006/07, and an estimated $4.0 million in 2007/08. 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 costs. This funding can be drawn on at a rate of $25 Includes non -replacement capital expenses of $26.2 million, and replacement, or maintenance -related capital expenses, of $647,000. 5 SAwater resources & conservationlltateslfinancial plan - 20041city councilldecember 4lagcnda report.draft Ldoc 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 and the C Street Pump Station Upgrade Project. 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 $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 year. 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. Proposed Rates. As stated above, future capital expenditures and the resulting debt service will effectively double the revenue requirement of the utility by 2011/12. The City investigated a number of rate scenarios that would allow the City to meet this target. It was determined that steady, level increases are an important policy consideration. As such, the analysis 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. This will increase the average single family residential wastewater customer's montly wastewater bill by approximately $5.68 in 2007. City Management recommends that these rates be put in place by January 1, 2007. Petaluma's rates are anticipated to remain competitive with nearby agencies. Ellis Creel{ Water Recycling Facility Project The Ellis Creek Water Recycling Facility is designed to meet Federal, State and regional environmental regulations, accommodate the needs of the community, and protect public health and safety, and protect the Petaluma River and the San Francisco Bay. Petaluma began construction in October 2005. The need to construct this facility is the primary driver for the proposed wastewater rate changes. Here are three key factors to consider regarding the City's decision to move forward with the Ellis Creek Water Recycling Facility Project: The project was subjected to an extraordinary amount of review; The cost of the project is competitive with recently bid projects; and No other proposal met the project's performance standards. R s:ltvater resources & conservation\Ratesltinaneial plan - 20041city councMdeeember 4lagenda report.dra t l.doc Proiect Review It is important to remember the extraordinary amount of review that preceded the City's decision to construct the Ellis Creels Water Recycling Facility Project. This effort began in 1988 when the City decided to replace the Hopper Street Wastewater Treatment Plant (constructed in 1938) and entered into a Memorandum of Understanding with a private company to construct a new, privately owned facility. This process was soon struck down by an administrative law judge. The City's second attempt at privatization ended on September 21, 1999, when the City Council decided it was in the City's best interest to terminate the privatization process and develop a publicly owned facility. The City Council has adopted over 20 resolutions related to this project. Once the City settled on a design of the facility, it was subjected to five (5) intensive value engineering efforts. The City then tools the extraordinary effort of pre -qualifying contractors prior to bid. This allowed qualified contractors ample time to become very familiar with the project and assemble their project teams well in advance of the project. These factors contributed to the City having a cost competitive project, as shown in the next section. Proiect's Costs are Competitive Table 2 presents a comparison of the unit cost of Petaluma's Ellis Creep project with unit cost of major wastewater treatment expansions in Healdsburg, Lompoc and Ukiah. These projects were selected for comparison because they include significant wastewater treatment facility expansions and were bidding near the same time as Petaluma's project. Table 2. Comparison of Recently Bid Wastewater Projects Agency Bid Date Cost of Cost Adjusted Capacity Unit Cost ($ Project for Inflation (million gallons millionslmgd) ($millions) ($ millions)3 per day) Petaluma August $110 $110 8 $13.75 2005 ( I City of June 2005 $30 $29.9 1.5 $19.93 Healdsburg I City of Ukiah February $57 $57.2 3.3 $17.3 I ( City of October $74 $69.1 5.5 $12.56 Lompoc 1 2006 I I 3 Costs were adjusted for August 2005, based on an Engineering News Record Construction Cost Index of 8259. 7 SANvater resources & conservation\RatesVinancial plan - 20041city caunciAdecember 4lagenda report.draft l.doc As shown in Table 2, the cost of Petaluma's project on a unit cost basis is $13.75 millionlmgd. This is 30% lower than Healdsburg, 20% lower than Ukiah, and 9% above Lompoc, which illustrates that the Ellis Creek project is cost competitive. Since construction of the Ellis Creek project began in October 2005, construction costs have increased 10%. If the City were to have delayed the project a year, it would have increased the cost of the project by as much as $21 million. Other Proposals Did Not Meet Performance Standards Throughout the history of this project, the City has considered several alternative proposals for the wastewater treatment facility, including two proposals from the Sonoma County Water Agency and a privatization proposal from Montgomery United Water. Even though the preliminary estimated costs of some of the proposals appeared attractive, it is important to remember that none of these proposals met the oroiect's performance standards. To pursue one of the alternative proposals would have been like purchasing a car without an engine. Other Regulatory Actions Affecting the Wastewater Utility In last few years, a few governmental regulatory actions have taken effect that requires a much higher level of performance from California wastewater utilities. In January 2000, SB 709 became effective. This bill requires California Regional Water Quality Control Board to assess mandatory minimum penalties for violation of National Pollutant Discharge Elimination System (NPDES) permits. Prior to January 2000, regulators used a fair amount of discretion when assigning penalties related to NPDES permit violations, recognizing that it is impossible for a complex wastewater treatment facility to be perfect 100% of the time. SB 709 eliminated this discretion. The minimum penalty is $3,000 per occurrence. Pursuant to Section 13267 of the California Water Code, the San Francisco Bay Regional Water Quality Control Board began requiring agencies with wastewater collection systems greater than one mile prepare an extensive Sanitary Sewer Management Plan (SSMP). Petaluma submitted the first report under this requirement in August 2006. The rules were implemented because wastewater collection systems were the last major component of the wastewater management system that were not subject to governmental regulation. s:huater resources & conservatinlRaleslfnancial plan - 20041city councMdeccmber 4lagenda report.draft Hoc PUBLIC OUTREACH The City has used a wide variety of methods to inform the public of the proposed rate increases. On October 16, 2006 the proposed rate increases were discussed by the City Council at a public meeting, during which the City Council set the public hearing date for December 4, 2006. On October 19, 2006 the City sent notices of the proposed rate increases and the public hearing to record owners of properties that would be impacted by the proposed rate increases 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. A copy of the notice is provided in Attachment B. The City published a notice on the proposed rate increases and the public hearing in the November 1, 2006 edition of the Petaluma Argus Courier, and posted a notice on the City's website. In response to the notices, the City has received several letters of protest. Letters received as of November 13, 2006 are provided in Attachment C. Through November 13, 2006, the City has received twenty-five (25) telephone calls regarding the rates. Seventeen callers had questions about the proposed rate increases, six callers protested the rate increases, and two callers offered comments to the City. One caller suggested the City use more groundwater and less Sonoma County Water Agency water. The other caller made recommendations on how to improve the rates notice. 3. ALTERNATIVES: Alternatives available for the proposed changes in the water utility rate structures include: L Take no action. 2. Adopt proposed resolutions with modifications as directed by the City Council. 3. Adopt proposed resolutions. 4. FINANCIAL IMPACTS: The proposed water rates are anticipated to increase annual revenues approximately $800,000. The additional revenue 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 expansion of the recycled water system and construction of the Ellis Creek 9 SAwater resources & conservafionlRatesl#inancinl plan - 20041city counciRdecem6er 4lagenda repart.dratt Ldoc Water Recycling Facility. To support these investments, annual revenues need to increase by approximately $7.4 million. The proposed wastewater rates will support the needed additional revenue. 5. CONCLUSION: The current water resources rate structures are not sufficient to support needed long-term investments in the City's water utilities. The proposed water and wastewater rates will support continued prudent investment in the City's utilities. 6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR COMPLETION: Continued prudent investment in the City's water utilities. i. RECOMMENDATION: City Management recommends the City Council conduct a public hearing on the proposed rate changes. City Management further recommends the City Council discuss, consider and approve the attached resolutions regarding changes to the water resources service rates. 10 S:lwater resources & conservationUZateslfinancial plan - 2004kity counciMecemher 4lagendn report.draft Ldac ATTACHMENT A AGENDA REPORT FOR OCTOBER 16, 2006 11 SAwater resources & conservatianlRatesl€inancial pion - 24641city counciildecember 4lagendn repart.draft i.doc 5.A October 16, 2006 CITY OF PGTALUMA, CALIFORNIA AGENDA BILL Agenda Title: Presentation and Discussion Regarding Proposed Changes Meeting Date: October 16, 2006 To Wastewater Service Rates and Charges and. Water Service Rates and Charges Meeting Time: 0 3:D0 PM ❑ 7:00 PM Categorv: ❑ Presentation ❑ Consent Calendar ❑ Public Hearing ❑ Unfinished Business © New Business Department: Director: Contact Person: Phone Number: Water Resources & Michael Ban, P.E. Michael Ban, P.E. 778-4487 Conservation 01"- Cost of Proposal: NIA Account Number: NIA Amount Budgeted: NIA Name of Fund: water and wastewater enterprise fiends Attachments to Agenda Packet item: Agenda Report Tables Photos Attachment A —Water Model • Attachment B — Wastewater Model Summary Statement: A comprehensive analysis of the City's Water and Wastewater Funds has determined the revenue necessary to support continued operation and maintenance of the City's water, wastewater, and stormwater utilities exceeds the revenue generated by the current rate structures. The need for prudent investment in the City's water and wastewater utilities is being driven by deterioration of aging infrastructure and equipment, construction of the Ellis Creels Water Recycling Facility, increasingly strict regulatory requirements, and inflationary increases. The City is scheduled to invest over $145 million in capital improvements to the wastewater utility over the next 5 years. To support the continued operation and maintenance of the water utility, it is recommended that the City annually increase water rates by approximately 10%, 9%, 8%, 5%, and 4% for each of the next five years, beginning January 2007. It is also recommended that the City annually increase wastewater rates by approximately 13% for each of the next five years, beginning January 2007. Recommended Citv Council ActionlSuegested Motion: City Management recommends the City Council consider and discuss the water and wastewater rate analysis on October 16, and conduct a public hearing on the proposed rates on December 4"' Reviewed by Admin. Svcs. Dir: Reviewed by City Attornev: Avvrovek0v, Citv Man alter: r ,i Date: Date: Date: 12 5:livntar resources & canservntianlRaleslfinandnl plus - 2004\citycauncillagendu repart.dralr 1.doc CITY OF PETALUMA5 CALIFORNIA OCTOBER 16, 2006 AGENDA REPORT FOR PRESENTATION AND DISCIlS5ION R,GARDING PROPOSED CHANGES TO WASTEWATER SERVICE RATES AND CHARGES AND WATER SERVICE RATES AND CHARGES EXECUTWE SUMMARY-. A comprehensive analysis of the City's Water and Wastewater Funds has determined the revenue necessary to support continued operation and maintenance of the City's water, wastewater and stormwater utilities exceeds the revenue generated by the current rate structures. The need for prudent investment in the City's water and wastewater utilities is being driven by deterioration of aging infrastructure and equipment, construction of the Ellis Creels Water . Recycling Facility, increasingly strict regulatory requirements, and inflationary increases. The City is scheduled to invest over $145 million in capital improvements to the wastewater utility over the next 5 years. To support the continued operation and maintenance of the water utility, it is recommended that the City annually increase water rates by approximately 10%, 9%, 8%, 5%, and 4% for each of the next five years, beginning January 2007. It is also recommended that the City annually increase wastewater rates by approximately 13% for each of the next five years, beginning January 2007. City Management recommends the City Council consider and discuss the water and wastewater rate analysis on October 16, and conduct a public nearing on the proposed rates on December 4tl`. 2. BACKGROUND: INTRODUCTION The City of Petaluma provides comprehensive wastewater, water and stormwater services for its residential, commercial and industrial customers. These services include the wholesale purchase of potable water from the Sonoma County Water Agency (Agency). This water is distributed to the City's customers through a network of six turnouts on the Agency's aqueduct, seven booster pump stations, 11 storage reservoirs, and 278 miles of distribution piping. The City annually 13 CMacuaieats and 5elOaLslccooper.CUMLocal SeltingslTemporary Internet FilesIOLK65lagenda report draft Mac distributes over 3,000 million gallons of potable water. The California Department of Health Services strictly regulates operation of the City's potable water system. The City operates an extensive water conservation program which currently yields annual potable water savings of 70 million gallons, which is equivalent. to the arnount of water used by over 500 single family households each year. In the last 3 years, the City has invested over $4.5 million in improvements to the water system, including replacement of worn-out water services, saddles, and water mains. Once used by the City's customers, the potable water becomes wastewater and is discharged to the City's wastewater collection system. The wastewater is collected through an underground network of 192. miles of collection system piping that conveys the wastewater to the City's wastewater treatment facility via nine collection system pump stations. Treatment of Petaluma's wastewater is provided at two facilities: the Hopper Street facility and the Oxidation Ponds. All flows up to 6 million gallons per day are treated at the Hopper Street facility. This facility was originally constructed in 1938 and includes sedimentation basins, trickling filters, aeration basins, a secondary clarifier, aerobic and anaerobic digesters, a centrifuge, and a belt press. Once treated, all flows are conveyed to the Pond influent Pump Station (PIPS). All flows above 6 mgd are directly conveyed to the PIPS. The PIPS conveys wastewater to the Oxidation Ponds through a 14,100-foot long 36—inch diameter forcemain. The Oxidation Ponds, constructed in 1975, provide additional secondary treatment of the wastewater. After treatment, the wastewater is disinfected and then discharged to the Petaluma River during the winter months or recycled for irrigation during the summer months. The City's water recycling facilities, which include three booster pump stations and 17 irrigation hydrants, provide recycled water under pressure to the Adobe Creels Golf Course, the Rooster Run Golf Course, a vineyard, and six privately owned ranches for irrigation of pasture. The City annually provides 560 million gallons of recycled water for irrigation. Petaluma. operates one of the largest water recycling programs in the Bay Area. Operation of the wastewater treatment facility is strictly regulated by the California Regional Water Quality Control Board through issuance of the City's National Pollutant Discharge Elimination System (NPDES) permit. Recent capital improvement and maintenance projects completed for the wastewater utility include: 14 CADacuments and Scltingskmaper.COMI-acal Scttings\Tempomry Intemet Flles%OUC65lageada repad draft I.dac ■ Phase 1 Recycled Water Pipeline. Completed June 2004. Final project cost: $3,535,000. Included installation of 19,000 linear feet of 20-inch recycled water pipeline from the City's Oxidation Ponds to Rooster Run Golf Course. • Interim Aerator Improvement Project. Completed January 2006_ Final project cost: $310,000. This project relocated aerators from Oxidation Pond No. 1 to Oxidation Pond No. 4 so that biosolids could be removed from Oxidation Pond No. 1. Other actions included purchase of new aerators for future use in Oxidation Pond No. 1 and replacement of the failed transformer at the entrance to East Gate. + Biosolids Removal Project. Completed June 2006. Final project cost: $1,437,421, This included the removal and beneficial reuse of over 5,200 tons of historic biosolids from the oxidation pond site. ■ Theater District and Other Downtown Improvements. Completed 2005. Final project cost: $2.2 million. Installation of wastewater pipelines and manholes in downtown area. The City's surface water drainage system includes open channels, 142 nriles of underground storm drain pipeline, 3,241 catch basins, culverts, bridge openings, and three storm water pump stations. Responsibility for maintenance of these facilities, excepting the open channels, is held by the City. Maintenance of the open channels within the City is shared between the City and the Sonoma County Water Agency. The Agency's maintenance activities are funded through Zone 2A_ The City also monitors and maintains a National Weather Service Automated Local Evaluation in Real Time (ALERT) emergency flood warning system which provides real-time water level conditions for the Petaluma River, Washington Creels, Willow BrooIs Creek, and real-time rain data throughout the Petaluma watershed. As a community of greater than 50,000 residents, the City is subject to the Environmental Protection Agency's Phase Il Stormwater Rule (Rule). In accordance with the Rule, the City obtained an NPDES permit for operation of its stormwater management system in 2003. The City of Petaluma's water utility enterprise funds are self-supporting entities — all revenues required to operate and maintain these enterprises are provided by fees and charges from our customers. No General Fund dollars are used to support the utility enterprises. RATE STUDY The City's water resources rate structures were previously analyzed in 2001. The information from the 2001 analysis resulted in the following Ivey changes to the rate structure: 15 CADocurnenLs and Settings\rconper.CQFNLnca1 Settings\Teatpornry Internal Fi1u!A0L1(G5\agcnda report draft Ldoc 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)' 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 Model is provided in Attachment A. The Wastewater Model is provided in Attachment B. 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, rninmize the impact of required rate adjustments on the City's utility customers. Existinz Rates and Charaes 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 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. 1 BWA is a public finance consulting firm with over 40 years' experienee providing independent, objective financial advice to public agencies throughout California. 16 CADacumcnts and Settingskm3per.COMLocal ScuingslTcmporary inlernel Filesl0LK651ngcnda report draft I.doc Commercial customers pay one flat rate for all water consumed ($2.07). The City also assesses a one-time capacity charge (also Imown 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 nullion 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. 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 ' 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 Rcscrvoir No. 2 (s424,000), water main replacement projects (S2.2 million), and construction of the water Field Office (S2.6 million). 17 CADocuments and settingslccooper.COFPILocat settinp\Temporary Internet FileslOLK651agenda report draft i.doc 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 Reserues 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 Prop -ram 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. Photos of a deteriorated water service saddle taken from the McDowell Blvd. Water Service Replacement Project are shown in Photos 1 and 2. Water service saddles are used to connect the water service to the water main. Water service saddles in this area were manufactured from steel. When they come in contact with the copper water services, they are subject to corrosion. Eventually the water service saddle becomes so weals it can no longer function, and the water service begins to leaf. This results in costly and disruptive water main repairs. It is estimated there may be several thousand water service saddles constructed, In this manner on the east side of Petaluma. New water service saddles are manufactured from bronze and are compatible with the new high strength plastic water services. In the last two years the Water Resources and Conservation Department has replaced over 200 deteriorated water services and saddles. 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 18 CADocumenLs and Settingslecooper.COMLocoi SettingsMrnporory [ntemctF!1cs\0LK631ugcndn report draft l.doc 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: • 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 he fl 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 par icualrly 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 plate 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 19 CADocuments and SetfingslcconpccCOMLoaal 5atlingsWump mry intemet Filcs\QLK65ingendn report dmIl Ldoc 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 $495,000 annually, starting in fiscal 2007/2008. Taken as a whole, the City needs to increase overall operating revenues somewhere between 14% and I b% 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 hef 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 4n/o. 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 20 C:Oocuments and Settingslccooper.COFP\Lncnl Setfings\TcmpomryInternet Fifesl0LK.651at;cnda report dreit Ldoc ($2.1 b). City Management recommends that this quantity rate be increased to eliminate this "discounted" water; the proposed rate schedule includes an 1.8% 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 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 Creels Water Recycling Facility; and • Where possible, minimize the impact of required rate adjustments on ratepayers. Existinl7 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). 21 C:117acoments and Sellingslccooper.COFP\Local ScltingATempomry Internet Files1OLK551ugcnda report draft I,dac 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. Industrial users are billed according to their specific discharges to the sewer system. Their lows 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 Entemrise Finances Rei)enues 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 intragovernmerital transfers to the General Fund totaled $1.2 million. 22 CADocuments and settingslcenoper.COMI-ocal SetlingsMrnpornry Internet %ilcsloLK651agendu report draft Ldoc Debt The wastewater enterprise issued revenue bonds in 20003. Annual debt service on this issue is approximately S720,000, and there is approximately S7.4 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 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. Fluid 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 for approximately $1.5 million) for emergency repairs or expenses. Capital Proararn The wastewater enterprise is currently in the midst of an extensive capital irnprovement program, Construction of the Ellis Creels 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 Creels 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. In addition, the City levies an administrative charge for its role in managing capital projects for the utility. This fee amounts to roughly 5% of total project costs, or $1.3 million in 2006/07, and an estimated $4.0 million in 2007/08. 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 Creekproject 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 2006107, will be used to fund the Phase 1I Recycled Water Improvements. The 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 Creels water Recycling Facility Project ($2 million). 23 CADacumcnts unit Seffingslccoaper.00FPILoca1 SettingslTemparary lntemet FAcs\0LK65lagcnda reparidrarr l.dac 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 Crack facility, and fund that with approximately $690,000 per year. All told, the City can expect to meet no less 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 Proiection 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 }vell; and • The line of credit is used to fund the General Fund capital administrative transfer of $3.9 million in 2007/0$. 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 sucb, 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. 24 C-1Docurnents Lind Settingskcooper.COMLocat Sellings7amporary Internet FileskOLK65 agenda report draft Ldoc 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 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 malting 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. CONNECTION FEES Changes to water and wastewater connection fees are not proposed as part of this rate analysis. Connection fees will be further considered following adoption of the General Plan. Aim, RNAT i s: City Management is requesting the City Council consider and discuss the proposed utility rates. 4. FINANCIAL IMPACTS: The proposed water rates are anticipated to increase annual revenues approximately $800,000. The additional revenue 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 expansion of the recycled water system and construction of the Ellis Creek Water Recycling Facility. To support these investments, annual revenues need to increase by 25 CADocuments and 5ettingslccooper.CQPP\Locu15ettingsWemgorary Internet HJesN0LK551ugenda report drufi Ldoe approximately $2.4 million. The proposed wastewater rates will support the needed additional revenue. 5. CONCLUSION: The current water resources rate structures are not sufficient to support needed long-term investments in the City's water utilities. The proposed water and wastewater rates will support continued prudent investment in the City's utilities. 6. OUTCOM>;S OR FERFORIVL&.NCE MkASUREM , NTS THAT WILL IDENTIFY SUCCESS OR COMPLETION: Continued prudent investment in the City's water utilities. 7. I COMMmNDATION: City Management recommends the City Council discuss, consider, and provide direction regarding the water and wastewater analyses and the recommendations contained herein. City Management further recommends the City Council set a public hearing date of December 4, 2006, for the proposed rates. To adequately notify the City's customers of the public hearing, notices will be issued the week of October 16'h. 26 CADocumcnts and Scltings%rcuoper.COFP1Lacu1 ScuinUslTemparury Internet rileslOLK651ugendu report drart Ldac TABLES 27 SAAvater resources & con5ervnti0n\RatC5lFInancial plan-?0(34leity counciNgendu reporLdran l.dnc Type of Charge Monthly Service Charges ($Imo) 518„ 3/,• 1" (residential) i" 1.511 f 7" 3„ 4" 6" Consumption Charges (Slheo Single Family Residential (monthly) Tier 1 {0-10 hcf) Tier 2 (11-26 bcf) Tier 3 (27+hc;Q Tier 1 (0-9 hc� Tier 2 (10-18 hco Tier 3 ( 19-24 hcf) Tier 4 (25+bef) Multi -Unit Residential: Business, Industrial, Public Table 1 Recommended Water Rates Current Recommended Water Rates Rates I -Jan- 1-Jan- I -Jan- 1-Jan- 1-Jan-10 1-Jan- OG 07 08 1 09 1 1 11 $3.79 $4.47 $4.92 $5.17 $3.79 $4.47 $4.92 $5.17 $4.55 $5.37 $5.91 56.20 $4.55 $5.55 $6.11 $6.41 $7.57 $9.24 j $10.72 $11.25 $10.98 $13.84 $16.05 $17.65 $21.21 $26.73 $33.14 $36.45 $27.27 $36.00 $44.64 $49.10 $39.39 $52,00 $64.48 $70.92 2.16 2.37 2.61 $5.42 $5.69 $5,42 $5.69 $6.51 $6.84 $6.73 $7.07 $11.81 $12.40 318.54 I $19.46 S3817 $40.1.9 351.55 $54.13 $74.47 $78.19 $2.31 $2.50 $2.70 $2.83 $2.94 $2.61 $2.87 $3.10 $3.25 S3.41 53.00 $3.39 $3.73 $4.07 $435 $3.24 $3.75 $4.13 $4.50 $4.&2 S2.07 $2.44 $2.64 $2.80 $2.96 $3.14 S.lwatcr resources & conservntionlRateffinancial plan-2W4Icity counciAngenda report.drnit I.doc Table 2 Changes of Proposed Water Rates For Sample Customers Estimated Monthly Bill Amount Jan-07 Jan-08 Ja-1.09 Jun -10 Ja-1-11 Average - Annual Current Monthly Monthly Water Use Water % % % %" % Type of Customer (hcl) ]Sill Amount Increase Amount Increase Amount Increase Amount Increase Amount Increase Low 8 .$21.07 $22.96 9% $24.89 8% � $26.73 7% $28.07 5% $29.25 4% Single Family Residential _ Average 12 $30.13 $33.09 10% $35.99 9% $38.72 8% $40.65 5% $42.43 4% Single Family Residential High. 18 $44.35 $49.73 10% $53.19 9% $57.30 8% $60.17 5% $62.92 5% Single Family Residential _ Very High 50 $125.95 $150.89 20% $171.15 13% $187.06 9%u $201.60 8% $214.25 6% Single Family Residential 20-unit Apartment Building 65 $145.53 $172.61 19% $187.52 9% $199.41 6% $211.20 6% $223.69 6% 2" meter Office Building 58 $131.04 $155.51 19%" $169.05 9% $179.84 6% $190.45 6% $201.69 6% ?" meter Restaurant 55 $124.83 $148.18 19% $161.14 9% $171.45 6% $181.56 6% $192.27 6% 1" meter 29 5:lrvaler resources & conscraaftnlRatealGnancial plan - 2004lcily coutielkngenda report.drsft 1.doc Table 3 Comparison of Monthly Water Charges for Average Single Family Residential Customer Average Monthly Water Bill Agency (12 bef/month) Windsor $19.91 North Marin $27.20 Petaluma (current) I $30.13 Petaluma (proposed for 2007) $33.09 Santa Rosa (2007) $34.70 -41,erage of all agencies $35.57 Cotati $37.76 Rohnert Park $38.75 Sonoma $3 8.95 Marin Municipal I $42.37 Healdsburg I $47.39 30 SA%valer resources & conservatianlltntesVinancial plan-20041city councMagendn rcporLdmfl Ldoc Table 4 Recommended Wastewater Rates Type of Charge Current Recommended Wastewater Rates Rates 1-Jan- 1-Jan- 1-ran- 1-Jan- 1-Tan- Wan- 06 07 08 09 10 11 Fixed monthly charge ($1mo) SingleFanuly Residential $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Multi -Unit Residential, per dwelling unit 59.11 $10.29 $11.63 $13.14 $14.85 $16.78 Unmetered Residential, per dwelling I unit _ $44.21 $49.96 $56.45 563.79 $72.08 $8I.45_ Commercial Low -Strength $9.11 $10.29 811.63 $13.14 $14.85 516.78 Medium -Strength $9.11 $10.29 $11.63 $13.14 $14.85 516.78 High -Strength 59.11 $10.29 $11.63 $13.14 $14.85 $16.78 Metered Industrial Users $9.I1 $1029 I $11.63 J $13.14 1 $14.85 l $16.79 Variable charge (S/hci) Single -Family Residential $4.32 $4.88 55.51 $6.23 $7.04 $7.96 Multi -Unit Residential $4.32 $4.88 $5.51 I $6.23 $7.04 I $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 $7.49 $8.45- $9.55 $10.79 $12.19 Metered Industrial Users Flow ($1hcf) $3.20 $3.62 $4.09 $4.62 $5 ?2 $5.90 BOD ($11b) $0.31 $0.35 $0.40 $0.45 $0.51 50.57 TSS ($IIb) $0.34 $0.38 50.43 SQ:49 $0.55 50.63 31 SANVUtcr resources & conservation\Ratesllinunciol plan - 2004kity cound1kagenda report.drafi i.doc Table 5 Changes of Proposed Wastewater Rates For Sample Wastewater Customers . Estimated Monthly Bill Amount .Tar -07 Jan-08 Jar -09 Jar -10 Jan-11 Average Current Monthly Monthly Wastewater Wastewater % % % `% Type of Customer Use (lief) Bill Amount Increase Amount Increase Amount Increase Amount Increase Amount Increase Low 5 $30.71 $34.70 13% $39.21 13% $44.30 13% $50.06 13% $56.57 13% Single family Residential Average 8 $43.66 $49.34 13% $55.75 13% $63.00 13% $71.19 13% $80.44 13% Single Family Residential High 13 $65.26 $73.74 13% $83.33 13% $94.16 13%$106.40 13% $120.23 13% Single Family Residential 20-unit Apartment Building 65 $462.94 5523.I2 13% $591.12 13% $667.97 13% $754.80 13% $852.93 13% 2" meter [71'fice Building 58 $258.39 $291.99 13% $329,94 13% $372.84 13% $421.30 13% $476.07 13% 2" meter _ Restaurant 55 $372.99 $421-49 13% $476.27 13% $538.19 13% 4 f S608.15 13% S687 21 13% I" meter 32 5:Vvater resources & conservatiosrlRateslfinanciai plan-2p04lcity counciINagenda rcporl.dralt [.dac Table 6 Comparison of Monthly Wastewater Charges for Average Single Family Residential Customer Average Monthly Single Family Residential Wastewater Bill Agency (8 hcflmouth) Novato Sanitary District $28.50 Windsor $43.06 Petaluma (current) $43.66 Sonoma $45.75 Petaluma (proposed for 2007) S49.34 ,overage of all agencies I $53.33 l Rolinert Parr $56.10 1 Santa Rosa (2007) $65.19 Healdsburg $67.88 Cotati $70.81 33 sAwaler resources & conservatianlRatesl{inancial plan - 2004kcity councillagenda repnmdraft 1,doc SAwater resources & eonservation\Rateslfnuneial plan-2(104Nricy cauneibagenda report.dmR t.doc Photo 1: Comparison of new water service saddle with corroded saddle removed from McDowelI Blvd. Water Service Replacement Project (20W 35, S: water resources & conservalionVUeslfinnncial plan - 2004kiry councillagenda repart.draft 1.doc ATTACHMENT A 37 SAwater resources & consmation\RatesVinancial plan-?00&Icity enunciRoctober 161agenda report.dmft Ldoc TaNaI rJlynfpetaluma -walur u4i Fmu1 Cash Flow Pm)oafom Snnlirtino FwW Man& Rate SlatMzallon FurW Bt Rate Irm=n for SFO • Low Um' Eit Row Irumam9 larSFP-Average Use ESL Ralu Incase fm SM. H1011 Usus tknn➢erW Usets Hew Cannedlon Feu Ravonues u Mmtim Cjiwgss rnrnir2 Chaine5 tori0r4taaY InlaMmmmemat Immuncd cantinas' O1har Suhlatal OpemWl0 em 11 Cannnclien fou Data luacceds Subttol Capnat T n r A t i Tr"artrupin) Su0mHATrdnsfsrs A AdJustmvMs Total Revenue,Tmnsrers, aril Ad#ustmulsts Expandltumm Onemill C,ml of zMesr Cori of surviacs, GumM and admirdsiraliv9 Rerycho ernerOEAI INmOmarmaL al7mnsfem{General Fund) Olitor Subdaal Opr sung KOM Orr mp�ammm4 opal Impmvemanl prgecn Roplocamenl mp9ot impmvrmcla pra)acts Pratanccnl wafer mlrservollan Capila uuaays Erlslaq Anbl Su4vicn PxjucW ClOtScrvinc I SLIMlal Mrt" Tm-fom ✓<Arinsaimnnt, Pmlec23. Cby Oeparonams-Tmmfem [appal 2dral Jalherl5%GF uvethead Tmnslnr WIWI) EuteuiaLTtarulum S k4uslrnms Total Eipervllums, Translars, and Adlustmonls Heldp4uaft tuvenim (b0cmdebi servtc➢I Huttata4 revenue Enalap Fund Saistrr Transfer W raw 41aWliullon Re4me FuW Turasts (3dll IM days) Reswvu CapId Rc{nnee nb d 3lmpmvamord Rus9.'vc Val ttnb7 mrl Reserve FstM TA Uets TotattlInimum FiasmoFund Tat0ets Mot 0s6t Servi:a Cmumou (l lln 125e Actual Estimate Suduet Pmlecttet 2004m5 2305fa0 NOW Mica 2oa➢foB 290will . 21110111 2(111112 2ai2713 21)13J14 SI0,72g,443 54.541,7Za 51-441,990 55,457,g00 54,031,0u0 53,lnu,uua V-010.000 52.144,000 53.47,Gu3 53,432,9ao S0 Su 5150,a90 S105go 5100,000 5105,06a 5210,OUG S"=,Ot-0 5249,000 535,0u0 5,4% ri4% 5,05i 0.4% 75% S.0% 4.2% 4-1% 3,4% 3.4% 5,4% 5.4% 0.9% 0.0% 7.7% 5.0% 4Z% 4 % 3.1311.1 3.0% 5.4% 514% 14.0% 1021% 11,4% 0.15. 5.31. 4.7% 3.0% 3.0% 10.167 10,360 E0,554 SO,o54 10,754 10,054 10,054 20,054 2a, 154 211,254 31253 51=0 S1,7u9 513,G00 SIX= 513,700 514,20➢ $14.010 515,573 515.53a 253,0Go I,107,000 03T,aoa O45,aoa T73,000 4,015.ma 8➢700o 9.45m,0I10 9,743,O31) I9,a40,ou0 IINT.000 13.72i.➢oo 13,405,00a 0.174,Q0o a,551.00a o,055,030 0,727,oa0 10,501.000 11,304,000 mcm,000 12,717,n00 13=3,oa0 11.795,110-0 a 000,60q 1AO5.O00 1.213,000 1,250,unu 1,35a,P00 1A31,1100 1,512.a00 1,53upm I.n03,0e➢ a p a a 0 tl 0 0 a a 1n5,00 1n11000 Sigoo 130,00 Ia1,na0 a➢,u0o T11,009 71.000 51.000 50,O0a aa12n0 11 n2 ennn 2(11.m n t2 i.n Zi,n -eP•I?a#! n7.onn 244.rroni1 25e100 1a,150,2l1a 0,55u,9o0 IU.004,tl11a II,203,OOo 12,1a2,0oa 13,a23,a➢0 13,704,500 14,537,00a 15,_^04.00 15,O10,000 447,603 1,053,31a 010,000 ma,0au rr57,000 O77.00G DoLcoo 71a,0nu 740,110a mum 9 2 G.3a4,000 n n n g 9 a n 447,003 1,oa3,910 6.GG3.000 010,OG0 05T.Wa 077.90u G➢T,0011 710,000 740.000 702,000 a9� 0 n a )7 n a n g 9 431O3o 0 a a 0 0 a 0 a a 5so.ese.a➢2 510,023,310 SIO,GHT.000 511,02i.nm 512,1340,oa9 513,7aa,000 514.4111,000 515,20,00a 515,044,OW 1110,500,oM3 4,020,00 4,933,3T0 4,404,000 4,641,00 4,003,000 4,1771,000 5,14S.00a 5,325,000 5,511,oaa 5,704,ffe0 3,301,35a 3,a9,515 3,000,000 3,ID3,00 4,071,9ua 4,213,90a 4,3011,00a 4.513,000 4,n77 Sao 4.ou a311 0 0 a a a u n 0 a u 0 a 9 0 0 0 a 0 a o 73. 11,xnn 1700,nfU! 15• 111 flna tain.nt10 twl l3aa 1.737.[lria 1193 rnn n5t, n,onn 1921.➢1111 1u. llom R 9 9 D 9 9 9 n ➢ 9 0.5o2,G5u 0,051,5a5 1?,045,oa0 10,150,000 1a,54T.000 10,0116003 11,200.00a 11,654,0aa 12,103,000 I EGIOoo 3,0to.wIL 53o,aa0 ;,Wo w 0 n a a a 0 0 S,Z0.5,Oa0 =0,00a 1,OG0,000 t5ou,00n 1,Su6,000 1,5o wit 1,5n0,o➢o i.so.00 2,000,900 2,wupua 6 a 0 0 0 0 0 a a o 212,750 0 0 0 a 0 0 0 a a 057,T53 659,03 ma.ow rm,o90 C53,a9a e54,1300 ➢50,000 a.55,003 OS0,000 054,000 a 9 0 AES 000 ea5.nan ens aan 4_a IffN7 4n�5„000 Ap-9 ilia 4R5.aa0 5,004,55o Z,023,501 3,65O,O130 2.042,000 Ma'am 1,539,00 2.044.00 5,443.ua0 3,I41,OOu 3,144.1)(30 1,131?,214 1.440,Sa7 350,000 500,➢a0 son,= 5O3,ana 500,Ouu 50,uua 500.DM SOtl= 20u,1101 49,OOa 05,0m a 0 0 0 a 11 n a 9 0 9 9 n n n n n 1.247.320 1,488,657 455,11011 SOu,o00 5un.000 Soa,apa 500,uoo 500,aaa 580,090 5L10,cm 51u,044,52➢ SI2,573.075 513,050,aoa 513.332on-0 5I3AIffnou 514,055,000 514,442,a➢a S14,037,000 515,744.00 515,I7G,MD C-S7,550 40E.115 150.Doo 1,➢tm.0m I.E45,a0a 7.107.1300 2,4130.11p0 2,643,uw 3.10i,➢00 M2.11011 (5,107,717) (1,050,055) 3,0naa0 (1,411,0a0) (p o'Doa# (355,000) 4u,nut) 410,u0a 2o0,ailu 410,000 4,041,724 2.501,070 5,472,00a 4,tHo,0ou 3,1a5,000 2,a25,c0u 2.150,0011 3,21[LD0a 3,447Aa0 3,a42,000 o a (1a,0tlo) (15,000) (15,000) (IS,OOa) (15,55a) (15,000) t15,009) (15,0001 1AB41c0o 1,510,090 I.W.000 11000,000 1,750,➢110 1,1110,000 1.003,000 1,040.000 2.0t7,000 3.O AM n5� n con sal nm n15 nll�t n374i,,00 g nnn 'ri,T,�. n02nfm 711,10 ]� onn S7 n nnF] 2.I64.GG0 2,1(rT,001 Z.'ar0.o0a 2,33t,➢00 2,410,000 Z,401.nf)u 2.575,000 2,0a2,000 2.751,u0u 2,1144.00 IM Z37 1,41 9.Ti0 115 2.a2 2.07 a.31 350 3.77 38 SA%vatcr Tesaurces & conservatiurARatesTnuneial plan - 26114 61y councMagendn Teport.druR 1.dsac Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program Nan -Replacement Capital C501100 New Wells C501200 Property Site Improvements C500105 Reservoir Seismic Upgrades C500101 Paula Lane Reservoir#2 C501004 E, Wash, St Water Main Wellhead Treatment Total 5a/a GF transfer Enhanced Water Conservation Water Conservation Total Replacement Capital C50i000 Water Main Improvements Total Total Pay-as-you-go Contribution Amount to be Financed 2006/2007 Bond 2005106 2006107 20D7/08 2006109 2009/10 2010/11 2011112 2012/13 2013114 Total $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 - a00,000 800,000 - - - - - 15,ao0 15,000 - - - 2,021,000 21,000 2,000.000 - - - - 0 830,000 2,0p0,000 0 0 0 0 0 0 0 2,836,000 40.000 95,000 0 0 0 0 0 0 0 135.000 528.000 71,000,000 1.500.000 1.500,000 1.500.000 1,600.000 1,500.000 2000000 2.000,000 528,000 1,000,000 1,500,000 1,500,000 1,50o,a00 1,500,000 1,500,000 2,000,000 2,000,000 1,364,000 3,000,000 1,500,000 1,500,000 1,500,000 1,600,000 1,500,000 2,000,000 2,000,000 1,000,000 500,000 1,000,000 1,000,000 1,000,000 1,000.000 1,000,000 1,500,000 1,500,000 364.000 2,500,000 500.000 500.000 500.000 500.000 500.000 5n0.000 500,000 6,364,000 39 Hartle WaUz Assuclates F:1JobslPefaluma1433A1Nlorking Papers]Draii Final WalerMedel (10-3-O61xls;(T2) CIP 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 260,000 393,603 653,603 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 77,000 662,000 2030 515,000 52,750 567,750 2031 540,000 27,000 567,000 Total 9,440,000 7,521,208 16,961.208 :rl, 6:Ixvatcr resources & conservatiarARatcArmuncial pitut - 2004kity cauncillagenda rcpomdraft l .doe Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service 1 and 11 Debt Issue 1- 2006/07 25 years Projects $5,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 UNV 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 11 - TBD 25 years Projects $0 Issuance costs 0 Reserve (1 year Debt Service) 0 UM discount and bond insurance at 1.5% 0 ContingencylRounding g Total Issue Size 0 Assumed Average Interest Rate* 5.00% Estimated Annual Payment for Reserve Sizing $0 . *Based an current rates - subject to change 41 S:Iwater resources & conservatiatAlbtcsViinancial plan -20 4lcity cauncillagenda rupart draft I A= ATTACHM ENT B WASTEWATER MODEL 42 SAwater resources & canscrvatinn\Rntcslfinancial plan - 2004\city counciRagcnda reparLdraft l.dac Tahle 1 Clty of Petaluma - Waslawaler OfilityFund Pacted WaslewalerCash Flow pfajecfians-EtlGCr➢akWaferRecycliltg Actuet Acival 8udpet 2010111 2011112 2012113 2113114 2004105 200510n MEW 2007MG 201311109 2002110 9aginntnil All Fund Snlanco' 3•?„5.,,128,00"0' S'amciaa 34,390,000 S5,se0,o00 S7,688,e0a $7,050,000 310,33G2,000'f0. 311,0102,0.00%0 g ;11,9gQ2.0% a Avom m[Jul!Ia1 Rafalnc[nnaat s$i<r4.",,00'•0,070",i s:n�Rs s 's h 3 130i 13OX Capadty Faas 3,3U 3,409 3,505 3,VA 3,756 3,807 4,023 4.164 4,310 4,461 100 NV. of NewConnur.11=4 2111 414 ilia Ion iaa 100 100 100 1aD ReVenues 2,544,671.00 1,9G3,0c0,aa 2,226,cO3.0D 2,527,000.110 2,87ZOD000 12,132,571.00 $2,425,534,20 12,0I39,329 14,634,006 15,597,000 1151,823,000 21,350,000 24,222,000 Operating Charges for sfirulces- Mod 5ervlco Chaignsr 5,015.800 3,110,613 3,604,000 3,947,0111) 3,458,001) 3,92kan0 4.457,00 4,7118,000 4,9i7,13011 21,765,00➢ 5,126,000 22,601,006 Char9aslorsunIces-Wasic4valerecnaumpnan Charges' 7,5U.700 0,970.715 11,950,001) 13,550,010 15,365,000 17.425,000 19,705,000 21,260,gg0 4311,000 450,13Da Garsaocllan foes 747,309 1,413,000 3513,00D 350,01313 300,oim 3911.e00 400,Goo 420,000 tnlelflavemmentallaranL and other funds 042,302 - - 150,0a0 2,233,oga 110,030 160,00D 190.000 10➢,➢an 750,0110 22D,0➢a 3D➢,DDD Investment oamingc' 73.0t0 i4,500 - Othar Subtotal cpnmllnR 143.0o➢ 14,353.929 - 13,516,029 15,134,000 19,3tla,aa0 - 19,353,012a - 21,93n,0o➢ 24,9a2,GOD 20,T39,000 27,392,00a 2➢,557,000 Capital SRF7matmealPlanlProcneds - - 50,000,0110 25,a00,000 25,1300,000 25,000,000 964254 - InlerlmFlnandngPmceeds!(AtruGtmant) 27,192734 35,32?,95➢ 2,404,000 - - Projecind Debt Proceeds _ - - 9.057.000 - - 2H.400.a00 subtaintDnbl - 27,1G2,739 ➢5.=950 36,471,a0D 25,a00,O0o 25,OaG,000 20,372,254 - Total Ravanuna 14,353,629 40,70,50➢ i0a,45o,050 55,771,000 44,25a,00 4➢,030,00 54,114,254 20,7321,000 27,392,Oaa 2a,657,0H0 Expenditures Opnmling, G,050,442 7,025,239 7,51➢,120 7,7➢D.000 0,059,000 0,330,00a 5,G20,G0➢ 0,92tl,0a0 9,a,a00 Caalorsorvicas caslAfln=Uontmmlom(lnlerriovenvnentalTrancfem) 94695g 1,218,78g 1,359,050 1.01,000 1,460,000 1,510,0a0 1,560,00a t,6yo,tla0 1,670,a00 o0,➢00 73 1730,000 Other - M.Oatl 760.000 9ubtolal OpamOng 9,937,192 11,593,999 D,075,170 9,100,0GG 9,919,a0➢ 9,040.0no 10,1 BO,OGa 1q�3n,a0o 1a,9tl0,900 11,2Ho,000 Cnpllal° M Crack Project Coats 3.319.000 27,192.739 131,331,1350 27,404,000 13,180,003 mttpoa 242,000 - Nan-replacemenScnpltollmpmvementpmjests 304,000 204,039 2,481.350 9,264,000 1,209,00G 3GO,Goo 1,317,1100 6,05,000 1,357,000 - 1,40a,D00 - 1,A57,Ga0 - 1,5tlH,000 1,501,000 RspiacamantcaldId lmprovemcntprojocla 1,250,000 hOnorcapllalardays 115,75. - - - 11,842,G00 24,67G.ana 2A,400,nnG - OnakLineorCmdil- Pdndpalpoymenl - Gehl Service 1° series 2000-ExIFUngAahlservice 714,30D 715.050 714,929 718,954 715,704 710,374 723,694 722,480 724,730 729,738 - - - 539.141 689,141 589.141 889,141 SRFWastawaterCoplidReplocomen$Fund - - - - - 4,379,000 0,750,QQ0 H,760,000 8,768,0tl0 Pmjeclad➢RFDeal Service,2.7%,20yaam - - - Bank Lines or Cracilt-Inlnmst - 385,000 - 2,153,000 - 3,058,000 312,137 3,110,000 574,000 2,832,000 524,000 1,95n,am 624,GOa 024,nG0 024,000 x!-1A,900 Sedes2007Dah15erv1ca - - - - 063.5aa 1a27,tla➢ 1.927.tlga 1,927.ao0 Sedes2011OobtService - 4,535,00a - 20,591,000 - 07,931,000 42,045,000 31,152,000 36,150,000 39,303,aa0 114,1711,0110 14,721.000 14,205,900 5ubtalal Caplan[ Tmnsfarand Adjuaimente Pmlods-eltyDephn aranls-Tmna am" 1.504,000 G4a,70a 334,000 350,00n 350,000 35a,am0 350,Ga0 35o,00G 350,a00 35➢,tl00 Capllnladndnfouler 177000 1,341,catl 3,091,000 1,747,000 645,000 284000 12,000 12,OGO i$000 i,02 Oa0 12,0011, y.oG1,000 51rtacewa1er08M 746,000 091,47H 035A5a 064,060 994.000 925000 957,000 99a.000 Subpolar TmnnlarsB,Adjaalman,s 2,507,000 2,079,170 6,100,050 2,99y,000 1,089,000 1,55g,000 1,319,a➢0 1,35A000 1,307,000 1,A23,0a0 Total Expendllurau 14,030,302 39,924,16T 102,16H,220 54,11113,000 42,751,000 47,555,900 50,002,000 2a,00,000 20,510,000 29,099,0111) TaialRevenue lessTahrlExpem0lsres 314,237 895.401 (1,700,270) 1575,000 1,H020a0 (emoo6) 3,292,254 618,000 574,1301) 1,05s,00a Ending Fund Balance 55,122,307 S9,G05,401 Uprfa,73G 55,975,00 S7,G0$000 ST,a49,Ga0 310,337,254 311,000,000 411,824,000 513,440,000 Reanrva Fund Tmanla MM(60dap) Reaerva 1,158,23E 1.427,332 1,512,625 1,531,07 1,585,0DD 1,640,00D 1,556,EW 1,7W.000 1,816,657 1,BH0,000 CapilolReplacameni6Improvement Rasarvn (Nato) _ 034,000 992.020 991.000 y.➢21Lane 1.n52.nn0 1.084cop 1.117o0n, 1,1510nn 1.185,0313 1 M006 ToialMinimum Reserve Fund Tatguls 2,100.232 2,38%332 7,603,529 2,652,EW 2,037,000 2,724,000 2,813,150 2,905,000 3,a02,657 3,102,0013 Yes Taim Minimum Reserve Fund TargetMel Yes Yes Yes Yes Yes Yes Yes you 1,26 Yes 1.20 1.34 DeMService coverage (Wri125xj 7.39 3,50 1.79 224 199 2.65 1.57 Hartle WallsAssaclalas 43 FJJobaMnW=mf433Al1mll submllnt° WastawoterfCmrt Woalawalar Maid- iG-3-➢Gx1q,(f t) Cnah Flow;yla5f-WOr Table 2 City of Petaluma - Wastewater Utility Fund Wastewater Capital Improvement Program (1) 2004/05 200510B Non -Replacement Capltal C500402 Water Recycling Facility - Treatment Plant $3,310,000 $26,616,751 C500AAA SCADA for Ellis Creek WRF 575,988 C500EEE Pump Station SCADA C501400 Wilmington Pump Station " C500205 C Street Pump Station Upgrade 394,000 27,910 C500302 Recycled Water Pipeline - - 05005o5 Phase 11 Recycled Water Improvements C5ooBBB Lakeville Highway Improvements - - 0500405 Oxidation Pond Dike Repair - 256,929 C500305 Demolition of Hopper WWTF - " C501104 Blosollds Mgmt Program - ' C500403 River Access Improvements - ' C5o05o5 Petaluma Marsh Soil Remedieflon - " Total $3,704,00D $27,478,000 Admin and other Total non -replacement CIP less adminlother Replacement Capital 8221-54151 Sewer Main Repairs C50ODDD 2nd St. Trunk Sewer Replace 8221-54110 Integrated Collection System Total Total Ellis Creek Project Costs Total Nan -Ellis Creek Project Casts Total replacement capital Total CIP 2006fO7 2007108 2008109 2009/10 $80,334,450 $28,555,000 $12,738,000 997,500 849,000 420,000 - 197,000 - 773,000 1,327,000 _ 1,708,350 7,740,000 - - 368,000 $83,813,000 $36,666,000 $13,526,000 $330,000 5,625,400 $5,955,000 177,000 1,30B4O00 3,991,000 1,747.000 645,000 284,000 3,527,000 26,170,000 79,822,000 34,921,000 12,881,000 5,671,000 2010111 Total $242,000 $150,126,201 2,842,488 197,000 2,521.910 9,44B,350 0 256,929 5,993,000 $242,000 $171,386,000 12,000 8,164,000 230,000 163, 222, 000 _ - 1,000,000 1,030,000 1,061,000 1,093,000 1,126,000 5,310,000 _ - 250,000 258,000 266,000 274,000 2B2,400 1,330,DOO - 1,250.000 1,288,000 1,327,000 1,367,000 1,408,000 6,640,000 3,310,000 27,192,739 B1,331,950 27,404,000 13,158,000 330,000 242,000 0 152,968,689 18,417,169 394,000 0 284,839 0 2,481.350 1,250,000 9,264,000 1,268,000 368,000 1,327,000 5,625,000 1,367,000 1,408,000 6,640,000 3,704,000 27,478,000 85,063,0011 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) Une of credit borrowing will he used based on an approval for retroactive funding from the SRF BARTLE wELL5 ASSOCIATES F:IJebslpaleluma/ 433A/Dre14 SubmilalslWosiewaler/Droll Waslewater Modal-10-3-e6x1s;(r2) Wuv cIP;11315l2005;12:29 AM 44 Table 3 City of Petaluma - Wastewater Utility Fund Petaluma Wastewater Revenue 2000 Bands Annual Debt Service May I 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 390,000 325,704 716,704 2010 410,000 308,374 27,910 718,374 2011 435,000 286,694 723,694 2012 455,000 267,4H8 722,486 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 4,245,476 12,275,475 45 SAwater resources & vanservationlRntesTnaneial plan - 204kity caunciAagenda reparLdmit l.dor Table 4 City of Pataluma - Wastewater Utility Fund Estimated Future Annual [Debt Service for SRF and Interim Flnaneing for Ellis Creek Water Recycling Facility 2004/05 20051013 2006/07 2007108 2006/09 2009/10 2010/11 Totals Ellis Creek Water Recycling Project Cast $3,310,000 $27,192,739 $85,322,950 $27,404,000 $13,158,000 $330,000 $242,000 $156,959,680 0 0 50,000,000 25,000,000 25,000,000 SRF Borrowing SRF Accumulated Borrowing (Prev Yr+ Interest on Prev Yrs + Current Yr) 0 0 50,000,000 76 2DD,DDO 103,029,000 Estimated Annual Accrued Interest - on 0 0 1,200 000 1,829,00D 2,473,000 Outstanding Balance Assumed Average Interest Rate 2,4011/6 2.40°/a 2.40% 2.40a/a 2.40% Term (years) Estimated Annual [Debt Service- SRF borrowings 2004/05 - 2010/11 with payments beginning 2009/10 WCRF Payments $3,110,613 $8,976.716 Assumed Line of Credit Interest Payment 1 2004/05 2005/00 1413000 2007108 2008/02 Line Used During Year $0 $27,192,739 $35,322,950 $2,404,000 $0 Outstanding Line (Current+ Prior) 27,192,739 62,515,689 64,919,689 64,919,689 (11.842.000) Repayment of Line Outstanding Balance _ 0 27,192,739 62,515,689 _ 64,919,689 53,077,689 Estimated Annual Interest Payment (4,8%) 0 368,000 2,163,000 3,058,000 3,116,000 6artle Wells Assoclates FJJobslPetalum31433A1Draft 5ubmifalslWastavraterlOraftWastewater Made1-10.3-t16 xl5;(T4) Eflls Creek Debt Serv1ce;101512et]s;12:z9 AM 46 25, 000, 000 130, 502, 000 3,132, 000 2.40% 964,254 125, 964, 254 134,598, 254 137, 828, 254 3,230, 000 2.40a/a 2009/10 2010/11 $D $0 53,077,689 28,407,689 (24,670,000)__J28.407.689) 26,407,689 0 2,832,000 1,956,000 2.40°/a 20 6,758,000 689,141 ATTACHMENT B NOTICE ON PUBLIC HEARINGS AND RATES 47 S:lwater resources & conservation\RatesWinancial plan - 20041city councilldecember 4lagenda report.draii l.doc Lrr Notice of Public Hearing on Proposed Increases In Water and Wastewater Rates The City of Petaluma has been providing quality wastewater service for over 60 years and quality water service for over 100 years. However, the effects of inflation, deterioration of an aging infrastructure, and increasingly strict governmental regulations require a proactive response from the City. Here's what the City is doing: Boosting Investment in the Water System. The City will invest $1 million annually to repair and re- place worn and deteriorated water main pipeline, services and saddles. Without this investment, the sys- tem may be subject to increasingly costly and disruptive water main leaks. The City will also add a new $2 million water storage reservoir to further improve the reliability of our water system. Constructing the Ellis Creek Water Recycling Facility. This facility, with an estimated capital cost of $110 million, will replace the City's circa 193 8 wastewater treatment facility. The new facility will serve the community for generations and provide superior protection of public health and the environ- ment. Construction began October 2005 and will be completed in 2009. Upgrading the Wastewater System. Increasingly strict regulatory requirements require the City to make further investments in the wastewater system, including $1 million annually to repair the aging sewer system and a $2 million upgrade to a downtown wastewater pump station. Proposed Water Rate Changes A change in water service rates is needed to fund continued proper operation and maintenance of the water utility. The primary factors supporting the need for a rate change are increases in the City's cost to purchase water, increases in costs to operate the City's water utility, and planned capital and mainte- nance improvements. Water bills include a fixed service charge and consumption charge. Consumption charges for single-family residential customers are based on three tiers. It is proposed that a fourth tier be added. The first tier is intended to reward outstanding water conservation efforts by our customers. The aver- Placing concrete at Ellis Creek {rater Re4ycling Facility, age household will see some usage in the second tier. Annual typical water consumption for a single-family residential customer is about 12 hundred cubic feet (hcf) per month, or 8,976 gallons (1 hef = 748 gallons). Table 1 presents the current and proposed water service rates. Under the proposed rates, what will the typical single-family residential water bill be? Using an average of 12 hcf per month, the first 9 hcf would be charged at $2.31 for bills rendered on or after January 1, 2007. The next 3 hcf would be charged at $2.61 per he£ The total bill would be $4.47 + (9 x $2.31) + (3 x $2.61) _ $33.091month. This is an increase of ap- proximately 10% compared to the current rate. Ise Table 1. Proposed Water Rate Changes Type of Charge Current Proposed Water Rates for Bills Rendered on or After the Rates Date Below 1-Jan-06 1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11 MonthIy Service Charges ($/month) 15/8" 1 $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 pwl j $3.79 $4.47 $4.92 $5.17 $5.42 $5.69 11" (residential) $4.55 $5.37 $5.91 $6.20 $6.51 $6.84 11" $4.55 $5.55 $6.11 $6.41 $6.73 $7.07 $7.57 $9.24 $10.72 $11 25 $11.81 $12.40 $10.98 $13.84 $16.05 ( $17.65 $18.54 $19.46 13" $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 16" $39.39 $52.00 $64.48 $70.92 $74.47 $78.19 Consumption Charges ($/hcf) (1 hcf = 748 gals) Single Family Residential (monthly) Tier 1 (0-10 hct) $2.I6 Tier 2 (I1-26 heo $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 hct) $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 $I 07 $244 $2,64 $2.80 $2,96 $3.14 Proposed Wastewater (Sewer) Rate Changes A change in wastewater rates is needed to: 1) Fund construction of the Ellis Creek Water Recycling Fa- cility; 2) Fund construction of other improvements to the wastewater utility, including the collection sys- tem and water recycling facilities; and 3) Fund continued proper operation and maintenance of the wastewater utility. The primary factor behind the rate change is the need to replace the existing wastewater treat- ment facility. The existing wastewater treatment facility, parts of which were constructed in 1938, is operating at near capacity, is costly to maintain and operate, and is not sufficient to meet the commu- nity's needs. The capital cost of the new wastewater treatment facility is estimated at $110 million. Wastewater rates for commercial and industrial customers are based on a fixed service charge and a commodity charge based on water use. Wastewater rates for residential customers are based on a fixed service charge plus a commodity charge based on average water usage during the wettest winter months (therefore water that is used for irrigation outside the residence is not included in the wastewater service charge). This structure rewards indoor water conservation efforts. Table 2 presents the current and proposed wastewater service rates. The typical household uses 8 hcf (5,984 gallons) of water per month during the winter. For wastewater bills rendered on or after .January 1, 2007, the wastewater charge would be $10.29 + ($4.88 x 8) = $49.33. This is an increase of approximately 13% compared to the current rate. 49 Table 2. Proposed Wastewater Charges Type of Charge Current Proposed Wastewater Rates for Bills Rendered on or After the Date Below Rates I-Jan-06 I 1-Jan-07 { 14an-08 { 1-Jan-09 I 1-Jan-I0 I 1-Jan-l1 Fixed monthly charge ($/month) Single -Family Resi- 1 dential $9.11 $10.29 $11.63 I $I3.14 $I4.85 S16.78 Multi -Unit Residential, per dwelling or $9.11 $10.29 $11.63 I $13.14 $14.85 $16.78 Unmetered Residential, per dwelling unit $44 21 S49.96 $56.45 I $63.79 $72.08 $81.45 Commercial Law -Strength $9.11 $10.29 $11.63 $13.14 $14.85 $16.78 Medium -Strength S9.11 $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 I $13.14 $14.85 $16.78 Variable charge ($!lief) (1 hef= 748 gallons) Single -Family Resi- dential $4.32 $4.99 $5.51 I $6.23 $7.04 I $7.96 Multi -Unit Residential $4.32 $4.89 $5.51 $6.23 { S7.04 { $7.96 Commercial Law -Strength $4.30 $4.86 $3.49 $6.20 $7.01 $7.92 Medium -Strength S5.11 $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 (Yhco $3.20 $3.62 $4.09 $4.62 S5 22 $5.90 BOD ($Ab) S0.31 $0.35 $0.40 $0.45 S0.51 $0.57 TSS ($lib) 50.34 $0.38 W.43 $0.49 $9.55 $0.63 Residential Charge Comparison How do Petaluma's current and proposed wastewater and water rates compare to other nearby communi- ties? Table 3 presents a comparison of Petaluma's monthly residential water and wastewater charges with other communities. Table 3. Comparison of Typical Single Family Bills Agency INovato Sanitary District (Windsor {Petaluma (current) I5onoma Petaluma (proposed for 2007) [4vera,ee of all agencies Rohnort Park Santa Rosa (2007) {Healdsburg Cotati Marin Municipal Average Monthly Single Family Average Monthly Single Family Resi- Residential Water Bill (12 hef/ dential Wastewater Bill (8 hcf/month) month) $28.50 I NIA $43.06 $19.91 $43.66 { $30.13 $45.75 $38.95 $49.34 $33.09 $53.33 $35.57 $56.10 I $38.75 $65.19 I $34.70 $67.88 I $47.39 $70.81 I $37.76 NIA I $42.37 50 Protecting Public Health and the Environment Our aging infrastructure requires major rehabilita- tion and investment. A rate increase is needed to fund critical upgrades that protect public health and the environment. rveiv "'afar service saddle and corroded service saddle from McDowell Blvd., rvhara 100 ulater sen,ice saddles "'era replaced this smnnrer, City of Petaluma 11 English Street Petaluma, CA 94952 Notice of Public Hearing on proposed increases in water and wastewater rates PLEASE CONTACT US: If you have ques- tions or comments about the proposed rate increases, or wish to protest, you may: Attend the Public Hearing: Monday, December 4, 2006, starting at 7:00 PM, Petaluma City Hall, I I English Street, Petaluma, CA. Phone: (707) 778-4546. Write: City Clerk, I I English Street, Petaluma, CA 94952. To Protest: Owners of property receiving City water and wastewater service may protest the proposed ser- vice charges by filing a written protest with the City Clerk which must be received (not postmarked) by the City Clerk before or during the public hearing. The Protest must be signed by the property owner or own- ers and must include the assessor's parcel number(s) or street address(es) of all property(ies) served. Writ- ten protests may be mailed to the City Clerk at the address above or hand delivered to the Office of the City Clerk at I I English Street- PRSRT STD U.S. POSTAGE PAID PETALUMA, CA PERMIT NO.255 51 ATTACHMENT C PUBLIC COMMENT LETTERS 52 SAwater resources & conservationTntesVinancial plan - 20041city councilldecember 4lagenda report.draft l .doc Petaluma City Clerk 11 English Street Petaluma, CA 94952 This letter is to inform you that we protest the new proposed City water and waste water service charges under consideration by our City Council. Our address is 405 Via Gigi Street, Petaluma, CA 94952 and our Assessment #: 006-480-048-000. Thank you for your attention to this matter. Respectfully, Linda M. Fitz eral s. ,lf James W. Fit'zgerald 53 3q3 RECEIVED C J, SSelra r -tl r ►per h�r��b�� ��g�l.d'1—oz 000 54 106 tijp C, n ��y �4,e r - 101 ............ A S Pe -(A i- 0.".-1 J) NOTIC-C-C OF &31.1e q(F&RI Al Jn Al-�R.. D WAST�UAT�ll T(j.?.3 fgr.OS'Q-b !AJQRFf) sIF FOR -TH� FOtaw, A!C, RCA-SdAIS izig 6—, tf o kjFR '70 'Yt7A ay o u Li Vlc- (JAJ A F I ->N—DL INC&ME' ,11i�asjF jjV App) j(, -A-IVD A '20 OcfiMA� 1W 60.q Als-bmif7FPR�,miuAi,. 00A TUTA 109. 00 F6 R 'ZW ? .3. wc:,A(Zc:- .13,0.Fty — WC- Rl� SP&—FFQ(-Q. -/ Rc- 9 () C-VT -1-ItA7- T-(-�(JA.. Qt'rt2-E-eV-3 fk' Qj/l gL—N/rTl0p) ge Fao-M -Pfl� WCOEAR-7. LOCRAW laUE-0 P-11) 1AX(FE Pe-l-Awm,+ Fon Try LA S I y"17 s R. IS4NN �F pk ul -v c V c--f 56 William C Youngs Jr. 1412 Aspen Way Petaluma, CA 94954-5403 City Clerk Ties is my letter of protest for the outrageous water and sewer increase that is proposed. I'm on fixed income and with all the added charges you have added with the garbage and water already I will have a hard time paying even more on my fixed income.. When we moved in here 32 years ago the water rates and taxes were great. When I retired in 96 I was in good shape even with a handicapped wife. Now that you have allowed so many new houses that the sewage has to be changed without making them pay for the required upgrades it isn't fair for me to be paying for those that required these upgrades because of all the new connections. William C. Youngs Jr. d':'�-fi�L•�� %� � Y LAG-IfL- T- ff� 57 Richard E. K. Brawn 141 Grevillia Drive Petaluma, CA 94952 October 25, 2006 City Cleric 11 English Street Petaluma 94952 Subject: Protest Waste Water and Water Rate Tiering I am protesting imposition of a tax under the guise of a rate increase for water and wastewater. I am absolutely willing to pay whatever increases are necessary to properly maintain the sewer and water system and pay whatever increase is charged by the Sonoma County Water Agency. I am not willing to pay a water tax to subsidize growth. I am not willing to participate in transfer of cost from others to me. That is a tax. The three-tier system was accepted and there is no reason to change to four tiers. The change of tiers constitutes a modification of the entire pricing structure and making the water utility into a tax collection agency for Petaluma to pursue redistribution of disposable income. Please start over. Do not change the tiers, do not change the percentages allocated to each tier. Subtract out new water sources that increase the cost of water. Charge new users for the higher cost new water. Allocate the cost increases accordingly. If City Council directs that some users subsidize others, then it is up to City Council to bring that to the public and to a public vote as a change in taxes. In short, the proposal is illegal under California law that requires a vote of the public for changes in taxes. Sincerely,—! , f� Richard E. IC Brawn 58 I - r on Sr s PE Zumxuai Sj ___._...____.._._...___,._._.-.__.__._..-__.--.---.._.._..,----..___.__.__ 3 - __...-s-f -------------- .._. a ddC� ld ------------_ -_._-_.___.._-.,vt___._...______._._._..,._6V-�..-----��_`_._______.___...___ F E 59 � t RESOLUTION ADOPTING NEW WATER RATES 391 5awater resources & conservation\RatesVinancial plan - 20041city councilldecember 4lagenda report.dm t Ldoc 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 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 a public hearing on the proposed rate increases on December 4, 2006, 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: (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; (3) That the proposed rates as presented herein will not be used for purposes other than providing water services; 61 sawater resources & conscrvatian\Patealfnancial plan - 20041city counciNecember 4hvater rate resolution.draR 3.clean.doc (4) 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 (5) That a majority of record owners of properties that would be impacted by the proposed increases did not protest the proposed rate increases. NOW, THEREFORE, BE 1T RESOLVED, that the Petaluma City Council hereby rescinds Resolution 2002-191 and adopts this resolution in its stead. ARTICLE I GENERAL SECTION 1.1 PURPOSE. (A) 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. (B) 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. ARTICLE 1I RATES SECTION 2.1 WATER SERVICE CHARGE. (A) Potable and Recycled Water. The monthly service charge for potable and recycled water shall be as set forth in Table 1. Meter Size 518" 3l11 I" (residential) 1" 1.5" 2" 3„ 4" 6" Table 1. Monthly Water Service Charges Monthly Service Charge on Billings Rendered On or After the Dates Indicated Below January 1, January 1, January 1, January 1, January 1, 2007 2008 2009 2010 2011 $4.47 $4.92 $5.17 $5.42 $5.69 $4.47 $4.92 I $5.17 $5.42 C $5.69 $5.37 $5.91 $6.20 y $6.51 $6.84 $5.55 I $6.11 $6.41 { $6.73 I $7.07 $9.24 1 $10.72 $11.25 $11.81 $12.40 $13.84 $16.05 $17.65 $19.54 $19.46 $26.73 ' $33.14 $36.45 $39.27 $40.19 $36.00 $44.64 $49.10 $51.55 $54.13 $52.00 $64.48 $7092 $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%). ` This charge does not apply if superseded by a recycled water user agreement. 62 S:hvater resources & consmadonTuteslfnancial plan - 2004\6ty counciMeccm6er 4vater rate resnlution.draft lclean.doc 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 Tier or Customer Below Class January January 1, January 1, January 1, January 1, 1,2007 2008 I 2009 2010 1 2011 Single Family Residential (monthly) Tier 1 (0-9 hcf) Tier 2 (10-18 hcfl Tier 3 ( 19-24 hcf) Tier 4 (25+ hef) Multi -Unit Residential, Business, Industrial, Public $2.31 $2.50 $2.70 $2.83 $2,94 $2.61 $2.87 $3,10 $3.25 $3,41 $3.00 $3.39 $3.73 $4.07 $4.35 $3.24 $3.75 $4.13 $4.50 $4.82 $2.44 $2.64 $2.90 $2.96 $3.14 (B) Potable Water Commodity Chames 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 Commodity Charge on Billings Rendered On or After the Dates Indicated Below January January 1, January 1, January 1, January 1, } 1,2007 I 2008 2009 a 2010 I 2011 j $IA6 $1,59 $1.69 $1.77 $1.99 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 he as follows; Connection Size (inches) 1 1 2 3 4 Monthly Service Charge $3.90 I $5.64 $8.40 $11.22 1 63 5:lNvater resources & conservationlRateA inancial plan - 20041city counciridecember 4ltivater rate resolutfon.draft Iclean.doc 6 1 $16.80 8 1 $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 DELINOUENCY AND SERVICE RESTORATION CHARGES. (A) Delinauencv 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,, Mondav through Fridav, excepting Citv 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 $35 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. 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 Construction Meter. A deposit of $200 shall be required for a 1-inch or smaller construction meter set at curb stop. (2) Bridge Meter. A deposit of $600 shall be required for a bridge meter. (3) Fire Hvdrant Meter. A deposit of $1,000 shall be required for a fire hydrant meter. (B) Service Charges. (1) 1" or Smaller Construction Meter. A $1.00 per day service charge shall be applied for water service, irrespective of the quantity used. (2) Bridge Meter or Hvdrant Meter. A $2.00 per day service charge shall be applied for water service, irrespective of the quantity used. sawater resources & conservationlRatcs%nancial plan - 200416ty counciMecemher 4ltvater rate resoiution.dmft lclean.duc (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) Temporary Meter Readina. (1) Temporary meters provided by City for service shall be read by the customer at monthly intervals. Reading shall be recorded on forms provided by the City that shall be delivered promptly to the City by the 151h day of each month. (2) A fee of $15.00 shall be levied for forms not received by the City by the 15t" of each month. ARTICLE IV CITY PROVIDE SERVICES SECTION 4.1 CITY PROVIDED SERVICES. (A) Hot Tap_ s. Hot tap fees shall be paid prior to service. Hot taps will be charged as follows: { Size of Hot Tap (inches) j Hot Tap Fee 3/4-2 I $200 4-6 I $400 8 I $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. 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. 65 s:lwater resources & conservation%tesVinancial plan - 20041city coancil%december 4lwater rate resolution.dratt 3.clean.dac ARTICLE VH 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 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 M 0. 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 .: SAwater resources & conservadon\kateslfinancial plan - 20441city councMdecernber 44ater rate resalu6on.draft 3_clean.doc 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. 67 s:hvater resources L conscrvationlRatesltinancial plan - 20Wcity enuncilldecember 4hvater rate resolution -draft 3.ciean.doe RESOLUTION ADOPTING NEW WASTEWATER RATES SAwater resources & conservationlRatesltinancial plan - 2op41city councilldecember 4`agenda report.drafl l.dnc 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 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 a public hearing on the proposed rate increases on December 4, 2006, 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: (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; (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 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 69 (5) That a majority of record owners of properties that would be impacted by the proposed increases did not protest the proposed rate increases. NOW, THEREFORE, BE IT RESOLVED, that the Petaluma City Council hereby rescinds Resolution 2002-189 adopts this resolution in its stead. ARTICLE I GENERAL SECTION 1.1 PURPOSE. (A) 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. (B) 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. ARTICLE II DEFINITIONS SECTION 2.1 DEFINITIONS. "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. 70 "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 FIND MONTHLY FEES. (A) Residential Users. The fixed monthly fee for Residential Users, per dwelling unit, shall be as set forth in Table 1. (B) 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 Single -Family Residential ($/ma) Multi -Unit Residential, per dwelling unit ($Imo) Unmetered Residential, per dwelling unit ($/mo) Commercial ($/mo) Low -Strength Medium -Strength High -Strength Metered Industrial Users ($/mo) Fixed Monthly Charge For Billings Rendered On Or After the Dates Indicated Below January 1, January 1, January 1, January 1, January 1, 2007 1 2008 2009 1 2010 1 2011 $10.29 $11.63 $13.14 $14.85 $16.78 $10.29 $11.63 $13.14 $14.85 $16.78 $49.96 $56.45 $63.79 $72.08 $81.45 $10.29 $11.63 $13.14 $14.85 $16.78 $10.29 $11.63 $13.14 $14.85 $16.78 $10.29 $11.63 $13.14 $14.85 $16.78 $10.29 $11.63 $13.14 I $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, 71 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 Iaboratory 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%). 72 Table 2. Variable Wastewater User Charges Wastewater Customer Classification Single -Family Residential ($Ihcfl Multi -Unit Residential ($/heft Commercial ($/hef) Low -Strength Medium -Strength High -Strength Metered Industrial Users Flow ($ihcf) BOD ($/lb) TSS ($/lb) Variable User Charge For Billings Rendered On Or After the Dates Indicated Below January 1, January 1, January 1, January 1, January 1, 2007 1 2008 2009 2010 1 2011 $4.88 $5.51 $6.23 $7.04 $7.96 $4.88 I $5.51 $6.23 $7.04 $7.96 $4.86 $5.49 $6.20 $7.01 $7.92 $5.78 $6.53 $7.38 $8.34 $9.42 $7.48 $8.45 $9.55 $10.79 $12.19 $3.62 $4.09 $4.62 $5.22 $5.90 $0.35 $0.40 $0.45 $0.51 $0.57 $0.38 $0.43 $0.49 $0.55 $0.63 SECTION 3.3 SPECIAL CHARGES AND FEES. (A) Sample Collection and Laboratory Analvsis. 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-Un Sampling. The charge for collecting a "grab" sample shall be $100. The charge for collecting a composite sample shall be $350. (2) Laboratory Analvsis Charges. (a) Outside Laboratories. Samples analyzed by outside laboratories shall be charged at cost per sample. (b) City Laboratorv. 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 73 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 setforth in Section 3.1. 74 EXHIBIT D-2 7 O.A (information from December 18, 2006 Council Meeting) City of Petaluma, California Memorandum Ciop ]Manager's Office, 11 English Street, Petaluma, CA 94952 (707) 778-4345 Fax (707) 778-4419 E-mail. citf,nrirn'a"eLi)etalurrra.ca.rrs DATE: December 15, 2006 TO: Mayor and Members of the City Co it FROM: Michael Bierman, City Manager #�' SUBJECT: Additional Information for Item #613 on the December 18, 2006 Council Session, Public Hearing on Wastewater and Water Service Charges Attached are various reports and memos addressing questions of Council at the previous public hearing on wastewater and water service charges which was held on December 4, 2006. A memo from Mike Ban, Director of Water Resources & Conservation, and attached report from Bartle Wells Associates (BWA), evaluating the impact of eliminating the 5% general fund capital overhead charge. In summary, BWA has determined this reduction would not change the recommended rates, because the rates are driven almost exclusively by the need to meet capital debt service coverage targets. 2. A memo from Steven Carmichael and attached report from Tom Sinclaire calculating the cost incurred for the 5% capital overhead fee. The report shows that staff costs plus future repair and reconstruction costs exceed the 5% charges billed to date as well as those expected in this fiscal year. 3. A memo from Michael Ban addressing questions of water and recycled water charges as well as the state revolving loan program_ 4. A memo from Michael Ban addressing the automatic water meter reading program and why the plan is to go to an automatic meter reading system. 1 believe this answers all the questions that we heard at the Council meeting of December 4th. If you have any questions, please give me a call. Attachments RECEIVED CITY OF PETALUMA, CALIFORNIA C E C 14 2006 MEMORANDUM CITY MANAGER Department of Water Resources and Consen7ation,11 English Street, Petaluma, CA 94952 (707) 778-4304 Fax (707) 776-3635 E-maii.mban a ci petahelna.ca.us DATE: December 14, 2006 TO: Michael Bierman — City Manager FROM: Michael Ban, P.E. — Director Water Resources & Conservation W SUBJECT: 5% CIP General Fund Overhead The City's water utility financial consultant, Bartle Wells Associates (BWA), has evaluated the impact eliminating the 5% General Fund COP overhead would have on the proposed water and wastewater rates. In summary, BWA has determined this reduction would provide savings to the water and wastewater utilities, but would not change the recommended rates. This is because the recommended water and wastewater rates are driven almost exclusively by the need to meet the capital debt service coverage targets. Eliminating the 5% General Fund CIP overhead does not affect the capital debt service coverage targets. BWA's memorandum and revised water and wastewater model runs are attached. 1889 Alcatraz Avenue BARTLE WELLS ASSOCIATES INDEPENDENT PUBLIC FINANCE ADVISORS TO: Mike Ban FROM: Tom Gaffney and Adam Lynch DATE: December 14, 2006 SUBJ: Water and Wastewater Rate Update Berkeley, CA 94703 510 653 3399 fax: 510 653 3769 e-mail: bwanbartlewells.com By request of City staff and City Council, BWA has conducted additional analysis to determine what impact, if any, the removal of the CIP General Fund Overhead charge would have on rates. This is a charge, calculated as 5% of the annual non -replacement capital spending of the utilities, collected by the General Fund to fund overhead expenses related to the administration of capital proects within the City. This memo transmits the results of that analysis. Water Rates The initial water rate recommendations assumed that the utility would pay a total of $95,000 to the General Fund for this charge, all of that related to its construction of the $2 million Paula Lane reservoir sometime in calendar year 2007. There were no other CIP General Fund charges included in the model. The elimination of this fee would have little or no impact on our rate recommendations, as they are driven in the near term by the need to increase revenues to meet debt service coverage requirements, and in the long- term by the need to fund pay-as-you-go finacing of replacement capital imrovements. The updated water rate model is included with this memo for reference. Wastewater Rate Unlike the water utility, the wastewater utility is in the midst of an aggressive capital program, and as such, is expected to incur significant CIP General Fund Overhead expense over the next three to four years. The first set of rate recommendations assumed that this transfer to the General Fund would be $3.99 million in 2006-07, $1.75 million in 2007/08, $645,000 in 2008/09, and $284,000 in 2009/10. The total charge over the four years is estimated at $6.67 million. Removal of this charge, however, would not have a direct impact on rates for two reasons. First, the initial rate recommendations assumed that the transfer in 2006/07 would be funded with the line of credit, not with operating revenues, so eliminating it would not directly reduce the revenue requirement of the utility in the near term. By reducing the size of the line of credit however, it would also reduce the size of the bond issue in 2010/11 that is intended to clear off the remaining line of credit. This bond would be approximately $4 to $6 million smaller, and the City could expect savings of $300,000 to $350,000 per year from 2010/11 onwards. Dec 14, 2006 Page 2 More importantly, the need for rate increases is driven, almost exclusively, by the need to meet debt service coverage targets in 2011/12. In this year, the wastewater utility will be faced with new debt service on its SRF loan. The annual debt service on this loan is estimated at $8.7 million. This is in addition to debt service on existing debt, and new debt service on the 2007 and 2011 bonds which have yet to be issued. All told, total new debt service in that year is $11.8 million. To put this in perspective, total operating revenues in 2005/06 were about $12 million, meaning the utility will need to almost double operating revenues between now and then. Adjusting for new customer growth (which will bring in some new revenues), BWA estimates that the composite rate increase between now and 2010/11 needs to be 84%. Should the utility not reach this revenue target, it would likely be in technical default on some or all of its debt obligations. The updated wastewater model is included with this memo for reference. If you have any other questions, please feel free to contact either of us by phone or email. Sincerely, Tom Gaffney Adam Lynch Principal Senior Financial Analyst WATER MODEL Table 1 City of Petaluma - Water Utility Fund Cash Flow Projections Actual Estimate Budget Projected 2004105 2005M6 20061G7 200710e 2009109 2009MI] 2010111 2011112 201PJ13 2013/14 Eegihning Fund Balance' $10.729.443 $4,541,726 S2,441,000 $5.552,000 $4,129,000 $3,260,90 S2,912,000 S2,949,000 $3,355,000 $3 543,000 Role SlabNzalien Fund Sa s0 $150,000 3165,G00 $160,000 5195,000 $210,000 5225,000 S240,000 S255,000 Esl- hale Increase for SFD- tow User 5.4% SA16 9.896 0.4% 7.5% 5.0% 4.21/. 4.2% 3,4% 3.4% Eat. Rate increase for SFO- Average Use' &4% 5.4% 9.9% 9.09E 7.7% 5.0% 4,596 4.5% 3,6% 3.6% Ecf Rote increase for SFO- High Use' 5.4% 5.4% 14.095 10.2% 0.4% 5.1% 5.2% 4.7% 3.8% 3.8% Revenues Operating Charges for sales' Charges for servlcas' Investment eamingsr Other Subtotal Operating Capital Connection fees Debt proceeds Subtotal Capital Transfers & Ad'iustmenls Transfer In/{Out) Subtotal Transfers & Adjustments Total Revenue, Transfers, and Adjustments ExpendAures Onerating Cost of sales' Cost of services, Intragovemmental Transfers (General Fund) Subtotal Operating Capital Non -replacement capital improvement projects Replacement capital impmvemenl projects Capital outlays Existing Debt Service Projected Debt Service I Subtotal Capital Transfers & Adiustments Projects - Glty Departments - Transfers ad Capit�l,letasdminlather1536 GF'cVeihe'.:' Subl Transfers & Adjustments Total Expenditures, Transfers, and Adjustments Net operating revenue (before debt service) Net total revenue Ending Fund EWance Transfer to rate staMizalian Reserve Fund Targets O&M (60 days) Reserve Capital Replacement B. Improvement Reserve Total Minimum Reserve Fund Targets Total Minimum Reserve Fund Targets Met Debt Service Coverage (Min 1.25 x)' 9,174,000 9,551,000 a,655,000 9,727,000 10,591.000 11,364,000 12,03,000 12,717,W0 13,283,000 13,795.000 0 909,aco 1,088,000 1,213.000 1,206,0GG 1.358,000 1,432,000 1,512.0011 1,595,000 1,603,000 105.000 100,000 81,000 139.Wa 103,000 62,0al) 73,000 74.000 64,000 69,000 681.2tla 0 20000a 213LOOg 214.004 221,00o 229.0W 237.0GO 245�000 254.0 10,160,200 9,560,000 10,004,000 11,286,000 12,194.000 13,025,000 13.797,000 14,540.000 15,207.000 15,021,000 447,603 1,063,319 619.000 MUM 657,000 6T7,000 697,000 718,000 740,OGO 762,000 a a 6.364,000 a 9 9 9 9 0 0 447,603 1.063,319 6.003.000 636.000 657,0GO 677,001) 697,000 710.000 740,000 762,000 4949 000 0 9 0 9 9 a a 9 0 49,000 0 a tl 0 0 0 0 0 0 310,655,803 $10,623,319 $16,997,000 $11.924,000 $12.051.000 $13,702,000 S14,494,000 515,25B4O00 515,947,000 516,593,000 4,600,000 4,332.370 4,484,000 4,641,000 4,B03,000 4.971,000 5,145,10GO 5,325,00 5,511.000 5,704,000 3,391,35a 3,023,515 3.800,000 3,933,000 4,071,000 4,213,000 4,360,OOfl 4,513,000 4,671.0Ga 4,834,000 1,311,300 1,706,000 1.561,M) 1.610.000 1,673,000 1.732M 1.793000 1,e56,000 1,921.000 196_, 8,000 9,502,650 9.061,885 9.645.000 10,190,000 10,547.13M 10.918.000 11.298,000 11,694,000 12,103,000 12,526,000 3,919,04a 636,000 2,000.0m 0 0 a 0 0 a 0 1,205,000 523.000 1,000,000 1,500,000 1,500,000 1.500.000 1,5GO,000 1,500,000 2.000,000 2,Ga0,000 212,750 0 0 0 0 a 0 0 a 0 657,753 659.503 656,0GO 657,000 653,000 854,000 659,000 658,000 656,000 659,000 0 a 0 4e5,000 485,000 4135,0_00 405,000 465,00a 4a5.000 465,OOa 5,994,550 2,023.503 3.556,000 2.642,00 2,635,GOa 2,039,000 2,644.000 2,643,000 3,141,600 3.144.000 1,139.214 1,448,507 360,000 500,000 500,000 500,000 5913,000 500,000 500,000 500,000 208,106 40,000 B G 0 0 0 0 a G 1,347.320 1.468,507 360,a00 500.0m 500.000 500,000 500,000 500,000 500,000 500,1100 518,844,520 S12,573,975 513,581,000 $13,332.000 $13,695,000 $14,055,000 $14.442.000 $14,837,0f1O S15,744,000 S16,170,000 657,550 498,115 159,000 1,095.000 1.647,000 2,109.000 2,499,000 2,846,000 3.104,000 3.295,000 (6,1E7,717) (1,95G,656) 3,126.000 (1,408,000) (034,000) (353,000) 52.000 421,000 203,000 413,MD 4,541.726 2,591,070 5,567,000 4,144,000 3,295,000 2,927,000 2,964.000 3.370,000 3,55B4O00 3,058,000 0 0 (15,000) (15,00) (15,000) 115,000) (15,0G0) (15,00a) (15.000) (15,Oa0) 1,584,000 1,510,000 1,641,000 1,69s,000 1,758,00 1,819,000 1,663,000 1,949,1100 2,017.000 2,686,000 580.000 597000 615000 633,000 652.000 672,000 6920n0 713,000 734.000 765,0 2,164,000 2,107.000 2,250,Oa0 2,331.000 2,410.WO 2,491,000 2,575,000 2,662.000 2,751,000 2,644,000 ®i 11.41 Ir Bi(41:Ii1i3?IIYFtII r 1.68 2.37 1.66 2.18 2.62 Zee 3.31 3.58 3.77 Table 2 City of Petaluma - Water Utility Fund Capital Improvement Program 2005/06 2006107 2007/08 2008/09 2009/10 2010111 2011112 2012/13 2013114 Total G, Plan Total Hon -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 0 5% GF transfer 40,000 g5,000 0 0 0 0 a 0 0 135,000 0 Enhanced Water Conservation Water Conservation - - - - - - _ - - - Total - - - - - - - - - - Replacement Capital C501000 Water Main Improvements 528.000 1.0001000 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 Bond' 6,364,000 1 - Hand to finance Paula Lane Reservoir and $500,000 per year for automatic read meters Bartle Walls Associates F:1Jobs1Pe1a1uma1433A1Working PapersOnal Water Rate Model (12-11-06).x1s;(T2) C1P 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 275,000 383,623 558,623 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 Bartle Wells Associates F:/Jobs/Petaluma1433A1Working Papers/Final Water Rate Made] (12-11-06).xls;(T3) Existing ❑ebt-,12J1412C]06;3:47 PM Table 4 City of Petaluma - Water Utility Fund Estimated Future Annual Debt Service I and Il Debt Issue I - 2006/07 25 years Projects $6,364,000 Issuance costs 200,000 Reserve (1 year Debt Service) 485,000 UNV 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 LIM 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 Bartle Wells Associates F:Jobs1Clientl#/WP/Final Water Rate Model (12-11-06).xls1(T4) New ❑ebtj 211412006,3:47 PM] 1 WASTEWATER MODEL lb Table t City of Petaluma - Wastewater Utility Fund Wastewater Cash Flow Projec8ons-UsCreek Water RecyclIng Actual Actual Budget 2004M5 2005/06 2006107 Beginning Alt Fund Balance' 34,898,070 $5,120,008 $0,010,000 Average Single Family Residential Rats Inarnnsat ` = t y 13.0'% Capacity Fee' 3.329 3.409 3.506 No. of New Connections' 210 414 100 Revenues Operating Charges for services- Fixed Servi:2Charges' 6,016,800 3,110,613 2,684,000 Charges for servtces- Wastewater Consumption Charges' 7.525.200 5,978,715 11,950.000 Connection fees 747,309 1,413,000 350 000 Irdargovammental/grants and olherfunds 842,302 - - Invaslmanleamings' 79,01E 14,500 150,000 Other 143,000 - - Sublatal Operating 14,353,629 13,516,829 15,134,000 Capital SRF Treatment Flanl Proceeds - - 50,000,000 #nterim Flnandng Proceedsl(Actustmenl) - 27,122.739 31.331.950 Projected Debt Proceeds - - - subtatni Debt - 27,192,739 81,331,950 Total ReVunuus 14,353,529 40,709,568 96,495,950 Expenditures Operating' Cost of services 6,050,442 7,095,239 7,516,120 Cost Allocation transfers(InlergavernmentO Transfers) 946.950 1,218,750 1,359,050 other - 250,000 200,000 Subtotal Operating 6,087,382 8,583,989 9,075,170 Capital' EAis Creak Project Costs 3,310,000 27,192,739 81.331.950 Non-replacementcoplial Improvement projects 394,000 284.839 2,481,350 Replacement capital Improvement projects - - €,250,000 Minor capital outlays 116,750 Bank Line of Credit- Principal payment - - - Debf Service 1° Series 2CO3- Existing debt Service 714.300 715,059 714,923 SRF Wastewater Capltat Replacement Fund - - - Projected SRF Debt Service, 2.4%, 20 years - - - Bank Lines of Credit- Interest - 388,OOo 2.057.000 Series 2007 Debt Service - - - Sedes 2011 Debt Service - - - Subtotal Capital 4,535,000 28,581,000 87,835,600 Transfer and Adjustmunts Projects. City Deparhaenls- Transferal° 1.584.000 646,700 334,000 Gapllaludmlhldlhrr _, €77,000 1,341,000 Surfacewater O&M 746,000 691.478 835,060 Sublatnl Transfars & Adjustments 2,507,0130 2,679,178 1,169,050 Total Exponditures 14,039,392 30,824,167 98,079,220 Total Revenue less Total Expenditures 314,237 885,401 (1,613,270) Ending Fund Balance $5,122,36T $6,005,401 34,398,730 Reserve Fund Tmmnts ❑&M (EO days) Reserve 1,165,232 1,427.332 €,5W2,528 Capital Replacement $ Improvement Reserve (Note) 934,000 962.000 991.00a Total Mlnlmum Reserve Fund Targets 2,100,232 2.389,332 2,503,528 Total Mlnlmum Reserve Fund Targets Mel Yes Yes Yes Debt Service Coverage (Min t.25 x) 7,39 3.50 1.85 Projecled 2007/08 2008109 2009110 201 2011112 2012/13 2013114 $4,400,000 $7,910,000 $10,600,800 310,520 314,220,000 $15,2130,000 $16,270,000 13.0% 13.0'/. 13.0% 13.0% 1-al, 0.0% 0.0% 3.629 3,756 3,087 4,023 4.164 4,310 4,461 100 1c0 100 100 too loci 100 3,047,000 3,458,000 3,925,000 4,457.000 4,75a,000 4,968,000 5,025,000 13,550,000 15,385,000 17.425,000 19,765.000 21,260000 21,550.000 22,238,000 360,000 380.000 390.000 400,000 420,000 430.000 450,000 2,233,000 - - - - - - 110,000 200,000 270,000 260.000 360,000 380,000 410,000 19,300,008 19,483,000 22,010,000 24,B9$000 26,838,000 27,220,000 20,124,000 25,000,000 25,000,000 25,000,000 984,254 - - - 2,404,000 - - - - - 9,067.000 - - 24,417,000 - - - 36,471,000 25,000,oO0 25,000,000 25,381,254 - - - 55,771,800 44,403,00o 47,010,000 50,263,254 26,639,000 2T,228,000 20,124,000 7,760,000 8.050.000 5,330,000 8,620,000 5,920,000 9,200,000 9.650.000 1.410, 000 1,460,1300 1,510,000 1,560,000 1,610,000 1,670,000 1,730,000 8,€90,o88 9,510,000 9,840,800 10,180,000 lo'sao,000 10,900,000 11,220,000 27,404,000 13,158,000 330.000 242,000 - - 9,264,000 366,000 5.625.000 - - - 1,288,Oo0 1,327,000 1,367,000 1, 408, 000 1,457.000 1.508.000 1.561000 - Il,842,000 24,670.000 24,417,000 - 718,964 716.704 718.374 723,694 722,488 724,738 725,738 - - - 689,141 689,141 689,141 589.141 - - - 4379,000 8,758,000 8,758,00 6,758,000 2.567.000 2,925,000 2,640,000 1,7154,000 - - - 312,137 624.000 624,090 624,000 624,000 624,000 624.000 - - - 829,000 1,658,000 1.658,000 1.658000 41,854,000 30,961,000 35,974,000 35,076,008 13,909,000 13,962,000 14,018,000 350,000 350,000 350,000 350.000 350.000 350.000 350,000 884,000 694.000 925000 957.000 990,000 1,025000 1.051,000 1,214,000 11,244,000 1,275,000 1,307, 000 1,340,000 1,375,000 1,411, 000 52,250,000 41,715,000 47,089,000 46,163,000 25,779,000 26,237,000 26,707,000 3,513,0011 2,688,000 (79.000) 3,700,254 1.059,000 991000 1,417.000 $7,913,000 $10,598,000 $10,521,000 $14,220,254 $15,279,000 316,271,6oa $17,087,000 1, 531, 667 1, 6 85,00 0 1,64 0,000 1,696,667 1,755.000 1,816.6 67 1, 8 60, 00 0 1.021.001) 1,052,000 1,0B4,000 1 117 000 1.1510oo 1.186 000 1 _22.0oo 2,652,667 2,637,000 2,724,000 2,813,667 2,906,000 3,002,667 3,102,000 Yes Yes Yes Yes Yes Yes Yes 2.35 2.09 2.80 1.64 i;.`i.;:�id'>:`:i:129, 1.29 1.33 / Hartle Wells Associates F:/JobslPeta1uma1433A1Orofl SubrnbatsNlastewmIer1Mnai Wastewater Model- 12-11-06xis;(Ti} Cash FlaWf12l1412006 Table 2 City of Petaluma - Wastewater Utility Fund Wastewater Capital Improvement Program (1) 2004/05 2005/06 2006/07 2007/08 2008109 2009/10 2010I11 Total — Non -Replacement Capital C500402 Water Recycling Facility - TreatmentPlant $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 - - 2.842,485 C500EEE Pump Station SCADA - - - - 0501400 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 - - - - - - - 0500505 Phase II Recycled Water Improvements - - 1,708,350 7,740,000 - - - 9,448,350 C50OBBB 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 - - - - - - - - 0500403 River Access Improvements -- 0500605 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 adminlother 3,527,000 26,170,000 79,822,000 34,921,000 12,861,000 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 C50ODDD 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 BARTLE WELLS ASSOCIATES R/JobslPetaluma/433A/Draft Submitals/WaslewaterlFinal Waslewaler Model - 12-11-06,x1s;(T2) WW CIP;12114I2006;3:4e PM Table 3 City of Petaluma - Wastewater Utility Fund Petaluma Wastewater Revenue 2000 Bonds Annual Debt Service May 1 Principal Interest Total 2004 $310,000 $4O2,608 $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 455,000 257,488 722,488 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 6990-000 37,950 727,950 Total 8,030,000 4,245,475 12,275,475 BARTL.E WELLS ASSOCIATES Bartle Wells Associates F:IJobs/Petaluma1433A/Draft submitalslWastewater/Final Wastewater Model - 12-11-06.xls;(T3) Existing Debt Service; 12/1412006;3:48 PM Table 4 City of Petaluma - Wastewater Utility Fund 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 Totals 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 $152,968,689 SRF Borrowing 0 0 50,000,000 25,000,000 25,000.000 SRF Accumulated Borrowing (Prev Yr + Interest on Prev Yrs + Current Yr) 0 0 50,000,000 76,200,000 103,029,000 Estimated Annual Accrued Interest - on Outstanding Balance 0 0 1,200,000 1,829.000 2,473,000 Assumed Average Interest Rate 2.40% 2.40% 2.40% 2.40% 2.40% Term (years) Estimated Annual Debt Service- SRF borrowings 2004/05 - 2010111 with payments beginning 2009/10 WCRF Payments $3,110,613 $8, 978,716 Assumed Line of Credit Interest Payment E 2004/05 2005/06 1413000 2007/08 2008/09 Line Used During Year $0 $27,192,739 $31,331,950 $2,404,000 $0 Outstanding Line (Current + Prior) 27,192,739 58,524,689 60,928,689 60,928,689 Repayment of Line - - - - (11,842.000) Outstanding Balance 0 27,192,739 58,524,689 60,928,689 49.086,689 Estimated Annual Interest Payment (4.8%) 0 388,000 2,057,000 2.867,000 2,925,000 Bartle Wells Associates F:/Joh5lPetaluma/433AlDraft SubmitalslWastewater/Final Wastewater Mode[-12-11-06.xfs;(r4) Ellis Creek Debt Servlce;12114/2006;3:48 PM _W__ 25,000,000 964,254 125,964,254 130, 502, 000 134, 508, 254 137, 828, 254 3,132,000 3.230,000 2.40% 2.40% 2.40% 20 8,758,000 689,141 2009/10 $0 49,086,689 (24.670.000) 24,416,689 2,B40,000 2010/11 $0 24,416,689 (24.416,689) 0 1,764,00❑ Table 5 City of Petaluma Estimated Future Annual Debt Service/Projected Monthly SPD Bills Series 2007 Debt Issue Projects' $9,067,000 Issuance costs 150,000 Reserve (1 year Debt Service) 624,274 UM discount and bond insurance at 1.5% 0 Contingency/Rounding 35,000 Total Issue Size 9,876,274 Assumed Average Interest Rate* 4,75% Estimated Annual Payment for Reserve Sizing $624,274 Series 2010/11 Debt Issue 30 years Projects' $24,416,689 Issuance costs 150,000 Reserve (1 year Debt Service) 1,658,000 UIW discount and bond insurance at 1.5% 0 Contingency/Rounding 0 Total Issue Size 26,224,689 Assumed Average Interest Rate* 4.75% Estimated Annual Payment for Reserve Sizing $1,658,000 1- Assumes refunding balance of line of credit in 2011 Bartle Wells Associates F:Liobs/Petaluma1433A1Draft SubmitalsMastewater/Final Wastewater Model - 12-11-06.xls;(T5) New 8onds;1211412006;3:48 PM DATE: TO: FROM: SUBJECT: CITY OF PETALUMA, CALIFORNIA MEMORANDUM Administrative Services Department, 11 English Street, Petaluma, CA 94952 (707) 778-4352 Fax (707) 778-4428 E-mail. fiiiarrceCaci.petalarnrr.ca.res December 15, 2006 Michael Bierman, City Manager Steven Carmichael, Administrative Services Director 5% CIP Administrative Fee The City Council has requested cost justification for the 5% CIP Administrative Fee. The City currently has under contract Tom Sinclaire who is updating the City impact fees. Mr. Sinclaire was a City Finance Director and City Manager for over 20 years prior to becoming a consultant. I have requested that Mr. Sinclaire do a calculation of cost incurred by staff regarding administrative hours spent on Ellis Creek project since September 21, 1999 when City Council approved going forward with the project. Staff has checked City Council and Planning Commission minutes, personal calendars, correspondence, contracts reviewed and actual costs incurred since that date to establish administrative costs. In addition, Public Works has estimated, based on past practice, that the road used by heavy trucks as entry way to the project will cost $3 million to reconstruct once the project is complete. The historical costs table attached to the consultant letter shows that these staff costs plus future road repair and reconstruction exceed the 5% charges billed to date as well as those expected through June 30, 2006. Mr. Sinclaire will continue to study the 5% CIP Administrative Fee and make recommendations regarding changes at a February City Council meeting. N SINCLA.IR & ASSOCIATES LOCAL GOVERNI T CONSULTING SERVICES MEMORANDUM TO: Steven Carmichael, Administrative Services Director, City of Petaluma FROM: Tom Sinclair, Principal Consultant RE: Wastewater Treatment Plant Administrative and Support Cost Analysis DATE: December 15, 2006 BACKGROUND: The City of Petaluma currently charges an administrative fee to major capital project accounts to reimburse the City's General Fund for costs associated with such projects. The current practice is to charge a Five percent fee, as an estimate of the cost of staff time and other costs not otherwise directly charged to capital projects. The City has -requested a more precise review and analysis of administrative and other costs related to the waste water treatment plant construction project. This Memorandum summarizes the results of the analysis. Additional details can be reviewed in the attached chart. ANALYSIS: Planning for the wastewater treatment plant began in 1999. City staff has compiled an estimate of the number of hours various staff members have spent since 1999 on the planning and administration of the project. These hours (and costs) have not previously been directly charged to the capital project. Staff hours include time spent on the project by the City Manager, Public Works Director, Administrative Services Director and other City staff members. We have calculated "billable" hourly rates for each staff member. The billable hourly rates include insurance costs ($) salary, benefits, a proportionate percentage of each department's non -personnel costs, and indirect costs (charged through the City's Internal Service Fund). The billable hourly rate for each staff member has been multiplied by the staff member's number of hours spent on the project, to calculate the total personnel cost that the City has incurred on planning and administration. The total cost is $308,953 for the period 1999 through 2006. In addition to the personnel costs, the City has incurred contract City Attorney costs ($36,579), insurance costs ($89,837) and Public Works pavement repair costs ($15,000) that have not been charged directly to the project. It is also expected that sections of McDowell Boulevard and Cypress Street will have to be reconstructed as a result of damage from truck traffic and construction activity, following the completion of the project. City staff estimates that the reconstruction cost will be approximately $3 million. The attached chart illustrates and summarizes these costs. The total costs incurred are $3,450,369, including the expected street reconstruction cost. PO Box 4882 Auburn, CA 93604-4982 Telephone: 530-878-9100 Fax: 330-879-0900 tsinclaina!usantedia.ty 6 Waste Water Treatment Plant Historical administrative cost analysis (1999-2006) December 15, 2006 Estimated Hourly billable Employee hours (1) rate (2) City expense Comment Staff costs: City Manager Mike Bierman 438 $ 248.98 $ 109,053 Status updates at Council meetings not included Finance Director Steven Carmichael 100 $ 194.14 $ 19,414 Accounting Manager Cinde Rubaloff 225 $ 80.67 $ 18,150 Info Specialist Dave Deorsey 290 $ 64.93 $ 18,831 Risk Manager Ron Blanque 450 $ 91.91 $ 41,358 Commercial Services Manager Susan Simmons 20 $ 86.00 $ 1,720 Public Works Director Vince Marengo 120 $ 193.22 $ 23,186 Traffic Engineer Frank Penry 80 $ 172.49 $ 13,799 PW Supervisor Kevin Homick 20 $ 148.35 $ 2,257 Assistant Engineer Jean Miche 80 $ 148.67 $ 11,893 Executive Assistant to CM Katy Crump 80 $ 95.87 $ 7,670 Administrative Assistant Chris Jones 80 $ 70.11 $ 5,609 Human Resource Manager Pamela Robbins 80 $ 153.41 $ 12,273 Council meeting updates Combined CC, CM, CA 49 $ 470.00 $ 23,030 Billable rate includes City Clerk, City Manager & City Attorney Sub -Total $ 308,953 Contract and infrastructure costs: Legal Department $ 36,579 Status updates at Council meetings not included Temporary asphalt repair $ 15,000 Estimated by and of construction Insurance $ 89,837 Liability and property insurance during construction McDowell Blvd. & Cypress Street reconstruction $ 3,000,000 Estimated by PW Department Sub -Total $ 3,141,416 Total $ 3,450,369 (1) 1999-2006 hours estimated by City staff (2) Includes salary, benefits, proportionate non -personnel costs and indirect cost allocation Sinclair and Associates CITY OF PETALUMA, CALIFORNIA MEMORANDUM Department of «"ater Resources and Consenwtion, II English Street, Petaluma, CA 94952 (707) 778-4304 Fax (707) 776-3635 E-mail:tnban a e petaluma.ca.its DATE: December 7, 2006 TO: Michael Bierman — City Manager FROM: Michael Ban, P.E. — Director Water Resources & Conservation SUBJECT: . Proposed Changes to Water and Wastewater Rates Response to Council Questions from Public Hearing on December 4'. 01. T Vat is Rooster Run Golf Course charged for the use of recycled Tvater? Al. $10.35/acre-foot. This charge will increase in January 2007 based on the CPI index. 02. TVhat is the Coast Girard charged far potable water? A2. The Coast Guard is charged the business class rate of $2.07/licf. This rate is proposed to increase to $2.44 in January 2007 tinder the recommended rate changes. 03. TVhat is the charge for- neater and wastewater customers that reside outside of the Cite lrmits? A3. Water customers outside the city limits area are charged the same rate as those within the city. Wastewater customers outside the city limits are charged an additional $0.80/month per account or unit. 04. What is the recycled ivater charge for Adobe Creek Golf Course? A4. $97.77/acre-foot. This charge is based on Adobe Creek's agreement of June 1990. Q5. What is the vineyard charged for recycled water? A5. The vineyard is charged 50% of the potable water rate, which is $1.035/hcf or $450/acre- foot. 06. What rate does the City pay the ranchers to irrigate theirfields ivith recycled water? A6. Since 1984, the California Regional Water Quality Control Board has prohibited the City from releasing treated wastewater into the Petaluma River from May I through October 20. This action prompted the City to develop an extensive agricultural water recycling program to help manage upwards of 600 million gallons of recycled water each year. The City contracts with six (6) ranchers who are paid to irrigate their fields with recycled water at the rate of $2731acre-Foot. Q7. Page 19 of the Agenda Report states that revenue projections are based on water ttse of 3.8 million hcf. This number is below the three-year average annual water sales and was chosen so as not to overestimate water sales revenue. How does this compare to prior water- use? A7. Annual water sales for the prior fiscal years were as follows: Fiscal Year Total Annual Water Sales (million hcf) 05-06 4.0 04-05 4.2 03-04 4.9 Q8. Page ?d of the Agenda Report states the 001 must form a replacement and rehabilitation reser ile for the Ellis Creek facility, and frnrd that reserve with approximately $690, 006 per year as a condition of its State Revolving Fund loam. Is this a recurring annua) arnornrt? Is it for the eventual replacement of the Ellis Creek -facility? A8. As a condition of its State Revolving Fund loan, the City is required to maintain a "Wastewater Capital Reserve Fund for expansion, major repair, or replacement of the wastewater facilities" at a minimum rate of one-half of one percent of the SRF loan amount each year for a period of ten (10) years. By replacement, the State does not mean replacement of the treatment plant. It means replacement of equipment at the facility. This is not an annual recurring amount. The proposed balance of $690,000 is maintained each year. Any amounts expended from the fund must be replaced by "depositing at a minimum rate of ten (10) percent of the expended amount." Money deposited into the fund can be used for planning, design and construction. The City Council approved the resolution establishing this fund on April 3, 2006. RECEIVED CITY OF PETALUMA, CALIFORNIA DEC 14 2006 MEMORANDUM CITY MANAGED Department of Water Resources and Conservation, 11 English Street, Petalrrrna, CA 94952 (707) 778-4304 Fax (707) 776-3635 E-mail.inhan aci petah nra.ca.its DATE: December 14, 200b TO: Michael Bierman — City Manager FROM: Michael Ban, P.E. — Director Water Resources & Conservation SUBJECT: Automatic Water Meter Reading program Late this summer two residential customers experienced significant leaks in their household water systems that went undetected for sixty days until the Department of Water Resources and Conservation manually read their water meters. One customer's irrigation system leak resulted in water use increasing from 5 hcf(3,740 gallons) in two months to 309 hcf (231,100 gallons), an increase of 304 hcf (227,000 gallons), or 3,800 gallons per day. The leaked water added approximately $775 to their water bill. Another customer experienced a toilet leak. This seemingly innocuous problem resulted in a water leak of over 380 hcf (284,000 gallons). That's over 4,700 gallons per day! This leaf added nearly $1,000 to the customer's water bill. These two leaks resulted in the accidental loss of over 500,000 gallons of water. Both cases illustrate the aggravation that accompanies a water leak. The customer is faced with a high water bill, and often feels slighted because they don't feel they did anything to cause the leak. The City spends a significant amount of time and resources reacting to the situation. This includes re -reading the meter and, in some cases, testing the meter; counseling the customer on leak detection and repair strategies; adjusting the water bill and, sometimes, arranging a payment plan for the high water bill. Finally, the leaks lead to increased and unnecessary water loss. Both of these cases could have been alleviated if the City had an aggressive Automatic Meter Reading (ARM) program. The City has approximately 19,100 water meters. In 2004 the Department of Water Resources and Conservation began a modest program of replacing deficient water meters with ARM, and began requiring new developments to install ARM. Approximately 1,200 ARM meters have been installed. The remaining meters are manually read. Manually reading water meters involves the following steps: Drive to central location in meter route. 2. Walk to meter. 3. Lift meter lid (meter Iids weigh about 10 pounds). 4. Manually read numbers on water meter and input meter reading into handheld device. 5. Replace meter lid. 6. Walk to next meter location. 7. When route is finished, drive to central location in next route and begin reading meters. 8. Take handheld device back to office and download meter reading data into computer program. 4. Review meter reading data. 10. Check data for anamolies such as high -reads or mis-reads. 11. Re -read meters that have anomalies, or that could not be read previously (there are a number of events that can prevent the meter from being read, including weather, cars or other obstruction parked on meter, meter box filled with water, meter box covered by vegetation, or dogs). 12. Issue water bills. 13. Schedule customer requested re -reads. 14. Conduct re -reads. Automatic meter reading is a technology that automatically performs what was once a manual data collection operation and transmits the data back to the utility for recordkeeping and billing. With AMR, the data are transmitted usually via radio frequency. Using radio technology, the read is automatically transmitted to a computer mounted in the meter truck. To collect the data, the Utility Service Worker merely drives down the street. There is no need to manually lift the meter lid or manually read the numbers on the meter. That step is completed electronically. The information is then downloaded into the utility billing system. Automated reading provides a host of benefits over manual. First is accuracy. With manual reading, there is the possibility that an incorrect reading will be recorded. Automatic meter reading eliminates this possibility. This reduces the time spent on re -reading meters and customer billing disputes. Automated reading also greatly improves efficiency. Given the right conditions, a utility worker can manually read 400 meters per day. With ARM, a utility worker can read upwards of 6,000 meters per days. Automated meters provide other benefits that will prove more significant over time. For example, they provide real-time data on the amount of water passing through a customer's meter. When a customer has a significant leak it may take eight weeks, or longer, to discover the problem by manually reading meters. Many minor leaks will go undetected with manual meter reading. The City of Opelika, Alabama, conducted a pilot test by installing 100 automated meters in a typical neighborhood. They discovered 28% of the residences were experiencing a previously undetected water leak'. With automated meter reading, leaks can be noticed far sooner, including modest or hard to detect leaks. Real-time data allows utility workers to discover unusual fluctuations in water flow. City of Houston, Texas. This amount will vary by agency, topography, and meter route. Opelika's water bills now feature leas: notifications, prompting customers to locate and repair their water leaks to limit unnecessary water and sewer charges. Let's take a look at the potential impact of residential water leaks. Leaks were detected in 20% of the homes that participated in Petaluma's Waterwise Housecalls program. As illustrated above, residential leaks can cause water losses of up to 4,700 gallons per day. To be conservative, let's assume the average water lealc is resulting in water losses of only 100 gallons per day per account. This means the City could be losing as much as 127 million gallons of water per year do to undetected residential water leaks. These leaks could be detected with automatic meters. The City has utilized a staff of three (3) utility services workers (USW) to read the City's water meters for utility billing purposes for the last 10 years. In addition to reading meters, the USW's also notify customers of pending water shut-off water for non-payment, execute water shut-off for non-payment, tum-on water to restore water service after payment, turn -on water service for new customers, turn-off water for closed out accounts, meet with customers in the field to resolve meter reading and other associated issues, and other utility service duties. To meet the increase in meter reading workload, the Department supplements the Utility Service Workers staff with a 0.5 full time equivalent (FTE) each month from the water or wastewater maintenance division. While this approach allows us to meet the meter reading workload, it's done at the expense of the water and wastewater maintenance programs. The City is at a crossroads -- it can either add additional USW's to help with the meter reading workload, or implement an alternate approach, such as automated meter reading. Two alternatives available for the meter reading program include: Alternative 1— Continue Manual Reading Program Alternative 2 — Implement Automated Meter Reading Program These two alternatives were compared based on the following assumptions: 1. Conversion to monthly utility billing. 2. Maintain a 15-year meter replacement program. Alternative 1— Continue Manual Reading Program This alternative would continue the City's program of reading water meters manually. Two USW's would be added, along with two new vehicles, increasing the staffing from 3.5 FTEs to 5.5 FTEs. The City would continue its practice of replacing worn water meters with automated meters and requiring new developments to install automated meters. Alternative 2 — Implement Automated Meter Readinn Program This alternative includes replacing existing manual read meters with automated meters, with the goal of installing 9,500 automated meters in three years or sooner, while continuing the program of replacing worn meters with automated meters, and requiring new developments to install automated meters. A comparison of these alternatives is provided in Table 1. 3 Table 1 Comparison of Meter Reading Alternatives Criteria Description Metric Alt. 1— Alt. 2 — Manual Automated Meters Meters Real-time Ability to provide real-time water use data. I Yes/No No Yes data I I Accuracy ( Ability to improve meter reading accuracy. Yes/No No Yes Customer I Ability to improve customer service by providing water Yes/No No Yes service customers with more information about their water use, I I Utility billing Ability to support monthly utility billing. Yes/No Yes Yes Workers Ability to reduce potential workers compensation Yes/No No Yes compensation liability. I Meter Ability to read meters more than once per month, Yes/No No Yes reading I Water loss Reduce water loss by identifying water Ieaks. Yes/No No Yes Leak Ability to detect water leak by tracking continued water YeslNo No Yes detection use or unusual water use patterns. I Estimated Total present value operating and capital costs over 15- Cost $8.8 $8.0 million Costs year period. I million ( As shown in Table 1, automated reading provides many intangible benefits when compared to manual reading, at a lower cost, Automated meter reading technology has matured significantly in the last few years. That's why agencies throughout the country are converting to automated water meters, including the cities of Houston (TX), Oxnard (CA), Palo Alto (CA), Philadelphia (PA), Augusta (GA), Ann Arbor (MI), Denver (CO), Wichita (KS), San Juan Water District (CA), Turlock (CA), Holly Hill (FL), Charlotte -Mecklenburg Utilities, Colorado Springs (CO), Richmond (VA), Wilmington (DL), Montgomery (AL), Glendora (CA), Eastern Municipal Water District (CA), and Santa Cruz (CA), to name just a few. In summary, automated meter reading is an efficient and effective tool for accurately recording water use that provides a creative way for the City to help its water customers manage their usage and bills. We recommend the City implement an aggressive automated water meter reading program. 4 ,y - =aaa� gumI�s r �� RA Rol s � a �g s s _ � B E 8 � g � H � n Ng Raems U a "1s _ s 1,.®® a "ea= mq g a "Oz n s = A "99L p�9 "gl� .� � ^� .-11IBe An v 11 1 " a s^s N T Y - �a3&R � SYdR Bn � k Yiry 9"•,^i Egli I.,- 8-S 11,31 �nud� 3s � Ij-11 �x MIN aH s'�