HomeMy Public PortalAboutCC - RESO - R2023-127RESOLUTION R2023-127
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
NAPA, STATE OF CALIFORNIA, APPROVING WATER
RATES OVER A FIVE-YEAR PERIOD (2024-2028), FOR ALL
WATER RATE CUSTOMERS (INSIDE CITY AND OUTSIDE
CITY) INCLUDING SINGLE-FAMILY RESIDENTIAL, MULTI-
FAMILY RESIDENTIAL, COMMERCIAL, IRRIGATION, FIRE
SERVICE CHARGES, PUMPED ZONE SURCHARGES,
AND TREAT & WHEEL CHARGES; AND MAINTAINING THE
AMOUNT OF THE RATESHARE PROGRAM FOR LOWER
INCOME CUSTOMERS; AND DETERMINING THAT THE
ACTIONS AUTHORIZED BY THIS RESOLUTION ARE
EXEMPT FROM CEQA
WHEREAS, Napa Municipal Code Section 13.04.020 and 13.04.030 specify that
inside and outside city water rates be set by Resolution; and
WHEREAS, Resolution No. R2017-153, adopted by City Council on November 7,
2017, established water rates which were enacted for 2017 — 2021: and
WHEREAS, water rates have not increased since October 1, 2021; and
WHEREAS, in September 2023, Black and Veatch completed a water cost of
service rate analysis for single family residential, multi -family residential, commercial, and
irrigation customers both inside and outside city, fire service charges and pumped zone
surcharges as part of the Water Cost of Service Rate Study ("Water Cost of Service Rate
Study") that has been on file in the office of the City Clerk, posted on the Water Division
website, attached to a prior Council agenda, and available for public review upon request,
which is attached hereto as Exhibit "A" and incorporated herein by reference; and
WHEREAS, staff prepares annual operating budgets and capital improvement
plans to operate, maintain, and invest in the water system to ensure safe and reliable
water service to all customers; and
WHEREAS, the costs to operate and maintain the system have increased since
the last rate increase in 2021 and will continue to increase due to inflation and other
factors over the next five year period (2024-2028); and
WHEREAS, the costs to purchase State Water Project supplies have increased by
$2M over the last two years; and
WHEREAS, staff determined that a •minimum annual capital improvement
investment increase from $6,000,000 to $8,000,000 by 2028 is necessary to maintain
a reliable water system and replace aging infrastructure; and
WHEREAS, pursuant to the City's Fiscal Policy, the City will maintain a prudent level of
reserve funds in the Water Fund as determined during the periodic rate -setting process;
R2023-127 Page 1 of 5 November 7, 2023
and
WHEREAS, the water cost of service rate analysis included prudent levels of Water
Fund Reserves for Operating, Emergency, Rate Stabilization, Water Supply, and Capital
Improvement Program; and
WHEREAS, use of Water Fund Reserves may occur based on actual revenues
and expenditures in a particular fiscal year and will be reported as such in fiscal reports
and budget updates; and
WHEREAS, water rates are subject to the provisions of California Constitution
Article XIIID (Proposition 218); and
WHEREAS, on September 19, 2023, City Council authorized staff to mail a Special
Notice of Water Rate Adjustment and Public Hearing regarding water rates to all property
owners and water customers who are not property owners (tenants) in accordance with
Government Code 53755 attached hereto as Exhibit "B", and incorporated herein by
reference; and
WHEREAS, a total of 30,994 Special Notices of Public Hearing regarding the
proposed adjustment to water rates and the opportunity to protest were mailed to
customers on September 22, 2023, at least 45-days prior to the scheduled public hearing;
and
WHEREAS, a majority protest pursuant to the provisions of California Constitution
Article XIIID (Proposition 218) was not received during the 45-day public comment period
or at the public hearing; and
WHEREAS, based on the 2023 Water Cost of Service Rate Study by Black and
Veatch and Staff's analysis, the proposed water rates are necessary for the following
reasons:
1. To cover rising costs to operate and maintain the water system due to
inflation, supply chain challenges, and other factors.
2. To cover rising costs of Water Supply purchased through the State Water
Project.
3. To provide an additional $2 million in annual contributions to capital
improvement projects to renew and replace aging infrastructure.
4. To fund debt service for a $100 million bond issuance for Lake Hennessey
Treatment Plant Improvements, 36-inch transmission main replacement,
expansion of the Hennessey Spillway, and future recommendations of the
30-Year Water Master Plan.
5. To continue the longstanding commitment to provide safe and reliable
.water to the community; and
R2023-127 Page 2 of 5 November 7, 2023r
WHEREAS, the proposed rate adjustments are necessary to cover the cost to
provide Treat & Wheel services; and
WHEREAS, the RateShare program is proposed to be maintained at $25 discount per
bi-monthly bill for those customers that apply and show proof that they are eligible for the
PG&E Care Program; and
WHEREAS, on November 7, 2023, the City Council held a duly noticed public
hearing on the actions identified in this Resolution, and the Council considered all
information related to this matter as presented at the hearing, including a consideration
of all protests against the proposed water rates.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Napa,
as follows:
1. The City Council hereby determines that this action is exempt from CEQA
pursuant to Sections 15061(b)(3) and 15273 of the Guidelines, which exempts the
establishment, modification, restructuring, or approval of rates, tolls, fares, or other
charges by public agencies for the purpose of meeting operating expenses and obtaining
funds for capital projects necessary to maintain service within existing service areas
based on the findings in Exhibit "D," attached hereto and incorporated herein by
reference. The Council further finds that there is no indication of unusual circumstances
that would create a reasonable possibility that approving the water rates would cause a
significant effect on the environment.
2. The City Council hereby finds that in accordance with the Water Cost of
Service Rate Study, the single family residential, multi -family residential, commercial, and
irrigation customers both inside and outside city, fire services, and pumped zone
surcharges meet the substantive applicable provisions as set forth in the California
Constitution, Article XIIID, section 6(b) and Government Code 53755 as follows:
A. The revenues derived from the rates do not exceed the cost of
providing service to single family residential, multi -family
residential, commercial, and irrigation customers inside the city,
outside the city, in pumped zones, or the customers of the
system as a whole.
B. None of the revenues derived from rates are used for any other
purpose other than meeting the costs of providing water service.
C. The revenues derived from rates are used for services actually
used by, or immediately available to, the person or owner of the
property responsible for the payment of the rate.
D. The amount recovered via the rates from any person or parcel
does not exceed the proportional cost of the service provided.
R2023-127 Page 3 of 5 November 7, 2023
E. No rate is assessed any person or parcel unless that person or
parcel is receiving water service; and
3. The City Council hereby adopts the water rates for single family residential,
multi -family residential, commercial, and irrigation customers both inside and outside city,
fire service charges and pumped zone surcharges for all water service provided after
January 1, 2024, October 1, 2024, October 1, 2025, October 1, 2026, and October 1,
2027, respectively. Details of the amended water rates for each year are as specified
under each relevant "Proposed" column on pages 3 and 4 of Exhibit "B".
4. The City Council hereby defines the customer classes of single family
residential, multi -family residential, commercial, irrigation, inside city, outside city,
pumped zone, and fire services, as it pertains to water rates, as defined in Exhibit "E,"
attached hereto and incorporated herein by reference.
5. The City Council hereby directs staff to publish the water rates in the Master
Fee Schedule, consistent with Policy Resolution No. 16 (R2018-046), by incorporating
the rates listed on pages 3 and 4 of Exhibit "B".
6. The City Council hereby adopts the rates for Treat & Wheel services as
defined in Exhibit "C.", attached hereto and incorporated herein by reference.
7. The City Council hereby authorizes the continuation of the RateShare
program as a $25 discount per bi-monthly bill, based on budget availability, for those
customers that apply and provide proof of enrollment in the Pacific Gas and Electric
Care Program.
8. The City Council hereby approves the Water Fund Reserve Policy,
attached hereto and incorporated herein by reference, identified on Exhibit "F."
9. In accordance with Resolution R2016-162, the City Council hereby
authorizes the City Clerk to organize and publish this Resolution and Water Fund
Reserve Policy as a part of the City Council Policy Resolutions.
10. The City Council hereby authorizes transfers within the Water Fund to
establish Reserves for Fiscal Year 2023-2024, based on Fiscal Year 2022-2023 year
end results, at the maximum levels as specified in the Water Fund Reserve Policy.
11. The City Council hereby finds that the facts set forth in the recitals to this
Resolution are true and correct, and establish the factual basis for the City Council's
adoption of this Resolution.
12. This Resolution shall take effect immediately upon its adoption.
R2023-127 Page 4 of 5 November 7, 2023
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City
Council of the City of Napa at a public meeting of said City Council held on the 7fh day of
November, 2023, by the following vote:
AYES: Alessio, Luros, Narvaez, Painter, Sedgley
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
-Cwodaft
Tiffany Uarranza
City Clerk
Approved as to form:
Michael W. Barrett
City Attorney
R2023-127 Page 5 of 5 November 7, 2023
Exhibit A
WATER COST OF SERVICE STUDY
BLACK & VEATCH PROJECT NO. 412083
PREPARED FOR
City of Napa, CA
7 SEPTEMBER 2023
13 BLACK & VEATCH
R2023-127 Page 1 of 59
Table of Contents
Disclaimer...............................................................................................................................................1
1.0 Executive
Summary.................................................................................................................1-1
1.1
Water System.........................................................................................................................1-1
1.2
Financial Plan........................................................................................................................1-1
1.3
Adequacy of Existing Rates to Achieve Financial Plan.......................................................1-2
1.4
Revenue Required to Achieve Financial Plan.......................................................................1-3
1.5
Cost of Service Analysis.......................................................................................................1-3
1.6
Rate Design............................................................................................................................1-4
1.6.1 Fixed Service Charge............................................................................................1-4
1.6.2 Quantity Charge.....................................................................................................1-5
1.6.3 Pumped Zone Charge...........................................................................................1-5
1.6.4 Treat & Wheel Charge...........................................................................................1-5
1.6.5 Treat Only Charge.................................................................................................1-5
1.6.6 Fire Service Charge...............................................................................................1-5
1.7
Study Recommendations......................................................................................................1-6
2.0 Revenue
and Revenue Requirements.......................................................................................2-1
2.1
Customer and Water Consumption Projections..................................................................2-1
2.2
Revenue under Existing Rates..............................................................................................2-4
2.3
Other Revenue.......................................................................................................................2-6
2.4
Operating and Maintenance Expenses................................................................................2-6
2.5
Debt Service Requirements...................................................................................................2-7
2.6
Capital Improvement Program.............................................................................................2-8
2.6.1 Capital Improvement Financing Plan...................................................................2-9
2.7
Transfers..............................................................................................................................2-10
2.8
Reserves...............................................................................................................................2-10
2.9
Projected Operating Results...............................................................................................2-11
3.0 Cost of Service Allocation........................................................................................................3-1
3.1
Functional Cost Components...............................................................................................3-2
3.2
Allocation to Cost Components...........................................................................................3-2
3.2.1 System Base, Max Day, and Max Hour Allocations............................................3-3
3.2.2 Allocation of Operating and Maintenance Expenses..........................................3-3
3.2.3 Allocation of Capital Investments........................................................................3-4
3.3
Units of Service......................................................................................................................3-4
3.4
Cost of Service Allocations...................................................................................................3-4
3.4.1 Units Costs of Service...........................................................................................3-4
3.4.2 Distribution of Costs of Service to Customer Classes.......................................3-4
4.0 Proposed
Water Rate Adjustments..........................................................................................4-1
R2023-127 Page 2 of 59
4.1
Existing Rates................................................................................................................:.,:...4-1
4.2
Proposed Water Rates..........................................................................................................4-1
4.2.1 Inside City and Outside City..................................................................................4-2
4.2.2 Fixed Service Charge............................................................................................4-2
4.2.3 Fire Service............................................................................................................4-3
4.2.4 Retail Quantity Charge..........................................................................................4-4
4.2.5 Pump Zone Charge.............................................................................................4-11
4.2.6 Contract Quantity Charge...................................................................................4-12
5.0 Summary of Proposed Rates and Typical Monthly Costs
.......................................................5-13
5.1
Proposed Rate Schedule.....................................................................................................5-13
5.2
Typical Monthly Costs under Proposed Charges..............................................................5-14
5.3
Summary of Cost -of -Service Study....................................................................................5-15
LIST OF TABLES
Table 1-1
Proposed Five -Year Rate Schedules....................................................................................1-7
Table 2-1
Number of Customer Connections......................................................................................2-2
Table 2-2
Billed Water Consumption....................................................................................................2-4
Table2-3
Existing Water Rates.............................................................................................................2-5
Table 2-4
Projected Revenue under Existing Water Rates..................................................................2-6
Table2-5
0&M Expenses.......................................................................................................................2-7
Table2-6
Debt Service...........................................................................................................................2-8
Table 2-7
Capital Improvement Projects..............................................................................................2-9
Table2-8
CIP Financing Plan..............................................................................................................2-10
Table2-9
Reserve Balances................................................................................................................2-11
Table2-10
Operating Fund....................................................................................................................2-14
Table 3-1
Cost of Service Revenue from Rates....................................................................................3-1
Table 3-2
Allocation of 0&M Expenditures...........................................................................................3-1
Table 3-3
Allocation of Capital Costs...................................................................................................3-3
Table3-4
Units of Service......................................................................................................................3-6
Table 3-5
Units Cost of Service.............................................................................................................3-7
Table 3-6
Distribution of Costs to Customer Classes.........................................................................3-8
Table 4-1
Costs within the Fixed Charge for FY 2024.........................................................................4-3
Table 4-2
Proposed Fixed Service Charge............................................................................................4-3
Table 4-3
Costs within the Fire Service Charge for FY 2024...............................................................4-4
Table 4-4
Proposed Fire Service Charge..............................................................................................4-4
Table 4-5
Water Supply Unit Costs.......................................................................................................4-5
Table 4-6
Water Sold by Customer Class.............................................................................................4-5
R2023-127 Page 3 of 59
Table 4-7
Water Supply Unit Costs by Customer Class.......................................................................4-6
Table 4-8
SFR Water Supply Unit Costs by Tier....................................................................................4-7
Table 4-9
Water Delivery Unit Costs.....................................................................................................4-7
Table 4-10
Common Water Peaking Unit Costs.....................................................................................4-8
Table 4-11
Inside City Water Peaking Unit Costs...................................................................................4-8
Table 4-12
Outside City Water Peaking Unit Costs................................................................................4-8
Table 4-13
Water Conservation Unit Costs............................................................................................4-9
Table 4-14
Common Water Unit Costs.................................................................................................4-10
Table 4-15
Inside City Water Unit Costs...............................................................................................4-10
Table 4-16
Outside City Water Unit Costs............................................................................................4-10
Table 4-17
Proposed Quantity Charge..................................................................................................4-11
Table 4-18
Pump Zone Unit Costs........................................................................................................4-11
Table 4-19
Proposed Pump Zone Charges..........................................................................................4-12
Table 4-20
Treat & Wheel and Treat Only Unit Costs...........................................................................4-12
Table 4-21
Proposed Treat & Wheel and Treat Only Charges.............................................................4-12
Table 5-1
Proposed Rate Schedule.....................................................................................................5-13
Table 5-2
Typical Monthly Water Costs..............................................................................................5-14
LIST OF FIGURES
Figure 1-1
Status Quo Operating Cash Flow.........................................................................................1-3
Figure 1-2
Proposed Operating Cash Flow............................................................................................1-3
Figure 2-1
Water Demand per Year........................................................................................................2-3
Figure 2-2
Status Quo Operating Cash Flow.......................................................................................2-12
Figure 2-3
Status Quo Debt Service Coverage....................................................................................2-12
Figure 2-4
Proposed Operating Cash Flow..........................................................................................2-15
Figure 2-5
Proposed Debt Service Coverage.......................................................................................2-15
Figure 5-1
Comparison of Costs for Customers in the Bay Area.......................................................5-16
R2023-127 Page 4 of 59
Disclaimer
Black & Veatch has prepared this report for the City of Napa (City) and it is based on information
not within the control of Black & Veatch. The City has not requested Black & Veatch to make an
independent analysis, to verify the information provided to us, or to render an independent judgment of
the validity of the information provided by others. Because of this, Black & Veatch cannot, and does not,
guarantee the accuracy thereof to the extent that such information, data, or opinions were based on
information provided by others.
In conducting these analyses and in forming an opinion of the projection of future financial
operations summarized in this report, Black & Veatch made certain assumptions on the conditions,
events, and circumstances that may occur in the future. The methodology utilized in performing the
analyses follows generally accepted practices for such projections. Such assumptions and
methodologies are reasonable and appropriate for the purpose for which they are used. While we believe
the assumptions are reasonable and the projection methodology valid, actual results may differ materially
from those projected, as influenced by the conditions, events, and circumstances that actually occur.
Such factors may include the Water Division's ability to execute the capital improvement program as
scheduled and within budget, regional climate and weather conditions affecting the demand for water,
and adverse legislative, regulatory, or legal decisions (including environmental laws and regulations)
affecting the Water Division's ability to manage the system and meet water quality requirements.
R2023-127 Page 5 of 59
1.0 Executive Summary
The City of Napa (City) commissioned Black & Veatch Management Consulting, LLC (Black &
Veatch) to conduct a Water Rate Study (Study) for the Water Division. The Study included the
development of a multi -year financial plan, a cost -of -service analysis, and the design of a rate structure
for the City's Water Division. The specific objectives and goals of the Study were to:
■ Evaluate the adequacy of projected revenues under existing rates to meet projected revenue
requirements.
■ Develop a sound financial plan for the Water Division covering a five-year Study period for both
ongoing operations and planned capital improvements.
e Allocate the Water Division's projected Fiscal Year 2023-2024 (FY 2024) revenue requirements to the
various customer classes in accordance with the respective service requirements.
■ Develop a suitable rate schedule that produces revenues adequate to meet financial needs while
recognizing customer costs of service and local and state policy considerations such as Proposition
218 and applicable judicial decisions.
■ Allocate costs in the fixed element to more accurately reflect the level of service that is provided to
customers each billing cycle, the costs incurred to maintain a reliable system, and ensure it is
available 24/7 for drinking water and fire protection to structures on properties served City water
whether water is used or not.
■ Allocate costs in tiers to reflect more accurately changed usage patterns among customers that
ensure cost recovery and corresponding allocation of system components.
1.1 Water System
The City of Napa's Water Division provides water services to over 24,650 residential, commercial,
irrigation, schools, and agricultural accounts. In addition, the City maintains contracts to treat and deliver
potable water to the cities of American Canyon, Calistoga, and other entities. The City obtains raw water
from two local sources: surface water impounded at Lake Hennessey and Milliken reservoirs, and from
the State Water Project (SWP) operated by the California State Department of Water Resources. The
SWP contracted entitlements are administered through the Napa County Flood Control and Water
Conservation District.
Surface water at Lake Hennessey and Milliken Reservoir provide the City a storage capacity of
31,000 and 1,390 acre-feet respectively. The City receives SWP water through the North Bay Aqueduct
(NBA) and it provides the City with an annual allocation or portion of its 21,900 acre-feet of entitlements.
Local treatment plants with a total capacity of 43.5 million gallons per day (MGD) treat the surface and
SWP water. The City delivers all treated water through an extensive system of 350 miles of transmission
and distribution pipelines.
1.2 Financial Plan
The City operates the Water Division as a self-supporting enterprise. As such, the Water Division
must develop a financial plan (also known as revenue requirements) that provides sufficient levels of
revenue to meet all operation and maintenance expenses, debt service requirements, routine annual
renewal and replacement of aging assets funded from current revenues, and consistent investments in
capital improvements.
R2023-127 Page 6 of 59
The Study develops a financial plan that pfojects operating revenue, expenses, and capital
financing costs for the Water Division over a five-year planning period beginning July 1, 2023 and ending
June 30, 2028. The financial plan projected future rate revenues under existing rates, operations and
maintenance (0&M) expense, principal and interest expense on bonded debt, and capital improvement
requirements. In the projection of rate revenues, annual projections of customers and water use rely upon
City estimates based on a reasonable increase from recent drought -constrained demands while
considering the public's desire to conserve and the urban water use targets established by the State's
Senate Bill (SB) 606/Assembly Bill (AB) 1668. This legislative package, also known as "Making Water
Conservation a California Way of Life; creates unique community budgets for indoor residential use,
outdoor residential use, irrigation of landscapes with dedicated irrigation meters, and water losses. It is
the aggregate sum of the four budgets that must be met, with escalating enforcement by the State Water
Board through the decade. Even with growth projections, the Water Division is expected to remain under
these targets set forth by SB 606/AB 1668.
The Water Division's revenue requirements are shown in Table 2-10 and key areas summarized
below:
f Operation and Maintenance Expenses: 0&M expenses as shown in Table 2-5, range from $35.2M in
FY 2024 to $39.OM in FY2028
a Debt Service: Existing debt service is projected to remain stable at $3.1 M per fiscal year. In FY 2027,
the City anticipates the issuance of Revenue Bonds for $100.OM, for improvements to the Hennessey
Water Treatment Plant and Spillway, which will add an additional $7.2M of annual debt service.
Capital Improvements: The identified capital needs average $16.9M per year over the five-year study
period. The Study incorporates the known capital needs; however, the City is in the process of
updating the Water Master Plan which will prioritize capital investments for a 30-year timeframe. The
Water Master Plan is expected to be complete by July 2024.
1.3 Adequacy of Existing Rates to Achieve Financial Plan
The last rate study was conducted in 2017 and set rates that took effect on October 1 of each
year in 2017 through 2021. Rates remained flat in 2022 and 2023 with no increases. Over the past couple
of years, water sales have decreased due to two years of drought in 2021 and 2022 requiring restrictions
on outdoor irrigation practices. In 2023 water supplies were replenished locally and regionally ending the
drought restrictions, however a wet spring and unseasonably cool temperatures through the end of June
resulted in suppressed sales through the end of FY23. Customer habits have changed in the wake of
increased concern over climate change and observations of extreme weather patterns. In addition, the
pandemic and inflationary periods were not predicted during the 2017 cost of service analysis. The costs
of critical consumables including chemicals, pipe, and repair clamps have increased beyond what was
projected in 2017.
The projected increase in revenues from existing rates are relatively flat at an average of 1.0%
over the Study period. Figure 1-1 shows the projected cost of providing reliable water service and
investing in capital improvements exceeds the revenue generated from existing rates and depletes the
cash balance in 2025. Since the existing rates do not recover sufficient revenue to provide the necessary
service, rates must be adjusted to recover revenue commensurate with the cost to provide service.
R2023-127 Page 7 of 59
Figure 1-1 Status Quo Operating Cash Flow
Sso
p
s �
S2C
SG
-S20
-S40
-560
Water Operations Cash Flow
2024 2025 -- 2G27 2028
iiiiiiiiiO&M water Suppry Debt Service Transfers - Other
�Transfer s-CIP Transfers-Reserves-0-Revenue -0-Cash Balance
1.4 Revenue Required to Achieve Financial Plan
To meet the projected revenue requirements, including the desired operating and debt service
coverage levels, the Water Division proposed revenue adjustments which would allow the Water Division
to operate the enterprise on a revenue -neutral basis as shown in Figure 1-2.
Figure 1-2 Proposed Operating Cash Flow
$70
p
.>i 560
S50
540
$30
$20
S10
so
-530
Water Operations Cash Flow
2024 2025 2026 2027 2028
iiiiiiiiiiO&M water Supply Debt Service Transfer s-Other
fillillif Transfer s-CIP Transfer s-Reserves--0-R&enue --0-Cash Balance
1.5 Cost of Service Analysis
The cost -of -service analysis is the process of allocating the costs to the various customer
classes of service in a fair and equitable manner. The cost -of -service allocations performed in this Study
are based on the base -extra capacity method endorsed by the American Water Works Association
(AWWA) Principles of Water Rates, Fees and Charges, M1 (M1) manual. We allocate costs to the different
customer classes in proportion to their use of the water system. As recommended by AWWA, Black &
R2023-127 Page 8 of 59
Veatch distributed functional costs to base (average load conditions), extra capacity (peaking) and
customer -related parameters such as whether service to the customer requires a pump station to reach
higher elevations. This allocation methodology produces unit costs for allocation to individual customer
classes based on the projected customer service requirements.
1.6 Rate Design
The final step of a cost -of -service analysis involves the design of rates. This step balances rate
design with allocated cost -of -service, state regulations and local policy considerations. Policy makers
must also evaluate the extent to which the existing rate structure recovers revenues from customer
classes in accordance with cost -of -service allocations.
The existing rates consist of a fixed bi-monthly service charge, a consumption charge, pumped
zone charge and a fixed service charge for private fire service connections. The single family residential
have three tiers of quantity charges and the multi -family residential, commercial, irrigation, and contract
customers have a uniform quantity charge. All customer classes vary whether they are located Inside City
or Outside City.
1.6.1 Fixed Service Charge
The fixed service charge is to recover the numerous costs incurred by the water system whether
water is consumed each billing cycle or not. The water system must be pressurized, monitored, and
analyzed for water quality to ensure it is always clean and safe. It is composed of major infrastructure
that must be maintained and cannot be reduced in size or neglected due to lower consumption.
Customers expect 24-hour reliable service that is provided to them and therefore appropriate staffing
levels are required to provide that level of service. The recent drought has emphasized that the water
system incurs numerous costs regardless of the volume of water consumption. There is a reduction in
the volume of chemicals required in the treatment process, but cost elements such as staffing required to
operate the treatment plants 24/7 and monitor water quality 24 hours per day are not impacted by a
reduction in consumption.
Costs associated with infrastructure do not reduce during a period of reduced production (i.e.,
pipes and tanks don't temporarily reduce in size.) Engineers size the system to meet the peak demand
that flows through the system and this parameter does not vary during periods of reduced production.
Debt service payments on capital improvements including the recently upgraded Barwick Jamieson
Treatment Plant do not change if the City produces less water. The need to invest in capital
improvements and maintain the massive infrastructure does not go down if customers use less water. In
fact, even if the City sells no water in a given billing period, the City still continues to incur many costs. For
example, staff must monitor and keep the system pressurized, maintain infrastructure, ensure fire -flow is
available to protect structures and properties that are served City water, make emergency repairs of
leaking pipes, read meters, monitor water quality in the system and ensure it is safe, and the City must
maintain licensed, credentialed staff to ensure the water is clean, safe, and reliable at all times.
In the past, customer water demands were consistently higher and lower fixed cost elements
were recovered through higher demand periods. In years of consistently lower consumption a shift in the
way the service provided is charged to customers is warranted to ensure cost recovery. The fixed service
charge was derived by allocating traditional cost components that do not vary with consumption.
R2023-127 Page 9 of 59
1.6.2 Quantity Charge
The consumption charge for the single-family residential class has tier breakpoints that align with
usage patterns and the relative costs to deliver service. Tier 1 rate is charged for consumption of 1
through 14 units which represents typical winter consumption. Based on fiscal year 2023 customer billing
data, the Tier 1 breakpoint accounts for 73% of billed consumption of Inside City single family residential
(ISFR) users. Tier 2 rate is charged for consumption of 15 through 27 units and represents typical
summer consumption. Based on the customer billing data, the Tier 2 breakpoint accounts for 90% of
billed consumption of ISM users. Tier 3 rate is charged for consumption of 28 or more units and
represents the remaining 10% of users' summer consumption. The high summer demands drive the size
of the system infrastructure (pipes, tanks, treatment capacity) and volume of water supply that must be
available to meet customer needs. Section 1.6 presents the full rate schedule.
1.6.3 Pumped Zone Charge
The pumped zone charge includes costs for electricity and pumping costs. The City service area
is separated into five pressure zone. The first three zones are served from water directly pumped from all
the water sources into the water system. Zones 4 and 5 required additional pumping stations to elevate
water to service the customers at higher elevations. Therefore, the are additional costs incurred which are
specific to these customers which are recovered through the surcharge.
1.6.4 Treat & Wheel Charge
The consumption charge for contract customers includes operating and capital costs associated
with treatment at the Barwick Jamieson treatment plant and transmission pipeline that transports water
from Barwick Jamieson to the cities of Calistoga and American Canyon. In 1998, the City entered into
agreement with the cities of Calistoga and American Canyon to treat the cities of Calistoga and American
Canyon's SWP entitlements at Barwick Jamieson. Once treated, the water is transported (wheeled) via a
transmission pipeline to the respective cities.
1.6.5 Treat Only Charge
The consumption charge for the contract customer includes costs associated with treatment at
Barwick Jamieson treatment facility. The City of American Canyon has a treatment facility adjacent to
Barwick Jamieson which treats a portion of their SWP entitlements. Unfortunately, American Canyon
cannot process the full amount and therefore relies on the City for treatment. American Canyon is in the
planning stages of expanding their treated water clear well to allow the City to transfer treated water
directly into their clear well and thus eliminated the transporting costs to American Canyon.
1.6.6 Fire Service Charge
The fire service charge includes costs of issuing bills, maintenance and capacity costs
associated with private fire protection costs. These customers have a dedicated water line connection to
the water system that is specifically for fire protection. To meet fire protection demands, the water
system must be designed, operated, and maintained so that it can meet peak fire demand requirements.
The fire service charges for private accounts are based on the diameter of the line that connects their fire
R2023-127 Page 10 of 59
protection system to the water system. These charges are solely for services specifically benefiting those
properties and not a service available to the public.
1.7 Study Recommendations
Through the cost -of -service analysis, the allocation of costs to customer classes must follow
Proposition 218, the regulatory guidelines to ensure cost recovery proportionate to cost of serving those
customer classes. Over the recent rate period, customer habits have changed, largely because of the
State of California's drought mandates. Section 2.1 provides detailed information on the Regulations and
Napa customer response to the drought mandates. As described above, the City s operating costs did not
exhibit a commensurate percentage reduction during this period of reduced consumption.
To retain simplicity in structure, ensure reasonable stability of revenue, Black & Veatch
recommends the following rate structure components:
■ Fixed Service Charge: The Water Division should retain the fixed service charge based on meter sizes
for all customer classes. The fixed service charge helps recover portions of fixed cost elements such
as operating and capital components associated with SWP, meter maintenance and services, meter
reading, issuing bills, and maintenance and capacity costs associated with available fire protection.
■ Quantity Charge: The Water Division should retain the quantity charges for all customer classes. For
the single-family residential the three-tier quantity charges and for multi -family residential,
commercial and irrigation the quantity charges will remain at a uniform rate. The quantity charge
helps recover costs associated with base, extra capacity, and conservation.
■ Pumped Zone Charge: The Water Division should retain the quantity charge for customers in zones 4
and 5 which rely on pump stations to receive water service. The pumped zone charge will help
recover costs from electricity and pumping costs specific to these customers.
e Treat & Wheel Charge: The Water Division should retain the quantity charge for contract customers
that the City provides treat & wheel water service. The treat & wheel charge will help recover costs
associated with treatment and transporting the water the contract customers.
a Treat Only Charge: The Water Division should retain the quantity charge for the contract customer
that the City provides treat only water service. The treat only charge will help recover the costs
associated with treatment if the water for the contract customer.
e Fire Service Charge: The Water Division should retain the fire service charge based on meter size for
private fire service connections. The fire service charge will help recover costs of issuing bills and
maintenance and capacity costs associated with private fire protection availability.
Table 1-1 summarizes the recommended 5-year rate schedules for all four components.
R2023-127 Page 11 of 59
Table 1-1 Proposed Five -Year Rate Schedules
..
Size of Meter
Fixed Service
2024
Charge
2025
2026
2027
2028
(inches)
S/bi-monthly $/bi-monthly
$/bi-monthly
$/bi-monthly
S/bi-monthly
_3/4" _
52.04
58.28
6353
69.25
74.79
1"
52.04
58.28
63.53
6925
74.79
1-1/2"
99.53
111.47
121.51
132.44
143.04
2" _
156.51
175.29
191.07
208.26
224.92
3"
308.45
345.46
376.56
410.45
443.28
4"
479.39
536.92
585.24
637.91
688.94
6"
954.22
1,069.73
1,164-91
1,269.75
1,371.33
8"
1,713.95
1,919-62
2,092-39
2,290.71
2,463-16
Quantity Charge
- Inside
City
Customei
2024
2025
2026
2027
2028
$/kgal
$/kgal
S/kgal
$/kgal
$/kgal
Single Family Residential
Tier 1 (0-14)
S.46
6.12
6.67
7.27
7.85
Tier 2 (15-27)
8.05
9.01
9.82
10.71
11.56
Tier 3 (>27)
9.77
10.94
11.92
_ 13.0_0
14.04
Multi Family Residential
7.59
8.51
9.27
10.11
10.91
Commercial
7.58
8.49
9.25
10.08
10.89
Irrigation
7.65
8.57
9.34
10.19
11.00
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgal
$/legal
$/legal
Single Family Residential
Tier 1 (0-14)
8.07
9.03
9.85
10.73
11.59
Tier 2 (15-27)
11.53
12.91
14.08
15.34
16.57
Tier 3 (>27)
12.72
14.25
15.53
16.92
18.28
Multi Family Residential
11.17
12.52
13.64
14.87
16.06
Commercial
11.10
12.44
13.55
14.77
15.96
Irrigation
11.27
12.62
13.76
15.00
16.20
Quantity Charge
- Pumped
Zone
Customer2024
2025
2026
2027
2028
$/kgaI
S/kgal
S/kgal
$/kgal
S/kgaI
Pump Charge
Zone 4 and 5
2.46
2.75
3.00
3.27
3.53
Quantity Charge
- Contract
Customer
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgaI
$/kgaI
$/kgal
Contract _
Treat & W_h_e_ el_ _
5.53
6.19
6.75
7.36
7.95
Treat Only
2.94
3.29
3.59
3.91
4.23
R2023-127 Page 12 of 59
(inches)
1-1/2"
2"
2-1/2"
3-
4-
6-
S.,
30`
12'
- 2024
2025
2026
2027
2028
Wbi-monthly
S/bvnm hly
S/bi-monthly
$/bi-monthly
$/bi-monthly
33.99
38.07
41.49
45.23
48-95
51.64
57.84
63.04
68.72
74.21
75.21
84-24
91.82
100.08
108.09
98.73
110-58
320-53
131.39
141.89
151.70
- - _- 169.90
195.20
201.86
218.01
298.83
334.69
364.91
397.64
429.46
53425
S9836
65221
71091
767J8
_ 730-91
796.11
867-76
945.85
1,021-52
997.72
1,117.45
1,219.02
1,327.64
1.433.85
R2023-127 Page 13 of 59
2.0 Revenue and Revenue kequirements
To meet the costs associated with providing water services to its customers, the Water Division
derives revenue from a variety of sources including water user charges, capacity fees, interest earned
from the investment of available funds, meter installation fees, late penalties, and a few minor
miscellaneous revenues including leases for cell towers at elevated tank sites. Black & Veatch has
projected the level of future revenue generated in the Study through a combination of an analysis of
historical and future system growth in terms of number of accounts and water consumption. This
section also projects the expenses, or revenue requirements, necessary to operate and maintain the
system, invest in capital improvements, make debt service payments, and cover other expenses of the
system.
2.1 Customer and Water Consumption Projections
The Water Division provides water services to various customer classes. The following provides a
brief description of the customer classes per the definitions of the respective dwelling units in Napa
Municipal Code Section 17.06.030:
■ The Retail Class consists of single-family residential, multi -family residential, commercial and
irrigation customers. The following are descriptions of the classes.
Single-family residential is each parcel on which a dwelling unit is served by an individual water
meter. For this Study, a dwelling unit is a structure with one or more rooms used as a residence
for one household with facilities for living, sleeping, cooking, dining, and sanitation. For this Study,
a dwelling unit may include either: (a) one single-family dwelling, or (b) one single-family dwelling
and one accessory dwelling on the same parcel.
Multi -family residential is each structure in which two or more separate dwelling units are served
by one water meter. This definition includes, but is not limited to, duplexes and triplexes,
apartments, and townhomes under a common ownership.
Commercial are properties that serve business, industrial, or institutional uses, and are
designated as commercial, office districts, residential office districts, industrial districts, public
and quasi -public in the Zoning Ordinance.
• Irrigation are properties with a dedicated water meter used for irrigation purposes. Interruptible
Agricultural are now considered irrigation, yet the Water Division maintains the right to interrupt
water service to these customers at any time because of water supply restrictions.
• Fire Services are commercial or multi -family residential properties with dedicated services for a
private fire system and typically include fire sprinklers.
In addition, the retail customers are differentiated as properties that are Inside both the Sphere of
Influence (S01) and Rural Urban Limit (RUL) (Inside City) or Outside either the SOI or the RUL (Outside
City). The S01 is a line defined by the City and approved by Local Agency Formation Commission
(LAFCO) to define the geographical boundaries within which the City is required to plan for public
infrastructure. The RUL is a line defined by the voters that limits the City's authority outside the line.
■ The Contract Class of customers consists of the cities of American Canyon, Calistoga, St Helena, and
Yountville. This Class receives water from the City based on the services provided and terms
pursuant to individual agreements. American Canyon and Calistoga, for example, receive only treat
and wheel services because they own their own water supplies such as SWP entitlements, and the
R2023-127 Page 14 of 59
City provides treatment and conveyance of their water`Fhrough the City's system to a metered
connection with their respective systems. Service to the City of St Helena is subject to terms of an
individual agreement that ties to the Outside City residential rate subject to phased implementation of
price changes (up or down) to accommodate budget cycles. Town of Yountville is also subject to the
terms of the individual contract agreement and tied to Outside City commercial rate.
a Congress Valley Water District (CVWD) and Cameros Mutual Water Company (CMWC) are also
contract customers with individual wholesale water service agreements with the City, however they
are billed under the Retail Class based on the type of service provided. CVWD is primarily single
family residential and a few irrigation accounts and CMWC is commercial.
iti Pumped Zones are properties in the water system pressure zone 4 and pressure zone 5 located at
elevations that require the City to operate and maintain pump stations to boost water pressure to
reach these properties.
Based on a review of historical patterns within the City, the projected total number of customer
accounts are expected to remain flat for the remainder of the Study Period. Development in Napa is
predominantly infill development. Although Napa has been and continues to undergo significant
redevelopment, particularly in the downtown area, this type of development does not result in a
significant increase in the number of water customer accounts but shifts current retail uses to hotels,
restaurants, and mixed -use customers. In addition, due to local and state policies, specifically City
Charter Section 180, and LAFCO Government Code 56133, the Outside City accounts are restricted from
growth. Table 2-1 summarizes the projected customer accounts for the system.
Table 2-1 Number of Customer Connections
Fiscal Year
Ending)une
r
r-
2024
2025
2026
2027
2028
(bills)
(bills)
(bills)
(bills)
(bills)
Inside City & Outside City
_
1 Single Family Residential
125,880
125,880
125,880
125,880
125,880
2 Multi -Family Residential
7,284
7,284
7,284
7,284
7,284
3 Commercial [11
8,054
8,054
8,054
8,054
8,054
4 Irrigation [2)
2,659
2,659
2,659
2,659
2,659
5 Subtotal
143,877
143,877
143,877
143,877
143,877
Est. Accounts
23,990
23,980
23,980
23,980
23.980
Rre Service
6 Fire Service -Inside City
3.982
3,882
3,882
3,882
3,882
7 Fire Service -Outside City_
126
126
126
126
126
Subtotal
4,008
4,008
4,008
4,008
4,008
Est. Accounts
668
668
668
668
668
[1] Includes State Hospital and CA Veterans
[2]includes Agricultural
Table 2-2 shows the projected water sales volumes for the Study Period. In determining the
projected water sales volume, Black & Veatch analyzed historical patterns of water consumption in
conjunction with the Urban Water Management Plan and future water conservation requirements set
forth by the State of California under SB 606/AB 1668. The City has a robust conservation program and
has been consistently educating customers, offering rebate programs, toilet retrofits and free low flow
R2023-127 Page 15 of 59
fixtures since the early 2000s. Asa result, the City has experienced steady decline in consumption and
increased efficiency in water use by its customers. As shown in Figure 2-1 below, annual water
consumption, measured in acre-feet (AF) has decreased overtime.
Figure 2-1 Water Demand per Year
Annual Water Use (Acre -Feet)
18,000
16.000
14,000
12,000
10,0D0
`u 8,0D0
a
6.000
4,000
2,000
0
0 0 0 0 0 0 0 0 0 R' •'� � "� ��� o"� *Q'� r-I � N N No [PV
The period between 2014 and 2016 and again in 2021 and 2022, the City experienced drought
conditions and state mandated cutbacks which significantly reduced consumption as shown in Figure
2-1. The City had to develop short-term and long-term conservation measures to encourage customers to
conserve to meet the mandates. These conservation measures worked and now the City has experienced
lower patterns of consumption.
Recognizing that the City will not experience an elastic rebound in consumption over the Study
Period due to educated, conservation -minded customers, changed customer habits influenced in part by
extensive media coverage, and expected cooler than usual winters, Black & Veatch and the Water Division
incorporated an objective realistic trend of a slow, steady increase in water use projections. For this
analysis, it is assumed that the overall increase in consumption will average 1.1 % for the remainder of the
Study Period.
R2023-127 Page 16 of 59
Table 2-2 Billed Water Consumption
Erne Fiscal Year Ending June 30,
NO. I Description i. - , . ,
kgaI
kgaI
kgaI
kgaI
kgaI
Inside City i Outside City
1
Single Family Residential
1,826,678
1,873,331
1,888,318
1,903,425
1,918,652
2
Multi Family Residential
548,705
562,719
567,220
571,758
576,332
3
Commercial
723,044
741,510
747.442
753,422
759,449
4
Irrigation_
321,436
328,624
330,933
333,261
335,607
5
Subtotal
3,419,863
3,5%,184�
3.533,913
3,561,866
3,590,040
Contract
6
City of American Canyon
32,000
32,000
32,000
32,000
32,000
7
City of Ca l istoga
157,000
157,000
157,000
157,000
157,000
8
City of St. Helena
211,803
211,803
211,803
211,803
211,803
9
Town of Yountvi Ile
978
978
978
978
978
10
Subtotal
401,781
401,781
_
401,781
401,791
_ _
401,781
11
Total Water Usage(1.000gal)
3,821,644
3,907,965
3,935,694
3,963,647
3,991,921
12
Total Water Usage (AF)
12,728
11,993
12,078
12,164
12,250
2.2 Revenue under Existing Rates
Water user rates serve as the primary source of revenue for the Water Division. Other revenue
sources include capacity fees, interest earned from the investment of available funds, meter installation
fees, late penalties, and other miscellaneous revenues. The level of future revenue incorporates the
projected system growth in terms of number of accounts and billed water consumption. The City bills
water consumption in units of 1,000 gallons (or kgal).
Projections of future water sales revenue are based on the number of customers and volume of
water sold multiplied by the applicable rates to determine water sales revenue. The City bills customers
on a bi-monthly basis. The difference in water demand as shown in Figure 2-1 and total water usage in
Table 2-2 is recognized and quantified in certified annual water loss audits and includes water loss due to
meters out of calibration, flushing, and main repair activities. Table 2-3 presents the Water Division's
current schedule of water charges. The charges are composed of the following elements:
■ Fixed Service Charge: A fixed service charge based on meter sizes for all customer classes. The
fixed service charge helps recover portions of fixed cost elements such as operating and capital
components associated with SWP, meter maintenance and services, meter reading, issuing bills, and
maintenance and capacity costs associated with available fire protection.
■ Quantity Charge: A quantity charges for all customer classes. For the single-family residential the
three-tier quantity charges and for multi -family residential, commercial and irrigation the quantity
charges will remain at a uniform rate. The quantity charge helps recover costs associated with base,
extra capacity, and conservation.
■ Pumped Zone Charge: A quantity charge for customers in zones 4 and 5 which rely on pump stations
to receive water service. The pumped zone charge will help recover costs from electricity and
pumping costs specific to these customers.
R2023-127 Page 17 of 59
a Treat & Wheel Charge: A quantity charge for contract customers that the City provides treat & wheel
water service. The treat & wheel charge will help recover costs associated with treatment and
transporting the water the contract customers.
■ Treat Only Charge: A quantity charge for the contract customer that the City provides treat only water
service. The treat only charge will help recover the costs associated with treatment if the water for
the contract customer.
s Fire Service Charge: A fire service charge based on meter size for private fire service connections.
The fire service charge will help recover costs of issuing bills and maintenance and capacity costs
associated with private fire protection availability.
Table 2-3 Existing Water Rates
r 2023 s 2M 2023 2023
(S/bi-monthly) (5/kgal) (5/kgal) (5/kcal)
Fixed Service Charge Quanthty Charge Inside City Outside City Contract
Inside City & Outside City All Customers Single Family Residential
3/4" $48.58 Tier 1:(0-14 kgal) $4.57 $6.53
1" $4858 Tier 2: (15-27 kgal) $6.58 $9.59
1-1/2' $93.43 Tier 3:(>27 kgal) $8.70 $12_39 >1
2" $147.24 Multi -Family Residential $6.53 $10.26
3" $290.75 commercial(Schools,City) $6.64 $10.40
4" $45249 Irrigation $6.94 $1070
6" $900.65
8" $1,438.79 Agricultural
On -Season (May -Oct) _ $856
.�' Fire Service Off -Season (Nov -Apr) __$1070 �
1-1/2" $3375
2' $5176 Pump Charge
2-1/2' $75.80 Zone 4 & 5 Elevation Surcharge _ _ $2 09 '.
3" $99.79
4' $153-81 Contract _
6" $303.89 City of American Canyon $5.48
8" $493.99 City of Calistoga $5.48
10" $694,10 City of St Helena $8.24
12" $1,294.42 Town of Yountvilit $10.40
Table 2-4 represents a summary of projected water sales revenue under existing rates and charges. As
shown, the revenue generated is anticipated to increase in conjunction with the increase in number of
accounts and water consumption because of the anticipated minor and gradual rebound from the
mandatory water conservation measures imposed by the State. The projected water revenue increases
from $34.8M in FY 2024 to $36.2M in FY 2028.
R2023-127 Page 18 of 59
Table 2-4 Projected Revenue under Existing Water Rates
Line Fiscal Year Ending June 30,
No. Description 2024 2025 2026,2022
!$I
f51
tSl
tSl
f51
Inside City & Outside City
1
Single Family Residential
16,840,000
17,113,500
17,201,400
17,289,900
17,379,200
2
Multi Family Residential
4,437,500
4,530,800
4,560,7D0
4,590,900
4,621,300
3
Commercial
6,042,100
6,172,800
6,214.700
6,257,000
6,299,600
4
Irrigation
2,762,200
2,815,900
2,933.200
2,850,600
2.868,100
5
Total
$30.081,900
$30,633,000
$30,810,0D0
$30 988,400
$31,168,200
6
Pumped Zone
$760,800
$780,300
$786,6D0
$792,800
$799,200
Contract
7
City of American Canyon
175,400
175,400
175,400
175.400
175.400
8
City of Cal i5toga
860,400
960,400
860,400
860,400
860,400
9
City of St. Helena
1,859,600
1,982,500
2,041,800
2,103,200
2.166.700
10
Town of You ntvi l le
10,200
10,200
10,200
10,200
10,200
11
Total
$2,905,600
$3,028,500
$3,087,800
$3,149,200
$3.212,700
12
Fire Service
$1,058,9oo
$1,o58,9o0
$1,058.900
$1,058,900
$1,058900
13 Total Water System $34,807,100 $35,500,700 $35,743,300 $35,989,300 $36,239,000
2.3 Other Revenue
There are other operating sources which include charges for hydrants, water installation,
penalties, interest on investments, rents and royalties, and other miscellaneous revenues. In total other
operating revenues represent about 4% of the Water Division's total revenue. The City anticipates that
these revenues will remain relatively constant but rents and royalties by agreement will increase at 3% per
year for the duration of the Study Period.
2.4 Operating and Maintenance Expenses
Table 2-5 summarizes the Water Division's projected 0&M expense for the Study Period. These
expenses include costs related to salaries and wages, materials and supplies, contract services,
purchased water, routine capital outlay, and transfers. The City anticipates that all 0&M expenditures will
increase on average between 3%to 7% annually from the Water Division's FY 2024 budget. Black &
Veatch has forecasted expenditures based upon historical cost increases, industry indices, and the Water
Division staffs knowledge of future expenses for the water system.
The following tables provides the escalations factors for FY 2024.
Cost Category
Personnel (Salaries)
Escalation Factor
3.0%
Benefits
4.0%
Contract Services
3.1 %
Materials and Supplies
4.6%
Water Purchase
3.5%
Utilities
7.1 %
R2023-127 Page 19 of 59
Cost Category Escalation Factor
Chemicals 5.2°a
Administrative 3.5%
Table 2-5 0&M Expenses
' 2023 2024 2025 2026 2027 2028
O&M Eape
($)
1$1
($I
($1
($1
($1
1
Water Administation
3,344,450
6,269,699
6.725.410
6,954,300
7,190,600
7,435,000
2
Water8i11Lng
516.600
598,830
594,990
615,300
635,600
656,800
3
Water Distribution
4,430,430
4,625 470
4.694,890
4,854,200
5,005,300
5,161,100
4
Water Engineering
3,159,970
3.413,590
3,476,950
3,592,600
3,704,900
3,820500
5
Water Supply
9.578,300
9,920,370
9,922,070
10,095,100
10,178,800
10r212,100
6
Water Transmission
2,012,250
1,940,880
2,0D8,320
2,066,300
2,12050o
2,176,10D
7
Water Treatment
7,960,390
7,606,630
7,798,350
9,041,200
8,276,600
8,519,400
8
Water Laboratory
298,000
329,000
328,000
_ 337,800
347,900
358,300
9
Water Conservation
551,400
590.120
599,540
620,500
640,800
661,500
10
Total
$31,851,790
$35,193.589
$36.148,420
$37,177,100
$38.101.000
$39,000,800
The expenses shown in Table 2-5 represent adopted budget in FY 2024 and projected expenses,
based on previously described escalation percentages, for FY 2025 — FY 2028. The adopted budget in FY
2024 is the base for considering 0&M expenses that need to be covered by future rates. Total 0&M
expenses are projected to increase an average 2.6% per year over the Study period.
As exhibited in Table 2-5, the budgeted expenditures increased approximately $3.3M (10%) in FY
2024 when compared to year-end projected expenditures from FY 2023. The budget for FY 2024 is the
result of a detailed process to determine all reasonably expected expenses. Rates must be set based on
these projections. The difference between year-end projected expenses in FY 2023 and the budgeted
expenses in FY 2024 predominately occur in Water Administration and are summarized as follows:
Transfers to General Fund ($1.2M) — The City recently updated its cost allocation plan which
identifies services provided by the General Fund to the Water Fund and identifies the percentages to
be recovered by each receiving department.
s Insurance and Liability ($700k) — Cost of insurance, workers compensation, and general liability.
■ Staff Expenses ($1.4M) — Overall the City is experiencing a high level of staff vacancies and a
backlog of recruitments, leading to FY 2023 expenses in the Water Fund being lower than expected.
These one-time savings do not carry on into FY 2024 since vacancies are planned to be filled.
2.5 Debt Service Requirements
Table 2-6 represents the Water Division's existing debt service obligations. This table shows both
principal and interest requirements on the existing debt over the Study Period. It is common practice for
utilities to utilize debt to finance multi -year capital improvement projects, but financing options will
depend on the utility's financial conditions. By financing the cost of the projects, the Water Division can
fund major projects immediately and spread the payment over a specified time frame. Debt service
represents roughly 11 % of total expenditures. Based on the revenue bond requirements, the debt service
coverage ratio is a minimum of 1.20x net revenues (revenue less operating expenses and not including
capital) for the Water Division.
R2023-127 Page 20 of 59
The Water Division issued Water Revenue Bonds 2016 to successfully refinance existing Water
Revenue Bonds and State Loans. By refinancing the existing debt, the City saved a projected $4.8M to the
Water Division over the course of the repayment. Identified in Table 2-6 is a new revenue bond issuance
in 2027. The City anticipates significant CIP that has already been identified and from the updated 30-
Year Master Plan that will be completed by 2024. The debt service amounts are estimates based on an
$100.OM revenue bond issuance.
Table 2-6 Debt Service
i11ra r- 2024 2025 2026 2027 2029
ISI lSl ($I fSl ($)
long -Term Debt
1 Existing Revenue Bonds 2016 3,232,800 3,148,550 3,057,800 3,236,800 2,973,800
2 Proposed Revenue Bond 2027 0 0 4,164,200 7,138,400 7,138,400
3 Total $3,232,800 $3,148,550 $7,221,900 $10,375,200 $10,112,200
2.6 Capital Improvement Program
The Water Division last developed a 20-year Master Plan in 2010 to identify system needs
including routine testing, inspections, maintenance, and renewal and replacement requirements. In 2023,
the City embarked on a new 30-year Master Plan that will provide necessary capital investments for
treatment, watershed, transmission, distribution, and information technology (IT)/Finance.
The City funds the Capital Improvement Program (CIP) through a combination of debt service,
capacity fees or rate generated revenue, which is often referred to as pay as you go or pay -go. For large
complex projects, the City uses debt financing. Pay -go funding through rates is appropriate for the base
CIP to replace aging infrastructure and upgrade facilities. Capacity fees typically generate approximately
$900,000 annually for the CIP. Current rates will contribute an average of $5.8M annually in pay -go
funding towards CIP which falls well short of funding the average $16.9M annual need. Recognizing the
shortfall, the City plans to phase -in additional rate generated funding for the CIP; the current proposal
includes increasing the annual funds available from pay -go from $5.2M in 2024 to $8.OM in 2028.
These are necessary investments in the system to keep up with recommended AW WA standards.
Staff prioritizes investments each year according to the greatest need and does its best within these
means to maintain high quality, reliable water, and contain costs. Deferring capital for long periods of
time is not an industry -recognized best management practice. Long-term deferral results in overall higher
operating costs due to emergency responses needed to address minor and major failures within the
aging system.
Table 2-7 summarizes the Water Division's CIP for FY 2024 through FY 2028. The Water Division
is projecting a $84.3M capital improvement program over the Study Period, which includes both capital
and replacement projects. The staff identified short and long-term capital facilities needs for the system
and developed a schedule and costs for the projects. The City anticipates that over the Study Period, the
Water Division will implement tank improvements to address disinfection byproduct formation, continue
annual infrastructure replacement of water mains and meters, transmission system valve installation to
decrease repair time and water volumes required to drain, flush and refill the large pipes, and pipe
replacement to increase reliability and reduce customer outages, and construct important dam, spillway,
and watershed improvements.
R2023-127 Page 21 of 59
Key projects identified in the CIP of the current FY 2024 and FY 2025 budget cycle are: Milliken
Water Treatment Plant Upgrades, Barwick Jamieson Chain and Flight Renovation, Hennessey Treatment
Plant Rehabilitation, and Hennessey Spillway Flow Expansion.
Table 2-7 Capital Improvement Projects
2024
2025
2026
2027
2028
Capital Improvement Program
1
Water Admin istration
0
100,000
0
0
0
2
Water Distribution
5,113,000
1,752.600
2,400,000
2,400,000
2,400,000
3
Water Quality (Treatment)
1,350,000
5,DD0,000
15,250,000
8,250.000
20,250,000
4
Watershed (Supply Source)
200,000
100,000
100,000
10,000,000
150,000
5
Water Transmission
5,650,000
650,000
650,0DO
650,000
650,OD0
6
Water Recovery/Disaster
1,200,000
0
0
0
0
7
Total
$13,513,000
$7,602,600
$18,4D0,000
$21.300,000
$23,450,000
2.6.1 Capital Improvement Financing Plan
The City funds annual expenditures for the CIP from a combination of available funds on hand,
capacity fees, long-term debt, interest earnings, and revenues derived from user rates. As shown in Table
2-8 the annual CIP expenditure averages $16.9M throughout the Study Period. Capacity fees, which can
only be used for capital improvements, are typically $900,000 per fiscal year. Contribution from Other
Agencies in 2024 accounts for reimbursements from FEMA for disaster related projects. The current
annual CIP contribution from the operating fund or pay -go averages $5.8M per year over the Study Period
and peaks at $8.OM in 2028.
The Water Division follows the practice of using bond funds for major projects ready for
immediate construction and then having customers that benefit from the improvements paying for these
projects over decades. The City of Napa last sold bonds for major treatment plant and other capital
improvements in 2007 and consolidated and refinanced all debt in 2016 resulting in debt service
payments of $3.2M per year. Given the size and age of the City's system, it is more fiscally responsible
for ratepayers to fund major capital investments through a combination of funds on hand, capacity fees,
user rate revenues and long-term debt.
In 2027, the City will seek a substantial bond sale in the magnitude of $100.OM to execute the
identified CIP, primarily improvements to the Hennessey Water Treatment Plant in 2028 — 2030. The City
anticipates completing its 30-year Master Plan by mid-2024 which will identify and prioritize a broad
range of necessary capital investments. These investments are expected to be significant, therefore, the
bond sale amount may differ upon completion of the Water Master Plan.
R2023-127 Page 22 of 59
Table 2-8 CIP Financing Plan
2024
2825
2026
2027
2029
W
($)
($)
(5)
($1
1
Beginning Balance
S 32,429.300
$ 29,123,170
$ 17,600,570
S 5,100,570
$ 92,705,970
Sources of Furls
2
Revenue Bond Funds
O
0
0
1oo;000,000
0
3
Capacity Fees
900,OOD
1,700,000
900=1
_ _ 900,000
900,000
4
Transfer from Operating Fund
5,200,000
4,300,000
S,OW,000
6,500,000
--
8,000,o00
5
Contributions from Other Agencies
7,440,6W
80,000
0
0
0
6
Intrfd Tsfr Out/(in)-Reserve
0
0
0
0
O
7
Interest income
0
0_
o
0
0
8
Total Sources of Funds
$ 13,540,683
$ 6,080,000
_
$ 5,900,000
$207,400,000
$ 8,900.000
_
Uses of Funds
9
Capital Improvements
13,513,000
7,602,600
18,400,000
21,30D,OW
23,450,000
10
Carryover Expense
13,333,913
0
0
O
0
11
Bond Issuance Expense
0
0
0
1,356,200
O
12
Bond Reserve Requirement'
0
0
0
7,138,400
0
13
Total Uses of Funds
$ 26,846,813
$ 7,602,600
$ 19.400,000
$ 29,794,600
$ 23,450,000
14
Ending Balance
$ 19,123,170
S 17,600,570
$ 5.100,570
$ 82,705,970
$ 69,155,970
" Represents amount dedicated to reserves based on issuance at any specific year. Thereafter the amount is not shown
in Line 12 unless there is another issuance.
2.7 Transfers
The Water Division performs various transfers throughout the course of the year to and from the
operating fund and other funds. Since such transfers do not represent direct operating expenses for the
Water Division, Black & Veatch includes these costs as "below -the -line" (i.e., after the payment of debt
service) cash flow items and not included as 0&M expenses in the calculation of projected debt service
coverage. General Fund transfers are the equivalent costs charged for services provided to the water
operation that would otherwise be paid for directly such as legal services and human resources. These
costs are considered operating costs and are factored into the debt service calculation but are shown as
a transfer for accounting purposes. Table 2-10 represents these transfers on an annual basis throughout
the Study Period. The following are a brief description of the transfers.
■ Rate Funded CIP Contribution Fund transfers represent funds to an internal Water Division fund to
cover planned CIP project expenditures.
■ Non -Recurring Fund transfers represent funds to an internal Water Division fund for periodic, studies
and plans that are required on 5- and 10-year intervals such as the Urban Water Master Plan (UWMP)
as required by the State Department of Water Resources, or the Sanitary Survey as required by the
State Water Resources Board Division of Drinking Water.
2.8 Reserves
Like transfers, the Water Division performs various transfers throughout the course of the year to
and from reserves. The Water Enterprise Fund's fiscal policy reserve requirements have been most
recently reviewed by Water Division staff and Black & Veatch to ensure that there are sufficient funds on
hand for unforeseen costs. Reserves are important in helping maintain good bond ratings, especially for a
R2023-127 Page 23 of 59
water system comprised of hundreds of millions of dollars of infrastructure to have the ability to secure
funding for long-term projects that exceed the capacity of ratepayers to support on a pay -go basis. It is
recommended that the Water Division have four reserves designated for various activities. The
recommended reserves consist of the following:
• Operating Reserve represents working capital maintained by the operating fund to cover day-to-day
expenses and maintain sufficient funds to cover accounts payable if there are supplier issues,
periods of low water sales, or unforeseen cost increases. The recommendation is to maintain a level
between 12% to 25% (45 — 90 days) of annual operating expenses excluding transfers to CIP.
a Emergency Reserve represents funds used to fund operating or capital expenditures required
because of unbudgeted financial liability. The recommendation is to maintain a level of 10% of annual
operating expenses excluding transfers to CIP.
■ Long Term Water Supply Reserve represents funds set aside to invest in future water supplies or to
purchases supplemental supplies during a drought. The recommendation is to initially fund this
reserve with a starting balance of $1.7M in FY2024 and then transfer $200,000 annually from the
operating fund.
■ Rate Stabilization Reserve represents funds used to absorb revenue shortfall due to short-term
decreases in water sales. The recommendation is to maintain a level of 10% of annual operating
expenses excluding transfers to CIP.
Regardless of the type of reserve, appropriate reserve levels help the Water Division maintain a
stable financial position and attain better bond ratings, which in turn, leads to lower borrowing costs.
Reserve levels are recommended to be funded at or near the fully funded level over the rate study period
and therefore transfers to reserves are accounted for as operating expenses increase. As shown in Table
2-9, total reserve levels over the 5-year study period will be maintained between $19.OM and $26.9M.
Table 2-9 Reserve Balances
2024
2025
2026
2027
2028
($)
($)
($)
($l
M
Rexrves
1
Working Capital Reserve
9,605,100
9,710.400
9,943,300
11,175,500
13,044,900
2
Emergency Reserve
3942,000
3,938,100
4.032,600
4,532,300
5,290,400
3
Water Supply Reserve
1300,000
1,900,000
2,100,000
2,300,000
3,300,000
4
Rate Stabilization Reserve
3,602,000
3,938,100
4,032,600
4,532,300
5,290,400
5
Total
$ 19,749,100 $
19,486,600
$ 20.108,500
5 22,540,100
$ 26.925700
2.9 Projected Operating Results
The revenue requirements of the Water Division consist of system 0&M expenses, routine capital
expenditures for equipment and improvements, the CIP, debt service requirements on existing debt,
transfers, and reserve requirements.
In the analysis, staff sought to examine the state of the Water Division if no revenue increases
were to occur. Under the status quo scenario, the Water Division would not impose any revenue increases
over the Study Period and continue to execute the planned CIP. As shown in Figure 2-2 the status quo
conditions mean that the Water Division will operate at an annual deficit position thus tapping into its
reserves. By FY 2025, both the operating fund and reserves run out of funds. In addition, since the Water
Division has debt service commitments, the debt service coverage will be in violation of debt covenants
R2023-127 Page 24 of 59
starting FY 2024 as shown in Figure 2-3. The debt service coverage will fluctuate year -over -year based on
operating results.
Figure 2-2
Sao
p
s_ SW
540
520
So
-520
-540
-560
Figure 2-3
1.40
1-20
1.00
0.90
0.60
0.40
0.20
Status Quo Operating Cash Flow
Water Operations Cash Flow
�O&M Water Supply Debt Service Transfers -Other
�-ransfers-CiP Transfer s- Reserves —0—R&enue —C.-Cash Balance
Status Quo Debt Service Coverage
Bond Convenant Coverage
o- - - -- 0 - - - - - - - 0 - - - - - - - 0 - - - - - - - 0
0.00
-0.20 2024
2025 2026
2 227 1"
� Debt Service Coverage —p • Deb Service CovrageTarget
To avoid deficit positions, revenue increases as shown in Table 2-10 are required. The revenue
increases represent the overall total revenue adjustment needed to meet revenue requirements. The
revenue adjustment does not represent adjustments to the individual rates but reflects the overall level of
revenue needed to meet the Water Division's obligations.
The suggested revenue increases help the Water Division to meet the following goals:
Meets budgeted and projected obligations through FY2028 for investments in operations
and maintenance.
R2023-127 Page 25 of 59
* Meets the need to increase annual level of pay-as-you-go investments in Capital
Improvements by increasing the annual transfer to CIP from $5M in FY2024 to $8M in
FY2028.
* Meets the need to issue debt financing for $100M in FY2027 to invest in Hennessey Water
Treatment Plant improvements in FY2028-FY2030.
Meets the Bond debt coverage ratio of 1.20x for existing debt and 1.25x for proposed debt
* Maintains total reserves described in Section 2.8.
Shown in Table 2-10 is a summary of the proposed operating fund for the Study Period. The
operating fund consists of two parts: revenue and revenue requirements. Line 1 is the revenue under
existing rates while Lines 2 through 7 is the additional revenue generated from the required annual
revenue increases. Lines 9 through 11 represent other operating revenues which include revenue from St.
Helena. Line 13 shows the total revenues generated from existing rates, revenue from increases and
other operating revenue.
As discussed earlier, 0&M, water purchase, debt service, and transfers make up the revenue
requirements section. Line 25 represents the total revenue requirement. Line 28 presents the net
cumulative working capital residual balance.
(Left Intentionally Blank)
R2023-127 Page 26 of 59
Table 2-10 Operating Fund
2024
2025
2026
2027
2028
cs)
($)
($)
($)
(s)
Revenue
_
Revenue from Existing Rates
32,947,500
33,518,200
33 701.500
33,986,100
34,072,300
Months
_Fiscal Year Effective
2
2024 6
1,976,900
4,022,200
4,044,200
4,066,300
4,088,700
3
2025 9
3,378,600
4529,500
4,554,300
4,579,300
4
2026 9
2,853,600
3,925,600
3,846,600
5
2027 9
3,127,400
4,192,80D
6
2028 9
_
3 046.800
7
Increased Revenue Due to Adjustments
1,976.900
7,400,B00
_
11,427,300
15,573,600
19,754,200
8
Subtotal
$ 34,924.400
$ 40,919,000
$ 45,128,800
$ 49.459,700
$ 53,826,50D
9
St Helena Contract
1,859,600
1,992,500
2,D41,B00
_2,1_03,200_
2,166,700
10
Other Operating Revenue
1,848,700
1,839,400
1,779,400
1,779,400
_ 1,779,400
11
Interest Income
222,000
222AM
222,000
222,000
222,OOD
12
Subtotal
$ 3,930,300
$ 4,043,900
$ 4,043,200
$ 4,104,600
$ 4.168,100
13
Total Revenue
$ 39,954,700
$ 44,962,900
$ 49,172,000
$ 53,564,300
$ 57,9KSW
Revenue Requirements
Operation and Maintenance
14
O&M Expenses
22,971,300
23,711,600
24,455,900
25,248,800
26,032.600
15
NBA Water Supply
9,100,OD0
9,200,000
9,394,100
9,411,600
9,420,900
Subtotal
$ 32,071,300
$ 32,911.600
$ 33,840,000
$ 34,660,400
$ 35 453,500
Debt Service
16
Existing Senior Debt
3,236,800
3,232,800
3,248,600
_ 3,057,800
2,976,000
17
Proposed Senior Debt _
0
_0
0
4,164,100
7,138,400
18
Subtotal
$ 3,236,800
$ 3,232,800
$ 3,149,600
$ 7,221,900
$ 10,114,400
Transfers
19
Tsfrto/from General Fund Services
3,112,300
3,236,80D
3,337,100
3,440,600
3,547,300
20
Tsfr to/from Water CIP(531)
_ 5,200,000
4,300,000
5,00D_,_000
6,500,000
B4O00,ODD
21
Tsfrto/from NR Water(539) _
0
0
0
0
0
22
Subtotal
$ 8,312,300
$ 7.536.800
_
S 8,357,200
_ _ _
$ 9-W,600
$ 11,547,300
_
Reserves
23
Tsfrto/from Reserves
(240,ODO)
737,500
_ 621,900
_ 2,431,600
1,893,500
24
Subtotal
$ (240,000)
$ 737,500
$ 621,900
$ 2,431,600
$ 1,893,500
25
Total Revenue Requirements
$ 43,380,400
$ 44,418,700
$ 45,947,600
$ 54,254,500
$ 59,008,700
26
Net Cash Balance _.
(4,525,700)
544,200
3,224,400
(690,200)
(1,014,100)
27
Beginning Fund Balance _
9,111,230
4,5_9_2,530
5,135,730
8,360,130
7,669,930_
28
Net Working Capital Balance
$ 4,591,530
$ 5,135,730
$ 8,360,130
$ 7,669,930
$ 6,655,830
29
Debt Coverage Ratio
1.21
2.73
3.57
2.14
1.98
R2023-127 Page 27 of 59
Figure 2-4 presents the proposed operating cash flow and Figure 2-5 presents the proposed debt
service coverage ratio.
Figure 2-4 Proposed Operating Cash Flow
S70
p
s $60
550
Soo
S30
$20
5io
so
-510
Figure 2-5
Lsc
4.00
3.50
3.00
2.50
2.00
150
1.00
0.50
0.00
Water Operations Cash Flow
2024 2025 2026 2027 2028
�O&M Water Suppry Debt Service Transfers- Other
�-ransfers-CIP Transfers -Reserves Revenue --Ci— Cash Balance
Proposed Debt Service Coverage
Bond Convenant Coverage
2024 2025 2026 2027
Debt Service Coverage —o- -Deb Service Courage Target
2028
R2023-127 Page 28 of 59
3.0 Cost of Service Allocation
The revenue requirements recovered from rates for water service are synonymous with the
definition of the Cost -of -Service. In developing equitable rate structures, revenue requirements are
allocable to the various customer classifications according to the service rendered. Proper allocation of
these requirements to customer classes should consider the quantity of water consumed, peak flows,
number of customer connections, and other relevant factors.
In analyzing the Water Division's cost of service for allocation to its customer classes, Black &
Veatch selected the annual revenue requirements for FY 2024 as the Test Year (TY) requirements to
demonstrate the development of cost -of -service water rates. Table 3-1 summarizes the total costs of
service recovered from water user rates for the TY 2024.
Table 3-1 Cost of Service Revenue from Rates
0 r MM
($)
($)
($)
Revenue Requirements
1
O&M Expense
22,971,300
0
22,971,300
2
Water Purchase
9,100,000
0
9,100,000
Transfers
3
Transfers- Operating
3,112.300
0
3,112,300
4
Transfers -Specific
0
5,200,000
5,200,000
5
Transfers - Reserves
(240,000)
0
(240,000)
6
Debt Service Requirements
0
3,236,800
3.236.800
7
Subtotal
$34,943,600
$8,436,800
$43,380.400
Less Revenue Requirements met from Other Sources
8
Other Service Charges
1,859,600
0
1,859,600
9
Other Operating Revenue
1,848.700
0
1.848,700
10
Interest Income
222,000
0
222,000
11
Subtotal
$3,930.300
$0
$3,930,300
Adjustments
12
Adjustment for Annual Cash Balance
3,645,500
880,200
4,525.700
13
Adjustment to Annualize Rate Increase
(1,592,300)
(384,500)
(1,976.800)
14
Subtotal
$2,053,200
$495,700
$2,548.900
15
Cost of Service to be Recovered from Rates
$28,960,100
$7,941,100
$36,901,200
Shown in Line 7 is the total revenue requirement that corresponds with Table 2-10, Line 25. To
derive the revenue requirement recovered via rates, it is necessary to deduct revenues from other sources
as shown in Lines 11 and 14. Line 12 represents the net annual cash balance for the Water Division
during the TY. In this case, the $3.6M figure indicates that the Water Division is projecting a negative cash
balance for the year. Since the City expects to implement the revenue adjustment across six months
starting in January, the final cost of service recovered from rates requires an adjustment. Line 13
represents the additional revenues generated if the revenue increase was effective for a full year, versus
R2023-127 Page 29 of 59
only 6 months. Line 15 represents the total -amount of funds needed in revenue from rates that will offset
the total revenue requirement.
3.1 Functional Cost Components
The first step in conducting a cost -of -service analysis involves analyzing the cost of providing
water service by system function to properly allocate the costs to the various customer classes and then
subsequently designing rates. As a basis for allocating costs of service among customer classes, we
separate costs into the following four basic functional cost components: (1) "Base"; (2) "Extra Capacity";
(3) "Customer"; and (4) "Direct Assignment,", described as follows:
2 Base costs represent operating and capital costs of the system associated with service to customers
to the extent required under constant or average annual load conditions without the elements
necessary to meet water use variations or peak demands.
■ Extra Capacity costs represent those operating costs incurred in meeting demands in excess of
average and capital -related costs for additional plant and system capacity beyond that required for
the average rate of use.
s Customer costs are those expenditures that tend to vary in proportion to the number of customers
connected to the system. These include meter reading, billing, collecting, and accounting, and
maintenance and capital costs associated with meters and services.
• Directly assigned costs are costs specifically identified as those incurred to serve a specific
customer group(s). These costs include fire protection for customers served City water, water supply,
pumped zones, treat & wheel, and treatment only. Similarly, there are costs specifically for Inside City
and Outside City customers. These dedicated costs consist of base, extra capacity, and conservation
cost components. Customers that are Outside City are beyond the core function of the water system
and service area. Local reservoirs of Lake Hennessey and Milliken Creek water supplies were
developed in 1948 and 1922 respectively and are under the jurisdiction of the City of Napa, who
maintains these assets to serve its residents. Through the years, the City has grown and has
developed imported water supplies through a connection to SWP. To have the ability to
accommodate service to Outside City customers in unincorporated county areas and to meet peak
demands, the City maintains all three types of water supplies. The SWP supplies are the highest cost
supplies that would decrease if the City did not serve Outside City customers. Geographically, the
Outside City customer class encompasses a widespread service area ranging from Rutherford to the
north, Silverado and Monticello Park to the east, and Congress Valley to the west. Therefore, vehicle
and labor costs are higher to provide the same level of service to the collective Outside City customer
class.
3.2 Allocation to Cost Components
The next step of the cost -of -service process involves allocating each element of cost to
functional cost components based on the parameter or parameters having the most significant influence
on the magnitude of that element of cost. We allocate 0&M expense items directly to appropriate cost
components. We use a detailed allocation of related capital investment as a proxy for allocating capital
and replacement costs. The separation of costs into functional components provides a means for
R2023-127 Page 30 of 59
distributing such costs to the various classes of customers based on their respective responsibilities for
each particular type of service.
3.2.1 System Base, Max Day, and Max Hour Allocations
The water system is comprised of various facilities; each designed and operated to fulfill a given
function. For the system to provide adequate service to its customers always, it must be capable of
meeting not only the annual volume requirements, but also the maximum demand rates placed on the
system. Because not all customers and types of customers exert maximum demand at the same time,
the capacities of the various facilities must meet the maximum coincidental demand of all classes of
customers. Each water service facility within the system has an underlying average demand, exerted by
the customers for whom the base cost component applies. For those facilities designed solely to meet
average day demand, 100% of the costs go to the base cost component. Extra capacity requirements
associated with coincidental demands in excess of average use consist of maximum daily and maximum
hourly demand subcomponents.
For volume -related cost allocations, the first step in determining the allocation percentages is to
assign system peaking factors. The base element is equal to the average daily demand (ADD) and
assigned a value of 1.0. Based on consumption figures from the 2017 to 2022, the Water Division's
maximum day (max day) demand is 1.63 times the ADD. Thus, we assign the max day factor a value of
1.63. The maximum hourly (max hour) consumption approximates the maximum instantaneous
consumption and is 3.6 times the ADD. Thus, we assign the max hour factor a value of 3.6. These peaking
factors are based on the Water Division's daily treated water production logs.
The costs associated with facilities required to meet maximum day demand are allocable to base
and maximum day extra capacity as follows:
T Base = (1.0/1.63) x 100 = 61.3%
Max Day = (1.63.— 1.0)/1.9 x 100 = 38.7%
These calculations indicate that the average or base use requires 61.3 percent of the capacity of
facilities designed and generated to meet maximum day demand and the remaining 38.7 percent meets
maximum day extra capacity requirements.
The costs associated with facilities required to meet maximum hour demand are allocable to
base, maximum day extra capacity, and maximum hour extra capacity as follows:
Base = (1.0/3.6) x 100 = 27.8%
• Max Day = (1.63 — 1.0)/3.6 x 100 = 17.5%
s Max Hour = (3.6 — 1.63)/3.6 x 100 = 54.7%
3.2.2 Allocation of Operating and Maintenance Expenses
In the allocation of 0&M expenses, we allocate costs directly to cost components to the extent
possible. The Water Division accounts for operating costs by functional categories. Therefore, Black &
Veatch used the factors noted in Section 3.1 to allocate the operating expenses to the cost components.
We allocate Administrative and Engineering cost elements based on the allocation of all other costs.
Table 3-2 represents the allocation of 0&M to the cost components. To determine the net 0&M costs, we
subtract revenues from other sources as shown in Table 3-1, Lines 11 and 14 from the allocated costs.
R2023-127 Page 31 of 59
The direct assignment represents Inside City, Outside City, fire protection, pumped zones, treat & wheel,
and treatment only.
3.2.3 Allocation of Capital Investments
Like 0&M expenses, we allocate existing fixed assets (which serve as a proxy for the current
capital investments) directly to cost components to the extent possible. The allocation of costs into the
costs components provides a basis for annual investment in water system facilities. Table 3-3 shows the
allocation of system investment serving water customers for the Test Year. The total net system
investment of $116,457,700 shown on Lines 10 and 20 represents the Test Year original cost less
accumulated depreciation of the system in service. The total net system investment reflects the Water
Divisions fixed asset listing ending June 30, 2022 grouped with planned CIR This value represents book
value of the assets. The system valuation under replacement cost ($940,700,000) would represent the
water system's estimate worth. Using the distribution of total net system investment across the
functional cost components, we can then allocate the planned capital costs.
R2023-127 Page 32 of 59
Table 3-2 Mlocall of O&M
=��
W
►i.0e9
Mp&flppr
Melee
C-Am
OpneiigE mall
l51
(S)
SO
151
(5)
(5)
(5)
15)
(5)
weer mrsin
1
Salaries & Wailes
1,421,800
267,600
a.900
0
36500
33,800
127,300
210,600
43,800
2
Materials and Supplies
13.000
2.400
100
0
Soo
300
1,200
1,900
400
3
Services - External&Internal
1,722.600
324,400
10800
0
44,300
41,000
1S4200
255,200
53,000
4
Transfers Out
3.059,500
577,900
19, 100
0
78.700
73,100
274.900
454700
94,500
Water Billing
5
Sa lanes and Wages
146700
0
0
0
0
146,700
0
0
0
6
Materials and Supolies
36.500
0
0
0
0
36.500
0
0
0
7
Services - External&Internal
405,700
0
0
0
0
405,700
0
0
0
Water oistrieution
8
Salaries and Wages
2976,900
a
0
0
297700
0
297.700
0
0
9
Materials and Supplies
541,700
0
0
0
54,200
0
54.200
0
0
10
Services Eternal & Internal
973,900
0
0
0
97,400
0
97,400
0
0
11
Capital Outlay
133,000
0
0
0
13,300
0
13,900
0
0
Water EngineehlM
12
Salaries and Wq6
2919,700
529.800
17,500
0
72,200
67 G00
251,800
416,800
86500
13
Materials and Supplies
46,900
8,900
300
0
1.200
1,100
4,200
6,900
1,400
14
services Extemal & Internal
553,000
104,000
3,500
0
14,200
13.200
49,500
81.900
17,000
Water Supply
15
Salaries and Wages
278.600
250,700
0
0
0
0
27.900
0
0
I6
Materialsand Supplies
81,700
74,400
0
0
0
0
8,300
0
0
17
Water Purchau
9,300000
4,550,000
0
0
0
0
930,000
3640,000
0
18
Services External&Internal
344,100
309,700
0
0
0
0
34.400
0
0
19
Capital Outlay
15'"
13,500
0
0
0
0
1.500
0
0
Water Transmission
20
Salaries and Wallis;
1428,300
203,300
128,100
0
142.800
0
142,1100
0
449,500
21
Materials and Suooses
47,700
6,700
4,300
0
4,800
0
4,800
0
15,000
22
Electricity
220,000
0
0
0
0
0
0
0
220,000
23
Services -Eternal&Internal
244,900
34,800
22.000
0
24500
0
24,500
0
76,900
W arer Treatment
24
Salaries and Wages
4,119,1100
0
0
0
0
0
412.000
0
0
25
Materials and Supplies
715,900
0
0
0
0
0
71.600
0
0
26
Chemicals
1,610,"
0
0
0
0
0
0
0
0
27
Services - Eeernal&Internal
1,060.900
0
0
0
0
0
106.100
0
0
28
Cep.tal Outlay
100.000
0
0
0
0
0
to,"
0
0
water Wratory
29
Maerial. and Supplies
137,000
0
0
0
0
0
O
0
0
30
Services - Eternal&Internal
191,000
0
0
0
0
0
0
0
0
Water Comervation
31
Salaries and Wages
313.500
0
0
0
0
0
0
0
0
32
Materials and Supplies
23,300
0
0
0
0
0
0
0
0
33
services - Eternal&Internal
253=
0
0
0
0
0
0
0
0
34
Total Operating Epenses
$34,943.700
57,191,500
5215.300
SO
$876800
$813,800
$3,061.200
55.064,500
$3,052300
35
4ss Oti Sources&Adjustments
5983,500
1,231,500
36,500
0
150.300
139,300
524,200
$67,200
180200
36
Ne Operating Epenses
$28960,200
55960000
$176800
$0
$726700
$674,500
52, 537,000
54,197,300
$972,100
R2023-127 Page 33 of 59
false
ales. Da,
INaumals,
e.ee
Ntl.&al,
asalrmesur
:3 [1;3gj��
OperaLLll Espernes
151
f51
151
151
I51
151
I5I
151
(5)
1$)
1$)
Water/dmin
37
Salaries&Wages
1i421,800
299,300
138,300
98,200
13,1100
41,600
20,Soo
18,200
20,300
38.900
4.100
38
Mahrials and Supplies
13,000
2,700
1.300
toll
100
400
200
200
200
400
0
39
Seryites- External&Ilernal
1.722,600
362,600
167,500
119,000
16, W
50400
25,200
22,000
24,100
47,300
5,000
40
Transfers Out
3,069.500
645,200
298,500
211.900
29.300
89.700
44,900
39.300
43,900
84=0
8,900
Water aimnl;
41
Salaries and Wages
146,700
0
0
0
0
0
D
0
0
0
0
42
Naerials and Supplies
36, 5Do
0
0
0
0
0
0
0
0
0
0
49
Services E#ernal & IMernal
405,700
0
0
0
0
0
0
0
0
0
0
Water Distribution
N
Salaries and Wages
2.976,900
558,200
351,600
1,099,600
0
303.400
65.100
203,600
0
0
0
45
Materials and Supplies
541.700
301,500
64000
200,100
0
13,800
11,800
37.100
0
0
0
46
Services - Eaternal&Internal
973,900
182,500
115.000
359,700
0
33,900
21,400
66,1500
0
0
0
47
Capital Outlay
133,000
25.000
15,700
49,100
0
4,600
2,900
9,100
0
0
0
Water En,ineerirq
68
Salaries and Wages
2,819,700
592,300
2)3.]00
194,300
25,900
82.2W
41,300
36r000
40.500
77,000
SAM
49
Materials and Supplies
46.900
9.900
4,600
3,200
400
1,400
700
600
Toll
1.300
loll
50
Services-External&Internal
553,000
116.400
53.800
38,200
5,300
16,200
8,100
7,100
7900
15.100
1,600
Water Supply
51
Salaries and Wales
278,600
0
0
0
0
0
0
0
0
0
0
52
Materials and Supppes
82.700
0
0
0
0
0
0
0
0
0
0
53
Water Purchase
9,100000
0
0
0
0
0
0
0
0
0
0
54
Services -External&Internal
344,100
0
0
0
0
0
0
0
0
0
0
55
Upital Outlay
15,000
0
0
0
0
0
0
0
0
0
0
Water Transmission
56
Salaries and Wales
1.428,300
0
0
0
0
47,300
29,800
0
0
285700
0
57
Materiels and Supplies
41700
0
C
0
0
3,600
1'000
0
0
9500
0
58
Electricity
220.000
0
0
0
0
0
0
0
0
0
0
59
Services - Extemal&Internal
244,900
0
0
0
0
8.100
5.100
0
0
49,000
0
Water Treatment
fill
Salaries and Wages
4,119.800
1.913.300
1,205,400
0
0
232,500
141SSOO
0
0
173,000
37.100
61
Materials and Supplies
735.Ml
332,400
209.500
0
0
40,400
25,500
0
0
30.100
6,400
62
Chemicals
1,610'"
1,379.800
0
0
0
148.100
0
0
0
67,6o0
14.500
63
Services - External&Internal
1,060,900
491,600
310,400
0
0
59900
37,800
0
0
44, 500
9,600
64
Upital Outlet'
100P00
46,400
29,300
0
0
5.600
3.600
0
0
4,200
900
Water laboratory
65
Materials end Supplies
137,ODO
72,000
45,400
0
0
).]00
4900
0
0
5800
1.200
66
Services External IS Internal
191,000
100,400
63,300
0
0
10,800
6,800
0
0
8,000
1700
Water Unservatlon
67
Salaries and Wages
313,500
0
0
0
125.4
0
a
0
MAW
0
0
68
Materials and Supplies
23,300
0
0
0
9,300
0
0
0
14,"
0
0
69
$ernes - External&Internal
253,300
0
0
0
101.400
0
0
0
151.900
0
0
70
TM4i Operabng Expenses
$34,943.700
$7,167,400
$3.325.400
$2,360.90C
$326,300
$m,loo
$500.000
$437.300
$489,300
$935700
$98.600
71
Less OMer Sources&Adjustments
5.983,500
1.232.400
569,400
404300
55,900
171,100
85,000
74,900
83,600
160,200
16,900
72
Net OperatmB Expenses
$28,9W,200
S5,965,000
S2,756.000
$1,956,fm
$270,400
$828,300
$414.400
$362,4W
5405500
$]]5,500
$81,700
R2023-127
Page
34 of 59
Table 3 3
8aP8 BBIa OaP BM.Maw MMea Gat/8�.
I51 1$) 151 I51 l51 I51
PUM Aneh
1
Siwrced5uppty
35,495,3W
31.945,8W
0
2
TreMwM
32,733,1W
0
0
3
Transmission
20,165,500
8,845,SW
5,572,BW
4
0istribu6m
16,781,SW
0
0
5
Mee &Service
3,363,7W
0
0
6
Hydrants
2,354,W0
0
0
7
-e
General Plant _
_ 5.154,6W
11923.4W
25619W
Trial Mm Meers
$116,027AW
$02,714,700
$5,629,7W
9
less t7lhwS C.&Mlustwenb
495.7W
184,900
24,7W
10
$116,457,7W
$42,529,8W
$5 W5.W0
0
0
0
3,549,SW
0
0
0
0
0
3,271,3W
0
0
0
2,016,600
0
1,2W,6W
0
524,3W
0
1,578,2W
0
1,074,OW
0
0
0
3.363.7W
0
0
0
0
0
0
0
2354,OW
0
0
_0_
_ 325.M
0
—$0
532,0W _
0
24,2W
$0
57,M.M
$12.071,4W
W
5548,SW
0
31,3W
0
51,2W
0
_2,3W
SO
$7.352600
50
512.0202W
50
$546,2W
=�MLQ
,rMM
ene
M Dft
3eaa. flaw t�
ewe
M Ory
Mw.flour
Im
W
M
151
l5l
(5)
(5)
(5)
l51
(5)
(5)
(5)
P1alt &ceew
11 Source of Wlv
35.495.3W
0
0
0
0
0
0
0
0
0
0
12 Trea0nml
32,719,2W
35,192,SW
9,571,300
0
0
1.W4
1,163,2W
0
0
1,374,OW
2944W
_ 13 Tnramission
20,165,W0
0
0
0
0
66&1W
420,9W
0
0
626,8W
0
14 OistriWtim
16.781,SW
3.314,3W
2A8&000
6,529,3W
0
581,7W
367,SW
1,147,9W
0
0
0
15 Meters&Services
3A63,70D
0
0
0
0
0
0
0
0
0
0
is Nydrana
2,354,000
0
_ 0
0_
0
0
0
0
0
0
0
17 PlaM
5,154,6W
855AW
537,6W
301, W
0
142,E
90,OW
52,90
0
101,500
13,600
_General
18 TM lPlaM MsM
S116,027AW
$19A60,100
$12,196,9W
_
$6,630,300
$0
$3.240.W0
$2.041.2W
$1,2W.B
$0
$2,502,3W
$50MOR
19 less Other Sources&ediastnanb
495,70D
82,1W
51,700
28,9W
0
13,7W
8,700
5,1W
0
9.8W
1,9W
20 Net GPitel Gaenses
$11&457,7W
$19.276A00
$12.345,200
$6A01,4W
$O
$9,226,3W
$2p32,5W
$1,195,7W
$O
$2.292.SW
$9W,70D
R2023-127 Page 35 of 59
3.3 Units of Service
Following the allocation of costs, the total cost responsibility for each customer class results by
developing unit costs of service for each cost function and subsequently assigning those costs to the
customer classes based on the respective service requirements of each. To properly recognize the cost
of service, each customer class receives its share of base, maximum day, and peak hour costs. The
number of units of service required by each customer class provides a means for the proportionate
distribution of costs previously allocated to respective cost categories.
Table 3-4 summarizes the estimated test year units of service for the various customer classes.
Base costs vary with the volume of water used and distributed to customer classes on that basis. Extra
Capacity costs are those associated with meeting peak rates of water use and distributed to customer
classes based on the respective class capacity requirements in excess of average rates of use. Peak
consumption information for each individual customer class is not available; therefore, the bi-monthly
consumption records in the City's Customer Information System (CIS) provides the basis for estimating
maximum day and peak hour ratios for each customer class. The number of bills for each customer
class serves as the basis for distributing customer billing requirements. Customer meter requirements
are allocated based on the number of equivalent meters serving each customer class. The estimated
number of equivalent meters for each customer class is based on the total number of various sizes of
meters serving respective classes and the ratio of the cost of meters for the various sizes to the cost of
5/8-inch meters. The equivalent meter ratios adopted in this analysis are consistent with those
established in AWWA M6 Manual, "Water Meters - Selection, Installation, Testing and Maintenance'.
Private fire protection costs allocations use equivalent fire hydrants.
3.4 Cost of Service Allocations
To determine the cost of service for each customer class, we apply the unit costs of service to
each customer classes' respective service requirements. The total unit costs of service applied to the
respective requirements for each customer class results in the total cost of service for each customer
class.
3.4.1 Units Costs of Service
The test year unit cost of service for each functional cost component is based on the total cost
divided by the applicable units of service as shown in Table 3-5.On Lines 1 to 3, the total costs represent
the cost that rates need to recover shown in Table 3-1 Line 15. The total 0&M cost includes 0&M, water
purchase, transfers less revenue from other sources and adjustments. The total capital cost includes
transfers to the capital fund, CIP reserves, and the total debt service, including debt owed to financial
institutions. Line 7 represents the unit costs used in allocating the costs to the specific customer classes.
3.4.2 Distribution of Costs of Service to Customer Classes
Applying the unit costs of service to the number of units for which the customer class is
responsible produces the customer class responsibility. This process is illustrated in Table 3-6, in which
the unit costs of service are applied to the customer class units of service. The costs attributable to each
customer class are based on the functional cost components described in Section 3.1. Each customer
R2023-127 Page 36 of 59
class places a burden on the system in different ways and thus the allocation of the units is
representative of this burden.
For example, the unit cost for the customers/bills functional cost component is $4.56 per bill as
shown in Table 3-5. The number of bills associated with the class serves as the basis for distributing
billing costs. So, for commercial customers within Inside City, Table 3-6 shows that Inside City issues
7,704 bills annually. Therefore, the cost of issuing bills for this customer class is 7,704 x $4.56, which.
rounds to about $35,100.
R2023-127 Page 37 of 59
M|
#__#
;;
§);;
,!■,
ƒ!!
I
.-
-
t
.I
i»|
� ;!2
i§;■§
\§§;j
�
�-|
! §;)
-
� k.=
Table 3-5 Units Cost of Service
Unit Cott d xraloe
1 Net operating Expense
2 Cabinet Costs
3 Debt Service _
4 Tebl Costd Service
5 Units of Service- Inside City
6 Units of Service - Outside City
J Units of Service - Contract
8 U,ft of Service - Eire
9 Units of a ice - lift Zones
10 Cmt per Unit
11 per Unit
Intl that d Service
12
Net Operating Expense
13
Capital Costs
14
_ Debt SeMce _
15
Total Cost of Service
16
Units dServ"ice-InsideCM
17
Units of Weice- Outside City
18
Units of Service -Contract
19
Units of Servce - Eire
20
Units of Service -Uft Zo.
21
Cast per Unit
Z�UnN
gate
1.W-OaY
Max. Hour
Meters
NcuK
==�
(5)
Of
1$)
IS)
IS)
28,96g100 5,959,900
176,800
0
726,100
674,500
2,537,000
4,197,300
872,100
4,704,300 1.755,400
234,500
0
297,000
0
us,=
0
22,100
3,2%ADO 2.999,10D
237,700
0
0
0
0
0
0
$96,901300 $10,731,400
$649,000
$D
$1,029,700
$674,500
$3,022,600
$4,19J,300
$894,200
3,091.424
12,157
11950
0.763
136,081
0
43,763
0
329.417 _
3,320
2,682
3.360
7,814
0
3,360
0
0
0
0
0
0
0
0
0
_ 0_
593
4,151
0
4,008
66,580
0
0
0
0
0
0
0
0
0
3M OM
$ 3,13 $
40." $
am
$ 2332 $
456 $
45.40
5 8927
$ 2.46
kpl
kpl/Day
kpl/Dsy
EM
8111
EC
kSal
sell
® MR
Bbr Daa
gger.lW
Base
M4e.Dav
Mae. Hour
I51 US)
W
(S)
(5)
151
1$1
(5)
l$1 I51 ($)
28.960.300 5.%5,000
2,756,000
1,956,600
270,400
828.300
414,400
362,400
405,500 77S,SDO 81,700
4,704,300 778,700
490,600
274,700
0
130.300
82,100
48,3_00
0 92,600 12,400
3,236,830 _ 0
0
0
_ 0
0
0
0_
0 0_
$36,901.200 56,743,700
$3,246,600
52,231900
$270.400
$958,600
$4%.500
- $410,700
_0
$405,500 $868,100 $94,100
3,091,424
12,19
111950
3,091,424
0
0
0
0 0 0
O
0
0
0
329,417
3.320
2,682
329,417 O 0
0
0
0
0
D
0
0
0 157,000 32,000
0
734
4,995
0
0
e
59
0 0 0
0
0
0
0
0
0
0
0 0 0
$ 218 $
25224 5
131.68
$ am $
2.91 _$
14919
$ 149a
5 113 $ 5.53 $ 2%
_ kpi
kpVD"
kPl/Day
ell __-
IVI _ _ _
al/Oa, _
kpl/Dry
kgal _ _. _.kVsl ..__. kp1
R2023-127 Page 39 of 59
Task 3-6 DisiciEution of Coats to Custail Classes
QA�IEQe,alrQ=
aae
M Dar
Maeaeor
Melva
CallM lma
ym�em.:tassm.
for
keal
k{all
k8ol/Day
EM
Bill
6C
kgal
k8al
1
Cat Mr Ur it
5
3.13 5
40.39 5
000 5
2172 $
4.56 5
4540 5
$907 $
0.09
Wow CRY
Single Family Residential
2
Units
1.683.005
5.336
5787
33.174
119,256
0
33,174
1,683,005
3
Allocation of cats 0 service
15.632,7W
5.271,300
215,500
0
220,700
543,900
0
2.954,900
147,200
Mufti Family Residential
4
Units
532,143
2,381
2,862
4439
7.056
0
4,439
532,143
5
Allocation of costs of oervi<e
4,471,600
11666,700
96,200
0
96,40p
32,200
0
395,400
46.500
Commercial
6
Unl"
640,741
3,099
2,711
4,930
7,704
0
4,930
640,741
7
Al location of coats of service
5,305,800
2,006,900
125,200
a
107100
35,100
0
439.100
56,000
"u.
a
Units
235.534
1.342
591
1,219
2,065
0
1.219
235,534
9
Allocation of costs of u111.
1,887,500
737,700
54,200
0
26,500
9,400
0
108,600
20,600
outride City
Sm81e Family Residential
10
Unl"
143,673
am
822
1.886
6,524
0
1,886
0
11
Allocation of costs of service
1,570,000
450."
34,600
0
41,000
30,200
0
168,000
0
Multi Family Residential
12
Units
16362
201
192
284
228
0
284
0
13
Allocationofcaa"ofservire
219.800
51900
8,100
0
6,200
1,000
0
25,300
0
Commercial
14
Units
83,281
1,054
847
690
368
0
690
0
15
Allocation of cos"of service
1,012.500
260.800
43.000
0
15,000
1,70o
0
61,500
0
trriaation
16
Uni"
85,902
1.196
821
500
594
0
500
0
17
Allocation of cos aservice
1,032,900
269,100
48.300
0
10,900
2,700
0
".600
0
R2023-127 Page 40 of 59
=®�
're
soewi a y
fe4. Feel
Aleeel4
aleum
Per
legal
kpl/Day
keal/Day
EM
Bill
EC
keel
keel
1 Cost Per Unit
$ 3.13 $
40.39 $
aoo $
2172 $
4.% $
35.00 $
8907 $
009
a Ieet
City of American Lenyon
18 Units
0
0
0
0
0
0
0
0
19 Al laetion of coats of service
94, 100
0
0
0
0
0
0
0
0
city of Ietop
20 Units
0
0
0
a
a
0
a
o
21 Allocetion of,.0 of service
868.100
D
0
0
0
a
0
0
0
Flee
Public Fire
22 Units
0
593
4,151
0
0
411,567
0
0
23 Allocation of costs of service
2834,300
0
23,900
0
0
0
2.114,000
0
0
Private Fire
24 Units
0
0
0
0
3.882
18.982
0
0
25 All"Bo" of costs 9f service
1,020.900
0
0
0
0
17,700
861700
0
0
nw¢! Iane
26 Units
0
0
0
0
0
0
0
364,038
27 Allocation of'osts of service
894,200
0
0
0
0
0
0
0
894200
28 lORAl CDS350F $90BCE
$ 36,901.20D
$ 10,714,4D0 $
649,000 $
0 $
IpI3,700 $
674,500 $
3,022,600 $
4,197,300 $
894,200
R2023-127 Page 41 of 59
:mid
Op!
MY.m"
mszgc=
M6
Ma.D"
MB MOY NANNMUMMi7iSii1
per
kgal
kg.]/Day
kgal/Day
kal
k8al
kgal/Day
kgal/Day
kgal
legal
kgal
29
cost Per Unft
$
2.18 $
Z5224
$ 13168 $
0.09 $
291 $
149.19
$ 149.93 5
123 $
553 5
294
k81de CRY
Single Fami ly Residential
W
Unifs
1.683,005
5,336
5.787
1,683,005
0
0
0
0
0
0
31
Allocation of cosh of service
15,632,700
3671,300
1,345,900
762,000
147,200
0
0
0
0
0
0
Mufti Family Residential
32
Units
532.143
2.381
2,862
532.143
0
0
0
0
0
0
33
Alloatmn of costs of service
4,471,600
1.160.800
600.600
376.800
W.500
0
0
0
0
0
0
commercial
34
Unfs
640.761
31088
2,711
640.741
0
0
0
0
0
0
35
Alloeation of costs of service
S.W5,800
1,3977W
7817D0
357,000
56,000
0
0
0
0
0
0
M,tian
36
Unify
235.534
1,342
591
235.534
0
0
0
0
0
0
37
Al location of costs of service
1.887,100
513.800
338.500
77.8D0
20.600
0
0
0
0
0
0
outd City
Single faml ly ResldenUal
38
Units
0
0
0
0
143,673
858
822
143,673
0
0
39
Al location of costs of service
1,570,"
0
0
0
0
418.100
128,000
123200
176,900
0
0
Multi Femi ly Residential
40
Unifs
0
0
0
0
16,562
201
192
16,562
0
0
41
Al location of costs of smice
219,600
0
0
0
0
48,200
W,000
28.700
20,W0
0
0
commercial
42
Units
0
0
0
0
83,281
1,064
847
83.281
0
0
43
Allocation of costa or service
1,012,5W
0
0
0
0
242.300
158,800
126900
102,500
0
0
Irrigation
44
Units
0
0
0
0
85,"2
1,196
821
85,902
0
0
45
Al location of costs of smice
1,032,900
0
0
0
0
250,"
178,500
123,300
305,700
0
0
R2023-127 Page 42 of 59
M�Mliwlizm
ewe
w D4y
eFe ewrcIsmac2m
ewe
w4a.0ay
64a.Mwr [='9jE�mjG:L-jm
Per
kaal
kal/Day
kal/Oay
kal
kal
k9al/Day
kal/Day
kal
keel
kal
29 ewe per Unit
5
2.18 $
252.24 $
131." $
009 $
291 $
14919 $
m83 $
125 $
5,53 $
2.94
Cawwot
City dP rlcan Canyon
46 Units
0
0
0
0
0
0
0
0
0
32,000
47 Al location of costs dservice
94,300
0
0
0
0
0
0
0
0
0
94,100
City d Calistoee
48 Units
0
0
0
0
0
0
0
0
157,000
0
49 Allocation d costs d service
868,100
0
O
0
0
0
0
0
0
868.300
0
Fire
Public Firc
50 Units
0
593
4,151
0
0
0
0
0
0
0
51 Abortion of Costs of service
2.834.100
0
349,600
546,600
0
0
0
0
0
0
0
Prink Fire
52 units
0
122
8d
0
0
0
0
a
0
0
53 Allxwion Of costs d service
1,020.900
0
30.400
111,100
0
0
0
0
0
0
a
Pwneea Zaee
54 Units
0
0
0
0
0
0
0
0
0
0
55 Allocation of costs of service
894.200
0
0
0
a
0
0
0
0
0
0
56 I Mc05130F5t0t910E
$ 36,901,200 $
6,743,700 $
3,246,lMi $
2,231,300 $
270,Wl $
9mimo $
496,500 $
410,700 $
405,SU0 $
66e,100 $
94,100
R2023-127 Page 43 of 59
4.0 Proposed Water Rate Adjustments
The initial consideration in the derivation of rate schedules for water service is the establishment
of equitable charges to the customers commensurate with the cost of providing that service. While the
cost -of -service allocations to customer classes should not be construed as literal or exact
determinations, they offer a guide to the necessity for, and the extent of, rate adjustments. Practical
considerations sometimes modify rate adjustments by considering additional factors such as the extent
of bill impacts, existing contracts, and historical local policies and practices.
4.1 Existing Rates
The Water Division's existing rates for all customers consist of a fixed bi-monthly service charge.
The single-family residential customers have a three-tier quantity charge based on units of consumption
(1 unit = 1,000 gallons). The multi -family residential, commercial, irrigation, agricultural and contract
customers have uniform quantity charge which varies by Inside City, Outside City, and customer class. In
addition, there is a fixed service charge for fire service connections. Table 2-3 presented earlier in this
report summarized the existing water rates.
4.2 Proposed Water Rates
The costs of service analyses described in preceding sections of this report provide a basis for
the design of water rates.
The water rates for all Inside City and Outside City customers will remain the same in structure
but change in value. The single-family residential rate will keep the fixed bi-monthly service charge based
on meter size plus an inclining three -tiered rate structure for consumption. The inclining tiered rate
structure consist of Tier 1 0-14 units, Tier 215-27 units and Tier 3 over 27 units. Under an inclining tier
rate structure, users pay different commodity rates for different block usages.
The inclining tier rate structure applies solely to single family residential customers as this
customer class represents the class with the highest variability between winter and summer demands
based primarily on additional discretionary use in the summer. The promotion of efficient use of water
has long term benefits to the water system and to the customer classes in avoidance of future capital
costs such as additional in -system tank/reservoir storage and pipe size upgrades required by AWWA
standards to meet peak daily requirements. During summer months the single-family residential water
demand nearly doubles when compared to winter water demand. As a result, it costs more to operate the
water system because the Water Division must maintain higher priced SWP water entitlements to ensure
ample reliable water supply. If the City did not need to accommodate higher water demand users, the
Water Division could sell these higher cost water entitlements and reduce operating costs. Water supply
costs are the main driver of higher costs in Tiers 2 and 3.
In addition to water supply costs, peaking costs are allocated to the higher users because they
determine the capacity required and therefore size of the infrastructure that must be available to always
provide water throughout the year. Aside from the major capital requirements for the infrastructure this
affects operating costs. The high water demands above wintertime averages require two and even all
three treatment plants to run simultaneously, thereby requiring more maintenance costs, staffing and
capital resources. Treatment plant assets including pumps, chemicals, laboratory and testing capabilities,
and associated staffing are required to provide 24/7 operation of the treatment plants to meet maximum
R2023-127 Page 44 of 59
day demand. These high water demands also drive the need for additional system assets including higher
tank storage volumes and the maximum pipeline conveyance capacity. Grouped all together, these
additional operating costs are allocated to the respective proposed three-tier system.
The rates for multi -family residential, commercial, and irrigation customers will remain the same
with a fixed bi-monthly service charge plus uniform consumption rate. Tiered rates are not applied to
these customer classes because, unlike single family residential customers, their consumption habits do
not have strong ties to seasonal variations when the costs to provide service increases. For example,
multi -family residential customers that have separate irrigation services demonstrate indoor use that is
more consistent throughout the year. The City charges higher variability irrigation services at a higher
rate. Commercial users pay a uniform rate because their demands are more dependent on the nature of
their businesses and they generally do not fluctuate tremendously during the summer and winter months
other than their separate irrigation accounts, which pay a higher rate accordingly.
In addition, the contract customers will keep their existing uniform consumption rate structure
and the pumped zone surcharge which will remain in effect as a surcharge on top of the consumption
rate for all customers in zones 4 and 5.
4.2.1 Inside City and Outside City
Within the customer classes, the Water Division separates Inside City and Outside City. The
separation exists because there are different costs associated with providing services to customers
residing Inside City or Outside City boundaries. The different costs vary by function throughout the water
system. For example, the Water Division maintains additional SWP entitlements to meet Outside City
obligations. Based on water demands in the Study period, Outside City customers use nearly 1,400 acre
feet of water. SWP allocations vary annually as a function of water availability within the project. To meet
demands of Outside City customers at 100% reliability, an additional SWP supply of 4,000 acre feet are
maintained. The City incurs these added costs for the benefit to outside customers and therefore, these
costs belong to this customer class.
Additionally, Black & Veatch notes that there are costs that are shared by both types of
customers, but there are allocation factors unique to each. For example, the transmission and distribution
costs for Outside City customers are greater because the locations are more widely spread out, requiring
greater linear footage per service than Inside City customers who are located in relatively dense and
closer geographic proximity; therefore, the costs are separated based on the miles of mains dedicated to
serving Inside City and mains serving only Outside City and would not otherwise exist to serve Inside City
customers.
4.2.2 Fixed Service Charge
The City incurs fixed cost elements, such as operating and capital components associated with
connectivity to the SWP, meter maintenance and services, meter reading, bill issuance, and maintenance
and capacity costs associated with fire protection to City water customers regardless of the level of
water consumed. Therefore, the fixed bi-monthly service charge recovers portions of these fixed cost
elements. SWP capital components are charged according to the amount of total water entitlements held
by the City (21,900 acre feet.) The City maintains SWP entitlements at sufficient levels to insure reliability
of supplies during years of low delivery allocations from the State Department of Water Resources. The
R2023-127 Page 45 of 59
City incurs these costs to ensure reliability of the water system to the benefit of customers connected to
the system, even if there is no water consumption.
The fixed service charge increases with increasing meter size. Black & Veatch used meter ratios
based on maximum operating capacities by meter size as shown in AWWA M1, Table B-1, which
recognizes that as meter size increases, so does the capacity. For example, customers with a 4' meter
have an expectation of being able to use more water (at a higher flow capacity) than customers are with a
374' meter. Consequently, the City's water system must maintain assets sized accordingly and capable of
providing customers the level of service expected from their meter connection when the tap turns on.
Table 4-1 demonstrates the cost elements incorporated into the fixed service charge for FY 2024. Table
4-2 shows the five-year fixed service charge rate schedule, based on unit costs in future years.
Table 4-1 Costs within the Fixed Charge for FY 2024
uerte. UWPII
mete. s 54a
Fire C4padry
Meter
tWA Costs
Unit Cast
tlNt Cast
Ratio
1/4"
$14.85
$3.62
$10.02
1.67
1"
14.85
3.62
10-02
1.67
1-1/2"
14.85
3.62
10.02
333
2"
14.85
3.62
10.02
5.33
3"
14.85
3.62
10,02
10.67
4"
14.85
3.62
1002
1667
6"
14.85
3.62
10.02
33.33
3"
14.85
362
1002
60.00
Table 4-2 Proposed Fixed Service Charge
AdfustM
A4urted
IrW Cast
Unit Curt
Bi Ratio
Unit Cost
$/bbmo
$/b,-mo
$/b,-ma
$47.48
$4.56
1.00
$4,56
$5204
47.48
4,56
I.00
4.56
5204
9497
4.56
1.00
4.56
9953
151.95
4.56
1.00
4.56
156.51
303.89
4.56
1.00
4.56
30845
47483
4,56
100
4.56
47939
949.66
4.56
100
4.56
954.22
130 39
4.56
100
456
1.71395
2024
2025
2026
2027
2028
(inches)
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
3/4"
52.04
58.28
63.53
69.25
74.79
1"
52.04
58.28
63.53
69.25
74.79
1-1/2"
99.53
111.47
121.51
132.44
143.04
2"
15651
175.29
191-07
208.26
224.92
3"
308.45
345.46
376.56
410.45
443.28
4"
479.39
536.92
585.24
637.91
688.94
6"
954.22
1,068.73
1,164.91
1,269.75
1,371-33
8"
1,713.95
1,919.62
2,092.39
2,280.71
2,463.16
4.2.3 Fire Service
Like the meter service charge, the fire service charge includes costs of issuing bills, maintenance
and capacity costs associated with private fire protection costs. The fire service charge increases with
increasing pipeline diameter size. The Water Division provides fire service to about 660 private fire
accounts. These customers have a water line connection to the water system that is specifically for fire
protection. To meet fire protection demands, the Water Division must design, operate, and maintain a
water system that can meet peak fire demand requirements. The Water Division charges private accounts
a fire service charge based on the diameter of the line that connects their fire protection system to the
water system. These charges are for services specifically benefiting those properties and not a service
available to the public. Table 4-3 demonstrates the costs incorporated into the fire service charge and
Table 4-4 shows the five-year meter charge rate schedule based on unit costs in future years.
R2023-127 Page 46 of 59
Table 4-3 Costs within the Fire Service Charge for FY 2024
Adjusted
Unit Cost
Bill Ratio
Cost
Unit Cost
Unit
$/bi-mo
1-1/2"
$4.56
1.00
$4.56
2"
456
1.00
4.56
2-1/2"
4.56
1.00
4.56
3"
4.56
1.00
4.56
4"
4.56
1.00
4.56
6"
4.56
1.00
4.56
8"
456
1.00
4.56
10"
4.56
1,00
4.56
12"
4.56
1.00
4.56
Table 4-4 Proposed Fire Service Charge
Ai
Unit Cost Meier Ratio Unit Cost
$/bi-mo
$/bi-mo
$9.83
3.33
$29.43
$3399
8-83
5.33
_ 47-08
51.64
B.83
8.00
70-65
7521
8.83
10.67
9417
98.73
8.93
16.67
14714
15170
8.93
33.33
29427
298.83
9.93
60.00
529.69
53425
8.83
80-00
70615
710-81
8.83
112.50
99316
99772
3M
2024
2025
2026
2027
2028
(inches)
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
1-1/2"
33-99
38.07
41.49
45.23
_ 48.85
2"
51.64
57.84
63.04
68.72
74.21
2-1/2"
75.21
84.24
91.82
100.08
108-09
3"
98.73
110.58
120.53
131.38
141-99
4"
151.70
169.90
185.20
201.86
218.01
6"
298.93
334-69
364.81
397.64
429.46
8"
534.25
593.36
652.21
710.91
767.78
10"
710.81
796.11
867.76
945.85
1,021.52
12"
997.72
1,117.45
1,218.02
1,327.64
1,433.85
4.2.4 Retail Quantity Charge
4.2.4.1 Base Costs
The base costs represent costs associated with water supply costs and delivery costs. Water
supply costs are the costs associated with obtaining and treating water. The Water Division obtains water
from the SWP via the North Bay Aqueduct and surface water at Lake Hennessey and Milliken Reservoir.
The City treats the SWP water at the Barwick Jamieson treatment plant, while site -specific treatment
plants handle the Hennessey and Milliken waters. Delivery costs are the operating and capital costs
associated with delivering water through the transmission and distribution system to all customers at
base use (average daily demand) conditions.
Water Supply Unit Costs
The determination of unit water supply costs associated with each customer class is a function
of the cost and amount of water allocated from the three water sources. Black & Veatch used the
following 4 -steps to derive the water supply unit costs:
■ Step 1: Determine the weighted average unit costs for produced water. Produced water represents
the amount of treated potable water produced by the Water Division. It incorporates both water sold
and unaccounted water. Unaccounted water represents water used to systematically flush and clean
the system, fight fires on structures located on properties that are served City water, and water loss
R2023-127 Page 47 of 59
through the system that occurs as a part of routine operations such as main breaks and associated
flushing of the lines for water quality purposes after each repair.
Table 4-5 identifies the amount of water produced by water supply source, the associated costs and
the unit costs. The production allocation is based on the average of actual water produced at the
three facilities between FY 2019 and FY 2021. The costs represent actual cost per gallon for each
source of water provided to customers. The water supply and treatment costs vary as shown
according to chemical usage and energy consumed to process water at each of our three treatment
plants. For example, in FY2024, total costs for SWP water, chemicals and electricity are $10,151,300
to produce 2,492,377 thousand gallons of water resulting in a unit cost of $4.07. Due to SWP supply
costs and energy consumption associated with ozone treatment, the cost of treated water from the
Barwick Jamieson Treatment Plant is higher than the limited processes and water costs from our
other two local sources.
Table 4-5 Water Supply Unit Costs
% kgaI $/kgaI
Water Supply Sources
garwicklamieson 60% 2,492,377 $ 4.07
Hennessy 38% 1,578,505 0.54
Milliken 2% 83,079 0.82
Subtotal 100% 4,153,961
Weighted Average Costs $ 2.66
■ Step 2: Determine the amount of water sold to each customer class. Table 4-6 identifies the amount
of water sold by customer class based on customer information system records. Note that the
difference between water sold and water produced is unaccounted water.
Table 4-6 Water Sold by Customer Class
r • • • SFR MFR Commercial Irrigation
Total Usage 1,826,678 548,705 724,022 321,436 3,420,941
%of Usage 53.4% 16.0% 21.2% 9.4% 100.0%
■ Step 3: Allocate the water supply sources to each customer class and determine the weighted
average costs by customer class. Table 4-7 identifies the amount of water sold by water source and
the associated unit costs. Each year, all three treatment plants treat water supplies, taking into
consideration multiple factors including water supply availability, water quality, operational
restrictions because of emergency repairs, or planned capital improvement projects. Based on the
different costs associated with inside and outside city customers, the Water Division allocates water
supply as follows:
R2023-127 Page 48 of 59
• Hennessy water supply is allocated to inside city single family, multi -family, and commercial
customers proportionate to their water demand.
• Milliken water supply is allocated to Inside City and Outside City single family, multi -family,
and commercial customers proportionate to their water demand.
Barwick Jamieson water supply makes up the remaining water demand for single family,
multi -family, and commercial as well as all irrigation and agricultural. Irrigation and
agricultural uses are deemed discretionary use under the State's Water Action Plan and in
state policies such as SB7x-7 that are shaping municipal water use in California; therefore,
they are assigned to Barwick Jamieson.
Table 4-7 Water Supply Unit Costs by Customer Class
•
®
SFR
MFR
Commercial
Irrigation
kgal
kgaI
kgaI
kgal
water Supply Sources
Jamieson Canyon
$
4.07
879,812
278,221
334,899
235,534
Milliken
0.82
37,150
11,747
14,142
0
Hennessy
0.54
766,043
242,175
291,702
0
Subtotal
1.683,005
532,143
640,741
235,534
Weighted Average Costs
$
2.66
$ 2.39 $
2.39
$ 2.39
$ 4.07
r -
SFR
MFR Commercial
Irrigation
. .
kgal
kgal
legal
kgal
kgal
Water Supply Sources
Jamieson Canyon
140,499
16,199
81,440
95,902
2,052,505
Milliken
3,175
363
1,840
0
68.417
Hennessy
0
0
0
0
1,299.920
Subtotal
143,673
16,562
83,281
85,902
3,420,841
Weighted Average Costs
$
4.00
$ 4.00 $
4.00
$ 4.07
• Step 4: For single-family residential, allocate the water supply sources to each tier and determine the
weighted average unit costs by tier. Table 4-8 identify the amount of water sold by water source and
the associated unit costs.
R2023-127 Page 49 of 59
Table 4-8 SFR Water Supply Unit Costs by Tier
kgal
Average Supply Costs by Water Source ($/kgal)
Total Water Available to Inside City SFR by Source
Inside City
Single Family Residential
Tier 1: 0-14 14 1,137,010
Tier 2: 15-27 27 337,608
Tiers:>27 >29 �208,398
Subtotal 1,693,005
kgal
kgal legal legal
$ 054 5 0.82 $ 4.07
766,043 37,250 879,812
Average Supply Costs by Water Source ($/kgal)
$
Total Water Available to Outside City SFR by Source
Outside City
Single Family Residential
Tier 1: 0-14 14
60.118
Tier 2: 15-27 27
29.423
Tier 3: _>27 >28
54,132
Subtotal
143,673
kgaI $Jkgal
766,043
37,150
333,817
1,137,010 $ 1.59
0
0
537,608
337,608 $ 4.07
O
0
208_398 _
208.388 $ 4.07
766,043
37,150
879,812
1,683,005
M mmm
kgaI
kgal
kgal
kgal $/kgal
0.54 5
0.82 $
4D7
0
3.175
140,499
0
3,175
56,943
60,118 5 3.90
0
0
29,423
29,423 $ 4.07
0
0
54,132
_54,132 $ _ 4.07
O
3,175
140,499
143,673
Delivery Costs
Next, to determine water delivery unit costs, Black & Veatch subtracted the water supply costs
common to all base costs determined in Table 3-5. The base costs represent the combined supply and
delivery costs under average daily demand conditions. In addition, Table 4-9 also identifies the delivery
unit costs specific to Inside City.
Table 4-9 Water Delivery Unit Costs
7
Inside City & Outside City
Base Costs $10,714,400 (Derived in Table 3-5, Line 4)
Less Water Supply Cost (9,116,290) (Derived in Table 4-7)
Subtotal $1,598,110
Water Supply (kgal) 3,420,841 (Derived in Table 4-5)
Unit Costs $0.47
Inside City $ 2.18 (Derived in Table 3-5, Line 15)
Outride City $ 2.91 (Derived in Table 3-5, Line 15)
4.2.4.2 Extra Capacity Costs
The extra capacity represents costs associated with peak demands in excess of base demand.
Total extra capacity costs are comprised of maximum day and maximum hour demands. Peaking factors
derived from customer consumption data serves as the basis for distributing the peaking costs derived in
Table 3-6 to each customer class. Table 4-10 identified the peaking unit costs common to all by tier and
R2023-127 Page 50 of 59
customer class. Table 4-11 and Table 4-12 identify the peaking unit costs for Inside City and Outside City
customers.
Table 4-10 Common Water Peaking Unit Costs
$
kgaI
$/kgal
bride City & Outside City
Single Family Residential
Tier 1
132,400
1,197.128
5 0.11
Tier 2
50,900
367,031
0.14
Tier
66AW
262,519
0.25
Multi Family Residential
104,300
548,705
$ 0.19
Commercial
168,200
724,022
0.23
Irrigation
102,500
321,436
032
Table 4-11 Inside City Water Peaking Unit Costs
$
kgaI
$/kgaI
Inside City
Single Family Residential
Tier 1
1,273,200
1,137,010 $
1.12
Tier 2
355,800
337,608
1.05
Tier 3
479,000
208,388
2.30
Multi Family Residential
977,400
532,143 $
1.84
Commercial
1,138,700
640,741
1.78
Irrigation
416.300
235,534
1.77
Table 4-12 Outside City
Water Peaking Unit Costs
5
kgaI
$/kgal
Outside City
Single Family Residential
Tier 1
40,700
60,118 $
0.68
Tier 2
68,900
29,423
2.34
Tier 3
141,600
54,132
2.62
Multi Family Residential
58,700
16,562 $
3.54
Commercial
295,700
83.281
3-43
Irrigation
301,600
85,902
3.51
4.2.4.3 Conservation Costs
The conservation costs represent costs incurred to promote, encourage, and enforce water
conservation. These costs represent water use efficiency programs and efforts. The City offers these
programs to both Inside City and Outside City residential and commercial customers, but efforts target
R2023-127 Page 51 of 59
users with high disci€tionary use. Black & Veatch allocated conservation costs to tiers 2 and 3, where
water consumption is primarily discretionary. The allocation of conservation costs to upper tiers provides
a strong price signal for conservation, consistent with Article X Section 2 of the State of California
Constitution, and proportionately allocates such costs to those customers whose greater demand create
the need for conservation and efficiency programs and efforts. Table 4-13 identifies the conservation
costs by tier and customer class.
Table 4-13 Water Conservation Unit Costs
$ kgal
Inside City
Single Family Residential
147,200
Tier 1
1,137.010
Tier 2
337.608
Tier 3
208,388
Multi Family Residential
Commercial _
Irrigation
Outside City
Single Family Residential
Tier 1
Tier 2
Tier 3
kgaI % $ 5/kgaI
0
67.522
156.291
0.0% 0 $ -
302% _4_4,4_09 0.13
69.8% 102,791 0.49
rr
.rr 640,741
20,600 235,534
onservation Annual Weighted Allo Percent Resp Alloc i
Costs Usage Factor Cons Costs Cos
176,900
O
0
0
$0.09
0.09
0.09
$/kgal
60,118 0 0.0% 0 $ -
29,423 14,712 26.6% 47,052 1,60
54,132 40,599 73.4% 129,848 240
Multi Family Residential 20,400 16,562 $1.23
Commercial 102,500 83,281 1.23
Irrigation 105,700 85,902 1.23
4.2.4.4 Summary of Base, Extra -Capacity, and Conservation Rates
The quantity charge includes costs associated with base, extra capacity, and conservation and
are shown in Table 4-14, Table 4-15, and Table 4-16 for each customer class.
R2023-127 Page 52 of 59
Table 4-14 Common Water Unit Costs
buiide City & Outside Gty
Single Family Residential
Tier 1
Tier 2
Tier 3
$/mil $/kpI
$0.47 $
0.47
0.47
Multi Family Residential $2.83
$0.47 $
Commercial
2.83
0.47
Irrigation
2.83
0.47
Table 4-15
Inside City Water Unit Costs
$/legal
0.11 $
0.14
025
0.19 $
0.23
0.32
$/kgal
0.58
0.61
0.72
3.49
3.53
362
$/legal
$/kgal
$/kgal
$/kga1
$/kgai
laside City
Single Family Residential
Tier 1 $ 0.58 $ 1.59 $
2.18
$ _ 1.12
$ - $
546
Tier 2 0.61 4.07
2.18
1.05
0.13
8.05
Tier 3 0.72 4.07
2.18
2.30
0.49
9.77
Multi Family Residential $ 3.49 $
2.18
$ 1.84
$ 0.09 $
7.59
Commercial 353
2.18
1.78
0.09
7.59
Irrigation 3.62
2.18
1.77
0.09
7.65
Table 4-16 Outside City Water Unit Costs
$/kgaI
$/kgal
$/kgal $/kgaI
Outside City
Single Family Residential
Tier 1 $ 0.58 $ 3.90 $
2.91 5
0.68
5 - $
8.07
_ Tier 2 0.61 4.07
- --
2.91
2.34
1.60
1153
Tier 3 0.72 4.07
2.91
2.62
2.40
_
12.72
Multi Family Residential $ 3.49 $
2.91 $
3.54
$ 1.23 $
11-17
Commercial_ _ _ _ 3.53
2.91
3.43
123
11.10
Irrigation 3.62
2.91
3.51
1.23
11.27
4.2.4.5 Summary of Retail Consumption Rates
Table 4-17 shows the results in a five-year quantity charge
rate schedule for Inside City and
Outside City customers.
R2023-127 Page 53 of 59
Table 4-17 Proposed Quantity Charge
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/legal
$/kgaI
$/kgal
Single Family Residential
Tier 1 (0-14)
5.46
6.12
6-67
727
_ 7.85
Tier 2 (15-27)
8.05
9.01
9.82
_10.71 _ _
_ 1156
Tier 3 (>27)
9.77
10.94
11.92
13.00
14.04
Multi Family Residential
7.59
8.51
9.27
_
20.11
1091
Commercial
7.58
8.49
9.25
10.09
10.89
Irrigation
7.65
9-57
9.34
10.19
11.00
Quantity Charge
- Outside City
Customer
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgal
$/kgaI
$/kgal
Single Family Residential
Tier 1 (O-14)
8.07
9.03
9.85
10.73
11.59
Tier 2 (15-27)
11,53
12.91
14.08
15.34
16.57
Tier 3 (>27)
12.72
24.25
1553
16.92
18.28
Multi Family Residential
11.17
12.52
13.64
14.87
16.06
Commercial
11.10
12.44
13.55
14.77
15.96
Irrigation
11.27
12.62
13.76
15.00
1620
4.2.5 Pump Zone Charge
The pump zone costs represent costs associated with electricity and pumping costs. The City
service area is separated into five pressure zone. The first three zones are served from water directly
pumped from all the water sources into the water system. Zones 4 and 5 required additional pumping
stations to elevate water to service the customers at higher elevations. Due to the cost difference for
providing service between zones 1- 3, and 4- 5, the Water Division enacted a pumped zone surcharge for
customers within zones 4 and 5. These operational and facilities costs associated with zones 4 and 5 are
standalone costs for which only those customers benefit. Therefore, the are additional costs incurred
which are specific to these customers which are recovered through the surcharge.
Table 4-18 Pump Zone Unit Costs
9
Pump Zone Costs
Operating
$872,100 (Derived in Table 3.5, Line 1)
Capital _
22,100 (Derived in Table 3-S, Line 2,3)
Subtotal
$894,200
Water Supply (kgal)
364,039 (Derived in Table 3-5, Line 9)
Unit Costs
$2.46
R2023-127 Page 54 of 59
Table 4-19 Proposed Pump Zone Charges
2024 2025 2026 2027 2028
$AgaI $/legal $/legal $/legal $/legal
Pump Charge
Zone 4 and 5 2.46 2.75 3.00 3.27 353
4.2.6 Contract Quantity Charge
4.2.6.1 Treat & Wheel Costs
The treat & wheel costs represent costs associated with treatment and delivery costs for water
delivered to the cities of Calistoga and American Canyon. The cities of Calistoga and American Canyon
obtain water from the SWP via the North Bay Aqueduct. Calistoga does not have treatment capabilities to
treat SWP water, therefore entered into agreement in 1998 with the City for treatment and delivery of their
water entitlements. American Canyon has the capability to treat a portion of the SWP water but entered
into agreement in 1998 with the City to treat the remaining portion of their SWP entitlement.
4.2.6.2 Treat Only Costs
The treat only costs represent costs associated with treatment only costs for City of American
Canyon. The City of American Canyon has a treatment facility adjacent to Barwick Jamieson which treats
a portion of their SWP entitlements. Unfortunately, American Canyon cannot process the full amount and
therefore relies on the City for treatment. American Canyon is in the planning stages of expanding their
treated water clear well to allow the City to transfer treated water directly into their clear well and thus
eliminated the transporting costs to American Canyon.
Table 4-20 Treat & Wheel and Treat Only Unit Costs
Contract Carts
Operating
$775,500
$81,700
(Derived in Table 3-5, Line 12)
Capital
92,600
12,400
(Derived in Table 3-5, Line 13,14)
Subtotal
$868,100
$94,100
Water Supply (kgal)
157,000
32,000
(Derived in Table 3-5, Line 18)
Unit Costs
$5.53
$2.94
Table 4-21 Proposed Treat & Wheel and Treat Only Charges
2024 2025 2026 2027 2028
$/kgal $/legal $/legal $/kgal $/legal
Contract
Treat & Wheel 5.53 6.19 675 7.36 Z95
Treat Only 2.94 3.29 3.59 3,91 4.23
R2023-127 Page 55 of 59
5.0 Summary of Proposed Rates and Typical Monthly Costs
5.1 Proposed Rate Schedule
Table 5-1 Proposed Rate Schedule
-
2024
2025
2026
2027
2028
(inches)
$/bi-monthly
$/bi-monthly
$/bi-monthly
5/bi-monthly
5/bi-monthly
3/4"
52.04
58.28
63.53
69.25
74.79
1"
52.04
58.28
63.53
69.25
74.79
1-1/2"
99.53
111.47
121-51
132.44
143.04
2"
156.51
175.29
191.07
208.26
224.92
3"
308.45
345.46
376.56
410.45
443.28
4"
479.39
536.92
585.24
637.91
688.94
6"
954.22
1,068-73
1,164.91
1,26915
1,371.33
8"
1,713.95
1,919.62
2.092.39
2.290-71
2,463,16
Quantity
Charge - Inside
City
Customer2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgal
$/kgal
$/kgal
Single Family Residential
Tier 1 (0-14)
5.46
612
6.67
7,27
7.85
Tier 2 (15-27)
8.05
SID1
9.92
10.71
11-56
Tier 3 (>27)
9.77
10.94
11,92
13.00
14.04
Multi Family Residential
7.59
8.51
917
1011
10.91
Commercial
7.58
8.49
915
10.08
10.89
Irrigation
7.65
8.57
9.34
10.19
11.00
Charge - Outside
City
CustomerQuantity
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgal
$/kgal
$/kgal
Single Family Residential
Tier 1 (0-14)
8.07
9.03
9.85
10.73
11.59
Tier 2 (15-27)
11.53
12.91
14.08
15.34
16.57
Tier 3 (>27)
12.72
14.25
15.53
16.92
18.28
Multi Family Residential
11.17
12.52
13.64
14.87
16.06
Commercial
11.10
12.44
13.55
14.77
15.96
Irrigation
1117
12.62
1176
15.00
16.20
Quantity
Charge - Pumped
Zone
Customer
2024
2025
2026
2027
2028
$/kgal
$/kgal
5/kgal
$/kgal
$/kgal
Pump Charge
Zone 4 and 5
2.46
2.75
3.00
317
3.53
R2023-127 Page 56 of 59
-
2024
2025
2026
2027
2028
$/kgal
$/kgal
$/kgal
$/kgaI
$/legal
Contract
Treat &Wheel
5.53
6.19
6.75
736
7.95
Treat Only
294
3.29
3.59
3.91
423
Size of MeterMMM2024
Fire
Se harge
2025
2026
2027
2028
(inches)
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
$/bi-monthly
1-1/2"
_ 33.99
38.07
41.49
45-23
48.85
2"
51.64
57.94
63-04
68.72
74.21
2-1/2"
75.21
84.24
91.82
100-08
10&09
3" _
98.73
110.58
120.53
131.38
141.99
4"
151.70
169.90
185.20
2D1.86
218.01
6"
298.83
334.69
364.81
397.64
429.46
8"
534.25
598.36
652.21
710.91
767.78
10"
710.81
796.11
867.76
945.85
1,021.52
12"
99732
1,117.45
1,218.02
1,327.64
1,433.85
5.2 Typical Monthly Costs under Proposed Charges
Table 5-2 presents a comparison of typical monthly costs under existing rates and the proposed
schedule of water user rates derived in this Study. The costs are shown monthly, although we recognize
that customers receive bi-monthly bills (so double the costs in Table 5-2 to get the corresponding bi-
monthly water bill amount), because most people think in terms of monthly expenses.
Table 5-2 Typical Monthly Water Costs
Single Family Residential
3/4" _
3
$52.29
$68.43
$6.14
3/4"
10
$94.28
$106.69
$12.41
3/4"
30
$217.62
$254.40
$36.78
Multi Family Residential _
_ _. _ _ 1"
25
$211.83
$241.91
$30.08
100
$701.58
$811.53
$109.95
2"
50
$473.74
$53626
$62.52
2"
150
$1,126.74
$1,295.75
$169.01
Commercial
1.125
$214.58
$241.48
$26.90
1"
100
$712.58
$809-80
$97.22
2"
50
$479.24
$535.39
$56.15
2"
-1.-
150
-25
$1,143.24
$1,293.15
$149.91
Irrigation
$219.58
$243.40
$23.82
1"
100
$732.58
$817.49
$84.91
2"
So
$48924
$539.23
$49.99
2"
150
$1,17324
$1,304-68
$131.44
*Although water bills are issued bimonthly, comparisons to other bills is shown
on a typical monthly basis.
R2023-127 Page 57 of 59
Single Family Residentia l
3/4'
3
$6917
$76.24
$8.07
_ 3/4' _
10
$113.98
$132.70
$18-82
3/4'
30
$292.25
$341.48
$4923
Multi Family Residential
1'
25
$305.08
$331.40
$2632
1"
100
$1,074.58
$1.169.50
$9492
2"
50
$660.24
$71524
$55.00
2"
150
$1,696.24
$1,832.69
$146,45
Commercial
1'
25
$308.58
$329-62
$21.D4
_ 1"
100
$1,088.58
$1,16235
$73.77
2'
50
$667.24
$711.66
$44.42
2"
150
$1,707.24
$1,821.97
$114.73
Irrigation
_ 1"_
25
$316.08
$333.79
$1T71
1"
100
$1,118.58
$1,179.05
$60-47
__ _ 2"
so
$68224
$720.01
$37.77
2"
150
$1,752.24
$1,947.02
$94.78
' Although water bills are issued bimonthly, comparisons to other bills is shown
on a typical monthly basis.
5.3 Summary of Cost -of -Service Study
This cost -of -service study proposes adjustments to the City of Napa's water rates. A summary of
actions and projections are as follows:
■ Maintain the fixed service charge to reflect the nature of fixed costs associated with providing 24/7
water service and investments in infrastructure through the capital improvement program.
■ Project water sales to increase slightly but continue to meet targets set forth by SB 606/AB 1668.
■ Meet debt service ratio of 1.20 for existing debt and 1.25 for proposed debt.
■ Fund budgeted and projected obligations through FY2028 for investments in operations and
maintenance.
■ Increase annual level of pay-as-you-go investments in Capital Improvements by increasing the annual
transfer to CIP from $5.3M in FY2024to $8.OM in FY2028.
■ Issue debt financing for $100M in FY2027 to invest in Hennessey Water Treatment Plant
improvements in FY2028-FY2030.
■ Operating Reserve. Maintain the maximum level of 90 days operating costs less transfers to CIP.
■ Emergency Reserves. Maintain the minimum level of 10% of operating costs less transfers to CIP.
■ Rate Stabilization Reserve. Drawdown $240k of the existing $3.8M Rate Stabilization Fund in FY2024
to address debt service coverage requirement. Maintain minimum level of 10% of operating costs
less transfers to CIP over the remaining study period.
■ Water Supply Reserve. Start with $1.7M in Water Supply Reserve and continue to add $200k per year
over the 5-year study period.
■ Maintain a below average cost of delivering potable drinking water amongst 20 San Francisco Bay
Area urban water providers. Figure 5 shows a comparison of the cost of 8 units of water per month
for single family residential customers in the Bay Area. This level of monthly water usage is typical for
an average home in the summer. Based on billing data for City of Napa customers, 77% of all bills
R2023-127 Page 58 of 59
sent to customers are for 8 units of water per month or less which means 71% of all bills will be $72
or less in 2024 under the proposed rates.
Figure 5-1 Comparison of Costs for Customers in the Bay Area
$175
Typical Monthly Water Costs (8,000 gallons) for Single -Family Residential
V50
$125
Quantity Charge
■ Fixed Service Charge
$100 _Bay Area Ayeraae=E96 ________________
_______________________-
$50
'72
�
a■aj
�1
$25
\\\� C\ 0e Fe \D et- UC �C el`9 M\e 0\O JO eC \\\0 e�0 ; JG Ce \ qT
>+ Fo Po \J . T� a 40 �,o of o\ Vo 0\� \e e\Qe o
..fO e�C$ p\o
eye
Qe0
.Qo Q`oQe
\
`\.Ce
o
ero e .0e C\fie .4 F0 4! pJC y+eta Qe\e �eC y \''e ape\ a\\9
? ea o c J Q 4
�oQ
deQo ,o\\e♦
Pee .G PFe�\oo yoc �orc
' Total cost is hiqher: a portion of capital costs are paid throuqh property fazes.
R2023-127 Page 59 of 59
PROPOSED RATE INCREASE
TO WATER SERVICE CHARGESff 07
PUBLIC HEARING - NOVEMBER 7, 2023 AT 6:30PM, WATER
CITY HALL, 955 SCHOOL STREET, NAPA, CA 94559 1922-2022
WATER RATES PROPOSED TO INVEST IN SYSTEM RELIABILITY
The City's water system is a network of treatment plants, pipes, tanks, pump stations,
fire hydrants, meters, and other facilities that are designed, operated, maintained,
repaired, and replaced for a single purpose - to provide you safe, reliable, and life
sustaining water every second of every day.
Water System Operations include labor, materials, and
equipment necessary to operate and maintain the water
system and purchase of State Water Project waterwhich
supplies almost 2/3 of the water used by the community.
Annual inflation and the size and age of the water system
are primary drivers of these costs.
Infrastructure Investments include planned capital improvements and debt service on past
capital improvements. A major focus of these investments is on aging infrastructure including
major transmission lines, neighborhood distribution lines, and the Hennessey Treatment Plant
and Reservoir. Failure to make these investments leads to system failures, increased operating
costs, and increased costs of future improvements.
Water rates have not increased over the past two years. Rates are the primary funding source for the water system - NO
taxes are used. Current rates do not bring in sufficient revenue to cover the cost of running a stable and reliable water system.
The proposed rates are necessary to cover the costs of investing in infrastructure, purchasing water supply, and
Napa rates would remain among lowest
Napa's water rates remain some of the lowest in the area, even after the proposed increases. The chart below shows a
typical summer water bill for 8,000 gallons per month. With the proposed rates, 77% of all water bills for Napa customers
will be $72 or less.
$175
$150
$125
$100
$75
$50
$25
$0
Typical Monthly Water Costs (8,000 gallons) for Single -Family Residential
■ Fixed Service Charge
® Quantity Charge
Bay -Area Average = $96 a - a - 2 -1-
---------------------------------------
$72
oc-k ca <<aGoS0 oc occ�•eaF'd�OPa\c�°°o
4J0 q��e�ei�cca
cy
a°,CO23-b1a27
�•�`
Page 1 of 8
What are water rates used for?
Water System Operations are projected to cost '
$44 million in 2028, which include an $8 million Ensuring the reliability of your
investment in Capital Improvements (CIP). Based t- drinking water system from
on these costs, a dollar of revenue is allocated "Source to Tap
as shown. 68 employees operate, maintain, and
manage a very complex system to provide you r :�
safe water that is available 24/7. As a comparison,
the City's Fire Department has 74 employees to I ce leis I rabw I oeu
Sewe
deliver services to keep you safe every day. $004 $024 $006
Infrastructure Investments use a combination Water Supply cperaho GP
$0.17 $0.34 $0.15
of revenue from rates, capacity fees from new
development, and debt service to complete capital improvements on the water system. The graph below
identifies the level of necessary investments in various areas of the water system. A primary focus is on water
quality, in particular improvements to the Lake Hennesey Treatment Plant in 2028-2030. This plant treats
our local supplies and was
constructed in 1981. $80-$100 Wa Opttz"mpmvem by Type
million is needed to refurbish and
upgrade the plant. Revenue bonds
will be sold in 2027 to generate
the necessary funds, resulting in 94®®
approximately $7 million per year in
debt service. A similar approach was
used for the $45 million upgrades
to the Barwick Jamieson Treatment
Plant in2010. .w,�m,.,,.:,o. w.<.,e,,:�:,o .w.,..a..,ry.s.w....,..wo'o. .w„�,..-..... . w.,,A..o_ryo,u...,
FROM SOURCE...
• 5,000 acres in two watersheds
• 3 water supplies
• Future water supply planning
Treatment
• 3 treatment plants
• Instrument and control systems
• 350 lab samples per day
• Regulatory compliance
• 2417 Operation
Transmission
• 14 storage tanks
• 9 pump stations
• 14 pressure regulator stations
Distribution
• 360 miles of pipe
• 2,900 Fire Hydrants
• 9,700 Valves
• 25,500 meters and service lines
• 12,000 meters read per month
• 1,000 customer visits per month
• 70-110 leak repairs per year
• 24/7 Emergency Response
... TO TAP
• Customer service
• Water conservation
• Development review
• Capital improvement design
r` T -
a
2 R2023-127
R2023-
Page 2 of 8
NOTICE: PROPOSED RATE INCREASE TO WATER SERVICE CHARGES
A Public Hearing on adopting the proposed rates will be held at City Hall, 955 School
Street, on November 7, 2023, at 6:30 pm. City Council will receive verbal or written com-
&M:. ments and/or protests regarding water rates at the hearing. Per the California Constitu-
tion (Prop 218), if written protests representing a majority of the parcels subject to the pro-
posed water rates are received prior to the close of the hearing, the City may not implement
the proposed water rates. Protest form with instructions is included with this mailer.
Bimonthly Fixed Service Charge
ALL CUSTOMER CLASSES
Inside/Outside City
Current
Service Size
Proposed
1/1/2024
10/1/2024
10/1/2025
10/1/2026
10/1/2027
$48.58
314-inch
$52.04
$58.28
$63.53
$69.25
$74.79
$48.58
1-inch
$52.04
$58.28
$63.53
$69.25
$74.79
$93.43
11/2-inch
$99.53
$111.47
$121.51
$132.44
$143.04
$147.24
2-Inch
$156.51
$175.29
$191.07
$208.26
$224.92
$290.75
3-inch
1 $308.45
$345.46
$376.56
$410.45
$443.28
$452.19
4-inch
$479.39
$536.92
$585.24
$637.91
1 $688.94
$900.65
6-inch
$954.22
$1,068.73
$1,164.91
$1,269.75
$1,371.33
$1,438.79
8-inch
$1,713.95
$1,919.62
$2,092.39
$2,280.71
$2,463.16
Water Quantity Charge
SINGLE-FAMILY RESIDENTIAL: Inside City (In) and Outside City (Out)
$ cost per unit (unit = 1,000 gallons)
Current
Tier
Proposed
1/1/2024
10/11 024
1 10/1/2025
10/1/2026
10/1/2027
In
Out
In
F Out
In
Out
In
Out
In
I Out
In
Out
$4.57
$6.53
0.14 units
$5.46
$8.07
$6.12
$9.03
$6.67
$9.85
$7.27
1 $10.73
1
$T85
1 $11.59
$6.58
$9.58
15-27 units
$8.05
$11.53
$9.01
$12.91
$9.82
$14.08
1$10.71
1 $15.34
$11.56
1$16.57
$8.70
$12.39
28+units
$9.77
$12.72
$10.94
$14.25
$11.92
$15.53
$13.00
$16.92
$14.04
$18.28
MULTI -FAMILY RESIDENTIAL, $ cost per unit (unit = 1,000 gallons)
Current
Location
Proposed
1/1/2024
101112024
10/1/2025 1
10/1/2026
10/1/2027
$6.53
Inside City
$7.59
$8.51
$9.27 1
$10.11
$10.91
$10.26
Outside City
$11.17
$12.52
$13.64 1
$14.87
$16.06
COMMERCIAL/INDUSTRIAL/INSTITUTIONAL, $ cost per unit (unit= 1,000 gallons)
Current
Location
Proposed
1/1/2024
10/1/2024
1011/2025 1
10/1/2026
1 10/1/2027
$6.64
Inside City
$7.58
$8.49
$9.25 1
$10.08
1 $10.89
$10.40
Outside City
$11.10
$12.44
$13.55
$14.77
$15.96
IRRIGATION, $ cost per unit (unit = 1,000 gallons)
Current
Location
Proposed
1/1/2024
1 10/1/2024
1 10/1/2025
10/1/2026
10/1/2027
$6.84
Inside City
$7.65
1 $8.57
1 $9.34
$10.19
$11.00
$10.70
Outside City
$11.27
1 $12.62
1 $13.76
$15.00
$16.20
R2023-127 Page 3 of 8
ELEVATION SURCHARGE for all Pumped Zone Customers
$ cost per unit (unit = 1,000 gallons)
Proposed
Current
1 1l1/2024
1101112024
101112025
1011/2026
101112027
$208
1 $2.46
1 $2,75
$3.00
$3,27
1 $3.53
Fire Services
RATESHARE DISCOUNT
per Bimonthly Water Bill*
CurrenUProposed
$25.00
w Program for low-income single-family residembal customers acsscnrolled
In PG&E CARE program.
Bimonthly Fire Service Charge
Current
Service Size
Proposed
1/1/2024
10/1/2024
10/112025
10/112026
10/112027
$33,75
1112-inch
$33,99
$38.07
$41,49
$45,23
$48.85
$51.76
2-inch
$51.64
$57.84
$63,04
$68.72
$74.21
$75,80
21/2-inch
$75.21
$84.24
$91.82
$100.08
$108.09
$99.79
3-inch
$98.73
$110,58
$120.53
$131.38
$141,89
$153,81
4-inch
1 $151,70
$169.90
$185.20
$201.86
$218.01
$303,89
6-inch
$298,83
$334,69
1 $364.81
1 $397.64
1 $429.46
$483.99
8-inch
$534.25
$598.36
$65Z21
$710,91
$767.78
$694.10
10-inch
$710.81
$796,11
$86T76
$945.85
$1,021.52
$1,294.42
12-inch
$997.72
$1,117.45
$1,218.02
$1,327,64
$1,433.85
Typical Cost for Water Each Month
Under the proposed rates, the monthly cost of water service for single-family residential customers inside
the City is illustrated below. High water users would see the largest dollar increase.
adopted, low water users (over 50% of all bills) would see a small
increase but remain at a very reasonable $48 per month for water
service. Typical summer bills will be in the $72 - $104 range as
irrigation use increases.
NOTE: These calculations are based on monthly charges. Water customers are actually billed every two months.
Ilb
Water Service
$48 - $104
If the proposed rates are
The typical household spends the following on other utilities each month:
0
Electricity/Gas Sewer Recycling
$240 $62 $30 - $59
a�
Cell Phone Cable/Internet
$144 $120 - $200
R2023-127 Page 4 of 8
^ STAPLE/TAPE HERE ^
^ STAPLE/TAPE HERE ^
City Clerk
PO Box 660
Napa, CA 94559
Place
stamp
here.
............................ .. ...............................................................................................................................................................
SHt1I'I Q3.L.LOQ I�IO Q'I03
R2023-127 Page 5 of 8
I am protesting the proposed water rates under Prop 218 (check box).
Water Service Address:
Printed Name:
Signature:
...........................................................................................................................................................FOLD.ON .DOTTED.LINES. ...........................
Mail to:
City Clerk
PO Box 660
Napa CA 94559
File in Person:
-OR- City Clerk
955 School Street
Napa
In order for a protest to count as valid, it shall be:
1. Submitted by the owner or customer of record (who is not the property owner) for a
parcel subject to the water rates.
2. Submitted on this fully completed form or another form with a statement of what is
.............................................................................................................................................................................................
being protested, service address, printed name, and signature provided.
3. A written protest mailed to the City Clerk or delivered in person prior to the close of the
public hearing on November 7, 2023 at 6:30 pm. Spoken, fax, email or other electronic
protests are not valid and will not be counted.
4. A maximum of one protest per parcel will be counted.
R2023-127 Page 6 of 8
Capital Improvement Projects (CIP)
While system operating costs have been streamlined, additional revenue is needed to fund
much -needed capital improvements such as replacement of aging pipelines, Hennessey
Treatment Plant (HTP) Improvements, and increased monitoring and laboratory analyses
that ensure water is safe to drink.
Aging infrastructure is a common challenge for many water systems. Much of Napa's water
infrastructure was built in the 1950s just after WWII. The City has a Water Master Plan to
address these capital improvement needs.
Recently Completed Projects
• 1,700 linear feet (If) 36-inch transmission main at Sheehy Ct ($1.3 million)
• 770 If 12-inch and 36-inch transmission main and 300 If 8-inch main on
Laurel Ave ($1.1 million)
• Hillcrest and Silverado Pump Stations ($3 million)
• 2,500 If 6-inch and 8-inch main on Randolph, Seminary, and Franklin
Streets ($280,000)
• Alta Heights II Pressure Tank replacement ($330,000)
1. %�
Planned Capital Investments:
• Hennessey Spillway Flow Expansion ($10 million)
• 2,800 If 12-inch main on Laurel Ave from Griggs to Freeway Dr
($1.2 million)
• 3,000 If 12-inch main on Browns Valley Rd ($1.5 million)
• Design Hennessey Treatment Plant Upgrades ($6 million)
• HTP Improvements ($80 million - $100 million)
Investment Needed: System is Aging
• 20 miles of distribution (<12-inch) mains are —100 years old
• 70-110 emergency repairs per year drive operating costs
• 50 miles of 42-inch and 36-inch transmission mains are between
50 and 70 years old
• Hennessey Treatment Plant is 42 years old
One week of indoor water use is...
All for only
$11m97
$6.51 + $5.46
Fixed Cost Unit Cost
' A typical family of 4 uses 1 unit of water per week during the winter months. These calculations are based on the average of low -flow fixtures and calculated
using the proposed rates. You can get more out of the highest efficiency fixtures. High -efficiency showerheads, faucet aerators, and other water -saving devices
are available at the Utilities Department, 1700 Second Street Suite 100, Napa.
R2023-127 Page 7 of 8 3
- S
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Tap Water: about a
Delivered right to your home!
— l�uuad
vD t&M
Givd
asulsod Sf1
piepuvis
pollosaid
What does 1 gallon cost?
Bottled Water: Milk: Latte:
$1.50 $5.43 $29.12 Gasoline: $5.09
PROPOSED RATE INCREASE
TO WATER SERVICE CHARGES
PUBLIC HEARING - NOVEMBER 7. 2023 AT 6:30PM, WATER
CITY HALL, 955 SCHOOL STREET, NAPA, CA 94559 1922_2022
Printed on Recycled Paper
Page 8 of 8
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EXHIBIT C TO ATTACHMENT 1
Treat & Wheel Rate Schedule
Treat & Wheel $5.53 $6.19 $6.75 $7.36 $7.95
Page 1 of 1
R2023-127
EXHIBIT D TO ATTACHMENT 1
CEQA,Firdings
(a) CEQA does not apply to the establishment, modification, structuring,
restructuring, or approval of rates, tolls, fares, or other charges by public agencies
which the public agency finds are for the purpose of:
(a)(1) Meeting operating expenses, and investing in capital projects to maintain the
reliability of existing infrastructure,
City of Napa Water Division operates a system that involves watershed protection,
collection, purchase, treatment, and delivery of potable water. Operation of the system,
regardless of the quantity of water collected, treated, and delivered carries certain fixed
and variable costs associated with the system's overall operation.
Over the past three years, the Water Division has encountered major operating expense
increases for consumables namely chemicals, pipe repair clamps, and water supply that
have increased greater than anticipated in the last rate study performed in 2017, while
the need to invest in capital projects increased from $6M per year to at least $8M per
year to more effectively maintain the existing assets. Division staff advised the Council
that to meet its needs for capital investment, a rate increase is necessary.
The rate increase will be used to maintain operations and invest in capital projects to
protect the integrity of the existing system.
(a)(2) Purchasing or leasing supplies, equipment, or materials,
Operating the water collection, treatment, and delivery system involves the purchase,
lease, and rental of supplies, equipment, and materials.
The rate increase will be utilized in part to fund the higher costs of purchasing or leasing
supplies, equipment, and materials.
(a)(3) Meeting financial reserve needs and debt service requirements,
The Water Revenue Bonds were refinanced in 2016 and consolidated outstanding debt
service on large capital improvements including the Barwick Jamieson Canyon Water
Treatment Plant Improvements, Imola Tank, Alston Tank and the solar array that offsets
raw water pumping to the Lake Hennessey Treatment Plant.
The rate increase will be utilized in part to meet bond debt service coverage ratio
requirements and to fund a future capital improvement bond to improve the Lake
Hennessey Treatment Plant, the 36-inch transmission main, and as funds permit,
improvements recommended in the pending 30-Year Water System Master Plan
and Corresponding Financial Plan.
(a)(4) Obtaining funds for capital projects, necessary to maintain service within existing
service areas.
The rate increase includes funds to maintain and replace the City Water Division's
infrastructure as necessary to ensure the continued delivery of reliable, high -quality
water.
Page 1 of 2
R2023-127
EXHIBIT D TO ATTACHMENT 1
-� (a)(5) Obtaining funds necessary to maintain such intra-city transfers as are authorized
by city charter.
The intra-city transfers from the Water Enterprise Fund to the City general fund are
calculated by the cost allocation plan and transfers are made to compensate only for
services received or direct impact mitigation fees.
(b) Rate increases to fund capital projects for the expansion of a system remain
subject to CEQA. The agency granting the rate increase shall act either as the Lead
Agency if no other agency has prepared environmental documents for the capital
project or as a Responsible Agency if another agency has already complied with
CEQA as the Lead Agency.
The City's rate increase will fund the on -going operation and maintenance of the water
collection, treatment, and delivery systems to serve water demand. Maintenance of the
overall water system includes the repair and replacement of facilities to safeguard
existing water supplies, infrastructure, and programs to ensure a reliable water supply
into the future. At such time as facilities are scheduled for repair or replacement, a review
of the specific activity will be conducted in accordance with the CEQA Guidelines to
assess the potential for impacts associated with the specific activity.
(c) The unusual circumstances exception to the exemption is inapplicable.
There is no indication of unusual circumstances that would create a reasonable
possibility that approving the water rates would cause a significant effect on the
environment.
R2023-127
Page 2 of 2
EXHIBIT E TO ATTACHMENT 1
Water Service Customer Classes
Single-family residential is each parcel on which a dwelling unit is served by an
individual water meter. A dwelling unit is a structure with one or more rooms used as a
residence for one household with facilities for living, sleeping, cooking, dining and
sanitation. A dwelling unit may include either: (a) one single-family dwelling, or (b) one
single-family dwelling and one accessory dwelling on the same parcel.
Multi -family residential is each structure in which two or more separate dwelling
units are served by one water meter. This definition includes, but is not limited to,
duplexes and triplexes, apartments, and townhomes under a common ownership.
Commercial are properties that serve business, industrial, or institutional uses,
and designated as commercial, office districts, residential office districts, industrial
districts, public and quasi -public in the Zoning Ordinance.
Irrigation are properties with a dedicated water meter used for irrigation purposes.
Inside City are properties within the City of Napa Rural Urban Limit (RUL) line
and inside the Sphere of Influence (SOI).
Outside City are properties outside the City of Napa Rural Urban Limit (RUL) line
or outside the Sphere of Influence (SOI).
Pumped Zone are properties in the water system pressure zone 4 and pressure
zone 5 located at elevations that require water to be pumped by the City water system to
the property.
Fire Services are properties with dedicated services for a private fire system and
typically include fire sprinklers.
Treat & Wheel are customers that own their own raw water supplies and the City
provides treatment and conveyance services to their metered connection. Cities of
American Canyon and Calistoga are treat & wheel customers.
R2023-127 Page 1 of 1
EXHIBIT F TO ATTACHMENT 1
Water Fund Reserve Policy
INTRODUCTION
Objective
This Water Fund Reserve Policy (or "Policy") establishes policy parameters to guide the City's
Water Fund's long term fiscal stability, including parameters for establishing and implementing
the Water Fund Reserves. This Policy is intended to provide direction for the management of the
City's Water Enterprise Fund finances to establish reserves necessary to meet known and
unknown future obligations.
Policy Areas
This Policy addresses the following areas:
1. Fiscal Policy Overview
2. Definitions
3. General Reserve Policies
4. Water Operating Fund Reserves
5. Water Capital Improvement Project (CIP) Fund Reserve
6. Unassigned Fund Balance
R2023-127 Page 1 of 6
EXHIBIT F TO ATTACHMENT 1
Water Fund Reserve Policy
Water Fund Reserve Policy
1. Overview of Purpose and Scope of this Policy
a. The purpose of this Policy is to establish appropriate reserve levels for the City's
Water Fund.
b. Applicability. This Policy applies solely to the Water Fund for the City of Napa.
2. Definitions. The definitions set forth below shall apply to this Policy. Unless otherwise
defined in this Policy, the definitions and interpretations set forth in the Budget shall
apply to this Policy.
a. "Budget": An annual plan approved by the City Council of financial activity including
anticipated expenditures and the estimated means to finance those expenditures.
Budget appropriations are authorized by formal City Council action with any budget
adjustments approved in accordance with the provisions of the City's Fiscal Policy.
b. "Capital Improvement Program (CIP) Project Budget": The Budget includes a
listing of all planned capital improvement projects by category.
c. "Fund": An independent fiscal and accounting entity with a self -balancing set of
accounts recording cash and/or other resources together with all related liabilities,
obligations, reserves, and equities.
d. "Fund Balance": The difference between assets and liabilities reported in a
governmental fund.
e. "Fund Balance Categories" per current governmental accounting standards
(GASB 54):
i. "Non -Spendable": Cannot be readily converted to cash or cannot legally be
spent
ii. "Restricted": External imposed (by granting agencies, governmental
entities, etc.) restrictions on spending
iii. "Committed": City Council formally -imposed (by resolution or other action)
restrictions on spending
iv. "Assigned": Funds reserved by Council direction or City Manager for
designated purposes
v. "Unassigned": Residual balance not classified in any of the above
categories
f. "Non -Recurring": Revenues or expenditures not expected to recur on a regular
basis; not to be included in the regular operating budget.
g. "Water Fund": A proprietary enterprise fund operated by the City for the purpose of
providing portable water service.
h. "Water Fund Operating Budget": total Water Fund expenditure budget less
expenditure budget for capital projects and Non -Recurring and less transfers to
other Water funds and reserves.
R2023-127 Page 2 of 6
EXHIBIT F TO ATTACHMENT 1
Water Fund Reserve Policy
3. General Reserve Policies
a. It is the intent of the City to establish and maintain reserve funds in the Water
Fund to ensure the continued delivery of water services to address emergencies,
address a temporary revenue shortfall or provide stability during economic
cycles. Sufficient reserve funds will be managed to provide adequate cash flow,
stabilize the City's interest rates, and provide continuity in service delivery. The
City shall maintain adequate cash reserves in the Water Fund to maintain a
positive cash position at any time during a fiscal year and at year-end.
b. If fiscal changes require staff to recommend funding reserves that differ from the
amounts identified in this Policy, staff will bring this recommendation to Council
as a specific action for approval.
4. Water Operating Fund Reserves
a. Operating Reserve. The City Council hereby authorizes the City Manager to
maintain a Water Fund Operating Reserve in accordance with this Policy. The
primary purpose of this Water Fund Operating Reserve is to cover day-to-day
expenses and maintain sufficient funds to cover accounts payable if there are
supplier issues, periods of low water sales, or unforeseen cost increases.
i. The Water Fund Operating Reserve shall be maintained at a level
between a minimum of 12 percent and a maximum of 25 percent of the
Water Fund Operating Budget.
ii. The use of the Water Fund Operating Reserve must be approved by
the City Council.
iii. Each fiscal year, the Water Fund will include in the Budget a transfer
from the Water Fund Operating Budget to the Water Fund Operating
Reserve to bring the reserve balance to within the required level.
However, this transfer may be excluded from the Budget to the extent
necessary to avoid a budgeted deficit.
iv. Approved use of Water Fund Operating Reserve funds may cause the
balance of the reserve to drop below the minimum percent level. The
City will begin to restore reserves used under this Policy within 24
months after their first use. The proposed timing of repayment of
reserves will be subject to approval by the City Council and will be
included in the Water Fund Budget.
b. Emergency Reserve. The City Council hereby authorizes the City Manager to
maintain a Water Fund Emergency Reserve in accordance with this Policy. The
primary purpose of this Water Fund Emergency Reserve is to protect the City's
Water Fund during significant events such as (but not limited to) economic
R2023-127 Page 3 of 6
EXHIBIT F TO ATTACHMENT 1
Water Fdnd Reserve Policy
downturns/recessions/droughts that impact Water Fund revenues, natural
disasters, declared emergencies (as defined by Napa Municipal Code Chapter
2.89), state government reductions or takeaways of Water Fund revenues, or other
situations that could not be reasonably foreseen during preparation of the budget.
i. The Water Fund Emergency Reserve shall be maintained at a minimum
level of 10 percent of the Water Fund Operating Budget.
ii. In the event the City Manager declares that action is needed to be taken
to resolve an emergency, in accordance with Napa Municipal Code
Section 2.91.040, the City Manager is authorized to encumber and
spend the Water Fund Emergency Reserve to pay the costs of the
action to resolve the emergency. These actions shall be reported to the
City Council at their next meeting after the declaration of the
emergency, and during the duration of the declared emergency in
accordance with Napa Municipal Code Section 2.91.040.
iii. In the case of natural disasters, the Water Fund Emergency Reserve
may be used to pay for FEMA-approved projects. If used, the project
total amount shall be transferred from the Emergency Reserve and
deposited into the appropriate project fund.
1. The City Manager is authorized to deposit any
reimbursement funds received from FEMA and CalOES, into
the Emergency Reserve to replenish the fund.
2. The City Manager is authorized to initially fund the Water
Fund's portion of FEMA projects from the Water Fund
Emergency Reserve. The proposed timing of repayment will
be included in the Water Fund's Budget.
iv. The use of the Water Fund Emergency Reserve must be approved by
the City Council. As an exception, in the situations described in 4.b.i
and 4.b.ii above, the City Manager is authorized to use the Water Fund
Emergency Reserve and then report to the City Council. All other
situations require advance approval from the City Council.
V. Each fiscal year, the City will include in the Budget a transfer from the
Water Fund Operating Budget to the Water Fund Emergency Reserve
to bring the reserve balance to a minimum of 10 percent of that year's
Water Fund Operating Budget. However, this transfer may be excluded
from the Budget to the extent necessary to avoid a budgeted deficit.
iv. Approved use of Water Fund Emergency Reserve funds may cause the
balance of the reserve to drop below the required 10 percent level. The
City will begin to restore reserves used under this Policy within 24
months after their first use. The proposed timing of repayment of
R2023-127 Page 4 of 6
EXHIBIT F TO ATTACHMENT 1
Water Fund Reserve Policy
reserves will be subject to approval by the City Council and will be
included in the Water Fund's Budget.
c. Rate Stabilization Reserve. The City Council hereby authorizes the City Manager
to maintain a Water Fund Rate Stabilization Reserve in accordance with this Policy.
The primary purpose of this Water Fund Rate Stabilization Reserve is to provide
funding to absorb revenue shortfalls due to short-term decreases in water sales
due to drought or other circumstances.
i. The Water Fund Rate Stabilization Reserve shall be maintained at a
minimum level of 10 percent of the Water Fund Operating Budget.
ii. The use of the Water Fund Rate Stabilization Contingency Reserve
must be approved by the City Council.
iii. Each fiscal year, the City will include in the Budget a transfer from the
Water Fund Operating Budget to the Water Fund Rate Stabilization
Reserve to bring the reserve balance to a minimum of 10 percent of
that year's Water Fund Operating Budget. However, this transfer may
be excluded from the Budget to the extent necessary to avoid a
budgeted deficit.
iv. Approved use of Water Fund Rate Stabilization Reserve funds may
cause the balance of the reserve to drop below the required 10 percent
level. The City will begin to restore reserves used under this Policy
within 24 months after their first use. The proposed timing of repayment
of reserves will be subject to approval by the City Council and will be
included in the City's Long -Term Financial Forecast.
d. Water Supply Reserve. The City Council hereby authorizes the City Manager to
maintain a Water Fund Water Supply Reserve in accordance with this Policy. The
primary purpose of this Water Fund Water Supply Reserve is to invest in future
water supplies or to purchase supplemental water supplies during a drought or
other circumstance where supplemental water supplies are necessary.
i. The Water Fund Water Supply Reserve shall be maintained at a
minimum level of $1,500,000.
ii. The use of the Water Fund Water Supply Reserve must be approved
by the City Council.
iii. Each fiscal year, the City will include in the Budget a transfer from the
Water Fund Operating Budget to the Water Fund Water Supply
Reserve in the amount of $200,000. However, this transfer may be
excluded from the Budget to the extent necessary to avoid a budgeted
deficit.
iv. The City will begin to restore reserves used under this Policy within 24
months after their first use. The proposed timing of repayment of
R2023-127 Page 5 of 6
EXHIBIT F TO ATTACHMENT 1
Water Fund Reserve Policy
reserves will be subject to approval by the City Council and will be
included in the City's Long -Term Financial Forecast.
e. In the event that budgeted revenue is not enough to fully fund all reserves, they
shall receive funding in the following priority order: first the Water Fund Operating
Reserve, then the Water Fund Emergency Reserve, then the Water Fund Rate
Stabilization Reserve, then the Water Fund Water Supply Reserve.
5. Water Capital Improvement Program (CIP) Fund Reserve
a. The City Council hereby authorizes the City Manager to maintain a Water Fund
CIP Reserve in accordance with this Policy. The primary purpose of this Water
Fund CIP Reserve is to provide funding for ongoing and future Capital
Improvement Projects for the City's water system.
i. The Water Fund CIP Reserve shall be maintained at a minimum level of
$4,000,000.
ii. The use of the Water Fund CIP Reserve must be approved by City Council,
generally through the CIP Budget adoption.
iii. Each fiscal year, the City will include in the Budget a transfer from the Water
Fund Operating Budget to the Water Fund CIP in the minimum amount of
$6,000,000 less the budgeted amount of revenue to the Water Fund CIP
Budget from capacity fees from new development. In Fiscal Year 2027-
2028 and beyond, the minimum amount shall be increased to $8,000,000
less the budgeted amount of revenue to the Water Fund CIP Budget from
capacity fees from new development. However, this transfer may be
reduced or excluded from the Budget to the extent necessary to avoid a
budgeted deficit.
6. Unassigned Fund Balance
a. The City Council hereby authorizes the City Manager to maintain an Unassigned
Fund Balance in the Water Fund Operating and Non -Recurring Funds for the
purpose of cash -flow and unforeseen changes in revenues and/or expenditures.
i. The use of Unassigned Fund Balance in the Water Fund must be approved
by the City Council.
ii. At the end of each fiscal year, Unassigned Fund Balance exceeding
$3,000,000 in the Operating Fund or $1,000,000 in the Non -Recurring
Fund shall be transferred to fully fund other Water Fund Reserves in the
following priority order: first the Water Fund Operating Reserve, then the
Water Fund Emergency Reserve, then the Water Fund Rate Stabilization
Reserve, then the Water Fund Water Supply Reserve, then the Water Fund
CIP Reserve.
R2023-127 Page 6 of 6