[PPT] - City of Vallejo Water Department and Recommended Water Rate Plan PowerPoint Presentation

SLIDE 1

City of Vallejo

Water Department

and

Recommended Water Rate Plan 218 Notice Request

SLIDE 2

Agenda

Vallejo Water System (not Green Valley or Travis)

1. Recap Rate Study Goals & Process

2. Water System Challenges
3. Proposed Financial Plan
4. Proposed Capital Plan
5. Plan Rate Adjustment
6. Next Steps
7. Questions

SLIDE 3

Water Director

Mike Malone

Water Admin & Conservation 9 Employees

Water Engineering Manager

Mark Quady 11.5 Employees

Treatment Superintendent

Joe Abitong (Acting) 21 Employees

Water Quality/Laboratory

Danielle Bonham 5 Employees

Distribution Superintendent

Oscar Alcantar 36 Employees

Water Facilities Superintendent

John Palesi 17 Employees

Water Operations Manager

Beth Schoenberger

Water Department

SLIDE 4

Water System Challenges

Insufficient capital spending to replace

aging infrastructure

Deferred maintenance due to insufficient funding
Mounting regulatory requirements (without funding)
Out-of-date information technology
Vacancies, retention, and failed recruitments
Increasing security requirements

SLIDE 5

Challenges: Increased Regulatory Requirements

(without funding for staffing to do the work)

Recent example: Lead Fixture Testing - State requires all Water agencies to test drinking fountains and faucets in all public schools K-12 for lead. Staff time is required for training, planning, coordination, implementation, sampling, testing. No funding is provided to carry

ut the work, so staff works longer hours to ensure compliance.

SLIDE 6

Challenges:

Aged Infrastructure & Deferred Maintenance

Aged Pipe: mineral deposits New Pipe Skyview Water Tank In Need of Cleaning and Maintenance Treatment Plant Aged Basin Flocculation Trough Cache Main Pipeline Break

Mineral corrosion (a common problem in old pipes) is not a health hazard, but reduces water flow and pipe life. Reduced flow increases electrical pumping costs.

SLIDE 7

Challenges: Vallejo Pipeline Breaks & Leaks vs. National Rankings

Number of Pipeline Breaks and Leaks Per 100 Miles of Pipe

2017 American Water Works Association National Benchmark Survey

Mile for Mile, Vallejo Pipes Break and Leak More Often Than

“Worst Case” Water Agencies Nationally

SLIDE 8

Water System Challenges: Vallejo Pipe Replacement vs Industry Standard

Vallejo’s current pipeline replacement cycle

is 450 years.

Vallejo Water’s goal is to establish a

pipeline replacement cycle of 100 years.

23% of Vallejo’s 475 miles of pipeline is over 70 Years Old

American Water Works Association industry standard pipeline replacement cycle is 75-100 years.

SLIDE 9

Vallejo Water’s Capital Spending vs. Industry Standard of 1% Total System Value

Vallejo’s Current 5-Year Avg Annual Capital Spending:

$4.7 Million

Industry Standard for System Capital Investment/Spending:

1% of Estimated System Valuation

Vallejo’s Estimated System Valuation: $1 Billion
Applying Industry Standard to Vallejo’s $1Billion System

Valuation:

$10 Million Annual Capital Investment (1% of $1 Billion)

Proposed Rates Would Increase Annual Capital Investment

From $6.6M (Proposed FY 19-20 CIP) to $12M

SLIDE 10

Infrastructure and Capital Projects Funded By Proposed Rates

Pipe Replacement
Meter Replacement
Pump Station Improvements
Treatment Plant Upgrades
Emergency Generators/Redundancy

SLIDE 11

Phase II Water Rates Goals and Process

Phase I Emergency Rate Setting: 2016-17

– Meet bond covenants and operating costs – Council direction to address infrastructure and deferred maintenance in Phase II

Phase II Goals

– Address Infrastructure and Deferred Maintenance – Create Long Term Financial Stability – Establish Targets for Reserves and Fund & Maintain Reserves – Ensure Sufficient Staffing to Deliver Services – To finance capital projects, balance debt vs “pay as you go” – Engage Community – Phase-In Rate Increases to Mitigate Community Impact

Phase II Process:

Community Engagement and Financial Planning 2017-19

– Hired Financial Consultants, Raftelis Inc. to Create Financial Model for Rate-Setting – Developed Necessary Data – Engaged the Community:

Establish City Council Ad Hoc Water Rate Committee
Establish Citizen Water Rate Working Group

SLIDE 12

Engaged Council & Community

City Council Ad Hoc Water Rate Committee

– 3 members of City Council: Mayor, Sunga, Brown, Malgapo (former member) – Focused on in-depth understanding of Vallejo Water System – 8 workshops/meetings and 5 Water System tours over 12 months – Will recommend Rate Plan to Full Council

Citizen Water Rate Working Group

– 10 Vallejo residents (23 applied) selected by Council Ad Hoc Committee – Included representatives from local businesses, and financial, and water industries – Year-long investment to understand Vallejo’s water system – 12 workshops/meetings, 5 water systems tours over 12 months – Work with staff to develop recommended rate plan

Other Community Engagement Activities

– Introduction to Your Water Department – 22 events – Conservation Outreach – 13 events

SLIDE 13

Tours and Workshops

Citizen Water Rate Working Group & City Council Water Rate Ad Hoc Committee

Fleming Hill Facilities Maintenance Shop Workshops and Rates Discussions in Fleming Hill Water Treatment Plant Meeting Room Cordelia Reservoir and Pump Station

SLIDE 14

Phase II Financial Goals

Financial Stability

– Raftelis Financial Consultants Develop Vallejo Enterprise’s 15 year Financial Plan – Meet bond covenants – Meet debt service requirements (current and future) – Balance Debt vs Pay-Go – Phase-in rate increases to minimize community impact

Establish and Fund Reserve Targets

– 120 days of Operating Reserves – Fully fund Rate Stabilization Reserve – Capital Reserve

Address Infrastructure and Deferred Maintenance

– Progress toward 100 year replacement cycle

Address Service Delivery Requirements & Staffing

– Needs assessment

SLIDE 15

5-Year Water Financial Plan (Million $)

USE OF FUNDS FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Water Supply and O&M Expenses $31,890,000 $34,130,000 $35,150,000 $36,660,000 $38,430,000 $40,440,000 Debt Service $5,170,000 $5,320,000 $6,550,000 $6,550,000 $6,550,000 $6,550,000 Pay as you go Capital Spending $6,830,000 $6,130,000 $0 $180,000 $5,350,000 $12,350,000 Additions to Reserves $0 $0 $2,670,000 $4,290,000 $360,000 $0 Total $43,890,000 $45,580,000 $44,370,000 $47,680,000 $50,690,000 $59,340,000

SLIDE 16

Rate Study Capital Financing Plan (Million $) City System

SLIDE 17

Operating Fund Balance (5 Years)

(Million $)

SLIDE 18

Proposed Rate Plan & Deliverables

Highlights 5 Year Plan

Rate Adjustments Pipe Replacement Cycle

150 years in 5-year plan 100 years in 10-year forecast

Facilities Investment

$30.7M Budget (City) 12% of 30-year project list Water Treatment, Pump Stations, SCADA, Storage, Dams

Total Capital Investment

$48.7M Budget (City & Lakes) Meets target of 1% of system value investment in 5th year

Funding Reserves

Operating Reserve Target: 120 days operations Rate Stabilization Target: 15% Revenue

Projected at end of FY 2023/24 Operating Reserve Target ($13.5M): 100% Met Rate Stabilization Reserve Target ($7.5M): 38% Met ($2.9M)

New Debt

Water Revenue Bonds

$27.0M in FY 2020/21 New Debt Rating Assumption: Standard and Poor’s A+

Staffing Plan

Aiming toward accelerated hiring to support the Capital Investment Plan and overall service delivery

FY19/20 4.3% FY20/21 10% FY21/22 7% FY22/23 6% FY23/24 5%

SLIDE 19

Proposed Pipe Replacement Plan

Ramp up capital investment
ver 5 years
9.3 miles replaced by 5th year
~28 miles replaced by 10th year
100-year replacement cycle by 10th

year (with second ramp up in years 6-10)

1.1 1.46 1.83 2.19 2.72 0.5 1 1.5 2 2.5 3 2020 2021 2022 2023 2024 Miles of Pipe Replaced

9.3 miles total

5-year plan

Year CIP Budget 2020 $1.6M 2021 $2.1M 2022 $2.8M 2023 $3.4M 2024 $5.1M Total $15.0M

5th Year: 150-year replacement cycle More than doubles the budget of current Water Main CIP!

Current CIP Budget (5 years): $2.3M (average) Current Pipe Replacement Cycle: ~450 years

SLIDE 20

Debt Coverage (5 Years):

Proposed rates allow Vallejo Water Department to meet all bond and other debt requirements

City System

SLIDE 21

Water Rate Study Parameters

Uniform Water Usage (Consumption) Charge for Multi-Family,

Commercial, Industrial, Institutional, Irrigation, and Construction

Uniform Service Charge for all customer classes per meter size and

billing frequency

Meter Size Factors are set by American Water Works Association

Manual 22

Single Family Residential Tier 1 lowered

from 11 HCF (hundred cubic feet) to 7 HCF per month

– Meets California standards for indoor residential use at 55 gallons per capita daily (GPCD)

SLIDE 22

Proposed Rate Plan: Sample Water Bills

These bills are based upon single family residential, bi-monthly, average usage of 16 units (12Kgallons)

Regular Current Water Bill As of July 1 Bill For Proposed October 24 Increase $100.06 $105.90

SLIDE 23

Vallejo’s Current Water Rates Among Lowest in Region Regional Comparison: Average Residential Monthly Bill Rate

For ¾” Meter, 8 Units of Water (5,984 gallons), which is the average single family monthly use

$0 $10 $20 $30 $40 $50 $60 $70

Napa Fairfield Suisun Vallejo Current Vallejo - New Proposed Benicia American Canyon EBMUD Pittsburg Sonoma Contra Costa Water Martinez

$41.82 $44.86 $47.49 $50.03 $52.87 $54.45 $55.38 $56.25 $59.14 $61.20 $66.53 $68.79

Amounts Based on Monthly Service Charge

1 Unit = 748 Gallons Rates Effective July 1, 2019 (3.5%) New Proposed Rates Effective Oct 24, 2019

SLIDE 24

Your Vallejo Tap Water: Less Than 1 ¢ per Gallon Delivered Directly To Your Home!

How Much Does 1 Gallon Cost?

Latte: $31.50 Gas: $3.90 Milk: $3.40 Bottled Water: $2.75

SLIDE 25

Approved & Proposed Rate Adjustments

Approved 2017: Current rate structure includes a

scheduled increase of 3.5% that goes into effect July 1, 2019.

(Approved by Council in 2017 Phase I emergency rates process.)

Proposed Rate Plan:

Fiscal Year Revenue Adjustment Date Effective FY 2020 4.3% October 24, 2019 FY 2021 10.0% July 1, 2020 FY 2022 7.0% July 1, 2021 FY 2023 6.0% July 1, 2022 FY 2024 5.0% July 1, 2023

SLIDE 26

Next: Proposition 218 Calendar

07-09-2019 City Council Direction on Prop 218 Noticing 07-26-2019 Deadline for Prop 218 Mailing (for 09-10-19 Council Meeting) 09-10-2019 City Council Rate Consideration, Public Hearing, Prop 218 1st Reading 09-24-2019 City Council 2nd Reading of Water Rates Ordinance 10-24-2019 New Rates Effective Date

– Meets 30 day minimum from 2nd Reading of Ordinance – Subsequent years: July 1st – Effective Dates to be included in proposed Water Rates Ordinance

SLIDE 27

Rates Outreach

Community Engagement on Rate Adjustment

– 22 stakeholder meetings held to date – Additional invitations to community groups in progress – Scheduled to present at VCUSD School Board meeting August 21st – 2 general information community meetings to be scheduled

Informational Flyers

SLIDE 28

Accountability Zone

Coming Soon to the Water Department Website “Accountability Zone” You will be able to easily find out more about:

Annual budget and audit information
Past water rate information
How your rates are spent and audited
Proposed and completed capital improvement projects
Project infrastructure status updates

Access this information and more at vallejowater.org Capital Projects (CIP) Finances Conservation Key Contact Information

SLIDE 29

Questions ?

SLIDE 30

Appendix

SLIDE 31

5-Year CIP FY 19/20 - FY 23/24

DRAFT WATER DEPT 5-YEAR CAPITAL IMPROVEMENT PLAN (5.10.19) Project Title FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-2023 FY 2023-2024 4 Year Total 5 Year Total Water Green Valley Diversion Dam Repairs

$
350,000
$
350,000

$

Green

Valley Water Treatment Plant Corrosion Control

$
250,000
$
250,000

$

Siebe

and Rockville Tank Replacement

$
350,000

400,000 $

1,500,000

$

1,250,000

$

3,150,000

$

3,500,000

$

Mare

Island Reservoir Disinfectant By-Product (DBP) Destruction Unit

$
80,000
$
80,000

$

New

Capitol Zone Pump Station

$
200,000

600,000 $

600,000

$

600,000

$

1,800,000

$

2,000,000

$

New

Enterprise Resource Planning Project (HTE Replacement)

$
280,000

280,000 $

280,000

$

280,000

$

280,000

$

1,120,000

$

1,400,000

$

New

Enterprise Resource Planning Project (HTE Replacement)

$
35,000

35,000 $

35,000

$

35,000

$

35,000

$

140,000

$

175,000

$

New

Enterprise Resource Planning Project (HTE Replacement)

$
35,000

35,000 $

35,000

$

35,000

$

35,000

$

140,000

$

175,000

$

Pump

Station Equipment Renovation

$
100,000
$
100,000

$

Water

Main Replacement FY19-20

$
1,500,000
$
1,500,000

$

Water

Main Replacement FY20-21 2,000,000 $

2,000,000

$

2,000,000

$

Water

Main Replacement FY21-22 2,500,000 $

2,500,000

$

2,500,000

$

Water

Main Replacement FY22-23 3,000,000 $

3,000,000

$

3,000,000

$

Water

Main Replacement FY23-24 4,300,000 $

4,300,000

$

4,300,000

$

Lake

Chabot Dam Improvement Project 100,000 $

200,000

$

200,000

$

400,000

$

500,000

$

Asset

Management Project (CMMS) 75,000 $

$
75,000

$

Lakes

Facilities Renovation 100,000 $

$
100,000

$

Cordelia

Unit No 3 Emergency 500,000 $

500,000

$

500,000

$

500,000

$

2,000,000

$

2,000,000

$

Fleming

Hill Filter Media Replacement 650,000 $

$
650,000

$

Solano

Transit Authority and Caltrans Pipe Replacement 300,000 $

400,000

$

400,000

$

400,000

$

400,000

$

1,600,000

$

1,900,000

$

Sacramento

Bridge Waterline 100,000 $

$
100,000

$

Trans-Vallejo

Pipeline and Grid Pumps 175,000 $

175,000

$

350,000

$

350,000

$

875,000

$

1,050,000

$

Lake

Curry Valve & Pipe Repair/Replace 100,000 $

100,000

$

100,000

$

Distribution

System SCADA Renovation 150,000 $

$
150,000

$

Distribution

Sampling Stations 85,000 $

$
85,000

$

Fleming

Hill Chemical System Replacement 100,000 $

100,000

$

100,000

$

100,000

$

300,000

$

400,000

$

Flocculation

& Sedimentation Basin Conversion/Replace 1,000,000 $

1,000,000

$

1,000,000

$

1,000,000

$

3,000,000

$

4,000,000

$

Lake

Curry Dam Improvement Project 500,000 $

500,000

$

500,000

$

500,000

$

500,000

$

2,000,000

$

2,500,000

$

Swing

Check Valve Replacement 75,000 $

75,000

$

75,000

$

75,000

$

300,000

$

300,000

$

Meter

Replacement Project 563,084 $

600,000

$

600,000

$

600,000

$

600,000

$

2,400,000

$

2,963,084

$

Lake

Frey Dam Improvement 200,000 $

200,000

$

100,000

$

500,000

$

500,000

$

Lake

Madigan Dam Improvement 100,000 $

100,000

$

100,000

$

SUBTOTAL

7,078,084 $

7,300,000

$

8,875,000

$

8,825,000

$

6,725,000

$

31,725,000

$

38,803,084

$

Funds

available from closed projects 513,084 $

NET

CIP 6,565,000 $

SLIDE 32

Water Use by Customer Class

Water Use by Customer Class and Tier (FY 2019 Projected)

CCF= hundred acre feet AF = acre feet

SLIDE 33

Service Charges

Bi-Monthly Single Family Rate (SFR) Charges: Current & Proposed Monthly Other* Charges: Current & Proposed

Meter Current Proposed Proposed Proposed Proposed Proposed Size July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023

5/8" or 3/4"

$41.66 $44.96 $49.46 $52.93 $56.11 $58.92

1"

$62.54 $66.93 $73.63 $78.79 $83.52 $87.70

1 1/2"

$104.32 $121.86 $134.05 $143.44 $152.05 $159.66

2"

$154.46 $187.77 $206.55 $221.01 $234.28 $246.00 Meter Current Proposed Proposed Proposed Proposed Proposed Size July 1, 2019 Oct 10,2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023 5/8" or 3/4" $29.88 $28.48 $31.33 $33.53 $35.55 $37.33 1" $42.92 $39.47 $43.42 $46.46 $49.25 $51.72 1 1/2" $71.41 $66.93 $73.63 $78.79 $83.52 $87.70 2" $111.93 $99.89 $109.88 $117.58 $124.64 $130.88 3" $206.52 $204.25 $224.68 $240.41 $254.84 $267.59 4" $341.49 $358.05 $393.86 $421.44 $446.73 $469.07 6" $679.31 $726.06 $798.67 $854.58 $905.86 $951.16 8" $1,084.62 $1,549.96 $1,704.96 $1,824.31 $1,933.77 $2,030.46 10" $1,557.41 $2,318.94 $2,550.84 $2,729.40 $2,893.17 $3,037.83 12" $2,908.31 $2,923.14 $3,215.46 $3,440.55 $3,646.99 $3,829.34

* Current 7/1/2019 rates are for “Non-Residential” Accounts.

SLIDE 34

Rate Classes

Rate Classes/Tiers Adjustments

Uniform Rate applies to these classes:

Multi-Family Residential, Commercial, Industrial, Institutional, Irrigation, and Construction

Current Proposed Proposed Proposed Proposed Proposed July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023 Tiered Water Rates SFR Tier 1 $3.65 $3.62 $3.99 $4.27 $4.53 $4.76 SFR Tier 2 $6.84 $5.13 $5.65 $6.05 $6.42 $6.75 Uniform Water Rate $4.47 $4.76 $5.24 $5.61 $5.95 $6.25 Raw Water $2.58 $3.22 $3.55 $3.80 $4.03 $4.24 Customer Class/Tier

SLIDE 35

Proposed Rate Adjustments

Service Charges

Bi-Monthly Fire Service: Current & Proposed

Meter Size July 1, 2019 Oct 24, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023 5/8" or 3/4" $41.54 $13.57 $14.93 $15.98 $16.94 $17.79 1" $49.38 $15.33 $16.87 $18.06 $19.15 $20.11 1 1/2" $65.34 $21.67 $23.84 $25.51 $27.05 $28.41 2" $84.58 $32.61 $35.88 $38.40 $40.71 $42.75 3" $129.40 $71.85 $79.04 $84.58 $89.66 $94.15 4" $193.22 $139.53 $153.49 $164.24 $174.10 $182.81 6" $353.02 $382.43 $420.68 $450.13 $477.14 $501.00 8" $544.72 $801.40 $881.54 $943.25 $999.85 $1,049.85 10" $768.58 $1,431.60 $1,574.76 $1,685.00 $1,786.10 $1,875.41

SLIDE 36

GIS Maps: Pipe Age & Pipe Replacement

MI Pipeline replacements will be completed in conjunction with development at Mare Island.