WELCOME Meeting Agenda Introductions Reminder on conducting Task - PDF document

8/20/2020 City of Salem Public Works Department 2021-2022 UTILITY RATE PROPOSAL 1 WELCOME Meeting Agenda  Introductions  Reminder on conducting Task Force meetings in times of Covid-19  Staff presentation topics Recap and questions from last week  Rate Proposal  Sample Bills  Schedule  2 1

8/20/2020 Task Force Members  Brad Nanke, Chair, City Councilor/Ward 3  Sam Brentano, Marion County  Bruce Carnine, Suburban East Salem Water District INTRODUCTIONS  Chris Hoy, City Councilor/Ward 6 Task Force Members  Cara Kaser, City Councilor/Ward 1  Jim Lewis, City Councilor/Ward 8 Staff/Consultants  Ryan Mann, At-Large Guests  Chris Sarles, SEDCOR  David Sawyer, City of Turner  Laura Tesler, At-Large  Jordan Truitt, Salem Area Chamber of Commerce  Tim Wood, City of Keizer 3 CONDUCTING MEETINGS IN TIMES OF COVID-19  On Zoom for participants and YouTube for observers  PowerPoint for ease of information presentation and to keep us on track  We will pause often for questions from Task Force members  Guest comments in writing only  Hoping for a Task Force recommendation tonight 4 2

8/20/2020 RECAP & QUESTIONS FROM LAST WEEK Water/Wastewater Task Force 5 RECAP FROM LAST WEEK’S PRESENTATION  Set the stage  Described Salem’s Utility  Rate setting process General factors affecting the rate proposal  Financial planning considerations  Previous years’ revenue and expenditures  Utility capital funding and debt service  PowerPoint slides sent to Task Force  members last week and available on City web site  Responses to Task Force member questions 6 3

8/20/2020 PERCENT OF UTILITY REVENUE BY CUSTOMER CLASS Sum of Billed Amount Column Labels Row Labels STORMWATER WASTEWATER WATER Grand Total COMMERCIAL $ 3,594,492.99 $ 6,621,615.27 $ 3,982,620.37 $ 14,198,728.63 16% INDUSTRIAL $ 88,514.59 $ 2,844,278.75 $ 626,837.94 $ 3,559,631.28 4% INSTITUTIONAL $ 163,513.78 $ 2,139,854.21 $ 985,783.09 $ 3,289,151.08 4% IRRIGATION $ 20,063.62 $ 1,575,327.22 $ 1,595,390.84 2% MULTI FAMILY $ 1,191,281.90 $ 7,797,858.92 $ 4,768,671.61 $ 13,757,812.43 15% PUBLIC $ 334,524.09 $ 652,640.39 $ 470,168.80 $ 1,457,333.28 2% RESIDENTIAL $ 8,069,673.13 $ 26,463,644.16 $ 16,525,337.83 $ 51,058,655.12 57% WHOLESALE $ 946,541.41 $ 946,541.41 1% Grand Total $ 13,462,064.10 $ 46,519,891.70 $ 29,881,288.27 $ 89,863,244.07 100% 7 Service 2015 2016 2017 2018 2019 2020 Water 52,107 52,723 52,895 53,579 54,057 54,641 % Change in Accounts 1.2% 0.3% 1.3% 0.9% 1.1% Adopted Revenue Slope 3.0% 3.0% 2.0% 3.0% 3.0% 3.0% Residential 45,601 46,068 46,221 46,857 47,304 47,892 Multifamily 2,644 2,654 2,662 2,710 2,716 2,730 Commercial 3,121 3,248 3,272 3,264 3,281 3,269 Industrial 20 21 21 19 18 16 Institutional 8 8 8 8 8 8 Irrigation 713 724 711 721 730 726 UTILITY ACCOUNTS Wastewater 62,649 63,319 63,547 65,229 65,925 66,772 % Change in Accounts 1.1% 0.4% 2.6% 1.1% 1.3% BY Adopted Revenue Slope 3.0% 3.0% 2.5% 3.0% 2.5% 2.5% Residential 55,840 56,484 56,679 58,162 58,808 59,492 Multifamily 3,208 3,222 3,229 3,303 3,308 3,330 CUSTOMER CLASS Commercial 3,582 3,593 3,619 3,744 3,789 3,933 Industrial 13 14 14 16 14 12 (All areas) Institutional 6 6 6 4 6 5 Stormwater 42,879 43,323 43,627 44,048 44,508 44,918 % Change in Accounts 1.0% 0.7% 1.0% 1.0% 0.9% Adopted Revenue Slope 3.0% 3.0% 3.0% 3.0% 5.0% 5.0% Residential 38,611 39,034 39,302 39,676 40,111 40,528 Multifamily 1,760 1,771 1,782 1,827 1,831 1,842 Commercial 2,475 2,473 2,497 2,501 2,523 2,506 Industrial 1 13 13 12 11 11 Institutional 8 8 8 8 8 8 Irrigation 24 24 25 24 24 23 Change in Rate Revenue 1.9% 3.1% 4.5% 3.6% 1.6% 8 4

8/20/2020 RATE PROPOSAL Water/Wastewater Task Force 9 Effective January 1, 2021 & January 1, 2022  3% for water RATE RECOMMENDATION  3% for wastewater  5% for stormwater  Based on 2018 COSA update  Expected through 2023 Written report provided to Task Written report provided to Task Force members late last week. Force members late last week. 10 5

8/20/2020 For the Utility and our For the Utility and our customers customers Planned rate increases Planned rate increases are critical to proper are critical to proper financial planning financial planning Approach has been Approach has been RATE PROPOSAL small annual rate small annual rate increases increases PHILOSOPHY Proper management of Proper management of Sustained capital Sustained capital operating expenses and operating expenses and investment is critical to investment is critical to Adopting less than capital investments capital investments the health of the utility the health of the utility necessary rates will result in higher rate increases in the future Consistent application of Consistent application of the cost of service model the cost of service model 11 HISTORY OF ADOPTED UTILITY RATE CHANGES Erratic Era Early Revenue Slope Era Current Revenue Slope Era Sewer & Sewer & Sewer & Date Water Storm Date Water Storm Storm 3/1/1980 14.0% 36.0% (Sewer Only 1/1/1994 9.0% 6.5% Date Water Storm after 2012) 3/1/1982 0.0% 68.0% 1/1/1995 9.0% 6.5% 1/1/2011 0.0% 0.0% 3/1/1985 12.5% 0.0% 1/1/1996 9.0% 6.5% 1/1/2012 3.0% 3.0% 1/1/1988 4.0% 3.0% 1/1/1997 14.0% 6.5% 1/1/2013 6.0% 6.0% 6.0% 5/1/1989 0.0% 12.0% 1/1/1998 14.0% 6.5% 1/1/2014 6.0% 6.0% 6.0% 5/1/1992 12.5% 18.4% 1/1/1999 14.0% 6.5% 1/1/2015 3.0% 3.0% 3.0% 1/1/1993 7.4% 10.0% 1/1/2000 5.0% 5.0% 1/1/2016 3.0% 3.0% 3.0% 7/1/2001 8.3% 8.9% 1/1/2017 2.0% 2.5% 3.0% 7/1/2002 8.3% 8.9% 1/1/2018 3.0% 3.0% 3.0% 7/1/2003 8.3% 8.9% 1/1/2019 3.0% 2.5% 5.0% 11/1/2004 6.5% 6.5% 1/1/2020 3.0% 2.5% 5.0% 11/1/2005 6.5% 6.5% 1/1/2021 3.0% 3.0% 5.0% 2/1/2007 7.5% 7.5% 1/1/2022 3.0% 3.0% 5.0% 1/1/2008 7.5% 7.5% 1/1/2009 6.5% 6.5% 1/1/2010 6.5% 6.5% 12 6

8/20/2020 RATE PROPOSAL GOALS 1. Operating 2. Debt Reserve 3. Capital 4. Unrestricted Reserve & Ratios Transfers Fund Balance Maintain a 120- Maintain Increase the Maintain an day operating required debt rate-funded unrestricted reserve reserves (one capital transfer fund balance of year of debt as debt service $10M service) and declines ratios (1.25) targeting 1% of utility valuation ($33.8M) 13 FINANCIAL PLAN SUMMARY (All dollar figures in millions) Proposed Planned 1 20-21 21-22 22-23 23-24 24-25 25-26 26-27 Planned Revenue Slope 3,3,5% 3,3,5% 3,3,5% 3% 3% 3% 3% (Water, Wastewater, Stormwater) Rate Revenue - Operating $92.5 $94.5 $98.0 $101.4 $104.1 $106.9 $109.8 Other Revenue - Operating 16.0 15.8 16.2 16.6 17.0 17.3 17.8 Other Revenue - Nonoperating 3.8 3.5 0.7 0.7 0.7 0.7 0.5 Total Revenue $112.2 $113.8 $114.8 $118.7 $121.9 $124.9 $128.1 Operations and Maintenance 73.9 76.9 79.3 83.2 85.5 88.4 91.4 Debt Service 19.1 19.1 19.1 17.3 14.4 13.3 4.5 Rate-Funded Utility Capital Transfer 19.5 16.9 21.8 18.7 21.5 23.0 25.0 Total Operating Expenditures $112.5 $112.9 $120.1 $119.2 $121.4 $124.6 $120.9 Fund Balance $49.5 $50.3 $45.1 $44.6 $45.1 $45.4 $52.6 Operating Expense/ 103.7% 102.4% 105.2% 101.0% 100.2% 100.3% 94.7% Operating Revenue Ratio 14 7

8/20/2020 FINANCIAL PLAN SUMMARY (All dollar figures in millions) Proposed Planned Fund Balance Components 20-21 21-22 22-23 23-24 24-25 25-26 26-27 Operating Reserve (120 days) $23.7 $24.7 $25.5 $26.8 $27.5 $28.4 $29.4 Debt Service Reserve (one year) 19.1 19.1 19.1 17.3 14.4 13.3 4.5 Unrestricted Fund Balance 6.7 6.5 0.5 0.5 3.2 3.7 18.7 Total Fund Balance $49.5 $50.3 $45.1 $44.6 $45.1 $45.4 $52.6 Debt Coverage Ratio (1.25 min) 2.1 1.9 1.8 1.9 2.1 2.6 2.8 15 SAMPLE BILLS Water/Wastewater Task Force 16 8