Facilitate Council discussion and obtain Council direction on the next Water Services rate study for water, wastewater and reclaimed water.

City Council has requested the opportunity to provide staff direction on the future rate study budgeted in FY19.  In accordance with Council adopted water policy A3 Rate Design Elements: rates shall be internally reviewed annually with a formal rate study performed every three (3) years.  Additionally, water and sewer rates should be set on a cost-of-service basis with the goal of encouraging water conservation. Their design should also anticipate a balance between conservation (commodity charges) and revenue stabilization (fixed rates).  The last financial rate study was completed in 2016. Subsequently, City Council adopted a 5-year adjustment to water, wastewater, and stormwater rates on April 5, 2016 and a 3-year adjustment to reclaimed water rates on November 21, 2017.  City Council also adopted an additional 3-year adjustment to stormwater rates on December 19, 2017.
 
Planning for the future is critical for maintaining reliable, cost effective water services.  According to the American Water Works Association's Manual M1, Principals of Water Rates, Fees and Charges, evaluating revenue requirements is a integral component of any rate setting process.  To achieve this objective, Council adopted the water policy G1 Master Planning, which recommends infrastructure planning for the future should be undertaken every five (5) years.  The most recent Water Infrastructure master plan was completed in 2014 and Sewer master plan was completed in 2015.  There has never been a master plan conducted for the Reclaimed Water system.  

Staff will present the generally accepted industry practice on how utilities evaluate the need, or not, to adjust rates and offer Council a few options to consider for a path forward.

In anticipation of an upcoming rate study, Water Services FY19 budget contains funding to update the water and sewer master plans as well as conduct the City's first master plan for the reclaimed water system.  These planning efforts are critical to identify potential capital projects, including their operations & maintenance costs, that will be needed over the next 10-year period in order to continue to provide reliable water services.  The cost estimates from these planning efforts are then folded into the financial rate study to determine the revenue requirements for the water, wastewater and reclaimed water enterprise funds.