Discussion and Direction following Council's Revisions to Water, Wastewater, and Reclaimed Water Model Assumptions and Resulting Rates
 

City staff and the City's Consultant, Stantec, have been discussing the water and sewer rate study components with the Water Commission and City Council since September 2023. There have been discussions about financial planning; capacity fees; rate design priorities; water, sewer, and reclaimed water rates; and miscellaneous fees. During today's presentation, City staff will present the results to the water, wastewater, and reclaimed water rates from adjusting the model assumptions as directed by Council at their May 21st meeting.  The desired outcome is for the Council to confirm their recommended revisions to develop the final rates package for Council consideration at the June 18 and July 2 public hearings.

The previous rates proposal provided to Council on April 16th incorporated the following assumptions: a 100% annual execution rate of the Capital Improvement Plan (CIP), a debt limit of 30% on water and 21% on wastewater, a 1% growth rate, and a cost escalation adjustment of 3.5% for the majority of the operating expenses (about 75% of the total expenses including salaries and benefits), 6% for chemical, utilities, and equipment maintenance (about 25% of the total expenses), and 4% on the capital program. The resulting rate increases were as follows:

• 15% each year for 5 years for the water fund
• 25%, 25%, 15%, 10%, 5% for the wastewater fund
• Reclaimed rates remain based on the percentage of the water rates
• Capacity Fees and Miscellaneous Fees changes vary based on cost of services

Staff and Stantec modified the proposed rate changes following Council direction from the May 21st meeting. At this meeting, Council directed staff to retain the growth rate and cost escalation adjustments but to reduce the capital program and increase combined debt. Staff and Stantec are proposing an 86% annual execution rate of the CIP for the water and wastewater funds with a maximum combined (water, wastewater, reclaimed water and stormwater) limit on borrowing of 38%. The new proposed adjustments to rates are:

• 10% each year for 5 years for the water fund
• 20%, 20%, 10%, 5%, 5% for the wastewater fund
• Reclaimed rates remain based on the percentage of the water rates
• Capacity Fees and Miscellaneous Fees are the same as presented previously