City of Laredo 2018 Water/Wastewater Rate Study and ... · City of Laredo Current Wastewater Rate Structure. Page: 5. Minimum Charge $ 9.66 Minimum Charge $ 25.87 (Includes 2,000

2018 Water/Wastewater Rate Study and Financial Forecast

City Council Presentation

City of Laredo

August 2018

Facts about Water and WW Ratesin the 21st Century

Page: 2

• Average utility has been increasing rates 5-6% per year; trend expected to continue

• AWWA expects water and wastewater rates across USA to triple in the next 15 years

• Rate adjustments are primarily due to reasons beyond a utility’s control – inflation, system replacement, regulatory mandates, etc.

• 30-40% of utilities currently charge rates that do not cover their costs

City of LaredoInitial Observations

City’s policy of annual nominal rate adjustments has been beneficial – has resulted in a financially healthy utility until current year

However, increasing costs and need to finance $150 -- $180 million in new debt for capital improvements will require rate adjustments that will be higher than 2.0%

Timing of rate adjustments will depend primarily on when City chooses to finance CIP

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City of LaredoCurrent Water Rate Structure

Page: 4

Minimum Charge Minimum Charge (Includes 2,000 Gallons in Base) (Includes 2,000 Gallons in Base)

5/8" or 3/4" 9.82 5/8" or 3/4" 36.99 1" 21.38 1" 40.18 1 1/2" 30.24 1 1/2" 44.69 2" 46.96 2" 61.70

3" 122.69 Volume Rate (per 1,000 Gallons) 4" 185.29

2,001 4,000 1.92 6" 333.71 4,001 10,000 2.05 8" and Larger 491.88

10,001 20,000 2.12 20,001 30,000 2.25 Volume Rate (per 1,000 Gallons)30,001 40,000 2.40 2,001 4,000 2.05 40,001 50,000 2.51 4,001 10,000 2.52 50,001 Above 5.00 10,001 40,000 3.17

40,001 150,000 3.35 150,001 300,000 3.62 300,001 600,000 4.00

Minimum Charge 459.00$ 600,001 1,000,000 4.72 (Includes 53,749 Gallons in Base) 1,000,001 Above 4.83

Volume Rate (per 1,000 Gallons)53,750 150,000 3.35

150,001 300,000 3.62 300,001 600,000 4.00 600,001 1,000,000 4.72

1,000,001 Above 4.83

Fire Hydrant

Residential Rates Commercial Rates

City of LaredoCurrent Wastewater Rate Structure

Page: 5

Minimum Charge 9.66$ Minimum Charge 25.87$ (Includes 2,000 Gallons in Base) (Includes 2,000 Gallons in Base)

Volume Rate (per 1,000 Gallons) Volume Rate (per 1,000 Gallons)

2,001 4,000 3.31 2,001 4,000 2.46 4,001 10,000 3.36 4,001 10,000 2.51

10,001 20,000 3.54 10,001 40,000 2.87 20,001 30,000 3.80 40,001 150,000 2.97 30,001 Above 3.80 150,001 300,000 3.79

300,001 600,000 3.79 600,001 1,000,000 4.34

1,000,001 Above 5.26

Residential Wastewater Rates Commercial Wastewater Rates

Monthly Residential Charge Comparison10,000 Gal Water/Wastewater

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$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

Laredo State Average

$62.40

$90.55

Monthly Residential Charge Comparison10,000 Gal Water/Wastewater

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$62.40

$47.87

$90.55

$142.76

$0

$20

$40

$60

$80

$100

$120

$140

$160

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Monthly Commercial Charge Comparison20,000 Gal Water/Wastewater

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$74.55 $78.95

$341.00

$-

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00La

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Actual and Forecast Total Water Accounts

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68,769 71,994

79,487

86,039

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

FY 2015 FY 2016 FY 2017 TY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027

2% Annual Growth

TY = Test Year

Historical and ForecastWater Billing Units - Gallons

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2% Annual Growth

Forecast Operating Costsand Capital Outlays

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Capital Improvement Plan

Capital Improvement Plan depends on City’s ultimate decision regarding its long term wastewater treatment needs

Therefore 2 cost and rate scenarios will be presented:

Scenario 1 – Zacate – City overhauls ZacateWWTP

Scenario 2 – Manadas – City constructs new Manadas WWTP

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Capital Improvement PlanScenario I & II

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Long-Term FinancingForecast W/WW Bond Issues

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Term = 25 Years Interest = 3.5%P&I = Fixed

Note: Debt Service for 2018 issue included as Current Debt not Future Debt

Scen 1 Scen 2

2019 -$ -$

2020 35,000,000 41,000,000

2021 42,000,000 68,000,000

2022 23,000,000 23,000,000

2023 21,000,000 21,000,000

2024 26,000,000 26,000,000

Total 147,000,000$ 179,000,000$

WaterForecast Cost of Service

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TotalOperating Debt Transfers & Cost ofExpenses Service Contingencies Service

WATER Revenue Requirement -- Scen ITY 2018 27,707,217$ 16,991,128$ 732,705$ 45,431,050$ FY 2019 28,928,928 17,241,533 754,686 46,925,147 FY 2020 30,370,927 17,098,906 777,327 48,247,160 FY 2021 31,806,164 16,586,831 800,647 49,193,642 FY 2022 33,320,623 19,666,321 824,666 53,811,610 FY 2023 34,930,795 20,408,171 849,406 56,188,372 FY 2024 36,555,472 21,376,391 874,888 58,806,751 FY 2025 38,273,019 22,606,365 901,135 61,780,519 FY 2026 40,098,486 22,271,136 928,169 63,297,791 FY 2027 42,040,226 21,366,670 956,014 64,362,910


WATER Revenue Requirement -- Scen IITY 2018 27,707,217$ 16,991,128$ 732,705$ 45,431,050$ FY 2019 28,928,928 17,241,533 754,686 46,925,147 FY 2020 30,370,927 17,098,906 777,327 48,247,160 FY 2021 31,806,164 16,586,831 800,647 49,193,642 FY 2022 33,320,623 19,666,321 824,666 53,811,610 FY 2023 34,930,795 20,408,171 849,406 56,188,372 FY 2024 36,555,472 21,376,391 874,888 58,806,751 FY 2025 38,273,019 22,606,365 901,135 61,780,519 FY 2026 40,098,486 22,271,136 928,169 63,297,791 FY 2027 42,040,226 21,366,670 956,014 64,362,910

WastewaterForecast Cost of Service

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WASTEWATER Revenue Requirement -- Scen ITY 2018 21,185,823$ 11,837,272$ 763,465$ 33,786,560$ FY 2019 22,036,121 11,584,858 786,369 34,407,347 FY 2020 22,994,437 11,732,784 809,960 35,537,181 FY 2021 23,992,233 14,420,010 834,259 39,246,503 FY 2022 25,012,770 14,574,247 859,287 40,446,304 FY 2023 26,089,731 15,406,482 885,065 42,381,279 FY 2024 27,207,000 15,901,030 911,617 44,019,647 FY 2025 28,386,321 15,923,767 938,966 45,249,053 FY 2026 29,634,257 15,876,495 967,135 46,477,886 FY 2027 30,955,999 15,497,585 996,149 47,449,733


WASTEWATER Revenue Requirement -- Scen IITY 2018 21,185,823$ 11,837,272$ 763,465$ 33,786,560$ FY 2019 22,036,121 11,584,858 786,369 34,407,347 FY 2020 23,033,090 11,732,784 809,960 35,575,834 FY 2021 24,513,536 14,884,394 834,259 40,232,188 FY 2022 25,615,862 17,050,956 859,287 43,526,105 FY 2023 26,784,618 17,883,192 885,065 45,552,876 FY 2024 27,931,365 18,377,740 911,617 47,220,722 FY 2025 29,135,055 18,400,477 938,966 48,474,497 FY 2026 30,408,198 18,353,205 967,135 49,728,537 FY 2027 31,756,014 17,974,295 996,149 50,726,457

Notes on Rate Proposal

• City’s policy of 2.0% annual rate adjustments have been effective in prior years in funding water and WW costs

• However, combination of increasing operating costs and need to fund capital projects will require a nominal adjustment in City’s rate plan beginning October 2019

• Combination of robust expected growth and higher adjustments to commercial W/WW rate is forecast to minimize impact on residential customers

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Water Rate PlanScenario I & II

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Annual 3.0% rate adjustments beginning October 2023

Water Rate PlanScenario I & II

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Current Oct-21 Oct-22

Approved Approved Proposed Approved Proposed Proposed ProposedCommercialBase Charge (Includes 2,000 Gallons)

5/8" or 3/4" 36.99$ 37.73$ 38.48$ 39.61$ 39.25$ 41.59$ 43.67$ 45.85$ 1" 40.18 40.98 41.80 43.03 42.64 45.18 47.44 49.81

1 1/2" 44.69 48.58 46.49 47.86 47.42 50.25 52.76 55.40 2" 61.70 82.90 64.16 66.08 65.44 69.38 72.85 76.50

Volume Rates Per 1,000 Gallons2,001 4,000 2.05 2.09 2.13 2.51 2.17 2.63 2.77 2.90 4,001 10,000 2.52 2.57 2.62 3.08 2.67 3.24 3.40 3.57

10,001 40,000 3.17 3.23 3.29 3.88 3.36 4.08 4.28 4.49 40,001 150,000 3.35 3.42 3.49 4.10 3.56 4.30 4.51 4.74

150,001 300,000 3.62 3.69 3.76 4.43 3.84 4.65 4.89 5.13 300,001 600,000 4.00 4.08 4.16 4.89 4.24 5.14 5.40 5.67 600,001 1,000,000 4.72 4.81 4.91 5.78 5.01 6.07 6.37 6.69

1,000,001 Above 4.83 4.93 5.03 5.92 5.13 6.21 6.52 6.85

Oct-19 Oct-20Oct-18EFFECTIVE DATE


Wastewater Rate PlanScenario I

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Approved Approved Proposed Approved Proposed Proposed Proposed ResidentialBase Charge 9.66$ 9.85$ 10.05$ 10.15$ 10.25$ 10.45$ 10.77$ 11.09$ (Includes 2,000 Gallons)


10,001 20,000 3.54 3.61 3.68 3.72 3.75 3.83 3.94 4.06 20,001 30,000 3.80 3.87 3.95 3.99 4.03 4.11 4.23 4.36 30,001 Above 3.80 3.87 3.95 3.99 4.03 4.11 4.23 4.36

CommercialBase Charge 25.87$ 26.39$ 26.92$ 27.18$ 27.46$ 27.99$ 28.83$ 29.70$

ncludes 2,000 Gallons)


10,001 40,000 2.87 2.93 2.99 3.37 3.05 3.54 3.64 3.75 40,001 150,000 2.97 3.03 3.09 3.48 3.15 3.66 3.77 3.88

150,001 300,000 3.79 3.87 3.95 4.45 4.03 4.67 4.81 4.96 300,001 600,000 3.79 3.87 3.95 4.45 4.03 4.67 4.81 4.96 600,001 1,000,000 4.34 4.42 4.51 5.09 4.60 5.34 5.50 5.67

1,000,001 Above 5.26 5.37 5.47 6.18 5.58 6.48 6.68 6.88

Oct-20Oct-18 Oct-19EFFECTIVE DATE


Wastewater Rate PlanScenario II

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Approved Approved Proposed Approved Proposed Proposed Proposed ResidentialBase Charge 9.66$ 9.85$ 10.05$ 10.44$ 10.25$ 11.07$ 11.74$ 12.44$ (Includes 2,000 Gallons)


10,001 20,000 3.54 3.61 3.68 3.82 3.75 4.05 4.30 4.56 20,001 30,000 3.80 3.87 3.95 4.11 4.03 4.35 4.61 4.89 30,001 Above 3.80 3.87 3.95 4.11 4.03 4.35 4.61 4.89

CommercialBase Charge 25.87$ 26.39$ 26.92$ 27.97$ 27.46$ 29.65$ 31.43$ 33.31$

ncludes 2,000 Gallons)


10,001 40,000 2.87 2.93 2.99 3.37 3.05 3.57 3.78 4.01 40,001 150,000 2.97 3.03 3.09 3.48 3.15 3.69 3.91 4.15

150,001 300,000 3.79 3.87 3.95 4.45 4.03 4.72 5.00 5.30 300,001 600,000 3.79 3.87 3.95 4.45 4.03 4.72 5.00 5.30 600,001 1,000,000 4.34 4.42 4.51 5.09 4.60 5.39 5.72 6.06

1,000,001 Above 5.26 5.37 5.47 6.18 5.58 6.55 6.94 7.35

Oct-20Oct-18 Oct-19EFFECTIVE DATE


Rate Plan – Scenarios I & IIImpact on Ratepayers

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Current Oct-18 Oct-19 Oct-20 Oct-21 Oct-22Residential Monthly ChargeScenario I5,000 Gallons Total 35.35$ 36.05$ 37.45$ 38.91$ 40.44$ 42.02$ Dollar Inc 0.71 1.40 1.46 1.52 1.58

2.0% 3.9% 3.9% 3.9% 3.9%

10,000 Gallons Total 62.40 63.65 66.09 68.62 71.27 74.02 Dollar Inc 1.25 2.44 2.54 2.64 2.75

2.0% 3.8% 3.8% 3.9% 3.9%

Scenario II5,000 Gallons Total 35.35$ 36.05$ 38.06$ 40.17$ 42.40$ 44.76$ Dollar Inc 0.71 2.00 2.12 2.23 2.36

2.0% 5.6% 5.6% 5.6% 5.6%

10,000 Gallons Total 62.40$ 63.65$ 67.20$ 70.96$ 74.92$ 79.11$ Dollar Inc 1.25 3.55 3.75 3.97 4.19

2.0% 5.6% 5.6% 5.6% 5.6%

EFFECTIVE

Rate Plan – Scenarios I & IIImpact on Ratepayers

Page: 23

Current Oct-18 Oct-19 Oct-20 Oct-21 Oct-22Commercial Monthly ChargeScenario I50,000 Gallons Total 371.22$ 378.65$ 433.52$ 454.66$ 473.48$ 493.13$ 2" Meter Dollar Inc 7.42 54.88 21.13 18.83 19.65

2.0% 14.5% 4.9% 4.1% 4.2%

Scenario II50,000 Gallons Total 371.22$ 378.65$ 434.31$ 457.90$ 482.78$ 509.03$ 2" Meter Dollar Inc 7.42 55.67 23.59 24.88 26.24

2.0% 14.7% 5.4% 5.4% 5.4%

EFFECTIVE

Presentation SummaryBenefits of Proposed Rate Plan

• Will contribute towards utility operating on a stand-alone basis and independent of general fund assistance

• Will result in financially-healthy utility that has ability to fund operations and capital needs

• Will ensure that ratepayers pay only what it costs to provide service

• Will allow $150-$180 million of additional capital investment into system to improve quality of service and provide a well-functioning system for future generations

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City of Laredo 2018 Water/Wastewater Rate Study and ... · City of Laredo Current Wastewater Rate Structure. Page: 5. Minimum Charge $ 9.66 Minimum Charge $ 25.87 (Includes 2,000

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