FINAL REPORT Wastewater Rate Study October 2019 OFFICE LOCATIONS: Temecula – Corporate Headquarters 32605 Temecula Parkway, Suite 100 Temecula, CA 92592 San Francisco – Regional Office 870 Market Street, Suite 1223 San Francisco, CA 94102 California Satellite Offices Atascadero, Davis Huntington Beach, Joshua Tree, Riverside Sacramento, San Jose www.nbsgov.com
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Wastewater Rate Study - City of Santa Monica, California
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FINAL REPORT
Wastewater Rate Study
October 2019
OFFICE LOCATIONS:
Temecula – Corporate Headquarters
32605 Temecula Parkway, Suite 100
Temecula, CA 92592
San Francisco – Regional Office
870 Market Street, Suite 1223
San Francisco, CA 94102
California Satellite Offices
Atascadero, Davis
Huntington Beach,
Joshua Tree, Riverside
Sacramento, San Jose
www.nbsgov.com
TABLE OF CONTENTS
Purpose and Overview of the Study .................................................................... 1
A. Purpose ........................................................................................................................... 1
B. Overview of the Study ..................................................................................................... 1
Figure 12. Bi-Monthly Wastewater Bill Comparison for Single Family Customers............................................ 15
Figure 13. Bi-Monthly Wastewater Bill Comparison for Multi-Family Customers ............................................ 16
Figure 14. Bi-Monthly Wastewater Bill Comparison for Commercial Customers ............................................. 17
This appendix identifies abbreviations and acronyms that may be used in this report. This appendix has not been viewed, arranged, or
edited by an attorney, nor should it be relied on as legal advice. The intent of this appendix is to support the recognition and analysis
of this report. Any questions regarding clarification of this document should be directed to staff or an attorney specializing in this
particular subject matter.
ABBREVIATIONS & ACRONYMS
AAF
AF
Alt.
Avg.
AWWA
BMP
BOD
CA
CAP
CCF
CCI
COD
COM
Comm.
COS
COSA
CPI
CIP
DU
Excl.
ENR
EDU
Exp.
FP
FY
FY 2017/18
GPD
GPM
HCF
Ind.
Irr.
LAIF
Lbs.
MFR
MGD
MG/L
Mo.
Average Annual Flow
Acre Foot, equal to 435.6 HCF/CCF or 325,851 gallons
Alternative
Average
American Water Works Association
Best Management Practice
Biochemical Oxygen Demand
Customer
Capacity
Hundred Cubic Feet (same as HCF); equal to 748 gallons
Construction Cost Index
Chemical Oxygen Demand
Commodity
Commercial
Cost of Service
Cost of Service Analysis
Consumer Price Index
Capital Improvement Program
Dwelling Unit
Exclude
Engineering News Record
Equivalent Dwelling Unit
Expense
Fire Protection
Fiscal Year (e.g., July 1st to June 30th)
July 1, 2017 through June 30, 2018
Gallons per Day
Gallons per Minute
Hundred Cubic Feet; equal to 748 gallons or 1 CCF
Industrial
Irrigation
Local Agency Investment Fund
Pounds
Multi-Family Residential
Million Gallons per Day
Milligrams per Liter
Month
This appendix identifies abbreviations and acronyms that may be used in this report. This appendix has not been viewed, arranged, or
edited by an attorney, nor should it be relied on as legal advice. The intent of this appendix is to support the recognition and analysis
of this report. Any questions regarding clarification of this document should be directed to staff or an attorney specializing in this
particular subject matter.
Muni.
NH3
NPV
N/A
O&M
Prop 13
Prop 218
Req’t
Res.
Rev.
RTS
R&R
SFR
SRF Loan
SWRCB
TSS / SS
V. / Vs. /vs.
WWTP
Municipal
Ammonia
Net Present Value
Not Available or Not Applicable
Operational & Maintenance Expenses
Proposition 13 (1978) – Article XIIIA of the California Constitution which limits taxes
on real property to 1% of the full cash value of such property.
Proposition 218 (1996) – State Constitutional amendment expanded restrictions of
local government revenue collections.
Requirement
Residential
Revenue
Readiness-to-Serve
Rehabilitation & Replacement
Single Family Residential
State Revolving Fund Loan
State Water Resources Control Council
Total Suspended Solids
Versus
Waste Water Treatment Plant
City of Santa Monica Wastewater Rate Study 1
PURPOSE AND OVERVIEW OF THE STUDY
A. Purpose
The City of Santa Monica (City) retained NBS to conduct a comprehensive wastewater rate study for a number
of reasons, including meeting revenue requirements, providing greater financial stability for the wastewater
enterprise, and complying with certain legal requirements (such as California Constitution article XIII D,
Section 6, which is commonly referred to as Proposition 218 [Prop 218]). The rates resulting from this study
were developed in a manner that is consistent with industry standard cost of service principles. In addition to
documenting the rate study methodology, this report is provided with the intent of assisting the City to
maintain transparent communications with its residents and businesses.
In developing new wastewater rates, NBS worked cooperatively with City staff, the Task Force on the
Environment (Task Force) and the City Council (Council) in selecting appropriate rate alternatives. A Council
Study Session was held on August 13, 2019 to obtain public input. Based on input from all stakeholders, the
proposed rates are summarized in this report.
B. Overview of the Study
Comprehensive rate studies such as this one typically includes the following three components, as outlined
in Figure 1:
1. Preparation of a Financial Plan, which identifies the net revenue requirements for the utility.
2. Cost of Service Analysis, which determines the cost of providing service to each customer class.
3. Rate Design Analysis, which evaluates different rate design alternatives.
Figure 1. Primary Components of a Rate Study
1 FINANCIAL
PLAN
2 COST-OF-
SERVICE
ANALYSIS
3 RATE DESIGN
ANALYSIS
Compares current sources and
uses of funds and determines the
revenue needed from rates and
projects rate adjustments.
Proportionately allocates the
revenue requirements to the
customer classes in compliance
with industry standards and State
Law.
Considers what rate structure will
best meet the City’s need to collect
rate revenue from each customer
class.
These steps are intended to follow industry standards and reflect the fundamental principles of cost-of-
service rate making embodied in the American Water Works Association (AWWA) Principles of Water Rates,
Fees, and Charges1, also referred to as the M1 Manual. The rate study also addresses requirements under
Proposition 218 that rates do not exceed the cost of providing the service, and that the rates be proportionate
1 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, M1, AWWA, seventh edition, 2017.
City of Santa Monica Wastewater Rate Study 2
to the cost of providing service for all customers. In terms of the chronology of the study, these three steps
represent the order they were performed in this Study. Detailed tables and figures documenting the
development of the proposed rates are provided in the Appendix.
FINANCIAL PLAN
As a part of this rate study, NBS projected revenues and expenditures on a cash flow basis for the next five
years. The amount of rate revenue required, that will allow reserves to be maintained at the recommended
levels is known as the net revenue requirement. Recommended reserve levels are based on a combination of
industry standards and each utility’s unique financial needs. More detail on recommended reserve levels is
included in the Section 2. As current rate revenue falls short of the net revenue requirement, rate adjustments
-- or more accurately, adjustments in the total revenue collected from rates -- are recommended. This report
presents an overview of the methodologies, assumptions, and data used, along with the financial plans and
proposed rates developed in this study2.
WASTEWATER RATE DESIGN ANALYSIS
Rate Design is typically the stage in the study where NBS, Staff, Committees and the Council must work closely
together, to develop rate alternatives that will meet the City’s objectives. It is important for the wastewater
utility to send proper price signals to its customers about the actual cost of providing service. This objective
is typically addressed through both the magnitude of the rate adjustments, and the rate structure design. In
other words, both the amount of revenue collected, and the way in which the revenue is collected from
customers are important.
Several criteria are typically considered in setting rates and developing sound rate structures. The
fundamentals of this process have been documented in a number of rate-setting manuals, such as the AWWA
Manual M1. The foundation for evaluating rate structures is generally credited to James C. Bonbright in the
Principles of Public Utility Rates3, which outlines pricing policies, theories, and economic concepts along with
various rate designs. The following is a simplified list of the attributes of a sound rate structure:
• Rates should be easy to understand from the customer’s perspective.
• Rates should be easy to administer from the utility’s perspective.
• Rates should promote the efficient allocation of the resource.
• Rates should be equitable and non-discriminating (that is, cost based).
• There should be continuity in the ratemaking philosophy over time.
• Rates should address other utility policies (for example, encouraging conservation & economic
development).
• Rates should provide month-to-month and year-to-year revenue stability.
The following are the basic rate design criteria that were considered in this study:
Rate Structure Basics – From a financial stability perspective, when utilities recover all of their fixed costs
from fixed charges and all of their variable costs from volumetric charges. When this is the case, fluctuations
in variable revenues are directly offset by reductions or increases in variable expenses. When rates are set in
2 The complete financial plan is set forth in the Appendix. 3 James C. Bonbright; Albert L. Danielsen and David R. Kamerschen, Principles of Public Utility Rates, (Arlington, VA: Public Utilities
Report, Inc., Second Edition, 1988), p. 383-384.
City of Santa Monica Wastewater Rate Study 3
this manner, they provide the greatest revenue stability for the utility. However, other factors are often
considered when designing rates such as community values, water conservation goals, ease of understanding,
and ease of administration.
The vast majority of rate structures contain a fixed or minimum charge in combination with a volumetric
charge. The revenue requirements for each customer class are collected from both fixed bi-monthly meter
charges and variable commodity charges. Based on input from the Council, the rates proposed in this report
are designed to collect 15 percent (15%) of rate revenue from the fixed meter charge and 85 percent (85%)
from the variable commodity charge4.
Fixed Charges – Fixed charges can be called base charges, minimum bi-monthly charges, customer charges,
fixed meter charges, etc. Fixed charges for wastewater utilities typically increase by meter size.
Volumetric (Consumption-Based) Charges – In contrast to fixed charges, variable costs such as the cost of
electricity used in pumping, and the cost of chemicals for treatment tend to change with the quantity of
wastewater produced. For a wastewater utility, variable charges are typically based on winter water usage
(or estimated wastewater discharge) and charged on a dollar-per-unit cost (for example, per 100 cubic feet,
or hcf). Following general industry practice, the City has established a “discharge factor” that represents the
percent of water consumption that is discharged into the wastewater system, based on the lowest four
months of water use during a twelve month period. This factor is used in the rate design to determine the
customer’s volumetric portion of their bill.
4 The California Urban Water Conservation Council recommends recovering at least 70 percent of rate revenue through volume-based rates. However, water utilities are allowed to develop their own allocations that accurately reflect their actual cost allocations.
City of Santa Monica Wastewater Rate Study 4
WASTEWATER RATES
A. Key Wastewater Rate Study Priorities
The City’s wastewater rate analysis was undertaken with a few specific objectives, including:
• Maintain wastewater service through operation and maintenance of an extensive wastewater
collection system.
• Achieve water self-sufficiency by 2023.
• Improve environmental sustainability by reusing local water resources and indirectly reducing
imported water purchases.
• Increase local control on wastewater treatment through the Sustainable Water Infrastructure Project
(SWIP).
• Maintain adequate reserve levels to ensure continuity in operations.
• Provide greater revenue stability for the Utility, due to the level of capital investment planned over
the next five years.
• Comply with Prop 218 requirements to ensure cost of service are properly allocated amongst user
classifications.
NBS developed various wastewater rate alternatives as requested by City staff and the Task Force over the
course of this Study. All rate structure alternatives relied on industry standards and cost-of-service principles.
The rate alternative that will be implemented, is ultimately the decision of the City Council. The fixed and
volume-based charges were calculated based on the net revenue requirements, number of customer
accounts, water consumption/estimated wastewater discharge, and other City-provided information.
B. Financial Plan
It is important for municipal utilities to maintain reasonable reserves in order to handle emergencies, fund
working capital, maintain a good credit rating, and generally follow sound financial management practices.
Rate increases are governed by the need to meet operating and capital costs, maintain adequate debt
coverage, and build reasonable reserve funds. The current state of the City’s Wastewater Utility, with regard
to these objectives, is as follows:
• Meeting Net Revenue Requirements: For Fiscal Year (FY) 2019/20 through FY 2023/24, the projected
net revenue requirement (that is, total annual expenses plus debt service and rate-funded capital
costs, less non-rate revenues) for the City averages $22.4 million, annually. If no rate adjustments are
implemented, the City is projected to average a $5.5 million deficit each year.
• Building and Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with fiscal
emergencies such as revenue shortfalls, asset failure, and natural disasters, among other events.
Reserve policies provide guidelines for sound financial management, with an overall long-range
perspective to maintain financial solvency and mitigate financial risks associated with revenue
instability, volatile capital costs, and emergencies. The City plans to have at least $12.5 million in
wastewater fund reserves by the end of FY 2023/24, to follow industry standard recommendations.
The reserve funds for the Utility are considered unrestricted reserves and consist of the following:
• The Operating Reserve should equal approximately 90 days of operating expenses (about
25% of the annual operating budget), in FY 2023/24, the balance for the operating reserve
City of Santa Monica Wastewater Rate Study 5
should be approximately $3.9 million. An Operating Reserve is intended to promote financial
viability in the event of any short-term fluctuation in revenues and/or expenditures.
Fluctuations in revenue can be caused by weather patterns, the natural inflow and outflow
of cash during billing cycles, natural variability in demand-based revenue streams (such as
volumetric charges), and – particularly in periods of economic distress – changes or trends in
age of receivables.
• The Capital Rehabilitation and Replacement Reserve should equal 3 percent of net capital
assets, which is approximately $7.5 million by the end of for FY 2023/24. This reserve is set
aside to address long-term and routine capital system replacement and rehabilitation needs.
• Rate Stabilization Reserve has a target reserve of $1 million and is to remain unchanged from
current City policy. This reserve is intended to provide additional financial security to the
Utility should any unforeseen revenue shortages or capital emergency occur.
• Funding Capital Improvement Projects: The City must also be able to fund necessary capital
improvements in order to maintain current service levels. City staff has identified roughly $118 million
in expected total capital expenditures for FY 2018/19 through 2023/24, which includes the SWIP.
With the recommended rate increases, these expenditures can be accomplished while also
maintaining reserves at the minimum recommended target. The SWIP capital cost will be funded
through various sources: approximately $69.8 million of the SWIP capital will be funded with a low
interest State Revolving Fund (SRF) loan that will be paid back over a 30-year period, $6.6 million will
be funded with contributions from the Storm Water fund, and $14.6 million funded with Capacity Fee
reserves. Capacity fees are one-time fees paid by new connections upon connecting to the
wastewater system.
• Inflation and Growth Projections: Assumptions regarding cost inflation were made in order to project
future revenues and expenses for the study period. Customer growth is expected to be nearly 0.42
percent annually per the 2018 Sustainable Water Master Plan (SWMP). This factor was used in the
analysis for some revenues and expenses, and all other factors were set by the City budget.
• Impact of Annual Rate Adjustment Date: The financial plan modelling assumes that rate adjustments
occur in January of each year5. This means that only about half of the planned revenue to be collected
from the rate adjustment listed for one fiscal year will be collected in that year. For example, there is
a 10 percent increase in rate revenue planned for FY 2019/20; meaning, the rates are developed to
recover $18.5 million, which is a 10 percent increase over the expected $16.8 million that would be
collected without a rate increase. However, because of the timing for when the rates will go into
effect, the Financial Plan results in only $17.6 million in rate revenue that will be collected for FY
2019/20, due to the mid-fiscal year implementation.
Rate revenue increases of 10 percent annually for four years from FY 2019/20 through 2022/23, and a 3
percent increase in FY 2023/24 will be needed in order to fully fund all operating expenses, planned capital
projects and maintain reserves at the recommended targets by FY 2023/246. Figure 2 summarizes the sources
and uses of funds, net revenue requirements, and the recommended annual percent increases in total rate
revenue recommended for the next 5 years for the City7. This rate represents feedback from majority of
5 The first rate increase is scheduled for January 1, 2020 but could be delayed to March 1, 2020. 6 Because of the mid-year adjustment to the rates, the full impact of each year’s increase does not affect revenue until the
following year. 7 Wastewater rates were last increased by the City in 2014 by 0.4%.
City of Santa Monica Wastewater Rate Study 6
Council which does not defer capital projects, an alternative rate option that was considered is shown in the
Appendix.
Figure 2. Summary of Wastewater Revenue Requirements
Figure 3 summarizes the City’s full Capital Improvement Plan, providing the expected cost and timing of
capital projects during the 5-year rate period. It is notable to mention that the Sustainable Water
Infrastructure Project (SWIP) will be funded with SRF loans and paid back over the next 30 years.
Figure 3. Summary of Capital Improvement Plan
Figure 4 summarizes the projected reserve fund balances and reserve targets for the sewer utility’s
unrestricted funds. A more detailed version of the utility’s proposed 5-year financial plan is included in
Appendix A. The appendix tables include revenue requirements, reserve funds, revenue sources, proposed
Wastewater Only 4 12,150 2,147 2,346 2,484 19,127 0.1%
11,959,976$ 2,654,712$ 2,654,712$ 1,210,601$ 18,480,000$ 100%1. Revenue requirement for each customer class is determined by multiplying the revenue requirement from each cost classification
by the allocation factors for each customer class. Multi-Family Residential = MFR
Customer Class
Cost Classification Components Cost-of-
Service Net
Revenue
% of COS Net
Revenue
Req'ts. Volume
Treatment Customer
Related
City of Santa Monica Wastewater Rate Study 9
industrial and wastewater only customers (these customers are contracted with the City of LA for water
service, and are all single-family residential accounts).
As shown in Figure 6, the development of the collection (or volume) allocation factor was calculated by taking
the lowest consecutive 4-month water usage from FY 2017/18 and annualizing the usage per customer class.
From here, the annual usage was adjusted to meet the flow data from the wastewater treatment plant. It
should be noted that this is where the discharge factor was also analyzed and calculated to reflect current
cost of service. The discharge factor was calculated by taking the estimated wastewater flow and dividing it
by the annual metered water use volume per customer class. This discharge factor is the multiplier specific
to each customer class that estimates the amount of sewage discharged to the City’s wastewater system.
Figure 6. Development of the Volume Allocation Factor and Discharge Factors
Figure 7 shows the development of the strength allocation factors by customer class. The typical strength
factors for biochemical oxygen demand (BOD) and total suspended solids (TSS) are derived from the
Amalgamated System Sewerage Facilities Charge (ASSFC) report for March-April 2018-19 to Los Angeles
Sanitation District (LASAN) and calculated for commercial customers based on weighted averages for each
class.
Customer ClassAnnual
Volume (hcf)1
Lowest
4-Months
Water Use
(hcf)1,2
Estimated
Wastewater
Flow
Updated
Discharge
Factors
Adjusted
Annual
Volume (hcf) 3
Percentage
of Adjusted
Volume
Calculation Components A B C = B * 3 = C / A E = C * 1.12
Single Family 1,220,522 345,886 1,037,657 85% 1,158,453 23.2%
Total 4,842,334 1,493,126 4,479,379 93% 5,000,833 100.0%1. Metered water consumption from May-June 2018 found in Source File: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
Multi-Family Residential = MFR
2. The four consecutive month period of lowest water usage during Fiscal Year 2017/18, for each customer class.
3. NBS adjusted the average winter consumption to the outgoing wastewater flows pumped from the City's Moss Avenue Pump Station to the City of
Los Angeles' Hyperion Water Reclamation Plant for treatment and disposal. Source file: Data Request Notes - 2018.11.13.docx, Item 19 information.
4. Estimated volume for Wastewater Only customers is the average adjusted annual per EDU for SFR customers, multiplied by the number of
Wastewater Only customers. All Wastewater Only customers are SFR.
City of Santa Monica Wastewater Rate Study 10
Figure 7. Development of the Strength Allocation Factor
Figure 8 summarizes the development of the customer allocation factor.
Figure 8. Development of the Customer Allocation Factor
Customer Class
Adjusted
Annual Flow
(hcf)
Average
Strength
Factor (mg/l)
Calculated
BOD
(lbs./yr.)
Adjusted
BOD
(lbs./yr.)
Percent of
Total
Average
Strength
Factor (mg/l)
Calculated
TSS
(lbs./yr.)
Adjusted TSS
(lbs./yr.)
Percent of
Total
Single Family 1,158,453 310 2,240,308 1,132,938 18.4% 350 2,529,381 913,812 20.2%
Total 5,000,833 12,147,266 6,142,950 100% 12,550,956 4,534,395 100%
Target, from WWTP Data 6,142,950 BOD (lbs./yr.) 4,534,395 TSS (lbs./yr.)
0.51 BOD Adj. Factor 0.36 TSS Adj. Factor
1. Consumption, accounts and EDUs from May-June 2018 found in Source Fi le: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
2. Typica l s trength factors for BOD and TSS are derived from the ASSFC Report for March-Apri l 2018-19 and ca lculated for Commercia l customers with weighted averages .
Source fi les : Santa Monica_Sewer Bill Data FY 17/18 gg jt_07.16.19_kb_v3.xlsx and ASSFC_Report_March-April_2018-19_to_LASAN.xlsx
Biochemical Oxygen Demand (BOD) Total Suspended Solids (TSS)
Customer ClassNumber
of Accounts 1
Percentage
of Accounts
Single Family 7,728 46.64%
MFR : Duplex 576 3.48%
MFR : Triplex 510 3.08%
MFR : Fourplex 751 4.53%
MFR : Over 4 Units 3,071 18.53%
MFR : Individually Metered 1,578 9.52%
MFR : Mixed Use 31 0.19%
Commercial - Low 1,665 10.05%
Commercial - Medium 33 0.20%
Commercial - High 301 1.82%
Institutional 113 0.68%
Church/Schools 168 1.01%
Misc Industrial 11 0.07%
Sewer Only 4 34 0.21%
Total 16,570 100%
1. Consumption, accounts and EDUs from May-June 2018 found in
Source Fi le: Santa Monica_Sewer Bi l l Data FY 17-18.xlsx.
City of Santa Monica Wastewater Rate Study 11
D. Rate Design Analysis
The process of evaluating the wastewater rate structure provides the opportunity to incorporate a number
of rate-design objectives and policies, including revenue stability, equity among customer classes, and water
conservation. NBS discussed several wastewater rate alternatives and methodologies with City Staff over the
course of this study, such as the percentage of revenue collected from fixed vs. variable charges and
differentiating rates by customer class. Based on input provided by City staff, the Task Force, and the City
Council, the proposed rates were developed. The following sections describe this process.
NBS recommends that the City make the following modifications to the wastewater rate structure:
1. Introduce a modest fixed charge, for all customer classes.
2. Update the discharge factor to reflect current consumption patterns.
3. Update the volumetric charges that will be calculated based on each unit of water consumed, and
multiplied by the discharge factor.
FIXED CHARGES
The fixed charge recognizes that the wastewater utility incurs fixed costs regardless of whether customers
send any wastewater into the City’s collection system. There are three factors used to develop the fixed
charge: the number of dwelling units for Residential customers and number of accounts for Non-Residential
customers, and the annual revenue requirement. The bi-monthly fixed charge is calculated by taking the 15
percent fixed multiplied by the annual revenue requirement, then divide by the number of dwelling units (for
Residential customers) and accounts (for Non-Residential customers) and billing periods per year. The fixed
charges for each customer class are shown in Figure 9.
VARIABLE CHARGES
The variable charges, on the other hand, are calculated by taking the additional 85 percent portion of the
revenue requirement divided by the estimated sewage volume produced. This sewage volume is the water
consumption multiplied by the updated discharge factors calculated in Figure 6. The volumetric charges for
each customer class are summarized in the rate design table shown in Figure 9.
City of Santa Monica Wastewater Rate Study 12
Figure 9. Development of Fixed and Variable Charges
Customer ClassNo. of
Accounts 1
No. of
Dwelling
Units 1
Estimated
Sewage
Volume 2
Annual
Revenue
Requirement
New
Discharge
Factor
Bi-
Monthly
Fixed
Charge 3
Volumetric
Charge Per
hcf 4
Residential Per DU
Single Family 7,728 7,753 1,037,657 4,359,766$ 85% $14.06 $3.40
1. Revenue and expenses for FY 2017/18 & FY 2018-19 are from source file: Item 1-FYE2018_OperatingBudget_LineItem.pdf, Pages 88-89 and 424-426.
Budget values have been adjusted as part of the analysis, as detailed in Exhibit 1 (O&M).
2. Revenue from rate increases assumes an implementation date of January 1, 2020 and then January 1 each year thereafter.
3. The FY 2018/19 operating expenses are from the budget. Inflationary factors are applied to these expenses to project costs in FY 2019/20 and beyond.
4. Stormwater fund 52 contributes to the SWIP project. Source file: Fund Forecast - Stormwater (52) - 20181212.xlsx, Summary tab.
RATE REVENUE REQUIREMENTS SUMMARY 1Projected
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Financial Plan - Wastewater, 1 of 4110/31/2019
CITY OF SANTA MONICA Financial Plan & Reserve SummaryWASTEWATER RATE STUDYFinancial Plan and Reserve Projections
Plus: SRF Loan Funding Proceeds 30,903,461 38,942,952 - - - - Plus: Revenue Bond Proceeds - - - - - - Less: Use of Bond & Loan Funds for CIP (30,903,461) (38,942,952) - - - -
Ending Bond Project Fund Balance -$ -$ -$ -$ -$ -$ Target Ending Balance -$ -$ -$ -$ -$ -$ Debt ReserveBeginning Reserve Balance -$ -$ -$ -$ -$ -$ Plus: Reserve Funding from New Debt Obligations - - - - - - Less: Transfer of Surplus to Operating Reserve - - - - - - Ending Debt Reserve Balance -$ -$ -$ -$ -$ -$ Target Ending Balance -$ -$ -$ -$ -$ -$ Connection and Capital Facility Fee ReserveBeginning Reserve Balance 11,181,125$ -$ -$ -$ -$ -$ Plus: Connection and Capital Facility Fee Revenue 407,782 407,782 407,782 656,000 656,000 656,000 Interest Earnings 223,623 - - - - - Less: Use of Reserves for Capital Projects (11,812,530) (407,782) (407,782) (656,000) (656,000) (656,000) Ending Connection Fee Fund Balance -$ -$ -$ -$ -$ -$ Annual Interest Earnings Rate 2 2.00% 1.96% 2.17% 2.28% 2.28% 2.75%
1. Total beginning cash and Reserve Targets for the Wastewater Fund for FY 2017/18 and FY 2018/19 found in source files: 51(31)Fund Forecast - Wastewater (May 2019)-Final.xlsx, Summary Tab.
2. City estimated interest earnings rate per LAIF. Source file: 51(31) Fund Forecast - Wastewater (May 2019) - Final.xlsx, 'Interest Schedule' tab.
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Financial Plan - Wastewater, 3 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYRate Adjustment Charts and Report Tables
CHART 1
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2020 2021 2022 2023 2024
Annu
al O
blig
atio
ns
Fiscal Year Ending June 30
Sewer Revenue Requirements vs. Revenue Under Existing and Increased Rates
Cash Funded Capital Expenses
Debt Service
O&M Expenses
Revenues under Existing Rates
Revenues under Adjusted Rates
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Charts and Tables, 4 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYRate Adjustment Charts and Report Tables
CHART 2
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2020 2021 2022 2023 2024 2025Fiscal Year Ending June 30
Un-Restricted Cash Balances vs. Recommended Reserve Targets
Unrestricted Cash Balance
60-Day Target Reserve Balance
90-Day Target Reserve Balance
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Charts and Tables, 5 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYRate Adjustment Charts and Report Tables
CHART 3
10.0% 10.0% 10.0% 10.0%
3.0%
0%
2%
4%
6%
8%
10%
12%
2020 2021 2022 2023 2024Fiscal Year Ending June 30
Projected Adjustments to Rate Revenue
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Charts and Tables, 6 of 4110/31/2019
CITY OF SANTA MONICA EXHIBIT 1WASTEWATER RATE STUDYOperating Revenue and Expenses
Wastewater Rate Revenue 16,800,000$ 16,800,000$ 16,870,560$ 16,941,416$ 17,012,570$ 17,084,023$ Charges for Services 1,596,568 597,183 597,183 942,002 950,810 959,829 Connection and Capacity Fees 407,782 407,782 407,782 656,000 656,000 656,000 Fines and Forfeitures - - - - - - Interest Income 850,000 - - - - - Other Revenue 352,500 351,000 351,000 368,002 376,810 385,829
TOTAL : OPERATING REVENUE 1 20,006,850$ 18,155,965$ 18,226,525$ 18,907,420$ 18,996,190$ 19,085,681$ 1. Revenue and expenses for FY 2017/18 & FY 2018-19 are from source files: Item 1-O&M Budgets.xlsx and Item 1-FYE2018_OperatingBudget_LineItem.pdf, Pages 88-89 and 424-426.
Source files for 10-year budget: 51(31)Fund Forecast - Wastewater (May 2019)-Final.xlsx and Fund Forecast - Stormwater (52) - 20181212.xlsx
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Exhibit 1 (O&M), 7 of 4110/31/2019
CITY OF SANTA MONICA EXHIBIT 1WASTEWATER RATE STUDYOperating Revenue and Expenses
1. Revenue and expenses for FY 2017/18 & FY 2018-19 are from source files: Item 1-O&M Budgets.xlsx and Item 1-FYE2018_OperatingBudget_LineItem.pdf, Pages 88-89 and 424-426.
Source file for 10-year budget: 51(31)Fund Forecast - Wastewater (May 2019) -Final.xlsx and Fund Forecast - Stormwater (52) - 20181212.xlsx
2. Some revenues and expenditures found in source file: Item 1-WastewaterFund31_ExpendituresTransfers_FY15-18.pdf , Pages 12-13.
3. For fiscal years 2017/18-2027/28, inflation factors are determined by the City. For the following fiscal years, NBS is estimating inflation factors based on industry standards.4. Customer growth is estimated at 0.42% per year per 2018 Sustainable Water Master Plan.
TOTAL : Wastewater Fund, 51
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Exhibit 1 (O&M), 10 of 4110/31/2019
CITY OF SANTA MONICA EXHIBIT 2WASTEWATER RATE STUDYCapital Improvement Plan Expenditures
Grants -$ -$ -$ -$ -$ -$ Use of Capacity Fee Reserves 11,812,530 407,782 407,782 656,000 656,000 656,000 Use of New SRF Loan 1 30,903,461 38,942,952 - - - - Use of New Revenue Bond Proceeds - - - - - - Use of Stormwater Fund Reserves 2 1,039,176 1,064,116 1,089,655 1,115,807 1,142,586 1,170,008 Use of Capital R&R Reserve 359,128 1,089,597 8,488,240 3,320,541 224,581 12,400 Rate Revenue - - - 2,700,267 5,360,069 5,407,949
Total Sources of Capital Funds 44,114,295$ 41,504,448$ 9,985,677$ 7,792,615$ 7,383,236$ 7,246,358$
Uses of Capital Funds:Total Project Costs 44,114,295$ 41,504,448$ 9,985,677$ 7,792,615$ 7,383,236$ 7,246,358$ Capital Funding Surplus (Deficiency) -$ -$ -$ -$ -$ -$
Clean Water SRF Loan 1 30,903,461$ 38,942,952$ -$ -$ -$ -$ New Revenue Bond Proceeds -$ -$ -$ -$ -$ -$
Stormwater Fund Transfers for projects 2 1,039,176$ 1,064,116$ 1,089,655$ 1,115,807$ 1,142,586$ 1,170,008$ 1. Balance sheet transfer in from Clean Water State Revolving Fund. Source file: 51(31)Fund Forecast - Wastewater (May 2019) - Final.xlsx, Summary tab.
Added $13million to FY 2019/20 per request of City April 30, 2019.
2. Stormwater fund 52 contributes to the SWIP project. Source file: Fund Forecast - Stormwater (52) - 20181212.xlsx, Summary tab.
ProjectedFunding Sources
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Exhibit 2C (CIP), 11 of 4110/31/2019
CITY OF SANTA MONICA EXHIBIT 2WASTEWATER RATE STUDYCapital Improvement Plan Expenditures
CAPITAL IMPROVEMENT PROGRAM
TABLE 11 : Capital Improvement Program Costs (in Current-Year Dollars)
Cumulative Construction Cost Multiplier from FY 2018/19 1.00 1.00 1.03 1.06 1.09 1.13 1. FY 2017/18 - 2028/29 given from City and assumed for future years. Source file: Item 17-FYE2019_CIP_Budget.pdf, Pages 148 in Wastewater Fund 51 and 51(31)Fund Forecast - Wastewater (May 2019)-final.xlsx, 'Capital (CIP)' tab.
Updates made to CIP per City request on 07.12.2019. Source file: SM Sewer CIP Comparison_JT.xlsx
2. Construction inflator is based on the most current 10 year average of the Engineering News-Record Construction Cost Index. Source: www.enr.com/economics
3. NBS assumed future CIP costs to be the average of CIP costs for years 2019-2023.
Annual Construction Cost Inflation, Per Engineering News Record
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Exhibit 2C (CIP), 13 of 4110/31/2019
CITY OF SANTA MONICA EXHIBIT 2WASTEWATER RATE STUDYCapital Improvement Plan Expenditures
Coverage Req't ($-Amnt. above annual payment) 0% 0% 0% 0% 0% 0%Reserve Requirement (total fund balance) -$ -$ -$ -$ -$ -$ 1. Principal payments found in Source file: Item 7-Wastewater2012ASeriesBondRedeenSchedule_2019-2022.pdf.
Per the official statement, there is a 120% coverage requirement of the operating fund and no reserve fund requirement. Source: Item 7-Wastewater2012ASeriesOS.pdf, Page 7-8.
2. Principal and Interest payments found in Source file: Item 7-WastewaterandCleanBeachesFund_SWIP_CWSRFLoanRepayment_8211-110.pdf.
3. Per official statement, no coverage or reserve requirement. Principal and Interest payments found in Source file: Item 7-Wastewater_SMURRF_CWSRFLoan.pdf.
TABLE 16 : EXISTING ANNUAL DEBT OBLIGATIONS TO BE SATISFIED BY WATER RATES
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Exhibit 3 (Debt), 15 of 41
CITY OF SANTA MONICA EXHIBIT 4WASTEWATER RATE STUDYProjected Water Rates Under Existing Rate Schedule
TABLE 17 : CURRENT WASTEWATER RATE SCHEDULE
Single Family Accounts Discharge
Factor Rate per
hcf All SFR Accounts 51% $4.65
Multi-Family Accounts Discharge
Factor Rate per
hcf Duplex 80% $4.65Triplex 85% $4.65
Fourplex 90% $4.65Over 4 Units 95% $4.65
Individually Metered 95% $4.65
Residential Low Income Rate Discharge
Factor Rate per
hcf All Residential Low Income 51% $2.24
Non-Residential Accounts Discharge
Factor Rate per
hcf General Commercial 89% $4.24
Medium Low 89% $4.40Medium 89% $5.09
Medium High 89% $5.55High 89% $6.50
Churches 89% $4.19Institutional 89% $4.19
Schools 89% $4.19Misc. Industrial 89% $5.16
1. Bi-Monthly Wastewater Rates per source file: water and Wastewater rates and capital facility fees 2018.pdf2. HCF = Hundred Cubic Feet or 748 gallons.
City recovers 100% of rate requirements currently with volumetric rates only.
Current Bi-Monthly Wastewater Rates 1, 2
Amount of Water Used (hcfs) x Rate x Discharge Factor = Wastewater Service Charge (bi-monthly bill)
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Exhibit 4 (Current Rates), 16 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYCost of Service Analysis
TABLE 23 : ADJUSTMENTS TO CLASSIFICATIONS OF EXPENSES
Adjustment to Current Rate Level: Total (VOL) (BOD) (TSS) (CA)FY 2019/20 Target Rate Rev. After Rate Increases $18,480,000Projected Rate Revenue at Current Rates $16,800,000FY 2019/20 Projected Rate Increase 10%
Adjusted Net Revenue Req'ts $18,480,000 11,959,976$ 2,654,712$ 2,654,712$ 1,210,601$ Percent of Revenue 100.0% 64.7% 14.4% 14.4% 6.6%
Strength Customer Basis of Classification
Total Cost Distribution to Fixed/ Variable
Budget CategoriesTotal Revenue Requirements
Flow
Prepared by NBS for the City of VictorvilleWastewater Rate Study
Funct. & Classification, 21 of 41
CITY OF SANTA MONICA WASTEWATER RATE STUDYCustomer Data
TABLE 24 : CITY CUSTOMER BILLING DATA
Water Consumption Data used for City of Santa Monica Rates 1, 2
1.12 Flow Adj. Factor1. Consumption, accounts and EDUs from May-June 2018 found in Source File: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
2. The four consecutive month period of lowest water usage during Fiscal Year 2017/18, for each customer class.
3. NBS adjusted the average winter consumption to the outgoing wastewater flows pumped from the City's Moss Avenue Pump Station to the City of Los Angeles' Hyperion Water
Reclamation Plant for treatment and disposal. Source file: Data Request Notes - 2018.11.13.docx, Item 19 information.
4. Estimated volume for Wastewater Only customers is the average adjusted annual volume per EDU for SFR customers, multiplied by the number of EDU's in this class.
All Wastewater Only customers are SFR.
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New Allocation Factors, 23 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYCost of Service Analysis
TABLE 26 : DEVELOPMENT OF THE STRENGTH ALLOCATION FACTOR
Total 5,000,833 12,147,266 6,142,950 100% 12,550,956 4,534,395 100%Target, from WWTP Data 6,142,950 BOD (lbs./yr.) 4,534,395 TSS (lbs./yr.)
0.51 BOD Adj. Factor 0.36 TSS Adj. Factor1. Consumption, accounts and EDUs from May-June 2018 found in Source File: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
2. Typical strength factors for BOD and TSS are derived from the ASSFC Report for March-April 2018-19 and calculated for Commercial customers with weighted averages. Source files: Santa Monica_Sewer Bill Data FY 17/18 gg jt_07.16.19_kb_v3.xlsx and ASSFC_Report_March-April_2018-19_to_LASAN.xlsx
Biochemical Oxygen Demand (BOD) Total Suspended Solids (TSS)
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New Allocation Factors, 24 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYCost of Service Analysis
TABLE 27 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTOR
Customer ClassNumber
of Accounts 1Percentage of Accounts
Single Family 7,728 46.64%MFR : Duplex 576 3.48%MFR : Triplex 510 3.08%MFR : Fourplex 751 4.53%MFR : Over 4 Units 3,071 18.53%MFR : Individually Metered 1,578 9.52%MFR : Mixed Use 31 0.19%Commercial - Low 1,665 10.05%Commercial - Medium 33 0.20%Commercial - High 301 1.82%Institutional 113 0.68%Church/Schools 168 1.01%Misc Industrial 11 0.07%Wastewater Only 4 34 0.21%
Total 16,570 100%1. Consumption, accounts and EDUs from May-June 2018 found in
Source File: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
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New Allocation Factors, 25 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYCost of Service Analysis
TABLE 28 : TOTAL REVENUE BY CUSTOMER CLASS
Customer ClassFY 2017/18
RateRevenue 1
Percentage of Accounts
Single Family 2,861,961$ 15.78%MFR : Duplex 273,235 1.51%MFR : Triplex 313,911 1.73%MFR : Fourplex 616,765 3.40%MFR : Over 4 Units 7,524,895 41.49%MFR : Individually Metered 393,754 2.17%MFR : Mixed Use 195,559 1.08%Commercial - Low 2,837,005 15.64%Commercial - Medium 115,276 0.64%Commercial - High 2,309,847 12.74%Institutional 304,346 1.68%Church/Schools 331,686 1.83%Misc Industrial 40,380 0.22%Wastewater Only 4 16,291 0.09%
Total 18,134,909$ 100%1. Per Source File: Santa Monica_Sewer Bill Data FY 17-18.xlsx.
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New Allocation Factors, 26 of 4110/31/2019
CITY OF SANTA MONICA WASTEWATER RATE STUDYWastewater Cost of Service Analysis
TABLE 29 : ALLOCATION OF REVENUE REQUIREMENTS BY CUSTOMER CLASS
11,959,976$ 2,654,712$ 2,654,712$ 1,210,601$ 18,480,000$ 100%1. Revenue requirement for each customer class is determined by multiplying the revenue requirement from each cost classification
by the allocation factors for each customer class. Multi-Family Residential = MFR