HomeMy WebLinkAbout06/10/2025 - PacketORCHARD
co4t
Meeting Location:
216 Prospect Street
Port Orchard, WA 98366
Utilities Committee
Contact us:
Phone (360) 876-4407
cityhall@portorchardwa.gov
www. portorchardwa.gov
Utility Committee Regular Meeting
Tuesday, June 10, 2025
4:30 PM
Remote Access
Zoom Webinar Public Link: https://us02web.zoom.us/j/88687180185
Webinar ID: 886 8718 0185
Dial -in Number: 1-253-215-8782
1. Call to Order
2. Discussion Items
A. Sewer Rate Discussion
3. Adjournment
Next Utility Committee Meeting: July 8, 2025
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June 10, 2025 Meeting Agenda
1
IRCHARD
Sewer
Orcha
Study
•FCS
Bowman Company
) Agenda
Revenue requirement
"What revenue adjustments are needed to cover the
utility's costs?"
Study period: 2025-2030 ,.
Cost of service analysis (COSA)
"What is the cost to serve each of the City's
customer classes?"
Varies by class characteristics
Rate Design
"How should rates be set to collect the costs of
service?"
Rates can be also be set to meet other City
objectives
•FCS
'I:'
••.! '. :
Slide 2
3
Operations & Capital
Maintenance Expenditures Revenue
Fiscal Policies
Debt Requirement
Service
Class Functional _____Cost of Service
Characteristics I Costs Analysis (COSA)
City's Rate Design
Objectives
•) Rate Increase History
Rates have been $163.00 bi-monthly per dwelling unit since 2020
Sewer Rates
2016
2017
2018
2019
2020
Class
Class
Description
No.
Description
1
Single-family
For each dwelling
$111.00
$124.00
$137.00
$150 00
S163 00
residences and
unit
mobile home
on single
parcel
•FCS
Slide 4
5
•;) Bi-monthly Sewer Rates (SFRs) vs. Inflation
$250
$200.36
$200
$163.00
$150
$100
$50
•FCS
2020 2021 2022 2023 2024 2025
Bi-Monthly Bill (SFR) -Bill with Inflation (CPI -U West)
Slide 5
6
7
•>
Financial Policies
General Reserve
(per Resolution 053-20)
Stabilization Reserve
(per Resolution 053-20)
Debt Service Coverage
FCS
Accommodate variations in revenue &
expenses.
Used for emergency costs outside of
typical contingency planning.
Compliance with existing debt covenants;
Maintain credit worthiness
Policy
Assumptions
60-90 days of annual budgeted
revenues
25% (90 days) of annual
expenditures
Target 1.5 to 2+
Typical legal minimum of 1.25
Slide 7
F
•) Introduction to Ratemaking
Rates are set to recover the cost of providing service
EXAMPLE
Sewer programs incur two primary types of costs
Operating costs (regular! ongoing)
» Employee salaries and benefits
» Routine asset / equipment repair and maintenance
» Supplies and materials
» Regulatory compliance
Bill processing
Capital costs
Repair and replacement
Capital improvement projects
•:;>FCS
III
Year 1 Year 2 Year 3
■ Operating
Year 4 Year 5
Capital
irori
•�• Operations and Maintenance Cost Increases
[ITh Fli Es] ii -..
General Cost 3.00% Based on the Consumer Price Index for Urban Customers (West)
Construction Costs 3.50% 10 -year average of the Engineering News -Record's 20 -City Avg. CCI*
Labor Cost 3.00% Set to be no less than the General Cost inflation assumption
Benefits Cost 5.00% Set 2.00% higher than Labor Cost inflation
Account Growth 1.25% Growth estimates per Kitsap County Countywide Planning Policies
•:;>FCS
Slide 9
10
.) Capital Funding Philosophy (after Outside Funding)
Cash (pay-as-you-go)
» Higher near -term rates
» Existing customers pay 100% of costs
Debt
�y Lowest near -term rates... but interest cost
4' » Spreads cost between existing / future customers
p
» Execute projects sooner; reduce effects of inflation
Hybrid
ai » Cash fund repair and replacement projects
» Debt fund large expansion projects
•:;>FCS
Slide 10
11
•) Capital Improvement Program
6-1
Annual Preservation
$ 583,333
$ 583,333
$ 583,333 $ 583,333
$ 583,333 $ 583,333
6-2
Marina Pump Station Construction
8,611,000
-
- -
- -
6-3
Bay Street Pump Station Replacement
1,000,000
-
3,500,000 3,500,000
- -
6-4
Minor Lift Station Improvements
650,000
650,000
- -
- -
6-5
Port Orchard Boulevard Lift Station and Siphon
-
1,522,000
- 6,088,000
- -
6-6
Sidney Road SW 2nd Force Main
1,300,000
-
- -
- -
6-7
McCormick Woods Sewer Lift Station #3
-
1,000,000
- -
- -
6-8
Ruby Creek Lift Station
-
3,140,000
- -
- -
6-9
Sidney Road Gravity Sewer Main Extension
-
2,290,000
- -
- -
6-10
Bravo Terrace (Sedgwick) Lift Station
-
-
- -
2,500,000 -
6-11
Bravo Terrace (Sedgwick) Force Main
-
-
- -
4,860,000 -
6-12
Sewer Facility Capacity Upgrades (PWO)
-
-
- -
- 2,000,000
6-13
McCormick East/Glenwood Sewer Basin Improvements
-
-
- 7,600,000
- -
6-14
2029 General Sewer Plan and Sewer Rate Study
-
-
- 350,000
- -
Total
$ 12,144,333
$ 9,185,333
$ 4,083,333 $ 18,121,333
$ 7,943,333 $ 2,583,333
•:;>FCS
Slide 11
12
•>
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
•FCS
Capital Spending Forecast
Capital Costs (2024$)
$12,100,000
$9,200,000
$4,100,000
2025 2026 2027
■ Outside Funding
Major projects include:
• Marina Pump Station Construction for $19.4 million in
2024-2026
• Bay Street Pump Station for $8.0 million in 2027-2028
• McCormick East/Glenwood Sewer Basin Improvements
for $8.7 million 2028
• Pipe replacement of $583,000 per year
$18,100,000
2028
■ City Costs
$7,900,000
2029
$2,600,000
2030
Slide 12
13
.) Capital Funding Strategy (2025-2030)
$3,600,000 Low -Cost Loans included:
Low -Cost Loans
6% Pottery Lift Station Repairs
Rate Revenue & $11,900,000 $253,000
Fund Balances Revenue
30% Bonds 0.94% interest
20% Sewer Lift Station
$200,000 » $825,000
Grants » 0.94% interest
0%
Bay Street Lift Station
» $850,000
$5,000,000 » 0.69% interest
CFCs $12,000,000
8% WSDOT/Kitsap Marina Pump Station
$9,800,000 20%
Developer Agreements $13 million (some already drawn)
2.60% interest
16%
>FCS Slide 13
14
•;�� Revenue Requirement Summary
$10,000,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
3.50% 3.50%
3.50% 3.50%
$187.05 $193.59
2025 2026 2027 2028 2029 2030
=Operating & Maintenance = Debt Service Rate Funded Capital
• —Revenue @ 2025 Rates --Revenue with Increases
>FCS
Slide 14
15
16
•>
•:;>FCS
How Will Costs Be Equitably Distributed?
Existing Revenue Collection
Slide 16
17
•>
>FCS
Allocating the Costs of Service
$180,000 (3%)
Customer m
(Accounts)
94% of accounts,
$169,000
Flow
(Thousand gallons)
1 6% of accounts,
$11,000
Non -
Residential
Treatment
(ERUs*)
Customer
Accounts
*ERUs = equivalent residential units, as calculated per the City's joint treatment agreement
Slide 17
18
•) COSA Results
Typical results fall within +1- 5% of the cost -of -service
COSA indicates a need for a non-residential rate increase
% of Cost of Service
120%
100%
80%
60%
40%
20%
0%
•:;>FCS
107%
Residentia
76%
Non -Residential
Slide 18
19
20
•;) Current Rate Schedule
The current rate schedule is complex
It includes 21 different classes
Each class has multiple rates
Complex rate schedules have
disadvantages
Difficult for customers to understand
Administratively burdensome
Obscure relationship between costs
and services provided
City staff wants to simplify the rate
schedule
•FCS
Sewer Rates
2016
2017
2018
2019
2020
Class
Class
Description
No.
Description
1
Single-Tamily
For each dwelling
$111.00
$124.00
$137.00
$150.00
$16300
residences and
unit
mobile home
on single
parcel
2
Business and
For each business
$111.00
$124.00
$137.00
$150O0
$16300
professional
with a fixture
For each business
$22.20
$24.80
$27.40
$30.00
$32.60
with an employee
present, without a
fixture
For each floor of
$111.00
$124.00
$137.00
$150.00
$163.00
an office building
or retail complex
that has a public
or community
bathroom
Plus the following
surcharge, based
on the store/office
interior size:
Small, less than
$0.00
$000
$0.00
$0.00
50 Co
15.000 sf, or
Slide 20
21
••) South Kitsap Water Reclamation Facility (SKWRF) Contract
Port Orchard and West Sound Utility District share the SKWRF
Agreement began in 1983, last updated in 2014
Equivalent residential units (ERUs) are measured annually for
each utility to determine cost sharing
How an ERU is defined:
1 per residence
Flow / 700 CF (180 gpd) for non-residential
•:;>FCS
Slide 21
22
•;> ERU Update
Customer stats support an ERU of 117 gpd per residence
Contract determines how ERUs are counted (180 gpd)
Options to accurately collect cost of service:
Change agreement with SKWRF
Use different ERU definitions for different purposes
Use a weighting factor for commercial
•FCS
Slide 22
23
•,•) Rate Calculation
ERUs (counted as per SKWRF)
Residential
Non-residential
Total
Cost of Service
Residential
Non-residential
Total Cost of Service
Calculated Bi-Monthly Rate per ERU
Residential
Non-residential
•:;>FCS
5,690
1,104
6,794
$ 5,174, 666
1,556,721
$ 6,731,388
$151.58
$234.99
Slide 23
24
Current Units Rate per Bi-Monthly Annual • S
Method Unit Bill Total
Total
Total
$151.58
$151.58
•:;>FCS
1
1
$163.00
$163.00
$978.00
Slide 24
25
Current Units Rate per Bi-Month ly Annual •
Method Unit Bill Total
Billing Units 132 $4.90 $646.80 $3,880.80
Total $646.80 $3,880.80
Total
1 $234.99 $234.99 $1,409.94
•:;>FCS
Slide 25
26
•) Sample Bill — Large Restaurant (150 seats or more)
� . Bi-monthly rates would
increase by $1,606.89
Billing Units 1 $978.00 $978.00 $5,868.00
Total $978.00 $5,868.00
Total
11 $234.99 $2,584.89 $15,509.34
•:;>FCS
Slide 26
27
•) Sample Bill - County Jail
$163.00 $978.00
Base Charge 1 $163.00
Housing Units 284 $32.60
Total
Total
156 $234.99 $36,658.44 $219,950.64
•:;>FCS
$9,258.40 $55,550.40
$9,421.40 $56,528.40
• Bi-monthly rates would
increase by $27,237.04
The jail makes up 15%
of the City's non-
residential ERUs, but
currently pays just 3.5%
of the non-residential
costs
Slide 27
28
•) Sample Bill — Small Restaurant
_______ � . Bi-monthly rates would
decrease by only $19.02
Base Charge 1 $489.00 $489.00 $2,934.00
Total $489.00 $2,934.00
Total
2 $234.99 $469.98 $2,189.88
•:;>FCS
Slide 28
29
•) ERUs with Proposed Increases
Revenue Increases
n/a
3.50%
3.50%
3.50%
3.50%
3.50%
Rate per ERU
$163.00
$168.71
$ 174.61
$ 180.72
$ 187.05
$ 193.59
IL I4
Rate Design 2025 02 2030
Revenue Increases n/a 3.50% 3.50% 3.50% 3.50% 3.50%
Residential Rate per $163.00 $151.58 $156.89 $162.38 $168.06 $173.94
ERU
Non-residential Rate n/a $234.99 $243.22 $251.73 $260.54 $269.66
per ERU
•:;>FCS
Slide 29
30
•;> Rate Survey — Bi-Monthly SFR Bill, 10 CCF
$300.00
$250.00
$200.00
$163.00
$150.00
$100.00
$ 50.00
$-
$151.58
Poulsbo Gig Harbor Kitsap County Bremerton Port Orchard Port Orchard - West Sound Utility
Proposed District
>FCS Slide 30
31
•;> Summary
Revenue needs increase by 3.5%
Rate structure:
Continue with existing rate structure
Simplified and equitable ERU structure
•:;>FCS
Slide 31
32
Thank you! Questions?
Tage Aaker — Senior Project Manger
(425) 615-6487
TageA@fcsgroup.com
www.fcsgroup.com
•FCS
a Bowman company