HomeMy WebLinkAbout06/10/2025 - Regular - Additional Doc-Sewer Rates (PowerPoint)June 10, 2025
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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
Agenda
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Study Overview
Operations & Maintenance
Revenue Requirement
Rate Design
Capital Expenditures
Debt
Service
Fiscal Policies
Cost of Service Analysis (COSA)
Class Characteristics
Functional Costs
City’s Objectives
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Rates have been $163.00 bi-monthly per dwelling unit since 2020
Rate Increase History
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Bi-monthly Sewer Rates (SFRs) vs. Inflation
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Financial Policies
Stabilization Reserve is for Qualified Events, and assuming other efforts to fill the gap have failed
The State of Washington or Federal government formally declares a disaster or emergency.
A natural or urgent event that jeopardizes public safety, impedes commerce, or threatens additional damage to City infrastructure.
Unforeseen events or situation outside of the scope of contingency planning or planned normal course of government operations.
An act of war, terrorism, or declaration of Martial Law.
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Introduction to Ratemaking
Rates are set to recover the cost of providing service
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
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Operations and Maintenance Cost Increases
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Capital Funding Philosophy (after Outside Funding)
Debt
Lowest near-term rates…but interest cost
Spreads cost between existing / future customers
Execute projects sooner; reduce effects of inflation
Cash (pay-as-you-go)
Higher near-term rates
Existing customers pay 100% of costs
Hybrid
Cash fund repair and replacement projects
Debt fund large expansion projects
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Capital Improvement Program
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Capital Spending Forecast
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
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Low-Cost Loans included:
Pottery Lift Station Repairs
$253,000
0.94% interest
Sewer Lift Station
$825,000
0.94% interest
Bay Street Lift Station
$850,000
0.69% interest
Marina Pump Station
$13 million (some already drawn)
2.60% interest
Capital Funding Strategy (2025-2030)
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Revenue Requirement Summary
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How Will Costs Be Equitably Distributed?
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Allocating the Costs of Service
Rate Revenue Requirement
Flow
(Thousand gallons)
Customer
(Accounts)
Residential
Non-Residential
$180,000 (3%)
94% of accounts, $169,000
6% of accounts, $11,000
Customer Accounts
Treatment
(ERUs*)
*ERUs = equivalent residential units, as calculated per the City’s joint treatment agreement
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COSA Results
Typical results fall within +/- 5% of the cost-of-service
COSA indicates a need for a non-residential rate increase
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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
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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
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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
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Rate Calculation
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Sample Bills – Residential
Bi-monthly rates would decrease by $11.42
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Sample Bill – Small School
Bi-monthly rates would decrease by $411.81
Bethany Lutheran Church / School (01-1134-00 – doesn’t include the church part)
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Sample Bill – Large Restaurant (150 seats or more)
Bi-monthly rates would increase by $1,606.89
Pancake House (02-1236-00)
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Sample Bill – County Jail
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
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Sample Bill – Small Restaurant
Bi-monthly rates would decrease by only $19.02
01-3291-00 S Sidney Plaza
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ERUs with Proposed Increases
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Rate Survey – Bi-Monthly SFR Bill, 10 CCF
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Summary
Revenue needs increase by 3.5%
Rate structure:
Continue with existing rate structure
Simplified and equitable ERU structure
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Thank you! Questions?
Tage Aaker – Senior Project Manger
(425) 615-6487
TageA@fcsgroup.com
www.fcsgroup.com
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