HomeMy WebLinkAbout06/10/2025 - Regular - Additional Doc-Sewer Rates (PDF)City of Port Orchard
ORCHARD Sewer Rate Study
❖>FCS
• a Bowman company
.':) Agenda
Revenue requirement
"What revenue adjustments are needed to cover the r.
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
It -
>1:(I S Slide 2
Operations & I Capital
Maintenance Expenditures Revenue
Fiscal Policies
Debt Requirement
Service
Class 1 Functional _____Cost of Service
Characteristics I Costs Analysis (COSA)
City's Rate Design
Objectives
) Rate Increase History
Rates have been $163.00 bimmonthly per dwelling unit since 2020
Sewer Rates
Class Class
No. Description
Description
1 Single-family For each dwelling
residences and unit
mobile home
on single
parcel
2016
F2O7
2018
2019
2020
$111 001 $124001 $137001 $150001 $16300
>Fcs Slide 4
•) Bimmonthly Sewer Rates (SFRs) vs. Inflation
$250
$200.36
$200
$150
$100
$50
.
.
2020 2021 2022 2023 2024
� Bi-Monthly Bill (SFR) Bill with Inflation (CPI -U West)
$163.00
2025
>FCS
Slide 5
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.) Financial Policies
Policy Purpose
General Reserve Accommodate variations in revenue &
(per Resolution 053-20) expenses.
Stabilization Reserve Used for emergency costs outside of
(per Resolution 053-20) typical contingency planning.
Debt Service Coverage Compliance with existing debt covenants;
Maintain credit worthiness
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
) 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 I 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
Year 1 Year 2 Year 3
■ Operating
Year 4
Capital
Year 5
Slide 8
.) Operations and Maintenance Cost Increases
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
Slide 9
) Capital Funding Philosophy (after Outside Funding)
Cash (pay-as-you-go)
Higher near -term rates
Existing customers pay 100% of costs
CDebt
�r Lowest near -term rates.. .but interest cost
Spreads cost between existing / future customers
Execute projects sooner; reduce effects of inflation
Hybrid
Cash fund repair and replacement projects
Debt fund large expansion projects
>FCS Slide 10
.9 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
) Capital Spending Forecast
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
Capital Costs (2024$)
$12,100,000
$9,200,000
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
$7,900,000
$8,000,000
$6,000,000
$4,000,000 _____________
$4,100,000
IlrIIIh $2,600,000
$2,000,000
$-
2025 2026 2027 2028 2029 2030
■ Outside Funding ■ City Costs
•:,>Fcs Slide 12
) Capital Funding Strategy (2025.2030)
Rate Revent
Fund Balan
30%
$5,000,00
CFCs
8%
$9,800,000
Developer Agreements
16%
$3,600,000 Low -Cost Loans included:
Low -Cost Loans
6% Pottery Lift Station Repairs
$11,900,000 $253)000
Revenue
Bonds 0.94% interest
20% Sewer Lift Station
$200,000 $825)000
Grants 0.94% interest
0%
Bay Street Lift Station
$850)000
0.69% interest
$12,000,000
WSDOT/Kitsap Marina Pump Station
20% » $13 million (some already drawn)
» 2.60% interest
>FCS
Slide 13
) 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
2025
3.50% 3.50%
3.50% 3.50% $193.59
3.50% $180.72 $187.05
$163.00 $168.71 $174.61
---------------------
2026
mOperating & Maintenance
2027
Debt Service
Data Labels: Rate Increase
Bi-Monthly SFR Bill
2028 2029
Rate Funded Capital
2030
• Revenue @ 2025 Rates --Revenue with Increases
>Fcs Slide 14
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Existing Revenue Collection
) How Will Costs Be Equitably Distributed?
Slide 16
) Allocating the Costs of Service
$180,000 (3%)
G
Customer
(Accounts)
94% of accounts,
4, $169,000
Flow
(Thousand gallons)
6% of accounts,
$11,000
Non -
Residential
Treatment
(ERUs*)
Customer
Accounts
•:>FCS *ERUs = equivalent residential units, as calculated per the City's joint treatment agreement Slide 17
) COSA Results
Typical results fall within +I- 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%
107%
Residential
76%
Non -Residential
':iFCs Slide 18
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.1-'- --iii_
) 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
>l(:S
Sewer Rates
2016
2017
2018
2019
2020
Class
Class
Description
No.
Description
1
Single-family
For each dwelling
$111 00
5124 00
5137 00
$150 00
$163 00
residences and
unit
mobile home
on single
parcel
2
Business and
For each business
5111 00
S12400
S13700
S15000 S16300
professional
with a fixture
For each business
S22 20
S24 80
S27 40
S30 00 S32 60
with an employee
present without a
fixture
For each floor of
5111 00
S12400
S13700
515000 5163 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
S0 00
S0 00
S0 00
S0 00 50 00
15 000 sf or
Slide 20
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
>I:(:. ,. Slide 21
) 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 weiahtina factor for commercial
I: ( ,. Slide 22
) 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
5,690
1,104
6,794
$ 5,174, 666
1,556,721
$ 6,731,388
$151.58
$234.99
>FCS Slide 23
•:j>
Total
Total
Sample Bills - Residential
1
1
Rate per Bi-Monthly Annual
Unit Bill Total
$163.00
$163.00
$978.00
$151.58
$151.58
$909.48
Slide 24
4> Sample Bill - Small School
Rate per Bi-Monthly Annual
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
Slide 25
4> Sample Bill - Large Restaurant (150 seats or more)
Rate per Bi-Monthly Annual
Unit Bill Total
I 11'l t*iiiiIIt
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
Slide 26
4> Sample Bill - County Jail
Bi-monthly rates would
_________ increase by $27,237.04
Base Charge 1 $163.00 $163.00
Housing Units 284 $32.60 $9,258.40
Total
$978.00
$55,550.40
$9,421.40 $56,528.40
Total 156 $234.99 $36,658.44 $219,950.64
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
�
4
•� Sample Bill - Small Restaurant
Base Charge
Total
Total
Irh4u11 , : Bi-monthly rates would
decrease by only $19.02
1 $489.00 $489.00 $2,934.00
$489.00 $2,934.00
2 $234.99 $469.98 $2,189.88
Slide 28
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
Rate Design � 2025 2029 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
Slide 29
•�) Rate Survey - BimMonthly SFR Bill, 10 CCF
$300.00
$250.00
Poulsbo
ORCHARD
$200.00
Gig Harbor
Kitsap County
Bremerton
$163.00
$150.00
$100.00
$50.00
Port Orchard
$151.58
Port Orchard -
Proposed
West Sound Utility
District
>FCS
Slide 30
) Summary
Revenue needs increase by 3.5%
Rate structure:
Continue with existing rate structure
Simplified and equitable ERU structure
>1:(; S Slide 31
Thank you! Questions?
Tage Aaker — Senior Project Manger
(425) 615-6487
TageA@fcsgroup.com
www.fcsgroup.com
•FCS
a Bowman company