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R-2001-084 2000 Cost of Service and Rate Study
RESOLUTION NO. R-2001- 84 A RESOLUTION adopting the 2000 Water Cost of Service and Rate Study for the City of Yakima, Washington. WHEREAS, the City of Yakima biannually prepares a Water Cost of Service and Rate Study (here referred to as the "Study"); and WHEREAS, a financing study is one element necessary to provide for the water needs of the area for the health, safety and well-being of the people, as well as to comply with State and Federal environmental laws and regulations; and WHEREAS, the City Council has complied with statutory requirements for public hearing on the findings of the Study; and WHEREAS, the City Council, through deliberation, has caused corrections and/or modifications to be made to such Study; and WHEREAS, the City Council deems it to be in the best interest of the City to adopt by resolution the 2000 Water Cost of Service and Rate Study; and WHEREAS, the City Council has considered the 2000 Water Cost of Service and Rate Study in evaluating increased water service charges and amendments to sections of Yakima Municipal Code Chapter 7.56 and Chapter 7.68; now, therefore BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The document entitled 2000 Water Cost of Service and Rate Study, dated November, 2000, as amended and/or modified, a true copy of which Study is on file in the City Clerk's Office and is incorporated by reference herein, is hereby adopted by the City of Yakima, and the Study is relied on for consideration in reviewing and enacting increases to water service charges and amendments to other sections of Yakima Municipal Code Chapter 7.56 and Chapter 7.68. ADOPTED BY THE CITY COUNCIL this 15th day of May, 2001. l `/cd.Cl�C ary Place, Mayor ATTEST: c vY► c_ Karen Roberts, City Clerk TRANSMI TTAL Water/Irrigation Division 2301 Fruitvale Blvd. Wednesday, December 27, 2000 To: The Honorable Mayor, Council Members, and Dick Zais, City Manager From: Dueane Calvin, Water/Irrigation ManagerG'�, Subject: Supplemental Information on Cost of Service Study as follow-up to public hearing of 4-17-2001 There are several items included in this package which staff believes with answer question and concerns expressed at the above referenced public hearing. First, Mr. Bill Hambilton has been provided a complete Cost of Service Study. In a follow up conversation with Mr. Hambilton he agree to furnish us a copy of the "Irrigation Contract" that he has in his possession (a copy is provided for your information.) The reality is that it is an application for an "irrigation rate" on a form that is still in use today. The point being, 1) it is not a contract, and 2) the City is under no obligation to maintain any particular rate structure and in particular a subsidy. Second, was the question concerning the impacts related to the amendment suggested by Councilman Barnett's by the lowering the ready -to -serve charge for the 3/4 inch meters? Revenue comparison tables (modified Table 15 from the Report) for total revenues from rates showing the original 20% proposal, and the modified 20% proposals are included. The impact on total revenue would be a reduction of $1,600 from the original proposal. The amendment would slightly shift some additional burden ($800 annually) to the commercial customer class as a result of the compensating increase the volume charge. Included with these comparisons is the modified rate table that sets out the charges for the amended Alternate 2 proposal. The difference in payments made by customer under amended Alternative 2 would not significantly impact any individual bi-monthly billing. Third, addressing the request of Council Puccinelli with respect to dollar amounts in lieu of percentages we are providing two pages of the tables that reflect the difference in current and proposed bi-monthly bills in dollar for four different size services. A further concern of Mr. Hambilton related to "how are the bills computed?" We have provided two pages of charts that graphically depict the comm station process for Bi_ monthly bills for the same meter sizes as shown on the charts mentioned above. Fourth, is a copy of a letter from the Memorial Foundation concerning the status of outside funding for the Fluoridation Project. And last is a corrected copy of the 'Question and Answer Memo of January 24, 2001. RECOMMENDATION: Staff and the Consultant hereby recommends that Council accept either the original Alternate 2 of the 2000 Cost of Service and Rate Study, or the version of Alternate 2 embodying Councilman Barnett's amend thereto. On the basis of that acceptance direct staff to prepare and return with legislation appropriate for implementation of said rates effective June 1, 2001. CITY OF YAKIMA PUBLIC UTILITIES DEPARTMENT Domestic Water Division Application for Irrigation Rate Date N2 1353 c. Application is hereby made under provision of Section 7.68.252 of the Municipal Code for the undersigned to be billed for domestic water at the irrigation rate. Applicant certifies and agrees: 1. Property served is inside the City limits and is not adequately served by a separate irrigation system. 2. My domestic water system shall not be cross -connected with any other water system (as provided in Section 7.68.070 of the Code). 3. All plans for piped lawn -sprinkling systems using domestic water must be submitted to the Plumbing Inspector for his approval prior to installation of such systems (as provided in Section 7.68.080 of the Code). 4. Rate automatically terminates when applicant permanently discontinues service at the address below. 5. Rate will commence %l 4 (Service charge of $ for special read will be made to my account). Irrigation rate will apply from regular Ai A y l read to / 0 4 read unless applicant requests annual special reads in paragraph 6l 6. It is requested that special read be made annually in to COMMENCE OR TERMINATE irrigation rate. Service charge specified in Section 7.68.252(d) to be made to my account for each such sp Name L ✓ I-- A sift Address b /� Signature Account No. S-9f3s Irrigation Division APPROVED OR DENIED SUPERVISOR 7 v Ledger Meter Book Base FRANKLIN•PRESS - 26520 Table 15 City of Yakima, Washington Water Utility Comparison of Adjusted Costs of Service With Revenues Under Proposed Rates Customer Class Inside City Residential Commercial Industrial Govemmental Interdanartmantal Residential Irrigation Private Fire Protection Total Inside City W'S 5, Revenue Percent Adjusted Under Over Cost of Proposed (Under) Service (a) Rates Recovery 2,544,900 2,455,400 1,478,100 1,531,500 277,600 317,500 217,200 247,800 176,800 i 904^vu^ 613,400 537,600 72,200 50,400 5,380,200 5,330,600 96.48% 103.61% 114.37% 11409% 107.69% 87 64% 69.81% 99.08% Outside City Residential 47,400 49,400 104.22% Commercial 67,300 71,300 105.94% Industrial 0 0 NA Governmental 21,500 28,500 132.56% Private Fire Protection 6,000 4,000 66 67% Total Outside City 142,200 153,200 107.74% Total All Classes 5,522,400 5,483,800 99.30% water increase in one year 2001 20% CostAllocations 04/25/2001 exo Mockiy;es z Table 15 City of Yakima, Washington Water Utility Comparison of Adjusted Costs of Service With Revenues Under Proposed Rates Customer Class Revenue Percent Adjusted Under Over Cost of Proposed (Under) Service (a) Rates Recovery Inside City Residential 2,547,600 2,423,500 Commercial 1,479,600 1,541,300 Industrial 277,900 317,500 Govemmental 217,500 250,200 Interdepartmental 177,000 192,200 Residential Irrigation 613,400 553,000 Private Fire Protection 66,700 50,400 Total Inside City 5,379,700 5,328,100 95.13% 104.17% 114.25% 115.03% 108.59% 90.15% 75.56% 99.04% Outside City Residential 48,700 49,000 100.62% Commercial 69,100 72,100 104.34% Industrial 0 0 NA Govemmental 22,000 29,000 131.82% Private Fire Protection 2,900 4,000 137.93% Total Outside City 142,700 154,100 107.99% Total All Classes 5,522,400 5,482,200 99.27% RTS for 3-4 meter CostAllocations Reduced 3/4 inch meter RTS and adjusted volume rates 04/25/2001 Ready -to -Serve Charge: 2001 Bi -Monthly Size of Meter (inches) Billing 3/4 $ 2.86 1 $ 5,65 1-1/2 $ 12.80 2 $ 26.00 3 $ 67.00 4 $ 107.00 6 $ 190.00 8 $ 310.00 10 $ 475.00 12 $ 700.00 Volume Charge: Domestic ($/100 cubic feet) Usage Block (cf) $/100 cf 0-1,200 $ 1.14 1,201-2,000 $ 1.14 2,001-25,000 $ 1.03 25,001 and over $ 0.75 Fire Service Charges: Meter Size $/bi-month 2 inch $ 5.00 3 inch $ 7.00 4 inch, including hydrant only $ 11.00 6 inch, inciuding hydrant only $ 26.00 8 inch $ 35.00 10 inch $ 60.00 12 inch $ 150.00 Outside City Factor 1.5 Reflects reduced RTS Charge for 3/4 inch meter and increase in volume charge as requested by Councilman Barnett Ccf / Units 3/4 Inch Bi -Monthly Bill -Bi-Monthly Proposed Rates Service Bi -Monthly Bill - Current Rates $ Difference Ccf / Units 1 inch Bill - Proposed Rates Service Bi -Monthly Bill - Current Rates $ Difference 1 $9.70 $8.95 $0.75 10 $17.05 $15.71 $1 34 2 $9 70 $8.95 $0 75 15 $22.75 $20.87 $1.88 3 $9.70 $8.95 $0.75 20 $28.45 $25.77 $2.68 4 $9.70 $8.95 $0.75 25 $33.60 $30.07 $3.53 5 $9.70 $8.95 $0 75 30 $38.75 $34.37 $4.38 I 6 $9.70r $8 95 $0.75 35 $43.90 $38.67 $5.23 7 $10.84 $10 06 $0.78 40 $49.05 $42.97 $6.08 8 $11.98 $11 17 $0 81 45 $54.20 $47.27 $6.93 9 $13 12 $12.28 $0.84 50 $59.35 $51.57 $7 78 10 $14.26 $13 39 $0 87 55 $64.50 $55.87 $8.63 11 $15.40 $14 50 $0.90 60 $69 65 $60.17 $9 48 12 $1654 $15.61 $0 93 65 $74.80 $64 47 $10.33 13 $17.68 $16.59 $1.09 70 $79.95 $68.77 $11 18 14 $18 82 $17.57 $1.25 75 $85.10 $73.07 $12.03 15 $19.96 $18 55 $1.41 80 $90.25 $77.37 $12.88 16 $21.10 $19.53 $1 57 85 $95.40 $81.67 $13 73 17 $22.24 $20.51 $1.73 90 $100.55 $85.97 $14.58 18 $23.38 $21.49 $1 89 95 $105.70 $90.27 $15.43 19 $24 52 $22.47 $2.05 100 $110.85 $94.57 $16.28 20 $25.66 $23.45 $2.21 110 $121 15 $103.17 $17.98 21 $26.69 $24.31 $2.38 120 $131.45 $111.77 $19.68 22 $27 72 $25.17 $2.55 130 $141.75 $120.37 $21.38 23 $28.75 $26.03 $2.72 140 $152.05 $128.97 $23.08 24 $29.78 $26 89 $2.89 150 $162.35 $137.57 $24.78 I 26 $31.84 $28.61 $3.23 160 $172.65 $146.17 $26.48 30 $35.96 $32.05 $3,91 170 $182.95 $154.77 $28,18 35 $41.11 $36.35 $4.76 180 $193.25 $163 37 $29.88 40 $46.26 $40.65 $5.61 190 $203.55 $171.97 $31.58 45 $51.41 $44.95 $6.46 200 $213.85 $180.57 $33.28 50 $56.56 $49.25 $7.31 225 $239.60 $202.07 $37.53 55 $61.71 $53.55 $8.16 250 $265.35 $223 57 $41.78 60 $66.86 $57.85 $9.01 275 $284 10 $238.57 $45.53 65 $72.01 $62.15 $9.86 300 $302.85 $253.57 $49.28 70 $77.16 $66.45 $10.71 325 $321.60 $268.57 $53.03 75 $82.31 $70 75 $11.56 350 $340 35 $283.57 $56.78 80 $87.46 $75.05 $12.41 375 $359.10 $298.57 $60.53 85 $92.61 $79 35 $13.26 400 $377.85 $313.57 $64.28 90 $97.76 $83.65 $14.11 425 $396.60 $328.57 $68.03 95 $102.91 $87.95 $1496 450 $415.35 $343.57 $71.78 I 300 $300.06 $251.25 $48.81 475 $434.10 $358.57 $75.53 Ccf / Units 4 Inch Bi -Monthly Bill - Proposed Rates Service Bi -Monthly Bill - Current Rates $ Differen Ccf / Units 8 Inch Bi -Monthly Bill - Proposed Rates Service Bi -Monthly Bill - Current Rates $ Difference 100 $212.20 $197.48 $14.72 100 $415.20 $524 44 ($109.24) 150 $263.70 $240 48 $23.22 200 $518.20 $610.44 ($92.24) 200 $315.20 $283.48 $31.72 300 $607.20 $683.44 ($76.24) 250 $366.70 $326.48 $40.22 400 $682.20 $743 44 ($61.24) 300 $404.20 $356.48 $47.72 500 $757.20 $803.44 ($46.24) 350 $441.70 $386.48 $55.22 600 $832.20 $863.44 ($31.24) 400 $479.20 $416.48 $62.72 700 $907.20 $923 44 ($16.24) 450 $516.70 $446.48 $70.22 800 $982.20 $983 44 ($1.24) 500 $554.20 $476.48 $77.72 900 $1,057.20 $1,043.44 $13 76 550 $591.70 5w6 48 $85.22 1000 $1,132.20 $1;103.44 $28.76 600 $629.20 $536.48 $92.72 1100 $1,207.20 $1,163.44 $43 76 650 $666.70 $566.48 $100.22 1200 $1,282.20 $1,223.44 $58.76 700 $704.20 $596 48 $107.72 1300 $1,357.20 $1,283 44 $73.76 750 $741 70 $626.48 $115.22 1400 $1,432.20 $1,343 44 $88 76 800 $779.20 $656 48 $122.72 1500 $1,507.20 $1,403.44 $103.76 850 $816.70 $686.48 $130.22 1600 $1,582.20 $1,463.44 $118.76 90n $854.20 $716 48 $137,72 1700 $1,657.20 $1,523.44 $133.76 950 $891 70 $746.48 $145.22 1800 $1,732.20 $1,583 44 $148.76 1000 $929.20 $776.48 $152.72 1900 $1,807.20 $1,643.44 $163.76 1200 $1,079.20 $89648 $182.72 2000 $1,882.20 $1,703.44 $178.76 1400 $1,229.20 $1,016.48 $212.72 2200 $2,032.20 $1,823.44 $208.76 1600 $1,379.20 $1,136.48 $242.72 2400 $2,182.20 $1,94344 $238.76 1800 $1,529.20 $1,256.48 $272.72 2600 $2,332.20 $2,063.44 $268.76 2000 $1,679.20 $1,376.48 $302.72 2800 $2,482.20 $2,183.44 $298 76 2200 $1,829.20 $1,496 48 $332.72 3000 $2,632.20 $2,303.44 $328.76 j 2400 $1,979.20 $1,616.48 $362.72 3200 $2,782.20 $2,423.44 $358.76 2600 $2,129.20 $1,736.48 $392.72 3400$2,932.20 $2,543 44 $388.76 2800 $2,279.20 $1,856.48 $422.72 3600 $3,082.20 $2,663.44 $418.76 3000 $2,429.20 $1,976.48 $452.72 3800 $3,232.20 $2,783.44 $448.76 3200 $2,579.20 $2,096.48 $482.72 4000 $3,382.20 $2,903.44 $478.76 3400 $2,729.20 $2,216.48 $512.72 4500 $3,757.20 $3,203.44 $553.76 3600 $2,879.20 $2,336.48 $542.72 5000 $4,132.20 $3,503.44 $628.76 3800 $3,029.20 $2,456.48 $572.72 5500 $4,507.20 $3,803.44 $703.76 4000 $3,179.20 $2,576.48 $602.72 6000 $4,882.20 $4,103.44 $778 76 4500 $3,554.20 $2.876.48 $677 72 6500 $5,257.20 $4,403.44 $853.76 5000 $3,929.20 $3,176 48 $752.72 7000 $5,632.20 $4,703.44 $928.76 5500 $4,304.20 $3,476.48 $827.72 7500 $6,007.20 $5,003.44 $1,003.76 6000 $4,679.20 $3,776.48 $902.72 8000 $6,382.20 $5,303.44 $1,078.76 6500 $5,054.20 $4,076.48 $977.72 8500 $6,757.20 $5,60344 $1,153.76 7000 $5,429.20 $4,376.48 $1,052.72 9000 $7,132.20 $5,903.44 $1,228.76 1 Bi -Monthly Bill of $9.70 for a 3/4 Inch Service with 6 Units of Consumption 6 Units of Consumption at $1.14 per Unit = $6.84 Ready to Serve $2.86 Bi -Monthly Bill of $31.84 for a 3/4 Inch Service with 26 Units of Consumption 6 Units of Consumption at $1.03 per unit = $6.18 Ready to Serve $2.86 20 Units of Consumption at $1.14 per Unit = $22.80 Bi -Monthly Bill of $300.06 for a 3/4 Inch Service with 300 Units of Consumption Ready to Serve $2.86 20 Units of Consumption at $1.14 per Unit = $22.80 50 Units of Consumption at $0.75 per Unit = $37.50 To Calculate a Bi -Monthly Bill Ready to Serve Charge by Meter Size from Table Units of Consumption over 251 units multiplied by $0.75 per Unit 230 Units of Consumption at $1.03 per Unit = $236.90 Units of Consumption from 6 — 20 units multiplied by $1.14 per Unit + $6.841 Units of Consumption from 21 - 250 units multiplied by $1.03 per Unit Total Bi -Monthly Bill 1. Minimum bill is Ready to Serve Charge + 6 units of consumption at $1.14 per unit ($6.84). Even if consumption is Tess than 6 Units. 1 Unit of Consumption = 100 cubic feet. Memorial Foundation April 16, 2001 Mayor Mary Place City of Yakima 129 N. 2nd Street Yakima, WA 98901 Dear Mayor Place: Attached please find a summary of all fluoride -related grant activity to date. Please note that only $50,000 of the $125,000 needed have been confirmed. Requests pending could bring in another $50,000, leaving a $25,000 shortfall. Several possibilities for funding the shortfall (up to $75,000) have been identified, including funding from the state legislature. We will know within the month whether pending funds will be approved ($50,000) and some or all of state funds (up to $100,000). State funds will help offset the community dollars being raised. Please feel free to contact me if you have questions. cc: Dave Brown, City of Yakima, Water Division Dr. Russell Maier, Central Washington Family Medicine Sean Pickard, Washington Dental Service Foundation Cathy O'Meara -Wyman, Wyman & Associates Gail Weaver, Yakima Valley Memorial Hospital Anne Caffery, The Memorial Foundation The Yakima Valley Memorial Hospital Charitable Foundation • TAX ID NO. 91-1022358 2701 Tieton Drive • Yakima, WA • (509) 576-5794 • FAX (509) 576-5772 FLUORIDATION GRANTS ACQUISITION PLAN Updated 04/10/01 Total cost to build system: WDSF 1999 Grant: City of Yakima Pledge: BALANCE NEEDED: The Memorial Foundation Memorial Hospital WA Dental Service Fnd. Lorene Petrie Trust LVI GIIV Petrie Paul Allen Charitable Fnd. Bill and Melinda Gates Fnd. Providence Rotary of Yakima United Way $ 10,000 secured 10,000 secured 30,000 secured 30,000 NO 30,000 pending 30,000 NO 10,000 pending 10,000 pending 10,000 NO SECURED: Pending: IMMEDIATE SHORTFALL: POSSIBLE SHORTFALL: Alternative Funding Sources: $418,000 179,000 114,000 $125,000 (inquiry made/declined) (decision due in April) (letter of inquiry submitted/declined) (application submitted/declined) $ 50,000 50,000 25,000 $ 75,000 Washington State Legislature Sisters of Prov=dence Group Health Fi5d. / Fluoride supply Kiwanis Foundation Northwest (Spokane) $100,000 $20,000 - $30,000 $10,000 - $15,000 $ 5,000 $10,000 In progress Investigating Application due in June Holding Holding City of Yakima, Washington Water/Irrigation Division Domestic Water Utility 2001 Rate Study Questions from City Council Workshop Question #1: How are revenues calculated? The following tables and discussion illustrate how revenues under Alternative 2, Recommended Rates, are calculated. Table 1 presents a summary of the Alternative 2 Rate Schedule, which is staff's recommended rate schedule. Table 1: Alternative 2 Rate Schedule Ready -to -Serve Charge: 2001 Bi -Monthly Size of Meter (inches) Billing 3/4 $ 3.65 1 $ 5.65 1-1/2 $ 12.80 2 $ 26.00 3 $ 67.00 4 $ 107.00 6 $ 190.00 8 $ 310.00 10 $ 475.00 12 $ 700.00 Volume Charge: Domestic ($/100 cubic feet) Usage Block (cf) $✓100 cf 0-1,200 $ 1.13 1,201-2,000 $ 1.13 2,001-25,000 $ 1.00 25,001 and over $ 0.75 Fire Service Charges: Meter Size $/bi-month 2 inch $ 5.00 3 inch $ 7.00 4 inch, including hydrant only $ 11.00 6 inch, including hydrant only $ 26.00 8 inch $ 35.00 10 inch $ 60.00 12 inch $ 150.00 Outside City Factor 1.5 Revenues are calculated by applying the rate schedule to the estimated number of meters and volume for a 12 -month period. The sections below describe the calculation of revenue in further detail. 1 January 24, 2001 Revenue from Ready -to -Serve Charge Revenue from the Ready -to -Serve Charge is calculated by multiplying the appropriate bi-monthly rate by the number of meters, and summing all together. Table 2 below presents a summary of projected meters by meter size for Test Year 2001. It also presents a summary of calculated revenue by meter size. Table 2: Test Year 2001 = Estimated Number of Meters & Calculated Ready -to -Serve Charge Revenue Customer Meter Size (inches) Class 3/4 1 1-12 2 3 4 6 8 39 12 Total Ready -to -Serve Charge: $ 3.65 $ 565 $ 12.80 $ 26.00 $ 67.00 $ 107.00 $ 190.00 $ 310.00 $ 475.00 $ 700.00 fermi r of Maws: Residential Inside 15,095 622 106 52 21 12 0 0 0 0 15,908 Commercial Inside 1,153 449 160 198 84 43 8 1 0 0 2,096 Industrial Inside 0 3 0 1 5 0 7 0 0 0 16 '-^:".1-11`...1" fr.i'1" r,,.;.e 17 16 12 16 58 37 0 0 0 0 146 Interdepartmental Inside 26 23 21 21 11 12 U 2 0 0 116 Residential Irrigation 122 25 3 5 2 0 0 0 0 0 157 Residential Outside 143 7 1 0 0 0 0 0 0 0 151 Commercial Outside 16 7 4 2 4 2 0 0 0 0 35 Industrial Outside 0 0 0 0 0 0 0 0 0 0 0 Governmental Outside 1 1 2 8 2 1 0 0 0 0 13 Total Number of Motors 16,573 1,153 309 301 187 97 15 3 0 0 18,638 Total Ready -to -Serve Revenue $ 364,701 $ 39,341 $ 24,000 $ 47,580 $ 78,380 $ 63,237 $ 17,100 $ 5,580 $ $ $ 837,919 Revenue from Volume Charge Volume Charge Revenue is calculated by applying the rate schedule to the total annual projected water sales volume for Test Year 2001. This requires an understanding of how much of the total water usage is consumed under each block in the rate structure. To accomplish this, staff created a bill tabulation for each customer class, based on actual usage data for the most recent available 12 -month period, to determine the percentage of total water usage that is used in each block. Table 3: Test Year 2001 = Estimated Test Year Volume and Calculation of Volume Charge Revenue Usage Charge - Domestic Use Test Test Year Percentage Year Usque Percent of Usage billed in the following Blocks (100 cf) Biked Volume ReverIle Ccf 0 -12 13 - 20 21 - 250 over 250 to Total Sales $ $1.13 $1 13 $1.00 $0.75 Residential inside 1,972,592 44.1% 15.1% 30.1% 10.7% 100.0% 5 2,071,528 Commercial Inside 1,527,984 7.5% 3.7% 42.0% 46.8% 100.0% $ 1,371,513 Industrial Inside 404,336 0.3% 0.2% 3.6% 95.9% 100.0% $ 307,591 Govemmental Inside 241,484 4.1% 1.8% 271% 67.0% 100.0% $ 202,871 interdepartmental trade 200,332 2.8% 1.6% 28.1% 67.5% 100.0% $ 167,693 Residential Irrigation i'1 532,230 0.0% 0.0% 100.0% 0.0% 100.0% $ 532,230 Residential Outside 27,331 47.6% 16.0% 35.1% 1.3% 100.0% $ 44,246 Commercial Outside 50,085 4.6% 2.5% 38.0% 56.9%100.0% $ 65,131 industrial Outside 0 0.0% 0.0% 0.0% 0.0% 0.0% $ Governmental Outside 16,965 7.3% 3.9% 69.4% 19.5% 100.0% $ 24,580 Total 4,973,339 $ 4,787,384 (a) Recommended rates indude elimination of the Residential Irrigation Rate. For purposes of calculating estimated revenue under recommended rates, it was assumed that nearly 100% of Residential Irrigation usage falls in the third block. Water/Irrigation Division - 2 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Revenue from Fire Service Charge Private fire services are required to pay a bi-monthly fee to compensate the Utility for the costs of facilities required to provide necessary water to a property in the event of a fire. Such customers are not charged for any actual water used in fighting a fire. Table 4 presents a summary of private fire services and calculated revenue under Alternative 2 Rates. Table 4: Number of Private Fire Services and Calculated Private Fire Service Charge Revenue Private Fire Protection Bi -Monthly Rate Calculated Revenue Inside Outside Inside Outside Inside Outside Total Number of Services 2 inch 29 0 $ 5.00 $ 7.50 $ 870 $ $ 870 3 inch 6 0 $ 7.00 $ 10.50 $ 252 $ $ 252 4 inch, including hydrant only 42 3 $ 11.00 $ 16.50 $ 2,772 $ 297 $ 3,069 6 inch, including hydrant only 110 9 $ 26.00 $ 39.00 $ 17,160 $ 2,106 $ 19,266 8 inch 104 5 $ 35.00 $ 52.50 $ 21,840 $ 1,575 $ 23,415 10 inch 21 0 $ 60.00 $ 90.00 $ 7,560 $ - $ 7,560 12 inch 0 0 $ 150.00 $ 225.00 $ $ - $ - Total 312 17 $ 50,454 $ 3,978 $ 54,432 Total Estimated Revenue under Recommended Rates (Alternative 2) The calculated total utility revenue under Alternative 2 Rates for Test Year 2001 is the sum of revenue from the Ready -to -Serve Charge, Volume Charge, and Private Fire Service Charges, or $5,534,167. Please note that this number will differ slightly from the total calculated revenue as shown in the Final Report and in the tables that follow. The difference is minimal and caused by the effect of rounding differences between the manner in which the tables above were laid out and how the rate model calculates projected revenues. The methodologies between the two, however, are identical. Question #2: Private Fire Protection rate increases are extremely high compare to other classes — why? Table 18 of the Final Report (page 35) presents a comparison of allocated cost of service with revenue under existing rates for Test Year 2001. The table indicates that Private Fire Protection would need a 109.75% increase in order to meet cost of service. Upon further review by staff, it was discovered that Revenue under Existing Rates for Private Fire Protection was calculated using the monthly charge as a bi-monthly charge. Revenue under Existing Rates for Inside City Private Fire Protection should be $64,600, and Outside City Private Fire Protection Revenue under Existing Rates should be $6,900. Table 5 below provides a revised table, indicating the corrected revenue. While the methodology used to allocate costs to various customer classes remains unchanged, the increase in revenue under existing rates that results from correcting the calculation of Private Fire Protection Revenue under Existing Rates causes the total Cost of Service to change slightly. Table 5 below presents a summary of'Cost of Service to be allocated. This is the same table as Table 12 on page 27 of the Final Report. All costs remain unchanged except for Line 2, Operating Reserve, indicating the slight increase in available revenue due to the change in calculating Private Fire Protection Revenue. Water/Irrigation Division - 3 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Table 5: Cost of Service to be Allocated Total Revenue Requirements Operating Capital Expense Costs Total Operating Expense $4,112,600 $4,112,600 Operating Reserve - Gain/(Loss) 569,737 569,737 Debt Service Requirements 625,900 625,900 Taxes 277,700 277,700 Residual Equity Transfer 74,263 74,263 Transfer to Water Construction Fund 250,000 250,000 Total $4,112,600 $1,797,600 $5,910,200 Revenue Requirements Met From Other Sources Other Operating Revenue $167,100 Non -Operating Revenue Interest income Total Revenue from Other Sources Total Cost of Service to be Met from Rates Adjustment for Full Year Rate Increase (a) TOTAL COST OF SERVICE 82,300 $167,100 130,400 130,400 28,OU0 9UU,:luu $229,400 $158,400 $387,800 $3,883,200 $1,639,200 $5,522,400 $0 $0 $0 $3,883,200 $1,639,200 $5,522,400 Because there is a slight change in the total costs to be allocated to customer classes, there is likewise a slight change in the resulting allocated costs of service. Table 6 presents a comparison of allocated cost of service with revenue under existing rates for Test Year 2001/Alternative 2. This table replaces Table 18 on page 35 of the final report. Customer Class Inside City Table 6: Comparison of Cost of Service with Revenue Under Existing Rates - Test Year 2001/Alternative 2 Revenue Indicated Adjusted Under Increase Costs of Costs of Existing (Decrease) Service Service (a) Rates Required $ $ $ Residential Commercial Industrial Public Fire Protection (a) Private Fire Protection Total Inside City Outside City Residential 46,200 48,500 30,400 59.54 Commercial 86,400 90,800 60,300 50.58 Industrial - N/A Public Fire Protection (a) 6,700 N/A Private Fire Protection 3,000 3,000 6,900 (56.52) Total Outside C 142,300 142,300 97,600 45.80 2,962,900 3,162,200 2,499,700 26.50 1,728,100 1,874,100 1,681,100 11.48 255,000 276,500 259,100 6.72 366,800 NA 67,300 67,300 64,600 4.18 5,380,100 5,380,100 4,504,500 19.44 Total All Classes 5,522,400 5,522,400 4,602,100 (a) Adjusted to reflect the redistribution of public fire protection costs of service to other customer classes. 20.00 Water/Irrigation Division - 4 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 As shown, the result is an indicated increase of 4.18% for Private Fire Protection -Inside City and a 56.52% decrease for Private Fire Protection -Outside City. Question # 3: Looking at typical bills for Residential, it is difficult to see how rates could generate sufficient revenue — please explain. The discussion under Question #1, above, describes the process used to calculate revenue under both existing rates as well as all alternative rate scenarios. In Section 4.2 of the Final Report (Alternative Rate Structure Design), the tables and discussion have been simplified to reflect the policy recommendation to eliminate the Residential Irrigation rate. The result is a much larger indicated revenue increase for the Residential class as a whole than would be indicated by evaluating non -irrigation Residential rates. Table 7 presents a breakdown of results for the Residential class. Table 7: Existing and Proposed Revenue for the Residential Customer Class — Test Year 2001/Alternative 2 Revenue Indicated Revenue Indicated Under Adjusted Increase Under Increase Existing Costs of (Decrease) Altern. 2 (Decrease) Rates Service Required Rates Required $ $ % $ Residential 2,149,600 2,557,000 18.95 2,455,376 14.22 Residential Irrigation 350,100 605,200 72.86 537,564 53.55 Total Residential 2,499,700 3,162,200 26.50 2,992,940 19.73 As shown, while the study results indicate that cost of service for the Residential class as a whole is 26.5% higher than revenue under existing rates, Residential/non-irrigation customers would only need an 18.95% increase to reach cost of service, while Residential Irrigation customers would require a 72.86% increase. Also shown in the table is a summary of revenue under Alternative 2 rates. As shown, Residential/non-irrigation customers would receive, on average, a 14.22% increase, compared to a 53.55% increase, on average, for the Residential irrigation customers. The class as a whole would receive an average increase of 19.73%. Question #4: What would rates be if the Utility recovered the 20% system -wide revenue increase evenly from all customers (20% RATE increase)? The approach of recovering increased revenue needs "across-the-board" from all customers is an approach often used by Utilities when a cost of service study is not conducted. While the approach does not ensure that costs will be recovered equitably from all customers, it will provide necessary revenues and is a reasonable approach to take if a cost of service study has been conducted recently and existing rates reflect the results of such study. Table 8 presents Water/Irrigation Division - 5 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 rates schedules under the existing rates, recommended (Alternative 2) rates, and 20% across-the- board increases to rates. Ready -to -Serve Charge: Table 8: Comparison of Rates % Incr. Across -the- % incr. Existing Altern. 2 (Decr.) over Board (Decr.) over Meter Size (inches)($/2 months) Rates Rates Existing Increases Existing 3/4 $ 2.29 $ 3.65 59.4% $ 2.75 20.0% 1 $ 4.61 $ 5.65 22.6% $ 5.53 20.0% 1-1/2 $ 11.47 $ 12.80 11.6% $ 13.76 20.0% 2 $ 25.21 $ 26.00 3.1% $ 30.25 20.0% 3 $ 66.34 $ 67.00 1.0% $ 79.61 20.0% 4 $ 107.52 $ 107.00 -0 5% $ 129.02 nn not e,x.a v pa 6 $ 244.70 $ 190.00 -22.4% $ 293.64 20.0% 8 $ 434.48 $ 310.00 -28.7% $ 521.38 20.0% 10 $ 681.39 $ 475.00 -30.3% $ 817.67 20.0% 12 $ 983.23 $ 700.00 -28.8% $ 1,179.88 20.0% Volume Charge: Domestic ($/100 cubic feet) Usage Block (cf) $/100 cf $/100 cf $/100 cf 0-1,200 $ 1.11 $ 1.13 1.8% $ 1.33 20.0% 1,201-2,000 $ 0.98 $ 1.13 15.3% $ 1.18 20.0% 2,001-25,000 (a) $ 0.86 $ 1.00 16.3% $ 0.95 10.5% 25,001 and over $ 0.60 $ 0.75 25.0% $ 0.72 20.0% Fire Service Charges: Size $/month $/tie -month VW -month 2 inch $ 5.72 $ 7.50 31.1% $ 6.86 20.0% 3 inch $ 7.60 $ 10.50 38.2% $ 9.12 20.0% 4 inch, including hydrant only $ 11.44 $ 16.50 44.2% $ 13.73 20 .Oi 6 inch, including hydrant only $ 15.24 $ 39.00 155.9% $ 18.29 20.0% 8 inch $ 22.86 $ 60.00 162.5% $ 27.43 20.0% 10 inch $ 30.46 $ 90.00 195.5% $ 36.55 20.0% 12 inch $ 30.46 $ 150.00 392.4% $ 36.55 20.0% Outside City Factor 1.5 1.5 1.5 (a) Rate shown for the third volume block under the "Across -the -Board" scenario has been reduced to reflect increased revenue from Residential Irrigation customer class. Water/Irrigation Division - 6 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Table 9 summarizes the results of this alternative in terms of revenue recovery from each customer class. Table 9: Existing Revenue, Cost of Service and Revenue under an Across -the -Board Increase Revenue Revenue Revenue Under Adjusted Under Percent of Under Percent of Existing Costs of Altem. 2 Cost of Across -the Cost of Customer Class Rates Service Rates Service Board Rates Service Inside City $ $ $ % $ % Residential 2,499,700 3,162,200 2,992,940 94.6% 3,046,800 96.4% Commercial 1,681,100 1,874,100 1,969,693 105.1% 1,959,800 104.6% Industrial 259,100 276,500 317,543 114.8% 310,200 112.2% Public Fire Protection (a) - - - N/A - N/A Private Fire Protection 64,600 67,300 100,822 149.8% 77,500 115.2% Total Inside City 4,504,500 5,380,100 5,380,998 100.0% 5,394,300 100.3% Outside City Residential 30,400 48,500 49,445 101.9% 51,800 106.8% Commercial 60,300 90,800 99,745 109.9% 98,600 108.6% Industrial - - N/A N/A Public Fire Protection (a) - N/A N/A Private Fire Protection 6,900 3,000 7,956 265.2% 6,200 206.7% Total Outside City 97,600 142,300 157,146 110.4% 156,600 110.0% Total All Classes 4,602,100 5,522,400 5,538,144 100.3% 5,550,900 100.5% Question #5: The indicated increase for the 3/4" meter Ready -to -Serve charge is substantially higher than the system -wide average revenue increase. Why is this so, and what would rates be if the 3/4" Ready -to - Serve charge were limited to a 25% increase? The Ready -to -Serve charge is a fixed monthly charge to the customer that is designed to recover certain fixed costs of the system. These costs include meter reading and billing expenses as well as costs required to maintain meters and services. While some of these costs vary by meter size, others, such as meter reading expenses, do not depend on the size of the meter, but rather are incurred on a "per customer" basis. The results of the cost of service analysis indicate that the existing Ready -to -Serve charges are not currently recovering associated costs in an equitable manner. Specifically, the charges for the smaller meter sizes are under -recovering their cost and the charges for the larger meters are recovering more than their assigned cost. Table 10 presents a summary of allocated cost of service by meter size, compared to existing rates and Recommended (Alternative 2) rates. Water/Irrigation Division - 7 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Table 10: Ready -to -Serve Charge - Cost of Service, Existing and Recommended Allocated % Incr. % Incr. Existing Cost of (Decr.) over Altem. 2 (Decr.) over % of Cost of Meter Size (inches)(bi-mttniv $) Rates Service Existing Rates Existing Service 3/4 $ 229 $ 6.56 186.5% $ 3.65 59.4% 55.6% 1 $ 4.61 $ 9.64 109.1% $ 5.65 22:6% 58.6% 1-1/2 $$ 11.471 $ 17.34 51.2% $ 12.80 11.6% 73.8% 225.21 $ 26.57 5.4% Gn�.VU 3 110 00 pi .p 97.9% 3 $ 66.34 $ 48.12 -27.5% $ 67.00 1.0% 139.2% 4 $ 107.52 $ 78.91 -26.6% $ 107.00 -0.5% 135.6% 6 $ 244.70 $ 155.88 -36.3% $ 190.00 -22.4% 121.9% 8 $ 434.48 $ 309.81 -28.7% $ 310.00 -28.7% 100.1% 10 $ 681.39 $ 463.74 -31.9% $ 475 00 -30.3% 1(12.4% 12 $ 983.23 $ 679.25 -30.9% $ 700.00 -28.8% 103.1% As shown, while the indicated increase under the Alternative 2 rate schedule is significant, it is still below cost of service, resulting in the need for other charges and rates to be increased above cost of service in order to meet total revenue needs. Because the majority of elderly and fixed income customers are served by the 3/4 inch meter size, there is concern tha: 1,tie level of increase indicated by the Alternative 2 increases could result in undue hardship on these customers. As an alternative, the Utility could limit the increase for the % inch Ready -to -Serve Charge. Table 11 presents the resulting rate schedule, assuming a 25% increase for the % inch Ready -to -Serve Charge. In order to recover total revenue requirements, Block 1 and 2 volume charges were increased. Because approximately 87% of the Utility's meters are 3/4" meters, the recovery of the resulting revenue shortfall from other meter sizes would drastically increase rates for these meter sizes. It would also result in a further deviation from cost of service. Water/Irrigation Division - 8 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Table 11: Existing Rates, Alternative 2 Rates and Resulting Rates After Limiting the 3/4" Charge to 25% Meter Size (inches)($/2 months; 3/4 1 1-1/2 2 3 4 6 8 10 12 Existing Rates $ 2.29 $ 4.61 $ 11.47 $ 25.21 $ 66.34 $ 107.52 $ 244.70 $ 434.48 $ 681.39 $ 983.23 Altem. 2 Rates $ 3.65 $ 5.65 $ 12.80 $ 26.00 $ 67.00 $ 107.00 $ 190.00 $ 310.00 $ 475.00 $ 700.00 % Incr. (Decr.) over Existing 59.4% 22.6% 11.6% 3.1% 1.0% -0.5% -22.4% -28.7% -30.3% -28.8% Limit 3/4" Meter Increase $ 2.86 $ 5.65 $ 12.80 $ 26.00 $ 67.00 $ 107.00 $ 190.00 $ 310.00 $ 475.00 $ 700.00 % Incr. (Decr.) over Existing 25.0% 22.6% 11.6% 3.1% 1.0% -0.5% -22.4% -28.7% -30.3% -28.8% Volume Charge: Domestic ($/100 cubic feet) Usage Block (cf) 0-1,200 1,201-2,000 2,001-25,000 (a) 25,001 and over Fire Service Charges: Size 2 inch 3 inch 4 inch, including hydrant only 6 inch, including hydrant only 8 inch 10 inch • 12 inch Outside City Factor $/900 cf $/100 cf $/100 cf $ 1.11 $ 1.13 1.8% $ 1.14 $ 0.98 $ 1.13 15.3% $ 1.14 $ 0.86 $ 1.00 16.3% $ 1.03 $ 0.60 $ 0.75 25.0% $ 0.75 2.7% 16.3% 19.8% 25.0% $/month $Thi -month $/bi-month $ 5.72 $ 7.50 31.1% $ 7.50 $ 7.60 $ 10.50 38.2% $ 10.50 $ 11.44 $ 16.50 44.2% $ 16.50 $ 15.24 $ 39.00 155.9% $ 39.00 $ 22.86 $ 60.00 162.5% $ 60.00 $ 30.46 $ 90.00 195.5% $ 90.00 $ 30.46 $ 150.00 392.4% $ 150.00 1.5 1.5 1.5 31.1% 38.2% 44.2% 155.9% 162.5% 195.5% 392.4% (a) Rate shown for the third volume block under the "Across -the -Board" scenario has been reduced to reflect increased revenue from Residential Irrigation customer class. Water/Irrigation Division - 9 - Domestic Water Utility 2001 Rate Study Questions from January 23, 2001 Council Workshop January 24, 2001 Re�viiseaL Mcrc)ii 2001 Prepared b� Staff City of Yakima Water/Irrigation Division Movermber 2000 REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table of Contents 1.0 EXECUTIVE SUMMARY 1 1.1 BACKGROUND 1 1.2 STUDY OBJECTIVES 1 1.3 DOMESTIC WATER UTILITY GOALS 2 1.4 PROGRESS SINCE 1996 RATE STUDY 2 1.5 NEED FOR PROJECTED RATE INCREASES 4 1.6 RESULTS 6 1.7 FURTHER STUDY 11 1.8 CONCLUSIONS 11 2.0 INTRODUCTION 11 2.1 BACKGROUND 11 2.2 PURPOSE 12 2.3 SCOPE 13 2.4 ORGANIZATION 14 3.0 REVENUE AND REVENUE REQUIREMENTS 15 3.1 REVENUE UNDER EXISTING RATES 15 3.1.1 Customer Growth 15 3.1.2 Water Volume 16 3.1.3 Water Sales Revenue under Existing Rates 16 3.2 CAPITAL IMPROVEMENT PROGRAM 18 3.3 CAPITAL FUND 19 3.3.1 Source of Funds 20 3.3.1.1 Funds on Hand 20 3.3.1.2 Bond Sales 20 3.3.1.3 Low Interest Loans and Grants 20 3.3.1.4 Transfer from the Water Operating Fund 21 3.3.1.5 Other Potential Sources of Funding 21 3.3.1.6 Interest Income 21 3.3.2 Use of Funds 21 3.3.3 Funds on Hand at End of Year 21 Domestic Water Utility - i - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division T�hle of i`nntontc, (continu iorl ) 1 u�✓iv vI vv� nvi rw `vv� iau �uv�w� 3.4 OPERATING FUND 22 3.4.1 Revenue 23 3.4.1.1 Water User Charge Revenue 23 3.4.1.2 Other Revenue 24 3.4.1.3 Interest Income 24 3.4.2 Revenue Requirements 24 3.4.2.1 Operation and Maintenance Expense 24 3.4.2.2 Debt Service 25 3.4.2.3 Transfers to Capital Fund 25 3.4.2.4 Routine Capital Outlays 26 3.4.2.5 Taxes 26 3.4.3 Comparison of Revenue and Revenue Requirements 26 4.0 COST OF SERVICE ALLOCATIONS 26 4.1.1 Cost of Service to be Allocated 27 4.1.2 Functional Cost Components27 4.1.3 Allocation to Cost Components 28 4.1.3.1 Allocation of Net Plant Investment and Capital Costs 29 4.1.3.2 Allocation of Operating Expenses 30 4.1.3.3 Allocation of Costs to Customer Classes 31 4.1.3.4 Customer Classifications,.,,,,,, „,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,;,,,,,,;,,;,,,,,,:,,,.,,,31 4.1.3.5 Units of Service 31 4.1.3.6 Customer Class Costs of Service 33 4.2 ALTERNATIVE RATE STRUCTURE DESIGN 35 4.2.1 Alternative 1 - Multiple Increases Over Three Year Period 36 4.2.1.1 Rate Adequacy 36 4.2.1.2 Typical Bills 37 4.2.2 Altemative 2 - Single increase in Year One of Study Period 38 4.2.2.1 Rate Adequacy 39 4.2.2.2 Typical Bilis 40 4.2.3 Alternative 3 — Fixed Amount - Single Increase in Year One of Study Period 42 4.2.3.1 Rate Adequacy42 Domestic Water Utility - ii - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table of Contents (continued) 4.2.3.2 Typical Bills 43 5.0 CONCLUSIONS 44 APPENDIX A 46 SAFE DRINKING WATER ACT AMENDMENTS OF 1996 47 ENDANGERED SPECIES ACT OF 1973 72 CODE OF FEDERAL REGULATIONS (CFR) 78 Domestic Water Utility - iii - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division List of Tables TABLE 1: TOTAL ESTIMATED REVENUE (ALTERNATIVE 2) 7 TABLE 2: COST OF SERVICE INCREASES SINCE 1990 11 TABLE 3: PROJECTED NUMBER OF 15 TABLE 4: PROJECTED TOTAL WATER USAGE 16 TABLE 5: EXISTING SCHEDULE OF WATER RATES 17 TABLE 6: PROJECTED WATER SALES REVENUE UNDER EXISTING RATES 17 TABLE 7: PROPOSED CAPITAL IMPROVEMENT PROGRAM 19 TABLE 8: PROJECTED CAPITAL IMPROVEMENT FINANCING PLAN 20 TABLE 9: PROJECTED OPERATING FUND CASH FLOW 23 TABLE 10: PROJECTED (IPRATINr1 AND IVIAINTNANfsE EXPENSE 24 TABLE 11: EXISTING AND PROPOSED DEBT SERVICE 25 TABLE 12: COST OF SERVICE TO BE ALLOCATED 27 TABLE 13: ALLOCATION OF NET PLANT TO FUNCTIONAL COST COMPONENTS 30 TABLE 14: ALLOCATION OF OPERATING EXPENSE TO FUNCTIONAL COST COMPONENTS 31 TABLE 15: ESTIMATED UNITS OF SERVICE 32 TABLE 16: DEVELOPMENT OF UNIT COSTS BY FUNCTIONAL COST COMPONENT 33 TABLE 17: ALLOCATION OF COSTS TO CUSTOMER CLASSES 34 TABLE 18: COMPARISON OF COST OF SERVICE WITH REVENUE UNDER EXISTING RATES 35 TABLE 19: SCHEDULE OF PROPOSED RATES — ALTERNATIVE 1 36 TABLE 20: COMPARISON OF ADJUSTED COSTS OF SERVICE WITH REVENUES UNDER PROPOSED RATES 37 TABLE 21: COMPARISON OF TYPICAL BILLS — RESIDENTIAL 38 TABLE 22: COMPARISON OF TYPICAL BILLS — COMMERCIAL 38 TABLE 23: COMPARISON OF RATES WITH OTHER REGIONAL PURVEYORS ........ 38 TABLE 24: SCHEDULE OF PROPOSED RATES ALTERNATIVE 2 39 TABLE 25: COMPARISON OF ADJUSTED COSTS OF SERVICE WITH REVENUES UNDER PROPOSED RATES 40 TABLE 26: COMPARISON OF TYPICAL BILLS — RESIDENTIAL ................. .........41 TABLE 27: COMPARISON OF TYPICAL BILLS — COMMERCIAL 41 TABLE 28: COMPARISON OF RATES WITH OTHER REGIONAL PURVEYORS 41 TABLE 29: SCHEDULE OF PROPOSED RATES — ALTERNATIVE 3 42 TABLE 30: COMPARISON OF ADJUSTED COSTS OF SERVICE WITH REVENUES UNDER PROPOSED Domestic Water Utility - iv - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division List of Tables RATES 43 TABLE 31: COMPARISON OF TYPICAL BILLS — RESIDENTIAL 44 TABLE 32: COMPARISON OF TYPICAL BILLS — COMMERCIAL 44 TABLE 33: COMPARISON OF RATES WITH OTHER REGIONAL PURVEYORS 44 Domestic Water Utility - v - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 1.0 EXECUTIVE SUMMARY 1.1 Background The City of Yakima owns and operates a Domestic Water Utility system ("Utility"). The Utility currently serves a population base of approximately 48,000 individuals, through 18,820 service connections. This report results from the analysis of the water utility funds. Total revenue requirements were developed, allocation of costs to customer classes completed with the resulting proposed rates based on an equitable cost of servic€ analysis for each service. Since 1990, the Utility has implemented four rate increases. The combined percentage increase for this period is 52 percent. The need for this study is driven by several guidelines, one being the City's standing poiicy that directs a cost of service and rate study be conducted on a bi-annual basis. Another item, becoming more of a factor each year, is the need to address the requirements under the Safe Drinking Water Act to demonstrate sound fiscal and financial management capabilities. This demonstration insures that both customers and regulators have confidence that the Utility can sustain itself and to be operated in a prudent and safe manner. During the process of adopting the 1996 Cost of Service and Rate Study and subsequent re -writing of the appropriate ordinances staff omitted the historic "Distribution Connection Charge". Consequently, the re -instituting of that charge will be brought forward as part of the recommendation resulting from this study. 1.2 Study Objectives The 2000 Cost of Service and Rate Study (2000 Report) has been conducted to provide the basis for recommending modifications to the existing rate structure, the rates, and fees applicable to the domestic water system. Therefore, this study fully considered and addressed financial planning, cost of service analyses, and rate design for the Utility. To accomplish this several key elements were scrutinized: i The future revenue requirements for the Utility, taking into consideration existing and planned debt, projected operating and maintenance expense, planned capital Domestic Water Utility - 1 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division expenditures, and other revenue requirements in order to ensure adequate revenue recovery. • Equability of costs of service, and allocation of these costs to the users of the systems, in order to insure that each customer class contribution is fair and defensible, and is able to stand the test of a legal challenge. • Evaluation of the current rate structure in terms of equity and revenue stability, and provide recommendations for long-term rate design altematives or improvements for the customer classes. 1.3 Domestic Water Utility Goals There are three primary goals that the Utility is striving to achieve: • Maintain a viable system that can serve all customers with a clean, safe and adequate amount of water and to achieve this in a prudent and timely manner. • As time and money allows, evaluate the parameters necessary for the development of a plan for the replacement/refurbishment of the aging distribution system, and particularly the portion in City's core area (constructed circa 1926). • Continue to extent hydrant replacement and valve operation programs. 1.4 Progress Since 1996 Rate Study Since completion of the 1996 study the Water/Irrigation Division has aggressively followed the pattern laid out therein with respect to operation and maintenance and the capital improvement program. In terms of work programs established/implemented in the operation and maintenance portion of our program the following is a list setting forth the major components: • Valve operation program substantially in place and on going. • Continue inspection and service related to cross connection program, which now requires two full-time employees to maintain the workload. • Fire hydrant replacement program continues. • Private main replacement continues to progress with 10 major reaches having been completed since the 1996 rate study. Domestic Water Utility - 2 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division • Operations crews have also undertaken and completed approximately 5,500 ft. of main replacement and new construction, with a total value of the work being near $350,000. ManyManyprojects end programs hue been rmm�leterl in the ,-.pita! imnrnvemente 'renes as projects and programs ..... W vv.. w...r.vw�r ... the v�+�,r. pan. n..fa. v . v.. w..w M. V..4, 4�a well as additional projects that were unknown at the time the 1996 study was completed. Following is a list of major accomplishments during this time period: • Continue to work on the Wright Avenue Well replacement through the proposed ASR program. • Built the Stone Church Pump Station to provide redundancy of feed into the middle zone, and to provide extra volume there on an as needed basis. • Designed a fluoride treatment process to be installed in the domestic water system, in response to citizen voted demand. ® Completed installation and implementation of the Contact Time Control Valve in the 48" main at Gleed. This included the installation of an isolation valve in the 48" main near the Gleed Pump Station. • Installed equipment and initiated the process for Corrosion Control at the Water Treatment Plant. ® Completed analysis of the Water Treatment Plant intake, in part as a response to potential Endangered Species Act conflicts. • Completed several segments of transmission main construction in the north and northeast portion of the City. • Undertook an analysis of the Water Treatment Plant to determine its ability to meet current and future requirements of the Safe Drinking Water Act ® Completed upgrades to the electrical systems for the Airport and Kiwanis wells, C Extended a transmission main along the east and south perimeters of the Airport complex, including a connection with the Nob Hill Water system that can provide emergency supply for the City. • Continue the replacement 3" and larger meters, including those dedicated to fire services. Domestic Water Utility - 3 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 1.5 Need For Projected Rate Increases The City is responsible under the Washington Administrative Code (WAC 246-290) to secure adequate supply, to provide treatment, storage, distribution and administrative programs to maximize its ability to deliver safe drinking water to anyone that may request it. In general those obligations are public health, financing and regulatory compliance. Aside from limited reliance on outside capital such as Public Works Trust Fund loans, and/or the issuance of revenue bonds for construction purpose, the Domestic Water Division is totally reliant upon customer rates for the dollars necessary to sustain its operations. The following are the fundamental reasons driving a need to increase rates. • To fulfill the requirements of such regulatory laws as the Safe Drinking Water Act and Endangered Species Act, Washington Salmon Recovery requirements, Washington Industrial & Safety Act, Washington Salmon Recovery Act, etc. To NOT comply with the rules and regulations associated with these laws will have significant financial implications for the City. Refer to Appendix "A" for a tabulation of applicable sections that are representative of these laws. • The cost of debt and debt service coverage increases in direct proportion to the amount of debt the Utility has become required to carry. • The funding needed to accommodate mandated capital projects over the next five years totals almost $12.5 million dollars, Refer to Table 7 on page 19 of this Report. • Continuing involvement in the Acquavella proceeding as the City strives to validate and protect its claims to water in the Yakima River basin. • Development of system capacity, so that growth in economic development is not hindered, a component of which will be the Aquifer Storage and Recovery program currently being studied. • On-going efforts to conserve water were such conserved water is widely recognized as potentially the next source of water, with which to meet future. • The added service requirements due to filling in of the vacant areas within the Utility's service area, and the changing character of the community being served. • Training to increase skill levels and abilities of existing employees, in an effort limit the need for additional employees in the context of this study. Domestic Water Utility - 4 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/irrigation Division • Inflation and its impact on the cost of operation and maintenance, and capital programs. Inflation, for instance, has been and continues to be a strong component of the increasing Utility costs. A review of relevant industry indicators such as those presented in the Engineering News Record database of cost indexes confirms such impacts. Eight -inch (8") ductile iron pipe has risen 7% above the October 1999 price, while PVC water pipe has risen by 18% over the same time period. The cost of skilled labor, year -to --date, has risen by 3.2%. It can readily be appreciated that much of the service and supply industries that support the Utility's activities have experienced similar escalations. The Utility needs and receives substantial outside services and supplies, such as those provided by suppliers such as the power company, chemical companies, pipe and appurtenant equipment, testing laboratories, and on-going engineering and legal support. The Utility also pays fees to various regulatory ayciwies for such activities as plan reviews, permits, etc. This report does not project any rate increase to fund additional personnel. Other events and or activities, such as resolution of program altematives contained in the Irrigation Master Plan or the updated Water Comprehensive Plan could require a change in the Utility's current personnel needs. At this time, it is believed that a comprehensive training program could defer the need for additional personnel to meet present needs. One exception, however, is with regard to the Utility's ability to address the growing number of 'backflow prevention devises' that must be inspected, tested, and maintained by the Utility's two Cross Connection Specialists. At some point in the immediate future the City's ability to continue to provide this service may require either 1) additional personnel, paid for by increases in the applicable fees, or 2) finding a mechanism or means to transfer some the workload to other entities. Staff will continue to evaluate and analyze the Utility's options, and at a later date provide Council with the results of this undertaking. in combination with ail of the above issues, the principal reason for the size of the projected rate increases is still the size of the Capital Improvement Program (CIP). The CIP is driven extensively by the need to comply with both Federal and State mandates. CIP requirements have increased in recent years in response to age of the system, regulatory requirements, and environmental concerns. These needs will continue into the foreseeable future. In both the near-term (five-year CIP) and the Tong -term (20 -year time frame of the Water Supply Plan) rehabilitation efforts, made necessary for compliance with environmental Domestic Water Utility - 5 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division regulations, will continue to dominant the Division's capital funding requirements. In this study it has been determined that compliance with mandated improvements will account for ninety-three and one-half percent (93..5%) of the needed rate increase. The balance of the increase, six and one-half percent (6.5%) is primarily associated with growth in the cost of services and materials that are necessary to sustain our day-to-day operations. Existing City policy, as recommended by the City's bond council and the City Utility Rate Advisory Board, requires Debt Service Coverage of 2.0. This means that each year the operating revenue (revenue from rates and fees) must exceed the sum of operating and debt service expenses by an amount equal to one times that debt service obligation. Furthermore, the revenue collected to fulfill the debt service coverage may not be used against operations or the actual debt service obligations. The 1997 Cost of Service adjustment, as adopted, included a $3.3 million increase in debt, with the funds being used to begin the process of rebuilding/refurbishing portions of the water system, and to re-establish the Wright Avenue Well. The Acquavella proceedings continue at a relatively brisk pace, and demands funding be maintained within a range of $75,000 to $100,000 per year from the Domestic Water operating funds. Additionally, and in keeping with a recommendation of the City Utility Rate Advisory Board during that same time period, the Water Division attempts to maintain an operating reserve of $750,000 in the Operating Fund and $500,000 in the Capital Fund. 1.6 Results The study has clearly identified the magnitude of our need. Staff has prepared three alternatives for Council's consideration, each of which would generate adequate revenue to meet the Utility's needs. AH of the alternatives presented in this study are based on a detailed cost of service analyses. With the exception of Alternative 3, rates were developed for each customer class, and were designed in a manner intended to fully and equitably provide for the system's revenue requirements. The schedule of proposed rates and adjustments for each alternative considered are presented in detail in the Rate Design Section of this report. Domestic Water Utility - 6 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division m. There are several issues currently developing that could have major impacts on the total funding requirements of the Utility, beyond those accounted for in this analysis. The three most significant are: 1) the update of the 1994 Water Comprehensive Plan; 2) the Master Irrigation Plan; and 3) the Acquavella proceedings. Each of these areas contains some unknowns with the Water Comprehensive Plan update being the least suspect, The calculations in Table 1 following, identifies that an additional $915,580 (average) per year in revenue from water sales that is necessary, based on current and proposed programs, to sustain the Utility over the next five years. T..hlw 4 • "rose.' C.64w.w4•.A rli..a.w..w a ¢a AO.'P!« tPPLIPT.t? P,AVT. t7P__ASA :'r"PIAS=14P5459>4 .4,,7 2000 2001 2002 2003 2004 2005 Water Sales Revenue from Exiting Rates $ 4,557,100 $ 4,566,200 $ 4,573,200 $ 4,580,100 $ 4,583,500 $ 4,586,900 Additional Sales Revenue -from Adjusted Rates $ - $ 913,200 $ 914,600 $ 916,000 $ 916,700 $ 917,400 Total EstimatedRevenuefrom Rates $ 4,557,100 $ 5,479,400 $ 5,487,800 $ 5,496,100 $ 5,500,200 $ 5,504,300 Other Operating Revenue $ 187,100 $ 167,100 $ 167,100 $ 167,100 $ 167,100 $ 167,100 Non -Operating Revenue $ 14-5,400 5 130,400 $ 130,400 5 130,400 $ 130,400 5 130,400 Interest Income $ 74,900 $ 87,400 $ 103,800 $ 112,100 5 107,000 $ 81,500 Estimated Total Revenue $ 4.964,500 $ 5.884.300 $ 5,889.100 $ 5,905.700 $ 5.904,700 $ 5,883.300 The rate schedules presented herein may vary some from this amount, yet they will adequately provide resources to cover estimated expenses. The rates for each alternative is fully detailed and supported in the later sections of this Cost of Service and Rate Study. Alternative 1 Under this alternative, system -wide revenue from water sales would be increased in increments of 7.5% each over the first three years of the five-year study period (2001 through 2005). The study also indicates the need for an increase in the last year of the study period. The projected rata increase identified in the last year of this study is far reference purpnses nnly and not rernmmend to he adnptad These yearly increases are addressed through changes to several components of the rate structure. The volume charges are affected only in part, however all of the ready -to -serve charges experience some level of change. The fourth increase identified in this alternative (four percent (4.0%) in year five), may or may not be valid as time goes on, and should be re-evaluated near the mid -point of the study period. Therefore, at this time staff is only proposing that the rate increases for the first three years be considered for adoption. Domestic Water Utility - 7 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Under Alternative 1, staff presents the following schedule of rates for consideration by Council. Ready -to -Serve Charge: 2001 2002 2003 Bi -Monthly Bi -Monthly Bi -Monthly Size of Meter (inches) Billing Billing Billing 3/4 $ 3.00 $ 325 $ 3.65 1 $ 5.00 $ 5.25 $ 5.65 1-1/2 $ 12.00 $ 12.50 $ 12.80 2 $ 25.50 $ 25.50 $ 26.00 4 $ 67.00 $ 67.00 $ 67.00 3 $ 107.00 $ 107.00 $ 107 00 6 $ 180.00 $ 190.00 $ 190.00 8 $ 333.00 $ 310.00 $ 310.00 10 $ 514.00 $ 500.00 $ 475.00 12 $ 745.00 $ 725.00 $ 700.00 Volume Charge: Domestic Usage Block (cf) 0-1,200 $ 111 $ 113 $ 1.14 1,201-2,000 $ 0.99 $ 1.07 $ 114 2,001-25,000 $ 0.88 $ 0.96 $ 1.03 Over 25,001 $ 0.65 $ 0.70 $ 0.78 Fire Service Charges: Monthly 5111 ng Charges Meter Size 2 inch $ 5.00 $ 5.00 $ 5.00 3 inch $ 7.00 $ 7.00 $ 7.00 4 inch, including hydrant $ 11.00 $ 11.00 $ 11.00 6 inch, including hydrant $ 20.00 $ 24.80 $ 26.00 8 inch $ 30.00 $ 35.00 $ 40.00 10 inch $ 40.00 $ 50.00 $ 60.00 12 inch $ 131.00 $ 141.00 $ 152.00 Outside City Factor 1.5 1.5 1.5 Alternative 2 This alternative consists of a single increase of 20% in the first year of the study period (2001). It is estimated that this increase would then generate all the revenue necessary accommodate the needs for the entire study period. Because of the increased interest eaming potential of this alternative, the magnitude of the rate increase is less than the cumulative increase of other alternatives (approximately 2.5 percent less that either alternate 1 or 3) and still generate the same total revenue by year five. This results in a reduction in the revenues that must be generated from rates, and is therefore Tess onerous for the ratepayers in the long run. This alternative does not propose any increases beyond year one of the study period. Domestic Water Utility - 8 - Revised 2000 Cost of Service & Rate Study REVISE) MARCH 2001 City of Yakima, Washington - Water/Irrigation Division In order to better reflect cost of service allocations, Alternative 2 rates include adjustments in all components of the rate structure As with _the _ather_alt • 1 • 1 • u- . - •II • •111? 11•. •• Under Alternative 2, staff presents the following schedule of rates for consideration by Council. Ready -to -Serve Charge: 2001 Bi -Monthly Sze or Meter (inches) L•IIIi13L; 3/4 $ 3.65 1 $ 5.65 1-1/2 $ 12.80 2 $ 26.00 3 $ 67.00 4 $ 107.00 6 $ 190.00 8 $ 310.00 10 $ 475.00 12 $ 700.00 Volume Charge: Domestic ($1100 cubic feet) Usage Block (cf) $/100 cf 0-1,200 $ 1.13 1,201-2,000 $ 113 2,001-25,000 $ 1.00 25.001 and over $ 0.75 Fire Service Charges: Meter Size hi -month bill 2 inch $ 5.00 3 inch $ 7.00 4 inch, including hydrant only $ 11.00 6 inch, including hydrant only $ 26.00 8 inch $ 35.00 10 inch $ 60.00 12 inch $ 150.00 Outside City Factor 1.5 Alternative 3 This alternative is a fixed amount to be added to the ready -to -serve portion of each bi- monthly billing — and is essentially a `surcharge'. The surcharge would be determined by dividing the total additional revenue requirements for each year by the total number of equivalent meters and then adding that amount to the various ready to serve charges for each of the meter sizes. This surcharge would be done in a single step implemented in 2001. No changes would be made to the commodity (volume) charges under this alternative. However, Domestic Water Utility - 9 - Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division staff believes this rate structure is not in keeping with the direction that the City has taken over the last several years as it attempts to fully and equitably meet the systems revenue requirements through justifiable and appropriate cost allocations based on nationally accepted standards. Staff believes that defending this proposal would be difficult at best, due to the allocation of charges other than the appropriate recipients of the service. Under this alternative, staff presents the following schedule of rates for consideration by Council. Ready -to -Serve Charge: Meter Size 2001 Bi - Monthly Billing 3/4" $ 7.50 1" $ 11.50 1-1/2" $ 22.50 2" $ 32.00 3" $ 70.00 4" $ 117.00 6" $ 247.00 8" $ 470.00 10" $ 700.00 12" $ 1,000.00 Volume Charge: Domestic Usage Block (cf) Rates 0 - 1,200 $ 1.11 1,201 - 2,000 $ 0.98 2,001 - 25,000 $ 0.86 Over 25,000 $ 0.60 Fire Service Charges: Monthly Meter Size Rates 2 $ 5.00 3 $ 7.00 4 $ 11.00 6 $ 24.00 8 $ 35.00 10 $ 60.00 12 $ 150.00 Outside City Factor $ 1.50 Domestic Water Utility - 10 - Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 1.7 Further Study Staff recommends keeping with the established practice of routinely conducting a -'- ''--' -'---`-- _r u:ra.. _t ..L.. .J.. ....1 41...aw4..A L. aetallea CVidIUdLIUtI VI ULIIIL (UbL UI betVIL.0 AMU rate design, aiiu that a wuvVr-up atuuy uc conducted no later that mid -year 2003. 1.8 Conclusions Based on the above presentation and the further details in the balance of this report, staff is proposing the adoption and implementation of Alternative 2. 2.0 INTRODUCTION 2.1 Background The City of Yakima owns and operates a Domestic Water Utility system ("Utility"). The Utility currently serves a population base of approximately 48,000 individuals, through 18,820 service connections. During 1996 staff completed a cost of service and rate study, in consultation with Black & Veatch. Recommendations arising out of that study were brought to Council in the form of "Cost of Service and Rate Study, dated August 1996", hereinafter known as the 1996 Report. The two rate increases undertaken as a result of this study were the last in a series of four increases that have been implemented since 1990. Below is a list showing the individual percentage of increase and the year in which each was implemented: Table 2: Cost of Service Increases Since 1990 Year Jul -93 Jul -94 Apr -97 Apr -98 Percentage 13 11 15 13 Pursuant to that report, on March 4, 1997, City Council adopted Ordinance 97-63, which provided for multiple rate adjustments. The last adjustment became effective April 1, 1998. The Utility has continued to operate since that date without benefit of further rate increases, or any infusion from outside funding sources. The 2000 Cost of Service and Rate Study (2000 Report) has been conducted to review and recommend modifications to the existing rate structure, the rates, and fees applicable to Domestic Water Utility -11 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division the domestic water system. The current customer classes include residential, commercial, and industrial customer classes, and fire services. This report was prepared utilizing data from multiple sources, including the 1996 Report, but is written as a stand-alone document. The study uses historical data on operating revenues, other income, operating expenses, debt service, billable consumption, as well as existing and projected capital expenditures for the domestic water system. 2.2 Purpose The purpose of the study is to: • Analyze and project the City's future revenues and revenue requirements for the Utility, taking into consideration existing and planned debt, projected operating and maintenance expense, planned capital expenditures, and other revenue requirements in order to ensure adequate revenue recovery. • Analyze costs of service and equitably allocate the costs of domestic water utility operations and capital costs to the users of the systems. • Evaluate the current rate structure in terms of equity and revenue stability, and provide recommendations for Tong -term rate design alternatives or improvements for the customer classes. In the process of achieving the above purposes the following principals shall govem the rate -setting process utilized herein: • Achieve cost -based rates that are equitable and meet the full revenue requirements of the Utility. • Develop rates that are easily understood and administered. • Develop rates and processes for allocating costs that conform to widely accepted rate - setting techniques and practices. • Implement rates that support conservation. The overriding issues to be addressed in this process are to ensure adequate revenue to maintain a viable domestic water system, and for the system to be capable of meeting future demands as well as being responsible in the context of environmental concerns. The largest single component in our revenue needs continues to be capital improvements, whether utilized to replace a portion of the system that in some areas are becoming obsolete, or to comply with Domestic Water Utility - 12 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division the regulatory requirements of State and Federal law. The City continues to seek assurances that there will be adequate water rights to anahla it to meat the rlemanric of future nrnwth The Arni iavplla nrnr•.aadinnc arA still pending before the Court. The City will continue to optimize its water resources by further development of conservation programs, by undertaking a test Aquifer Storage and Recovery program (ASR), and solidification of its ground water rights. Water conservation planning is an integral part of the Water System Plan required by the Washington State Department of Health Regulations (WAC 246-290-100), and will hehe included as a nmm�onent of the ')n0J1 lA ater Comprehensive Plan. The move towerri a included cO LU td%J!15*#!!l !I Y! n!!Sd S_$#'A! 9l ILSs! »S!!!!ISI Ss! l.y.!!x�lOM ! !SAl 1. !!!Sy move 1..4n Sl Se Sq conservation rate structure by Council when they adopted the 1996 Cost of Service and Rate Study was a positive step in our conservation effort. The City is obligated, from the perspective of concern for our customers as well as compliance with the requirements of State and Federal regulations, to develop a financial management plan that will enable the Utility to maintain the infrastructure in a safe, sound and operable condition. Therefore, this study fully considered and addresses financial planning, cost of service analyses, and rate design for the Utility. The first step of the study is to project future revenues under existing rates. Projections are also made for operating expenses and financing requirements associated with the capital improvement program. The corresponding revenues are then evaluated to determine if they are adequate to meet the operating expenses and capital improvement program needs. Five years are shown for planning purposes (2001 through 2005). The second step is a cost of service analysis, which allocates revenue requirements in accordance with various customer class demands. Uniform unit costs are calculated and used to distribute requirements to all classes based on customer demands. The cost of service analysis will then provide a guide toward making rate adjustments for each customer class. From the results of the cost of service analysis, the final step, rate design, is accomplished. 2.3 Scope This report includes the results of the analysis of all domestic water utility funds. As discussed previously, total revenue requirements are developed, and allocation of costs to customer classes are completed, with the resulting proposed rates being established on the Domestic Water Utility - 13 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division basis of an equitable cost of service analysis. Additionally the following tasks/investigations were undertaken: • reviewed existing financial policies of the City as they pertain to water costs of service and rates that are presently in effect. • reviewed United States Environmental Protection Agency (USEPA) rules, State Department of Health regulations, and other City documents governing cost of service and rate -related issues. • reviewed the most current applicable publications and manuals pertaining to financing and rate charges for water systems. • evaluated the matter of subsidies to special customer classes. • compiled and reviewed historical account data utilizing the 1997 - 2000 billable consumption records for all customer classes. • developed costs for mandated programs. Analyses of historical trends are included which show the number of accounts and/or units, along with other billable measures, such as water usage. Annual customer growth projections, consistent with GMA, are incorporated into the study projections. Revenue requirements include operation and maintenance expense, existing and proposed debt service requirements, routine capital and capital improvement projects resulting from regulatory requirements, as well as operating and capital reserves. Inflation for on-going expenditures as well as capital improvement projects is included to reflect cost escalation. The cash flow analyses compare projected revenue requirements with projected revenue under existing rates, and indicate the level of needed revenue adjustments for each service. The proposed rates have been designed to generate sufficient revenues to meet projected system requirements for each service over the study period. 2.4 Organization The remainder of this report is divided into separate sections, describing the analysis undertaken, and results of each phase of the study, as well as staffs recommendations. The sections are as follows: • Revenue requirements • Cost of service allocations Domestic Water Utility - 14 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division • Rate design ® Recommendations 3.0 REVENUE AND REVENUE REQUIREMENTS S 3.1 Revenue Under Existing Rates Development of projected revenues under existing rates provides the benchmark upon which to evaluate the need for revenue adjustments throughout the five-year study period (2001- 2005). Domestic Water Utility revenue is obtained from charges for water service. Such revenue is _ 2__ of the number ..-J � of customer �.. .��L�� and the quantity �2 ..-�L�..�J �L�- fora unction and size customer m�.tef uanti y or metered water usage connected customers, potential demand based on the number of Tots where water service is not currently not provided, and the current schedule of water rates. 3.1.1 Customer Growth Based on actual 1999 billing records, the domestic water utility currently provides service to 18,820 customer accounts. The City categorizes customers into eight (8) customer classes: Residential Inside and Outside; Commercial Inside and Outside; Industrial Inside and Outside; and Private Fire Protection Inside and Orurtside. For the purpose of projecting revenue under existing rates, a residential customer growth rate of onequarter of one percent (0.25%) has been assumed. Table 3 summarizes the projected number of meters by class for the study period. Table 3: Projected Number of Meters Projected Number of Meters Customs Class 2,001 2,002 2,003 2,004 2,005 Residential Inside 16,065 16,097 16,129 16,145 16,161 Commercial Inside 2,358 2,362 2,366 2,368 2,370 Industrial Inside 16 16 16 16 16 Private Fre Protection Inside 312 313 314 314 314 Residential Outside 151 151 151 151 151 Commercial Outside 48 48 48 48 48 Industrial Outside - - - Private Fire Protection Outside 17 17 17 17 17 Total 18,967 19,004 19,041 19,059 19,077 Domestic Water Utility -15 - Revised 2000 Cost of Service & Rate Study REVISE() MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 3.1.2 Water Volume Projections of total water volume and billable water volume for the customer classes are based on a detailed analysis of customer water usage patterns reflected in a typical water bill tabulation developed by City staff. Future year projections incorporate customer growth. Table 4 summarizes projected total water volume by customer class for each year of the study period. Table 4: Projected Total Water Usage Projected Usage CustomerClass 2001 2002 2003 2004 2005 Residential Inside 2,504,822 2,508,790 2,512,758 2,514,742 2,516,726 Commercial Inside 1,969,800 1,972,716 1,975,632 1,977,090 1,978,548 Industrial lnside 404,336 404,336 404,336 404,336 404,336 Private Fire Protection Inside 1,248 1,252 1,256 1,256 1,256 Residential Outside 27,331 27,331 27,331 27,331 27,331 Commercial Outside 67,050 67,050 67,050 67,050 67,050 Industrial Outside - - - Private Fire Protection Outside 85 85 85 85 85 Total 4,974,672 4,981,560 4,988,448 4,991,890 4,995,332 All usage is in hundreds of cubic feet. 3.1.3 Water Sales Revenue under Existing Rates Revenue under existing rates is obtained by applying the current rate schedule to the projected number of customer meters and billable water volume. Customers currently pay a `ready - to -serve charge' (RSC), which is based on meter size, and a 'Unit of Cost (UOC) that is based on one hundred cubic feet per unit. The is UOC then applied to the volume of water used over a two- month period, after which it is combined with the RSC to produce the bi-monthly bill for each account. Fire Services are charged a ready -to -serve charge, are not billed for any actual water usage. Pursuant to the last increase implemented in 1998, Table 5 summarizes the current schedule of bi-monthly water rates. Domestic Water Utility -16 - Revised 2000 Cost of Service & Rate Study REVISE) MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 5: Existing Schedule of Water Rates Ready -to -Serve Charge: Meter Size (inches) Bi -Monthly Billing 3/4 1 1-1/2 2 3 4 6 8 10 12 $2.29 $4.61 $11.47 $25.21 $66.34 $107.52 $244.70 $434.48 $681.39 $983.23 Volume Charge: Domestic Usage Block (cf) 0-1,200 1,201 - 2,000 2,001 - 25.000 Over 25,001 Municipal 0-5,000 Over 5,000 Irrigation Irrigation Inside City Irrigation Outside City State or municipal $1.11 $0.98 $0.86 $0.60 $0.27 $0.14 $0.65 $0.97 $0.65 Fire Service Charges: Meter Size 2 inch 3 inch 4 inch, including hydrant 6 inch, including hydrant 8 inch 10 inch 12 inch Monthly Billing $5.72 $7.60 $11.44 $15.24 $22.86 $30.46 $30.46 Outside City Factor 1.50 1.50 Table 6 summarizes projected water sales revenue under existing rates for the study period. Table 6: Projected Water Sales Revenue Under Existing Rates Projected Customer Class Residential Inside Commercial Inside Industrial Inside Private Fire Protection Inside Residential Outside Commercial Outside Industrial Outside Private Fire Protection Outside Total 2001 2002 $ 2,499,726 $ 2,504,051 $ 1,680,997 $ 1,683,490 $ 259,147 $ 259,147 $ 31,773 $ 31,875 $ 30,399 $ 30,399 $ 60,245 $ 60,245 $ $ $ 3,429 $ 3,429 $ 4,565,716 $ 4,572,636 2003 2004 $ 2,508,375 $ 2,510,538 $ 1,685,982 $ 1,687,229 $ 259,147 $ 259,147 $ 31,977 $ 31,977 $ 30,399 $ 30,399 $ 60,245 $ 60,245 $ 3,429 $ 3,429 $ 4,579,554 $ 4,582,964 2005 $ 2,512,699 $ 1,688,475 $ 259,147 $ 31,977 $ 30,399 $ 60,245 $ $ 3,429 $ 4,586,371 Domestic Water Utility -17 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 3.2 Capital Improvement Program Table 7 presents the proposed capital improvement program (CIP) for the domestic water utility for the study period. As shown in the table, the annual cost of capital improvement projects varies substantially from year to year. All costs include an allowance for inflation estimated at 4.0 percent per year. Routine improvements are funded from the Operating Fund of the Utility and are not include in the CIP. It should be noted that all projections of system costs and associated computations of proposed funding sources, including charges for water use developed herein, are dependent upon the estimated costs of the CIP. Table 7 is a listing of the projects by name and displays the associated estimated cost by project. The City, in conjunction with an engineering consultant, is currently updating the 6 -year Water Comprehensive Plan. This Plan must be complete and approved by the Washington Department of Health, no later that June 30, 2001. In addition to the update of the Water Comprehensive Plan, the City is currently working with Golder Associates to complete the development of a detail Master Irrigation Rebuild Plan. Depending on the final outcome of this plan, the revenue needs of the domestic water utility proposed revenue levels in this report could require adjustment. Domestic Water Utility -18 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation biwsion Project Name/Description Table 7: Proposed Capital Improvement Program (inflated $) 2000 2001 2002 2003 20.04 2005 2 Million Gallon Reservoir Low Zone $ 250,000 $ 9.5 Million Gallon Reservoir - Middle Zone $ 1,700,000 $ Contact Basin Building at WTP $ $ - $ - $ East Mead Ave 1st to 10th St. water Main $ 160,000 Mead Ave Water Main $ 175,000 Viola Ave Freeway X-ing $ 180.000 $ - $ Washington Ave - 40th - Mead Ave Water Main Kissel Park SCADA Retainage $ (12,670) Wright Ave. Well Repiacement/ASR $ 100,000 $ 25,000 Northeast Yakima Water Mains $ 1,065 King to Washington Ave Water Mahn WTP Pipe Gallery Rebuild $ 26,500 $ 275,000 $ 275,000 Long Fiber to S. 1st Water Main $ 155,000 Stone Church Pump $ 23o 000 WTP Intake Modification $ 17,000 $ 550,000 9th Ave. Water Main DOE Water Main Replacement Program $ 100,000 $ 175,000 $ 175,000 $ 175,000 $ 175,000 $ 175,000 WTP - Waste Recycle Study Water Comp Plan $ 50,000 $ 150,000 Fluoride $ 420,000 Marries Tie Over $ 75,000 Upgrage Chemical Systems $ 615,000 Upgrage Chemie Systems On Site Cl2 $ 645,000 Flash Mix $ 105,000 Modify Contact Basins $ 1,600,000 $ Rehabilitate Filters $ 1,500,000 $ Lagoons $ 1,800,000 $ 2005 Future Capacity - ASR $ 415,000 TOTAL $ 931,895 $ 1,250,000 $ 450,000 $ 1,875,000 $ 7,025,000 $ 925,000 $ 12,458,895 3.3 Capital Fund To provide for the continuing capital needs of the City, adequate sources of capital funds must be available to the Utility. A proposed plan for financing the CIP shown in Table 7 is summarized in this section and shown in Table 8. Domestic Water Utility - 19 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 8: Projected Capital Improvement Financing Plan SOURCE OF FUNDS 2000 2001 2002 2003 2004 2005 Beginning of Year Fax! Balance $ 1,259,500 $ 879,800 $ 208,300 1 230,200 $ 3,589,300 $ 1,059,400 Proposed Band Sales Issue Amount $ - $ - $ - $ - $ - $ Less: Issuance Costs (a) $ - $ - $ - $ - $ - $ Less: Reserve Requirement (b) $ - $ - $ - $ - $ - $ Net Proceeds $ - $ $ - $ - $ - $ Low Interest Rate Loans Amount of Loan $ - $ $ - $ 5,000,000 $ 5,000,000 $ Less: Issuance Costs (c) $ - $ $ - $ (25,000) $ (25,000) $ Less: Reserve Requirement (d) Taal Available Loan Funds $ - $ - $ - $ 4,975,000 $ 4,975,000 $ Grant Funds/Contributions $ 400,000 $ 350,000 $ - $ $ - $ Transfer from Operating Fund $ 100,000 $ 250,000 $ 500,000 $ 400,000 $ 600,000 $ 550,000 Connection Charge Revenue $ - $ - $ - $ - $ $ Other $ $ $ $ $ $ Interest Earnings (e) $ 52,200 $ 26,500 $ 10,600 $ 93,200 $ 113,400 $ 38,600 Total Funds Available $ 1,811,700 $ 1,508,300 $ 716,900 $ 5,698,400 $ 9,277,700 $ 1,648,000 APPLICATION OF FUNDS Major Capital Improvements $ 931,900 $ 1,300,000 $ 486,700 $ 2,109,100 $ 8,218,300 $ 1,125,400 Total Funds Applied $ 931,900 $ 1,300,000 $ 486,700 $ 2,109,100 $ 8,218,300 $ 1,125,400 End of Year Fund Balance $ 879,800 $ 206,300 $ 230,200 $ 3,589,300 $ 1,059,400 $ 522,800 Minimum Desired balance $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 (a) Assumed to be equal to0.0 percent of total issue amount. (b) Assumed to be equal to ane year average debt service. (c) Assumed to be equal to 0.5 percent of total issue amount. (d) Assumed that there is no reserve requirement. (e) Interest earnings on unspent construction funds assumed at 4.0 percent. 3.3.1 Source of Funds Obligations of the Domestic Water Utility Capital Fund are met from a combination of available funds on hand, proposed low interest loans, grants, cash transfers from the Domestic Water Utility Operating Fund, and interest income. It should be noted that the combination of funding sources shown in the capital -financing plan is dependent upon the amount of estimated capital costs to be incurred in any given year of the program. Should either of these amounts differ from the assumptions provided, the combination of funding sources could change. 3.3.1.1 Funds on Hand Based on City accounting records, a beginning balance of $1,259,500 is available in the Capital Fund for 2000. 3.3.1.2 Bond Sales The City does not plan to issue bonds to pay for Domestic Water Utility capital projects. 3.3.1.3 Low Interest Loans and Grants This cost of service and rate study currently is proposing that the City borrow $10,000,000 in low-interest money from the Public Works Trust Fund. By utilizing operating transfers and grant Domestic Water Utility - 20 - Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division /RFNJ°ll Friar "ATP'i1'C7r 19i 7"®M, -1f funds as matching funds, it is believed that the these loans, $5,000,000 each in years 3 and 4 of the program, can be written with only a one-half of one percent interest burden. The City further anticinates r e ivina annroximataly $150,000 in grant funds from the Washington Dental Association to complete the installation of the fluoride treating equipment at the Neches River Water Treatment Plant. The City has already received $179,800 from the Dental A for a .d a he F ♦h the On r1SSOciauiO, i ivi this protect. i r addition, the City is in the process of applying t0 both u lir BPA and the Salmon Recovery Funding Board for funds totaling $1,900,000 to be used in the modification of the Water Treatment Plant Intake structure. 3.3.1.4 Transfer from the Water Operating Fund Transfers from the Operating Fund are planned during each year of the study period to provide cash financing for the remaining identified water capital projects. The transfers will range in Qi7a from Sinn nnn tr sRnn nnn 3.3.1.5 Other Potential Sources of Funding Currently, there are limited alternative funding sources available. However staff will continue to seek outside funding sources. One such source that is currently being investigated is the Yakima River Basin Water Enhancement Project - Title XII. As time progresses, the likelihood of funds becoming available through the State's Salmon Recovery Funding Program could potentially become another funding source for some projects. 3.3.1.6 Interest Income Interest income is generated from the investment of available annual balances in the water utility Capital Fund. An average annual interest rate of 4.0 percent is assumed. 3.3.2 Use of Funds Obligations of the Capital Fund include major capital improvements, bond reserve requirements for existing bonds, and capital financing issuance expense. The major capital improvements shown in Table 8 are a reflection of the totals shown in Table 7. 3.3.3 Funds on Hand at End of Year Table 8 shows a projected Capital Fund balance of $522,600 by the year 2005. Fund hnInnr®c of fhe ®noi of one year e.re ncncr�Ihr nnrriod fnnu3rri 4n "In fi nrni®n+e +ha fnlln..dnrr ................. .... ... .. . ...... J...... ....v yv..v.a,.n' ..a.....va. .v. .waw.ae LSO ..v.F. .v..a.. pnvwvw 1. Me wnveneey year and to provide for unanticipated changes in project costs and schedules. Domestic Water Utility - 21 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division While the above assumptions are based on the best information available to City staff at this time, it is important that such assumptions are reviewed annually, and the projected CIP and associated funding sources be updated annually. Again, the City, in conjunction with an engineering consultant, is currently updating the 6 -year Water Comprehensive Plan. This Plan must be complete and approved by the Washington Department of Health, no later that June 30, 2001. In addition to the Water Comprehensive Plan, the City, working with Golder Associates, is completing the development of a detail Master Irrigation Rebuild Plan. Depending on the final direction taken as a result of this planning process, it could require an adjustment in direction relative to the proposed Capital Improvement Program that is the basis of this report. 3.4 Operating Fund To provide for the continued operation of the Utility on a sound financial basis, revenue must be sufficient to meet revenue requirements. This section of the report analyzes projected Utility operating revenues and operating revenue requirements during the five-year study period and sets forth revenue adjustments needed to meet future revenue requirements. Table 9 presents the Domestic Water Utility Operating Fund cash flow for the study period. Domestic Water Utility - 22 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 9: Projected Operating Fund Cash Flow Line No. Revenue Under Existing Rates 1 2000 2001 2002 2003 2004 2005 W ater Sales Revenue $ 4,557,600 $ 4,568,200 $ 4,573,200 $ 4,580,100 $ 4,583,500 $ 4,586,900 Additional Revenue Required Percent # of Months Year Increase Effective 4 2001 20 12 $ $ 013,200 8 914,600 $ 916,000 $ 916,700 $ 917,400 5 2002 0 12 $ - 5 - $ - $ 6 2003 0 12 $ - $ - $ 7 2004 0 12 $ $ 8 2005 0 12 $ 9 Total Additional Revenue $ $ 913,200 $ 914,600 $ 916,000 $ 916,700 $ 917,400 10 Total Revenue from Adj Rates $ 4,557,600 $ 5,479,400 $ 5,487,800 $ 5,496,100 $ 5,500,200 $ 5,504,300 91 Other Operating Revenue $ 187,100 $ 167,100 $ 167,100 $ 167,100 $ 167,100 $ 167,100 13 Non -Operating Revenue $ 145,400 $ 130,400 $ 130,400 $ 130,400 $ 130,400 $ 130,400 14 Interest Income $ 74,900 $ 87,400 $ 103,800 $ 112,100 $ 107,000 $ 81,500 18 Total All Revenues 5 4,965,000 $ 6,664,300 5 5,889,100 $ 6,905,700 $ 5,904.700 $ 5,863,300 REVENUE REQUIREMENTS 16 Total Operation and Maintenance $ 3,927,400 $ 4,112,600 $ 4,244,300 $ 4,380,100 $ 4,520,300 $ 4,665,000 Debt Service 17 Existing Bonds $ 595,000 $ 552,200 $ 545,600 $ 340,400 $ 335,300 $ 321,700 18 Proposed Bonds $ $ $ - $ - $ - $ 19 Total Bonds $ 595,000 $ 552,200 $ 545,600 $ 340,400 $ 335,300 $ 321,700 20 Existing Loans $ 74,500 $ 73,700 $ 102,900 $ 102,100 $ 101,200 $ 100,400 21 Proposed Loans $ $ - $ - $ 131,700 $ 395,000 $ 526,600 22 Total Loans $ 74,500 $ 73,700 $ 102,900 $ 233,800 $ 496,200 $ 627,000 23 Total Debt Service $ 889,500 $ 825,900 $ 648,500 $ 574,200 $ 831,500 $ 948,700 24 Transfer to Capital Fund $ 100,000 $ 250,000 $ 500,000 $ 400,000 $ 600,000 $ 550,000 25 Risk Management Ins.641 534 10 960 $ 72,100 5 74,263 $ 76,491 $ 78,786 $ 81,149 $ 83,584 26 Taxes $ 210,000 $ 275,600 $ 276,000 $ 276,400 $ 276,600 $ 276,800 27 Total Revenue Requirements $ 4,979,000 $ 6,338,363 $ 5,746,291 $ 5,709,486 $ 6,309,549 $ 8,624,084 FUND BALANCES 28 Change in Cash Position 29 Beginning Cash Balance 30 Ending Cash Balance 31 Minimum Desired Cash Balance $ (14,000) $ 525,937 $ 143,809 $ 196,214 $ (404,849) $ (640,784) $ 1,543,400 $ 1,529,400 $ 2,055,337 $ 2,199,146 $ 2,395,360 $ 1,990,511 5 1,529,400 $ 2,055,337 $ 2,199,146 $ 2,395,360 $ 1,990,511 $ 1,349,728 $ 750,000 $ 750,000 $ 750,000 $ 750,000 $ 750,000 $ 750,000 3.4.1 Revenue Revenue for the Operating Fund is derived from user charges for metered water sales, miscellaneous revenues such as hookup fees and penalties, new water services, rental income, personnel services, and interest income from operations. Sources of operating revenues are shown on Table 9, Lines 11 through 13, and discussed in this section. 3.4.1.1 Water User Charge Revenue Revenue of the Utility is derived principally from the sale of water. Estimates of future water sales revenues are based on a detailed analysis of the number of estimated customer meters, water usage, and projected customer growth throughout the study period. Water sales revenue is based on the rates, number of estimated meters, and projected volume of metered water (Line 2 of Table 9). Additional revenues from proposed rate adjustments are shown at Line 4. All of the Domestic Water Utility - 23 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division revenues are discussed in more detail in Section 3.4.3, Comparison of Revenue and Revenue Requirements. 34.1.2 Other Revenue As shown in Table 9, Lines 10 through 13, the Utility also receives revenue from miscellaneous revenues such as hook-up fees, permitting fees, and penalties. 3.4.1.3 Interest Income Interest income (Table 9, Line 13) is based on the estimated available balances in the Operating Fund for each investment period, and an average annual interest rate of four percent. 3.4.2 Revenue Requirements Revenue requirements for the Operating Fund include operation and maintenance expense, debt service, transfers to the Capital Fund, routine capital outlays, and taxes. Operating revenue requirements are shown on Table 9, Lines 15 through 26, and are discussed in detail in this section. 3.4.2.1 Operation and Maintenance Expense Operating and maintenance (O&M) expense consists of the cost of personnel and materials to supply, pump, and distribute water on a routine basis. Since these costs are an annual obligation of the Utility, they must be met from water sales revenue. Detail O&M projections are presented in Table 10. O&M expenses for the budget year 2000 were used as the basis for projecting future O&M levels. Inflation of 3.5 percent hass been assumed for all O&M cost. Table 10: Projected Operating and Maintenance Expense Budget Projected Total Expenses 2000 2001 2002 2003 2004 2005 Source of supply $ 237,382 $ 238,861 $ 246,500 $ 254,400 $ 262,500 $ 270,900 Pumping $ 153,328 $ 152,000 $ 156,900 $ 161,900 $ 167,100 $ 172,400 Treatment $ 728,679 $ 812,822 $ 838,800 $ 865,600 $ 893,300 $ 921,900 Transmission and Distribution $ 1,478,382 $ 1,551,155 $ 1,600,800 $ 1,652,000 $ 1,704,900 $ 1,759,500 Customer Accounts $ 273,776 $ 293,000 $ 302,400 $ 312,100 $ 322,100 $ 332,400 Administrative and General $ 1,055,804 $ 1,064,788 $ 1,098,900 $ 1,134,100 $ 1,170,400 $ 1,207,900 Total Operating Expenses $ 3,927,351 $ 4,112,626 $ 4,244,300 $ 4,380,100 $ 4,520,300 $ 4,665,000 As shown in Table 10, total operation and maintenance expenses of the Utility are projected to increase from a budgeted amount of $4,112,626 in 2001 to $4,665,000 in 2005. These amounts Domestic Water Utility - 24 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division do not include debt service, taxes or allowances for routine capital outlays such as equipment replacements, furniture, and fixtures, which are discussed later in this section. 3.4.2.2 Debt service Existing and proposed debt service for the study period is summarized in Table 11, in Lines 1 through 3, and is comprised of bonds and PWTF loans from prior years. Existing revenue bond debt service ranges from $669,485 in 2000 to $422,111 in the year 2005. Proposed bond revenue debt service is shown on Table 11, Line 10 is zero as no bond sales are being considered during the five-year cost of service study period. As discussed previously, the study assumes two future !ow -interest loans, which will increase total outstanding debt obligations. Table 11: Existing and Proposed Debt Service Line Na. Existing Debt 2000 2001 2002 2003 2004 2005 1 Bonds 2 PWTF Loans 3 Total Existing Debt $ 594,971 $ 552,163 $ 545,563 $ 340,358 $ 335,342 $ 321,688 $ 74,514 $ 73,696 $ 102,878 $ 102,059 $ 101,241 $ 100,423 $ 669,485 $ 625,859 $ 648,441 $ 442,418 $ 436,583 $ 422,111 Proposed Revenue Bonds Principal and Interest (a) 4 2000 Bonds $ $ $ - $ - $ - $ 5 2001 Bonds $ $ - $ - $ - $ 6 2002 Bonds $ - $ $ - $ 7 2003 Bonds $ $ $ 8 2004 Bonds $ $ 9 2005 Bonds $ 10 Total Proposed Bonds $ - $ - $ - $ $ - $ Proposed Low -Interest Loans Principal and Interest (a) 11 2000 Loans $ $ $ - $ - $ $ 12 2001 Loans $ $ - $ $ $ 13 2002 Loans $ - $ $ $ 14 2003 Loans $ 131,700 $ 263,300 $ 263,300 15 2004 Loans $ 131,700 $ 263,300 16 2005 Loans $ 17 Total Proposed Loans $ $ - $ $ 131,700 $ 395,000 $ 526,600 18 Tota! Debt Service $ 669,485 $ 625,859 $ 648,441 $ 574,118 $ 831,583 $ 948,711 (a) Based upon equal annual debt service payments for all proposed Loans at an assumed interest rate of 6.0 percent for revenue bonds and 0.5 percent for low interest loans and assumed maturities of 20 years. The bonds are assumed to be issued by and dated July 1 in the respective fiscal years shown. 34.2.3 Transfers to Capital Fund Transfers to the Capital Fund for cash financing of capital improvements vary each year based on needs and carry-over amounts, and will range in size from $100,000 to $600,000. Domestic Water utility - 25 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 3.4.2.4 Routine Capital Outlays Capital expenditures for equipment and system replacements that recur on a more or less annual basis are considered routine, and are properly met from water sales revenue rather than from debt financing or other major capital improvement sources of funds. 3.4.2.5 Taxes Projected state public utilities taxes and taxes to be paid to the General Fund and range from $210,000 in 2000 to $298,000 by the end of the study period. Taxes are a function of domestic water utility revenues and, as such, increase as the total revenues for the water utility increase. 3.4.3 Comparison of Revenue and Revenue Requirements To meet the projected revenue requirements previously discussed and to meet other policy objectives, revenue adjustments are potentially necessary in several years of the study period. Policy objectives considered in arriving at the indicated rate adjustments include maintaining an Operating Fund working fund balance of $750,000 by the end of the study period and maintaining debt service coverage for the Utility of at least 200 percent of annual debt service. Based on the assumptions utilized in this study and discussed in previous sections, the indicated rate adjustments for the overall water system are shown in each of the three alternatives discussed later in Section 4.2. The proposed adjustments represent the system -wide adjustments necessary to recover total revenue requirements for the Utility. Adjustments for individual customer classes will vary based on the allocated cost of service for each customer class, as discussed in more detail in the next section. The proposed increases to overall revenue, barring something unforeseen, indicates that the Operating Fund balance will be at or very near the desired level by the year 2005, and for most of the intervening years as well. 4.0 COST OF SERVICE ALLOCATIONS In developing an equitable schedule of charges for water service, costs of service are allocated to the various customer classes according to the service requirements of each class. Allocation of the cost of service takes into account the availability of service to unconnected customers, volume of water used, peak rates of demand, and number of customer meters for Domestic Water Utility - 26 - Revised 2000 Cost of Service & Rate Study REVISE© MARCH 2001 City of Yakima, Washington - Water/Irrigation Division connected customers, and other relevant factors. The cost of service assumptions, methodology, and allocations used for this study are discussed in this section. 4.1.1 Cost of Service to be Allocated Cost of service allocations are made for a test year considered representative of the period in which proposed rates are expected to be in effect. The year 2001 was selected as the test year for this study. The cost of service to be allocated to the various customer classes consists of the total net revenue requirements for the test year, as shown in Table 12. The test year 2001 costs to he recovered from water sales revenue totals $5,478.800_ As shown in Table 12 Line 1. net operating expenses of $3,884,800 and net capital costs of $1,594,000 comprise the total cost of service. Table 12: Cost of Service to be Allocated Test Year 2001 Line Operating Capital No. Total Revenue Requirements Expense Costs Total 1 Operating Expense $ 4,112,600 $ 4,112,600 2 Operating Reserve - Gain/(Loss) $ 525,437 $ 525,437 3 Debt Service Requirements $ 625,900 $ 625,900 4 Taxes $ 275,500 $ 275,500 5 Residual Equity Transfer $ 74,263 $ 74,263 6 Transfer to Water Construction Fund $ 250,000 $ 250,000 7 Total $ 4,112,600 $ 1,751,100 $ 5,863,700 Revenue Requirements Met From Other Sources 8 Other Operating Revenue $ 167,100 $ 167,100 9 Non -Operating Revenue $ 130,400 $ 130,400 10 Interest Income $ 60,700 $ 26,700 $ 87,400 11 Total $ 227,800 $ 157,100 $ 384,900 12 Cost of Service to be Met from Water E $ 3,884,800 $ 1,594,000 $ 5,478,800 13 Adjustment for Full Year Rate Increase ( $ 14 TOTAL COST OF SERVICE $ 3,884,800 $ 1,594,000 $ 5,478,800 4.1.2 Functional Cost Components The various cost elements of water service are assigned to functional cost components as the first step in the subsequent distribution of the cost of service to customer classes. The principal functional cost components consist of base costs (average day water use), extra capacity costs (peak demand), and customer costs. Base costs are those operating costs which tend to vary directly with the quantity of water Domestic Water Utility - 27 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division used, plus a portion of other costs associated with serving customers under average day Toad conditions. Extra capacity costs represent those operating costs incurred to meet customer peak demands for water in excess of average day usage, plus those capital costs for extra plant and system capacity beyond that required to supply water at the average rate of use. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demands. Customer costs are defined as costs that tend to vary in proportion to the number of customer units served by the system. Such costs include meter reading, billing, collecting and accounting, and maintenance and capital costs associated with meters and services. These costs are assigned directly to either the meters and services cost component, or the billing and collection cost component. Fire protection costs represent operating and capital costs related to fire service, fire hydrants, and public fire protection. Such costs are assigned directly to the fire protection cost component. 4.1.3 Allocation to Cost Components The Utility is comprised of various facilities; each designed and operated to serve a given function. In order to provide adequate service to its customers at all times, the Utility must be capable of not only providing the total amount of water used, but also supplying water at maximum rates of demand. Since all customers do not exert their maximum demand for water at the same time, capacities of water facilities are designed to meet the coincidental demands of all classes of customers that have been experienced by the system. For every facility on the system, there is an underlying average demand, or uniform rate of usage exerted coincidentally by the customers for which the base cost component applies. For those facilities designed solely to meet average day demand, costs are allocated 100 percent to the base cost component. Extra capacity requirements pertain to coincidental maximum daily and hourly demands in excess of average usage. System demand factors for maximum day and maximum hour demands were used to calculate ratios for the allocation of capital costs to base and extra capacity cost components. Maximum day and maximum hour water system demands used in this study were provided in the 1994 Water Comprehensive Plan. A maximum day to average day ratio of 1.5 was used for this Domestic Water Utility - 28 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division study, which indicates that approximately 66.7 percent of the capacity of facilities designed and operated to meet maximum day demand is needed to meet average or base use. The remaining 33.3 percent is required to meet maximum day extra capacity requirements. Since maximum hour water usage also utilizes facilities designed and operated for average day and maximum day demands, the costs associated with meeting maximum hour demand are allocated to base, maximum day extra capacity, and maximum hour extra capacity. A maximum hour to annual average day use ratio of 2.14 was used, which indicates that 46.7 percent of the capacity of facilities designed and operated for maximum hour demand is needed for average or base use, 23.3 percent is required to meet maximum day extra capacity demand, and the remaining 30.0 percent is for maximum hour extra capacity demand. In the allocation of capital costs, costs are allocated directly to functional components to the extent possible. The separation of costs into functional components provides a means for distributing such costs to the customer classes on the basis of respective responsibilities for each particular type of service. 4.1.3.1 Allocation of Net Plant Investment and Capital Costs Capital costs include routine capital outlays, cash -financed capital improvements, debt service, and a portion of taxes. The most common methodology for assigning capital costs to functional components is to allocate such costs on the basis of net plant investment. Net plant investment represents the original cost of the existing plant in service Tess accumulated depreciation and excluding contributed plant. This is typically referred to as the Utility's "rate base." The investment in source of supply, pumping plant, and storage, designed to meet maximum day demands, is allocated to base and maximum day. Investment in transmission and distribution facilities, designed to meet maximum hour demands, is allocated to base, maximum day, and maximum hour. General plant is allocated on the summation of all other plant investment. Other investment is directly allocated to appropriate functional components. The resulting allocation of net plant investment of $16,658,715, shown in Table 13, serves as the basis for allocating the test year 2001 net capital costs of $1,019,200 (Table 12) to cost functions. Domestic Water Utility - 29 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Line No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 14 15 16 17 18 19 20 Table 13: Allocation of Net Plant to Functional Cost Components Test Year 2001 Description Total Base Extra Capacity Maximum Day Maximum Hour Meters & Services Customer Biting Direct Fire Source of Supply $ 2,436,435 $ 2,436,435 Pumping Plant $ 714,680 $ 476,480 $ 238,200 Reservoirs $ 1,645,351 $ 767,800 $ 383,900 $ 493,651 Water Treatment Plant $ 2,694,988 $ 1,796,659 $ 898,329 Subtotal $ 7,491,454 $ 5,477,375 $ 1,520,429 $ 493,651 Transmission Mains $ 2,804,307 $ 1,869,500 $ 934,807 Distribution Mains $ 12,863,539 $ 6,003,000 $ 3,001,500 $ 3,859,039 Subtotal $ 15,667,846 $ 7,872,500 $ 3,936,307 $ 3,859,039 Hydrants $ 1,116253 $ 1,116253 Services $ 5,087,355 $ 5,087,355 Meters $ 1,132,592 $ 1,132,592 Subtotal $ 7,336,200 $ 6,219,947 $ 1,116253 Land $ 62,088 $ 62,088 Structures 8 Improvements/Mains $ 163,700 $ 76,400 $ 38,200 $ 49,100 Intangible Plant $ 221,830 $ 97,130 $ 39,700 $ 31,700 $ 45,200 $ - $ 8,100 General Plant $ 283,497 $ 124,097 $ 50,700 $ 40,500 $ 57,800 $ - $ 10,400 Working Capital Plant $ - $ - $ - $ - $ - $ - $ - Total Plant $ 31,226,615 $ 13,509,092 $ 5,496,436 $ 4,384,389 $ 6,265,147 $ - $ 1,124,353 Less: Contributed Plant $ (14,567,900) $ (6,511,000) $ (2,564,200) $ (2,045,400) $ (2,922,800) $ - $ (524,500) Net Plant Investment $ 16,658,715 $ 6,998,092 $ 2,932,236 $ 2,338,989 $ 3,342,347 $ - $ 599,853 Net Capital Cost $ 1,594,000 $ 712,407 $ 280,573 $ 223,808 $ 319,815 $ - $ 57,397 4.1.3.2 Allocation of Operating Expenses Projected operating expenses for the test year are allocated to cost components based on an analyses of the detailed line items of the operating budget. Salaries & wages and personnel benefits are allocated to the components based on an analysis of full-time equivalent employee's time spent on each function. Operating expenses related to the operation of specific facilities are allocated to cost components in generally the same manner as capital costs. Indirect costs, which are related to total system operations, are allocated in relation to all other operating expenses. The resulting allocation of operation and maintenance expenses, shown in Table 14, serves as the basis for allocating the test year 2001 net operating costs of $3,884,800 (from Table 12) to the base, extra capacity, and customer cost functions. Domestic Water Utility - 30 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Line No. 1 2 3 4 5 6 7 8 9 10 11 12 Table 14: Allocation of Operating Expense to Functional Cost Components Test Year 2001 4.1.3.3 Allocation of Costs to Customer Classes The total cost responsibility of each class of customer is determined by the distribution of the cost of service for each cost component among the classes based on the respective service requirements of each class. 4.1.3.4 Customer Classifications Water customers have been separated into categories including residential, commercial, industrial, and fire protection. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. Each class will have similar service requirements and will be allocated costs associated with the appropriate service provided. 4.1.3.5 Units of Service The number of units of service required by each customer class provides a means for the proportionate distribution of costs previously allocated to respective functional cost components. Service requirements for each class are based on average daily water use projections and estimates of each class' maximum day and maximum hour (peak) demands and metering and billing requirements. Estimated units of service for each customer class are summarized in Table 15. Domestic water Utility - 31 - Revised 2000 Cost of Service & Rate Study Total Base Extra Capacity Meters & Services Customer Billing Direct Fire Maximum Day Maximum Hour Source of Supply $ 238,861 $ 159,241 $ 79,620 Pumping $ 152,000 $ 101,333 $ 50,667 Treatment $ 812,822 $ 541,881 $ 270,941 Transmission & Distribution $ 1,551,155 $ 723,873 $ 361,936 $ 465,346 Customer Accounts $ 293,000 $ 293,000 Administration & General $ 1,064,788 $ 533,236 $ 266.618 $ 162,572 $ - $ 102,362 $ - Total Operating Expense $ 4,112,626 $ 2,059,564 $ 1,029,783 $ 627,918 $ - $ 395,362 $ - Less Other Operating Revenue Other Operating Revenue $ 167,100 $ 167,100 Interest Income $ 60,700 $ 30,400 $ 15,200 $ 9,300 $ - $ 5,800 $ - Subtotal $ 227,800 $ 30,400 $ 15,200 $ 9,300 $ - $ 172,900 $ Net 0nersting Expense $ 3,884,826 $ 2,029,164 $ 1,014,583 $ 618.618 $ - $ 222.462 _ $ - Adjusted Operating Expenses $ 3,884,800 $ 2,029,100 $ 1,014,600 $ 618,600 $ - $ 222,500 $ - 4.1.3.3 Allocation of Costs to Customer Classes The total cost responsibility of each class of customer is determined by the distribution of the cost of service for each cost component among the classes based on the respective service requirements of each class. 4.1.3.4 Customer Classifications Water customers have been separated into categories including residential, commercial, industrial, and fire protection. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. Each class will have similar service requirements and will be allocated costs associated with the appropriate service provided. 4.1.3.5 Units of Service The number of units of service required by each customer class provides a means for the proportionate distribution of costs previously allocated to respective functional cost components. Service requirements for each class are based on average daily water use projections and estimates of each class' maximum day and maximum hour (peak) demands and metering and billing requirements. Estimated units of service for each customer class are summarized in Table 15. Domestic water Utility - 31 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 15: Estimated Units of Service Test Year 2001 Total Annual Customer Class Ccf Average Day Ccf/day Maximum Day Marzimum Hour Customer EquNalent Hydrants Capacity Factor % Total Capacity Ccfxiay Extra Capacity(a) CcfAlay Capacity Fades % Total Capacity Ccilday Extra Capacity(b) Ccfklay Equivalent Meters No. of Bile Inside City Residential 2,504,822 6,883 200 14454 7,592 350 24,748 10,294 17,309 96,390 Commercial 1,5699,800 5,397 170 8,932 3,536 250 13,129 4,196 7,252 14,148 Industrial 404,336 1,108 110 1,219 111 150 1,662 443 293 96 Fie Protection Pudic 1,070 1,070 8,422 5,352- 2,451 Private 188 186 1.114 928 1,872 425 Total Inside Cry 4,878,958 13,387 25,881 12,494 47,074 21,213 24,854 112,506 2,678 Outside City Residential 40,997 112 200 225 112 350 393 168 237 1,359 Commercial 100,575 276 170 454 179 250 668 213 306 432 Industrial - - 110 - - 150 - - - - Fire Protection Public 19 19 116 97 50 Private 88 49 41 102 21 Total Outside City 141,572 388 708 316 1,22E 620 543 1,693 71 TWdSysfian 5,020,530 13,755 20,597 12,912 40,300 21,733 25,397 114,399 2,947 The base cost responsibility of each customer class is related to the estimated quantity of water used by each class under average day load conditions. Estimated average day quantities are based on 1999 actual billing records of the water utility. The responsibility for extra capacity costs varies with the extra capacity requirements for maximum day and maximum hour demands of each class. Average day usage and capacity factors, representing the relationship between individual class peak demand and average day usage, are used to develop extra capacity requirements for maximum day and maximum hour demands. The estimated capacity factors are based on engineering and staff judgment. These projections were then compared to the actual City water production records to determine the general reasonableness of the assumptions. From test year projections of customers by class and by meter size within a class, estimates are made of the average number of equivalent meters. Equivalent meter ratios show the relationship of the costs to install and maintain various sized meters to the costs of a 3/4 -inch meter and provide a reasonable means of estimating the variation in meters and services operation and maintenance costs. Fire protection costs represent the portion of extra capacity cost related to meeting potential fire demands. Peak fire flow requirements were assumed at 4,000 gallons per minute for 4 hours for public and private fire protection, based on the City's minimum Insurance Service Office (ISO) requirements. In Table 15, fire demand quantities have been assigned to public and private fire protection on the basis of the number of equivalent hydrants. Domestic Water Utility - 32 - Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division .A V4'1117%♦ .Y"""1'1717'11 4.1.3.6 Customer Class Costs of Service The total costs of service are distributed to the various customer classes by application of unit costs of service to respective service requirements. The test year 2001 unit cost of service for each functional cost component is shown on the last line of Table 16. Unit costs are based on the total costs for each component divided by the applicable units of service. The total unit costs of service applied to the respective service requirements for each customer class results in the total allocated cost of service for each customer class. Line No. 2 3 4 5 6 6 7 Table 16: Development of Unit Costs by Functional Cost Component Test Year 2001 The costs of service allocated to customer classes are shown in Table 17. Total costs of service for each class are based on unit costs of service from Table 16 and units of service from Table 15. Domestic Water Utility - 33 - Revised 2000 Cost of Service & Rate Study Base Extra Capacity Meters & Services Customer Billing Direct Fire Total Ma imurn Day Maximum Hour Units of Service: Number 5,020,529.50 12,812.25 21,733.17 25,397.00 114,399.00 2,947.00 Units Ccf Ccf/day Ccf/day Equivalent Bills Equivalent Meters Hydrants NetOperating Expenses: Tonal Cost - $ $ 2,029,100.00 3 1,014,600.00 $ 818,800.00 $ - $ 222,500.00 $ $ 3,884,800.00 Unit Cost - $IUnit $ 0.40 $ 79.19 $ 28.46 $ - $ 1.94 $ - Net Capital Costs: Total Cost- $ $ 712,407.00 $ 280,573.00 $ 223,808.00 $ 319,815.00 $ - $ 57,397.00 $ 1,594,000.00 Unit Cost - $!Unit $ 0.14 $ 21.90 $ 10.30 $ 12.59 $ - $ 19.48 Total Cost o1 Service $ 2,741,507.00 $ 1,295,173.00 $ 842,408.00 $ 319,815.00 $ 222,500.00 $ 57,397.00 $ 5,478,800.00 Total Unit Cost of Service $/Unit $ 0.55 $ 101.09 $ 38.76 $ 12.59 $ 1.94 $ 19.48 The costs of service allocated to customer classes are shown in Table 17. Total costs of service for each class are based on unit costs of service from Table 16 and units of service from Table 15. Domestic Water Utility - 33 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Unit Cost of Service - SJUntt Inside City Reside/raid Units of Service Casts of Service - $ Commercial Units of Service Casts of Service - $ Industrial Units of Service Casts of Service - $ Govemmental Units of Service Costs of Service - $ Interdepartmental Units of Service Cats of Service - $ Residential Irrigation Units of Service Cats of Service - $ Pudic Fire Prctec8ai Urns of Service Cats of Service - $ Private Fre Protection Units of Service Cats of Service - $ Table 17: Allocation of Costs to Customer Classes Test Year 2001 Fla Capacity Maximum Mmdmum Direct Base Day Hcur Meters Biting Fire Total $ 0.546 $ 101.089 $ 38.761 $ 12.593 $ 1.945 S 19.476 1,972,592.00 5,404.36 8,108.54 17,088.00 95,448.00 $ 1,077,000.00 S 548,300.00 $ 314,200.00 $ 215200.00 $ 185,600.00 $ 2,338,300.00 1,527,984.00 2,930.38 3,349.01 5364.00 12,576.00 $ 834,400.00 $ 296,200.00 S 129,800.00 $ 67,500.00 $ 24,500.00 $ 1,352,400.00 404,336.00 110.78 443.11 293.00 98.00 $ 220,800.00 $ 11200.00 $ 17,20000 $ 3,700.00 $ 200.00 $ 253,100.00 241,484.00 330.80 463.12 1,199.00 876.00 $ 131,900.00 5 33,400.0 5 18,000.00 $ 15,100.00 $ 1,700.00 $ 200,100.00 200,332.00 274.43 384.20 689.00 696.00 $ 109,400.00 $ 27,70000 $ 14,90000 $ 8,700.00 $ 1,400.00 $ 162,100.00 532,230.00 2,187.25 2187.25 221.00 94200 $ 290,600.00 $ 221,100.00 S 84,800.00 $ 2800.00 $ 1,800.00 $ 601,100.00 1,070.00 $ 108,200.00 186.00 $ 18,800.00 5,352.00 $ 207,500.00 928.00 $ 36,000.00 Tdid Inside City Outside City Residential Units of Service Cats of Service - $ Commercial Urns of Service Cats of Service - $ Industrial Units of Service Cats of Service - $ Gavemmental Units of Service Cats of Service - $ Public Fire Protection Units of Service Cats of Service - $ Private Fire Protection Urns of Service Cats 01 Service - $ Tata! Outside Cky 2,451.00 $ - $ 47,700.00 $ 363,400.00 1,872.00 425.00 $ 3,600.00 $ 8,300.00 $ 66,700.00 $ 5,337,200.00 40,998.50 112.32 168.48 237.00 1,359.00 $ 22,400.00 $ 11,400.00 S 8,500.00 $ 3,000.00 $ 2600.00 $ 45,900.00 75,127.50 144.08 164.68 187.50 315.00 $ 41,000.00 $ 14,600.00 $ 8,400.00 $ 2,400.00 S 600.00 $ 85,000.00 25,447.50 34.88 48.80 118.50 117.00 $ 13,900.00 $ 3,500.00 $ 1,900.00 $ 1,500.00 S 200.00 $ 21,000.00 19.00 $ 1,900.00 8.00 $ 800.00 97.00 $ 3,800.00 41.00 $ 1,600.00 50.00 $ $ 1,000.00 $ 6,700.00 102.00 21.00 5 200.00 $ 400.00 $ 3,000.00 $ 141,600.00 TOTAL SYSTEM $ 5,478,800.00 Comparison of the cost of service for each customer class with revenue under existing rates, and the indicated percentage adjustment in the level of revenue from each class required to meet those costs, is shown in Table 18. A 20.0 percent overall increase in the level of water sales revenue is indicated by the analyses (Alternative 2) to be necessary in order to meet projected revenue requirements for test year 2001. The table indicates that under the current rate schedule and residential customers have been paying less than cost of service, multi -family and commercial customers have been paying more than the cost of service, while bulk water and availability service have also been paying Tess than cost of service. To achieve test year 2001 cost of service, all customer classes require a rate increase. Domestic Water Utility Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 18: Comparison of Cost of Service With Revenue Under Existing Rates Test Year 2001 Total Revenue Requirements Operating Expense Capital Costs Total Operating Expense Operating Reserve = Gain/(Loss) Debt Service Requirements Taxes Residual Equity Transfer Transfer to Water Construction Fund $4,112,600 Total $4,112,600 569,737 625,900 277,700 74,263 250,000 $1,797,600 $4,112,600 569,737 625,900 277,700 74,263 250,000 55,910,200 Revenue Requirements Met From Other Sources Other Operating Revenue Non -Operating Revenue Interest Income Total Revenue from Other Sources Total Cost of Service to be Met from Rates Adjustment for Full Year Rate Increase (a) TOTAL COST OF SERVICE $167,100 62,300 $229,400 $3,883,200 $0 $3,883,200 130,400 28,000 $158,400 $1,639,200 $0 $1,639,200 $167,100 130,400 90.300 $387,800 $5,522,400 $0 $5,522,400 4.2 Alternative Rate Structure Design The principal consideration in establishing water rate schedules is to obtain rates for customers that generate sufficient revenues for the Utility and are reasonably commensurate with the cost of providing water service. Other considerations in designing rates should include ease of implementation, impact on customer bills, and incentives for water conservation. Theoretically, the only method of assessing entirely equitable rates for service would be the determination of each customer's bill based upon his/her particular service requirements. Since this is impractical, rates are normally designed to meet average conditions for groups of customers having similar service requirements. Practicality also dictates the use of a rate schedule that is simple to apply, reasonably recovers costs from all classes, and is subject to as few misinterpretations as possible. Proposed rates have been developed under three separate alternative rate structures for City Council's review and selection. The following sections, one for each of the alternatives, contains a schedule of proposed rates, rate adequacy and example typical bilis. Domestic Water Utility - 35 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 4.2.1 Alternative 1 - Multiple Increases Over Three Year Period The above discussion of cost of service is based on Altemative 2, whereby the Utility would meet projected revenue needs through a single revenue increase. Under Alternative 1, the Utility would meet projected revenue needs through the implementation of three smaller increases. Table 19 presents the proposed schedule of rates for all three increases. The data for years 2002 and 2003 are also shown for comparison purposes. Table 19: Schedule of Proposed Rates - Alternative 1 Ready -to -Serve Charge: 2001 Bi -Monthly Size of Meter (inches) Billing 2002 Bi -Monthly Billing 3/4 $ 3.00 1 $ 5.00 1-1/2 $ 12.00 2 $ 25.50 4 $ 67.00 3 $ 107.00 6 $ 180.00 8 $ 333.00 10 $ 514.00 12 $ 745.00 $ 3.25 $ 5.25 $ 12.50 $ 25.50 $ 67.00 $ 10700 $ 190.00 $ 310.00 $ 500.00 $ 725.00 2003 Bi -Monthly Billing $ 3.65 $ 5.65 $ 12.80 $ 26.00 $ 67.00 $ 107.00 $ 190.00 $ 310.00 $ 475.00 $ 700.00 Volume Charge: Domestic Usage Block (cf) 0-1,200 $ 111 $ 1.13 $ 114 1,201-2,000 $ 0.99 $ 1.07 $ 114 2,001-25,000 $ 0.88 $ 0.96 $ 1.03 Over 25,001 $ 0.65 $ 0.70 $ 0.78 Fire Service Charges: Monthly Billing Charges Meter Size 2 inch $ 5.00 $ 5.00 $ 5.00 3 inch $ 7.00 $ 7.00 $ 7.00 4 inch, including hydrant only $ 11.00 $ 11.00 $ 11.00 6 inch, including hydrant only $ 20.00 $ 24.80 $ 26.00 8 inch $ 30.00 $ 35.00 $ 40.00 10 inch $ 40.00 $ 50.00 $ 60.00 12 inch $ 131 00 $ 141.00 $ 152.00 Outside City Factor $ 1.5 1.5 1.5 4.2.1.1 Rate Adequacy Comparison of water sales revenue under proposed rates with allocated cost of service for test year 2001 is shown in Table 20. As shown in the table, the proposed rates under the existing structure generate sufficient revenues in total for the Utility, with slightly greater than cost of service Domestic Water Utility - 36 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division recovered from the commercial, industrial and govemmental classes and slightly less than cost of service recovered from residential and multi -family classes. Table 20: Comparison of Adjusted Costs of Service With Revenues Under Proposed Rates Test Year 2001 Revenue Percent Adjusted Under Over Cost of Proposed Under Customer Class Service (a) Rates Recovery Inside City Residential $ 2,809,300 $ 2,733,700 97.3i% Commercial $ 1,665,500 $ 1,764,500 105.94% Industrial $ 247,600 $ 276,700 111.75% Private Fire Protection $ 58,800 $ 40,400 68.71% Tot* imgide City $ 4,781,209 $ 4,815,300 100.71% Outside City Residential $ 43,200 $ 45,600 105.56% Commercial $ 62,900 $ 71,300 113.35% Industrial $ - $ - NA Private Fire Protection $ 2,600 $ 3,300 126.92% Total Outside City $ 126,900 $ 138,200 108.90% Total All Classes $ 4,908,100 $ 4,953,500 100.93% (a) Adjusted to reflect the redistribution of public fire protection costs of service to other customer classes. 4.2.1.2 Typical Bills Table 21 and Table 22 present a comparison of typical monthly water bills under Alternative 1 rates for the different customer classes with those for existing rate structure, assuming various levels of water usage, for test years 2001, 2002, and 2003. Table 23 is a comparison of typical residential billings for customers of the City and those of other purveyors from around the region. It should be noted that the typical bills presented in the tables are examples only and reflect the stated monthly water usage shown in the table. Most likely, a customer's usage will vary from month to month. As such, the actual water bill would also vary from month to month. Domestic Water Utility - 37 - Revised 2000 Cost of Service & Rate Study REVISEb MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 21: Comparison of Typical Bills - Residential Meter Size Bi -Mthly Usage 2000 Bi -Mthly Bill 2001 Estd Bi -Mthly Bill $ incr(decr) from 2000 Bill 2002 Estd Bi -Mthly Bill $ incr(decr) from 2000 Bill Estimated Bi -Mthly Bill $ incr(decr) from 2000 Bill inches (Ccf) $ $ $ $ $ $ $ 3/4 0 $ 2.29 $ 3.00 $ 0.71 3.25 $ 0.96 3.65 $ 1.36 3/4 6 $ 8.95 $ 9.66 $ 0.71 10.03 $ 1.08 10.49 $ 1.54 3/4 12 $ 15.61 $ 16.32 $ 0.71 16.81 $ 1.20 17.33 $ 172 1 40 $ 42.97 $ 43.84 $ 0.87 46.57 $ 3.60 49.05 $ 6.08 (a) Proposed rates based on existing 4 -block declining rate structure. Meter Size inches Bi -Mthly Usage (Ccf) Table 22: Comparison of Typical Bills - Commercial 2000 Bi -Mthly Bill 2001 Estd Bi -Mthly Bill $ $ incr(decr) from 2000 Bill 2002 Estd Bi -Mthly Bill $ incr(decr) from 2000 Bill $ Estimated Bi -Mthly Bill 2 4 4 150 400 800 $ 158.17 $ 416.48 $ 656.48 $ 161 14 $ 428.14 $ 688.14 $ $ (a) Proposed rates based on existing 4 -block declining rate structure. Meter Size (Inches) 2.97 11.66 31.66 172.42 454.92 734.92 $ 14.25 38.44 78.44 182.7 483.7 795.7 Table 23: Comparison of Rates with Other Regional Purveyors Low Mid High City of Yakina 2001 Bi -Mthly Estd Bi -Mthly Usage (Ccf) Bbl ($) $ incr(decr) from 2000 Bill $ $ 24.53 $ 67.22 $ 139.22 Nob HiH Water 2000 Compared to Estd Bi -Mthly City of Bili ($) Yakima ($) City of Pasco Compared to 2000 Estd Bi- City of Mthly Bill ($) Yakima ($) City of Kennewick Compared to 2000 Estd Bi- City of Mthly Bili ($) Yakima ($) 3/4 12 16.32 Meter Size (Inches) 1 Yakima 2001 Bi -Mthly Estd Bi -Mthly Usage (Ccf) Bili ($) 18.3 Lav 1.98 25.88 9.56 Mid 40.97 High 24.65 City of Selah Compared to 2000 Estd Bi- City of Mthly Bill ($) Yakima ($) Yakima County 2000 Compared to Estd Bi -Mthly City of Bill ($) Yakima ($) City of Kennewick Compared to 2000 Estd Bi- City of Mthly Bill ($) Yakima ($) 50 52.94 50.84 (2.10) City of Selah, Nob Hill Water, City of Pasco, City of Richland, City of Union Gap, Yakima County, City of Sunnyside, City of Ellensburg and City of Kennewick used for comparisons 60.75 7.81 89.76 36.82 4.2.2 Alternative 2 - Single Increase in Year One of Study Period Table 24 presents a rate schedule for a twenty percent increase (20%) that would be levied in the first year, 2001, of a five-year period ending in 2005. Domestic Water Utility -38- Revised 2000 Cost of Service & Rate Study REVISE) MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 24: Schedule of Proposed Rates — Alternative 2 rwaur-w.vw VD view'aQ. 2001 Bi -Monthly Size of Meter (inches) Billing 3/4 $ 3.65 1 $ 5.65 1-112 $ 12.80 2 $ 26.00 3 $ 67.00 4 $ 107.00 6 $ 190.00 8 $ 310.00 10 $ 475.00 12 $ 700.00 Volume Charge: Domestic (S/100 cubic feet) Usage Block (cf) $1100 cf 0-1,200 $ 1.13 1,201-2,000 $ 1.13 2,001-25,000 $ 1.00 25.001 and over $ 0.75 Fire Service Charges: Meter Size bi-month bill 2 inch $ 5.00 3 inch $ 7.00 4 inch, including hydrant only $ 11.00 6 inch, including hydrant only $ 26.00 8 inch $ 35.00 10 inch $ 60.00 12 in $ 150.Q0 Outside City Factor 1.5 4.221 Rate Adequacy Comparison of water sales revenue under proposed rate with allocated cost of service for test year 2001 is shown in Table 25. As shown in the table, the proposed rates under the existing structure generates sufficient revenues in total for the Utility, with a greater than cost of service recovered from all classes, except the private fire protection. The recovery seems to be significantly Targe, however this perception is due to the fact that the rate increase is all up -front. However, as can be seen when making a comparison with the end results achieved under Alternate 1, Alternative 2 can result in a long-term benefit to the customer. This overall reduction in cost to the customer comes from interest eamings that come about in the earlier portion of the study period. Domestic Water Utility - 39 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 25: Comparison of Adjusted Costs of Service With Revenues Under Proposed Rates Test Year 2001 Revenue Percent Adjusted Under Over Customer Class Cost of Proposed (Under) Inside City Service (a) Rates Recovery Residential $ 3,136,700 $ 2,993,000 95.42% Commercial $ 1,859,300 $ 1,969,700 105.94% Industrial $ 274,500 $ 317,500 115.66% Private Fire Protection $ 66,700 $ 53,100 79.61% Total Inside City $ 5,337,200 $ 5,333,300 99.93% Outside City Residential $ 48,200 $ 49,400 102.49% Commercial $ 90,400 $ 99,800 110 40% Industrial $ - $ - Private Fire Protection Total Outside City $ 3,000 $ 4,200 140.00% $ 141,600 $ 153,400 108.33% Total All Classes $ 5,478,800 $ 5,486,700 100.14% (a) Adjusted to reflect the redistribution of public fire protection costs of service to other customer classes. 4.2.2.2 Typical Bills Table 26 and Table 27 present a comparison of typical monthly water bills with the new rates for the different customer classes with those for existing rate structure, assuming various levels of water usage, under existing and proposed rates for test year 2001. Table 28is a comparison of typical residential billings for customers of the City and those of other purveyors from around the region. It should be noted that the typical bills presented in the tables are examples only and reflect the stated monthly water usage shown in the table. Most likely, a customer's usage will vary from month to month. As such, the actual water bill would also vary from month to month. Domestic Water Utility - 40 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Divrsron Table 26: Comparison of Typical Bills - Residential Meter Size inches 3/4 3/4 3/4 1 1 Bi -Mthly Usage (Ccf) 0 6 12 40 100 Proposed 2000 Estimated $ Bi -Mthly Bi -Mthly from Bill 2001 Bill 2000 $ $ $ 2.29 3.65 1.36 8.95 10.43 1.48 15.61 17.21 1.60 42.97 48.25 5.28 94.57 108.05 13.68 Table�'Yv. /'�.......... �....... ..i T....:....1 Q :11.. P...v.w....... 1.1 a aable 2 ;, yogAeaEr94??9z zega �.aE ? �ar.A??,>6'a3 �agg� - +._aae0e9ceg 9?a5�a Meter Bi -Mthly Size Usage inches (Ccf) 2 150 4 400 4 800 2000 Bi -Mthly Bill Proposed Rates Estimated $ incr(decr) Bi -Mthly from 2001 Bill 2000 $ $ 158.17 416.48 656.48 178.40 471.90 771.90 20.23 55.42 115.42 In Table 28, the only comparison we have charted are the high, medium and low ranges to demonstrate a range of the rates currently being charged throughout the region. Listed at the bottom of the table are all of the cities that were contacted and contributed to our survey. Meter Size (Inches) 3/4 Meter Size (Inches) 1 Table 28: Comparison of Rates with Other Regional Purveyors Yakima 2001 Bi -Mthly Estd Bi-Mthty Usage (Ccf) Bill ($) Low Mid High Nob Hill Water 2000 Estd Bi -Mthly Bill ($) Compared to City of Yakima ($) City of Pasco 2000 Estd Bi - Mthly Bill ($) Compared to City of Yakima ($) City of Kennewick 2000 Estd Bi - Mthly Bill ($) Compared to City of Yakima ($) 12 17.21 18.3 1.09 Low 25.88 8.67 40.97 23.76 Mid High Yakima 2001 City of Selah Compared to Bi -Mthly Estd Bi -Mthly Usage (Ccf) Bill ($) 50 58.25 2000 Estd Bi - Mthly Bill ($) 50.84 City of Yakirna ($) (7.41) City of Selah, Nob Hill Water, City of Pasco, City of Richland, City of Union Gap, Yakima County, City of Sunnyside, City of Ellensburg and City of Kennewick used for comparisons Yakima County 2000 Compared to Estd Bi -Mthly City of Bill ($) Yakima ($) 60.75 2.50 City of Kennewick 2000 Estd Bi - Mthly Bill ($) 89.76 Compared to City of Yakima ($) 31.51 Domestic Water Utility - 41 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division 4.2.3 Alternative 3 - Fixed Amount - Single Increase in Year One of Study Period Table 29presents the proposed schedule of rates for this increase. Table 29: Schedule of Proposed Rates — Alternative 3 Meter Size 2001 Bi - Monthly Billing 3/4" $ 7.50 1" $ 11.50 1-1/2" $ 22.50 2" $ 32.00 3" $ 70.00 4" $ 117.00 6" $ 247.00 8" $ 470.00 10" $ 700.00 12" $ 1,000.00 Volume Charge: Domestic Usage Block (cf) Rates 0 - 1,200 $ 1.11 1,201 - 2,000 $ 0.98 2,001 - 25,000 $ 0.86 Over 25,000 $ 0.60 Fire Service Charges: Monthly Meter Size Rates 2 $ 5.00 3 $ 7.00 4 $ 11.00 6 $ 24.00 8 $ 35.00 10 $ 60.00 12 $ 150.00 Outside City Factor $ 1.50 4.2.3.1 Rate Adequacy A comparison of water sales revenue under proposed rates with allocated cost of service for test year 2001 is shown in Table 30. As shown in the table, the proposed rates under the existing structure generate sufficient revenues in total for the Utility, with slightly Domestic Water Utility - 42 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division greater than cost of service recovered from the commercial, industrial and govemmental classes and slightly less than cost of service recovered from residential and multi -family classes. Table 30: Comparison of Adjusted Costs of Service With Revenues Under Proposed Rates Test Year 2001 Revenue Percent Adjusted Under Over Customer Class Cost of Proposed (Under) Inside City Service (a) Rates Recovery Residential $ 3,139,700 $ 2,993,010 95.42% Commercial $ 1,859,300 $ 1,969,700 105.94% Industrial $ 274,500 $ 317,500 115.66% Private Fire Protection $ 66,700 $ 53,100 79.61% Total Inside City $ 5,337,200 $ 5,333,300 99.93% Outside City Residential . $ 48,200 $ 49,400 102.49% Cor" rcial $ 90,400 $ 99,800 110 40% Industrial $ $ Private Fire Protection Total Outside City $ 3,000 $ 4,200 140.00% $ 141,600 $ 153,400 108.33% Total All Classes $ 5,478,800 $ 5,486,700 100.14% (a) Adjusted to reflect the redistribution of public fire protection costs of service to other customer classes. 423.2 Typical Bills Table 31 and Table 32 present a comparison of typical monthly water bills with the new rates for the different customer classes with those for existing rate structure, assuming various levels of water usage, under existing and proposed rates for test year 2001, as well as those for 2002. The detailed tables containing information directly related for these years are located in Appendixes "B". Table 33 is a comparison of typical residential billings for customers of the City and those of other purveyors from around the region. It should be noted that the typical bills presented in the tables are examples only and reflect the stated monthly water usage shown in the table. Most likely, a customer's usage will vary from month to month. As such, the actual water bill would also vary from month to month. Domestic Water Utility - 43 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division Table 31: Comparison of Typical Bills - Residential Proposed Rates Monthly Existing Estimated $ incr(decr) Bi -Mthly Bi -Mthly Bi -Mthly from Usage Bill Bill Existing Meter size - inches (Ccf) $ $ $ 3/4 0 $ 2.29 $ 7.50 $ 5.21 3/4 6 $ 8.95 $ 14.16 $ 5.21 3/4 12 $ 15.61 $ 20.82 $ 5.21 1 0 $ 4.61 $ 11.50 $ 6.89 1 10 $ 15.71 $ 22.60 $ 6.89 (a) Proposed rates based on existing 4 -block declining rate structure. Table 32: Comparison of Typical Bills - Commercial Proposed Rates Monthly Existing Estimated $ incr(decr) Bi -Mthly Bi -Mthly Bi -Mthly from Usage Bill Bill Existing Meter size - inches (Ccf) $ $ $ 2 150 $ 158.17 $ 164.96 $ 6.79 2 268 $ 254.97 $ 261.76 $ 6.79 4 400 $ 416.48 $ 425.96 $ 9.48 4 800 $ 656.48 $ 665.96 $ 9.48 (a) Proposed rates based on existing 4 -block declining rate structure. Table 33: Comparison of Rates with Other Regional Purveyors Low Mid High Yakima 2001 Bi -Mthly Estd Bi -Mthly Meter Size (Inches) Usage (Ccf) Bill ($) Nob Hill Water 2000 Estd Bi- Mthly Bill ($) Compared to City of Yakima ($) City of Pasco 2000 Estd Bi- Mthly Bil ($) Compared to City of Yakima ($) City of Kennewick 2000 Estd Bi- Mthly Bill (5) Compared to City of Yakima (5) 0.75 12 $ 20.82 Yakima 2001 Bi -Mthly Estd Bi -Mthly Meter Size (Inches) Usage (Ccf) Bill (5) $ 18.30 Low $ (2.52) $ 25.88 Mid $ 5.06 $ 40.97 High $ 20.15 City of Selah 2000 Estd Bi- Mthly Bill (5) Compared to City of Yakima ($) Yakima County 2000 Estd Bi- Mthly Bill ($) Compared to City of Yakima ($) City of Kennewick 2000 Estd Bi- Mthly Bill (5) Compared to City of Yakima (5) 1 40 $ 58.25 $ 49.86 $ (8.39) $ 60.75 $ 2.50 $ 89.76 $ 31.51 City of Selah, Nob Hill Water, City of Pasco, City of Richland, City of Union Gap, Yakima County, City of Sunnyside, City of Ellensburg and City of Kennewick used for comparisons 5.0 CONCLUSIONS The analysis performed in this Cost of Service and Rate Study provides a reasonable level of assurance with respect to the adequacy of the proposed rates and rate structure. Domestic Water Utility - 44 - Revised 2000 Cost of Service & Rate Study REVISED MARCH 2001 City of Yakima, Washington - Water/Irrigation Division In the course of making preparations to accomplish this analysis, it was determined that the distribution system connection charge had been inadvertently eliminated when the Municipal Code was amended. This charge is for the recovery of costs incurred for the installation of various distribution system components. It only applies to properties seeking a connection to the system and they have not previously contributed to the construction costs. Based on these findings, staff will ask that this charge be reinstated. It would appear that Alternative 2 would best serve our customers, however Alternative 1 does provide for a more gradual increase over the first three years of the study period. While AlFerrt.M.k n. 4 h. r, henn rarnaiirinrl i+ it+ +kexle.�e.4 rlee.ir.�4ale frr,m ♦he r.er�r.aw�:aie. r.r t+ 99:fnL.il:iar :r e11e2s1-1 !1 VI to deed 6waa, ea e,a ate es -s l2�5 e-eGa�sa ea a.esG as a„sg:s 5946- esScs ?? 3?54 mgr as: f�.aA gScs aa:l e5, !-e the allocation of the cost of services to the various customer classes. A review of the appropriate tables will bear out these conclusions. Alternative 2 will have higher impacts in the immediate future, years 2001 and 2002; however, beyond that time period the real cost to the customer will continue to be less than that probable under the other alternatives. Based on this analysis, staff would recommend that Council adopt Alternative 2 for implementation. Domestic Water Utility - 45 - Revised 2000 Cost of Service & Rate Study BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. For Meeting Of May 15, 2001 ITEM TITLE: A request for Council action on the 2000 Cost of Service and Rate Study for the domestic water system. SUBMITTED BY: Dueane Calvin, Water/Irrigation Manager.`=. Dave Brown, Water/Irrigation Engineer Glenn K. Rice, Assistant City Manag CONTACT PERSON/TELEPHONE: Dueane Calvin, Water/Irrigation Manager, 575-6154 SUMMARY EXPLANATION: The domestic water 2000 Cost of Service and Rate Study originally investigated three alternative rate structures to increase revenue from rates. Each of these alternatives was designed to generate adequate revenues to fully meet the ongoing needs of the Division over the course of the next five years. The basis for the needed rate increases stems primarily from requirements related to the implementation of significant capital projects that have been identified in connection with mandated regulatory requirements of State, and Federal law, as well as local mandates. Following a Public Hearing conducted on April 17, 2001, and work session on May 1, 2001, Council directed staff to return with legislation appropriate to implement the rate structures set forth in Alternative 2 of the 2000 Cost of Service and Rate Study. That legislation is attached hereto for Council's consideration and action. Resolution X Ordinance X Other (Specify) Contract Mail to (name and address): Phone: Funding Source 474 Wat Operation Fund APPROVED FOR SUBMITTAL: 9 T City Manager STAFF RECOMMENDATION: Staff respectfully requests Council to: 1) Adopt, by resolution, the 2000 Cost of Service and Rate Study; and, 2) enact by Ordinance, rates as set forth in Alternative 2 of said 2000 Cost of Service and Rate Study. BOARD/COMMISSION RECOMMENDATION: COUNCIL ACTION: A. Resolution adopted. RESOLUTION NO. R-2001-84 B. Ordinance tabled to the next Council meeting.