HomeMy WebLinkAbout09/30/2014 04 Drinking Water Rate Study 2015 to 2018BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. 4.
For Meeting of: September 30, 2014
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ITEM TITLE:
SUBMITTED BY:
SUMMARY EXPLANATION:
Drinking Water Rate Study 2015 to 2018
David Brown, Water/Irrigation Manager
Debbie Cook, Utilities and Engineering Director
The water rate study for the years 2014 to 2018 is attached. This is the third multiyear water
rate study the city has conducted. The city adopted the process of conducting five year rate
studies in 1996 to help stabilize rates, keep rate increases as low as possible, keep necessary
increases as even as possible and in insure adequate funding for operations and capital
improvements. The capital improvement program is adopted by Council through the six-year
Water System Plan and is incorporated within this study.
The rate study (Appendix B of the attached) that was completed the fall of 2012 proposed three
9% and two 3 %2% increases over the following five years. The study was tabled while further
review of the capital improvement needs and costs could be completed. No rate increase was
implemented in 2013. A new study reflecting the true costs for the capital program was
conducted in the spring 2013. This updated study, attached, proposes for a 4% revenue
increase in each year starting in 2014 and ending in 2018. No rate increase was implemented in
2014.
Closer analysis of the 2013 study update shows that the utility can choose not to implement the
indicated 4% increase, taking no increase at all in 2014 and still maintain at least a 60 day
operating reserve as well as proceed with the planned capital improvement program until 2016.
In 2017 and beyond, it is estimated that the operating reserve will drop below 60 days.
However, it is anticipated that currently unquantifiable increased revenue as a result of the
automated meter reading program and efficiencies in capital projects along with other cost
saving efforts will result in higher operating reserves in 2017 and 2018 than current forecast. If
anticipated revenues do not materialize and/or capital improvement costs are higher than
current estimates, there are a number of solutions including reducing transfers from the
operating to capital fund, delaying certain capital projects and/or increasing the 2015-2019
rates.
Water sales are down and have been for several years due to the economic downturn and
people are using less water through conservation. The study points out that Yakima is a bit
lower in the fixed charges (Ready -to -Serve) than the national average of 30%, currently we are
at 22% fixed charge. Because of the lower volume of water sales we raised our fixed charge to
27% of the revenue and lowered the volume rate from $1.51 to $1.46 per 100 cubic feet of
water in 2014. No additional revenue is anticipated to be generated however some users saw a
slight increase in their utility bill and a slight decrease.
The study includes a benchmark analysis included in appendix A of the attachment. The
benchmark analysis was conducted for two purposes, to look for deficiencies and to help find
areas where we might improve efficiency to reduce costs. The study indicated two areas where
we are below industry standards, training and water loss. The training budget has been
increased along with improved tracking of training. The water loss should improve with the new
meters in the automated meter reading program as it is probable that the system is not losing
water, but rather our current meters are not accurately measuring all of it.
Resolution:
Other (Specify): Study
Contract:
Start Date:
Item Budgeted: Yes
Funding Source/Fiscal
Impact:
Strategic Priority:
Insurance Required? No
Mail to:
Phone:
APPROVED FOR
SUBMITTAL:
RECOMMENDATION:
Ordinance:
Contract Term:
End Date:
Amount:
Revenue increase of 3 1/2% in 2015 is $301,181
Revenue increase of 4% in 2016 is $301,934; and
raise the fixed charges (Ready -to -Serve) from 27%
of revenue to 30% of revenue (this will not increase
to overall revenue but hel
Improve the Built Environment
City Manager
Accept study and direct preparation of ordinance
ATTACHMENTS:
Description Upload Date Type
strategic inititiave water rate study 9/26/2014 Cover Memo
Study 9/25/2014 1Bacup IMaterliall
Revised Table 5.1 9/26/2014 1Baollcup IMaterliall
Revised Table 5 9/26/2014 Cover Memo
STRATEGIC INITIATIVE (POLICY ISSUE) WATER RATE STUDY
BUDGETED
PROPOSAL
The water rate study for the years 2014 to 2018 is attached. This is the third multiyear water rate
study the city has conducted. The city adopted the process of conducting five year rate studies
in 1996 to help stabilize rates, keep rate increases as low as possible, keep necessary increases as
even as possible and in insure adequate funding for operations and capital improvements. The
capital improvement program is adopted by Council through the six-year Water System Plan
and is incorporated within this study.
The rate study (Appendix B of the attached) that was completed the fall of 2012 proposed three
9% and two 3 1/z% increases over the following five years. The study was tabled while further
review of the capital improvement needs and costs could be completed. No rate increase was
implemented in 2013. A new study reflecting the true costs for the capital program was
conducted in the spring 2013. This updated study, attached, proposes for a 4% revenue increase
in each year starting in 2014 and ending in 2018. No rate increase was implemented in 2014.
Closer analysis of the 2013 study update shows that the utility can choose not to implement the
indicated 4% increase, taking no increase at all in 2014 and still maintain at least a 60 day
operating reserve as well as proceed with the planned capital improvement program until 2016.
In 2017 and beyond, it is estimated that the operating reserve will drop below 60 days.
However, it is anticipated that currently unquantifiable increased revenue as a result of the
automated meter reading program and efficiencies in capital projects along with other cost
saving efforts will result in higher operating reserves in 2017 and 2018 than current forecast. If
anticipated revenues do not materialize and/or capital improvement costs are higher than
current estimates, there are a number of solutions including reducing transfers from the
operating to capital fund, delaying certain capital projects and/or increasing the 2015-2019 rates.
Water sales are down and have been for several years due to the economic downturn and
people are using less water through conservation. The study points out that Yakima is a bit
lower in the fixed charges (Ready -to -Serve) than the national average of 30%, currently we are
at 22% fixed charge. Because of the lower volume of water sales we raised our fixed charge to
27% of the revenue and lowered the volume rate from $1.51 to $1.46 per 100 cubic feet of water
in 2014. No additional revenue is anticipated to be generated however some users saw a slight
increase in their utility bill and a slight decrease.
The study includes a benchmarking analysis included in appendix A of the attachment. The
benchmarking analysis was conducted for two purposes, to look for deficiencies and to help
find areas where we might improve efficiency to reduce costs. The study indicated two areas
where we are below industry standards, training and water loss. The training budget has been
increased along with improved tracking of training. The water loss should improve with the
new meters in the automated meter reading program as it is probable that the system is not
losing water, but rather our current meters are not accurately measuring all of it.
IMPACTS
1. Fiscal Impact -
Revenue increase in 2015 of $301,181
Revenue increase in 2016 of $357,144
Revenue increase in 2017 of $372,359
Revenue increase in 2018 of $388,221
2. Proposed Funding Source - Rate increase
3.5%in2015
4% in 2016, and raise the fixed charges (Ready -to -Serve) from 27% of revenue to 30%
of revenue (this will not increase to overall revenue but help to stabilize the revenue)
4%in2017
4%in2018
Each year rates will be analyzed during the budget preparation to determine if the
proposed rate increase is warranted.
3. Public Impact - cost of water increase
4. Personnel Impact - None
5. Required Changes in City Regulations or Policies - will require an ordinance and
public hearing to change rates
6. Legal Constraints, if applicable -
7. Viable Alternatives - Alternatives to the proposed 0% rate increase in 2015 would
be to approve an increase between 0% and 4% or to approved the increases,
including the 2015 4% increase with the utilities commitment that future increases
will be reduced if actual revenues are higher than currently anticipated.
H Jr.) Hir��
July 31, 2013
Mr. Dave Brown
Water/Irrigation Division Manager
City of Yakima
2301 Fruitvale Blvd.
Yakima, WA 98902
Draft Report: Modified 2012/2013 Domestic Water System Rate Update
Dear Mr. Brown:
FCS GROUP is pleased to submit our final report for the 2012/2013 Domestic Water
System Rate Update for the City of Yakima (City). This letter provides a brief summary
of the study objectives, process, finding and conclusions.
BACKGROUND:
In May 2012, the City retained FCS GROUP to update the Domestic Water Rate Study to
evaluate Utility capital needs and ongoing operations and maintenance expenses and
develop a rate strategy to recover costs for the five-year planning period (2013-2017).
The draft analysis concluded that annual revenue adjustments were necessary over the
study period to fund the capital program and address the declining revenue stream. The
recommended rate strategy called for three years of 9.0% increases (2013-2015)
followed by two years of 3.5% increases (2016-2017). Given the magnitude of proposed
increases City management directed staff to research opportunities to reduce costs and
mitigate customer impacts. At that point, the study was put on hold to allow staff time
for the development of strategies to reduce costs. No increase was implemented for
2013.
The study was re-initiated in May 2013, following receipt of year-end 2012 financial
records, customer billing system data, the revised capital program, and the adopted
2013 budget. The analysis was updated to incorporate this new information and develop
an updated rate strategy for the five-year period 2014-2018, using 2013 as the baseline
for future projections.
We also completed a benchmarking survey to compare relevant performance indicators
for the City against comparable agencies using AWWA published criteria. The Technical
Memorandum summarizing those results is provided in Appendix A.
This letter report summarizes the key assumptions, findings, and recommendations for
the updated rate study. Note that Exhibit numbering is consistent with the original
report document for ease of reference. Additional detail can be found in the original
comprehensive draft rate study report included as Appendix B.
> FCS GROUP
Page - 1
A. CAPITAL PROGRAM AND FUNDING PLAN
The capital program and funding plan was updated to incorporate completed projects
and current estimates for 2013-2018 and the 2012 beginning balance in the capital
account. Current bids for the Automated Meter Reading project are about $4 million
below estimates used in the original rate analysis.
Transfers from the operating account were increased from $650,000 a year to $750,000
(2014-2018) to help fund capital projects and maintain the minimum balance target.
The City identified $21.5 million ($23.1 million in inflated dollars) in capital projects
(2013-2018). In addition to the Utility capital resources, $3.5 million in State Revolving
Fund loans are planned for water treatment plant projects in 2013-2014; $5.o million in
Public Works Trust Fund loans are planned for the automated metering project in 2013-
2014; and revenue bond proceeds are assumed at $3.6 million in 2015 and $3.2 million
in 2017.
Exhibit 3-1 presents the 2013-2018 Capital Improvement Program and Exhibit 3-2
presents the capital funding plan.
Exhibit 3-1 (Revised): Capital Improvement Program (inflated)
4111111111mm.'/l'!111111111, ai / LI h1/�/!f+f+///rrrrrrr
H1111
Leak Detection
WTP PLC Replacement
WTP Lagoon / Electrical service
Intake Flood Repair
Automated Metering Infrastructure
Open Gear Vale Replacement
Private Water Main Replacement
Lead -Oakum Joint Line Replacement
Total
$
250,000
3,514,800
1,000,000
4,500,000
25,000
175,000
$ 9,464,800
11111�miiiiiiiiumllmli1iumi11111111111'1'111111111111111 goloififfiffiugmmIIID
$ 20,800 $ 21,632 $
520,000
520,000
1,560,000
26,000
182,000
27,040
189,280
2,163, 200
$ 2,828,800 $ 2,401,152
- $ 23,397 $ 24,333
28,122
196,851
2,249,728
$ 2,474,701
29,246
204,725
2,339,717
$ 2,597,086
30,416
212,914
2,433,306
$ 3,309,296
Exhibit 3-2 (Revised): Capital Funding Plan
RA011tAt11,10INANOING'04,11A011111111 7!!!lf J J
Beginning Fund Balance
Funding Sources
Connection Charges
Direct Funding from Rates
Net Loan Proceeds
Net Bond Proceeds
Total Funding Sources
Less: Capital Projects [a]
Fund Balance
MMMM 11' illull11111111 11111111111111111H
914
� I 149,1*1111111111111111111m
$ 3,829,733 $ 3,523,733 $ 1,488,933
$ 44,000 $
600,000
8,514,800
11����l��uu IIIIIIIIIII(
17.1,11 IIIIIIII goloffi
$ 3,520,811 $ 1,840,110 $ 3,221,175
44,000 $ 44,000 $ 44,000 $ 44,000 $ 44,000
750,000 750,000 750,000 750,000 750,000
3,639,030 - 3,184,151
$ 9,158,800 $ 794,000 $ 4,433,030 $ 794,000 $ 3,978,151 $ 794,000
($9,464,800) ($2,828,800) ($2,401,152) ($2,474,701) ($2,597,086) ($3,309,296)
$ 3,523,733 $ 1,488,933 $ 3,520,811 $ 1,840,110 $ 3,221,175 $ 705,879
Actual % of Assets: 6.5% 2.8% 6.5% 3.4% 6.0% 1.3%
Minimum Target Balance [1.0% of assets]: $ 540,974 $ 540,974 $ 540,974 $ 540,974 $ 540,974 $ 540,974
City Established Target Balance: $750, 000 $750, 000 $750, 000 $750, 000 $750, 000 $750, 000
[a] Includes an allowance for inflation of 4.0 percent per year.
> FCS GROUP
Page - 2
B. OPERATING FORECAST
The operating forecast was updated to incorporate the adopted 2013 operating budget.
Exhibit 3-3 presents the O&M expense forecast over the study period (excluding
utility taxes shown in Exhibit 3-4).
Exhibit 3-3 (Revised): Operating and Maintenance Forecast
� �� „�� IIIIIIIIII llmmm
tll
20114 IIIIIIIIII
1
1111 III1MMll MM 2HIll 0110'fff11111111 IlllllM 201In"(fffflllllllll IIIIIIIIII ri1 011
Functional Categories
Fire Suppression
Fire Suppression Admin
Water Distribution
WTP, Trans & Storage
Water/Irrigation Engineer
Water Administration
Interfund In lieu Utility Tax
Total O&M Expenses [a]
$ 305,179 $ 314,335 $ 323,765 $ 333,478 $ 343,482 $ 353,787
32,395 33,366 34,367 35,398 36,460 37,554
2,143,889 2,208,206 2,274,452 2,342,686 2,412,966 2,485,355
1,691,494 1,742,239 1,794,506 1,848,341 1,903,792 1,960,905
59,048 60,819 62,644 64,523 66,459 68,453
1,482,247 1,526,715 1,572,516 1,619,692 1,668,282 1,718,331
$ 5,714,253 $ 5,885,680 $ 6,062,251 $ 6,244,118 $ 6,431,442 $ 6,624,385
[a] Includes an allowance for inflation of 3.0 percent per year, plus known operational changes; excludes utility taxes.
C. REVENUE NEEDS ASSESSMENT
The revenue requirement analysis was updated to incorporate revised operating and
capital related costs, the 2012 actual ending cash balance in the operating account, and
2012 actual rate revenue collections. It is noteworthy that reported 2012 actual rate
revenues were significantly higher than originally estimated when using 2011 actual rate
revenues as the baseline - about a$1 million positive impact to the Utility. Based on
discussions with City staff, this is the result of resolving issues with meter reads and
billing system data where not all customers on the system were being adequately
charged.
In addition, this update reversed the previous removal of fire protection costs from rates
and the associated increase to the water utility tax in light of Substitute Bill 1512, which
as of July 28, 2013 allows re -integration of fire protection costs into water rates. Fire
protection costs are again recovered from rates and the utility tax has been reset to 20%.
The Utility averages about $9.8 million annually in cash obligations over the study
period. Average annual revenues (excluding the use of cash reserves) are forecasted at
$9.o million over the same time period — yielding an average annual deficit of $o.8
million without rate increases. The proposed rate strategy calls for five years of 4.o%
increases (2014-2018). These increases represent the system -wide adjustments
necessary to recover total revenue requirements for the Utility. Impacts to individual
customer will vary based on meter size and water usage levels, discussed further in
Section D — Rate Design.
Note that in addition to proposed rate increases, cash reserves in excess of minimum
target levels are used to supplement annual revenue shortfalls to mitigate rate impacts.
Exhibit 3-4 presents the revenue requirement analysis for the study period.
> FCS GROUP
Page - 3
Exhibit 3-4 (Revised): Revenue Requirement and Reserve Analysis
fIck404' RPIRNY � (111111
� V ,ulllllll
Revenues
Water Sales (w/ existing rates)
Other Revenues
Total Revenues
11111111111111111111 Hill' 011111 Iwo
$ 8,562,300 $ 8,583,706 $ 8,605,165 $ 8,626,678 $ 8,648,245 $ 8,669,866
395,500 395,500 395,500 395,500 395,500 395,500
$ 8,957,800 $ 8,979,206 $ 9,000,665 $ 9,022,178 $ 9,043,745 $ 9,065,366
Expenses
Operating & Maintenance Expenses $ 5,714,253 $ 5,885,680 $ 6,062,251 $ 6,244,118 $ 6,431,442 $ 6,624,385
Interfund In lieu Utility Tax 1,564,000 1,737,311 1,813,929 1,893,828 1,977,145 2,063,443
Existing Debt Service 556,006 562,896 559,188 555,279 551,169 550,669
New Debt Service 134,074 468,054 628,540 789,025 929,449 1,069,874
Residual Equity Transfers 64,497 64,497 64,497 64,497 64,497 64,497
Transfers to the Capital Fund 600,000 750,000 750,000 750,000 750,000 750,000
Total Expenses $ 8,632,829 $ 9,468,438 $ 9,878,404 $10,296,747 $10,703,702 $11,122,868
Annual Surplusl(Deficiency) $ 324,971 $ (489,232) $ (877,739) $(1,274,568) $(1,659,956) $(2,057,502)
Annual Rate Adjustment 0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Additional Revenue from Rate Adjustments $ - $ 343,348 $ 702,182 $ 1,077,162 $ 1,468,978 $ 1,878,352
Net Surplusl(Deficiency)
Beginning Fund Balance
Cumulative Fund Balance
$ 324,971 $ (145,884) $ (175,557) $ (197,407) $ (190,978) $ (179,151)
$ 2,847,073 $ 3,172,044 $ 3,026,160 $ 2,850,603 $ 2,653,196 $ 2,462,218
$ 3,172,044 $ 3,026,160 $ 2,850,603 $ 2,653,196 $ 2,462,218 $ 2,283,067
Actual Days of O&M: 159 145 132 119 107 96
Minimum Target Balance [60 days]: $1,196,425 $1,253,094 $1,294,715 $1,337,745 $1,382,233 $1,428,136
City Established Target Balance: $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
D. RATE DESIGN
The existing domestic water rate structure consists of a fixed charge increasing by meter
size and a uniform volume charge. The same schedule of rates applies to all domestic
service customers, with a 1.50 multiplier applied to outside city customers. Private fire
services are charged a readiness -to -service charge increasing by line size.
The proposed rates have been developed in accordance with the City's policy to apply
the same schedule of rates to all domestic customer classes and to recover an
appropriate balance of system costs from the fixed and variable components of the rate
structure to maintain revenue stability. Cost recovery under the existing rate structure is
about 22% from fixed charges and 78% from volume charges. Industry practice suggests
generating closer to 3o% from fixed charges and 70% from volume charges to balance
revenue stability with a customer's ability to control their water bill through changes in
water use.
The proposed rate structure increases the fixed charge cost recovery to 27% - up 5.o%
from historical levels. This shift will improve revenue stability without unduly
burdening customers with relatively low water usage. We recommend that the City
monitor water usage patterns over time to determine if a further increase to the fixed
charge component is warranted.
Exhibit 5-1 presents a comparison of existing Utility rates and the proposed five-year
schedule of Utility rates (2014-2018).
> FCS GROUP
Page - 4
Exhibit 5-1 (Revised): Existing & Proposed Water Rates
Meter Size
II!kN i1MNiI!1 �I
Existing
2013
Pro .osed
2014
2015
2016
2017
2018
3/4"
1"
1-1/2"
2"
3"
4"
6"
8"
10"
12"
$ 15.91
$ 20.09
$ 31.24
$ 44.67
$ 76.03
$ 120.82
$ 232.70
$ 453.59
$ 680.41
$ 993.82
$ 18.24
$ 23.03
$ 35.81
$ 51.20
$ 87.15
$ 138.49
$ 266.74
$ 519.94
$ 779.93
$ 1,139.18
$ 18.97
$ 23.95
$ 37.24
$ 53.25
$ 90.64
$ 144.03
$ 277.41
$ 540.73
$ 811.13
$ 1,184.75
$ 19.73
$ 24.91
$ 38.73
$ 55.38
$ 94.26
$ 149.79
$ 288.50
$ 562.36
$ 843.57
$ 1,232.14
$ 20.51
$ 25.90
$ 40.28
$ 57.60
$ 98.03
$ 155.78
$ 300.04
$ 584.86
$ 877.32
$ 1,281.43
$ 21.33
$ 26.94
$ 41.89
$ 59.90
$ 101.95
$ 162.02
$ 312.04
$ 608.25
$ 912.41
$ 1,332.68
Commodity
Rate
$/ccf
Line Size
2"
3"
4"
6"
8"
10"
12"
Existing
2013
$ 1.51
Ex.st ng
2013
$6.00
$8.76
$17.54
$51.56
$109.82
$197.46
$319.12
Ex.st ng
2013
$1.51
IIIIIIIIuIIIIIII W1 7Illlllilllllllll�fllllll
Proposed
2014
1.52
2015
1.58
2016
1.65
2017
1.71
�� 111111 �I IIIIIII I �I ! �IIIII �IIII
2018
1.78
Pro .osed
2014
$ 6.24
$ 9.11
$ 18.24
$ 53.62
$ 114.21
$ 205.36
$ 331.88
2015
$ 6.49
$ 9.47
$ 18.97
$ 55.77
$ 118.78
$ 213.57
$ 345.16
2016
$ 6.75
$ 9.85
$ 19.73
$ 58.00
$ 123.53
$ 222.12
$ 358.97
IIIIIII III
2017
$ 7.02
$ 10.25
$ 20.52
$ 60.32
$ 128.47
$ 231.00
$ 373.33
2018
$ 7.30
$ 10.66
$ 21.34
$ 62.73
$ 133.61
$ 240.24
$ 388.26
Pro .osed
2014
$ 1.52
2015
$ 1.58
2016
$ 1.65
2017
$ 1.71
2018
1.78
Dail water meter rental rema ns at $4.00 .er da
[a] Outside City rates are 1.50 times inside City rates
Based on the City's billing system information, the residential class uses an average of
about 2,200 cubic feet (22 ccf) of water per bi-monthly billing period over the course of
a year. The commercial class uses an average of about 10,600 cubic feet (io6 ccf) per
billing period, and industrial customers average about 32,700 cubic feet (327 ccf) per
billing period. Actual water usage will likely vary by customer and by billing period. For
example, residential customers typically experience higher than average usage in
summer months and lower than average usage in the winter months. As such, the water
bill will also vary by customer and by billing period.
> FCS GROUP
Page - 5
Revised Exhibit 5.1 Page 5 of updated report
Meter Size
Existing
2013
11.1111111111i
Proposed
2014
2015
2016
2017
2018
3/4"
1"
1-1/2"
2"
3"
4"
6"
8"
10"
12"
$ 15.91
$ 20.09
$ 31.24
$ 44.67
$ 76.03
$ 120.82
$ 232.70
$ 453.59
$ 680.41
$ 993.82
$ 17.54
$ 22.14
$ 34.43
$ 49.23
$ 83.80
$ 133.17
$ 256.48
$ 499.94
$ 749.93
$ 1,095.37
$ 18.24
$ 23.03
$ 35.81
$ 51.20
$ 87.15
$ 138.49
$ 266.74
$ 519.94
$ 779.93
$ 1,139.18
$ 18.97
$ 23.95
$ 37.24
$ 53.25
$ 90.64
$ 144.03
$ 277.41
$ 540.73
$ 811.13
$ 1,184.75
$ 19.73
$ 24.91
$ 38.73
$ 55.38
$ 94.26
$ 149.79
$ 288.50
$ 562.36
$ 843.57
$ 1,232.14
$ 20.51
$ 25.90
$ 40.28
$ 57.60
$ 98.03
$ 155.78
$ 300.04
$ 584.86
$ 877.32
$ 1,281.43
Commodit
Rate
$/ccf
Line Size
2"
3"
4"
6"
8"
10"
12"
Ex.st ng
2013
1.51
Ex.st ng
2013
$6.00
$8.76
$17.54
$51.56
$109.82
$197.46
$319.12
Ex.st ng
2013
$1.51
Proposed
2014
1.46
2015
1.52
2016
1.58
2017
1.65
illl rm! 1"ni "'1""
2018
1.71
Proposed
2014
$ 6.00
$ 8.76
$ 17.54
$ 51.56
$ 109.82
$ 197.46
$ 319.12
2015
$ 6.24
$ 9.11
$ 18.24
$ 53.62
$ 114.21
$ 205.36
$ 331.88
2016
$ 6.49
$ 9.47
$ 18.97
$ 55.77
$ 118.78
$ 213.57
$ 345.16
�llllll/IIIIIIIIIIIII III�IIIIIIII
2017
$ 6.75
$ 9.85
$ 19.73
$ 58.00
$ 123.53
$ 222.12
$ 358.97
2018
$ 7.02
$ 10.25
$ 20.52
$ 60.32
$ 128.47
$ 231.00
$ 373.33
Proposed
2014
1.46
2015
1.52
2016
1.58
2017
1.65
2018
1.71
Daily water meter rental remains at $4.00 per day
[a] Outside City rates are 1.50 times inside City rates
Exhibit 5-2 presents a comparison of sample customer water bills under existing rates
and the proposed 2014 rates. As shown in the exhibit, a residential customer using
2,200 cubic feet on average per bi-monthly period will experience an average increase of
$2.59 per bi-monthly period.
Exhibit 5-2 (Revised): Sample Residential Water Bills
E. CONCLUSIONS AND RECOMMENDATIONS
Projections are by nature conjectural and rely on many assumptions regarding growth,
water usage, inflations and other factors, and no guarantee as to their ultimate accuracy
can be made. We have endeavored to apply the best available estimates of future
conditions that affect these findings, and believe the analyses performed in this study
provide a reasonable level of assurance with respect to the adequacy of the proposed
rates and rate structure. However, regular review of actual financial performance of the
Utility should be an integral part of the successful implementation of this study. The
next rate study update is anticipated to be completed in 2018.
> FCS GROUP
Page - 6
Meter
Size
inches
Bi-Mth
Usage
cc
y
1111n
Ex
Bi
sting
-Mthly
Bill
I I All
2014
Bi -Mthly
Bill
$ Change
from
Existin.
3/4
6
$24.97
$27.37
$2.40
3/4
15
$38.56
$41.07
$2.51
3/4
22
$49.13
$51.72
$2.59
3/4
40
$76.31
$79.12
$2.81
1
50
$95.59
$99.13
$4.35
Illll
flllll •11111
l'
Meter
Bi-Mth y
Existing
2014
$ Change
Size
Usage
Bi -Mthly
Bi -Mthly
from
inches
cc
Bill
Bill
Existin.
3/4
75
$129.16
$132.39
$4.13
3/4
106
$175.97
$ 179.57
$3.60
1
200
$322.09
$ 327.43
$5.34
1
300
$473.09
$ 479.64
$6.55
Meter
Bi-Mth
y
Ex
sting
2014
$ Change
Size
Usage
Bi -Mthly
Bi -Mthly
from
inches
cc
Bill
Bill
Existin.
2
100
$195.67
$ 203.41
$7.74
2
327
$538.44
$ 548.91
$10.47
2
400
$648.67
$ 660.01
$11.34
E. CONCLUSIONS AND RECOMMENDATIONS
Projections are by nature conjectural and rely on many assumptions regarding growth,
water usage, inflations and other factors, and no guarantee as to their ultimate accuracy
can be made. We have endeavored to apply the best available estimates of future
conditions that affect these findings, and believe the analyses performed in this study
provide a reasonable level of assurance with respect to the adequacy of the proposed
rates and rate structure. However, regular review of actual financial performance of the
Utility should be an integral part of the successful implementation of this study. The
next rate study update is anticipated to be completed in 2018.
> FCS GROUP
Page - 6
Kevisea txnioir o.z on page n or updated report
III
Meter
Bi-Mth y
Ex st ng
2014
$ Change
Esf mated
Size
Usage
Bi -Mthly
Bi -Mthly
from
No. of
(inches)
(ccf)
Bill
Bill
Existing
Customers
3/4
6
$24.97
$26.32
$1.35
5,200
3/4
15
$38.56
$39.49
$0.93
3,900
3/4
22
$49.13
$49.73
$0.60
1,550
3/4
40
$76.31
$76.08
($0.23)
1,400
1
50
$95.59
$95.32
($3.39)
250
IIIII Pup
Meter
Bi-Mth
y
Ex
sting
2014
$
Change
Esfmated
Size
Usage
Bi -Mthly Bi -Mthly
from
No. of
(inches)
(ccf)
Bill Bill
Existing
Customers
3/4
75
$129.16 $127.30
($5.35) 90
3/4
106
$175.97 $ 172.67
($3.30)
80
1
200
$322.09 $ 314.84
($7.25)
30
1
300
$473.09 $ 461.19
($11.90)
40
MI
1.21!
Meter
Bi-Mth y
Ex st ng 2014
$ Change
Size
Usage
Bi -Mthly Bi -Mthly
from
(inches)
(ccf)
Bill Bill
Existing
2
100
$195.67 $ 195.58
($0.09)
15
2
327
$538.44 $ 527.79
($10.65)
10
2
400
$648.67 $ 634.63
($14.04)
FCS GROUP and City staff recommends that this study be utilized as support for the
adoption of the five-year rate schedule presented herein for years 2014-2018. The study
assumes rates will become effective January 1 of each year beginning in 2014.
Please feel free to contact me at 245-867-1802, ext. 241 or karynjPfcsgroup.com if you
have questions or comments.
Sincerely,
Karyn Johnson
Principal
> FCS GROUP
Page - 7
APPENDIX A
> PCS GROUP
Benchmarking Analysis
Page - 8
•
•
r1 i, (11(.111
To: Dave Brown, Water & Irrigation Manager
Yakima, Washington
From: Karyn Johnson, Principal
Tage Aaker, Analyst
RE: City of Yakima Water Utility - Benchmarking Analysis
C (,
ndum
Date: November 15, 2012
A. Nir
ROJUC. OON
In conjunction with the Domestic Water Rate Study FCS GROUP conducted for the City of Yakima
("City"), a benchmarking analysis was prepared to evaluate the City's water utility performance in
comparison to industry benchmarks. Relevant performance indicators were evaluated and compared
against the results from an industry benchmarking survey as well as FCS GROUP experience within
the industry. This memorandum summarizes the findings and conclusions of our review.
It is important to note that benchmarking results are only a start to the evaluation of utility
performance and do not necessarily reflect good or bad performance in all cases. There are many
internal and external factors that affect how a specific utility compares to the benchmarking
standards provided. Elements to consider when evaluating these results:
Regional Climate
Customer Base
Supply Source
Local & Regional Regulations
Density of Population
Age of Infrastructure
Treatment Processes
Organizational Goals
These explanatory factors can have a significant influence on the documented performance of a
specific utility. Further analysis with those closely familiar with a utility may reveal additional
insight on performance indicators.
It is also important to note that an initial benchmarking analysis provides a snap shot of utility
performance for the given year of review. Subsequent, multi-year analyses would allow the City to
evaluate utility performance and trends over time in order to make better informed decisions.
Exhibit A-1 presents the suggested benchmarking process.
Redrno id ".lown Center, 7525 166t1i Ave NI, Suite D-215, Fled ond, WA 98052 ♦ 425.867.1802 Page 1
City of Yakima — Benchmarking Analysis November 15, 2012
Exhibit A-1: Steps to Benchmarking
1 .Review and
evaluate utility
goals
2. Select relevant
and material
performance
measures
3. Define
evaluation
criteria
6. Identify strong
and weak
performance
■
5. Compare your
utility to compar-
able industry data
■
4. Collect and
validate data
B. METHODOLOGY
7. Develop
prioritized action
plans
8. Follow through
and follow up
REPEAT
___J
Sources for the utility benchmarks include a publication by the American Water Works Association
(AWWA) entitled Benchmarking Performance Indicators for Water and Wastewater Utilities: Survey
Data and Analyses Report (2007), as well as FCS GROUP industry knowledge and experience
gained through our work with utilities throughout the western United States. Note that the financial
data sources and results for the City of Yakima reflect performance for year 2011, which might not
be representative of all results reflected in the 2007 AWWA publication, particularly those measures
related to current O&M costs.
The AWWA industry survey compiled utility financial and operational information from 180
participants. Participation in the survey was voluntary and information submitted was self-reported
by the participating utilities. For performance indicators used within this publication, we referenced
the following benchmark categories:
Utility Service or Operation Type: For the City of Yakima, "Water Operations" was selected. This
represents survey participants designated as exclusively providing water services. Water Operations was
selected as the most representative category since the City's water and wastewater services are provided
through separate and distinct divisions.
Size of Service Population: This represents the size of the population served by the designated utility
service. Yakima's water service population falls within the "50,001-100,000" population category.
Geographical Region: The City of Yakima falls within the "West" region which includes the State of
Washington (along with AK, AZ, CA, CO, NM, NV, OR, UT, and WY).
Exhibit B-1 lists the performance indicators selected for this analysis based upon available
information and applicability to the City's domestic water system / utility.
•FCS GROUP
Page 2 of 38
City of Yakima — Benchmarking Analysis
Exhibit B-1: Index of Performance Indicators
November 15, 2012
# Performance Indicator
1 Organization Best Practices Index Survey
2 Employee Health & Safety Severity Rate
3 Training Hours per Employee
4 Customer Accounts per Employee
5 MGD of Water Delivered per Employee
6 Drinking Water Compliance Rate
7 Distribution System Loss / Leakage
8 Water Distribution System Integrity
9 O&M Cost per Customer Account
10 O&M Cost per Million Gallons of Water Distributed
11 Direct Cost of Treatment per Million Gallons Distributed
12 Debt to Total Asset Ratio (Debt Ratio)
13 Debt to Equity (Net Asset) Ratio
14 System Renewal / Replacement Rate (Distribution)
15 System Renewal / Replacement Rate (Treatment)
16 Retum on Assets
17 Retum on Fixed Assets
18 Accounts Receivable Tumover
19 Accounts Receivable Collection Period
20 Current Ratio
21 Operating Working Capital
22 O&M Coverage Ratio
23 Debt Coverage Ratio
24 Customer Service Related Complaints
25 Technical Quality Related Complaints
26 Planned Disruptions (< 4 hours) per 1,000 Customers
27 Planned Disruptions (4 hours - 12 hours) per 1,000 Customers
28 Planned Disruptions (>12 hours) per 1,000 Customers
29 Unplanned Disruptions (< 4 hours) per 1,000 Customers
30 Unplanned Disruptions (4 hours - 12 hours) per 1,000 Customers
31 Unplanned Disruptions (>12 hours) per 1,000 Customers
32 Customer Service Cost per Account
33 Monthly cost of using 7,500 gallons (Water - Residential)
Results for these indicators are organized into the following categories: Organizational Development,
Water Operations, Business & Finance Operations, and Customer Relations.
The analysis calculates a formula -based (or in some cases, subjective) result for the City's water
utility for each performance indicator and then assigns a score to each indicator based on how well
the City compares to the industry benchmark.
Benchmarks are shown for the bottom quartile, top quartile and median responses from participants.
For additional indicators, not included in the AWWA publication, general industry standards are
shown. An overall (or average) score is then assigned to the category as a whole, assuming equal
weight for each indicator within the category. Exhibit B-2 presents the scoring system for this
exercise.
Exhibit B-2: Scoring System
Scoring Tabl
Score
Description
1 Very Good
2 Good
3 Fair
4 Poor
In general, the scores are assigned as follows:
• "1 — Very Good" - results equal to or better than the top quartile;
• "2 - Good" - results close to the median;
• "3 - Fair" - results better than the bottom quartile but worse than the median; and
• "4 — Poor" - results equal to or worse than the bottom quartile.
The intent of the scoring system is to assist the City in identifying areas for further investigation and
potential improvement. For example, the City might consider tagging those areas that are scored
either "Fair" or "Poor" as priority targets for improvement.
•FCS GROUP
Page 3 of 38
City of Yakima — Benchmarking Analysis
C. SUMMARY OF RESULTS
November 15, 2012
Exhibit B-1 summarizes the results, including individual scores and an overall score for the
category. Additional detail is provided in Section C, including both a numerical and graphical result
for each indicator. Note that the bar line in each graphic depicts the range from bottom to top quartile
results and the triangle depicts the median result as well as the City's results.
Exhibit B-1: Performance Indicator and Score by Category
Organizational Development
Water Operations
Business & Finance Operations
Customer Relations
Organization Best Practices
Index Survey
2
3
4
1
Drinking Water Compliance Rate 1
Distribution System Loss /
Leakage 4
Water Distribution System
Integrity 1
O&M Cost per Customer Account 2
O&M Cost per Million Gallons of
2
Water Distributed
Direct Cost of Treatment per 2
Million Gallons Distributed
Debt to Total Asset Ratio (Debt
Ratio) 1
Debt to Equity (Net Asset) Ratio 1
System Renewal / Replacement
Rate (Distribution) 1
System Renewal / Replacement 1
Rate (Treatment)
Return on Assets 3
Return on Fixed Assets 2
Accounts Receivable Turnover 1
Accounts Receivable Collection1
Period
Current Ratio 1
Operating Working Capital 1
O&M Coverage Ratio 1
Debt Coverage Ratio 1
Customer Service Related
Complaints
4
1
1
1
1
1
1
1
2
1
Employee Health & Safety
Severity Rate
Technical Quality Related
Complaints
Training Hours per Employee
Planned Disruptions (< 4 hours)
per 1,000 Customers
Customer Accounts per
Employee
Planned Disruptions (4 hours -
12 hours) per 1,000 Customers
MGD of Water Delivered per1
Employee
Planned Disruptions (>12 hours)
per 1,000 Customers
Unplanned Disruptions (< 4
hours) per 1,000 Customers
Unplanned Disruptions (4 hours -
12 hours) per 1,000 Customers
Unplanned Disruptions (>12
hours) per 1,000 Customers
Customer Service Cost per
Account
Monthly cost of using 7,500
gallons (Water - Residential)
Average 2.2
2.0
1.3
1.4
Organizational Development received an overall (average) score of 2.2, indicating "good"
performance. Areas warranting further investigation and potential improvement include the
Employee Health & Safety Severity Rate and Training Hours per Employee. The score for the
Organization Best Practices Index Survey is expected to move toward "very good" following
implementation of the Asset Management Program planned for implementation in 2013.
Water Operations received an average score of 2.0, indicating "good" performance. The score for
Distribution System Loss is expected to improve with the new Automatic Metering Program
currently in progress.
Business & Finance Operations received a score of 1.3, indicating "very good" performance. This is
likely the direct result of the financial policies implemented for the water utility more than a decade
ago, including regular annual rate adjustments to keep pace with inflation and generate adequate cash
for capital spending and maintaining reserves. Improvement to the results for Return on Assets and
Return on Fixed Assets could result in a perfect score for this category.
Customer Relations received a score of 1.4, indicating "very good" to "good" performance. All
operational/technical indicators within this category received a score of very good, with customer
service indicators receiving lower scores. Customer service related complaints, most notably billing
error complaints, warrant further investigation for potential improvement.
•FCS GROUP
Page 4 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
D. RESULTS OF BENCHMARKING ANALYSIS
ORGANIZATIONAL DEVELOPMENT
1. Organizational Best Practices Index Survey
Description: The purpose of the Best Practices (BP) survey is to summarize a utility's
implementation of management programs important to a water utility. Generally, higher values are
desirable. Practices are likely to be more formal and extensive in larger utilities.
Exhibit C -1(a): Formula and Comparative Benchmarks
Organization Best Practices Index Survey
Formula: Results of "Best Practices" Survey (min 7 - max 35 at each
utility)
Yakima Result: 25
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
22.80
30.00
21.00 30.00
Type: Water 20.50
26.50
24.50
28.80 24.00
Exhibit C -1(b): Graphical Results
r32
30
28
a 26
m 24
E 22
O
20
18
0
U
Organization Best Practices
Index Survey
a
Region: West Population Type: Water Yakima
Served:50k-100k
Analysis: Higher values are desirable. The City's result is in line with the median results from the
survey. Score: 2 - "Good". Note: The City plans to implement an asset management program in
2013, at which point, the score would likely move closer to the top quartile with a score of "very
good".
•FCS GROUP
Page 5 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
2. Employee Health & Safety Severity Rate
Description: Quantifies the rate of employee days lost from work due to illness or injury. Generally,
lower values are desirable. Excessive lost workdays affect productivity and can cost utilities in a
number of ways. Health care, insurance premiums and overtime can all be adversely impacted by lost
work due to injury or health reasons. Indicator measures the rate of days lost per 100 employees per
year.
Exhibit C -2(a): Formula and Comparative Benchmarks
Employee Health & Safety Severity Rate
Formula: 200,000 X (Total Workdays away from Work) + Total Hours
Worked by All Employees
Days Away (Work 13
Injury & Illness)
Total Hours Worked 62,338
Yakima Result: 42
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
88.10 0.10
49.40 0.00
79.00 0.00
21.20
5.30
12.90
Exhibit C -2(b): Graphical Results
rD� ays Lost (per 100 employee-years)
100
90
80
70
60
50
40
30
20
10
0
Employee Health & Safety
Severity Rate
Region: West Population Type: Water Yakima
Served: 50k-10Gc
Analysis: Lower values are desirable. The City's result is on the high side, warranting further
investigation and potential improvement. Score: 3 — "Fair"
•FCS GROUP
Page 6 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
3. Training Hours per Employee
Description: Measures the quantity of formal training that utility employees are actually completing.
This indicator is expressed as the number of formal training hours per employee per year. Generally,
higher values are desirable. This measure is intended to reflect the organization's commitment to
formal training as a means of improving employee knowledge and skills.
Exhibit C -3(a): Formula and Comparative Benchmarks
Training Hours per Employee
Formula: Total Qualified Formal Training Hours for All Employees = Total
FTEs Worked by Employees During Reporting Period
Training Hours 384
Number of FTEs 31.65
Yakima Result: 12.13
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
14.10 36.10
11.80 29.00
12.10 23.90
23.70
20.30
15.50
Exhibit C -3(b): Graphical Results
40
35
30
25
20
15
10
5
0
Training Hours per Employee
t t
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: Higher values are desirable. The City's result is on the low side, warranting further
investigation and potential improvement. Score: 4 — "Poor"
•FCS GROUP
Page 7 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
4. Customer Accounts per Employee
Description: This indicator is intended to measure employee efficiency. Generally, higher values are
desirable.
Exhibit C -4(a): Formula and Comparative Benchmarks
Customer Accounts per Employee
Formula: Number of Accounts = Number of FTEs
Number of Accounts 18,700
Number of FTEs 31.65
Yakima Result: 591
Benchmarks
Bottom Quartile To• Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
349
408
635
558
422
473
333 667 456
Exhibit C -4(b): Graphical Results
700
650
600
550
500
450
400
350
300
Customer Accounts per
Employee
t
1
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: In general, higher values are desirable. The City is on the high side, indicating very
efficient water operations. Score: 1 — "Very Good"
•FCS GROUP
Page 8 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
5. MGD of Water Delivered per Employee
Description: This indicator is intended to measure employee efficiency. Generally, higher values are
desirable.
Exhibit C -5(a): Formula and Comparative Benchmarks
MGD of Water Delivered per Employee
Formula: Average MGD Delivered = FTEs
MGD 9.65
Number of FTEs 31.65
Yakima Result: 0.30
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
0.17
0.40
0.26
0.14 0.29 0.19
Type: Water 0.15
0.33 0.24
Exhibit C -5(b): Graphical Results
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
MGD of Water Delivered per
Employee
I- i
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: Higher values are desirable. The City's results are on the high side, indicating very
efficient water operations. Score: 1 — "Very Good"
•FCS GROUP
Page 9 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
WATER OPERATIONS
6. Drinking Water Compliance Rate
Description: This indicator quantifies the percentage of time each year that a water utility meets all
health-related drinking water requirements of the US National Primary Drinking Water Regulations.
Higher results are desirable. A compliance rate of 100% is the goal of every utility.
Exhibit C -6(a): Formula and Comparative Benchmark
Drinking Water Compliance Rate
Formula: Number of Days in Full Compliance = 365 Days
Days in Full
Compliance
365
Formula Piece #2 365
Yakima Result: 100%
1
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
Exhibit C -6(b): Graphical Results
7 Drinking Water Compliance Rate
100%
95%
90%
Region: West Population Type: Water Yakima
Served:50k-100k
Analysis: A utility should strive to achieve compliance 100% of the time. The City has met this
target. Score: 1 — "Very Good"
•FCS GROUP
Page 10 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
7. Distribution System Loss / Leakage (DSL)
Description: This indicator is a measure of the percentage of produced water that fails to reach
customers and cannot otherwise be accounted for through authorized usage. Generally higher values
are not desirable. Water loss can adversely impact revenue and water use efficiency.
Exhibit 7(a): Formula and Comparative Benchmarks
Distribution System Loss / Leakage
Formula: [Volume distributed - (volume billed + volume unbilled but
authorized) = volume distributed]
Volume Distributed 3,522,567,974
Volume Billed &
2'951'690'565
Authorized
Yakima Result: 16.21%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
10.4% 3.8%
15.0% 4.0%
12.4% 4.9%
7.2%
8.9%
8.6%
Exhibit 7(b): Graphical Results
18%
16%
14%
12%
10%
8%
6%
4%
2%
Distribution System Loss /
Leakage
Region: West Population Type: Water
Served:50k-100k
Yakima
Analysis: Lower values are desirable. The City's result is on the high side. Score: 4 — "Poor". Note:
The City is in the process of installing Automatic Meter Reading (AMR), which should result in
lower DSL and an improved score.
•FCS GROUP
Page 11 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
8. Water Distribution System Integrity
Description: This indicator is a measure of the condition of the water distribution system, expressed
as the total annual number of leaks and pipeline breaks per 100 miles of distribution piping.
Generally, higher values are not desirable. Excessive leaks and breaks can result in increased costs
due to an increased number of emergency repairs.
Exhibit C -8(a): Formula and Comparative Benchmark
Water Distribution System Integrity
Formula: 100 X (Annual total number of leaks + annual total number of
breaks) = Total miles of distribution piping
Annual Leaks & Breaks 6.0
Miles of Distribution 300
Piping
Yakima Result: 2.00
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
53.00 15.80
69.60 14.80
56.10 21.70
31.20
32.70
34.30
Exhibit C -8(b): Graphical Results
80
70
60
50
40
30
20
10
0
Water Distribution System
Integrity
•
Region: West Population Type: Water Yakima
Served:50k-100k
Analysis: Lower values are desirable. The City's result is very low, placing better than the top
quartile, indicating an effective maintenance and replacement program. Score: 1 — "Very Good"
•FCS GROUP
Page 12 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
9. O&M Cost per Customer Account
Description: Generally, higher values are not desirable. Higher O&M costs per customer account
may indicate inefficient procedures or may be the result of aging infrastructure. However, this may
not always be the case. Higher costs per account may be the desired outcome to improve customer
satisfaction or to make up for deferred maintenance practices.
Exhibit C -9(a): Formula and Comparative Benchmarks
O&M Cost per Customer Account
Formula: Total O&M less depreciation = Total number of customer
accounts
Total O&M (less dep.) $5,296,003
Total Customer
Accounts
18,700
Yakima Result: $283
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$443
$252
$302 $101
$357 $205
$339
$161
$272
Exhibit C -9(b): Graphical Results
$500
$450
$400
$350
$300
$250
$200
$150
$100
O&M Cost per Customer
Account
-4
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: In general, lower values are desirable. The City is in line with the median results of the
industry survey. Score: 2 — "Good"
•FCS GROUP
Page 13 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
10. O&M Cost per Million Gallons of Water Distributed
Description: Generally, higher values are not desirable. Higher O&M costs per million gallons may
indicate inefficient procedures or may be the result of aging infrastructure. However, this may not
always be the case. Higher costs per million gallons distributed may be the desired outcome to
improve customer satisfaction or to make up for deferred maintenance practices.
Exhibit C -10(a): Formula and Comparative Benchmark
O&M Cost per Million Gallons of Water Distributed
Formula: Total O&M less depreciation = Volume (in MG) Distributed During
the Reporting Period
Total O&M (less dep.) $5,296,003
Volume Distributed (in
MG)
3,523
Yakima Result: $1,503
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$2,509 $1,163
$2,286 $667
$2,310 $1,037
$1,608
$1,373
$1,506
Exhibit C -10(b): Graphical Results
$3,000
$2,500
$2,000
$1,500
$1,000
$500
O&M Cost per Million Gallons of
Water Distributed
Region: West Population Type: Water Yakima
Served: 50k -100k
Analysis: Lower values are desirable. The City's results are in line with the median in each category.
Score: 2 — "Good"
•FCS GROUP
Page 14 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
11. Direct Cost of Treatment per Million Gallons Distributed
Description: Generally, higher values are not desirable. Higher O&M directly attributable to water
treatment per million gallons distributed may indicate high staffing levels or increased maintenance
due to aging equipment and facilities. However, this may not always be the case. Higher costs may
be unavoidable due to the use of more expensive treatment processes.
Exhibit C -11(a): Formula and Comparative Benchmark
Direct Cost of Treatment per Million Gallons Distributed
Formula: Total Direct O&M Costs for Water Treatment + Volume (in MG)
Distributed During the Reporting Period
Treatment Cost $900,750
Total Volume 3,523
Processed (MG)
Yakima Result: $256
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
$558
$660
$75
$234
$130 $353
Type: Water $550 $100 $322
Exhibit C -11(b): Graphical Results
$700
$600
$500
$400
$300
$200
$100
$0
Direct Cost of Treatment per Million
Gallons Distributed
Region: West Population Served: Type: Water Yakima
50k -100k
Analysis: Lower values are desirable. The City's results are in line with the median in each category.
Score: 2 — "Good"
•FCS GROUP
Page 15 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
BUSINESS & FINANCE OPERATIONS
12. Debt to Total Asset Ratio (Debt Ratio)
Description: This indicator quantifies the utility's level of indebtedness. Generally, the higher the
ratio, the more dependent the utility is on debt financing. A higher dependence on debt can cause
larger long-term costs for interest repayments when compared with cash financing capital. Lower
values are generally desirable.
Exhibit C -12(a): Formula and Comparative Benchmark
Debt to Total Asset Ratio (Debt Ratio)
Formula: Total Liabilities = Total Assets
Total Liabilities $6,358,342
Total Assets $40,041,390
Yakima Result: 15.9%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
42.1% 18.1%
28.9% 21.4%
43.3% 20.7%
28.0%
26.9%
28.6%
Exhibit C -12(b): Graphical Results
45%
40%
35%
30%
25%
20%
15%
10%
Debt to Total Asset Ratio (Debt
Ratio)
•
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: Lower values are generally desirable. The City's results score better than the top quartile.
Score: 1 — "Very Good"
•FCS GROUP
Page 16 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
13. Debt to Equity (Net Asset) Ratio
Description: This ratio gives insight into a utility's equity -liability relationship in terms of funded
capital assets. The lower the percentage, the less leveraged a utility is, which can imply more
potential to fund future projects fully with debt. A ratio of 1.5 (60% debt / 40% equity) is a generally
accepted industry target.
Exhibit C -13(a): Formula and Comparative Benchmark
Debt to Equity (Net Asset) Ratio
•
Formula: Total Current & Non -Current Borrowed Debt = Net Assets.
Total Borrowed Debt $5,608,215
Net Assets $33,683,048
Yakima Result: 0.17 to 1 (14% debt / 86% equity)
Benchmarks
FCS GROUP Experience
Generally Accepted Debt / Equity Ratio
Yakima
1.50
0.17
Benchmarks
FCS GROUP Experience
Generally Accepted Debt Target
Yakima
60.0%
14.3%
Exhibit C -13(b): Graphical Results
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Debt to Equity (Net Asset) Ratio
•
Generally Accepted Debt / Equity Yakima
Ratio
70%
60%
50%
40%
30%
20%
10%
0%
Debt + (Debt + Net Assets)
•
Generally Accepted Debt Target Yakima
Analysis: Lower values are generally desirable. The City's results are well below the generally
accepted targets, indicating the potential to fund additional capital projects with debt while still
maintaining a healthy capital structure. Score: 1 — "Very Good"
•FCS GROUP
Page 17 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
14. System Renewal / Replacement Rate (Distribution)
Description: This indicator quantifies the rate at which the utility is meeting its individual need for
infrastructure renewal or replacement. Generally, higher values are desirable. This indicator
measures the degree to which a water utility is replacing its distribution system infrastructure. This
indicator creates a theoretical annual funding target, and then divides actual capital expenditures over
this "target" to arrive at the replacement rate. For example, if total replacement costs for the
distribution system were $500 (with 50 year asset life), and the utility averages $5 in annual
expenditures, then the result would be fifty percent [$5 ± ($500 =50 years)].
Exhibit C -14(a): Formula and Comparative Benchmark
System Renewal / Replacement Rate (Distribution)
Formula: 100 X (Total Actual Expenditures for R&R for each Asset Class)
Total Present Worth of R&R Needs for Each Asset Group
Total Annual Actual $230,513 Note: 3 -year Actual Average
Ex penditures
R&R Needs $1,280,543
Yakima Result: 18%
(Total Group Replacement Cost
Weighted Asset Life)
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
0.8% 8.6%
1.9% 22.5%
1.3% 6.4%
2.0%
4.3%
2.5%
Exhibit C -14(b): Graphical Results
17s a % of theoretical target
System Renewal / Replacement
Rate (Distribution)
25%
20%
15%
10%
5%
0%
1 � 1
Region: West Population Type: Water Yakima
Served:50k-100k
Analysis: In general, higher values are desirable. The City places above or near the top quartile
depending upon the comparative benchmark. Score: 1 - "Very Good"
•FCS GROUP
Page 18 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
15. System Renewal / Replacement Rate (Treatment)
Description: This indicator quantifies the rate at which the utility is meeting its individual need for
infrastructure renewal or replacement. Generally, higher values are desirable. This indicator
measures the degree to which a water utility is replacing its treatment infrastructure.
Exhibit C -15(a): Formula and Comparative Benchmark
System Renewal / Replacement Rate (Treatment)
Formula: 100 X (Total Actual Expenditures for R&R for each Asset Class)
Total Present Worth of R&R Needs for Each Asset Group
Total Annual Actual $131,273 Note: 3 -year Actual Average
Ex penditures
R&R Needs $375,937
Yakima Result: 35%
(Total Group Replacement Cost
Weighted Asset Life)
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
2.1% 15.1%
1.7% 5.0%
1.7% 7.7%
3.4%
2.9%
3.2%
Exhibit C -15(b): Graphical Results
n System Renewal / Replacement
Rate (Treatment)
0)
• 40%
_ 35%
a
U 30%
25%
0
20%
s • 15%
10%
5%
o 0%
La
•
Region: West Population Type: Water Yakima
Served:50k-l00k
Analysis: In general, higher values are desirable. The City places above the top quartile for all
comparative benchmarks. Score: 1 - "Very Good"
•FCS GROUP
Page 19 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
16. Return on Assets
Description: In general, utilities are seeking a higher return on asset ratio performance where
possible. This indicator is a measure of a utility's financial effectiveness.
Exhibit C -16(a): Formula and Comparative Benchmark
Return on Assets
Formula: Net Income = Total Assets
Net Income $690,580
Total Assets $40,041,390
Yakima Result: 1.72%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
0.90% 4.30%
1.10% 5.30%
0.90% 3.60%
2.30%
2.40%
2.60%
Exhibit C -16(b): Graphical Results
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Return on Assets
ti
Region: West Population Type: Water
Served:50k-100k
Yakima
Analysis: Higher values are desirable. The City's result places it below the median benchmarks, but
above the bottom quartile in each category, warranting further investigation and potential
improvement. Score: 3 — "Fair".
•FCS GROUP
Page 20 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
17. Return on Fixed Assets
Description: In general, this value indicates whether the utility is earning sufficient net operating
income (before any non-operating revenues & expenses) as a return on its investment in capital assets
to equal or exceed its weighted cost of capital for the reporting period. A return equal to or greater
than the entity's average cost of capital is a prudent financial objective. The City's estimated
weighted average cost of capital (WACC) is 1.48% based on debt issues from its 2011 CAFR.
Exhibit C -17(a): Formula and Comparative Benchmark
Return on Fixed Assets
Formula: Net Operating Income = Total Net Plant -in -Service (less dep.)
Net Operating Income $483,532
Total Plant -in -Service $33,302,999
Yakima Result: 1.45%
Net of depreciation. Excl.
Intangibles and Unamortized
City of Yakima FCS GROUP Experience
Yakima's Estimated Weighted Cost of
Capital
1.48%
Exhibit C -17(b): Graphical Results
5.00%
4.00%
3.00%
2.00%
1.00%
Return on Fixed Assets
Yakima's Estimated Weighted Cost Yakima
of Capital
Analysis: In general, a utility would want to have a return that exceeds its weighted average cost of
capital. The City's result approximately equals its WACC, but does not exceed it. Score: 2 — "Good"
•FCS GROUP
Page 21 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
18. Accounts Receivable Turnover
Description: In general, higher values are desirable. A result of greater than 12 is very good. Less
than 12 can be okay if it is explained by bi-monthly billing cycles or some other lag creating factor.
Otherwise, a lower ratio may suggest that a utility should assess their collection results against
policies in relation to customer accounts and average collections per period.
Exhibit C -18(a): Formula and Comparative Benchmark
Accounts Receivable Turnover
Formula: Annual Billings = End of Year A/R Balance
Annual Billings $6,792,444
End of Year A/R $113,552
Balance
Yakima Result: 59.82
Benchmarks
FCS GROUP Experience
Industry Benchmark
12
Exhibit C -18(b): Graphical Results
70
60
50
40
30
20
10
0
Accounts Receivable Turnover
•
Industry Benchmark Yakima
Analysis: Higher values are desirable. The City's result significantly exceeds the industry
benchmark, indicating an efficient billing and collection operation. Score: 1 — "Very Good"
•FCS GROUP
Page 22 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
19. Accounts Receivable Collection Period
Description: This indicator measures the number of days from when a customer is billed to when the
payment is received by the Utility. In general, lower values are desirable. Less than 30 days improves
cash flow from operations and the ability for a utility to meet short-term obligations, after working
capital is depleted.
Exhibit C -19(a): Formula and Comparative Benchmark
Accounts Receivable Collection Period
Formula: 365 days = Accounts Receivable Turnover
Formula Piece #1 365 days
Accounts Receivable
59.82
Turnover
Yakima Result: 6.10
Benchmarks
FCS GROUP Experience
Industry Benchmark
30
Exhibit C -19(b): Graphical Results
35
30
25
20
15
10
5
0
Accounts Receivable Collection
Period
•
Industry Benchmark Yakima
Analysis: Lower values are desirable. The City's result significantly exceeds the industry
benchmark, indicating an efficient billing and collection operation. Score: 1 — "Very Good"
•FCS GROUP
Page 23 of 38
City of Yakima - Benchmarking Analysis November 15, 2012
20. Current Ratio
Description: In general, higher values are desirable. This is a liquidity ratio and a ratio of 2:1 is good
to excellent. Generally, a consistent ratio of greater than 1:1 indicates that the utility can pay its
current operating obligations without borrowing working capital.
Exhibit C -20(a): Formula and Comparative Benchmark
Current Ratio
Formula: Current Assets - Current Liabilities
Current Assets $6,141,072
Current Liabilities $1,173,114
Yakima Result: 5.23
Benchmarks
FCS GROUP Experience
Industry Benchmark
2
Exhibit C -20(b): Graphical Results
Current Ratio
Industry Benchmark Yakima
Analysis: Higher values are desirable. The City's results are much higher than the targeted
benchmark, indicating that the utility can pay its current operating obligations with current assets,
avoiding the use of working capital reserves. Score: 1 - "Very Good"
•FCS GROUP
Page 24 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
21. Operating Working Capital
Description: Today, Financial Advisors and rating agencies would like to see up to 180 days of total
unrestricted cash, cash equivalents and longer term forms of liquidity, of which 30-90 days could be
working capital. Try to achieve a positive number sufficient to cover at least 30-45 days of expense.
Up to 90 days may be prudent depending on the volatility of revenue. In general, this indicator shows
how much cash plus current assets a utility has on hand, to make up for any short-term variances in
service revenue, to cover current liabilities. We cannot assure that "unrestricted" assets are all
actually available for working capital, but that is the general assumption.
Exhibit C -21(a): Formula and Comparative Benchmark
Operating Working Capital
Formula: [(Current Assets - Current Liabilities (not devoted to debt or
capital projects)) + Operating Expenses (less dep.)] X365 days
Current Assets $6,141,072
Current Liabilities (less $728 265
Debt portion)
Operating Expenses $5,296,003
Yakima Result: 373 days
Benchmarks
FCS GROUP Experience
Industry Benchmark
90 days
Exhibit C -21(b): Graphical Results
Days of O&M
400
350
300
250
200
150
100
50
0
Operating Working Capital
Industry Benchmark Yakima
Analysis: Higher values are desirable. The City's result significantly exceeds the targeted
benchmark, indicating that current cash and cash equivalents on hand can act as a buffer against
short-term variances in revenues and/or expenses. Score 1 — "Very Good"
•FCS GROUP
Page 25 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
22. O&M Coverage Ratio
Description: This ratio shows how operating revenues compare to operating expenses. A utility
should strive to be above 1.0, which would mean that operating expenses are being covered by
operating revenues, and operating expenses are not being paid for with non-operating revenues such
as interest income or capital connection charges. Less than 1.0 will not ultimately lead to a healthy
financial trend over the long run, especially during periods of negative non-operating income.
Exhibit C -22(a): Formula and Comparative Benchmark
O&M Coverage Ratio
Formula: Total Operating Revenues = Operating Expenses (incl dep.)
Total Operating
$6,887,220
Revenues
Total Operating
$6,403,688
Expenses (incl. dep.)
Yakima Result: 1.08
Benchmarks
FCS GROUP Experience
Industry Benchmark
1.00
Exhibit C -22(b): Graphical Results
1.10
1.08
1.06
1.04
1.02
1.00
0.98
0.96
O&M Coverage Ratio
Industry Benchmark Yakima
Analysis: A utility should strive to be above 1.0, implying that operating revenues can cover
operating expenditures (including depreciation). The City's result is above the industry benchmark.
Score: 1 — "Very Good"
•FCS GROUP
Page 26 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
23. Debt Coverage Ratio
Description: In general, higher values are desirable. The Debt Service Coverage (DSC) ratio is an
indicator that measures the average amount of net operating income available to pay annual debt
service. Yakima's most recent debt issuance has a debt service coverage requirement of 1.25 times
annual debt service; current internal policy is 2.0. The DSC is essentially an instantaneous
measurement of estimated cash income generating performance. It is considered in rate making as a
critical factor and driver in projecting needed annual rate revenue requirements.
Exhibit C -23(a): Formula and Comparative Benchmark
Debt Coverage Ratio
Formula: Net Revenue = Period Interest and Principal (Only Revenue
Bonds)
Total Operating $6,887,220
Revenue
Total Operating $5,296,003
Expenses ( less dep.)
Water: City Taxes $951,037 From Trial Balance Report
Net Revenue $2,542,254 Rev. - Exp. (Excludes dep. & city
taxes)
Period Principal $170,000 Revenue Bond P&I Only from Debt
Schedule
Period Interest $67,793
Yakima Result: 10.69
Benchmarks
FCS GROUP Experience
Internal Policy
2.00
Exhibit C -23(b): Graphical Results
11
10
9
8
7
6
5
4
3
2
1
0
Debt Coverage Ratio
Internal Policy Yakima
Analysis: Higher values are desirable. The City's result is much higher than both its contractual
requirement and internal target. Score: 1 — "Very Good"
•FCS GROUP
Page 27 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
CUSTOMER RELATIONS
24. Customer Service Related Complaints
Description: This indicator measures the complaint rate experienced by the utility associated with
customer service, expressed as complaints per 1,000 customer accounts. Generally, lower values are
desirable. The number of complaints is a good measure of customer service. This indicator may
include complaints about an employee's helpfulness, timeliness, personal appearance, adhering traffic
laws while driving, customer bills etc.
Exhibit C -24(a): Formula and Comparative Benchmark
Customer Service Related Complaints
Formula: 1,000 X Number of Customer Service Complaints + Number of
Active Water Accounts
Customer Service 538
Complaints
Accounts 18,700
Yakima Result: 28.77
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
9.9
8.2
14.5
0.6
0.6
3.0
3.0
0.9 5.0
Exhibit C -24(b): Graphical Results
Complaints per 1,000 accts
35
30
25
20
15
10
5
0
Customer Service Related
Complaints
Region: West Population Type: Water Yakima
Served: 50k -100k
Analysis: Lower values are desirable. The City's results are higher than the bottom quartile,
warranting further investigation and potential improvement. Score: 4 — "Poor". Note: there were 538
complaints in the reporting period, with 401 of them (75%) related to billing errors. The City's utility
billing is a centralized service combined for water, wastewater, and refuse; and thus, beyond the
scope of authority for the water utility. Total complaints were included in the results to provide an
"apples to apples" comparison with the survey participants. Excluding the billing related complaints
improves the result to 7.3, somewhat better than the bottom quartile.
•FCS GROUP
Page 28 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
25. Technical Quality Related Complaints
Description: This indicator measures the complaint rate experienced by the utility associated with
technical quality, expressed as complaints per 1,000 customer accounts. Generally, lower values are
desirable. This indicator represents complaints related to water quality, color, odor, pressure, etc.
Exhibit C -25(a): Formula and Comparative Benchmark
Technical Quality Related Complaints
Formula: 1,000 X Number of Technical Quality Complaints = Number of
Active Water Accounts
Technical Quality 28
Complaints
Accounts 18,700
Yakima Result: 1.50
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
10.0
28.3
Type: Water 11.2
1.9
1.3
5.0
3.9
1.9 4.4
Exhibit C -25(b): Graphical Results
U 30
O
25
O 20
N 15
Q' 10
5
.0
Technical Quality Related
Complaints
1 1 1
Region: West Population Type: Water Yakima
Served: 50k -100k
L
Analysis: Lower results are desirable. The City's result places it among the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 29 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
26. Planned Disruptions (< 4 hours) per 1,000 Customers
Disruption Indicator Summary (Following 6 indicators): Maintenance and repair work that results
in water outages or substantially reduced water pressure disrupts customer plans, brings customer
complaints, and diminishes goodwill toward the utility. Large numbers and proportions of unplanned
disruptions likely reflect on distribution system inadequacies. Outages of long durations may be
indicative of poor repair practices. These indicators are separated between planned and unplanned
disruptions as well as by duration. *Note: An assumption is made relating to the formula: it is
assumed that the number of Customers Experiencing Disruptions equates to number of disruptions.
Description: This indicator quantifies the number of planned water outages experienced by utility
customers for duration less than 4 hours. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -26(a): Formula and Comparative Benchmark
Planned Disruptions ( < 4 hours) per 1,000 Customers
Formula: 1,000 XNumber of Customers Experiencing Disruptions*
Number of Active Customer Accounts
Disruptions (<4 h) 20
Accounts 18,700
Yakima Result: 1.07
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Sensed: 50k -
100k
Type: Water
21.40
0.67
19.60 0.28
5.00
1.31
16.49 1.21 4.10
Exhibit C -26(b): Graphical Results
25.00
20.00
15.00
10.00
5.00
0.00
Planned Disruptions (< 4 hours)
per 1,000 Customers
ILI
•
Region: West Population Type: Water Ya kima
Served: 50k -100k
Analysis: Lower values are desirable. The City's result places it among the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 3o of 38
City of Yakima — Benchmarking Analysis November 15, 2012
27. Planned Disruptions (4 - 12 hours) per 1,000 Customers
Description: This indicator quantifies the number of planned water outages experienced by utility
customers for duration between 4 and 12 hours. It is expressed as the number of customers
experiencing disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -27(a): Formula and Comparative Benchmark
Planned Disruptions ( 4 hours -12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions*
Number of Active Customer Accounts
Disruptions (4 h - 12 h) 1
Accounts 18,700
Yakima Result: 0.05
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
5.20
1.12
Type: Water 3.51
0.18
0.06
1.00
0.31
0.17 0.77
Exhibit C -27(b): Graphical Results
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Planned Disruptions (4 hours -
12 hours) per 1,000 Customers
Region: West Population Type: Water
Served: 50k -100k
•
Yakima
Analysis: Lower values are desirable. The City's result places it among the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 31 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
28. Planned Disruptions (>12 hours) per 1,000 Customers
Description: This indicator quantifies the number of planned water outages experienced by utility
customers for duration longer than 12 hours. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -28(a): Formula and Comparative Benchmark
Planned Disruptions ( >12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions*
Number of Active Customer Accounts
Disruptions (>12 h) 0
Accounts 18,700
Yakima Result: 0.00
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
0.36
0.13
Type: Water 0.12
0.00
0.00
0.00
0.00
0.00 0.00
Exhibit C -28(b): Graphical Results
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Planned Disruptions (>12 hours)
per 1,000 Customers
1 1 .
Region: West Population Type: Water
Served: 50k -100k
Yakima
Analysis: Lower values are desirable. The City's result places it among the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 32 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
29. Unplanned Disruptions (< 4 hours) per 1,000 Customers
Description: This indicator quantifies the number of unplanned water outages experienced by utility
customers for duration less than 4 hours. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -29(a): Formula and Comparative Benchmark
Unplanned Disruptions ( < 4 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions*
Number of Active Customer Accounts
Disruptions (<4 h) 5
Accounts 18,700
Yakima Result: 0.27
Benchmarks
Bottom Quartile To• Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
5.00
5.00
0.50
0.80
1.98
2.01
9.10 0.89 2.83
Exhibit C -29(b): Graphical Results
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Unplanned Disruptions (< 4
hours) per 1,000 Customers
1- I t
•
Region: West Population Type: Water Yakima
Served:50k-100k
Analysis: Lower values are desirable. The City's result places it above the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 33 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
30. Unplanned Disruptions (4 - 12 hours) per 1,000 Customers
Description: This indicator quantifies the number of unplanned water outages experienced by utility
customers for duration between 4 and 12 hours. It is expressed as the number of customers
experiencing disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -30(a): Formula and Comparative Benchmark
Unplanned Disruptions ( 4 hours -12 hours) per 1,000 Customers
Formula: 1,000 * Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (4 h - 12 h) 1
Accounts 18,700
Yakima Result: 0.05
Benchmarks
Bottom Quartile To• Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
1.79
0.96
0.14
0.12
0.50
0.38
3.22 0.13 0.98
Exhibit C -30(b): Graphical Results
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Unplanned Disruptions (4 hours -
12 hours) per 1,000 Customers
Region: West Population Type: Water
Served: 50k -100k
•
Yakima
Analysis: Lower values are desirable. The City's result places it above the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 34 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
31. Unplanned Disruptions (>12 hours) per 1,000 Customers
Description: This indicator quantifies the number of unplanned water outages experienced by utility
customers for duration over 12 hours. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are desirable.
Exhibit C -31(a): Formula and Comparative Benchmark
Unplanned Disruptions ( >12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions*
Number of Active Customer Accounts
Disruptions (>12 h) 0
Accounts 18,700
Yakima Result: 0.00
Benchmarks
Bottom Quartile To• Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
0.17 0.00
0.21 0.00
0.00
0.00
0.20 0.00 0.00
Exhibit C -31(b): Graphical Results
0.25
0.20
0.15
0.10
0.05
0.00
Unplanned Disruptions (>12
hours) per 1,000 Customers
Region: West Population Type: Water
Served: 50k -100k
•
Yakima
Analysis: Lower values are desirable. The City's result places it among the top quartile of survey
participants. Score: 1 — "Very Good"
•FCS GROUP
Page 35 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
32. Customer Service Cost per Account
Description: This indictor measures the amount of resources a utility applies to its customer service
program. Generally, lower values are desirable. The indicator is expressed as the cost of managing a
single customer account for one year. When viewed alone, it quantifies resource efficiency. Viewing
in conjunction with other indicators, it can help clarify performance. For example, a utility with high
numbers of customer complaints and lower customer service costs might be sacrificing effectiveness
and yet appear as efficient.
Exhibit C -32(a): Formula and Comparative Benchmark
Customer Service Cost per Account
Formula: Total Customer Service Cost + Total Number of Active Water
Accounts
Allocable Customer
Service Costs
$576,232
Total Accounts 18,700
Yakima Result: $30.81
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
$58.64
$42.63
$50.69
$24.92
$22.80
$19.33
$38.82
$34.47
$30.22
Exhibit C -32(b): Graphical Results
$70
$60
$50
$40
$30
$20
$10
$0
Customer Service Cost per
Account
t-
Region:
West Population Type: Water
Served: 50k -100k
Yakima
Analysis: Lower values are desirable. The City's results are slightly better than overall benchmark
medians. Score: 2 — "Good"
•FCS GROUP
Page 36 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
33. Monthly Cost of Using 7,500 gallons (Water - Residential)
Description: Allows for a utility to compare the residential cost of water service with a large sample
of the industry. In general, lower values are desirable. Each utility is unique, however, and different
circumstances may be the cause of a specific result.
Exhibit C -33(a): Formula and Comparative Benchmark
Monthly cost of using 7,500 gallons (Water - Residential)
Formula: Calculated value of a monthly bill based upon 7,500 gallons or
about 10 ccfs.
Fixed $5.52
Volume $14.44
Yakima Result: $19.96
Benchmarks
Bottom Quartile To• Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$33.84
$28.69
$32.04
$21.77
$20.89
$21.44
$27.75
$23.77
$26.41
Exhibit C -33(b): Graphical Results
$35
$33
$31
$29
$27
$25
$23
$21
$19
$17
$15
Monthly cost of using 7,500
gallons (Water - Residential)
1 4
•
Region: West Population Type: Water
Served: 50k -100k
Yakima
1
Analysis: In general, lower values are desirable. The City's results are significantly lower than those
of the top quartile. Score: 1 — "Very Good"
•FCS GROUP
Page 37 of 38
City of Yakima — Benchmarking Analysis November 15, 2012
APPENDIX: BENCHMARK MODEL
•FCS GROUP
Page 38 of 38
City of Yakima
Benchmarking Analysis
City of
Yakima
Description
2011 Total Water Accounts
Total Water Produced & Purchased
Authorized Consumption
Volume Distributed (MG)
Average MGD
Water
Miles of Water Distribution Pipe
Annual Leaks in Year of 2008-2009 Study
Population served
2011 Total Workdays Away (Work Injury / Illness)
2011 Total Work Hours of Employees
Direct Cost Allocated to Water Treatment
Customer Service Complaints
Technical Quality Complaints
Customer Service Costs
Training Hours
Number of Days in Full Compliance
Disruptions
Planned Disruptions (<4 hours)
Planned Disruptions (4 hours - 12 hours)
Planned Disruptions (>12 hours)
Unplanned Disruptions (<4 hours)
Unplanned Disruptions (4 hours - 12 hours)
Unplanned Disruptions (>12 hours)
System Renewal / Replacement
Distribution
Present Worth of Replacement Needs
Weighted Book Life of Assets
Annual Replacement Target
3 - Year Average Actual Expenditures
Treatment
Present Worth of Replacement Needs
Weighted Book Life of Assets
Annual Replacement Target
3 - Year Average Actual Expenditures
Figure
18,700
3,522,567,974 gallons
2,951,690,565 gallons
3,523 (MG)
9.65 (MG)
31.65 FTEs
300
6
— 65,000
13 days
62,338 hours
$900,750
538
28
$576,232
384
365 days
20
0
5
0
$ 61,854,517
48.30
$ 1,280,543
$ 230,513
$ 12,847,480
34.17
375,937
131,273
Source
Dave Brown Email (10/23)
Water Use Efficiency Annual Performance Report - 2011
Water Use Efficiency Annual Performance Report - 2011
Formula: Gallons of water delivered in 2011 = 1,000,000
Formula: Millions of gallons of water delivered in 2011 = 365 days
Dave Brown Email (10/23)
Dave Brown Email (10/23)
Dave Brown Email (10/23) Averaged the "5-7" leaks per year
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26) (Zero days out of Violation = 365 days in compliance)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Dave Brown Email (10/26)
Note: Data for these calculations were derived from the City's 2009-2011 actual capital expenditures
as well as the City's fixed asset records.
PREPARED BY FCS GROUP Yakima Benchmarking Model - Final.xlsx
Data Other - Page 1 of 38
425-867-1802
City of Yakima
Benchmarking Analysis
2011 CAFR Data
Statement of Net Position
#974 WATER
Assets
Current Assets
Cash & Equity Pool Investments
1,214,008
Deposits w/ Fiscal Agent/Trustee
-
Receivables:
Accounts/Taxes (Net)
113,552
Other Receivables
-
Due from Other Gov. Units
-
Inventories
204,512
Investments, at Amortized Cost
4,609,000
Total Current Assets
6,141,072
Noncurrent Assets
Restricted Assets
Cash
362,249
Investments
-
Land
173,614
Buildings
8,548,449
Other Improvements
42,294,730
Machinery & Equipment
2,858,730
Accumulated Depreciation
(23,919,400)
Construction in Progress
3,346,876
Intangibles
221,830
Unamortized Debt Issue Costs
13,240
Total Noncurrent Assets
33,900,318
Total Assets
40,041,390
Liabilities
Current Liabilities
Warrants/Accounts Payable
171,777
Wages/Benefits Payable
211,785
Compensated Absences Payable
219,923
Claims an judgments Payable
-
Accrued Payables
19,571
Deposits Payable
105,209
Current Portion of Long-term Debt
269,849
Restricted Payables
Current Portion LT Debt
175,000
Total Current Liabilities
1,173,114
Noncurrent Liabilities
Bonds Payable
1,210,000
Unamortized Bond Discount/Premium
52,111
Deferred Amount on Debt Refunding
(30,249)
Loans Payable - Long -Term
3,953,366
Total Noncurrent Liabilities
5,185,228
Total Liabilities
6,358,342
Net Position
Invested in Capital Assets Net of Related Debt (s
27,888,421
Restricted for Debt Service
362,249
Unrestricted
5,432,378
Total Net Position
33,683,048
Check
[a Investment Securities (Pg. 36 CAFR)
PREPARED BY FCS GROUP
425-867-1802
a]
Revenue, Expenses, Changes in Fund Net Position
Operating Revenues
Charges for Services
Charges for Insurance
Employer Contributions
Employee Contributions
Other Operating Revenues
Total Operating Revenues
#974 WATER
6,792,444
94,776
6,887,220
Operating Expenses
Operations and Maintenance 1,985,520
Administration/Overhead 1,903,156
Taxes 1,407,327
Depreciation/Amortization 1,107,685
Other Benefits -
Total Operating Expenses 6,403,688
Operating Income (Loss) 483,532
Non -Operating Revenues (Expenses)
Operating Grants/Subsidies
Interest Revenue
Other Non -Operating Revenues
Interest Expense
Amortization of Bond Payment Discount
Gain (Loss) on Capital Assets Disposition
Non -Operating Revenues Net of Expenses
Income (Loss) before Contributions
Capital Contributions
Transfers In
Transfers )Out)
Change in Net Position
Total Net Position January 1
Prior Period Adjustments
Total Net Position - December 31
1,540
10,986
(89,956)
(2,870)
(80, 300)
403,232
409,345
(121,997)
690,580
32,713,505
278,963
33,683,048
Check
Data CAFR- Page 2 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
2011 CAFR, p76,78
Issue Description Interest Outstanding % of Total
PW -03-027 Naches River Water Treatment Plt Impr 0.50% $ 1,616,700 29%
SRF -04-65104-037 - Naches River Water Treatment Filter Rehab 0.50% 649,444 12%
PC08-951-051 - New Water Well 0.50% 1,946,670 35%
L11000008 - Wastewater Energy Efficiency Project 0.50% 36,856 1
Water Revenue Bonds (2008 Refunding of 1998) [a] 4.50% 1,385,000 25%
$ 5,634,670
Estimated Weighted Average Cost of Capital
1.48%
[a] The 2011 CAFR cited the rate as "4.0 - 5.0%", so the midpoint was assumed.
PREPARED BY FCS GROUP Yakima Benchmarking Model - Final.xlsx
425-867-1802 Data WACC - Page 3 of 38
City of Yakima
Benchmarking Analysis
Index
Table for Report
# Performance Indicator
1 Organization Best Practices Index Survey
2 Employee Health & Safety Severity Rate
3 Training Hours per Employee
4 Customer Accounts per Employee
5 MGD of Water Delivered per Employee
6 Drinking Water Compliance Rate
7 Distribution System Loss / Leakage
8 Water Distribution System Integrity
9 O&M Cost per Customer Account
10 O&M Cost per Million Gallons of Water Distributed
11 Direct Cost of Treatment per Million Gallons Distributed
12 Debt to Total Asset Ratio (Debt Ratio)
13 Debt to Equity (Net Asset) Ratio
14 System Renewal / Replacement Rate (Distribution)
15 System Renewal / Replacement Rate (Treatment)
16 Return on Assets
17 Return on Fixed Assets
18 Accounts Receivable Turnover
19 Accounts Receivable Collection Period
20 Current Ratio
21 Operating Working Capital
22 O&M Coverage Ratio
23 Debt Coverage Ratio
24 Customer Service Related Complaints
25 Technical Quality Related Complaints
26 Planned Disruptions ( < 4 hours) per 1,000 Customers
27 Planned Disruptions (4 hours - 12 hours) per 1,000 Customers
28 Planned Disruptions ( >12 hours) per 1,000 Customers
29 Unplanned Disruptions ( < 4 hours) per 1,000 Customers
30 Unplanned Disruptions (4 hours - 12 hours) per 1,000 Customers
31 Unplanned Disruptions ( >12 hours) per 1,000 Customers
32 Customer Service Cost per Account
33 Monthly cost of using 7,500 gallons (Water - Residential)
PREPARED BY FCS GROUP Yakima Benchmarking Model - Final.xlsx
425-867-1802 Index - Page 4 of 38
City of Yakima
Benchmarking Analysis
Color Coded Tables
2
3
4
5
6
7
8
9
10
11
12
Total Score Check: Check O.K.
Organizational Development
Water Operations
Drinking Water Compliance Rate
Distribution System Loss /
Leakage
Water Distribution System Integrity
O&M Cost per Customer Account
O&M Cost per Million Gallons of
Water Distributed
Direct Cost of Treatment per
Million Gallons Distributed
1
4
1
2
2
2
Business & Finance OperatioM
Debt to Total Asset Ratio (Debt 1
Ratio)
Debt to Equity (Net Asset) Ratio 1
System Renewal / Replacement 1
Rate (Distribution)
System Renewal / Replacement 1
Rate (Treatment)
Return on Assets 3
Return on Fixed Assets 2
Accounts Receivable Turnover 1
Accounts Receivable Collection1
Period
Current Ratio 1
Operating Working Capital 1
O&M Coverage Ratio 1
Debt Coverage Ratio 1
Customer Relations
Organization Best Practices Index
Survey
2
Customer Service Related
Complaints 4
Employee Health & Safety Severity
Rate
3
Technical Quality Related 1
Complaints
Training Hours per Employee
4
Planned Disruptions (< 4 hours) 1
per 1,000 Customers
Customer Accounts per Employee
1
Planned Disruptions (4 hours - 12 1
hours) per 1,000 Customers
MGD of Water Delivered per1
Employee
Planned Disruptions (>12 hours)
per 1,000 Customers 1
Unplanned Disruptions (< 4 hours) 1
per 1,000 Customers
Unplanned Disruptions (4 hours - 1
12 hours) per 1,000 Customers
Unplanned Disruptions (>12 1
hours) per 1,000 Customers
Customer Service Cost per 2
Account
Monthly cost of using 7,500 gallons 1
(Water - Residential)
Average
2.2
2.0
1.3
1.4
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425-867-1802 Score Summary - Page 5 of 38
Score Description
1 Very Good
2 Good
3 Fair
4 Poor
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cursulnng
1
Organizational Development
Score: 2 "Good"
Organization Best Practices Index Survey
Formula: Results of "Best Practices" Survey (min 7 - max 35 at each utility)
Yakima Result: 25
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
22.80
21.00
20.50
30.00
30.00
26.50
24.50
28.80 24.00
Performance Indicator Description:
To summarize a utility's implementation of management programs important to
a water utility. Generally, higher values are desirable. Practices are likely to be
more formal and extensive in larger utilities. Note: Asset Management Program
scheduled to be installed 2013 in Yakima, which would increase their BMP
Survey score once installed.
32
> 30
28
N
a 26
24
E 22
20
N 18
O
U
N
Organization Best Practices Index
Survey
Region: West Population Type: Water Yakima
Served: 50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Corrsulhng
2
Organizational Development
Score: 3 "Fair"
Employee Health & Safety Severity Rate
Formula: 200,000 X (Total Workdays away from Work) = Total Hours Worked
by All Employees
Days Away (Work Injury 13
& Illness)
Total Hours Worked 62,338
Yakima Result: 42
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
88.10
49.40
79.00
0.10
0.00
0.00
21.20
5.30
12.90
Performance Indicator Description:
Quantifies the rate of employee days lost from work due to illness or injury.
Generally, lower values are desirable. Excessive lost workdays affect
productivity and can cost utilities in a number of ways. Health care, insurance
premiums, and overtime can all be adversely impacted by lost work due to
injury or health reasons. Indicator measures the rate of days lost per 100
employee -years of work.
100
N
90
.. 80
N 70
O 60
50
N 40
0
0 30
N 20
Employee Health & Safety Severity
Rate
Region: West Population Type: Water Yakima
Served: 50k-1 OOk
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Corrsulhng
3
Organizational Development
Score: 4 "Poor"
Training Hours per Employee
Formula: Total Qualified Formal Training Hours for All Employees = Total
FTEs Worked by Employees During Reporting Period
Training Hours 384
Number of FTEs 31.65
Yakima Result: 12.13
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
14.10
11.80
12.10
36.10
29.00
23.70
20.30
23.90 15.50
Performance Indicator Description:
Measures the quantity of formal training that utility employees are actually
completing. This indicator is expressed as the number of formal training hours
per employee per year. Generally, higher values are desirable. This measure is
intended to reflect the organization's commitment to formal training as a means
of improving employee knowledge and skills.
40
35
30
25
20
15
10
5
Training Hours per Employee
t
A
Region: West Population Served: Type: Water Yakima
50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Corrsulhng
4
Organizational Development
Score: 1 "Very Good"
Customer Accounts per Employee
Formula: Number of Accounts = Number of FTEs
Number of Accounts 18,700
Number of FTEs 31.65
Yakima Result: 591
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
349
408
635
558
422
473
333 667 456
Performance Indicator Description:
This indicator is intended to measure employee efficiency. Generally, higher
values are desirable.
700
650
600
550
500
450
400
350
300
Customer Accounts per Employee
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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425-867-1802 Calculations - Page 9 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i I,CS GROUT'
Solutions-Uriented Cunsulnng
5
Organizational Development
Score: 1 "Very Good"
MGD of Water Delivered per Employee
Formula: Average MGD Delivered = FTEs
MGD 9.65
Number of FTEs 31.65
Yakima Result: 0.30
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
0.17
0.14
0.40
0.29
0.26
0.19
0.15 0.33 0.24
Performance Indicator Description:
This indicator is intended to measure employee efficiency. Generally, higher
values are desirable.
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
MGD of Water Delivered per
Employee
A
Region: West Population Served: Type: Water
50k -100k
Yakima
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
6
Water Operations
Score: 1 "Very Good"
Drinking Water Compliance Rate
Formula: Number of Days in Full Compliance = 365 Days
Days in Full Compliance 365
Formula Piece #2 365
Yakima Result: 100%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
100.0% 100.0%
100.0% 100.0%
100.0% 100.0%
100.0%
100.0%
100.0%
Performance Indicator Description:
This indicator quantifies the percentage of time each year that a water utility
meets all health-related drinking water requirements of the UW National
Primary Drinking Water Regulations. Higher results are desirable. A
compliance rate of 100% is the goal of every utility.
100%
95%
90%
Drinking Water Compliance Rate
Region: West Population Served: Type: Water Yakima
50k -100k
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425-867-1802 Calculations - Page 11 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
7
Water Operations
Score: 4 "Poor"
Distribution System Loss / Leakage
Formula: [Volume distributed - (volume billed + volume unbilled but
authorized) = volume distributed]
Volume Distributed 3,522,567,974
Volume Billed & 2,951,690,565
Authorized
Yakima Result: 16.21%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West 10.4% 3.8%
Population Served: 50k- 15.0% 4.0%
100k
Type: Water 12.4% 4.9%
7.2%
8.9%
8.6%
Performance Indicator Description:
This indicator is a measure of the percentage of produced water that fails to
reach customers and cannot otherwise be accounted for through authorized
usage. Generally higher values are not desirable. Water loss can adversely
impact revenue and water use efficiency, Note per Yakima staff: Once
Automatic Meter Reading (AMR) is implemented, high DSL will be corrected.
18%
16%
14%
12%
10%
8%
6%
4%
2%
Distribution System Loss / Leakage
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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425-867-1802 Calculations - Page 12 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Corrsulhng
8
Water Operations
Score: 1 "Very Good"
Water Distribution System Integrity
Formula: 100 X (Annual total number of leaks + annual total number of
breaks) = Total miles of distribution piping
Annual Leaks & Breaks 6.0
Miles of Distribution
Piping
300
Yakima Result: 2.00
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
53.00
69.60
56.10
15.80
14.80
21.70
31.20
32.70
34.30
Performance Indicator Description:
This indicator is a measure of the condition of the water distribution system,
expressed as the total annual number of leaks and pipeline breaks per 100
miles of distribution piping. Generally, higher values are not desirable.
Excessive leaks and breaks can result in increased costs due to an increased
number of emergency repairs.
80
70
60
50
40
30
20
10
0
Water Distribution System Integrity
1 4 -
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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425-867-1802 Calculations - Page 13 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
9
Water Operations
Score: 2 "Good"
O&M Cost per Customer Account
Formula: Total O&M less depreciation = Total number of customer accounts
Total O&M (less dep.) $5,296,003
Total Customer 18,700
Accounts
Yakima Result: $283
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$443
$302
$357
$252
$101
$205
$339
$161
$272
Performance Indicator Description:
Generally, higher values are not desirable. Higher O&M costs per customer
account may indicate inefficient procedures or may be the result of aging
infrastructure. However, this may not always be the case. Higher costs per
account may be the desired outcome to improve customer satisfaction or to
make up for deferred maintenance practices.
$500
$450
$400
$350
$300
$250
$200
$150
$100
O&M Cost per Customer Account
Region: West Population Served: Type: Water Yakima
50k -100k
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425-867-1802 Calculations - Page 14 of 38
1
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
10
Water Operations
Score: 2 "Good"
O&M Cost per Million Gallons of Water Distributed
Formula: Total O&M less depreciation = Volume (in MG) Distributed During
the Reporting Period
Total O&M (less dep.) $5,296,003
Volume Distributed (in 3,523
MG)
Yakima Result: $1,503
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$2,509 $1,163
$2,286 $667
$2,310 $1,037
$1,608
$1,373
$1,506
Performance Indicator Description:
Generally, higher values are not desirable. Higher O&M costs per million
gallons may indicate inefficient procedures or may be the result of aging
infrastructure. However, this may not always be the case. Higher costs per
account may be the desired outcome to improve customer satisfaction or to
make up for deferred maintenance practices.
$3,000
$2,500
$2,000
$1,500
$1,000
$500
O&M Cost per Million Gallons of
Water Distributed
-t
f
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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11
Water Operations
Score: 2 "Good"
Direct Cost of Treatment per Million Gallons Distributed
Formula: Total Direct O&M Costs for Water Treatment = Volume (in MG)
Distributed During the Reporting Period
Treatment Cost $900,750
Total Volume Processed 3,523
(MG)
Yakima Result: $256
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
$558
$660
$550
$75
$130
$100
$234
$353
$322
Performance Indicator Description:
Generally, higher values are not desirable. Higher O&M directly attributable to
water treatment per million gallons distributed may indicate high staffing levels
or increased maintenance due to aging equipment and facilities. However, this
may not always be the case. Higher costs may be unavoidable due to the use
of more expensive treatment processes.
$700
$600
$500
$400
$300
$200
$100
$o
Direct Cost of Treatment per Million
Gallons Distributed
•
Region: West Population Served: Type: Water Yakima
50k -100k
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425-867-1802 Calculations - Page 16 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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12
Business & Finance Operations
Score: 1 "Very Good"
Debt to Total Asset Ratio (Debt Ratio)
Formula: Total Liabilities = Total Assets
Total Liabilities $6,358,342
Total Assets $40,041,390
Yakima Result: 15.9%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
42.1% 18.1%
28.9% 21.4%
43.3% 20.7%
28.0%
26.9%
28.6%
Performance Indicator Description:
This indicator quantifies the utility's level of indebtedness. Generally, the higher
the calculated ratio, the more dependent the utility is on debt financing. Many
utilities use this indicator as an internal measure of performance. Lower values
are generally desirable.
45%
40%
35%
30%
25%
20%
15%
10%
Debt to Total Asset Ratio (Debt
Ratio)
f 1 -
Region:
•
West Population Served: Type: Water Yakima
50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Corrsulhng
13
Business & Finance Operations
Score: 1 "Very Good"
Debt to Equity (Net Asset) Ratio
Formula: Total Current & Non -Current Borrowed Debt = Net Assets.
Total Borrowed Debt $5,608,215
Net Assets $33,683,048
Yakima Result: 0.17 to 1 (14% debt / 86% equity)
Benchmarks
FCS GROUP Experience
Generally Accepted Debt / Equity Ratio
Yakima
1.50
0.17
Benchmarks
FCS GROUP Experience
Generally Accepted Debt Target
Yakima
60.0%
14.3%
Performance Indicator Description:
This ratio gives insight into a utility's equity -liability relationship in terms of
funded capital assets. The lower the percentage, the less leveraged a utility is,
which can imply more potential to fund future projects fully with debt. A ratio of
1.5 (60% debt / 40% equity) is a generally accepted industry target.
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425-867-1802
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Debt to Equity (Net Asset) Ratio
Generally Accepted Debt/ Equity Yakima
Ratio
70%
60%
50%
40%
30%
20%
10%
0%
Debt + (Debt + Net Assets)
•
Generally Accepted Debt Target Yakima
Calculations - Page 18 of 38
1
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
14
Business & Finance Operations
Score: 1 "Very Good"
System Renewal / Replacement Rate (Distribution)
Formula: 100 X (Total Actual Expenditures for R&R for each Asset Class)
Total Present Worth of R&R Needs for Each Asset Group
Total Annual Actual $230,513 Note: 3 -year Actual Average
Expenditures
R&R Needs $1,280,543
Yakima Result: 18%
(Total Group Replacement Cost
Weighted Asset Life)
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
8.6%
22.5%
6.4%
2.0%
4.3%
2.5%
Performance Indicator Description:
This indicator quantifies the rate at which the utility is meeting its individual
need for infrastructure renewal or replacement. Generally, higher values are
desirable. This indicator measures the degree to which a water utility is
replacing its infrastructure of its distribution system.
G)
a25%
v 20%
U
o 5%
a 0%
System Renewal / Replacement
Rate (Distribution)
� � t
Region: West Population Type: Water Yakima
Served: 50k -100k
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1
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
15
Business & Finance Operations
Score: 1 "Very Good"
System Renewal / Replacement Rate (Treatment)
Formula: 100 X (Total Actual Expenditures for R&R for each Asset Class)
Total Present Worth of R&R Needs for Each Asset Group
Total Annual Actual $131,273 Note: 3 -year Actual Average
Expenditures
R&R Needs $375,937
Yakima Result: 35%
(Total Group Replacement Cost
Weighted Asset Life)
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
2.1%
1.7%
1.7%
3.4%
2.9%
3.2%
Performance Indicator Description:
This indicator quantifies the rate at which the utility is meeting its individual
need for infrastructure renewal or replacement. Generally, higher values are
desirable. This indicator measures the degree to which a water utility is
replacing its treatment infrastructure.
System Renewal / Replacement
Rate (Treatment)
rn
a 40%
35%
U 30%
N 25%
N 20%
-c15%
0 1o%
e 5%
a o%
A
Region: West Population Type: Water
Served: 50k -100k
Yakima
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
16
Business & Finance Operations
Score: 3 "Fair"
Return on Assets
Formula: Net Income = Total Assetsll
Net Income $690,580
Total Assets $40,041,390
Yakima Result: 1.72%
Benchmarks
Bottom Quartile Top Quartile Median
Region: West
Population Served: 50k -
100k
Type: Water
0.90% 4.30%
1.10% 5.30%
0.90% 3.60%
2.30%
2.40%
2.60%
Performance Indicator Description:
In general, utilities are seeking a higher return on asset ratio performance
where possible. This indicator is a measure of a utility's financial effectiveness.
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Return on Assets
Ti
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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17
Business & Finance Operations
Score: 2 "Good"
Return on Fixed Assets
Formula: Net Operating Income = Total Net Plant -in -Service (less dep.)I1
Net Operating Income $483,532
Total Plant -in -Service $33,302,999 Net of depreciation. Excl. Intangibles
and Unamortized
Yakima Result: 1.45%
City of Yakima
FCS GROUP Experience
Yakima's Estimated Weighted Cost of
Capital
1.48%
Performance Indicator Description:
A return equal to or greater than average costs of capital is a prudent financial
objective. City of Yakima's estimated weighted cost of capital is 1.48% based
on debt issues from its 2011 CAFR.
5.00%
4.00%
3.00%
2.00%
1.00%
Return on Fixed Assets
Yakima's Estimated Weighted Cost of Yakima
Capital
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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18
Business & Finance Operations
Score: 1 "Very Good"
Accounts Receivable Turnover
Formula: Annual Billings = End of Year A/R Balancell
Annual Billings $6,792,444
End of Year A/R $113,552
Balance
Yakima Result: 59.82
Benchmarks
FCS GROUP Experience
Industry Benchmark
12
Performance Indicator Description:
In general, higher values are desirable. Greater than 12 is very good. Less
than 12 can be okay if it is explained by bi-monthly billing cycles or some other
lag creating factor.
70
60
50
40
30
20
10
0
Accounts Receivable Turnover
Industry Benchmark Yakima
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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19
Business & Finance Operations
Score: 1 "Very Good"
Accounts Receivable Collection Period
Formula: 365 days = Accounts Receivable Turnover
Formula Piece #1 365 days
Accounts Receivable 59.82
Turnover
Yakima Result: 6.10
Benchmarks
FCS GROUP Experience
Industry Benchmark
30
Performance Indicator Description:
In general, lower values are desirable. Less than 30 days improves cash flow
from operations and the ability for a utility to meet short-term obligations, after
working capital is depleted.
35
30
25
20
15
10
5
0
Accounts Receivable Collection
Period
Industry Benchmark Yakima
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425-867-1802 Calculations - Page 24 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
20
Business & Finance Operations
Score: 1 "Very Good"
Current Ratio
Formula: Current Assets = Current Liabilities
Current Assets $6,141,072
Current Liabilities $1,173,114
Yakima Result: 5.23
Benchmarks
FCS GROUP Experience
Industry Benchmark
2
Performance Indicator Description:
In general, higher values are desirable. This is a liquidity ratio and a ratio of 2:1
is good to excellent. Generally, a consistent ratio of greater than 1:1 indicates
that the utility can pay its current operating obligations without borrowing
working capital.
6
5
4
3
2
0
Current Ratio
Industry Benchmark Yakima
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425-867-1802 Calculations - Page 25 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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21
Business & Finance Operations
Score: 1 "Very Good"
Operating Working Capital
Formula: [(Current Assets - Current Liabilities (not devoted to debt or capital
projects)) = Operating Expenses (less dep.)] X 365 days
Current Assets $6,141,072
Current Liabilities (less
Debt portion)
Operating Expenses $5,296,003
$728,265
Yakima Result: 373 days
Benchmarks
FCS GROUP Experience
Industry Benchmark
90 days
Performance Indicator Description:
Try to achieve a positive number sufficient to cover at least 30-45 days of
expense. Up to 90 days may be prudent depending on the volatility of revenue.
400
350
300
O 250
p 200
N
v 150
100
50
0
Operating Working Capital
Industry Benchmark Yakima
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425-867-1802 Calculations - Page 26 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
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22
Business & Finance Operations
Score: 1 "Very Good"
O&M Coverage Ratio
Formula: Total Operating Revenues = Operating Expenses (incl dep.)
Total Operating $6,887,220
Revenues
Total Operating $6,403,688
Expenses (incl. dep.)
Yakima Result: 1.08
Benchmarks
FCS GROUP Experience
Industry Benchmark
1.00
Performance Indicator Description:
Greater that 1.0 is a sign of good fiscal operating results in that reporting
period. Less than 1.0 is a red flag that the period financial performance is
lagging. This ratio ignores dependence on non-operating revenue and expense
performance.
1.10
1.08
1.06
1.04
1.02
1.00
0.98
0.96
O&M Coverage Ratio
Industry Benchmark Yakima
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425-867-1802 Calculations - Page 27 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
23
Business & Finance Operations
Score: 1 "Very Good"
Debt Coverage Ratio
Formula: Net Revenue = Period Interest and Principal (Only Revenue Bonds)
Total Operating
Revenue
Total Operating
Expenses ( less dep.)
Water: City Taxes
$6,887,220
$5,296,003
$951,037 From Trial Balance Report
Rev. - Exp. (Excludes dep. & city
taxes)
Revenue Bond P&I Only from Debt
Schedule
Net Revenue $2,542,254
Period Principal $170,000
Period Interest $67,793
Yakima Result: 10.69
Benchmarks
FCS GROUP Experience
Internal Policy
2.00
Performance Indicator Description:
In general, higher values are desirable. The Debt Service Coverage (DSC)
ratio is an indicator that measures the average amount of net operating income
available to pay annual debt service.
PREPARED BY FCS GROUP
425-867-1802
>>
10
9
8
7
6
5
4
3
2
0
Debt Coverage Ratio
Internal Policy
Yakima
Calculations - Page 28 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
• FCS GROUP
Solutions -Oriented Consulting
24
Customer Relations
Score: 4 "Poor"
Customer Service Related Complaints
Formula: 1,000 X Number of Customer Service Complaints = Number of
Active Water Accounts
Customer Service 538
Complaints
Accounts 18,700
Yakima Result: 28.77
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
9.9
8.2
0.6
0.6
3.0
3.0
14.5 0.9 5.0
Performance Indicator Description:
This indicator measures the complaint rate experienced by the utility
(complaints associated with customer service). It is expressed as complaints
per 1,000 customer accounts. Generally, lower values are desirable. The
number of complaints is a good measure of customer service.
35
a 30
0 25
20
0.15
tn 10
a
5
T1
E
O
U
Customer Service Related
Complaints
Region: West Population Type: Water Yakima
Served: 50k -100k
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425-867-1802 Calculations - Page 29 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i I,CS GROUT'
Solutions-Uriented Cunsulnng
25
Customer Relations
Score: 1 "Very Good"
Technical Quality Related Complaints
Formula: 1,000 X Number of Technical Quality Complaints = Number of Active
Water Accounts
Technical Quality 28
Complaints
Accounts 18,700
Yakima Result: 1.50
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
Yakima
10.0
28.3
1.9
1.3
5.0
3.9
11.2 1.9 4.4
1.5
Performance Indicator Description:
This indicator measures the complaint rate experienced by the utility
(complaints associated with technical quality). It is expressed as complaints
per 1,000 customer accounts. Generally, lower values are desirable. The
number of complaints is a good measure of customer service.
o30
0
o 25
0
0 20
N 15
0.
tn 10
a
5
Q- 0
pRegion: West Population Type: Water Yakima
o Served: 50k -100k
Technical Quality Related
Complaints
1 I 1
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
26
Customer Relations
Score: 1 "Very Good"
Planned Disruptions ( < 4 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (<4 h) 20
Accounts 18,700
Yakima Result: 1.07
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
21.40
19.60
16.49
0.67
0.28
5.00
1.31
1.21 4.10
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
25
20
15
10
5
0
Planned Disruptions (< 4 hours)
per 1,000 Customers
4
Region: West Population Served: Type: Water Yakima
50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
27
Customer Relations
Score: 1 "Very Good"
Planned Disruptions (4 hours -12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (4 h - 12 h) 1
Accounts 18,700
Yakima Result: 0.05
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
5.20
1.12
0.18
0.06
1.00
0.31
3.51 0.17 0.77
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
6
5
4
3
2
0
Planned Disruptions (4 hours - 12
hours) per 1,000 Customers
♦
•
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
28
Customer Relations
Score: 1 "Very Good"
Planned Disruptions ( >12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (>12 h) 0
Accounts 18,700
Yakima Result: 0.00
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
0.36
0.13
0.00
0.00
0.00
0.00
0.12 0.00 0.00
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
Planned Disruptions (>12 hours)
per 1,000 Customers
Region: West Population Served: Type: Water Yakima
50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
29
Customer Relations
Score: 1 "Very Good"
Unplanned Disruptions (< 4 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (<4 h) 5
Accounts 18,700
Yakima Result: 0.27
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
5.00
5.00
0.50
0.80
1.98
2.01
9.10 0.89 2.83
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
10
8
6
4
2
0
Unplanned Disruptions ( < 4 hours)
per 1,000 Customers
4
•
Region: West Population Served: Type: Water Yakima
50k-1 OOk
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
30
Customer Relations
Score: 1 "Very Good"
Unplanned Disruptions ( 4 hours - 12 hours) per 1,000 Customers
Formula: 1,000 * Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (4 h - 12 h) 1
Accounts 18,700
Yakima Result: 0.05
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
1.79
0.96
0.14
0.12
0.50
0.38
3.22 0.13 0.98
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Unplanned Disruptions (4 hours -
12 hours) per 1,000 Customers
Region: West Population Served: Type: Water
50k-1 OOk
•
Yakima
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425-867-1802 Calculations - Page 35 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
31
Customer Relations
Score: 1 "Very Good"
Unplanned Disruptions (>12 hours) per 1,000 Customers
Formula: 1,000 X Number of Customers Experiencing Disruptions* = Number
of Active Customer Accounts
Disruptions (>12 h) 0
Accounts 18,700
Yakima Result: 0.00
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
0.17
0.21
0.00
0.00
0.00
0.00
0.20 0.00 0.00
Performance Indicator Description:
This indicator quantifies the number of water outages experienced by utility
customers. It is expressed as the number of customers experiencing
disruptions per 1,000 customer accounts per year. Generally, lower values are
desirable. *Note: Assumption is number of Customers Experiencing
Disruptions equates to number of disruptions.
0.25
0.20
0.15
0.10
0.05
0.00
Unplanned Disruptions (>12 hours)
per 1,000 Customers
•
Region: West Population Served: Type: Water Yakima
50k -100k
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Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i L Cs GROUT'
Solutions-Uriented Cunsulnng
32
Customer Relations
Score: 2 "Good"
Customer Service Cost per Account
Formula: Total Customer Service Cost = Total Number of Active Water
Accounts
Service Costs $576,232
Total Accounts 18,700
Yakima Result: $30.81
Allocable Customer
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
$58.64
$42.63
$50.69
$24.92
$22.80
$19.33
$38.82
$34.47
$30.22
Performance Indicator Description:
This indictor measures the amount of resources a utility applies to its customer
service program. Generally, lower values are desirable. The indicator is
expressed as the cost of managing a single customer account for one year.
When viewed alone, it quantifies resource efficiency. Viewing in conjunction
with other indicators, it can help clarify performance. For example, a utility with
high numbers of customer complaints and lower customer service costs might
be sacrificing effectiveness and yet appear as efficient.
$70
$60
$50
$40
$30
$20
$10
$o
Customer Service Cost per
Account
4 -
Region: West Population Served: Type: Water Yakima
50k-1 OOk
PREPARED BY FCS GROUP
425-867-1802 Calculations - Page 37 of 38
Yakima Benchmarking Model - Final.xlsx
City of Yakima
Benchmarking Analysis
:i i'CS GROUT'
Solutions-Uriented Cursulnng
33
Customer Relations
Score: 1 "Very Good"
Monthly cost of using 7,500 gallons (Water - Residential)
Formula: Calculated value of a monthly bill based upon 7,500 gallons or about
10 ccfs.
Fixed $5.52
Volume $14.44
Yakima Result: $19.96
Benchmarks
Bottom Quartile To. Quartile
Median
Region: West
Population Served: 50k -
100k
Type: Water
$33.84
$28.69
$32.04
$21.77
$20.89
$21.44
$27.75
$23.77
$26.41
Performance Indicator Description:
Allows for a utility to compare the residential cost of water service with a large
sample of the industry. In general, lower values are desirable. Each utility is
unique, however, and different circumstances may be the cause of a specific
result.
$35
$30
$25
$20
$15
Monthly cost of using 7,500 gallons
(Water - Residential)
•
Region: West Population Served: Type: Water Yakima
50k -100k
PREPARED BY FCS GROUP
425-867-1802 Calculations - Page 38 of 38
Yakima Benchmarking Model - Final.xlsx
APPENDIX B
•:> .FCS GROUP
Comprehensive 2012 Draft Rate Study Report
Page - 9
DOMESTIC WATER SYSTEM
2012 RATE UPDATE
PREPARED FOR THE
CITY OF YAKIMA
YAKIMA, WASHINGTON
CONSULTING SERVICES PROVIDED BY:
0•
)
) [ i(.,(J HHI Htirr)i,
7525 166th Ave. NE, Suite D-215 • Redmond, Washington 98052
(425) 867-1802 • fax (425) 867-1937 • www.fcsgroup.com
October 18, 2012
October 18, 2012
Mr. Dave Brown
Water/Irrigation Division Manager
City of Yakima
2301 Fruitvale Blvd.
Yakima, WA 98902
Draft Report: 2012 Domestic Water System Rate Update
Dear Mr. Brown:
FCS GROUP is pleased to submit our report for the 2012 Domestic Water System Rate
Update for the City of Yakima (City). This letter provides a brief summary of the study
objectives, finding and conclusions.
A. STUDY OBJECTIVES AND APPROACH:
The 2012 Domestic Water System Rate Update involved a review of previously
established Utility financial policies, development of a capital funding plan for the
Capital Improvement Program, an update of annual revenue needs, and a schedule of
proposed rates for years 2013 through 2017. An update of Utility connection charges
and a Utility performance benchmarking analysis are currently underway and will be
provided under separate cover by year-end 2012.
The methods used in this study follow general industry guidelines for developing utility
rates — rates must generate enough revenue to maintain self-supporting and financially
viable utilities without undue discrimination toward or against any customer. In
compliance with the Washington State Supreme Court Ruling (Lane vs. Seattle), this
study removes fire protection -related costs from general service water rates; and, as
allowed by the Court, increases the water utility tax as necessary to recover those costs
from the City's General Fund.
B. SUMMARY OF KEY ASSUMPTIONS AND FINDINGS
Key study assumptions and findings are highlighted below. Additional detail is provided
throughout the study report:
■ This study continues the financial policies established in the City's previous
Utility rate studies updated to reflect current conditions. The Utility is well within
industry best practices for debt-to-equity ratios, debt coverage policies, system
reinvestment funding, and cash reserves. Maintaining sufficient operating
reserves over the study period will require rate adjustments as proposed herein.
■ The City has identified $23.9 million (inflated dollars) in projects over the next
five years consisting of replacement and rehabilitation projects necessary to
sustain viable operation of the system, as well as supply and treatment projects
necessary to comply with state and federal regulations and ensure the public
health and safety of the community. In addition to the use of direct rate -funding
and cash reserves, $8.5 million in approved low-interest loans and $8.6 million
in new revenue bond proceeds will be used to fund identified capital projects.
• New annual debt service payments reach $1.1 million by the end of the study
period, which when added to the existing debt burden of $o.6 million, totals $1.7
million in debt service payments.
• Operating and maintenance (O&M) expenses (excluding utility taxes) are
assumed to increase at inflationary levels from $5.5 million to $6.4 million over
study period.
• Fire protection costs of $317,433 were identified for removal from general service
water rates (Washington State Supreme Court Ruling — Lane vs. Seattle). The
reduction in water rates for fire protection cost removal is offset by an increase to
the water utility tax. The Utility is made whole by receiving payment from the
General Fund to recover the fire protection costs, and the General Fund is made
whole by receiving the incremental revenue generated from the increased water
utility tax. The current utility tax rate is 20.0 percent of revenues, increasing to
23.9% assuming recovery of fire protection costs from this tax.
• Water sales revenue have been steadily declining over past few years, down about
17% over the last five years - due to a combination of water conservation efforts,
economic conditions, and weather patterns. This pattern is expected to continue
for this study period. Assuming nominal customer growth, revenue under
existing rates is assumed to increase from $7.5 million to $7.8 million over the
study period.
• Study findings concluded that annual revenue adjustments are necessary over the
study period to fund the capital program and address the declining revenue
stream. The recommended rate strategy calls for three years of 9.o% increases
(2013-2015) followed by two years of 3.5% increases (2016-2017). For 2013, this
results in an increase to the average residential customer bi-monthly water bill of
$4.o6, or about $24 over the course of the year (assuming a 3/4 -inch meter and
2,200 cubic feet per bill).
• Rates were designed to recover a slightly higher amount of revenue from the fixed
charge portion of the rate structure to maintain rate stability in light of current
economic conditions and changing water demands. Proposed rates recover about
25% from fixed charges (up from about 22% currently). The detailed schedule of
rates and sample typical bills are presented on Pages 20-21 of the study report.
C. CONCLUSIONS AND RECOMMENDATIONS
The proposed rates presented herein are designed to generate the revenues necessary to
fund the capital program, cover forecasted ongoing annual expenditures, and meet cash
reserve targets. FCS GROUP and City staff recommends that City Council approve the
five-year schedule of proposed rates presented herein. The study assumes adoption in
> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Executive Summary - 2
January 2013, with implementation of rates effective January 1, 2013, and January 1 of
each subsequent year in the study period.
Of special note, the City has been successful in maintaining some of the lowest water
rates in the area, while continuously improving its level of service. The City has
undertaken a variety of Utility organizational, operational, and financial studies to
promote water system sustainability and sound fiscal management practices - including
strategic business plans, comprehensive system plans, and regular rate and charge
studies. Since 1998, the City Council has adopted a rolling five-year schedule of water
rates to fund its current five-year capital program, ongoing operations, and special
program incentives. The City Council should be commended for this proactive approach
to fiscal management. Regular review of actual financial performance of the Utility
should be an integral part of the successful implementation of this study.
As always, it has been a pleasure working with you and the City and hope to be of
continued service in the future.
Sincerely,
Karyn Johnson
Principal
> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Executive Summary - 3
TABLE OF CONTENTS
1. STUDY FRAMEWORK 1
A. Background 1
B. Study Objectives 1
C. Methodology 2
D. Report Organization 2
2. FINANCIAL POLICIES 3
A. Fund Accounting 3
B. System Reinvestment Funding 4
C. Debt Service Coverage 5
D. Use of Connection Charge Revenue 5
E. Capital Program Funding / Debt Management 6
F. Cumulative Impact of Financial Policies 7
3. REVENUE REQUIREMENTS 8
A. Methodology 8
B. Capital Program and Funding Plan 9
C. Operating Forecast 10
D. Revenue Needs Assessment 11
4. REMOVAL OF FIRE PROTECTION COSTS 13
A. Methodology 13
B. Results 14
5. RATE DESIGN 19
A. Methodology 19
B. Results 19
C. Conclusions and Recommendations 22
TECHNICAL APPENDIX
•:> .FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Table of Contents
SECTION 1
STUDY FRAMEWORK
A. BACKGROUND
The City of Yakima (City) owns and operates a Domestic Water Utility System (Utility),
which provides service to a population base of slightly over 65,000 through just over
18,000 service connections. The main goal of the water system is to provide customers
with a clean, safe and adequate supply of water. In support of this goal, the City
continually evaluates its water system capital needs to address federal and state
regulations and environmental concerns; periodically reviews its strategic plan to ensure
alignment with City goals and Utility conditions; and regularly updates its Utility rates
and charges to support identified programs and initiatives.
Of special note, the City has been successful in maintaining some of the lowest water
rates in the area, while continuously improving its level of service. The City has
undertaken a variety of Utility organizational, operational, and financial studies to
promote water system sustainability and sound fiscal management practices - including
strategic business plans, comprehensive system plans, and regular rate and charge
studies. Since 1998, the City Council has adopted a rolling five-year schedule of water
rates to fund its current five-year capital program, ongoing operations, and special
program incentives. The City Council should be commended for this proactive approach
to fiscal management.
The City updated its Water System Comprehensive Plan (WSCP) in 2011 and
implemented the final installment of the previous five-year rate adjustment strategy
(2008-2012); with additional adjustments necessary to address changes in legal
requirements for water rate setting (Washington State Supreme Court decision in Lane
vs. Seattle, discussed later in this report).
B. STUDY OBJECTIVES
In May 2012, the City retained FCS GROUP to update the Domestic Water Rate Study to
evaluate Utility capital needs and ongoing operations and maintenance expenses and
develop a rate strategy to recover costs for the current five-year planning period (2013-
2017). The scope of this study included the following major elements:
1. Update operating and capital reserve targets, debt management strategies, and
other fiscal policies as appropriate to ensure sound financial operations of the
Utility.
2. Develop financing strategies for funding the Utility's current five-year capital
program (2013-2017).
3. Forecast revenue requirements for the study period, incorporating fiscal policies,
capital -related costs, ongoing operating & maintenance expenses, and other cash
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -1
obligations of the Utility. Determine annual revenue adjustments necessary to
fund revenue requirements for the five-year period (2013-2017).
4. Identify and remove fire protection -related costs from general service water
rates, in compliance with the Washington State Supreme Court Ruling (Lane vs.
Seattle). Calculate the water utility tax increase necessary to recover those costs
from the City's General Fund.
5. Update the schedule of rates to recover total Utility costs through an appropriate
balance of fixed and variable rate components. Assignment of costs to customer
classes is not necessary since the same schedule of general service rates applies to
all domestic service customers on the system (e.g., residential, governmental,
commercial, and industrial). A unique schedule of charges applies to customers
receiving private fire protection (e.g., commercial sprinkler systems).
6. Present findings and document study results in a project report, including
technical appendices containing the detailed analyses.
The above scope elements are addressed throughout each section described in this
report. An update of Utility connection charges and a Utility performance benchmarking
analysis are currently underway and will be provided under separate cover by year-end
2012.
C. METHODOLOGY
The methods used to complete our work employed analytical principles that are
generally accepted and widely followed throughout the industry — rates and charges
should generate sufficient revenue to maintain a self-supporting and financially viable
Utility without undue discrimination toward or against any customer.
We worked closely with City staff to develop a five-year rate strategy that recovers the
forecasted costs of Utility operations, complies with legal requirements and industry
practices, supports City pricing goals, and remains affordable to customers. This report
documents our assumptions, findings and recommendations for the study period (2013-
2017).
D. REPORT ORGANIZATION
The remainder of this report provides separate sections for Financial Policies (Section
2), Revenue Requirements (Section 3); Removal of Fire Protection Costs (Section 4);
and Rate Design (Section 5). The technical appendix contains the analytical detail
supporting study conclusions.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 2
SECTION 2
FINANCIAL POLICIES
The purpose of establishing financial policies is to promote the financial integrity and
stability of the Utility and to provide for the sustainability of essential water system
services. These policies form the foundation of Utility management and, with routine
application, can act as overarching guidelines for consistent decision making.
Some financial policies are imposed by outside sources (e.g., minimum debt service
coverage and bond reserves) while other policies are specific to the agency and its utility
(e.g., discretionary reserve levels, reinvestment protocols, and use of debt). This study
continues the financial policies established in the City's previous Utility rate studies
updated to reflect current conditions.
A. FUND ACCOUNTING
From an industry and fiscal management perspective, cash balances are a necessary and
appropriate part of prudent utility budgeting. Within each utility enterprise, appropriate
segregation of monies should be established and maintained to provide adequate
controls as to the sources and uses of funds. This practice helps to ensure that funds
raised through the utility are applied to the appropriate purposes, and that equity
attained through rate and charge structures is maintained in application. Above all, the
City should establish and maintain a financial structure that provides for adequate and
predictable revenues to meet the forecasted needs and operational, legal, and policy
objective of its utility systems.
The City maintains separate fund accounting for the Utility and segregates account
balances for operating activities, capital activities, and restricted debt reserves. The rate
management strategy presented in this study presumes that the Utility will continue to
operate as a self-supporting enterprise fund. This means Utility rates and charges have
been designed to recover the forecasted costs and financial obligations of the water
system — without subsidy from other City utilities or General Fund revenues sources,
such as property taxes.
1. Operating Reserves
The operating reserve is designed to provide a liquidity cushion to maintain financial
viability of the Utility despite short-term variability in revenues and expenses —
primarily caused by seasonal fluctuations in billings and receipts, unanticipated cash
operating expenses, or lower than expected revenue collections. Target funding levels
are generally expressed in number of days' cash operating expenses, with the minimum
requirement varying with the expected risk of unanticipated needs.
FCS GROUP recommends that the City maintain a minimum cash balance in the Utility
operating account equal to between 45 and 6o days (12% to 16.5%) of annual O&M
expense. The current financial plan continues the City's historical practice of
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 3
maintaining a minimum target balance of $i million, which falls within the
recommended target. This target should be evaluated over time to reflect changing
demand patterns and associated revenue risk.
2. Capital Reserves
A capital reserve is an amount of cash set aside in case of an emergency, should a piece
of equipment or a portion of the Utility's infrastructure fail unexpectedly. Additionally,
the reserve could be used for other unanticipated capital needs, including project cost
overruns. These reserves are not intended to cover the cost of system -wide failures
resulting from catastrophic events; a more common practice is to carry insurance for
such purposes. The capital account holds loan and bond proceeds; other capital -related
revenues, and transfers from the operating fund designated for capital construction and
replacement projects.
FCS GROUP recommends that the City maintain a minimum cash balance in the Utility
capital account equal to i.o% to 2.o% of water system fixed assets. The current capital
funding plan continues the City's historical practice of maintaining a minimum target
balance of $750,000, which falls within the recommended target. This target should be
evaluated over time to increase as the Utility's asset base increases.
3. Restricted Debt Reserves
When issuing revenue bonds, underwriters require the municipality to establish and
maintain a restricted cash reserve for the utility through the term of debt repayment.
The purpose of a debt reserve is to provide one safeguard for bondholders, in the event
the utility has insufficient funds to meet annual debt service payments. This reserve is
generally equal to one year's debt service payment for each bond issue. The reserve can
be used to fund the last year's debt service payment for each issue.
The City has historically used both revenue bonds and low-interest state loans to finance
Utility capital projects. The rate management strategy presented in this study
conservatively presumes that the City will issue revenue bonds for future debt -financing
needs, unless grants or state loans have been approved. Additional reserves have been
incorporated for each proposed future bond issue (assumed to be funded with debt
proceeds equal to one year's principal and interest payment). The City will continue to
pursue grants and low-cost loans to reduce future bond financing requirements.
B. SYSTEM REINVESTMENT FUNDING
The purpose of system replacement funding is to provide for the replacement of aging
system facilities to ensure sustainability of the system for ongoing operations. A
common approach of municipal utilities is to incorporate a replacement funding (or
equity accumulation) mechanism based on annual depreciation expense as a reasonable
level of reinvestment in the system.
Annual depreciation is a non-cash expense intended to recognize the consumption of
utility assets over their useful lives. Collecting the amount of annual depreciation
expense through rates provides a funding source for capital expenditures, especially
those related to repair and replacement of existing utility plant. Further, funding
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 4
depreciation through rates helps to ensure that existing ratepayers pay for the use of the
assets serving them, with the cash flow funding at least a portion of the eventual
replacement of those assets. As an alternative to full depreciation funding, depreciation
funding net of debt principal payments is sometimes used as a relatively moderate
replacement funding strategy. Using this approach, the full funding of depreciation is
seen as having two uses: first, reducing liabilities by paying debt principal as due, and
second, generating a cash asset for system reinvestment. Debt reduction, cash
accumulation, or both thereby offset depreciation.
The Utility's annual depreciation expense is currently about $1 million. The City
includes a water main replacement program in the five-year capital program. Further,
the City plans to transfer between $600,000 and $650,000 per year from the operating
account to the capital account for direct rate -funding of capital projects. Given this level
of rate -funding, FCS GROUP does not see a need to generate additional rate revenues
for reinvestment funding during this study period. Over time, the City should consider
phasing in an increase to the direct rate -funding of capital projects to reach about $1
million to more closely align with funding annual depreciation expense.
C. DEBT SERVICE COVERAGE
When a municipality issues revenue bonds (and other types of debt instruments), it
agrees to certain terms and conditions related to the repayment of those bonds. One of
those terms is referred to as bond coverage. Simply put, the agency agrees to collect
enough in annual system revenues to meet all operating expenses and not only pay debt
service, but actually collect an additional multiple of that debt service. Bond coverage
ratios typically range from 1.10 to 1.50, meaning that the agency would collect O&M
expenses plus 1.10 to 1.50 times revenue bond debt service as a minimum legal level of
revenues. The stated coverage factor is a minimum requirement — meaning anything
less than this level would be a technical default of the bond covenant.
The City's current minimum coverage requirement on outstanding revenue bonds is 1.25
times annual revenue bond debt service, using the net revenues of the Utility. This study
continues the City's internal policy to set Utility rates at a level that will achieve coverage
of at least 2.o times revenue bond debt service. Revenue generated above cash needs to
comply with coverage requirements may be used for capital purposes, and thus reduce
future borrowing needs.
D. USE OF CONNECTION CHARGE REVENUES
Connection charges are assessed on new development as a condition of connection to
the utility system. Because of the variability in customer growth from year to year, the
annual revenue stream from this resource can be unreliable and subject to wide
fluctuations. The City should estimate and budget Utility connection charge revenues
based on long-term growth estimates, recent growth experience, and the scale of known
development planned or underway. The purpose is to establish a reasonable and
conservative estimate of potential connection charge revenue collections.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 5
Connection charge revenue should be deposited in the capital account and made
available for capital purposes only. Connection charges can legally be used in two ways —
they can be applied to capital project costs directly (reducing the amount of debt
issued), or they can be applied toward annual debt service payments. FCS GROUP
recommends that, as a general policy, connection charge revenues be used to directly
fund capital expenditures. This practice serves to mitigate the risk of relying on this
volatile revenue source to pay debt obligations.
E. CAPITAL PROGRAM FUNDING / DEBT MANAGEMENT
In conjunction with establishing or planning its Utility capital program, the City should
develop a corresponding capital -financing plan that supports execution of that program.
This program should incorporate system replacement and rehabilitation, system
upgrade and improvement, and system expansion. The policy intent is to establish an
integrated capital funding strategy that considers best management practices for debt
management.
1. Capital Funding
Utilities can typically draw funds for capital projects from a variety of sources:
• Grants
• Developer contributions
• Connection charges
• System reinvestment funding
• Direct funding from rates
• Other capital revenues
• Debt
Given these potential funding sources, utilities often find themselves choosing between
funding sources when establishing a capital funding plan. While available grants and
developer contributions would logically be applied to project costs first, the next choice
in the funding "hierarchy" is not necessarily apparent.
The specific decision regarding whether to fund projects by cash or debt is an important
policy decision that will likely be driven by a number of considerations. Cash funding
might be cheaper in the long -run because there is no interest, but debt funding could be
the more practical option since it allows for the payment of project costs over an
extended period of time. In addition, using debt to spread the cost over time will help
ensure that future customers pay for their fair share of system costs.
Finding the appropriate balance of cash versus debt financing requires an evaluation of
debt management policies discussed below.
2. Debt Management
Historically, the City has funded Utility capital projects through a combination of "pay-
as-you-go" cash funding (cash reserves, connection charges, rates) and debt issuance.
Excessive use of debt is unfavorable for a utility, and can damage the utility's credit
rating, reducing its ability to acquire low-cost debt in the future. On the other hand,
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 6
"pay-as-you-go" funding might create excessive burdens for existing customers, raising
questions of practicality and equity between current and future customers.
Industry best practices (and bond underwriter's preference) suggest that municipalities
should maintain a debt-to-equity ratio (total debt divided by the sum of total debt and
equity) of no greater than 5o% debt and 5o% equity (cash). The Utility's current debt-to-
equity ratio is 14% debt /86% equity — well within industry capacity benchmarks to fund
near-term capital projects through debt instruments.
The City's general policy is to maintain debt service below 25 percent of the total Utility
budget. Utility debt service is currently 7.5 percent of the budget, forecasted to increase
to 15 percent by the end of the study period - well within the City's established target.
F. CUMULATIVE IMPACT OF FINANCIAL POLICIES
Satisfying all of these policy objectives might seem daunting at first, but the outcome is
that multiple benchmarks overlap, resulting in the simultaneous achievement of
multiple objectives within the same level of rates. For example, the higher internal
policy for debt service coverage provides a cash resource to the capital account that
helps maintain a healthy debt-to-equity ratio and contributes to the recommended
capital reserve.
Each criterion provides a different perspective on how much revenue is appropriate, and
satisfying them all generally results in a higher rate than if only a single standard is
considered. However, this approach reduces financial risk and increases financial
stability — any near term increases that result will help to promote more stable, and
lower, long-term rates. This is evidenced by the City's continued delivery of high quality
water service while maintaining relatively low water rates.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 7
SECTION 3
REVENUE REQUIREMENTS
The revenue requirement analysis forms the basis for a long-range financial plan and
multi-year rate management strategy. It also forms the basis for the City to set Utility
rate structures that are rooted in the "cost -of -service" and which fully recover the total
costs of operating the utility: capital improvement and replacement, operations and
maintenance, general administration, and fiscal policy attainment. Linking Utility rate
levels to a financial plan such as this helps to enable not only sound financial
performance for the Utility, but also, a clear and reasonable relationship between the
costs imposed on water system customers and the costs incurred to provide them the
service.
A. METHODOLOGY
The financial plan includes the following core elements, which together, form a
complete portrayal of the water system's financial obligations:
• Capital Funding Analysis — Defines a strategy for funding the water system
capital improvement program including an analysis of available resources from
rate revenues, connection charges, debt financing, and any special resources (e.g.,
grants, developer participation, etc.).
• Operating Forecast — Identifies future annual non -capital costs associated with
the operation, maintenance, and administration of the water system.
• Sufficiency Testing — Evaluates the sufficiency of Utility revenues in meeting all
obligations, including cash uses such as operating expenses, debt service, capital
outlays, and reserve contributions, as well as any coverage requirements
associated with long-term debt.
• Rate Strategy Development — Designs a forward-looking strategy for adjusting
Utility resources to fully fund all utility obligations on an annual or periodic basis
over the forecast period.
• Reserve Analysis — Forecasts cash flow and fund balance activity in Utility
reserves. Tests for satisfaction of recommended minimum fund balance policies
(as discussed in Section 2 — Financial Policies).
From this foundation, Utility rate structures can be adjusted to meet the defined annual
and long-term funding targets, as well as the City's pricing objectives.
The financial plan was developed for the five-year planning period 2013-2017, using
2012 as the baseline.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 8
B. CAPITAL PROGRAM AND FUNDING PLAN
1. Assumptions
The following assumptions were used in developing the capital funding plan:
• The five-year capital program includes projects identified in the CWSP, updated
to incorporate completed projects and current estimates for years 2012-2017.
Costs include an allowance for inflation estimated at 4.o% per year, consistent
with the industry construction cost index (Engineering News Record). Routine
capital outlays are funded from the Utility operating account and are not
included in the CIP.
• 2012 beginning fund balance for the capital account reflect year-end 2011
financial records.
• Capital connection charge revenues are based on the 2012 budget ($44,000), and
are assumed to remain at the current level throughout the study period.
Consistent with State guidelines, such revenues are used to fund capital projects.
• Transfers from the operating account of $600,000 in 2012, $625,000 in 2013
and $650,000 a year thereafter are planned for direct rate -funding of capital
projects.
2. Results
The City has identified $22.1 million ($23.9 million in inflated dollars) in capital
projects (2012-2017) consisting of replacement and rehabilitation projects necessary to
sustain viable operation of the system, as well as supply and treatment projects
necessary to comply with state and federal regulations and ensure the public health and
safety of the community.
In addition to the Utility capital resources identified above, $3.5 million in State
Revolving Fund loans are planned for water treatment plant projects in 2012-2013; $5.0
million in Public Works Trust Fund loans are planned for the automated metering
project in 2012-2013; and revenue bond proceeds are assumed at $2.7 million in 2013,
$3.7 million in 2015, and $2.3 million in 2017.
Exhibit 3-1 presents the 2012-2017 Capital Improvement Program and Exhibit 3-2
presents the capital funding plan.
Exhibit 3-1: Capital Improvement Program (inflated)
Leak Detection
WTP PLC Replacement
WTP Lagoon / Electrical service
Intake Flood Repair
Automated Metering Infrastructure
Open Gear Vale Replacement
Private Water Main Replacement
Lead -Oakum Joint Line Replacement
Total
1044, .1111ffiullml1r`f r orf J f�� o 1 11r Ji
$ - $ 20,800 $ 21,632 $ - $ 23,397 $ 24,333
260,000 -
450,000 3,239,392 -
1,040,000 - - -
1,500,000 6,760,000 - - -
25,000 26,000 27,040 28,122 29,246 30,416
175,000 182,000 189,280 196,851 204,725 212,914
- - 2,163, 200 2,249,728 2,339,717 2,433,306
$ 2,150,000 $11,528,192 $ 2,401,152 $ 2,474,701 $ 2,597,086 $ 2,700,969
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 9
Exhibit 3-2: Capital Funding Plan
immmmml
ffiffilullImml11111111 g0117
Beginning Fund Balance $ 3,374,890 $ 3,818,890 $ 2,253,770 $ 546,618 $ 2,404,947 $ 501,861
Funding Sources
Connection Charges $ 44,000 $ 44,000 $ 44,000 $ 44,000 $ 44,000 $ 44,000
Direct Funding from Rates 600,000 625,000 650,000 650,000 650,000 650,000
Net Loan Proceeds 1,950,000 6,564,800 - -
Net Bond Proceeds - 2,729,272 3,639,030 2,274,394
Total Funding Sources $ 2,594,000 $ 9,963,072 $ 694,000 $ 4,333,030 $ 694,000 $ 2,968,394
Less: Capital Projects [a] ($2,150,000) ($11,528,192) ($2,401,152) ($2,474,701) ($2,597,086) ($2,700,969)
Fund Balance $ 3,818,890 $ 2,253,770 $ 546,618 $ 2,404,947 $ 501,861 $ 769,285
Actual % of Assets: 7.1% 4.2% 1.0% 4.4% 0.9% 1.4%
Minimum Target Balance [1.0% of assets]: $ 540,974 $ 540,974 $ 540,974 $ 540,974 $ 540,974 $ 540,974
City Established Target Balance: $750,000 $750,000 $750,000 $750,000 $750,000 $750,000
[a] Includes an allowance for inflation of 4.0 percent per year.
C. OPERATING FORECAST
1. Assumptions
The following assumptions were used in developing the operating forecast:
■ Operating & maintenance (O&M) expenses consist 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 rates.
O&M expense projections are based on the 2012 budget, plus 3.o percent annual
inflation (consistent with the Consumer Price Index). No additional staff is
planned for this study period. Electricity costs are assumed to increase by
$25,000 per year (plus inflation) for additional pumping requirements for the
new well.
■ Utility taxes are excluded from the O&M forecast and shown separately in order
to illustrate the impacts of the Washington Supreme Court Decision (Lane vs.
Seattle), which dictates the removal of fire protection costs from general service
water rates and prescribes the potential recovery of those costs from an increase
to the utility tax (Further discussed in Section 4 - Removal of Fire Protection
Costs).
2. Results
The operating forecast focuses on annual expenses incurred to operate, maintain, and
manage the water system. While the cost of skilled labor, employee benefits, and certain
materials continue to increase, the City has strived to achieve cost savings wherever
possible to maintain overall operating increases at or below inflationary levels. As noted
previously, the City in is the process of conducting a benchmarking study to assist in
evaluating the cost effectiveness and efficiency of the Utility as compared to industry
performance. This information will be used to identify potential areas for further
investigation. Results are expected by the end of the year.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 10
Exhibit 3-3 presents the O&M expense forecast over the study period (excluding utility
taxes).
Exhibit 3-3: Operating and Maintenance Forecast
1111111111111111111
WI/ "1111(1
iiii14,11,ffiffiullmIll 1111111 11111111111 111
ll 1111111 f11ffiuulluuu11ll
is;60 1111111 111111111 g0117
Functional Categories
Fire Suppression
Fire Suppression Admin
Water Distribution
WTP, Trans & Storage
Water/Irrigation Engineer
Water Administration
Total O&M Expenses [a]
$ 288,094 $ 296,737 $ 305,639 $ 314,808 $ 324,252 $ 333,980
32,496 33,471 34,475 35,509 36,575 37,672
2,129, 807 2,193, 701 2,259,512 2,327,298 2,397,117 2,469,030
1,652,832 1,702,417 1,753,489 1,806,094 1,860,277 1,916,085
57,870 59,606 61,394 63,236 65,133 67,087
1,378,832 1,420,197 1,462,803 1,506,687 1,551,888 1,598,444
$ 5,539,931 $ 5,706,129 $ 5,877,313 $ 6,053,632 $ 6,235,241 $ 6,422,298
[a] Includes inflation of 3.0 percent per year, plus known operational changes; excludes Utility Taxes.
D. REVENUE NEEDS ASSESSMENT
1. Assumptions
The following assumptions were used in developing the revenue needs assessment:
• Existing rate revenues are based on actual 2011 billing system records applied to
current rates. Future revenues (under existing rates) incorporate annual
customer growth. Projected revenue under existing rates provides the benchmark
upon which to evaluate the need for revenue adjustments over the study period.
Such revenue is a function of the number and size of meters, water usage, and
current water rates. Note that water sales revenue is down from historical levels
as a result of lower water demands - due to a combination of water conservation
efforts, economic conditions, and weather patterns. Water use has declined about
17% over the last five years. This pattern is expected to continue for this study
period.
• Miscellaneous revenues from charges for new water services, personnel services,
and hydrant fees are based on the 2012 budget and assumed to remain at current
levels. Interest earnings on Utility cash balances are assumed to be deposited into
the General Fund per City policy.
• 2012 beginning fund balances for the operating account reflect 2011 actual
financial records.
• A new revenue source, "General Fund Payment for Fire Protection", represents
the fire protection costs historically included in the general service water rates -
now to be paid from the General Fund per the Supreme Court decision in Lane
vs. Seattle. (Further discussed in Section 4 — Removal of Fire Protection Costs).
• Utility taxes are a function of Utility revenues and as such, increase as the total
revenues for the Utility increase. The current utility tax rate is 20.0 percent of
revenues (excluding annual debt service payments on revenue bonds). Based on
this study, the utility tax is proposed to increase to 24.o percent assuming
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 11
recovery of fire protection costs from this tax. (Further discussed in Section 4 -
Removal of Fire Protection Costs).
• Existing debt service schedules were provided by City staff and include
outstanding revenues bonds, Public Works Trust Fund loans, and State Revolving
Fund loans. New debt service incorporates the impacts of the proposed capital
funding plan as shown in Exhibit 3-2.
• Residual equity transfers are transfers from the Utility operating account to other
City funds for the Utility's allocated share of other City debt.
2. Results
The Utility faces $10 million in total cash obligations over the study period. Total
revenues (excluding the use of cash reserves) are forecasted at $8.3 million over the
same time period - yielding a deficit of $1.7 million. The proposed rate strategy calls for
three years of 9.o% increases (2013-2015), followed by two years of 3.5% increases
(2016-2017). Note that in addition to proposed rate increases, cash reserves are used to
supplement annual revenue shortfalls in years (2012-2014). For 2013, this results in an
increase to the average residential customer bi-monthly water bill of $4.o6, or about
$24 over the course of the year (3/4 -inch meter and 2,200 cubic feet per bill).
Additional sample bills are presented in Section 5 - Rate Design. Exhibit 3-4 presents
the revenue requirement analysis for the study period.
Exhibit 3-4: Revenue Requirement and Reserve Analysis
Revenues
Water Sales (w/ existing rates)
General Fund Payment for Fire Protection
Other Revenues
Total Revenues
Expenses
Operating & Maintenance Expenses
Interfund In lieu Utility Tax
Existing Debt Service
New Debt Service
Residual Equity Transfers
Transfers to the Capital Fund
Total Expenses
Annual Surplus/(Deficiency)
Annual Rate Adjustment
Additional Revenue from Rate Adjustments
Net Surplus/(Deficiency)
Beginning Fund Balance
Cumulative Fund Balance
011111 1g
Illlluuuu ffii1ffI m11111111111M01014 iffiffiullm1111111111401 i1111111111MM
$ 7,480,452 $ 7,677,228 $ 7,696,421 $ 7,715,662 $ 7,734,951 $ 7,754,289
317,433 347,405 380,597 395,369 410,699
258,500 258,500 258,500 258,500 258,500 258,500
$ 7,738,952 $ 8,253,161 $ 8,302,326 $ 8,354,759 $ 8,388,820 $ 8,423,487
$ 5,539,931
1,025,000
558,963
28,487
64,497
600,000
$ 7,816,878
$ 5,706,129 $ 5,877,313
1,944, 529 2,128,128
556,006 562,896
406,996 708,782
64,497 64,497
625,000 650,000
$ 9,303,157 $ 9,991,616
$ 6,053,632 $ 6,235,241
2,331,459 2,421,945
559,188 555,279
869,267 1,029,752
64,497 64,497
650,000 650,000
$10,528,043 $10,956,714
$ 6,422,298
2,515,853
551,169
1,130,056
64,497
650,000
$11,333,873
$ (77,925) $ (1,049,996) $(1,689,290) $(2,173,284) $(2,567,895) $(2,910,386)
0.00% 9.00% 9.00% 9.00% 3.50% 3.50%
$ - $ 690,951 $ 1,447,697 $ 2,276,344 $ 2,632,629 $ 3,002,984
$ (77,925) $ (359,045) $ (241,594)
$ 2,015,478 $ 1,937,553 $ 1,578,507
$ 1,937,553 $ 1,578,507 $ 1,336,914
$ 103,060 $ 64,735
$ 1,336,914 $ 1,439,974
$ 1,439,974 $ 1,504,709
$ 92,598
$ 1,504,709
$ 1,597,307
Actual Days of O&M: 108 75 61 63 63 65
Minimum Target Balance [60 days]: $1,079,167 $1,257,642 $1,315,963 $1,378,371 $1,423,099 $1,469,285
City Established Target Balance: $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 12
The proposed increases represent the system -wide adjustments necessary to recover
total revenue requirements for the Utility. The design of the fixed and variable
components of the rate structure is discussed in Section 5 — Rate Design.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 13
SECTION 4
REMOVAL OF FIRE PROTECTION COSTS
The Washington State Supreme Court decision in Lane vs. Seattle defines fire protection
as a general government service that cannot be funded through water rates. This
analysis aims to facilitate compliance with the verdict by identifying fire protection costs
embedded in the City's water rates and removing those costs from the general service
water rate structure.
To finance this shift in funding responsibility, the court upheld "a solution" that an
increase to the utility tax on the water utility to recover identified fire protection costs is
valid and within statutory authority. This analysis presumes the City will follow this
approach. Alternatively, the City could directly bill the General Fund for payment. The
City should consult with its own legal counsel regarding the mechanism for recovery.
It is important to note that compliance with this ruling under the proposed approach
will be transparent to the Utility customer. Meaning, it will not materially impact
general service water rates or resulting customer bills. It involves simply removing the
fire protection costs from domestic water rates and replacing that dollar amount with an
equal amount (with adjustments for private fire services) generated from an increase to
the current tax imposed on the Utility by the General Fund. The utility tax is treated as a
water utility expense, with the cost embedded in the calculation of water rates, just like
all other expenses. Thus, the reduction in water rates for fire protection cost removal is
offset by the increase to the utility tax. The Utility is made whole by receiving payment
from the General Fund to recover the fire protection costs, and the General Fund is
made whole by receiving the incremental revenue generated from the increased water
utility tax. Should the City choose the alternative approach of a direct payment from the
General Fund without a corresponding increase to the water utility tax, the General
Fund would not be made whole.
A. METHODOLOGY
While the decision in Lane vs. Seattle requires the removal of "the cost of providing
hydrants" from water rates, it does not provide a specific methodology for identifying
such costs. Consequently, local governments have considerable discretion in
determining the best way to address this decision. There is ambiguity in the definition of
the "cost of providing fire hydrants." The most literal interpretations would suggest that
it only includes costs specifically related to fire hydrants (such as the operation and
maintenance of fire hydrants) that are embedded in water rates; other interpretations
may be more aggressive in allocating water system facilities and revenue requirement
components to fire protection. There is flexibility in assigning the water system to fire
protection, depending on how the water system is viewed:
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -14
• Most Common — Allocating primary cost to general water service, with incremental
costs allocated to fire protection service. This would result in relatively lower fire
protection costs.
• Rare — Allocating primary cost to fire protection service, with additional costs
allocated to general water service. This would result in relatively higher fire
protection costs.
• Seattle Method — Allocating costs to general water service and fire protection on a
proportional basis.
The methodology used in this study is based on cost allocations that are driven by an
analysis of the City's entire water system to identify costs related to fire protection. We
believe that this methodology is most consistent with the intent of the decision in Lane
vs. Seattle.
B. RESULTS
Results of the fire removal analysis for the Utility are summarized in this section.
Additional detail can be viewed in the technical appendix.
1. Allocation of Assets to "Fire Protection"
The first step is to allocate water system assets to functional categories, including:
• Customer: Related to providing customer service.
• Meters & Services: Related to servicing meters and customer connections.
• Base Capacity: Related to providing capacity to meet average demands.
• Peak Capacity: Related to providing capacity to meet peak demands.
• Fire Protection: Related to providing capacity for fire flow, including portions of
certain assets (mains, pumping facilities and storage facilities) dedicated to fire
protection, plus direct fire protection costs related to fire hydrants, hydrant stub
lines, and private fire sprinkler systems.
The water system fixed asset schedule and system design criteria form the basis for
allocating the water costs between functions of service, as discussed in further detail
below.
Supply/treatment and pumping assets are assigned to base and peak capacity using
the ratio of peak day to average day demand. As cited in the WSCP, this ratio is 1.75,
resulting in a split of 57% and 43%, respectively, to base and peak capacity.
Storage assets are allocated to the functions based on the WSCP analysis of
operational, equalizing, standby, fire suppression, and dead storage requirements.
Exhibit 4-1 summarizes the storage allocation.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 1�
Exhibit 4-1: Allocation of Storage Facilities
Operational Storage
Equalizing Storage
Standby Storage
Fire Flow Storage
ALO
OP
STORAGE
Caj
1.89
1.89
27.20
5.20
0.00%'..
0.00%''.
0.00%''.
0.00°o
METERS &
EFWICES O , ,,,P4
0.00%
0.00%
0.00%
0.00%
100.00%
0.00
57.14%
0.00
0.00%'..
100.00%
42.86%
0.00%'
PROTECTI
0.00%'..
0.00%''.
0.00%''.
100.00%
0.00%
0.00%
0.00%
0.00%
100.00% All to Base
100.00% All to Peak
100.00% Peak/Average Day Ratio
100.00% All to Fire Capacity
TOTAL STORAGE
36.17
0.00°o 0.00%
48.18% 37.44
14.38%'. 0.00
100.00%
[a] Source: City of Yakima Comprehensive Water System Plan, Table 3-34
Mains are allocated to the functions based on the estimated replacement cost, type, and
size of pipe. Pipes are allocated to fire capacity based on the estimated cost of over -
sizing pipes. Exhibit 4-2 shows the functional allocation of mains:
• Pipe sizes up through 6 -inches are assumed to provide domestic capacity only,
and thus, are allocated to base and peak capacity using the peak day to average
day demand ratio.
• Pipe sizes between 8 and 12 -inches are assumed to be oversized one increment
from 6 -inch pipes to provide fire capacity.
• Pipes greater than 12 -inches are assumed to be transmission mains, allocated to
base and peak capacity.
Exhibit 4-2: Allocation of Water System Mains
PROTECTION
4" or less
6
8"
10
12
16
WEN
130
160
185
215
230
280
2,460,120
86, 505, 760
101,853,415
818,505
60, 250,110
21,251,720
$273,139,630
13,763,975
114,210
3,929,355
$ 17,807,540
44.05°o
44.05%
49.42%
49.17%
53.42%
44.05%
48.14%
55.95%
55.95%
37.07%
36.88%
40.06%
55.95%
0.00%'
0.00 0
13.51%
13.95%
6.52%
45.35% '...
6.52%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Domestic: Base/Peak
Domestic: Base/Peak
Fire Flow Capacity Oversizing: Base/Peak
Fire Flow Capacity Oversizing: Base/Peak
Fire Flow Ca.acit Oversizin.: Base/Peak
Transmission: Base/Peak
[a] Source: City of Yak.ma Comprehensve Water System Plan, Table 3-36
[b] Sou ce: General planning estimates, to be updated
[c] Incremental unit cost times linear feet of pipe at each size. Minimum distribution line size = 8"
Hydrant assets are assigned directly to fire protection, Meter & services assets are
directly assigned to meters and services, and general plant assets are allocated in
proportion to all other assets.
Exhibit 4 -3 shows the resulting functional allocation of total water system assets.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -16
Exhibit 4-3: Functional Allocation of Assets
PLANT4N-SERVICE
of Supply / Treatment
C T
$11,896,540
GENEMILL WATER SERVICE
'FUNCTION
PROTECTION
0.00%
OTHER
0.00%
100.00%
'Source
ALL CATION EL I
Peak/Average Ratio - Max Day = 1.75
CUSTOMER 1 sTRIR4,1
0.00% 0.00%',
BASE
57.14%',
:pow
42.86%',
Pumping Plant
1,280,515
0.00% 0.00%', 57.14%', 42.86%', 0.00% 0.00%
100.00%
Peak/Average Ratio - Max Day = 1.75
Reservoirs / Standpipes
3,301,452
0.00% 0.00%', 48.18%', 37.44% 14.38% 0.00%
100.00%
See Storage Capacity Allocation Table
Transmission & Distribution
22,051,442
0.00% 0.00%', 48.14%', 45.35%', 6.52% 0.00%
100.00%
See Pipe Capacity Allocation Table
Meters
1,548,738
0.00% 100.00%', 0.00%', 0.00%', 0.00% 0.00%
100.00%
All to Meters & Services
Service Connections
9,585,460
0.00% 100.00%', 0.00%', 0.00%', 0.00% 0.00%
100.00%
All to Customer
Hydrants
1,630,174
0.00% 0.00%', 0.00%', 0.00%', 100.00% 0.00%
100.00%
All to Fire Protection
General Plant/ Intangible Plant
2,803,031
0.00% 0.00% 0.00% 0.00% 0.00% 100.00%
100.00%
As All Other
Total Utility Plant
$54,097,352
$ - $ 11,134,198 $19,735,017 $16,882,636 $ 3,542,469 $ 2,803,031
$54,097,352
Total Water Ser,Ace Functions
0.00% 20.58%'. 36.48%'. 31.21%
6.55%
5.18%
100.00%
General Water Service Functions
0.00% 23.32% 41.33% 35.35%
100.00%
Allocation of "As All Other"
$ - $ 653,577 $ 1,158,445 $ 991,010
$(2,803,031)
$ -
TOTAL
$54,097,352
$ - $11,787,775 $20,893,462 $17,873,646 $ 3,542,469 $ -
$54,097,352
Total Allocation Percentages
0.00% 21.79% 38.62% 33.04%
6.55%
0.00%
100.00%
General Water Service Allocation %
0.00% 23.32%', 41.33%', 35.35%
0.00%
100.00%
[a] Source: City of Yakima Comprehensive Water System Plan, Table 2-33
2. Functional Allocation of Revenue Requirement
The allocation principles developed in this analysis will extend to the determination of
water rates for 2013 and subsequent years. This step involved a detailed review of 2013
revenue requirements, as summarized below:
• City staff identified specific fire suppression related O&M costs, including
administrative costs. These costs were directly assigned to the fire protection
component. Other O&M costs were allocated to functional components based on
assumed cost causation.
• Debt service payments and rate -funded capital are allocated in proportion to total
plant in service.
• Miscellaneous operating revenues (non -rate revenues and interest earnings) are
allocated in proportion to total operating and maintenance expenses.
• The analysis incorporates a transfer from the General Fund to the Utility for the
fire protection costs identified for domestic water service. This revenue stream
effectively "reimburses" the Utility for fire protection costs that are incurred by
the water system. This new cost to the General Fund is assumed to be funded
through an incremental increase to the current water utility tax (treated as an
expense of the Utility). The resulting tax increase is embedded within the
proposed 2013 rates.
Exhibit 4-4 shows the 2013 O&M allocation to functional components and Exhibit 4-
5 presents the total revenue requirement allocation to functional components.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -17
Exhibit 4-4: Functional Allocation of O&M Expenses
)'1 J 11111111 11111111111111111111111
11 f �� 1,uui
r��� -� Iwlllll 1?
l ff�
w g1 (IIIIIIII Illlliiiill
1111
X14//rrrr� 11111118
m mmIIIII I r 11111m����11f 0017
Funcfonal Categories
Fire Suppression
Fire Suppression Admin
Water Distribution
WTP, Trans & Storage
Water/Irrigation Engineer
Water Administration
Interfund In lieu Utility Tax
Total O&M Expenses [a]
$ 288,094
32,496
2,129, 807
1,652,832
57,870
1,378,832
$ 296,737
33,471
2,193,701
1,702,417
59,606
1,420,197
$ 305,639
34,475
2,259,512
1,753,489
61,394
1,462,803
$ 314,808
35,509
2,327,298
1,806,094
63,236
1,506,687
$ 324,252
36,575
2,397,117
1,860,277
65,133
1,551,888
$ 333,980
37,672
2,469,030
1,916,085
67,087
1,598,444
$ 5,539,931 $ 5,706,129 $ 5,877,313 $ 6,053,632 $ 6,235,241 $ 6,422,298
[a] Includes an allowance for inflation of 3.0 percent per year, plus known operational changes; excludes utility taxes.
Exhibit 4-4: Functional Allocation of Total Revenue Requirement
REVENUE RE°UIIREMENT
CO
PROTECTION'
,,,,
f,,,�„e,
�,�f,�f, �'
METER 1
;g�N��
OPERATING AND CAPITAL EXPENSES
Cash Operafing Expenses
$ 7,650,658
25.28%',
0.00%
40.69%
29.72%
4.32%
0.00%
100.00%
As O&M Expense
Exisfing Debt Service
620,503
0.00%',
21.79%
38.62%
33.04%
6.55%
0.00%
100.00%
As Plant In Service
New Debt Service
406,996
0.00%',
21.79%
38.62%
33.04%
6.55%
0.00%
100.00%
As Plant In Service
Rate -Funded Capital
625,000
0.00%',
21.79%
38.62%
33.04%
6.55%
0.00%
100.00%
As Plant In Service
$ 9,303,157
20.79%',
3.87%
40.32%
3031%
4.71%
0.00%
100.00%
OTHER REVENUES AND ADJUSTMENTS
Less: Other Revenues
(258,500)
25.28%',
0.00%
40.69%
29.72%
4.32%
0.00%
100.00%
As O&M Expense
Less: Operafing Fund Interest Earnings
-
25.28%',
0.00%
40.69%
29.72%
4.32%
0.00%
100.00%
As O&M Expense
Plus: Adjustment for Partial Year Increase
-
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
As All Other
Plus: Net Cash Flow after Rate Increase
(359,045)
0.00%',
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
As All Other
Rate Revenue Requirement
$ 8,685,612
$ 1,868,555
$ 360,078
$ 3,645,868
$ 2,742,894
$ 427,262
$ (359,045)
$ 8,685,612
Water Service Funcfions
20.66%'.
3.98%
40.31%
30.33%
4.72%
100.00%
Water Service Funcfions (Excluding Fire)
21.68%
4.18%
42.31%
31.83%
100.00%
Allocafion of"As All Others"
$ (77,854)',
$ (15,003)
$ (151,906)
$ (114,283)
$ 359,045
$ -
Total Rate Revenue Requirement
$ 8,685,612
$ 1,790,701
$ 345,076
$ 3,493,962
$ 2,628,611
$ 427,262
$ -
$ 8,685,612
less: Provision for Operafional Use of Fire Assets [a]
$ 9,265
$ 1,785
$ 18,077
$ 13,600
$ (42,726)
$ -
CostAllocalion Before Fire Protection Adjustment
$ 8,685,612
$ 1,799,966
$ 346,861
$ 3,512,039
$ 2,642,211
$ 384,535
$ 8,685,612
Total Fire Protecfion
$ (384,535)
$ 384,535
Fire Protection Allocated to Private Fire Services
67,102
less: Public Fire Payment from General Fund
$ (317,433)
$ (317,433)
$ (317,433)
Rate Revenue Requirement
8,368,178
$ 1,799,966
$ 346,861
$ 3,512,039
$ 2,642,211
$ 67,102
$ 8,368,178
Allocafion Percentages
21.51%',
4.15%
41.97%
31.57%
0.80%
0.00%
100.00%
[a] Percent of fire assets used for operalions.
10.00%
As shown in the table above, io% of the costs allocated to fire protection are separated
out from that category and reallocated proportionally amongst the other functions. This
adjustment recognizes that fire protection -related assets are periodically used for water
system operations such as water main flushing.
The remaining fire protection costs of $384,535 are allocated between public fire
protection (domestic service) and private fire service based on equivalent number of
hydrants. Private fire service represents 17% of total equivalent hydrants (476 out of
2,254) resulting in an allocation of $67,1o2. Private fire service charges need to recover
the allocated share of fire protection costs for those customers with private fire
suppression systems. Service to these unique customers is not of general benefit thus
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -18
should not be considered a General Fund obligation. These costs are more appropriately
recovered from water rates imposed on only those customers requiring the specific
service from the water system.
The remaining cost of $317,433 is allocated to domestic water service and removed from
general service water service rates.
3. Water Utility Tax Rate Increase
The domestic water service share of fire protection costs ($317,433) forms the basis for
the General Fund payment to the Utility, as well as the calculation of the necessary
utility tax increment. The payment from the General Fund to the Utility is offset by an
increase to the water utility tax rate.
The City's existing water utility tax rate is 20.o%. This tax would need to increase to
23.9% (perhaps rounded to 24.o%) in order to offset the General Fund payment. The
incremental portion of the tax related to fire protection costs and the basis for the
annual General Fund payment is 3.9% (or rounded to 4.o%). This percentage would be
applied to the annual budgeted Utility rate revenues in subsequent years to determine
the annual payment from the General fund to the Utility for fire protection costs.
4. Removal of Fire Protection Costs and Reallocation of Water Utility
Tax
The City currently applies the same schedule of water rates to all domestic customer
classes, thus, the fire protection costs were removed from each domestic customer class
in proportion to existing rate revenues. The dollar amount generated from the
incremental utility tax (3.9%) was then allocated to all customers on the water system
(including private fire services) in portion to revenues. Note that the impact to private
fire services is higher since there is no fire protection cost deduction, yet an impact for
the system -wide increase (9.o%) and application of the incremental utility tax.
Exhibit 4-5 shows the progression of customer bill impacts.
Exhibit 4-5: Total Customer Bill Impacts
2013 Revenue 201 Revenu ✓a Change
Cu %Cates,;;;; Under , n with 9 ATi,,/, WithAdditional
Domestic Water Customers
Private Fire Services
TOTAL
$ 7,529,461
147,767
$ 7,677,228
$ 8,207,112
161,066
$ 8,368,178
9.00%
9.00%
9.00%
$ (317,433)
$ (317,433)
l bon of
Utility Tax
$ 311,323
6,110
$ 317,433
1 Revenue
r
Inc e e Net of
Fire
$ 8,201,002
167,176
8,368,178
8.92%
13.13%
9.00%
[a] Rate increase applied Jan. 1, 2013
[b] To be applied across-the-board (ATB) to existing rate structure and rates to meet revenue requirements and comply with Lane vs. Seattle.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report -19
SECTION 5
RATE DESIGN
The rate design focuses on constructing rate structures, including fixed and variable
components for each class of customer, to recover the appropriate amount of revenue
from each class and to recover the revenue necessary in total to fund utility financial
obligations. Further, City pricing objectives regarding rate stability, affordability, equity,
and conservation are applied.
A. METHODOLOGY
Prior to this section, our findings rested on financial and technical analyses to derive the
total annual revenue need of the Utility and to determine the amount that should be
collected from domestic and private fire service customers. In this section, we focus on
the design of the pricing structure itself to achieve intended outcomes that carry out
desired public policy.
The existing domestic water rate structure consists of a fixed charge increasing by meter
size ("readiness -to -serve" and a uniform volume charge ("unit of cost"). The same
schedule of rates applies to all domestic service customers, with a 1.50 multiplier
applied to outside city customers. Private fire services are charged a readiness -to -service
charge increasing by line size; no charge is applied to actual water usage, if any. Cost
recovery under the existing rate structure is about 22% from the fixed charge and 78%
from volume charges.
In general, the fixed charge component recovers customer related costs, meters &
services related costs, and commonly a portion of peak demand costs. The volume
charge recovers base (average) demand costs and a portion of peak demand costs.
Including a portion of peak costs in the fixed charge enhances revenue stability. Relying
too heavily on volume charges to recover costs can result in revenue shortfalls if water
sales are less than anticipated (due to unusually wet summers and/or or increased water
conservation practices).
B. RESULTS
The proposed rates have been developed in accordance with the City's policy to apply
the same schedule of rates to all domestic customer classes and to recover an
appropriate balance of system costs from the fixed and variable components of the rate
structure to maintain revenue stability. The proposed rate structure increases the fixed
charge cost recovery to 25% to improve revenue stability without unduly burdening
customers with relatively low water usage. We recommend that the City monitor water
usage patterns over time to determine if a further increase to the fixed charge
component is warranted to maintain a stable revenue stream.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 20
1. Rate Design
Exhibit 5-1 presents a comparison of existing Utility rates and the updated five-year
schedule of Utility rates reflecting the removal of fire protection costs from the domestic
rates, incorporation of the annual system -wide increases, and the shift to more cost
recovery from the fixed charges.
Exhibit 5-1: Existing & Proposed Water Rates
Meter Size
Existing
2012
•iuiiiiimrri
Proposed
2013
2014
2015
2016
2017
3/4"
1"
1-1/2"
2"
3"
4"
6"
8"
10"
12"
$ 15.91
$ 20.09
$ 31.24
$ 44.67
$ 76.03
$ 120.82
$ 232.70
$ 453.59
$ 680.41
$ 993.82
$ 16.25
$ 20.52
$ 31.91
$ 45.63
$ 77.66
$ 123.41
$ 237.69
$ 463.31
$ 694.99
$ 1,015.12
$ 17.71
$ 22.37
$ 34.78
$ 49.73
$ 84.65
$ 134.52
$ 259.08
$ 505.01
$ 757.54
$ 1,106.48
$ 19.31
$ 24.38
$ 37.91
$ 54.21
$ 92.27
$ 146.62
$ 282.40
$ 550.46
$ 825.72
$ 1,206.06
$ 19.98
$ 25.23
$ 39.24
$ 56.11
$ 95.50
$ 151.75
$ 292.28
$ 569.72
$ 854.62
$ 1,248.27
$ 20.68
$ 26.12
$ 40.61
$ 58.07
$ 98.84
$ 157.07
$ 302.51
$ 589.66
$ 884.53
$ 1,291.96
Commod ty
Rate
$/ccf
Line Size
2"
3"
4"
6"
8"
10"
12"
Ex sting
2012
$ 1.51
•uri 111%
Proposed
2013
$ 1.68
2014
$ 1.83
2015
$ 1.99
2016
$ 2.06
2017
$ 2.14
11m IIII rIII ITIMIti 5 T1 r1171
Ex sting
2012
$6.00
$8.76
$17.54
$51.56
$109.82
$197.46
$319.12
Ex sting
2012
$1.51
Proposed
2013
$ 6.79
$ 9.91
$ 19.84
$ 58.33
$ 124.24
$ 223.40
$ 361.04
2014
$ 7.40
$ 10.80
$ 21.63
$ 63.58
$ 135.43
$ 243.50
$ 393.53
2015
$ 8.06
$ 11.77
$ 23.58
$ 69.30
$ 147.61
$ 265.42
$ 428.95
IIIIIIIIIIIGr¢IlJlllll (IIIIIIIIj�///fir
2016
$ 8.35
$ 12.19
$ 24.40
$ 71.73
$ 152.78
$ 274.71
$ 443.96
2017
$ 8.64
$ 12.61
$ 25.26
$ 74.24
$ 158.13
$ 284.32
$ 459.50
Proposed
2013
$ 1.68
2014
$ 1.83
2015
$ 1.99
2016
$ 2.06
2017
$ 2.14
Daily water meter rental remains at $4.00 per day
[a] Outside City rates are 1.50 times inside City rates
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 21
2. Customer Bill Impacts
Based on the City's billing system information, the residential class uses an average of
about 2,200 cubic feet (22 ccf) of water per bi-monthly billing period over the course of
a year. The commercial class uses an average of about 10,600 cubic feet (io6 ccf) per
billing period, and industrial customers average about 32,700 cubic feet (327 ccf) per
billing period. Actual water usage will likely vary by customer and by billing period. For
example, residential customers typically experience higher than average usage in
summer months and lower than average usage in the winter months. As such, the water
bill will also vary by customer and by billing period.
Exhibit 5-2 presents a comparison of sample customer water bills under existing rates
and the proposed 2013 rates.
Exhibit 5-2 - Sample Residential Water Bills
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 22
Meter
Size
(inches)
Bi-Mth
Usage
(ccf)
y
II
111IIIPM
Existing
Bi -Mthly
Bill
2013
Bi -Mthly
Bill
$ Change
from
Existing
3/4
6
$24.97
$26.32
$1.35
3/4
15
$38.56
$41.43
$2.87
3/4
22
$49.13
$53.19
$4.06
3/4
40
$76.31
$83.40
$7.09
1
50
$95.59
$104.46
$20.18
01111111111111PH.
I
I
PIIIVII
I
Meter
Bi-Mth y
Existing
2013
$ Change
Size
Usage
Bi -Mthly
Bi -Mthly
from
(inches)
(ccf)
Bill
Bill
Existing
3/4
75
$129.16
$142.16
$25.67
3/4
106
$175.97
$ 194.21
$18.24
1
200
$322.09
$ 356.29
$34.20
1
300
$473.09
$ 524.17
$51.08
IMIII
Meter
Bi-Mth y
Existing
2013
$ Change
Size
Usage
Bi -Mthly
Bi -Mthly
from
(inches)
(ccf)
Bill
Bill
Existing
2
100
$195.67
$ 213.51
$17.84
2
327
$538.44
$ 594.61
$56.17
2
400
$648.67
$ 717.16
$68.49
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 22
C. CONCLUSIONS AND RECOMMENDATIONS
Projections are by nature conjectural and rely on many assumptions regarding growth,
water usage, inflations and other factors, and no guarantee as to their ultimate accuracy
can be made. We have endeavored to apply the best available estimates of future
conditions that affect these findings, and believe the analyses performed in this study
provide a reasonable level of assurance with respect to the adequacy of the proposed
rates and rate structure. However, regular review of actual financial performance of the
Utility should be an integral part of the successful implementation of this study. The
next rate study update is anticipated to be completed in 2017.
FCS GROUP and City staff recommends that this study be utilized as support for the
adoption of the five-year rate schedule presented herein. The study assumes adoption in
December 2012, with implementation of 2013 rates effective January 1, 2013.
Subsequent years' rates in the five-year forecast would become effective January 1 of
each year.
Following implementation of this five-year rate strategy, the City might consider
implementing rate ordinance language providing for the automatic adjustments of rates
based on the Consumer Price Index (CPI) or other similar index to become effective
January 1 of each year. The intent of this policy is to avoid large rate increases that can
occur when rates are not adjusted annually in recognition of the constant rise in the cost
of delivering services.
Automatic index adjustments may generate excess revenues in some years, while falling
short of revenue requirements in other years. Additional revenues generated from the
annual index adjustments could be used to build operating reserves or to cash -finance
capital projects to help mitigate future debt issuance. Adjustments above the index
should be reviewed as part of the rate study.
•:;> FCS GROUP
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 23
APPENDIX
Available on Request
•:;> FCS GROUP
Spreadsheet Model Outputs
CITY OF YAKIMA
2012 Domestic Water System Rate Update
Study Report - 24
Meter Size
n
2013
11111111,
1111111
Existing
2014
ng H
IIIIIII
11111111
Proposed
2015
2016
2017
2018
3/4"
1"
1-1/2"
2"
3"
4"
6"
8"
10"
12"
$ 15.91
$ 20.09
$ 31.24
$ 44.67
$ 76.03
$ 120.82
$ 232.70
$ 453.59
$ 680.41
$ 993.82
$ 17.54
$ 22.14
$ 34.43
$ 49.23
$ 83.80
$ 133.17
$ 256.48
$ 499.94
$ 749.93
$ 1,095.37
$ 18.15
$ 22.92
$ 35.64
$ 50.96
$ 86.73
$ 137.83
$ 265.45
$ 517.44
$ 776.18
$ 1,133.71
$ 18.88
$ 23.83
$ 37.06
$ 53.00
$ 90.20
$ 143.34
$ 276.07
$ 538.13
$ 807.23
$ 1,179.05
$ 19.63
$ 24.79
$ 38.55
$ 55.12
$ 93.81
$ 149.07
$ 287.12
$ 559.66
$ 839.52
$ 1,226.22
$ 20.42
$ 25.78
$ 40.09
$ 57.32
$ 97.56
$ 155.04
$ 298.60
$ 582.04
$ 873.10
$ 1,275.27
Commodity
Rate
$/ccf
Line Size
2"
3"
4"
6"
8"
10"
12"
2013
.51
Existing
2014
1.46
1. 1111 1„,
y
Proposed
2015
1.51
2013
$6.00
$8.76
$17.54
$51.56
$109.82
$197.46
$319.12
Existing
2013
$1.51
2016
1.58
2017
1.64
on hir
II III
2018
1.70
Existing
Proposed
2014
$ 6.00
$ 8.76
$ 17.54
$ 51.56
$ 109.82
$ 197.46
$ 319.12
2015
$ 6.21
$ 9.07
$ 18.15
$ 53.36
$ 113.66
$ 204.37
$ 330.29
2016
$ 6.46
$ 9.43
$ 18.88
$ 55.50
$ 118.21
$ 212.55
$ 343.50
2017
$ 6.72
$ 9.81
$ 19.64
$ 57.72
$ 122.94
$ 221.05
$ 357.24
2018
$ 6.99
$ 10.20
$ 20.42
$ 60.03
$ 127.86
$ 229.89
$ 371.53
Proposed
2014
1.46
2015
1.51
2016
1.58
2017
1.64
2018
1.70
Daily water meter rental remains at $4.00 per day
Meter
Size
(inches)
Bi-Mth y
Usage
(ccf)
rr umiit+''
Existing
Bi -Mthly
Bill
3/4 6 $26.30 ($13.15/m)
2015
Bi -Mthly
Bill
$27.21 ($13.61/m)
$ Change
from
Existing
Estimated
No. of
Customers
$0.91 5,200
3/4
13
$36.52 ($18.26/m)
$37.78 ($18.89/m)
$1.26
3,900
3/4
22
$49.66 ($24.83/m)
$51.37 ($25.69/m)
$1.71
1,550
3/4
1
Meter
Size
(inches)
Meter
Size
(inches)
2
40
50
Bi-Mth y
Usage
(ccf)
75
106
200
300
Bi-Mth y
Usage
(ccf)
100
327
400
$75.94 ($37.97/m)
$95.14 ($47.57/m)
$78.55 (39.28/m)
$98.42 ($49.21/m)
11111 II c
Existing
Bi -Mthly
Bill
$127.04 ($63.52/m)
$172.30 ($86.15/m)
$309.54 ($154.77/m)
$455.54 ($227.77/m)
j" rl'I'llllluuiuuu1111
2015
Bi -Mthly
Bill
$131.40 ($65.70/m)
$178.21 ($89.11/m)
$324.92 ($162.46/m)
$475.92 ($237.96/m)
Existing
Bi -Mthly
Bill
$195.23 ($97.62/m)
$526.65 ($263.33/m)
$633.23 ($316.62/m)
2015
Bi -Mthly
Bill
$201.96 ($100.98/m)
$544.73 ($272.37/m)
$654.96 ($327.48/m)
$2.61
1,400
$3.28 250
$ Change
from
Existing
Estimated
No. of
Customers
$5.91
80
$15.38 30
$20.38 40
$ Change
from
Existing