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Home My WebLink About10/22/2024 03.A. Domestic Water Rate and Fee Study i4 =+ BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 3.A. For Meeting of: October 22, 2024 ITEM TITLE: Domestic Water Rate and Fee Study SUBMITTED BY: * Scott Schafer, Director of Public Works Mike Shane, Water/Irrigation Manager SUMMARY EXPLANATION: The City's Water/Irrigation Division and the FCS Group have prepared a presentation for the City's Domestic Water Rate and Fee Study for 2025-2029. In developing and setting rates and fees, it is important to base them on actual costs to ensure the rate structure properly supports the cost of providing the essential service, but is also fair and equitable to the users. ITEM BUDGETED: N/A STRATEGIC PRIORITY 24-25: A Resilient Yakima RECOMMENDATION: No action is needed. The Water Rate and Fee Study is to inform the City Council of the proposed rate and fee adjustments that are included in the proposed 2025-26 Budget. Rates and fees to be approved as part of final 2025-26 Budget. ATTACHMENTS: Yakima Water Rate Study Presentation - Final.pdf 3 _ _ .. . - - _ . .= --1•11 illialreillaa liWIfitheir- .- ' -,--7-.0 1- fr'l .i.---4...••' '•....1.--\ .....0'A, f 4''',• .''-./''',), --` ... AP... - .•. Water Utility Rate Study „..-d.,... ..- ;" ,., 4._ •••401%.1% _ •• ... goim.•-•••••,R '• .. 144 '. • . • • -•"', ••• _ ..... ., ,••1••• 801 , 4.111 • IMMO II , .... , - __': ' . .r • '• . ,A, Aplk . , •:•41.11111P- i — '. di . ' " ........ . ... 1 ° 1 . 1 I 1 — • - . - •1•••• ..dish • 'V '• . .711.•• 1!), 1' r- *Ai p,.. Mr" . ." I 1 I '.-- ..7 P.•••••A , 14 •ii -.SM.., lal• iiiii. i • • ..-_= ...... .... • ..— _. - iv . • 717 ; 1 I I I t • • .. 4'‘. i747.7" ''47'.' . .1 ' Il• 17 - .• 111. ,1 ' Fa •e 1 .I ........„. J •••,. .fl"a. ipp I _ , . lithi PPM' •• 1 • .7•771‘..7. .....41111r1V....4 ,.• .1 •.- , V. . k .. Niumm. . ' ..011. P.1,....„ 7 •:-- VI. - .,.. . 4. 111111•1111 ' 1111 am.' . . -I 1 II I ' nit V,I At 0.* . 0. r 'r. qr' . • "'IWO 10." Tage -Aa er , ....4„ i it, 4. -•' , .. .,......_- _ ., .,, .. .••k4 •egcg....a......._I.." . q... ...2,.,-. I . „groj ect Manage / . , , e . _ i' . ' _11_, Ili • - ' III October. 22 3 2024 -. opinion', 4•-•_... • .„ $. . • 3.•-_ " alai•••• :•I • . .t. • • I di 0 Z Ili - /- J ler i mp a .4::.• -- ‘ . I . - - 1- _ -1 7 ' ' - , • '4.' es.a 11 ^=•L'i, • . — • , , oig . . L.„...„. • ........ o... :i IllWor Ell ' . — , ./K rni?4 . .. • ilin"Ilair.-. '!47 V V .. 1 1116k e • , I L L L 46., 1 I . 001:i . •, .... 4.4 -..,..-) FCS....„11 .... . ., ,, . ___ Iv TT lir t„,......14,-9111- ._- _- ..imuirlru-, :...:_. .1 . - i p ill- a Bowman company 9•••-rwa 01" a• e01 O. s- .'7". • 4=1. •;•) Introduction / Background • Presented on wastewater and stormwater rate studies in July 2024 • Began work on domestic water utility rate study this summer Today's focus Overall revenue needs Connection charges Water Service Installation fee evaluation Future focus Inter-class equity evaluation Rate structure evaluation ':>FCS Slide 2 • . ) Introduction to UtilityRate Making • Utility rates are set to recover cost of providing service All utilities are self-supporting Hypothetical Example • Operating costs (regular / ongoing) » Employee salaries and benefits » Supplies and materials » Routine inspections and maintenance » Fleet replacement contributions » Interfund charges for services » Utility taxes • Capital costs Infrastructure replacement Year 1 Year 2 Year 3 Year 4 Year 5 • Facility upgrades Operating Capital ':; FCS Slide 3 a) •> Rate StudyOverview ♦ Policy Framework Technical Framework Fiscal Policies Reserves Operations & Maintenance Capital Funding Capital Debt Service Options Expenditures Connection Revenue Requirement Charges Equity & Rate Design Evaluation* Cost of Service Rate Structure Evaluation Adjustments ':>FCS Will be covered at a future meeting Slide 4 ♦ ♦;♦) StudyData and Assumptions ♦ F Operating Costs 2024 budget + 2025-26 supplemental budget requests Fund Balance 2024 starting fund balances Capital Expenditures 2024-2029 Capital Improvement Plan Revenues Validated customer billing statistics General Cost Inflation WA State Revenue and Economic Forecast Council, CPI, Staff input (3.5%) Construction Cost 20-City ENR Construction Cost Index (4.0%) Wages Just below General Cost Inflation (3.0%) Benefits Employment Cost Index 5-year average, Staff input (5.0%) City Utility Taxes Remaining at current rates (20%) Customer Growth Yakima Water System Plan data (0.3% per year) •:>FCS Slide 5 co •;•) Fiscal Policies Summary • Policy Purpos = Policy Target Operating Reserve Cushion to accommodate cash flow 60 to 90 days of operating expenses Combined fluctuations (Approximately$1.6-2.4m in 2024) target slightly higher than To meet emergency repairs, Minimum balance 2% of capital assets City's currento Capital Reserve unanticipated capital, and project (Approximately$1.Sm in 2024) policy of 25/o of cost overruns revenue Debt Service Compliance with existing debt Target: 2.0 or higher Coverage (DSC) covenants and maintain credit Legal Minimum: 1.25 worthiness for future debt >FCS Slide 6 cG •;•) Overview of City's Water Rates A. The charge for domestic water supplied within the city of Yakima shall consist of a ready-to- serve charge and a charge for water consumed. Ready-to-serve charges are as follows: Ready-to-Serve Charges per Two-Month Period 5% annual increases for 2020-23 Meters January January I January January January Size 11.2019 1,2020 l 1.2021 1.2022 1,2023 3i4" S21.68 $22.76 1523.90 $2510 $26.36 1" .27.36 28.73 130.17 31.68 ,33.26 2023 adopted rates maintained for 2024 1- 42.57 44.70 146.94 49.29 51.75 112" 2" 60.85 63.89 67.08 70.43 73.95 3" 103.58 108.76 114.20 119.91 .125.91 Fixed charge: scaled by meter size 4" .164.61 -172.84 1181.48 190.55 _200.08 » Standard practice with water utilities 6' 317.03 332.88 349.52 367.70 385.35 8" 617.97 .648.87 1681.31 715.38 751.15 10" 923.97 973.32 1.021.99 1.073.09 1.126.74 Consumption charge: single rate per UOC 12" 1.353.48 1.421.68 1.492.76 1.567.40 1.645.77 Multi-tier structure for single-family Charges for water consumed are as follows.expressed in rates per UOC.where"UOC"means unit residential evaluation in progress of consumption and equals one hundred cubic feet of water: January I January January January January Note:All rate comparisons will maintain this rate structure for today's discussion 11.2019 1,2020 1.2021 1,2022 1,2023 S1 80 $1 89 $1 98 S2 08 S2 18 Note:UOC = unit of consumption(748 gallons) •::>FCS Slide 7 0 i'j= - - �. } _ !!"9;'ter - K- F = .L ti +- _ :�5► "Ir .* }• •• _ '? ��"'. • Il — - - •a_• _ •-r I■_• - _ • _.' .- .��. 704111111.1.- .fin •- 011P. - �:. -_ _ - .w .� ` 1•• r1i ._ _- . site • -—• — ' j101161„... '.7.1 Revenue Requirement -, ,..... '7'. . e • - .-Lmnelt:., _}b■_1•e _ - -. w i T - • - _- 1 r 'II - ILLC . r ^ 4411FRInFirrqi/L-T111711111111. _ 11 - ; - ///////////. / / / / / / / / / / I / / 11 :IIIIII \. \ \ 1 \ \ \ \ \ \\` r • •;•) Capital Pro ram & Fund •n StrateJY • Escalated Capital Interfund Loan Repayment$5 $2,400,000 o 11% Grants $1,000,000 $4 Debt 5% $4,000,000 19% $3 Connection Charges $500,000 2III Cash 2% $13,700,0 63% $1 • $21 .6m in total escalated capital 2024 2025 2026 2027 2028 2029 $3.6m average annual ':; FCS Slide 9 N • •;•) Revenue Requirement Forecast Rate Funded Capital approaches annual capital ti $20 Data label legend: o • Increase % 4.5% $18 4.5%f • Monthly single-family rate $ 6.5% $37.52 $16 6.5% $34.35 $35.90 ow 6.5% $32.26 _ _ — � _ ma". .. all' $14 $30.29 $28.44 � � Es. owow $12 $10 $8 $6 $4 il $2 1111111 III! - 2024 2025 2026 2027 2028 2029 M Operating & Maintenance Existing Debt Service New Debt Service •:;>FCS m Rate Funded Capital Revenue @ 2024 Rates — -Revenue with Increases Slide 10 w •;•) Ending Fund Balance Projections • $8 c $4m debt issuance 0 $7 - Spent in 2025-2027 $6 - $4 MO MIRMO OM GM IND Mb OM OW MI AND ME MIN $2 $1IL $- 2024 2025 2026 2027 2028 2029 MI Combined Operating & Capital Cash — =90 Days of O&M + 2% of Assets — —25% of Rate Revenues (Current Policy) >FCS Slide 11 • •;•) 2024 Single- Family Monthly Water Rate Survey (7 ccf) • $90 $80 $70 - $60 $50 *it?'' $40 d $28 $30 $30 $20 $10 I I I $0 & gar -� ��, �' (h1 19 , s, ' / '/>' ' �� " J < QJ• ':;"CS Slide 12 t • ••v Bimonthly Ready to Serve Rate Schedule Forecast • maiiiiisi I 2025 2026 2027 2028 2029 3/4" $26.36 $28.07 r $29.89 $31 .83 $33.26 $34.76 1" 33.26 35.42 37.72 40.17 41 .98 43.87 1 1/2" 51 .75 55.11 58.69 62.50 65.31 68.25 2" 73.95 78.76 83.88 89.33 93.35 97.55 3" 125.91 134.09 142.81 152.09 158.93 166.08 4" 200.08 213.09 226.94 241 .69 252.57 263.94 6" 385.35 410.40 437.08 465.49 486.44 508.33 8" 751 .15 799.97 851 .97 907.35 948.18 990.85 10" 1,126.74 1,199.98 1,277.98 1,361.05 1,422.30 1,486.30 12" 1,645.77 1,752.75 1,866.68 1,988.01 2,077.47 2,170.96 Consumption I 2024 2025 2026 2027 2028 P 2029 Per UOC $2.18 $2.32 F 47 $2.63 $2.75 $2.87 ':;)FCS Slide 13 Note:UOC= unit of consumption(748 gallons) 8 } — !!"9 r - K F = _ :�5► .A }• •• _ '? ��"'.1 Ili — - •ate• _ •�•r �_ I . _ _.' .- .;�_ 4111;4111"-11111.1041111L. ' ,_,____,_ iii=____ Connection Charges -v. A e ,� —1 .. — t 11 __ _ _. ..mnelw-,,. ,41p9�1w ,, - . {_ '. -- mow..• �e� r _ .. _ a -i_ _- � �. f f , � _ ■ it - -....... ,••.-• :,' 041;17-'i • i L L. C . i ,r'�` ^ ~� ///.////////. / / / / / / / / / / I / / 1 1 I I I III \• \ \ 1 \ \ \ \ \ \ '\ \\`' :� r "..1 •;•) Cityof Yakima s Current Connection Charges • Domestic Connection Charge 3/4" $ 683.00 1 " 7.56.050 Domestic charge. $ 1 .139.00 1 1/2" ...facilities related to the supply, treatment, transmission, $ 2.278.00 2" _ storage and pumping of domestic water ... $ 3,644.00 3" $ 7,289.00 4" _ $ 11 .388.00 6" — 12" Fee Calculated by Manager Based on Water Demand Distribution Connection Charge 3/4" C S 595.00 1 " 7.56.055 Distribution connection charge. S 992.00 1 1/2" ... facilities related to the distribution of domestic water S 1 .984.00 2" ... S 3,175.00 3" sk, 1 S 6,350.00 4" S 9.922.00 6"-12" Fee Calculated by Manager Based on Water Demand FCS Source: 2024 Fee Schedule Slide 15 8 a since •;•) Charges calculated in 2012, no chang Example: Domestic Charge vs. Construction Cost $1,200 $1,000 • • • • • . . • . • . • • • . . . • $970 • • • • • • $800 $600 $400 $200 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Domestic Charge (actual) Domestic Charge (w/ inflation) •:>FCS Slide 16 8 ♦ •;•) General Characteristics of Connection Charges One-time charges, '_ Air For citywide not ongoing rates , k ; , facilities Jr 4 Provide revenue for = Recover capital as growth14. _ = L�. proportionate share ,iti• �' • 7:= �' of cost of capacity occurs -r, 4 ' ' �7 ; � , ;1i, ` P Y v -+�'3' y µtad r '� a' l• vio 7�,y,'i° saw _.i" , 7 1s• y Include future & r r.. ' .., 4 `' a. u i = t ,� A �v , �z � For capital only, in existing �> "4 both calculation I infrastructure costs r;`, and in use Properties which are already developed do not pay charges unless they redevelop to more •::)FCS intense use Slide 17 N 0 •;•) Connection Charge State Law for Cities • f._ WASHINGTON STATE LEGISLATURE Revised Code of Washington (RCW) 35.92.025 ✓ Equitable share Cities and towns are authorized to charge property owners seeking to connect to the water or sewerage system of the city or town as a condition to granting the right to so connect, in addition to the cost of such connection, such ✓ Can include up to 10 years of reasonable connection charge as the legislative body of the city or town shall interest determine proper in order that such .,ro ^.rty owners shall bear their equi dale shares ch - "sterr . The equitable share may include interest charges applied from the date of construction of the water or sewer ✓ No stated limit on timeline for system until the connection, or for a period not to exceed t __ ars, at a rate future facilities included in the commensurate wi° rate of interest applicable to -' °4, or town at "-f3 =.Pf construe , or major rehabilitation of the water or sewer system, charge or at the time of installation of the water or sewer lines to which the property owner is seeking to connect but not to exceed ten percent per year: PROVIDED, ✓ No mention of excluding grant That the aggregate amount of interest shall not exceed the equitable share of the cost of the system allocated to such property owners. Connection charges funded or donated facilities collected shall be considered revenue of such system. (conservatively excluded) •:>FCS Slide 18 N •;�) Calculation Methodology Existing Future Cost Basis Cost Basis Connection Charge + = per Meter Capacity Equivalent (MCE) Estimated System Capacity '., FCS Slide is N N . ) Calculation Summary.• • Calculation represents the maximum allowable charge • Many customers pay both = $2,891 Description 111 Domestic Distribution Existing Cost Basis $48.7 million $17.9 million Future Cost Basis $1.2 million $13.3 million Total Cost Basis $50.0 million $31.2 million System Capacity 28,065 MCEs 28,065 MCEs Proposed Charge per Meter Capacity Equivalent $1,780 $1,111 ':; FCS Note:Totals may be slightly off due to rounding Slide 20 N t4 •;•) Resulting Domestic Schedule • Meter Domestic Domestic $ Size Existing Calculated increase 3/4" —m — $683 Ir — $1,780 $1,097 1 " $1,139 $2,966 $1,827 1 1/2" $2,278 $5,933 $3,655 2" $3,644 $9,494 $5,850 3" $7,289 $18,988 $11,699 111 4" $11,388 $29,669 $18,281 • 6" — 12" Fee Calculated by Manager Based on Water Demand FCS Slide 21 N •;•) Resulting Distribution Schedule • Meter Distribution Distribution $ Size Existing Calculated increase 3/4" �� $595 mir - $1,111 . $516 mil 1 " $992 $1,851 $859 1 1/2" $1,984 $3,702 $1,718 I 2" $3,175 $5,924 $2,749 3" $6,350 $11,849 $5,499 111 4" $9,922 $18,514 $8,592 • 6" — 12" Fee Calculated by Manager Based on Water Demand FCs slide 22 N al •;•) Connection Charge Surveywith Update • $7,000 $6,000 1 $5,000 $4,000 Distribution: $1,111 Domestic: $1,780 $3,000 Distribution: $595 Domestic: $683 $2,000 $1,000 I Hill s_ ._. 1_, 1 ._ I_ •& r 6 co ee � e aQ -� a �a c$1 & N6 •be' V e •c4 .a lko�� yrc �\t � �•to � \a �a � a �J \ae T e � •� L . 0 � o ) e4 a 4 J cu • � sc.� s • 2,` a� o e` ,a >FCS *Kennewick and Pasco Slide 23 Connection Charge ■ Domestic Charge Distribution Charge assume 10,000 sq ft lot N a) i'j= __ - } _ !!"9 r K :, " = .L ti +- ► .A }• •• _ '? �Z+�. -. • •ate• _ �Tr� I._ - _ .. _.' .- .�A. D`' 4s � _ ^ ue- _- ~ - 0 Ail Installation Fee Evaluation „ . e • • - • ;' / --, ; bra\\ _ , _^` r 1 ��---� .' . 4. • 1N1117-' IIIIII j iLLC •'. i ~� ///.////////. / / / / / / / / / / I / / / 1 .1I I III \- \ \ 1 \ \ \ \ \ \ ‘\ \ \\`' :•• r N -.1 •;•) Introduction • • City staff requested that FCS facilitate an update to these fees DOMESTIC WATER INSTALLATION AND CONNECTION FEES ITEM DESCRIPTION YMC 7.56 and YMC 7.68 Fee Amount Installation Fees 3/4" S 1 ,285.00 1" S 1 ,325.00 1 1/2" — 12" (Fee Based on Actual Material, Labor and Equipment Cost) Actual • Fees intended to cover labor and cost of meter + service line • Water department staff costed out a detailed work order for each ':; FCS Slide 25 Co • •••) Current Fees vs. Costs •• $6,000 $5,349 $5,000 $4,968 • 2024 costs based on average actual cost $4,000 estimate to perform $3,000 the service $2,000 $1,285 $1,325 • Current fek._ $1,00o significantly under $o recoverctuai cost 3/4 Inch 1 Inch • 2024 Fee 2024 Cost ':; FCS Slide 26 cG •;•) Installation Fees: Example Phase In Plan • • Consider reevaluating costing out of work orders every few years 3/4 Inch Installation Fee Phase In $6,000 $4,968 $4,231 $4,000 $3,495 $2,022 $2,758 $2,000 $1,285 $0 IF 1 _, _.ii - I 2024 2025 2026 2027 2028 2029 1 Inch Installation Fee Phase In $6,000 - $5,349 $4,544 $4,000 $3,739 $2,935 $2,130 $2,000 $1,325 $0 2024 2025 2026 2027 2028 2029 >FCs Slide 27 w 0 • ;• Survey) Installation Fee and Connection (3/4 ) • • $6,000 $5,000 Jurisdictions fees may or may not include $4,000 asphalt restoration $3,000 $2,000 $1,000 n Mill [ 'lilt $0 r�� `� ��e �c., mac• aca \ar .ei a�� dab �ea1 ��` �� o�� Quo ��c <`r` •J•S '79o� •ok�• \C Cle Elum: Actual cost At" •:; FCS Liberty Lake: Actual cost + $140 Slide 28 w j=i' - - } — !"9 r - K :, " = .L ti +- -. :�►'- "Ir .A }• •• '- - r--• • - ' •a•s• •_ �r• �_ - _ _.' .w .��. ''.. . .....11.4ik .� ry _ Summary __. e '_ 1 1 _ . i■r\ __.-- I , r . -,1' t -\ . at - t I �j i L L C .•rt., 1 i =-- ///.////////. / / / / / / / / / / I / / / 1 I I I III \. 1 \ \ \ \ \ \ \ \ \ \ '', . \\`' r W N •;•) SummaryFindingsof • • Revenue requirement » 6.5% annual increases from 2025-2027 » 4.5% annual increases for 2028 and 2029 • Connection charges Domestic charge: $1 ,780 per MCE Distribution charge: $1, 111 per MCE • Installation fees » 3/4" Installation fee: $4,968 » 1 " Installation fee: $5,349 • Next steps •:>Fcs Slide 30 Thank you ! Questions? Tage Aaker, Senior Project Manager (425) 615-6487 (direct) tagea@fcsgroup.com www.fcsgroup.com • FCS a Bowman company w