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BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEM ENT
Item No. 2.
For Meeting of: October 17, 2018
ITEM TITLE: 2019 Budget Preparation#3
SUBMITTED BY: Ana Cortez,Assistant City Manager
SUMMARY EXPLANATION:
See attached.
ITEM BUDGETED:
STRATEGIC PRIORITY:
APPROVED FOR
SUBMITTAL: City Manager
STAFF RECOMMENDATION:
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description Upload Date Type
d session 3 10/12/2018 Caw Memo
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YAKIMA 2019
10/12/2018
RESTRICTED FUNDS
10/12/2018
4
BEFORE OVE ON TO RESTRICTED
• DEBT OVERVIEW
• NATIONAL LEAGUE F CITIES
• YES?
• NO?
• CLEAN CITIES PROGRAM
• PROGRAM DETAIL
• COST/FEE
• DEFICIT
• WHERE ARE WE AS OF 10.11.18? MINUS 61K = DEFICIT
10/12/2018
D E BT OV E RV E
•
A`x
What is our total debt?
• How muchdo we pay for what?
• Where do the payments come from?
10/12/2018
' EST ' ICTE � FUNS
10/12/2018
.
RESTRICTED FUNDS : .F
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2019- Proposed 2019- Proposed DELTA
INTERNAL SERVICE FUNDS' Expenses Revenues
Equipment Rental $ 5,618,157.00 $ 4,746,378.00 $ (871,779.00)
Environmental Fund $ 222,950.00 $ 145,000.00 $ (77,950.00)
Public Works Admin $ 1,258,251.00 $ 1,240,201.00 $ (18,050.00)
$ 7,099,358.00 $ 6,131,579.00 $ (967,779.00)
10/12/2018
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2019- Proposed 2019- Propose DELTA
EMPLOYEE BENEFITS RESERVE + RM Expenses Revenues
Unemployment Compensation $ 188,629.00 $ 221,343.00 $ 32,714.00
Employees Health Benefit $ 13,649,443.00 $ 14,189,179.00 539,736.00
....................
Workers Comp $ 2,223,444.00 $ 1,497,704.00 $ (725,740.00)
Wellness/EAP Fund $ 66,900.00 $ 100,000.00 $ 33,100.00
Risk Management $ 4,318,852.00 $ 4,345,936.00 $ 27,084.00
$ 20,447,268.00 $ 20,354,162.00 $ (93,106.00)
10/12/2018
R KE RS CO
{$ n
• Why?
• Large Cairns
• Next Steps?
• State mandated assessment to determine if we can increase for employer and
employee
• AWC Co-op
• WA program
• Goal?
• Find most cost effective model to handle workers comp
10/12/2018
MACRO VIEW OF RESTRICTED FUNDS •. a
NU 11111r
OTHER GOVERNMENTAL 2019- Proposed 2019- Proposed DELTA
Expenses Revenues
Economic Development $ 116,400.00 $ 119,356.00 $ 2,956.00
Community Development $ 1,509,331.00 $ 1,681,434.00 $ 172,103.00
Community Relations $ 659,140.00 $ 659,600.00 $ 460.00
Cemetery $ 297,153.00 $ 298,500.00 $ 1,347.00
Emergency Services $ 1,357,829.00 $ 1,412,809.00 $ 54,980.00
Public Safety Communication $ 4,427,779.00 $ 4,209,740.00 $ (218,039.00)
Police Grants $ 417,918.00 $ 430,000.00 $ 12,082.00
Downtown Improvement District $ 193,924.00 $ 200,340.00 $ 6,416.00
Trolley $ 31,699.00 $ 31,704.00 $ 5.00
Front Street $ 3,500.00 $ 3,735.00 $ 235.00
Tourism Promotion (Conve. Ct) $ 1,768,274.00 $ 1,773,250.00 $ 4,976.00
Capitol Theater $ 442,356.00 $ 452,720.00 $ 10,364.00
.00000000 PFD Revenue-Convention Ct $ 958,395.00 $ 946,000.00 $ (12,395.00)
Tourism Promotion Area $ 690,000.00 $ 690,350.00 $ 350.00
PFD Revenue - Capitol Theater $ 683,400.00 $ 711,250.00 $ 27,850.00
$ 13,557,098.00 $ 13,620,788.00 $ 63,690.00
10/12/2018411 POINTS OF INTEREST ABOUT
• CAPITOL THEATRE
• $25,000 increase request — operating
• Increase of 3% in budget due to lease increases
• $2,000 increase in maintenance and repair line item
• Source: Lodging Tax/PFD
• CONVENTION CENTER
▪ $36,000 increase for Community Service Program including wages for
Convention Center staff and management fee for Yakima Valley Tourism.
• $5,000 increase for utilities related to Yakima Valley Sports Commission
• $120,000 for technology improvements at the Center
10/12/2018
t."
2019- Proposed 2019- Proposed DELTA
CAPITAL FUNDS Expenses Revenues
Arterial Street $ 12,077,639.00 $ 10,789,713.00 $(1,287,926.00)
CBD Cap Improvement $ 10,838,560.00 $ 10,821,250.00 $ (17,310.00) ,
Capitol Theater Construction $ 60,000.00 $ 60,000.00 $
Yakima Rev. Development Area $ 11,500,142.00 $ 13,000,000.00 $ 1,499,858.00
Parks and Rec $ $
Fire $ 80,000.00 $ 163,000.00 $ 83,000.00
Law and Justice $ 570,000.00 $ 586,450.00 $ 16,450.00
Public Works $ 838,584.00 $ 1,231,948.00 $ 393,364,00
REET 2 $ 775,320.00 $ 1,147,500.00 $ 372,180.00
Street Capital Fund $ 550,000.00 $ 600,000.00 $ 50,000.00
Convention Center Cap $ 1,013,600.00 $ 759,100.00 $ (254,500.00),
Cum Reserve Cap Imp $ 33,620.00 $ 45,000.00 $ 11,380.00
$ 38,337,465.00 $ 39,203,961.00 $ 866,496.00
10/12/2018
R E ET OVE RV I E
• LEAVE ? $40,000
• LEAVE TRAFFIC CALMING? $130,000
10/12/2018
Public Works Trust Construction Fund REET 1
Statement of Revenues,Expenses, and Changes in Fund Balance
Actual Projected Actual @ 122717 Projected Projected
2015 2016 2017 2018 2019 .
Beginning Balance $750,742.18 $1,171,475.77 $1,518,084.14 $2,131,718,55 $2,644-263.21
Revenues:
Local Real Estate Excise Tax 977 069.94
, 878,729.58 1,040,151.81 904,592.00 1,147,500.00
Interest From Investments 2,000.00
2,000.00 0.00 0.00 0.00
Residual Equity Transfer(Water/Wastewater-
2011) 0.00 0.00 0.00 0.00 0.00
,
Operating T i 8e8(8. --I-2011) 0.00 0.00 0.00 0.00 0.00
Operating T ) .fer(Irrigatic)rt-2()11) 0.00 0.00 0.00 0.00 0.00
Grade Separation Stormwater Loan 0.00 0.00 0.00 0.00 0.,00
Tsf from WW to 342 84,448.00 84,448.(10 84..447.84 84 448.00 84.448.00
, .
Purchasing Remodel From County 0.00 0.00 0.00 0.00 0.00
Total Revenues 1,063,517.94 965)1-1'7.58 1,124,599.65 989,040.00 1,231,948.00
10/12/2018
. ....
'ublic Works Trust Construction Fund REET 1
itatement of Revenues,Expenses,and Changes in Fund Balance
Actual Projected Actual g 122717 Projected Projected
2015 2016 2017 2018 2019
Expenditures
Debt Service(PWTF-1818 Underpass End
date 2031) 0.00 0,00 0,00 0,00
Debt Service i 1 8 i 8 RR Grade Stormwater $4.4.48.00 a4,447.84. 84,447,84 84,447,84 84.447,84-
,
Debt Service(P1455-Fruitvale Cn1 Phase II
mat date-2011) 0,00 0.00 0,00 0,00; 0,00
Debt Service(Sun Dome Cray Bnd mat date .
,
2023) 40,000.00 40,000.00 146 689,60 1413,412.50 150.000,00
Debt Sery Fd(1998 Street Bond mat date
20081 0,00 0,00. 0.00 0,00 : 0.00 :
....
Debt Service(Fire Station 92 WV Add mat
date 20221 75,360,00 72.,610,00' 74.735,00 72,035,00 74.535.00
Debt Service(3rd Ave Mead Walnut mat
dare 2019) 120,475_09 119,475.00 120,631_25 121,600,00 119.600.00
Debt Sery Kiwanis(UppeiT — Dev line of credit
mat date 2016) 107,500,00 OAK) 0.00 4.00
Projr11783-City Hall Facilty
IrtreroverttentrRepur*s 54,701-35 , 41,736,37 24,161-55 50.000,00 50,000_00
Proia2214-W Nobhill Grind&Overlay
Pro2285 2nd St Sidewalk Cousin', 60,300,00 60,300.00' 60,300.00 0,00 0,00
P2351 Franklin Park Parking Lot
Construction Contingency . 1.000,000,00
Parking Lot Maim'
Parks'Expanses to be paid by REET I I .
125,000,00
REET to Parks MI-K Pool 40,000.00
.
Infrastructure-Streets 130,000,00
Traffic Signal Improvements 65,000.00
Capital Transfer to Parks Capital Fund 100,000.00 100,000.00. 0.00 0.00 0,00
Capital Transfer to Fire Capital Fund I 0.00 100,000.00 0.00, 0.00
Capital Transfer to 321 Project 2284 DYF I
Phase 4 0.00 0.00. 0.00 0.00 0.00
Total Expenditures 642,784.35 618,569,21 . 5 I 0.965.24 476,495,34 1,838,582,84
Revenues over(under)Expenditures 420,733.59 346,608,37 613,634.41 512,544.66 (606,634,34)1
Ending Fund Balance 11471.475_77 11.518,084,14 $2.131,718_55 $2.644.263.21 $2,037,62837
Note, Current practice is to maintain at least$500,000
in this Fund for capital corrtingencies/emergencies,
............
10/12/2018
REET 2 Capital Fund 343
Statement of Revenues, Expenses
Actual Actual Actual Projected Projected
2015 2016 2017 2018 2019
Be? t *le Balance $551,437.74 $352,960.99 $256,318.78 $596,018.08 $811,507.31
Revell es:
1 4
Local Real Estate Excise Tax 977 069 93 878 ,729 56 17 040/151.81 993 135.00 1?147 500.00
Interest From Investments 2 111.00 27 000.00 0.00 0,00 0.00
Contribution for Plaza 0.00 0.00 0.00 0.00 0.00
Total Revenues 9795 069•93 8809 729.56 1 04059
151.81 993 135.00 1 147 500.00
10/12/2018
................
REET 2 Capital Fund 343
Statement of Revenues,Expenses
Actual Actual Actual Projected Projected
2015 2016 2017 2018 2019
Expenditures
Debt Service(Downtown
Reviudizatk n mat date 2022) 131,940.00 132,065.00 136,815.00 131,865.00 132,365.00
Debt Service(1818 PWTF t
Underpass End date 2031) 175,131.68 ,175,831.77 175,006.26 174,180.77 : 173,355.25
Debt Service(3rd Ave Mead Walnut
mat date 2019)Revitalization 120,475.00 119,475.00 120,631.25 121,600.00 119,600.00
Street Maintenance Supplies 350,000.00 350,000.00 268,000.00' 350,000.00 350,000.00
Construction Contingency 0.00 0,00 0.00 0,00 800,000.00
Street Equipment/Replacement 0.00 0.00 0.00 0.00 0.00
Capital Transfer to Arterial St P2229
Nobllill Bridge Repair 0.00 0.00 0.00 0.00 0.00
P 1944 River Rd/16th Ave Fruitvale I
Yakima Plaza-Design Engineering
(tsfr to 321) 400,000.00 200,000.00 0.00 0.00 1 0.00
P2270 16th Ave Grinding&Overlay
Nob Hill-Wash Ave 0.00 . 0.00 0.00 0.00 0.00
0.00 : 0.00 0.00 0.00 1 0.00
Total Expenditures 1,177,546,68 977,371.77 700,452.51 777,645.77 1,575,320.25
Revenues over(under)
Expenditures (198,476.75) (96,642.21) 339,699.30 215,489.23 (427,820,25).
Ending Fund Balance $352,960.99 $256,318.78 $596,018.08 $811,507.31 $383,687.06
18
YAKIMA CONVENTION CENTER
CAPITAL FACILITY PLAN 2019-2022
In the past three years, work has been done developing plans for improving and maintaining
the convention center. This Capital Facility Plan advances that. The expansion of the Yakima
Convention Center has been in planning stages since 3015 when a market study concluded
there was a need for additional space for the center to remain competitive. After the Public
Facilities District (PFD) considered various scenarios, a modest expansion (I8,25O square foot)
was developed in the summer of3018.
�
These improvements will help us keep existing groups that could leave to other cities,
accounting for nearly$G million in annual economic loss. Add to that,the %8 conventions that
have left due to space and availability equals another$9 million lost imeconomic impact.
Two separate dedicated funding sources will be used tn fund the Capital Facility Plan:
Public Facility District (PFD): |n20O3 the City took the lead in forming aPFD. By state law these
PFD funds can only be used to build, maintain and/or operate the Convention Center. The PFD
financed the 2002/2003 expansion of the Yakima Convention Center by levying the sales tax
credit from the State of Washington. This revenue comes from state sales tax already being
paid by the buyers of goods locally. It was not a new or increased tax; it is a credit back from
the State.
Hote|/MmteXTmx (NMT): This tax is imposed on hotels and motels and was used to finance the
`
1996/97 expansion. In November 2019, the bonds for that expansion will mature. Postponing
the project could jeopardize the ability to renew those bonds with favorable rates, plus the loss
of the "double dip" additional lodging tax the City receives from the state enacted in 1997 for
the expansion. As a general rule, Bond Counsel has previously advised that the City continue to
pledge the Hotel/Motel tax revenue on any and all debt for the existing Convention Center to
assure continued collection of the tax.
In addition to the expansion, there are a variety of capital needs for the facility for the next four ^
years. Again, all are paid by the HN1T and PFD dedicated revenues.
2019
Architectural predesign,technical consulting, design-development
and contract documents to "bid ready" status. $567,208
Equipment needs for Sports Commission $5,000
19
Widen service hall & re-configure storage $55,000
Refinance existing PFD Bond $3,500,000
Upgrade & install AV in each meeting room $120,000
$4,247,200
2020
Upgrade existing carpet in building $288,800
Fire system upgrades $50,000
Bond for construction $12$00,000
$12,838,800
2021
Restroom upgrades in existing building $110,000
Replace wall finishes in existing building 5200,000
$310,000
2022
Re-Roofing original building & North addition $255,000
VIC Relocation $280,000
$535,000
10/12/2018
Proceeds
Payoff all Current Available for Interest Term Annual Debt Term Annual Debt
Amount Financed Debt Project Rate (Years) : Service (Years) Service
15,000,000 3,500,000 11,500,000 3.0% 25 857,150 30 761,803
16,000,000 3,500,000 12,500,000 3.0% 25 914,294 30 812,590
17,000,000 3,500,000 13,500,000 3.0% 25 971,437 30 863,377
18,000,000 3,500,000 14,500,000 3.0% 25 1,028,581 30 914,163
15,000,000 3,500,000 11,500,000 3.3% 25 885,819 30 791,482
16,000,000 3,500,000 12,500,000 3.3% 25 944,874 30 844,247
17,000,000 3,500,000 13,500,000 3.3% 25 1,003,929 30 897,013
18,000,000 3,500,000 14,500,000 3.3% 25 1,062,983 30 949,778
15,000,000 3,500,000 11,500,000 3.7% 25 924,842 30 831,982
16,000,000 3,500,000 12,500,000 3.7% 25 986,498 30 887,448
17,000,000 3,500,000 13,500,000 3.7% 25 1,048,154 30 942,913
18,000,000 3,500,000 14,500,000 3.7% 25 1,109,810 30 998,379
15,000,000 3,500,000 11,500,000 4.0% 25 954,696 30 863,039
16,000,000 3,500,000 12,500,000 4.0% 25 1,018,343 30 920,575
17,000,000 3,500,000 13,500,000 4.0% 25 1,081,989 30 978,111
18,000,000 3,500,000 14,500,000 4.0% 25 1,145,636 30 1,035,647
10/12/2018
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10/12/2018
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2019- Proposed 2019- Proposed DELTA AK- .
UTILITIES- OPS Expenses Revenues •
‘".4 111 ,1:
Airport $ 1,390,426.00 $ 1,390,502.00 $ 76.00
Stormwater $ 3,737,204.00 $ 3,950,444.00 $ 213,240.00
Transit $ 9,501,399.00 $ 9,562,225.00 $ 60,826.00
Refuse $ 7,607,243.00 $ 7,477,946.00 $ (129,297.00)
Wastewater $ 25,393,001.00 $ 23,578,045.00 $(1,814,956.00)
Water $ 10,332,928.00 $ 10,343,000.00 $ 10,072.00
Irrigation $ 1,876,517.00 $ 1,859,100.00 $ (17,417.00)
Utility $ 1,871,700.00 $ 1,871,593.00 $ (107.00)
$ 61,710,418.00 $ 60,032,855.00 $(1,677,563.00)‘
10/12/2018
1-***-"'";\
•
2019- Proposed 2019- Proposed 'DELTA
UTILITIES- CAPITAL Expenses Revenues
Airport $ 4,810,000.00 $ 4,987,150.00 $ 177,150.00
Stormwater $ 3,085,000.00 $ 1,200,000.00 $(1,885,000.00)
Transit $ 1,270,000.00 $ 1,462,000.00 $ 192,000.00
Wastewater- Reserve $ 1,250,000.00 $ 1,000,000.00 $ (250,000.00)
Wastewater Construction $ 3,560,000,00 $ 2,900,000.00 $ (660,000.00)
Water $ 2,135,000.00 $ 565,000.00 $(1,570,000.00)
Wastewater $ 3,025,000.00 $ 501,500.00 $(2,523,500.00)
Irrigation $ 5,367,542.00 $ 7,217,060.00 $ 1,849,518.00
$ 24,502,542.00 $ 19,832,710.00 $(4,669,832.00):
10/12/2018
RATES- POLICY #16
1. Adopt Studies and Rates
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RATE STUDY Approve Irrigation Rate Approve Rate Analysis for 2019-2021 Irrigation increase of 5.5%
APPROVAL Irrigation Analysis each year for four years on Capital expenses:2019,20,21,22. $ 67,300.00.$ 71,000.00 $ 75,000.00=$ 80,000.00
RATE STUDY Approve Stormwater Rate Study that indudes increase of 2.5%in
APPROVAL Stormwater Stormwater Rate increase 2019,2020,21,22 $ 54,300.00.$ 96,700.00 $ 99,100.00.$ 101,500.00
....................
RATE STUDY Approve Rate Study that indudes Strong waste surcharge 4.2%in
APPROVAL Wastewater Wastewater Rate Increases 2019 and 24%in 2020,21,22. $ 37,444,00 $ 22,295.00 $ 22,830.00 $ 23,378.00
RATE STUDY
APPROVAL Wastewater Wastewater Rate Increases Approve Rate Study that includes retail increase 3°%(2019-2022) $ 557,879.00 $ 574,616.00 $ 591,854.00 $ 609,610.00
RATE STUDY Approve Rate Study that includes Sewer pretreatment fee 17%in
APPROVAL Wastewater Wastewater Rate Increases 2019and 4,3%in 2020,21,22 $ 140,182.00 $ 41,486.00 $ 46,270.00 $ 45,130.00
True up Stormwater utility tax to be consistent with refuse.From
U/F Tax Stormwater Utilty Tax Rate Increase 6%to15 $ 250,000.00 $ 250,000.00 $ 250,000.00 $ 250,000.00
25
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IRRIGATION STUDY
2019
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Irrigation Proposed Rate Increase
To keep up with inflation, ensure further erosion of fund reserves, adequately prepare
for issuing construction bonds and properly plan for infrastructure improvements,
including Nelson Dam, City Council must periodically adjust irrigation.
Irrigation's funds come from two rates that are part of a combined bill. Operation and
maintenance revenues are collected in the 475 fund and capital improvement are
collected in the 479 fund. Rates are calculated based on lot size, total square feet of lot
times the rate. The annual charge is divided by six about billed with the bi-monthly utility
bill.
The above stated goals can be met by increasing the irrigation operation and
maintenance rate by 3% each year for four years, resulting in increased revenue by
about $55,000 in year one to about $60,000 in year four. In order to meet the goals for
capital improvements the capital rate will need to be increased by 5.5% each year for
four years resulting in increased revenue of about $67,000 in year one to about $80,000
in year four. See rate worksheets for details of rates, these sheets include two other
options for the required increase in revenue. This rate increase is for 2019-2022.
These rate adjustments will result in an increase to a customer of$1.64 every two
months in year one and $1.87 every two months in year four for an average lot size of
7,000 square feet. See Example bill worksheet for details about how rate adjustment will
affect customers with other lot sizes.
Operation and Maintenance rates were last adjusted in 2014.
Capital Improvement rates have not been adjusted since rate was established in 1998.
Operation and Ma ntenance Rate
Current
87,465,843 Total assessed acres
$1,854,275.88 O&M Revenue
$1,224,521.81 CIP Revenue
$ 0.0212 O&M Rate per square foot
$ 0.0140 CIP Rate per square foot
$ 0.0352 Total rate per square foot
Oprtion 1 5%each year for 2 years
5%-Jan,1,2019 5%-Jan.1,2020 Cumulative total of revenue
Annual inc9ease in Revenue $ 92,713.79 $ 97,30.46 $190,063.28 10.3%
M Rate 0,0223 (1) (2) okr$4 (1) (2) Cumulative total of rate increase
InCreate in Rate $ 0.0011 $ 7.42 $1.24 $ 0.0011 $ 7.79 $ 1.30 $ 0.0022
Opetion 2 4%each year for 3 years
4%-Jan.1,2019 4%-Jan.1,2020 4%-,,ten.1 2021 Cumulative total of revenue
AtmuM increase in Revenue $ 74,171.04 $ 7 2,137.:: $ 80,22139 $231,532.30 12.5%
0,0220 (1) (2) 0.0229 (1) (2) 0.0236 (1) (2) Cumulative total of rate increase
Increase in Rale $ 0.0008 $ 5.94 $0.99 $ 0.0009 $ 6.17 $ 1.03 $ 0.0009 $ 6.42 $ 1.07 $ 0.0026
Option 3 3%each year for 4 years (Recommended)
3%-Jan.1,2019 314-Jac.1 2020 3%-Jan.I„2021 3%-Jan.1,2022 Cumulative total of revenue
AnnnM In :.• :.in Re98800 $ 5$02323 $ 57,29712 $ 59J316.04 $ 60,78152 $232,727.96 12.6%
(
ram 0&M Rate O*0218 (1) (2) 0..0225 (1) (2) D.0232 (1) (2) 0,0239 (1) (2) Cumulative total of rate increase
incr(.,•,9.•In Rate $ 0,0006 $ 4.45 $0.74 a 0,0007 $ 4.59 $ 0.76 $ 0.0007 $ 4.72 $ 0.79 $ 0.0007 $4.86 $0.81 $ 0.0027
(1)Annual increase in rate for an average 7,000 square foot lot
(2)Bi-monthly increase Sr rate Mr an average 7,000 square foot lot
5%each year for 2 years $ 384,762.24 Collected after 4 years
4%each year for 3 years $ 311,755.69 Collected after 4 years
3%each year for 4 years $ 232,727.96 Collected after 4 years
Capital Improvement Rates
Current
87,465,843 Total assessed acres
$1,854,275.88 O&M Revenue
$1,224,521.81 GIP Revenue
$ 0.0212 O&M Rate per square foot
$ 0.0140 CIP RaM per square for
$ 0.0352 Total rate per square foot
Option 1 1 %®each year for 2 years
10%-J99.1,201 9 1 0%-Jan.1,2020 Cumulative total of revenue
Annual inmease in Revenue $ 122.45218 $ 13,1.697.40 $257,149.58 13.9%
New CIP Rate $ 0,0154 (1) I (2) S 0.0169 (1) 1 (2) Cumulative total of rate increase
Incumne in Rate $ 0.0014 $ 9.80 $ 0.0016 $ 10.78 $ 1.80 $ 0.0029
Option 2 7%each year for 3 years
7%-fan,1,Nis 7%-Jan.1,2020 753-Jan.1,2021 Cumulative total of revenue
Annual In ut,z in Reveriue $ 85,716.53 $ 91,710.68 $ 98,136.85 $275,570.06 14.9%
New ClP Rate 5 0,0150 (1) (2) $ 0.0160 (1) (2) $ 0,0172 (1) (2) Cumulative total of rate increase
Increase in Rate $ 0.0010 $ 6.86 $1.14 $ 0,0010 $ 7.34 $ 1.22 S 0.0011 $ 7.85 $ 1.31 $ 0.0032
option 3 6.5%each year for 4 years (Recommended)
5.5%-Jan.1,2019 5.5%-Jan.1,2020 5,5%-Jan,1,2021 5.5%-Jan.1,2022 Cumulative total of revenue
Arinura increase in Reverme $ 67,346.70 $ 71,052.88 a 74.960.79 $ 79,053.63 $292,445.99 15.8%
!slew CIP Rate $ 0.0148 (1) (2) $ 0.0156 (1) (2) $ 0,0164 (1) 1 (2) $ 0.0173 (1) I (2) Cumulative total of rate increase
0,0006 $6.33 $1.05 $ 0.0033
(1)Annual increase in rate for an average 7,000 square foot lot
(2)Bi-monthly increase in rate for an average 7,000 square foot of
10%each year for 2 years $ 526,544.38 Collected after 4 years
7%each year for 3 years $ 373,706.91 Collected after 4 years
5.5%each year for 4 years $ 292,445.99 Collected after 4 years
Example Bills
Combined ill at ec e a Rate Increas
Lot Size in 2019 i- Bi-Monthly 2020 Bi- Bi-Monthly 2021 Bi- Bi-Monthly 2022 B- Bi-Monthly
Square Foot Monthly Increase Monthly Increase Monthly Increase Monthly Increase
5,000 $ 30.51 $ 1.17 $ 31.73 1.22 $ 33.00 $ 1.28 $ 34.34 $ 1.33
7}000 '$ 42.71 $ 1.64 $ 44.42 $ 1.71 $ 46.21 $ 1.79 $ 48.07 1.87
10,000 61.01 $ 2.34 $ 63.46 $ 2.45 $ 66.01 ` $ 2.55 $ 68.67 $_ 2.67
15,000 $ 91.52 $ 3.52 $ 95.18 ; $ 3.67 $ 99.01 $ 3.83 $ 103.01 $ 4.00
20,000 122.02 4.69 $ 126.91 $ 4.89 " $ 132.02 $ 5.11 $ 137.35 $ 5.33
40,000 $ 244.04 9.37 253.82 9.78 264.03 10.21 274.70 10.66
30
City of Yakima
91.
414
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1 • 7
NI11111111111r.
1 4-
N1,4Z
Report for
2014 Wastewater,
Industrial Wastewater &
Stormwater Rate Study
December 2014
FCS GROUP
7525 166th Avenue NE, Suite D-215
Redmond, WA 98052
7: 425.867.1802 I F: 425.867.1937
This entire report is made of readily recyclable materials,
including the bronze wire binding and the front and
back cover,which are made from post-consumer
recycled plastic bottles.
31
94. 4 )
F C CJ U Firm Headquarters U
Redmond Town Center Serving the Western U.S.
and Canada since 1988
/525 166,,Ave NE Washington 425 86/ 1802
Suite D-1I 5 Oregon .103 841 6543
Redmond,Washington 28052 Alaska 907.242 0659
December 2014
Jeff Bond, Acting Wastewater Manager
City of Yakima, Wastewater Division
2220 E Viola Ave
Yakima, WA 98901
Subject: 2014 Wastewater, Industrial Wastewater, and Stormwater Rate Study
Dear Mr. Bond,
FCS GROUP is pleased to submit this report documenting the 2014 rate study conducted for the City of
Yakima. Enclosed is a description of our methodology, key assumptions, findings, and recommendations.
For the wastewater utility, our analysis shows that increases are needed for pretreatment charges and the
strong waste surcharge. With pretreatment charges, the increases are substantial enough that we
recommend a three-year phase-in. We have recommended a new type of charge for Industrial Waste
customers that accommodates the City's two goals: to achieve cost recovery and to create an incentive for
high-sugar content industrial customers to make use of the City's industrial waste facilities. We are
assuming implementation of the most recent wholesale agreements with Terrace Heights and Union Gap.
Assuming implementation of the recommended pretreatment charges, strong waste surcharges, industrial
wastewater charges, and wholesale charges, the retail wastewater rates are projected to require increases of
3%per year, enough to keep up with inflation and carry out the planned capital improvement program. We
also have recommendations about the application of the out-of-City multiplier to pretreatment charges,
strong waste surcharges, and retail wastewater rates.
The stormwater system is still developing as a self-supporting utility, and its current rates are far below the
rates for comparable jurisdictions and below the level needed to maintain and improve the City's
stormwater system. In order to fund the stormwater capital program, City stormwater rates will need to
increase substantially. In this report, we outline three alternative rate increase strategies and recommend
one of them. Our recommended strategy takes advantage of the fact that stormwater charges are relatively
small in dollar terms: even a high percentage increase in stormwater rates has less impact on customers
than a moderate increase in water or sewer rates.
It has been a pleasure to work with City staff on this effort. We look forward to working with you in the
future, and we encourage you to contact us at 425-867-1802 if you have any comments or questions
regarding this study.
Sincerely,
Gordon Wilson Tage Aaker
32
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33
City of Yakima 2014 Wastewater,1W,Stormwater Rate Study
December 2014
" • TI
SECTION 1: INTRODUCTION 1
1.1. Study Objectives 1
1.2. Summary of Results 2
SECTION 2: FINANCIAL POLICIES ....... 3
2.1. Fund Management 3
2,2, Operating Reserves 4
2.3. Capital Contingency Reserves
2.4. Planned Rate-Funded Capital Reinvestment
2.5. Debt Management 6
2,5.1. Debt Service Coverage 6
2.5.2. Capital Structure 7
2.6. Cumulative Impact of Fiscal Policies
2.7. Review of Historical Financial Performance 8
2.7.1. Stormwater Utility Historical Financial Performance
2.7.2. Wastewater Utility Historical Financial Performance 10
SECTION 3: STUDY ASSUMPTIONS 12
3.1. General Forecast Assumptions 12
SECTION 4: STORM WATER UTILITY 13
4.1. Summary 13
4.2. Customer Data Corrections 14
4.2.1. Change ERU Calculation Methodology 14
4.2.2. Reclassification of Residential to Non-Residential 14
4.3. Changes to Revenues & Expenditures 15
4.3.1. Future Savings in Annual Costs 15
4.3.2. Future Increases in Annual Costs 15
4.4. Capital Program Funding and Rate Strategies 15
4.4.1. Overview of Scenarios 15
4.4.2. Current Stormwater Rate in Context 16
4.5. Rate Increase Scenarios 17
4.5.1. Scenario 1:Smooth Rate Increases 17
4.5.2. Scenario 2: Right-Size Increase (Recommended) 19
4.5.3. Scenario 3: No Debt 21
4.6. Summary of Stormwater Recommendations 23
4.6.1. Rate Increase Strategy 23
4.6.2. Timing of Billing 23
.4
• ww.fesgro up,com
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City of Yakima 2014 Wastewater, IW,Stormwater Rate Study
December 2014
SECTION 5: WASTEWATER UTILITY 24
5.1. Summary 24
5.2. Pretreatment (MIU) Rates 25
5.2.1. Overview 25
5.2.2. MIU Charges-Methodology and Results 25
5.2.3. Out-of-City Multiplier-MIU Rate and Strong Waste Surcharge 26
5.3. Strong Waste Surcharges (BOD,TSS, FOG)
5.3.1. Why is There a Strong Waste Surcharge?
5.3.2. Overview-Current and Projected Strong Waste Surcharges 28
5.3.3. Methodology 29
a) Allocation of Fixed Assets to Functional Categories
b) Allocation of Operating and Capital Costs to Functional Categories 29
5.3.4. Results 30
5.4. Industrial Wastewater/ UASB Rates
5.4.1. Overview 31
5.4.2. Methodology 31
a) Industrial Wastewater Rate 31
b) Modified Retail Rates 32
5.4.4. Capped Industrial Wastewater Rates 33
5.4.5. Impact on Existing Industrial Wastewater Customers 34
5.6. Retail Rates (Ready-To-Serve,Volume Charge) 35
5,6.1. Capital Funding Strategy
5.6.2. Annual Financial Forecast 36
5.6.3. Realignment of Out-of-City Multiplier 37
5.6.4. Recommended Rate Schedule 38
5.6.5. Rate Comparison 39
5.7. Bill Impact to Sample Customers 39
5.8, Changing from 360 Days to 365 Days 40
5.9. Unmetered Customer Assumptions 41
5.9.1. Residential Assumption
5.9.2. Assumption for Commercial Customers 41
++
wwwlesgroup.com
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Clty of Yakima 2014 Wastewater, Indusfi al Wastewater and Stormwaier Rate Study
December 2014 Page 1
I 1 : I
TRO UCTIO
In March 2014, the City of Yakima contracted with FCS GROUP to undertake a Wastewater,
Industrial Wastewater, and Stormwater Rate Study. This study deals with two separate utilities:
wastewater and stormwater. Industrial wastewater charges are part of the wastewater revenue stream.
This report documents the objectives, assumptions, findings, and recommendations of the study.
Section 2 discusses the financial policy assumptions. Section 3 presents general forecast assumptions
for inflation, customer and consumption growth, interest on investment, debt terms, and applicable
State and City taxes. Section 4 explains the stormwater forecast results, including three alternative
strategics for implementing the rate increases needed for that utility. We also discuss briefly the
potential impact of changing to monthly billing for both stormwater and wastewater.
Section 5 is the longest section, focused on the wastewater utility. For wastewater, the main source of
revenue is the retail rates, equal to 79% of total revenue for the utility. However, there are four other
sources of revenue that are large enough to make a difference in the retail rates: pretreatment
charges, the strong waste surcharge, the new industrial waste charge, and wholesale charges. These
revenues together comprise 20% of total revenue, and they offset the retail revenue requirement the
more revenue is generated by those four other charges, the less is required from retail rates.
For that reason, Section 5 begins with a discussion of the four offsetting revenue sources—first the
pretreatment charges, then the strong waste surcharge, then the industrial waste charge, and finally
the wholesale service charges. After those four offsetting revenues are determined, then we can know
how much money needs to be generated by the retail rates, so our discussion moves to the retail rate
forecast. Finally, Section 5 ends with a rate comparison between Yakima and other wastewater
utilities, the overall bill impacts to some hypothetical sample customers, and two smaller issues: the
impact of changing the daily rate calculation so that it is equivalent to 365 days per year rather than
360 days per year, and usage assumptions for unmetered customers.
1 . 1 . STUDY OBJECTIVES
The primary objectives of the study were to:
* Evaluate financial policies for both utilities.
• Develop a capital financing strategy for each utility.
• Assess revenue needs and forecast needed rate adjustments from 2015 through 2024.
• Update stormwater charges, including alternate ways to implement rate increases.
* Update wastewater rates, including:
• Fixed and volume charges for retail customers.
• Strong waste surcharges, which are special charges for heavier-than-normal generators
of Biochemical Oxygen Demand(ROD), Total Suspended Solids (TSS), or Fats, Oils,
and Greases (FOG).
• Pretreatment charges for Minor Industrial Users (MIUs).
ASglr(11111„C11111
36
City of Yakima 2614 Wastewater, Industrial Wastewater and Stormwater Rate Study
December 2014 Page 2
• Develop industrial wastewater rates for customers connected to the Upflow Anaerobic Sludge
Blanket (UASB), a new process for pre-treating high-sugar wastewater at the plant.
1 .2. SUMMARY OF RESULTS
Exhibit 1-1 shows the existing 2014 stormwater rates along with three scenarios for 2015-2024 rates.
We recommend Scenario 2, for reasons discussed later, in Section 4.
Exhibit 1-1: Rate Scenarios for Stormwater Utili er ERU)
Stormwater Scenarios 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Scenario 1:Rate Smoothing(9%/yr) $3.58 $ 3.91 $4 26 $4.64 $5.06 $5.51 $6,01 $6.55 $7.14 $7.78 $8 48
Scenario 2:"Right-Size"(55%,then 2.5%/yr) $3.58 $ 5.55 $5,69 $5.84 $5.98 $6.13 $6.28 $6.44 $6.60 $6.77 $6.94
Scenario 3:'Right-Size";No Debt(106.25%,
$3.58 $7.39 $7 58 $7.76 $7.96 $8.16 $8.36 $8.57 $8.79 $9.00 $9.23
then 2.5%I yr)
Exhibit 1-2 shows recommended percentage increases in retail wastewater rates from 2015-2024.
Exhibit 1-2: Across the Board Retail Rate Increases for Wastewater Retail Customers
Retail Wastewater Rates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 •
Annual Increases 3.00% 3.00% 3.00°A, 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00°/0
Single Family Bill @ 6 cam() $38.68 $39.84 $41.03 $42.26 $43.53 $44.84 $46.18 $47.57 $48.99 $50.46 $51.98
These increases in the retail wastewater rates assume that the recommended increases in the strong
waste surcharge and pretreatment charges are adopted as well. This schedule also assumes
implementation of the new Industrial Wastcwater rates developed as part of this study, as well as
implementation of the new wholesale wastewater agreement with Terrace Heights and Union Gap.
The specific charges for pretreatment, strong waste, industrial waste, and wholesale service are
discussed in more detail in Section 5.
44? FCS GROUP www.fcsgroup.com
37
City of Yakima 2014 Wastewater, Industrial wastewater and Stormwater Rate Study
December 2014 Page 3
SECTION 2: FINANCIAL POLICIES
This section outlines financial policies that are used to guide financial planning and ratemaking for
City utilities. We evaluated the following policies:
* Fund Management
• Operating and Capital Cash Reserves
• Planned Rate-Funded Capital Reinvestment
Ill Debt Management
2.1 . FUND MANAGEMENT
The wastewater and stormwater utilities are both expected to be fully self-supporting, recovering all
of their costs through user fees. Conceptually, utility expenditures can be divided into three main
types of costs: operating, capital, and debt service. Operating costs tend to be ongoing and
predictable, while capital costs are highly variable and may include large, one-time projects. Debt
service results when one-time capital costs are converted into an ongoing stream of payment
obligations. Therefore, debt service is similar to capital in its purpose but similar to the operating
budget in its cash flow characteristics, consisting of regular, relatively predictable amounts.
The main funding source for the utility operating budget is ongoing rate revenue. Operating revenue
can be used for capital purposes, either in the current year or by building reserves for future capital
needs; however, capital funding sources cannot be used for operating purposes. Capital funding
sources consist of debt and loan proceeds, connection charges, most types of grants, and capital
revenues from wholesale customers, as well as operating revenue designated for capital purposes.
The sources and uses of operating, capital, and debt service functions are illustrated in Exhibit 2-1.
Exhibit 2-1: Summar of Of eratin Ca iital and Debt Accounts
Operating Account Capital Account Debt Service
Sources of Fundlnq Sources of Funding Sources of Funding
User Rates Connection Charges Transfers from Operating
Interest Earnings Debt Proceeds Debt Proceeds(for initial
Miscellaneous Service Fees Transfers from Operating establishment of bond reserves)
Interest Earnings
Uses Grants
Operating Expenses Wholesale Capital Rewnue
Maintenance Uses
Administration Uses Debt Service Payments
Debt Service Capital Projects
Transfers to Capital
The City currently maintains the following funds:
• Stormwater—Operating Fund(441), Capital Fund (442)
* Wastewater—Operating Fund(473), Treatment Plant Capital Reserve (472), Construction
Fund(476), Facility Project Fund (478)
The City also maintains several reserve funds related to outstanding revenue bond issues.
• ,
11C S GROUP ININNI.frigroup.curn
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City of Yak Imo 2014 Wastewater, Industrial Wastewater and Stormwater Rote Study
December 201 4 Page 4
2.2. OPERATING RESERVES
When evaluating fund reserve levels, it is important to recognize that the value of reserves lies in
their potential use. A reserve strategy that deliberately avoids any use of reserves negates their
purpose. Fluctuation of reserve levels merely indicates that the system is working, while lack of
variation over many years strongly suggests that the reserves are, in fact, unnecessary.
An operating reserve is designed to provide a liquidity cushion; it protects the utility from short-term
variations in the timing of revenue collection or payment of expenses. Like other types of reserves,
operating reserves also serve another purpose: they help smooth rate increases over time. Target
funding levels for an operating reserve are generally expressed as a certain number of days of
operating and maintenance (O&M) expenses, with the minimum requirement varying with the
expected revenue volatility.
Industry practice for utility operating reserves ranges from 30 days (8%) to 120 days (33%) of O&M
expenses, with the lower end more appropriate for utilities with stable revenue streams and the higher
end of the range more appropriate for utilities with significant seasonal or consumption-based
fluctuations. The most common operating reserve targets are 30-45 days for stormwater utilities, 45-
60 days for sewer utilities, and 60-90 days for water utilities. This study assumed the following
operating reserve targets:
Recommended Policy: A target of between 60 and 90 days (16-25% of annual O&M) for both
wastewater and stormwater. City staff recommended minimum targets of 60 days of O&M for each
utility.
Policy Achievement: In 2014, beginning operating balances for wastewater and stormwater were
approximately 82 and 270 days of O&M respectively. City currently meets and exceeds the minimum
recommended policy. Rate increase recommendations within this report allow for each utility to
remain within the 60-90 day range throughout the study period.
• •w
In our forecast, the operating reserve target is based on December 31 of each year, with the balance
expected to vary during the course of the year. If operating reserves exceed the maximum target at
year-end, we assumed the excess cash would be used for capital projects. This can be accomplished
by calculating the target balance at year end and comparing it against the actual ending cash balance.
If the actual balance is greater than the target, the difference is transferred to the utility capital
account.
2.3. CAPITAL CONTINGENCY RESERVES
In addition to protecting against variations in the timing of operating costs and revenues, it is prudent
to maintain a capital contingency reserve to meet unexpected emergency capital outlays. There are
several methods used in the industry to set the level of these types of reserves, including:
• Most costly piece of equipment or infrastructure: A utility may predict the cost of
replacing its most expensive piece of equipment or infrastructure, such as a large
reservoir, vital transmission main, or a key pump station.
▪ Average annual cost of capital program: Alternatively, a utility may use a percentage of
its projected capital program, or set the reserve equal to the average annual cost of its
capital program.
* Percentage of utility plant: A utility may also elect to hold a capital contingency equal to
a percentage of its fixed assets, usually 1-2% of the original cost of total assets.
t14-FCS GROUP ,,%„ .fc.,groupxtlin
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City of Yakima 2014 Wastewater, Industrial Was evvater and Stormwater Rote Study
December 2014 Page 5
For wastewater, we assumed a capital contingency reserve of 1% of original asset cost. However, for
stormwater, fixed asset records prior to 2007-08 (when the stormwater utility was formed) were
booked in the street asset inventory, so the assets booked in the stormwater fund do not represent all
of the assets associated with the stormwater utility. If 1% of asset cost were to be assumed for the
stormwater capital contingency, the result would understate the target. For this reason, we assumed
an initial baseline capital contingency of$300,000. Going forward, the greater of either $300,000 or
100% of annual depreciation was used as the capital contingency for the stormwater utility.
Recommended Policy: Wastewater has a target reserve of I% of the original cost of fixed assets,
which equates to $1.4 million and increases to $1.9 million by 2024. We do not have a reliable
measure of the total cost of stormwater capital assets, because stormwater assets were historically
tracked as part of the Street Fund. For that reason,we assumed a minimum capital contingency of the
greater of$300,000 or 100% of depreciation. Annual depreciation is projected to exceed this baseline
in 2021 and is estimated to be nearly$525,000 by 2024.
Current Achievement: Capital fund balances currently exceed the minimum capital contingency level
for both funds. Beginning capital fund balances in 2014 for wastewater and stormwater were$3.2
million and $1.4 million respectively.
\ / JULL. /HI \
2 2- PLANNED RATE-FUNDED CAPITAL REINVESTMENT
As a municipal utility service provider, the City has a"duty to serve," both now and in the future.
Utilities are capital-intensive businesses; high levels of capital investment are required in order to
build the infrastructure and keep it up to date. For that reason, utility financial policies should
address the question of how to pay for future replacement of capital facilities.
The cash requirements of a capital program can be difficult to absorb within any given year's rate
revenue. The cost of replacing a given piece of infrastructure is usually higher than its original
construction cost many years ago, because of inflation, construction conditions, and the reduced
availability of grants or developer funding. In addition, due to the integrated nature of utility
infrastructure, it is possible that multiple assets will need to be replaced concurrently. Therefore, in
order to avoid excessive reliance on debt, it is prudent to have a financial policy that plans to commit
a certain minimum amount of current rate revenue toward capital projects each year.
A common approach is to establish a funding target using a percentage of depreciation expense as a
benchmark, (Depreciation expense is calculated as the original cost of each asset divided by its
expected useful life.) Sometimes this benchmark is modified so that the annual funding target is
equal to a percentage of depreciation net of annual debt principal payments. This provision
recognizes the system reinvestment that the utility is already making each year as it makes debt
principal payments.
Conceptually, basing system reinvestment funding on depreciation expense meets several standards
for reasonable rates:
w Financial integrity: Funding depreciation expense from current rates avoids a decline in
total asset book value;
• Rate equity: Funding depreciation expense from rates means that customers are charged
in proportion to their consumption of facilities' useful lives; and
Adequacy of capital funding: Funding depreciation expense from current rates provides a
stable funding source for capital expenditures, especially those related to repair and
replacement of existing system infrastructure.
ITS GROUP
vvvv„,fc,0-4,up.00111
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City of Yakima 7014 Wastewner, 1riduOrial Wai0ewuter cud Sforrovvoter Rote Sludy
December 2014 Page 6
It is important to note that depreciation is not expected to equal the future replacement cost of the
utility assets, but serves simply as a starting point for addressing future capital funding needs. As
noted previously, actual system replacement costs will probably be much higher than the cost
originally incurred to build the systems.
The City does not currently have a policy specifying the amount of rate revenue to commit each year
to capital reinvestment, so we made assumptions about rate-funded capital reinvestment in order to
guide the capital funding strategy and financial forecast.
Recommended Policy: For Wastewater, we assumed a target of funding 100% of depreciation (net
of debt principal payments) each year; this averages nearly $1.5 million per year. Because of
incomplete asset records for Stormwater, a minimum baseline of$350,000 per year was assumed. In
future years, we assumed the greater of this baseline amount or 100% of depreciation on assets
booked in the stormwater utility. The target amount increases to nearly$525,000 by 2024.
Current Achievement: The City does not currently have a policy set in place.
2.5. DEBT MANAGEMENT
Debt financing is onc appropriate tool for capital funding. Compared with pay-as-you-go funding,
debt smooths out the rate impact of a capital program by spreading costs over time. It also creates
intergenerational equity it is sometimes called "pay-as-you-use" because future customers who use
the assets are the ones paying for them. However, debt cannot be relied on too much because it
carries the risk of default. Debt also reduces budget flexibility pay-as-you-go capital projects can
he delayed if there is a revenue shortfall, but once the utility has sold debt, the debt service needs to
be paid in good times or bad. So while debt is a useful part of the toolbox, it needs to be monitored to
ensure that the system does not become too heavily dependent on it. To evaluate the City's debt
level, we will discuss two measurements: debt service coverage and capital structure.
2.5. 1 . Deat Service Coverage
Debt service coverage is most easily understood by focusing on its reciprocal: the amount of debt
service as a percentage of the utility's net revenue. "Net revenue" is analogous to the operating profit
of a private business; it refers to the total operating income minus operating expenses. For example,
if net revenue were $200,000 and debt service were $100,000, then debt service as a percentage of
net revenue would be 50% (or $100,000 divided by $200,000). If you take the reciprocal of that
percentage (in other words, $200,000 divided by $100,000), you get 2.0. This is "coverage,"as the
term is used in debt agreements. Occasionally, State loans will have coverage requirements, but
usually this requirement comes from the sale of revenue bonds, in which case the calculation only
includes bonded debt service. A typical coverage requirement for utility revenue bonds is 1.25,
including for the City's most recent revenue bond issue. In the simple illustration above, if annual
bonded debt service were $100,000, then net revenue each year would have to be at least$125,000 in
order to comply with bond covenants. A bond coverage requirement of 1.25 is equivalent to saying
that bonded debt service can be no higher than 80% of net revenue ($100,000 divided by $125,000).
Because of the coverage requirement, when it sells bonds, the City agrees to collect enough revenue
to meet operating expenses and not only pay debt service, but collect an additional 25% increment
above debt service. The extra revenue is a cushion that makes bondholders more confident that debt
service will be paid on time. The extra revenue can be used for capital expenditures, to build system
reinvestment reserves, or for debt service on subordinate debt that does not require coverage.
Achieving a bonded debt service coverage level greater than the minimum amount that is
contractually required is a positive signal that bond rating agencies notice, and it can result in more
favorable terms when the City next goes to the market for revenue bonds.
if+FCS GROUP
41
Cify of Yakima 2014 Wadewater, Industrial Wastewater and Stormwater Rate Study
December 2014 Page 7
Recommended Policy: Per contractual obligation, minimum bonded debt service coverage is 1.25.
However, the City has an internal policy of planning for debt service coverage of at least 2.0, which
is more conservative and safer than the 1.25 threshold. Our forecast assumes a minimum of 2.0.
Current Achievement: The utilities are currently exceeding the minimum target of a 2.0 coverage
on bonded debt. Wastewater currently has an estimated coverage of 3.3 on bonded debt and 1.8 on all
debt(including state/other local loans). Assuming the level of rates recommended in this report, debt
coverage on bonded debt remains at or above 2.0 and coverage on all debt remains at or above 1.6
throughout the 10-year study period. Stormwater is not currently paying debt service. The levels of
projected debt vary significantly with each rate increase scenario presented. However, the coverage
stays at or above 2.0 in each scenario, while the coverage on all debt remains at or above 1.8.
2.5.2.Capital Structure
Another useful measurement in assessing the debt burden of a utility is the capital structure: the
outstanding debt as a percentage of total capital assets (original cost net of depreciation). A capital
structure of 60% debt/40% equity is considered an appropriately conservative limit on total
indebtedness. A capital structure that is lower than this target suggests that the utility has the
financial capacity to issue more debt if needed. For Stormwater, a capital structure slightly higher
than 60% is still acceptable because so many its assets are currently recorded in the Streets Fund.
Current Achievement(2014): The estimated capital structure for Wastewater is 3 l'Yo debt/69%equity;
Stormwater does not have any debt at this time.
Future Achievement: Wastewater projected capital structure peaks at 32%debt/68%equity and ends at
23%debt/77% equity in 2024. Stormwater projected capital structure varies with each rate increase
scenario. Considering all scenarios,highest projected capital structure for Stormwater peaks at 64%debt
/36% equity and ends at 61%debt/39%equity in 2024.
2.6. CUMULATIVE IMPACT OF FISCAL POLICIES
These fiscal policies reinforce each other and provide overlapping benefits. For example, the policy
for rate-funded system reinvestment has multiple benefits: it helps build capital contingency reserves,
contributes to the cash funding of capital projects, helps maintain a healthy capital structure, and
contributes annual revenue towards debt service coverage. Rate-funded system reinvestment can also
help mitigate rate spikes during periods of significant capital needs. Each policy helps determine how
much revenue is appropriate, and satisfying them all generally reduces financial risk and increases
financial stability. Exhibit 2-2 summarizes the recommended policies.
Exhibit 2-2: Summar of Financial Policies
Key Policy Assumptions 2014 2015 2016 2017 2018 2019 2024
Minimum Operating Reserve
Wastewater&Stormwater 60 days 60 days 60 days 60 days 60 days 60 days 60 days
(days of O&M expense)
Target Rate.Funded System Reinvestment
Wastewater(%of Depreciation,net of Debt Principal) 100% 100% 100% 100% 100% 100% 100%
Storm($) $350,000 $350,000 $350,000 $350,000 $350,000 $350,000 $520,000
Target Capital Contingency
Wastewater(%of utility plant original cost) 1% 1% 1% 1% 1% 1%
Storm($) $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $520,000
Debt Service Coverage:
Revenue Bonds 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Outstanding Debt as%of Net Book Value of Assets 60% 60% 60% 60% 60% 60% 60%
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City of Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Rote Study
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2.7. REVIEW OF HISTORICAL FINANCIAL PERFORMANCE
Part of the scope of work for this rate study was a review of historical financial performance for both
stormwater and wastewater funds.
2.7.1 .Stormwater Utility I-istorica Financial Performance
Exhibit 2-3 shows historical stormwater income statements for 2008-2013. Operating revenue saw a
significant increase in 2009 as the annual rate was increased from$22 per year to $35 per year. Revenue
has plateaued in recent years as the annual rate has not increased since 2011.
Net operating income (which is operating revenue minus operating expense, including depreciation
expense)was growing through 2011, but in the past two years it has declined to the 2009 level--$690,000
in 2013 compared with$680,000 in 2009. The stormwater utility has received operating grants and
subsidies in each of the past six years, ranging from$75k to $260k. To the extent that a utility depends on
an unreliable revenue source such as grants, the more it is exposed to revenue shortfalls in years that
grants are unavailable.
Exhibit 2-3: Stormwater Income Statement 2008-2013
Stormwater-Income Statement 2008. 2009 2010 2011 2012 2013.
Operating Revenues
Charges for Services $ 1,065,308 $ 1,707,076 $ 1,975,814 $ 2,169,932 $ 2,183,484 $ 2,142,452
Other Operating Revenues $ - 5 - $ - $
Total Operating Revenues $ 1,065,308 $ 1,707,076 $ 1,975,814 $ 2,169,932 $ 2,183,484 $ 2,142,452
Operating Expenditures
Operations&Maintenances $ 445,802 $ 833,292 $ 995,251 $ 1,031,539 $ 1,012,617 $ 996,155
Administration/fNerhead $ 94,288 $ 119,432 $ 147,504 $ 171,388 $ 180,208 $ 201,350
Taxes $ 42,764 $ 64,686 $ 81,025 $ 91,907 $ 217,599 $ 212,467
Depreciation/Amortization - $ 10,768 $ 15,840 $ 22,190 $ 37,465 $ 42,453
Other Benefits • $ $ - $ - $
Total Operating Expenditures $ 582,854 $ 1,028,178 $ 1,239,620 $ 1,317,024 $ 1,447,889 $ 1,452,425
Net Operating Income 482,454 $ 678,898 $ 736,194 $ 852,908 $ 735,595 $ 690,027
Non-Operating Revenues/(Expenditures)
Operating Grants&Subsidies $ 75,580 $ 108,682 $ 140,474 $ 256,948 $ 85,110 $ 59,318
' Amortization of Bond Payment Discount - $ - $ - $ - $ - $
,Non-Operating Revenue Net of Expenses $ 75,580 $ 108,682 $ 140,474 $ 256,948 $ 85,110 $ 59,318
Income(Loss)Before Contributions&Transfers $ 558,034 $ 787,580 $ 876,668 $ 1,109,856 $ 820,705 $ 749,345
Capital Contributions $ 391,896 $ 9,600 $ 154,765 $ 435,106 $ 102,566 $
Transfers In - $ - $ - $ - $ - $ 93,617
Transfers(Out) $ (42,395) $ (225,000) $ (240,000) $ (265,000) $ (238,308) $ (200,000)'
;Change in Net Position $ 907,535 $ 572,180 $ 791,433 $ 1,279,962 $ 684,963 642,962
ITotal Net Position January 1 - $ 907,535 $ 1,479,715 $ 2,271,148 $ 3,551,110 $ 4,236,073
'Total Net Position December 31 $ 907,535 $ 1,479,715 $ 2,271,148 $ 3,551,110 $ 4,236,073 $ 4,879,035
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City of Yakima 2014 Wastewater, industrial Wastewater and Stormwater Rate Study
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Exhibit 2-4 shows historical balance sheets for the stormwater utility from 2008 through 2013.Under
Noncurrent Assets, Other Improvements have quadrupled since 2009. This is to be expected, since
stormwater is a relatively new utility,and its fixed assets have been previously lumped together with
street assets.Now as the stormwater utility completes portions of its capital improvement plan,the book
value of the assets recorded in the stormwater fund should increase quickly.
Exhibit 2-4: Stormwater Balance Sheet 2008-2013
Stormwater-Balance Sheet 2008 • 2009 2010 2011 2012 2013
,Amets
Current Assets
Cash&Equity in Pooled Investments $ 477,011 $ 562,740 $ 596,118 $ 471,582 $ 325,917 $ 499,565
• Accounts Receivables $ 34,584 $ 85,472 $ 62,830 $ 59,120 $ 45,334 $ 37,808
Other Receivables - $ - $ $ - $ 72,398 $
Due from Other Gov.Units $ 25,550 $ - $ 29,240 $ - $ 23,518 $ 30,142
Investments,at Amortized Cost - $ 500,000 $ 1,000,000 $ 1,770,000 $ 2,100,964 $ 2,369,289
Total Current Assets $ 537,145 $ 1,148,212 $ 1,688,188 $ 2,300,702 $ 2,568,131 $ 2,936,804
Noncurrent Assets
Other Improvements $ 430,734 $ 440,334 $ 739,610 $ 1,317,770 $ 1,484,679 $ 1,785,988
Machinery&Equipment $ 11,879 $ 11,879 $ 22,839 $ 27,543 $ 27,543 $ 27,543
Accumulated Depreciation (9,517) $ (20,285) $ (36,125) $ (58,315) $ (95,780) $ (138,234)
Construction in Progress S 4,498 $ 27,346 $ 24,980 $ 109,020 $ 475,627 $ 384,095
Intangibles - $ - $ $ - $ - $
Unamortized Debt Issue Costs 5 - $ - 5 - $ - 5 •
Total Noncurrent Assets $ 437,594 $ 459,274 $ 751,304 $ 1,396,018 $ 1,892,069 $ 2,059,392
'Total Assets 5 974,739 $ 1,607,486 $ 2,439,492 $ 3,696,720 $ 4,460,200 $ 4,996,196
Liabilities
Current Liabilities
Warrants Accounts Payable 12 $ 15,612 $ 31,560 $ 31,004 $ 108,205 $ 19,199
Wages/Benefits Payable $ 37,020 $ 53,614 $ 62,719 $ 56,548 $ 57,355 $ 55,879
Compensated Absences Payable $ 30,172 $ 58,545 $ 74,065 $ 58,058 $ 58,567 $ 42,083
Restricted Current Portion of Long-terrn Debt $ - $ - $ - $ - $ - $
Total Current Liabilities $ 67,204 $ 127,771 $ 168,344 $ 145,610 $ 224,127 $ 117,161
Net Position
Invested in Capital Assets,Net of Related Debt $ 437,594 $ 459,274 $ 751,304 $ 1,396,018 $ 1,892,069 $ 2,059,392
Restricted for Debt Service - $ - $ - $ - $ - $
Unrestricted $ 469,941 $ 1,020,441 $ 1,519,844 $ 2,155,092 $ 2,344,004 $ 2,819,643
Total Net Position $ 907,535 $ 1,479,715 S 2,271,148 S 3,551,110 $ 4,236,073 4,879,035
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City of Yokirric_i 2014 Wastewater, inaustrial Wastewater and Stormwater Rote Study
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2.7.2.Wastewater Utility Historical Financial Performance
Exhibit 2-5 shows historical income statements for the wastewater utility for the years 2008-2013.
The year 2011 saw a one-time decrease in operating revenues-about$1 million from the previous year,
and$2 million from the trend line. This decrease is unexplained in the City's financial statements.
However, the$456,000 prior period adjustment, also in 2011,was attributed to the City's conversion that
year to a new utility billing system, and it is possible that much of the one-time drop in operating revenue
was related to the same system conversion,particularly if there were a change in the way receivables are
treated and revenue recorded. As a result of this drop in operating revenue, net operating income was
reduced from$2.2 million in 2010 to only$377,000 in 2011. However,by 2012 the wastewater utility
resumed the previous trend, to total operating revenue of$18.7 million and net operating income of$2.2
million. In 2013, operating revenue grew to$19.2 million, but because operating expenditures grew even
faster than the revenue,net operating income declined to about$1.8 million.
Exhibit 2-5: Wastewater Income Statement 2008-2013
Wastewater-Income Statement 2008 2009 2010 2011 2012. 2013
Operating Revenues
Charges for Services $14,886,361 $15,933,456 $16,422,039 $15,452,634 $18,688,307 $19,145,010
Other Operating Revenues $ 11,503 $ 7,690 $ 19,760 $ 13,541 $ 14,696 $ 8,486
Total Operating Revenues $14,897,864 $15,941,146 $16,441,799 $15,466,175 $16,703,003 $19,153,496
Operating Expenditures
Operations&Maintenances $ 6,485,338 $ 6,661,512 $ 6,903,965 $ 6,644,793 $ 6,469,911 $ 6,693,255
Administration/Overhead $ 1,325,347 $ 1,447,551 $ 1,468,340 $ 2,466,352 $ 2,546,975 $ 2,783,154
Taxes $ 2,595,019 $ 2,716,749 $ 2,862,802 $ 2,657,506 $ 4,265,854 $ 4,420,374
Depreciation/Amortization $ 2,776,932 $ 2,755,730 $ 3,026,976 $ 3,320,794 $ 3,227,625 $ 3,465,893
: Other Benefits $ $ - $ - $ - $
Total Operating Expenditures $13,182,636 $13,581,542 $14,262,083 $15,089,445 $16,510,365 $17,362,676
Net Operating Income $ 1,715,228 $ 2,359,604 $ 2,179,716 $ 376,730 $ 2,192,638 $ 1,790,820
Non-Operating Revenues(Expenditures)
Operating Grants&Subsidies $ - $ - $ - $ - $
Interest Revenue $ 108,604 $ 36,153 $ 5,613 $ 2,989 $ 4,376 $ 2,118
Other Non-Operating Revenues $ 365,171 $ 24,491 $ 371,596 $ 365,828 $ 391,403 $ (35,487)
Interest Expenses $ (922,168) $ (767,762) $ (697,078) $ (850,747) $ (650,067) $ (592,614)
Amortization of Bond Payment Discount $ (25,519) $ (9,969) $ (9,969) $ (9,969) $ 17,585 $ 34,818
Gain(Loss)on Capital Assets Disposition $ 10,000 $ 2,500 $ 17,128 $ - $ - $
Non-Operating Revenue Net of Expenses $ (463,912) $ (714,587) $ (312,710) $ (491,899) $ (236,703) $ (591,165)
Income(Loss)Before Contributions&Transfers $ 1,251,316 $ 1,645,017 $ 1,867,006 $ (115,169) $ 1,955,935 $ 1,199,655
Capital Contributions $ 2,108,720 $ 778,613 $ 2,062,204 $ 786,289 $ 1,428,631 $ 880,488
Transfers In $ 32,939 $ 232,939 $ 232,939 $ 232,939 $ 232,939 $ 232,939
:Transfers(Out) $ (757,170) $ (542,516) $ (42,516) $ (162,516) $ (45,210) $(1,190,641)
'Change in Net Position $ 2,635,805 $ 2,114,053 $ 4,119,633 $ 741,543 $ 3,572,295 $ 1,122,441
Total Net Position January 1 $52,562,140 $55,197,945 $57,311,998 $61,431,631 $61,716,906 $65,289,201
Period Adjustments - (456,268)
Total Net Position December 31 $55,197,945 $57,311,998 $61,431,631 $61,716,906 $65,289,201 166,411,642
1.4.4. PCS CiROUP
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City of Yakima 7014 Wostewater, Industrial Wastewater and Stormwater Kate Study
December 2014 Page I I
Exhibit 2-6 shows historical balance sheets for the wastewater utility from 2008 through 2013.This
shows steady growth in the amount of fixed assets(or"noncurrent assets"), from$73 million in 2008 to
$88 million in 2013.
The"net position" is equivalent to"equity" in a private sector balance sheet; it represents the difference
between total assets and total liabilities. For the City wastewater utility,the net position increased from
$55 million to$66 million over the 2008 to 2013 time period; this represents a 20%increase over the six
year period(approximately 3%simple annual average).
Exhibit 2-6: Wastewater Balance Sheet 2008-2013
Wastplvoter-nAtaqco Sheet 20Q9 002 WO. 261i 2012 .2016
Assets
Current Assets
Cash&Equity in Pooled Investments 5 5,934,625 S 1,706,504 $ 1,980,138 $ 2,208,140 $ 1,393,681 $ 1,169,084
Accounts Receivables $ 1,587,609 S 1,253,168 $ 1,503,384 5 717,103 S 1,242,618 $ 904,666
Other Receivables 7,500 5 7,500 $ 3,000 S 3,000 $ 3,000 $ 3,000
Inventories 5 12,081 5 - $ - $ $ - $
Due from Other Governmental Units S - 5 • $ - $ • 55,131 $
Investments,at Amortized Cost $ 5,007,244 $ 8,506,248 $ 9,005,167 S 8,384,000 $ 9,312,042 $ 5,628,793
Total Current Assets $ 12,549,059 $ 11,473,420 $ 12,491,689 $ 11,312,243 $ 12,006,472 $ 7,705,543
Noncurrent Assets
Restricted Cash $ 1,965,858 $ 1,969,220 $ 1,972,583 $ 549,569 $ 581,834 $ 619,479
Restricted Investments $ - $ - $ 1,425,000 $ 776,294 S 740,267
Land $ 583,270 $ 583,270 $ 583,270 $ 583,270 $ 583,270 $ 583,270
Buildings $ 54,343,132 $ 66,439,113 $ 66,428,118 $ 66,500,454 $ 66,500,454 $ 66,500,454
Other Imprmements $ 40,582,134 $ 45,118,296 $ 46,491,764 47,209,321 $ 47,578,535 $ 48,835,279
Machinery&Equipment $ 5,664,966 $ 10,748,850 $ 15,888,613 $ 16,075,811 $ 20,034,174 $ 20,216,027
Accumulated Depreciation $ (54,881,097) $ (57,636,828) $ (60,587,519) $ (63,908,313) $ (67,135,939) $ (70,601,831)
Construction in Progress $ 24,865,746 $ 7,077,061 $ 4,749,142 $ 6,714,601 $ 10,459,226 $ 20,989,626
Intangibles - $ - $ - S - $ - $
Unamortized Debt Issue Costs $ 133,834 $ 122,479 $ 111,125 $ 99,770 $ 142.802 $ 129.105
Total Noncurrent Assets $ 73,257,843 $ 74,421,461 $ 75,637,096 $ 75,249,483 $ 79,520,650 $ 88,011,676
Total Assets $ 85,806,902 $ 85,894,881 $ 88,128,785 $ 86,561,726 $ 91,527,122-$ 95,717,219
LiabitlUes
Current Liabilities
Warrants I Accounts Payable $ 410,023 S 368,290 $ 297,957 S 543,045 S 1,253,958 $ 1,123,011
Wages/Benefits Payable 5 425,020 5 431,686 $ 464,380 $ 456,939 $ 472,853 $ 445,256
Compensated Absences Payable S 580,048 $ 588,176 $ 610,983 5 653,183 5 694,135 $ 609,723
Claims&Judgments Payable - $ S - S 5 390,491
Accrued Payable $ 176,443 $ 166,778 $ 157,764 5 144,466 $ 108,392 $ 119,040
Deposits Payable S 4,500 5 4,500 $ 189,323 $ 243,114 5 256,435 $ 271,750
Interfund Payable 5 $ $ $
Current Portion of Long-term Debt $ 770,695 $ 764,246 $ 771,455 $ 771,455 $ 709,724 $ 1,068,832
Restricted Current Portion of Lang-term Debt S 1,33'9,988 $ 1,383,750 $ 1,436,688 $ 990,000 $ 1,030,000 $ 1,080,000
. Total Current Liabilities $ 3,706,717 $ 3,707,426 $ 3,928,550 $ 3,802,202 $ 4,525,497 $ 5,108,103
Noncurrent Liabilities
Bonds Payable $ 19,580,437 $ 18,196,687 $ 16,760,000 $ 15,770,000 $ 13,940,000 $ 12,860,000
Unamortized Bond Discount/Premium $ 444,873 $ 404,458 $ 364,043 $ 323,627 $ 1,061,178 $ 960,219
Deferred Amount on Debt Refunding $ (117,087) $ (78,058) $ (39,029) $ - $ (576,883) $ (524,439)
Loans Payable-Long Term $ 6,994,017 $ 6,352,370 $ 5,683,590 $ 4,948,991 $ 7,288,126 $ 10,901,694
Total Noncurrent Liabilities $ 26,902,240 $ 24,875,457 $ 22,768,604 $ 21,042,618 $ 21,712,421 $ 24,197,474
Total Liabilities $ 30,608,957 $ 28,582,883 $ 26,697,154 $ 24,844,820 $ 26,237,918 $ 29,305,577
Net Position
Invested in Capital Assets,Net of Related Debt $ 51,069,488 $ 50,575,420 $ 51,115,002 $ 52,161,375 $ 55,661,985 $ 60,441,584
Restricted for Debt Service $ 1,965,858 $ 1,969,220 $ 1,972,583 $ 1,974,569 $ 1,358,128 $ 1,359,746
Unrestricted $ 2,162,599 $ 4,767,358 $ 8,344,046 $ 7,580,962 $ 8,269,091 $ 4,610,312
'Total Net Position 5 55,197,945 $ 57,311,998 64,431,631 $ 61,716,906 $ 65,289,204 $ 66,411,842
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City of Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Rate Study
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1.-
II TURY ASSU PT. S
3. 1 . GENERAL FORECAST ASSUMPTIONS
The following major assumptions were used in the Wastewater and/or Stormwater rate forecast:
General Cost Inflation: assumed to be 2.50% per year based on historical data from the
Consumer Price Index Urban Consumers-Seattle/Tacoma/ Bremerton(CPI-U)
" Construction Cost Inflation: assumed to be 3.50% per year based on historical data from
the ENR Construction Cost Index (CCI)-20 City Average index
* Personnel Cost Inflation: Confirmed by City staff
• Labor Cost Inflation: assumed to be 2.00% per year
• Benefits Cost Inflation: assumed to be 5.50%per year
Fund Earnings: 0.08% based on the current Local Government Investment Pool (LGIP)
rate, phased into 0.25% by 2016; conservatively remains at 0.25% through 2024.
" Customer Growth:
• Stormwater: 0.50% annual customer growth. Results in 130-140 additional
parcels per year(or 260 —270 ERUs) throughout study period. This assumption is
based on the "Low" scenario from the Washington State Growth Management
Population Projections for Yakima County. We reviewed and confirmed this
assumption with City staff.
* Wastewater: 0.50% annual customer account growth based on three years of
customer account history. We assumed negative growth in sewage volume, with a
reduction of 0.50% per year based on recent declines in overall usage. Net
revenue growth assuming existing rates is approximately neutral.
" Revenue Bond Terms: 20 year maturity, 4.75% interest, 1% issuance cost,and 2.0 policy
target coverage. Interest rate assumption is based upon relevant Bond Buyer Indices.
▪ City Utility Taxes: wastewater at 20%; stormwater at 6%
• State Taxes:
• Excise Tax: excise tax on wastewater collection revenue is 3.852%, while B&O
tax on wastewater treatment revenue is 1.5%. The effective rate after allocating
functions between collection and treatment is approximately 2%.
* State B&O Tax (for stormwater): 1.50%
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Cily of Yakima 2014 Watevvo1er, Industrial Wastewater and Stormwater Rote S1ucy
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T .
0 . T• ATER TILITY
Section 4 focuses on the stormwater utility, while Section 5 deals with the wastewater utility.
4. 1 . SUMMARY
The stormwater utility forecast has several key assumptions and policy questions:
• Customer Data Corrections:
• There is a change in the calculation of equivalent residential units (ERUs) for
non-single family parcels. Currently, the billing system rounds ERUs only
downward to whole numbers, so that a parcel with 2.89 ERUs is only billed for
2.0 ERUs. In our forecast, we are assuming that ERUs are rounded either up or
down to the nearest one-tenth, so that a parcel with 2.89 ERUs is billed for 2.9
ERUs.
• We are also assuming the reclassification of 197 parcels previously shown as
residential in the billing system but which are really non-residential,
* Changes to Revenues and Expenditures:
• Several one-time expenditures in the 2014 budget will drop off in 2015, including
a$242,000 final payment to the Wastewater Fund to retire an interfund loan
associated with the formation of the stormwater utility.
• Stormwater-related debt service previous paid by Wastewater is assumed to be
shifted to the Stormwater fund from 2015 forward.
• Additional engineering staffing is needed in order to implement the stormwater
capital program.
". Capital Program Funding and Rate Strategies:
• Annual rate revenues are currently about $2.2 million per year; however, the
capital improvement program by itself even without any O&M costs is about
$2.5 million per year. In order to carry out this capital program, there clearly will
be a need for additional revenues.
• We present three alternative strategies for rate increases:
• Scenario 1: Smoothed annual rate increases; high levels of debt required.
O Scenario 2: "Right size" initial increase, with inflationary increases
afterwards; limited debt required.
• Scenario 3: Larger"right size" initial increase so that no debt is required
during forecast period; inflation-based increases afterwards.
• We recommend Scenario 2 because it leads to the lowest rates over the ten-year
period of the forecast. Yakima's current rates are extremely low relative to other
stormwater utilities. Even after a large increase in 2015, Yakima's rates will be in
the middle of the comparison group, and it will put the utility in a position to
need only 2.5% annual increases thereafter, with modest levels of debt.
•
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City of Yakima 2014 Wastewater, Industrial Wastewater and Sformwater Rafe Study
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4.2. CUSTOMER DATA CORRECTIONS
We performed a detailed review of the City's customer data, including testing the reported revenue
by applying the previous year's rates to the raw customer billing data. This test is called a "priceout."
The revenue resulting from this calculation should approximately equal the amount of revenue
actually collected in the historical year. In the City's case, 2013 customer data was used. The overall
result of the priceout was positive. The underlying customer data and billing rat es combined to
produce a revenue total that closely matched the actual revenue collected. However, as a result of this
exercise, a couple of key findings should be noted. The first finding has to do with how the non-
single family ERU is calculated. The second finding involves the reclassification of 197 parcels that
were being charged as residential but are really non-residential.
4.2.1 . Change ERU Calculation Metlodology
To calculate the total ERUs currently billed to non-single family parcels, the billing system divides
the impervious square footage within a parcel by 3,600 square feet (one ERU equals 3,600 square
feet per the Yakima Municipal Code 7.80.030 [9]). Then the billing system rounds the calculated
ERU down to the next-lowest whole number.
For example, consider a parcel with 14,000 square feet. Before rounding down, the calculation would
yield 3.89 ERUs. However, this number is currently being rounded down to 3.00 ERUs when the bill
is sent out. Our recommendation is that the ERU calculation be rounded to the nearest 1/10'"(either
up or down)instead of universally rounding down to the whole number. In this example, the 3.89
would be rounded up to 3.90 ERUs, which means that an additional 0.9 ERUs would be billed
compared to the current methodology. When applying the revised methodology to the entire
stormwater database, roughly 1,500 ERUs would be added to the existing total. This change would
generate nearly$65,000 in annual revenues without incorporating any rate increases above the
current $43 per year per ERU.
This calculation change was discussed with utility staff. They confirmed with both customer billing
and legal representatives that this new rounding methodology could be implemented. These
additional ERUs and revenues are included within our baseline revenue projections.
4.2.2.Reclassification of Residential to Non-Residential
While performing the priceout test, we found 380 parcels that were being charged as if they were
residential, but based on the parcel description it was possible that they were really non-residential.
For example, parcel descriptions that were being charged as residential included some of the
following: "Trans-Parking", "Service-Governmental", "Service-Repair", "Service—Business",
"Retail—Other", "Retail—Food", etc. A City stormwater engineer researched each of these parcels
and found that of the 380 parcels, 197 of them should be reclassified and be charged as non-
residential. The impact of these reclassifications was implemented into the revenue projections.
These changes will also be made within the customer billing database before bills are sent out in
February of 2015. In total, this correction added over 60 ERUs to the database. Although the revenue
impact is relatively small, these 197 customers will be charged more equitably, which is an important
goal in the ratemaking process.
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4.3. CHANGES TO REVENUES & EXPENDITURES
The following subsections summarize the most significant cost savings and cost increases that are
unrelated to inflation.
4.3.1 .Future Savings in Annual Costs
There are several expenditures in the 2014 budget that are not expected to continue on an annual
basis beyond 2014. These include one-time expenditures such as the Stormwater Rate Study and
Stormwater and Wastewater System Study. In addition to these, the stormwater utility in 2014 is
projected to make its final repayment to the wastewater utility for an interfund loan that was made
from wastewater to stormwater in 2007 and 2008, when the stormwater utility was being formed. In
total, these non-recurring expenditures totaled over $350,000.
4.3.2. Future Increases in Annual Costs
Partially offsetting these savings are some increases to the stormwater utility's annual costs.
* Personnel: We are assuming that in 2015, an additional engineering FTE will need to be
added to the stormwater utility with a combined salary and benefit cost of$100,000. City
staff agrees that this type of position would be needed to aid in the planning and
implementation of the stormwater capital program, since the number of stormwater
capital projects to manage is projected to be higher than in the past.
• Debt Service on Railroad Grade Project: There is a general obligation loan that is
related to Project 1818 (the stormwater portion of the Railroad Grade Separation project)
with annual debt service payments of$84,300, for which debt service is currently being
paid by the wastewater fund. This loan originated before the stormwater system was a
standalone utility, and debt service for it is currently being paid by the wastewater fund.
We recommend that these loan payments now be paid by the stormwater utility starting in
2015.
Annual cost savings from non-recurring expenditures total $350,000, whereas these future cost
increases total $184,000. As a result, the forecast shows about $166,000 net savings in annual costs
when comparing 2015 to 2014.
4.4. CAPITAL PROGRAM FUNDING AND RATE STRATEGIES
4.4.1 .0verview of Scenarios
The major driver of rate increases for the stormwater utility is an increase in the scale of the capital
program. According to stormwater planning documents and City staff, an increased pace of capital
investment is needed to make progress on a backlog of high priority projects. In the scaled-up capital
program, average annual capital spending is expected to be nearly $2.5 million per year. To put this
in perspective, consider that the annual rate revenues of the entire utility are currently only $2.2
million. Increases in rate revenue will clearly be needed in order to meet this deferred capital
liability, in addition to operating and maintaining the system.
There is a range of ways to pay for this level of capital spending. At one end of the spectrum, the
City could borrow the needed capital dollars and then raise rates over time to pay debt service. At the
other end of the spectrum, the City could increase rates high enough to cash-fund the entire capital
program. This would involve a significant upfront rate increase in 2015 but would avoid the use of
debt. The City could also adopt a middle-of-the-road option that combines a modest amount of debt
with a significant one-time rate increase in 2015 and inflation-based increases thereafter.
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City of Yakima 2014 Wastewater, Industrial Wastewater and Starmwater Rate Study
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Considering this conceptual range, we developed three scenarios:
* Scenario 1: Smoothed rate increases
▪ Scenario 2: "Right Size" initial increase, inflation-based increases afterwards
It Scenario 3: "Right Size" larger initial increase so no debt funding; inflation-based
increases afterwards
The following two exhibits highlight the rate impacts of each of these scenarios. The following
subsections give a detailed discussion of each scenario. Scenario 2 is the recommended scenario
because:
• It is not as steep an increase as Scenario 3.
* Compared with Scenario 1, Scenario 2 ends up with lower monthly rate by 2024, the final
year of the forecast horizon.
sr Compared with Scenario 1, Scenario 2 uses more cash financing and less debt funding for
the capital program.
Exhibit 4-1: Monthly Stormwater Charle b Scenario
Stormwater Scenarios 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Scenario 1:Rate Smoothing $3.58 $ 3.91 $4.26 $4.64 $5.06 $5.51 $6.01 $6.55 $7.14 $7.78 $8.48
Scenario 2:"Right-Size" $3.58 $ 5.55 $5.69 $5,84 $5.98 $6.13 $6.28 $6.44 $6.60 $6,77 $6.94
Scenario 3:"Right-Size";No Debt $3.58 $7.39 $7.58 $7.76 $7.96 $8.16 $8.36 $8.57 $8.79 $9.00 $9 23
Exhibit 4-2: Graph of Monthly Stormwater Charge & Debt Service by Scenario
$10.00 $1,800,000
Monthly Rates& Debt Service $9.23
$9.00 $1,600,000
$8.48
$8.00
$1400000
$7.39 66.94
sLoo
$1,2no,000
$5.55
st000,ocio
Ss.oe *** •:*:**
mit „ ••••*:* • • 4
$3.91 ••- ••• ••, •, ssomoo
••• • • • ;sr
$4.no
f' ,•••• :*!. ••••• ••'!,••
$3.00 $3.58 •scenario 1:Annual Debt Service $600,000
Scenario 2,Annual Debt Service
*r oo • * I.: $400,000
$2.00 •, :*•••:*i*"'! 1:Rate Smoothing
""*"""Scenario 2:"Right-Size" * $200,000
$1.00
'- '-Scenario 3:"Right-Size";No Debt •********* ****•!*
******F.'44***".6t:Iff.:*********1:*:1***•:•:"7:00i!1***!;*******1**:e*::::*.*:**•"7:**Y: ••• *:•••• ,;* ••••••••••*, $
$-
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
4.4.2.Current Stormwafer Rate in Context
Exhibit 4-3 shows the results of a survey of existing stormwater rates for single-family parcels
across the state of Washington. Cities in western Washington have generally higher stormwater rates
than those east of the Cascades, but even among eastern Washington cities, the Yakima rate is the
lowest. Even if, for example, the City's stormwater rate were to increase by 50% (to $5.37 per
month), the resulting charge would still be well within the average range for eastern Washington
cities. If the Yakima rate were doubled, the City would be approximately at the top end of the eastern
Washington group and the lower end of the western Washington group, but it would not be an outlier.
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City of Yakima 2014 Wastewater, Industriai Wastewater and Stormwater Rate StLidy
December 2014 Page I/
In summary, there is room to significantly increase the charge without putting the City out of line
with other comparable stormwater utilities.
Exhibit 4-4 shows recent stormwater rate history, since 2008. There was a large increase in 2009 and
more moderate increases the following two years. The rate has not been increased since 2011.
Exhibit 4-3: Jurisdictional Rate Surve Exhibit 4-4: Yakima's Stormwater Rate
• awa,famity novo:ow History
APIP8iibaan 144*.n.80 R*t*
1 Yakima(2014) $3.58
2 Spokane $3.84 MO Annual Stormwater Rate
3 Richland $3.85 taSSiti
4 Pasco $4 40 SOSO
5 West Richland $4 90 MEOW
6 Moses Lake $5 30 atiMitanat ::71$1Nai
7 Centralia $6.00 INOMAIS
8 Ellensburg $5 08 Sitialitataa air
9 Wenatchee $6.09 XaVatel*
10 Ridgefield $6 50 VISSORSiti
11 Walla Walla $6 50 filgnatilti
„, i A:2 t g • :
12 Pullman $7 00 NOSaMag clittffilt: 1filfilff3fild L.; ,fittfificin
13 Vancouver $7.83 talliliNSIMS
14 Sunnyside op; rili):::$fi tn..•L)li
.. ... .. „. ........... ......... . .
15 Mukilteo $8 32 satasicassat
16 Tumwater $8.41 samanotatat
17 Bellingham
18 Camas 2008 2009 2010 2011 2012 2013 2014
19 Marysdlie
20 Renton
21 Washougal $13,75
22 Kenmore $13.95 ttá It
23 Bonney Lake $14,00
24 Auntie,
4.5. RATE INCREASE SCENARIOS
4.5.1 .Scenario 1 : Smootn Rate ncreases
This scenario assumes an equal percentage increase each year throughout the forecast horizon.
Exhibit 4-5 shows that this scenario would require annual increases of 9%per year for the next ten
years. The monthly rate in 2024 would be $8.48.
Exhibit 4-5: Scenario 1 -Rate 1m a acts
Scenario 1:Smooth •
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Rate Increases
Monthly Rate($) $3.58 $3.91 $4,26 $4.64 $5.06 $5 51 $6.01 $6.55 $7.14 $7.78 $8.48
Annual Rate Increase 9.0% 9.0% 9.0% 9,0% 9.0% 9.0% 9 0% 9 O'hi 9.0% 9.0%
Exhibit 4-6 summarizes the capital funding strategy for Scenario 1. Out of the three scenarios,
Scenario I requires the most debt. There is no large upfront rate increase, so compared to the other
two scenarios, not as much cash is generated on an annual basis to help cash-fund capital projects.
Exhibit 4-6: Scenario 1 -Ca 0 ital Fundin Strate!
Capital Funding Strategy 2014 2015 2016 2017 2018 2019 2024
Capital Expenditures(Escalated Dollars) $ 739,000 $ 1,190,250 $ 2,249,573 $ 3,437,025 $ 3,098,312 $ 2,494,141 $ 2,962,257
Capital Funding Strategy:
Beginning Fund Balance $ 1,360,734 $ 1,887,281 $ 1,335,730 $ 668,855 $ 615,003 $ 612,215 $ 1,248,525
plus: Grants/Outside Sources 94,000
plus. Annual Capital Charge Revenue
plus: Rate Funded System Reinvestment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
plus: Transfer of Surplus from Operating Fund 820,459 285,868 315,516 263,330 260,677 331,553 961,983
plus: Interest Earnings 1,089 2,831 3,339 1,672 1,538 1,531 3,121
plus: Net Debt Proceeds Available for Projects 913,842 2,768,170 2,483,310 1,881,926 1,713,732
Total Capital Resources $ 2,626,281 $ 2,525,980 $ 2,918,428 $ 4,052,028 $ 3,710,527 $ 3,177,225 $ 4,451,593
less: Capital Expenditures 739,000 1,190,250 2,249,573 3,437,025 3,095,312 2,494,141 2,962,257
Ending Fund Balance $ 1,887,281 $ 1,335,730 $ 668,855 $ 615,003 $ 612,215 $ 683,083 $ 1,489,335
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City of Yakima 2014 Waslewater, Industrial Wastewater and Slorrnwater Rote Study
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Under Scenario 1, approximately 37% of the capital revenue is cash-funded while 63% comes from
debt. Cash-funded capital is the combination of planned rate-funded system reinvestment, the transfer
of operating reserves when those reserves are above the target maximum, and interest earnings on
cash balances. The average annual amount of cash funded capital is roughly $900,000. In this
scenario, the level of cash funding that comes from excess operating reserves plays a significant role
because of the City's conservative debt coverage requirement of 2.0. When annual rate increases are
driven by the 2.0 coverage requirement, it generates a substantial amount of cash each year that can
be used to cash-fund capital.
Exhibit 4-7 shows the annual financial forecast for Scenario 1. The annual financial forecast
incorporates the results of the capital funding strategy as well as information about operating costs,
existing debt service, required reserves, beginning fund balances, and non-rate revenues-all for the
purpose of generating the rate revenue requirement. The upper part of the table shows what revenues
and expenses would be without any rate increase. This leads to a growing cash deficiency in future
years. The shaded middle section of the table shows what rate increases would be needed in order to
remedy that deficiency-each year's percentage increase and the cumulative percentage increase
since 2014. Finally, the lower part of the table tests whether the financial policy targets would be
achieved after the revenue increase.
Exhibit 4-7: Scenario 1-Annual Financial Forecast
• •
Revenue RegulrementS 2014 2015 2016 2017 2018 pi . . ;024
Assuming Existing Rates:
Revenue
Rate Revenues $ 2,159,866 $ 2,236,966 $ 2,248,151 $ 2,259,391 $ 2,270,688 $ 2,282,042 $ 2,339,666
Non-Rate Revenues 16,171 15,732 16,091 16,314 16,943 17,508 16,348
Total Revenue $ 2,176,036 $ 2,252,698 $ 2,264,242 $ 2,275,705 $ 2,287,631 $ 2,299,550 $ 2,356,014
Expenses
Cash Operating Expenses $ 1,980,434 $ 1,770,513 $ 1,816,668 $ 1,864,355 $ 1,913,637 $ 1,964,578 $ 2,246,669
Existing Debt Service 84,306 84,306 84,306 84,306 84,306 84,306
New Debt Service - 78,757 317,323 531,339 693,527 1,484,700
Rate-Funded System Reinvestment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
Additions to Operating Reserve -
Total Expenses I $ 2,330,434 $ 2,204,819 $ 2,329,731 $ 2,615,984 $ 2,879,282 $ 3,092,411 $ 4,339,906
Cash Surplus!(Deficiency) $ (154,398) $ 47,879 $ (65,489) $ (340,279) $ (591,651) $ (792,862) $ (1,983,893)
Annual Rate Adjustment 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Cumulative Annual Rate Adjustment 9.00% 18.81% 29.50% 41.16% 53.86% 136.74%
Annual Rate per ERU $43.00 $46.87 $51.09 $55.69 $60.70 $66.16 $101.80
Monthly Rate per ERU $3.58 $3,91 $4.26 $4.64 $5,06 $5.51 $8.48
After Rate Increases
Rate Revenues $ 2,159,866 $ 2,438,293 $ 2,671,028 $ 2,925,977 $ 3,205,262 $ 3,511,204 $ 5,538,840
Net Cash Flow (154,400) 234,100 325,700 276,300 272,800 344,100 975,300
Debt Service Coverage-Revenue Bonds We n/a 10.69 3.24 2.33 2,12 2.07
Debt Service Coverage-All Debt n/a 7.96 5,16 2.56 2.01 1.89 1.96
........
Ending Fund Balances 2014 2015 2016- 2017 2018 2019 2024
Operating Reserve $ 488,326 $ 436,565 $ 446,722 $ 459,704 $ 471,856 $ 484,416 $ 552,460
Capital Reserve 1,887,281 1,335,730 668,855 615,003 612,215 683,083 1,489,335.
Debt Reserve ., 78,757 317,323 531,339 693,527 ; 1,484,700
Total $ 2,375,607 $ 1,772,295 $ 1,194,334 $ 1,392,029 $ 1,615,410 $ 1,861,027 $ 3,526,495
Operating Reserve(Days of O&M Expense) 90 days 90 days 90 days 90 days 90 days 90 days 90 days
Target Capital Contingency $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 i$ 524,231
Capital Contingency Deficit(if any) $ - $ - $ - $ - $ - $ - $
Capital Structure:%Debt 38% 24% 31% 51% 60% 62% 61%
Capital Structure:%Equity 62% 76°A, 69% 49% 40% 38% 39%
In Scenario 1, 9% annual rate increases would be needed, mainly due to new debt service from the
capital program.
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City of Yakima 2014 Wastewater, Industrial Wastewater and Stormwater mote Study
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Exhibit 4-8 shows the annual financial forecast in graphic form. The green segment of each column
represents new debt, which grows from$0 in 2014 to $1.48 million in 2024.
Exhibit 4-8: Scenario 1 —Forecast Graph
Stormwater Revenue Requirement
$6,000,000
meri Additional Revenue for Debt Coverage
Nraak Additions to Reserves . . ..
aamot*Rate-Funded System Reinvestment
.,.. New Debt Service r r
r
iti1111111110Existing Debt Service all
. MOM Cash Operating Expenses r
--Revenues Under hoisting Rates li 11
$4,000,000 , -- Wo r '1 t....... .,...:,..,
$3,000 ..
,000 .......„--•
.--" 1,
. ,!r",
... . 701 .::::::::.::;:f .,,•,,., i.:••:. :..!::,:• :gx:::. L...ss ':::,:e:',.., ,,,,••••••:
52000000 , 1:•:•i•:•i;• a :.*:::4 '7:::•'•:: ••••••••. . •
.. .
•
I I •.
•
$L000,000
: .
. .. . ..:
-•• , •
. . ..
. ..
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
4.5.2. Scenario 2: Right-Size ncrease (Recommended)
This scenario assumes a large initial rate increase in 2015, followed by inflation-based increases in
subsequent years. The large initial rate increase was set so that the calculated coverage ratio
remained at or above 2.0 throughout the study period while incorporating inflation-based increases in
the years 2016-2024. Exhibit 4-9 shows the monthly rate impacts as well as the annual rate increases
that would be needed. The initial rate increase in 2015 would be 55%, or $1.97 per month. By 2024,
the monthly rate would be $6.94 per month, which is $1.54 less than the Scenario 1 rate in 2024.
Exhibit 4-9: Scenario 2-Rate 1m'acts
Scenario 2:"Right•
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Size"
Monthly Rate($) $3.58 $5.55 $5.69 $5,84 $5.96 $6.13 $6.28 $6.44 $6.60 $6.77 $6:94
:Annual Rate Increase 55.0% 2,5% 2.5% 2 5% 2.5% 2.5% 2.5% 2,5% 2,5% 2.5%
Exhibit 4-10 summarizes the capital funding strategy required under Scenario 2. This scenario does
include debt,but it relies more on cash financing and less on debt financing than Scenario 1.
Exhibit 4-10: Scenario 2- Ca I ital Fundin: Strait 3
copltal Funding S1tAtegy. 2014 2015 2016 2017 2018 2019 2024 •
Capitol Expenditures(Escalated Dollars) $ 739,000 $ 1,190,250 $ 2,249,573 $ 3,437,025 $ 3,098,312 $ 2,494,141 $ 2,962,257
Capital Funding Strategy:
Beginning Fund Balance $ 1,360,734 $ 1,887,281 $ 2,287,559 $ 1,621,145 $ 1,474,881 $ 1,389,953 $ 1,082,209
plus Grants/Outside Sources 94,000 -
Plus: Annual Capital Charge Revenue .
plus: Rate Funded System Reinvestment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
plus; Transfer of Surplus from Operating Fund 820,459 1,237,697 1,227,440 1,120,828 1,036,265 996,602 457,142
plus: Interest Earnings 1,089 2,831 5,719 4,053 3,687 3,475 2,706
plus Net Debt Proceeds Available for Projects 1,815,880 1,623,431 1,104,189. 1,880,049
Total Capital Resources $ 2,626,281 $ 3,477,809 $ 3,870,718 $ 4,911,907 $ 4,488,265 $ 3,844,218 S 3,946,336
less: Capital Expenditures 739,000 11190,250 2,249,573 3,437,025 3,098,312 2,454.141 2,952,257
,Ending Fund Balance $ 1,887,281 $ 2,287,559 $ 1,621,145 $ 1,474,881 S 1,389;953 5 1,350,077 $ 984,078
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City et Yakima 2014 Wastewater, Industrial Wastewater dna Storrnwater Rate Study
December 2014 Page 2()
Under Scenario 2, approximately 54% of the capital revenue is cash-funded while 45% is debt. The
large initial rate increase in 2015 creates a level of rates that is sufficient to cash fund over$1.3
million of capital each year.
Exhibit 4-11 shows the annual financial forecast for Scenario 2, including the impact of the capital
funding strategy. The initial rate increase would be 55%, after which rates would increase by 2.5%
per year. New debt service would start at $155,000 in 2017 and grow to $1.04 million by 2024.
Exhibit 4-11: Scenario 2-Annual Financial Forecast
Revenue Requirements 2014 2015 2016 2017 2018 2019 2024
Assuming Existing Rates:
Revenue
Rate Revenues $ 2,159,866 $ 2,236,966 $ 2,248,151 $ 2,259,391 $ 2,270,688 $ 2,282,042,$ 2,339,666
Non-Rate Revenues 16,171 15,732 16,091 16,117 16,541 16,921, 16,348
Total Revenue $ 2,176,036 $ 2,252,698 $ 2,264,242 $ 2,275,508 $ 2,287,229 $ 2,298,962 $ 2,356,014
Expenses
Cash Operating Expenses $ 1,980,434 $ 1,770,513 $ 1,816,668 $ 1,864,355 $ 1,913,637 $ 1,964,578;$ 2,246,669'
Existing Debt Service - 84,306 84,306 84,306 84,306 84,306 84,306
New Debt Service 156,496 296,406 391,567 1,055,420
Rate-Funded System Reinwstment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
Additions to Operating Reserve
Total Expenses $ 2,330,434 $ 2,204,819 $ 2,250,974 $ 2,455,157 $ 2,644,349 $ 2,790,451 $ 3,910,626
Cash Surplus/(Deficiency) $ (154,396) $ 47,879 $ 13,268 $ (179,649) $ (357,121) $ (491,469):$ (1,554,612),
Annual Rate Adjustment 55.00% 2.50% 2.50% 2.50% 2.50%. 2.50°4'
Cumulative Annual Rate Adjustment 55.00% 58.88% 62.85% 66.92% 7119% 93.57%
Annual Rate per ERU $43 00 $66.65 $68.32 $70.02 $71.77 $73.57 $83.24
Monthly Rate per ERU $3,58 $5.55 $5,69 $5,E34 $5.98 $6.13 $6.94
'After Rate Increases:
Rate Revenues $ 2,159,866 $ 3,467,297 $ 3,571,749 $ 3,679,348 $ 3,790,188 $ 3,904,368 $ 4,528,980
; Net Cash Flow (154,400) 1,185,900 1,237,600 1,133,800 1,048,400 1,009,200 470,500
Debt Service Coverage•Revenue Bonds n/a n/a n/a 11.05 6.01 4.70; 2.02,
Debt Senice Coverage-All Debt n/a 19.25 19.90 7,18 4,68 3.86 1.88
Ending Fund Balances 2014 2015 2016 2017 2018 2019 2024 •
Operating Reserve $ 488,326 $ 436,565 $ 446,722 $ 459,704 $ 471,856 $ 484,416 $ 552,460
Capital Reserve 1,887,281 2,287,559 1,621,145 1,474,881 1,389,953 1,350,077 984,078
Debt Res en,e 156,496 296,406 391,567 1,055,420
...... ............
Total $ 2,375,607 $ 2,724,124 $ 2,067,867 $ 2,091,081 $ 2,158,215 $ 2,226,061 $ 2,591,958
Operating Reserve(Days of O&M Expense) 90 days 90 days 90 days 90 days 90 days 90 days 90 days
Target Capital Contingency $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 524,231
Capital Contingency Deficit(if any) $ - $ - $ - $ - $ - $ - $
Capital Structure:%Debt 38% 24% 14% 30% 36% 37% 45%
Capital Structure:`Y.Equity 62% 76% 86°A, 70% 64% 63% 55%
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City or Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Note Study
December 2014 Rage 21
Exhibit 4-12 presents the annual financial forecast in graphic form. The "Additions to Reserves" (the
orange segments) represents cash that is purposely generated to help cash-fund the capital program.
Exhibit 4-12: Scenario 2—Forecast Graph
Stormwater Revenue Requirement
$5,000,000
$4,500,000 -.• .. •
..
$4,000,000 EEK gi.1111
...
*... PR
—'
fra....— — 711 — lei teil 110 4E]
$3,Suou00 .— —txITi''. IreW
*:11 ip21 pi Itm
$3,000.000 ttir i Ei? 1g iiE; lig: iiii*RR • ..
, c.E1 FE is. :4 giiiii In ......-II
,,,,,.. ,,,,,,,,, 4...,
' 0.4 078::
$2
,5.0.0 . , Egi :fzio :,,,,i.i:iii gg8, I.1.4 E:::: IF:i ''''•':•'' ..7.7.•••'
$2,000,003 lig , :!;.!i:;:.! i i -- .
.. :
•1,500,000 ,....Arlditional Revenue for Debt Coverage •
$ ' •.
cromom Additions to Reserves
arrosirre Rate-Funded System Reinvestment •$1,000,000 New Debt Service .•
. .
, 110111114 Existing Debt Service
. .
• ism Cash Operating Expenses :
$500,000 —RevenuesUnderExisting Rates • .
EiiI I •
— — Revenues After Rate Increases . •
•. .:
$- • •. • •
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
4.5.3, Scenario 3: No Deot
This scenario was designed to allow the capital plan to be entirely cash-financed, with no debt. Once
again, there would be a large initial rate increase in 2015 followed by inflationary increases in 2016-
2024, but the initial increase would be large enough to avoid debt during the forecast period. Exhibit
4-13 shows the monthly rate impacts as well as the percentage rate increases that would be required.
The monthly rate in 2024 would be $9.22 per month, which is $2.28 higher than Scenario 2 and
$0.74 higher than Scenario I.
Exhibit 4-13: Scenario 3-Rate 1m i acts
Scenario 3:"Right-Size";No Debt 2014 2015 2016 2017. 2018 2019 2020 2021 2022 2023 2024
Monthly Rate($) $3,58 $ 7.39 $7.58 $7.76 $7,96 $8,16 $8.36 $8.57 $8.79 $9.00 $9.23
Annual Rate Increase 106.25% 2.5% 2,5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Exhibit 4-14 summarizes the capital funding strategy assumed under Scenario 3 annual rate
increases. Under Scenario 3, 100% of the CIP is cash funded,
Exhibit 4-14: Scenario 3—Ca 1 ital Fundin Strafe:
Capital Funding Strategy 2014 2015 2016 2017 2018 2019 2024
Capital Expenditures(Escalated Dollars) $ 739,000 $ 1,190,250 $ 2,249,573 $ 3,437,025 $ 3,098,312 $ 2,494,141 $ 2,962,257
Capital Funding Strategy:
Beginning Fund Balance $ 1,360,734 $ 1,887,281 $ 3,348,021 $ 3,776,666 $ 3,101,724 $ 2,852,663.$ 5,134,100
plus: Grants/Outside Sources 94,000 - - - .. • .
plus: Annual Capital Charge Revenue . - . .
plus: Rate Funded System Reinvestment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
plus: Transfer of Surplus from Operating Fund 820,459 2,298,159 2,319,848 2,402,641 2,491,497 2,581,567 2,897,736
plus: Interest Earnings 1,089 2,831 8,370 9,442 7,754 7,132 12,835
plus: Net Debt Proceeds Available for Projects
Total Capital Resources $ 2,626,281 $ 4,538,271 $ 6,026,239 $ 6,538,749 $ 5,950,975 $ 5,791,361 $ 8,568,902
less: Capital Expenditures 739,000 1,190,250 2,249.573 3,437,025 3,098.312 2,494,141, 2,962,257
Ending Fund Balance $ 1,887,281 $ 3,348,021 $ 3,776,666 $ 3,101,724 $ 2,852:863 $ 3,297,220 $ 5,606,645
4...3.4FCS GROUP iNvirwAsgroup,com
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City of Yakima 2014 Wastewaer, Industrial Wastewater and Stormwater Rate Study
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Exhibit 4-15 shows the annual financial forecast for Scenario 3, including the impact of the capital
funding strategy. The initial increase would need to be 106.25°A, after which the following years
would see 2.5% increases.
Exhibit 4-15: Scenario 3-Annual Financial Forecast
Revenue Requirements 2014 2015 2016 2017 2018 2019 2024
Assigning Existing Rates:
Revenue
Rate Revenues $ 2,159,856 $ 2,236,966 $ 2,248,151 5 2,259,391 $ 2,270,668 $ 2,282,042 $ 2,339,666,
Non-Rate Revenues 16,171 15,732 16,091 16,117 16,149 16,180 16,348'
Total Revenue $ 2,176,036 $ 2,252,696 $ 2,264,242 $ 2,275,508 $ 2,286,637 $ 2,298,221 $ 2,356,014
' Expenses
Cash Operating Expenses $ 1,980,434 $ 1,770,513 $ 1,616,668 $ 1,664,355 $ 1,913,637 $ 1,964,578 $ 2,246,669
Existing Debt Service 84,306 84,306 84,306 84,306 84,306 84,306,
New Debt Service .
Rate-Funded System Reirnestment 350,000 350,000 350,000 350,000 350,000 350,000 524,231
Additions to Operating Reserve -
Total Expenses $ 2,330,434 $ 2,204,819 $ 2,250,974 $ 2,298,661 $ 2,347,943 $ 2,398,884 $ 2,655,206
Cash Surplus/(Deficiency) $ (154,398) $ 47,879 $ 13,268 $ (23,153) $ (61,105) $ (100,663) $ (499,192)
Annual Rate Adjustment 166;25% 2.50% 2.50% 2,50% 2.50% 2.50`Y,
Cumulative Annual Rate Adjustment 10615% 111.41% 116.69% 122.11% 127.66% 157,58%
Anneal Rate per ERU $43.00 $88.69 $90.90 $93.18 $95.51 $97.89 $110.76
Monthly Rate per ERU $3 58 $7.39 $7.58 $7,76 67.96 $8.16 69.23
After Rate Increases:
Rate Revenues $ 2,159,866 $ 4,613,742 $ 4,752,731 $ 4,895,907 $ 5,043,396 $ 5,195,328 $ 6,026,465
Net Cash Flow (154,400) 2,246,400 2,330,000 2,415,600 2,503,600 2,594,100 2,911,100
Debt Service Coverage-Revenue Bonds nix n/a n/a n/a nia nta: nia
Debt Service Coe a-All Debt n/a 31.83 32.84 33,92 34.94 36,01 , 41,90
. .
EntlIng Fund Balances 2014 2015 2016 2017 2018 2019 2024
Operating Reserve $ 488,326 $ 436,565 $ 446,722 $ 459,704 $ 471,1356 $ 484,416 $ 552,460'
Capital Reserve 1,887,281 3,348,021 3,776,666 3,101,724 2,852,663 3,297,220 5,606,645
Debt Reserve -
Total $ 2,375,607 $ 3,784,585 $ 4,223,38E1 $ 3,561,428 $ 3,324,519 $ 3,781,637 $ 6,159,105
Operating Reserve(Days of O&M Expense) 90 days 90 days 90 days 90 days 90 days 90 days 90 days
Target Capital Contingency $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 524,231
Capital Contingency Deficit(if any) $ - $ - $ - $ - $ - $ - $
Capital Structure:%Debt 38% 24% 14% 8% 6% 4% 1%
Capital Structure:%Equity 62% 76% 86% 92% 94% 96% 99%
,
Exhibit 4-16 presents the annual financial forecast in graphic form. The "Additions to Reserves" is
cash that is purposely generated to help cash fund the capital program.
Exhibit 4-16: Scenario 3-Forecast Graph
Stormwater Revenue Requirement
$7,000,000 , Mold A4ilettel Revenue for Debt Coverage
co=Additions to Reserves
enema Rate-Funded System Reinvestment
, L------New Debt Service
$6,000,000 EXiAting bebt Smite _., ,-Ill
*NM Cash Due,ating Ex periocv , ... •iii Mgr pliir rifir
-iiiii7R4venues Under Wilfrid Rates 1111 Witr "iiiR 1,3
-- 4.i-- , 81 .8 .
$5,000,000 zrt.** /••••• -In it al jia Hi lig
- '14 a a gil ill fi: li til 11 . 4 Eit i iii iii lii til 91
$4000000 all II iii.,.. i.:.. I.D.::: .I7l9.1..i1, 1
-1 l :.::1.g:••,; :.1..{.....I3.1!••I.1::• 1b
$3,000,000 / ._ ._ .A ;1 ,l Si: 4
/ .1 ax, :.E4. .....1...i':i 1a:.•'.":•i:1::•::•
,••
,...i..... ...... ••••• ..•••
$2,000,000 ...... •
i $1.,000,e00
S.- . .
2014 2015 2016 2017 2018 2019 2020 2021 2u22 2023 2024
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City at Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Rate Study
[December 20]4 Pogo 23
4.6. SUMMARY OF STORMWATER RECOMMENDATIONS
4.6.1 .Rate Increase Strategy
In our capital planning for most utilities including the Yakima wastewater utility, which we discuss
in the next section—we normally recommend a smooth pattern of rate increases,because a multi-year
set of gradual rate increases is usually less disruptive to customers than a sudden one-time increase.
However, the Yakima stormwater utility is an exception. It is still maturing as a utility, and it has not
yet reached the level of capital investment needed to both catch up and keep up with its infrastructure
responsibilities. Its current rates reflect its status as a relatively new utility they are far below the
stormwater rates of most other jurisdictions, even those in the drier parts of Washington state. Even
with a 55% increase, Yakima stormwater rates would be in the middle of the comparison group
instead of the very lowest.
One reason to consider an exception to the usual smoothed approach to rate increases is that
stormwater is such a small part of the overall utility bill only $3.58 per month for a typical single-
family customer. Even a high percentage increase to the stormwater bill has less impact on customers
than much smaller increases in water or wastewater rates. A 55% percent increase looks dramatic,
but for stormwater, the impact to single-family homeowners averages only $1.97 per month.
Another consideration is that a very long series of close-to-double-digit rate increases can leave
customers feeling angry, year after year. When the need for additional revenue is so great that a
smoothed rate strategy would call for 9% annual increases for ten years, it seems more realistic and
respectful to customers to "get it over with" put the level of rates where it needs to be, and then just
keep up with inflation after that. In this case, the "right sizing" strategy has the psychological
advantage of allowing the City and its customers to readjust expectations all at once.
However, the most persuasive reason to adopt Scenario 2 is simply that it leads to the lowest rates in
2024, the end of the forecast period. Scenario 2 would lead to an average charge per ERU of$6.94
per month ten years from now. The rate-smoothing approach, because it would require so much debt,
would mean average monthly charges of$8.48 by 2024. The no-debt approach would be even worse,
leading to a single-family rate of$9.23 by 2024. Through a judicious use of debt and a willingness to
make a sharp correction in the level of rates at the outset of the forecast period, the right-sizing
approach (Scenario 2) would leave the utility well positioned to minimize its long-term rates. For that
primary reason, we recommend that the City adopt the rate increases shown in Scenario 2.
4,6.2.Timing of Billing
Currently the stormwater charge is collected annually, as part of the property tax bills. Even though
the charge currently averages only $3.58 per month, customers see a rate of$43.00 per year.
Similarly, wastewater rates are collected every two months, so even though a typically single-family
home using 6 ccf/month of water is now charged an average of$38.68 per month, the customer sees
a bill of$77.36 every two months. Less frequent, higher bills are more of an imposition on a
customer than monthly bills, because the customer typically pays those bills from monthly income.
So a 55% increase in stormwater charges seems less significant when paid as $1.97/month rather than
$23.65/year. The City customer billing staff has expressed an interest in exploring the feasibility of
monthly billing, which has some administrative advantages and is less disruptive to customers than
bi-monthly or annual billing. There are costs associated with monthly billing, such as added postage
costs, but it is an improvement in customer service. In the case of stormwater,the 2015 "right-sizing"
increase we have recommended would be less disruptive if at the same time the City could add
stormwater to its utility billing system and make that billing monthly rather than bi-monthly. The
City staff would need to quickly evaluate the technical feasibility of such a change, but if it can be
done, it would mitigate the impact of the stormwater increase in 2015.
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SECTION 5: WASTEWATER UTILITY
5. 1 . SUMMARY
Regular retail rates are the largest single source of revenue for the wastewater utility, providing 79%
of total revenue. However, there are four significant revenues that offset the retail rate revenue
requirement the higher these four revenues are, the less is required to be generated by retail rates.
(There are also a collection of smaller fees that generate less than 1% of the total revenue; these have
little effect on retail rates, and they are not discussed in this report.) Because the four offsetting
revenues affect the level of rate increases needed for the retail rate, Section 5 deals with them first.
After we know what these four revenues should be, then we turn our attention to the retail rates.
The four offsetting revenues together provide 20% of the total revenue required by the utility. They
include:
I Pretreatment Rates: Minor Industrial User(MILT) monthly rates to pay for the cost of
running the City's Pretreatment program.
I Strong Waste Surcharges for the following: Biochemical Oxygen Demand (BOD), Total
Suspended Solids (TSS), and Fats, Oils, and Grease (FOG).
Industrial Wastewater Rates: A new type of charge, to recover the costs associated with
constructing and operating the newly constructed Industrial Wastewater(IW) collection
line and Upflow Anaerobic Sludge Blanket (UASB) treatment process.
• Wholesale revenue from Terrace Heights and Union Gap under a new 3-party agreement.
Projected 2015 revenues for each of these categories are shown in Exhibit 5-1. This table assumes
that the recommended rate schedules are fully implemented for each type of offsetting charge.
Exhibit 5-1: Estimated 2015 Revenues b Ire
Total Revenue Requirement $ 21,430;000
Less: Pretreatment(MIUs, Sills, Lab Fees) $ (970,000)
Less: Strong Waste Surcharges (510,000)
Less: Industrial Waste(IW) $ (1,610,000)
Less: Wholesale Revenue $ (1,260,000)
Less: Other Miscellaneous Revenues (140,000)
Retail Rate Revenue Requirement $ 16,940,000
Totals may be off due to rounding.
Includes wholesale share of cash-funded capital costs.
If the recommended rate increases for the four offsetting revenues are adopted, then the retail rate
increases can be limited to 3% per year throughout the projected study period(2015 —2024), as
shown in Exhibit 5-2.
Exhibit 5-2: Pro'ected Retail Rate Increases
Retail Wastewater Rates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Annual Increases 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Single Family Bill e)6 cern° $38.68 $39.84 $41,03 $42.26 $43.53 $44.84 $46.18 $47.57 $48.99 $50.46 $51.98
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5.2. PRETREATMENT (MIU) RATES
5.2.1 .0veryiew
The City's pretreatment program was formed in 1988 for the purpose of regulating non-domestic
strength wastewater discharge. Charges are established under Yakima Municipal Code (YMC)
7.60.105. Revenue collected from these charges is used to administer and enforce pretreatment
regulations as established under YMC 7.65. Per the City's website, the pretreatment department's
main goal is to protect the treatment plant from pollutants discharged by industries that can cause
equipment damage, interference of plant processes, or pass through into the receiving waters, and to
protect the community. Businesses are either classified as minor industrial users (MIUs) or as
significant industrial users (SIUs).This determination is based on the amount and type of wastewater
flow from each business.
SIU permit fee amounts shall be set at ninety percent of the amount identified in the industrial
facility categories of Washington Administrative Code (WAC) 173-224-040, according to YMC
7.60.105. Based on historical amounts, the revenue generated from the SIU customers is projected to
be nearly$215,000 per year.
The MIU businesses are subject to a sewer pretreatment charge that helps cover periodic testing and
monitoring performed by the City to ensure compliancy with wastewater discharge limits set by the
Pretreatment Program.
5.2.2.MIU Charges - Methodology and Results
The MIU rate calculation is a function of the annual cost of pretreatment, minus two types of
offsetting revenues, divided by the number of MIU customers. The annual cost of pretreatment is
based on the Pretreatment program budget (Budget Unit S232) plus a small allocation of estimated
supplies and services from the Treatment Budget Unit that pertain to the pretreatment program. For
2015, the total cost of pretreatment (including city & state taxes) is estimated at$1.09 million. That
total is offset by SIU revenue (about$215,000 per year) and sampling and lab testing fees ($111,000
per year), which leaves a net MIU revenue requirement of$763,000, to be spread over 461 MIU
customers. Therefore, the equivalent monthly MIU rate is $137.91 per month ($763,000 ÷461
customers ÷ 12 months). This is compared to the current MIU rate of$92.09 per month.
Because the unsubsidized rate would mean a 50% increase over current rates, we recommend that the
full cost-recovery MIU rate be phased in over three years. In the first year (2015), MIU revenue
would be approximately $600,000, which is roughly 80% of the full cost recovery level. The 2016
rate would recover nearly 90% of full program costs, and finally in 2017, the rate would recover
100% of costs. The three year phase-in strategy would mean three years of 17.8% annual increases
instead of an upfront 50% increase. After 2017, projected rate increases are largely inflation-based.
Exhibit 5-3 shows the impact of implementing the full cost recovery MIU rate all in 2015, while
Exhibit 5-4 shows the effect of phasing in the increase over three years.
Exhibit 5-3: Monthly MIU Rates-Immediate Im•lementation of Full Cost Recove
Year 2014 2015 2016 2017 2018 2019 2024
Inside City Rate $92.09 $137.91 $143.96 $150.24 $156.76 $163.53 $201.61
Outside City Rate $102.32 $137.91 $143.96 $150.24 $156.76 $163.53 $201.61
Exhibit 5-4: Month! MIU Rates-Three-Year Phase-In of Full Cost Recove Recommended
Year 2014 2015 2016 2017 2018 2019 2024
Inside City Rate $92.09 $108.66 $128.22 $150.24 $156.76 $163.53 $201.61
Outside City Rate $102.32 $108,66 $128,22 $150,24 $156.76 $163.53 $201.61
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Exhibit 5-5 summarizes the Pretreatment program expenditures, offsetting revenues, the resulting
monthly rates, and whether or not the rates support full cost recovery. To be conservative, we
assumed no growth in the offsetting SIU and lab fee revenue, and we also assumed no growth in the
number of MIUs.
Exhibit 5-5: Summa of Costs and Revenues Assumin Three Year Phase-in of Rate
MIU Summary Table 2014 2015 2016 2017 2018 2019 2024
Forecasted Program Expenses $ 1,057,258 $ 1,089,471 $ 1,122,906 $ 1,157,619 $ 1,193,668 $ 1,231,114 $ 1,441,673
Less:Projected Lab Fees (111,370) (111,370) (111,370) (111,370) (111,370) (111,370) (111,370)
Less:SIU Revenues (215,530) (215,530) (215,530) (215,530) (215,530) (215,530) (215,530)
Net Annual Revenue Requirement $ 730,358 $ 762,571 $ 796,006 $ 830,719 $ 866,768 $ 904,214 $ 1,114,773
MIU Rate
Total Accounts 461 461 461 461 461 461 461
Monthly Rates $92.09 $106.66 6128.22 $150.24 $156.76 $163.53 1 $201.61
Monthly Revenue $ 509,185 $ 600,838 $ 708,989 $ 830,719 $ 866,768 $ 904,214 $ 1,114,773
Over/(Under)Recowy 5 (221,173) $ (161,733) $ (87,017) $ • 5 - S • $ •
Why is such a large increase in pretreatment charges needed? The main reason is that the full-cost-
recovery rates recommended in the previous rate study were not adopted by the City. As a result, the
pretreatment program has been under-recovering its costs by about$220,000 per year. The monthly
MIU rates projected in the previous rate study would have been about$123 per month in 2014,
whereas the current inside-city rate in 2014 is $92.09 per month. As a result, pretreatment customers
have been subsidized by the retail customers.
The phased-in full-cost-recovery MIU rates are assumed in the development of the retail rates,
discussed later in Section 5. If the City does not adopt the recommended MIU rates,then the retail
rates will need to be adjusted upward in order to account for the reduced revenue stream from the
pretreatment program.
5.2.3.0ut-of-City Multiplier - MIU Rate and Strong Waste Surcharge
By policy, the City has an out-of-City multiplier of 1.5 for its retail rates that is, the rates for
customers outside the City limits are 1.5 times the rates for inside-City customers. For pretreatment
charges, the City's most recent approach is different; for the period 2012 through 2014, MIU rates
for out-of-City customers have been set at$102.32 per month (which is still below the full cost
recovery level, but closer). Then, inside-City customers have been charged an increasing percentage
of the out-of-city rates 80% in 2012, 85% in 2013, and 90% in 2014.
What should the City's approach be toward out-of-City customers with pretreatment rates? In this
case, we recommend that for both the MIU charge and for the strong waste surcharge, there be no
out-of-City multiplier. There are only three out-of-City customers who are subject to the pretreatment
charge and the strong waste surcharge. As a result, there is virtually no benefit to inside-City
customers from having out-of-City customers pay a higher amount. If three customers were to pay
150% of the inside-City rate, how much would they have to pay, and how much would the other 458
customers save, and still have the overall program recover its full costs? The answer is that the three
customers would have to pay$206.20 per month—more than double what they are now paying, and
$68.73 more than the inside-City customers. Meanwhile, the inside-City customers would save only
$0.44 per month. In general, an out-of-City multiplier is not related to the cost of service; it is simply
a policy choice that the City can choose to adopt or not adopt. In this case we recommend against it.
For such a disruptive result to a few, and so little benefit to the many, it does not make sense to
differentiate between inside-City and out-of-City customers when it comes to the pretreatment MIU
rate and the strong waste surcharge.
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5.3. STRONG WASTE SURCHARGES (BOD, TSS, FOG)
5.3.1 .Why is There a Strong Waste Surcharge?
In order to recover costs equitably between its residential and commercial customers, wastewater
utility charges must do two things: differentiate based on the scale of the service, and differentiate
based on the characteristics of the wastewater flow. (In this explanation, the term "commercial"
includes both industrial and smaller commercial.) Single-family residential customers tend to be
similar to each other, and multi-family customers tend to be similar to single-family customers
except for their scale, which can readily be measured by either number of dwelling units or volume
of metered water consumed. However, commercial customers vary widely from each other and from
residential customers in both scale and flow characteristics. A given commercial customer may be
very large or quite small—no larger than a single family home—in the amount of wastewater it
generates. Similarly, the wastewater generated by a given commercial customer can vary widely in
its degree of strength that is, the amount of treatment that will be required per unit of volume.
Some commercial customers generate wastewater that is essentially the same as the wastewater of a
single family home. Others generate much higher levels of organic or chemical loads, which require
proportionately more effort and cost to clean up. Because of this variability in commercial customers,
a key question that every utility must address in its rate design is, "How should we charge a
particular commercial customer in relation to what we are charging the residential customers?"
Many wastewater utilities answer this question by creating a one or more separate customer classes
for commercial customers. With this approach, there is one set of fixed monthly charges and volume
rates that might apply to residential customers (possibly with a per-unit charge for multi-family), and
there is a separate schedule of fixed monthly charges and volume charges for commercial customers,
which takes into account the fact that, on average, commercial customers generate higher strength
wastewater flows than residential customers. This way of answering the rate design question has the
advantage of being simple to administer, but it does require that we lump together commercial
customers, treating each one as though it is the same as all other commercial customers in its class. It
is possible to ameliorate this difficulty by creating classes called "Commercial 1," "Commercial 2,"
"Commercial 3" and so forth, or by separating light commercial from industrial customers, but as
long as the answer to the rate design question is to rely on different customer classes to create a
separate schedule of charges, then there is inevitably a lot of reliance on averages average
characteristics and average scale.
Yakima's answer to this rate design question takes two forms. To account for the varying scale of
commercial customers, the Yakima wastewater utility uses meter size as a proxy for the amount of
capacity that might be required by a particular customer, which is recovered through the fixed ready-
to-serve charge. (There is no need to have a separate volume charge differentiated based on scale,
since measuring water consumption already provides that differentiation.)
Then, to differentiate commercial customers based on their flow characteristics, Yakima develops an
estimate or an actual measurement of the wastewater flow characteristics of each business that
generates higher-than-normal levels of Biochemical Oxygen Demand (BOD), Total Suspended Solids
(TSS), and Fats, Oils and Greases (FOG), which are the three main culprits that drive the cost of
collecting and treating high-strength wastewater. Relying on specific lab testing data (or, when lab
testing data is not available, on national averages that arc specific to the type of industry), each
business that generates higher-than-domestic strength wastewater receives a separate "strong waste
surcharge" for HOD, TSS, and FOG, based on the number of pounds of BOD,the number of pounds
of TSS, and the number of pounds of FOG discharged into the wastewater system.
The thresholds are based on the concentrations of BOD, TSS, and FOG-300 mg/L for BOD and
TSS and 100 mg/L for FOG. Concentration is the amount of a particular pollutant per unit volume of
wastewater, and that is the measurement yielded by the lab tests. If the concentration is above the
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City of Yakima 2014 Wastewaer, Industrial Wastewater and Stormwoter Rate Stuay
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threshold for domestic strength wastewater, then the concentration for that business (in mg/L) is
converted to loadings (in pounds per month) by multiplying it by the volume of water and also by a
conversion factor. For each of the three categories, the strong waste surcharge is applied per pound of
excess loadings—that is, loadings that are above domestic-strength loadings.
This approach is more costly to administer than simply having a separate schedule based on
averages it requires a lot of lab testing—but it is ultimately more fair for the businesses in Yakima.
It makes sense for this community because of the unusually wide variation among its commercial
customers in the strength of their wastewater. For example, for a small office that is essentially the
same as a single family home in its wastewater characteristics (in other words, its wastewater is
"domestic strength"), the City charges the same as it would for a single family home. However, for a
large food processing facility that discharges wastewater that is much higher strength than a typical
domestic level, the City will apply the strong waste surcharge, which is in addition to the regular
fixed and volume charges paid by all customers (including by those businesses). The cost of testing
and administering the testing program is then recovered through the pretreatment charges.
5.3.2.Overview - Current and Projected Strong Waste Surcharges
Projected 2015 surcharge rates are increasing 16.2% for ROD, 7.3% for TSS, 35.1% for FOG.
Inflationary level increases are projected for years 2016 —2024. Several factors contribute to higher
than inflationary increases for 2015, including the following:
• Declining treatment plant loadings:
* Decline in domestic loadings: domestic treatment plant loadings(in total pounds)
have seen a decline in recent history. As Exhibit 5-6 illustrates, when the
denominator in the unit cost equation shrinks, the unit cost increases.
Exhibit 5-6: Sam Ile Calculation for Surchar le Unit Cost
• , • * * *
Total'
Allocated Annual
=MP Annual = Unit Cost.
•Operating &Capital ($)
Pounds
9. Decline in Industrial loadings: the Industrial Waste/UASB treatment process
significantly decreases BOD loadings on the conventional treatment plant and
frees up capacity. By delaying the need to expand the treatment plant, this saves
money in the long run; however, in the short term it increases the unit cost of
treating strong waste, again because the denominator is smaller.
" There was a one-year lag in the implementation schedule from the previous cost of
service rate study performed in 2007-2008.
* The FOG rate has not been updated since 2007 because of data limitations. Weekly data
is now tracked and measured so that annual loadings can he projected and incorporated
into the surcharge calculation.
* There was an update to the wastewater treatment plant asset allocation,which assigned a
higher percentage to both the BOD and TSS categories. This increases the amount of
operating and capital costs that are allocated to BOD & TSS, which increases the unit
cost of treating strong waste. The update was performed by City staff, which revisited
each of the asset categories and updated the functional percentages where operational
functionality has changed. Due to data limitations, this most recent allocation was based
upon estimated asset replacement cost rather than original cost depreciation,which was
the allocation metric used in the previous rate study. Exhibit 5-7 on the following page
summarizes the new allocation percentages.
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5.3.3.Metriodology
The strong waste surcharges are a function of forecasted plant loadings and corresponding operating
and capital costs.
The operating and capital costs include Budget Service Unit 232 (Treatment), a 10% share of Budget
Service Unit 211 (Collections), existing debt service and projected new debt service related to the
treatment plant, and calculated city and state taxes on the aforementioned costs. For the treatment
costs, the total costs were assigned to functional categories based on the allocation of the wastewater
treatment plant fixed assets shown in Exhibit 5-7.
FOG differs from BOD and TSS in that a significant part of its impact is on collection system costs,
not just treatment costs, since fats, oils and greases reduce hydraulic flow in the pipes and pumps. In
the past rate study, an assumption was made that 10% of collection system costs were attributable to
FOG. As part of this rate study, City staff reviewed maintenance demands and the line item budget,
and they concluded that the 10% assumption is still valid.
a) Allocation of Fixed Assets to Functional Categories
To allocate the operating and capital costs to the functional categories of Flow, BOD, TSS, and FOG
the existing wastewater treatment plant assets must first be allocated to the same functional
categories. City staff provided the asset allocation, and the summarized version is shown below.
Exhibit 5-7: Allocation of Treatment Plant Assets to Functional Catelories
•
Allocation to Categories
Plant Area Flow BOD TSS FOG Total
Influent Area $ 1,692,400 5 647,000 $ 7,163,500 $ 7,100 $ 9,510,000
Primary Clarifiers $ 137,350 $ 5,508,500 $10,335,000 $ 44,150 $ 16,025,000
Trickling Filters $ 350,600 $12,179,500 $ 1,129,900 $ $ 13,660,000
Activated Sludge $ 820,000 $18,440,000 $ 1,940,000 $ - $ 21,200,000
Final Treatment(Disinfection/Outfall) $ 14,492,000 $ - $ $ - $ 14,492,000
Solids Handling Building $ 305,500 $ 7,665,500 $10,439,000 $ $ 18,410,000
Solids Digestion - $ 2,200,000 $ 6,600,000 $ $ 8,800,000
OS Dewatering/UASB/Storage $ 238,345 $ 1,149,967 $ 4,435,588 $ 1,100 $ 5,825,000
Belief Building $ 225,900 $ 1,129,500 $ 1,129,500 $ 25,100 $ 2,510,000
Garage $ 702,204 $ 702,204 $ 702,204 $ 43,888 $ 2,150,500
Misc,Yard Equip. $ 326,531 $ 326,531 $ 326,531 $ 20,408 $ 1,000,000
Lab - 980,000 5 980,000 5 40,000 $ 2,000,000
Total S. 19,290,830 $50,928,702 $45,181,222 $ 181,746 $ 115,582,500
Allocation 16.7% 44.1% 39.1% 0.2% 100.0%
b) Allocation of Operating and Capital Costs to Functional Categories
The"Common Subtotal" in Exhibit 5-8 is allocated according to the percentages shown in Exhibit
5-7. The 10% of collection system costs are allocated 100% to FOG.
Exhibit 5-8: Costs to be Allocated to Functional Cate lodes in 2015
Cost Allocation 2015
UnalJrned Costs
Service Unit 232-Wastewater Treatment $ 6,069,445
Debt Service-Existing(Allocated to WWTP,per Wholesale Agrmt) 2,249,820
Debt Service-New[a] 41,652
City&State Taxes 2,365,781
Common Subtotal $ 10,726,698
plus: 10%of Collections for FOG(incl,City/State Taxes) 454,199
Total $ 11,180,897
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City of Yakima 2014 Wastewater, Industrial Wastewater and Storrnwater Rate Study
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The resulting percentage and dollar amounts of this calculation are summarized in Exhibit 5-9.
Exhibit 5-9: Allocating Operating&Capital Costs to Functional Categories
T5S,
$4,193,407
385
GOD,
Total 611"180 897
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• *„
Note that the dollar amount allocated to Flow is excluded from the strong waste rates, since the
strong waste surcharge is only intended to recover the incremental costs associated with excess
loadings, not hydraulic flow. Those businesses that generate high amounts of flow already pay more
for that flow through their volume charges.
The projected flow and loadings are shown in Exhibit 5-10. The dollar amounts within BOD, TSS,
and FOG represent the numerator in each unit cost calculation. The denominator in each calculation
is the annual projected loadings at the treatment plant for each surcharge category. The forecast
conservatively assumes no growth.
Exhibit 5-10: Forecasted Treatment Plant Flow and Loadin Is
Loading PrelecllonS 2014 2015 2016 2017 2018 2019 2024
Influent Flow(mg) 112 112 112 112 112 112 112
BOD(lbs) 614,455 614,455 614,455 614,455 614,455 614,455 614,455
TSS(lbs) 176,160 176,160 176,160 176,160 176,160 176,160 176,160
i 1 n PI n n
Influent Flow(mg) 3,140 3,140 3,140 3,140 3,140 3,140 3,140
BOO(lbs) 7,708,363 7,708,363 7,708,363 7,708,363 7,708,363 7,708,363 7,708,363
TSS(lbs) 7,786,918 7,786,918 7,786,916 7,786,918 7,786,918 7,786,918 7,786,918
FOG(lbs) 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072
Influent Flow(mg) 3,253 3,253 3,253 3,253 3,253 3,253 3,253
BOO(Ibs) 8,322,818 8,322,818 8,322,818 8,322,8113 8,322,818 8,322,818 8,322,8113
TSS(Ibs) 7,963,078 7,963,078 7,963,078 7,963,078 7,963,078 7,963,078 7,963,078
FOG(Ibs) 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072 1,263,072
5.3.4.Results
Exhibit 5-11 shows the forecasted unit costs for each surcharge category. The percentage rate
increases from 2014 to 2015 are as follows: BOD 16.2%, TSS 7.3%, and FOG 35.1%. Inflationary
level increases are projected for years 2016 —2024.
Exhibit 5-11: Cost er Pound that Exceeds Domestic Concentration Threshold
Cost per Pound 2014 2015 2016 2017 2018 2019 2024
BOD $0.4890 $0.5680 $0.5900 $0.6148 $0.6296 $0.6424 $0.6459
TSS $0.4910 $0.5266 $0.5470 $0.5700 $0.5837 $0.5956 $0.5988
FOG $0.2760 $0.3729 $0.3836 $0.3948 $0.4061 $0.4178 $0.4808
Among the strong waste surcharges, the FOG percentage increase is the highest. However, unlike the
BOD and TSS charges, the FOG charge is designed to be an avoidable charge, based on actions the
customer can take. Its main purpose is not to generate revenue but to influence customer behavior.
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5.4. INDUSTRIAL WASTEWATER / UASB RATES
5.4.1 .0yeryiew
In the past year, the City has begun to treat certain high-sugar industrial waste (1W) separately from
domestic waste, using an Upflow Anaerobic Sludge Blanket(UASB) system. The wastewater being
treatcd by the UASB significantly reduces the BOD loadings of the influent flow. The effluent is then
treated in the conventional wastewater treatment plant where it is comingled with the domestic flows.
The UASB can yield significant capacity savings; pretreating the IW flows before they enter the
conventional treatment plant can delay the need to expand the plant and therefore reduce future costs.
City staff estimates that wastewater flows going through the UASB will enter the rest of the
treatment plant with 80% less BOD (as measured in total pounds). Initially, there are four major
industrial customers connected to the industrial waste collection line which leads to the UASB; other
IW customers may he added later.
Customers connected to the UASB system will have rates broken into three major categories:
* Industrial Wastewater(IW) Rate (for influent treated by the UASB system)
it Uniform volume rate per ccf, initially set at $7.69/ccf in 2015
* Modified Retail Rates (for UASB effluent that enters regular treatment plant)
• Ready-to-serve charge: 60% of stated retail rate
• Volume rate per cc f: 60% of stated retail rate
▪ Strong waste surcharges (ROD, TSS, and FOG): 100% of stated rate
We estimate that 40% of the retail rates are related to the collection system rather than the treatment
plant. Since Industrial Wastewater customers have their own collection line (and do not use the city's
collection system), they should receive a corresponding 40% reduction against the stated retail rate.
There would be no reduction in per-pound rates for the strong waste surcharge, but due to the UASB
process, there would be a significant reduction in the amount of BOD that is subject to those rates.
For reasons discussed below, we recommend that the total bill for any given IW customer be capped
at the amount that would be paid by that customer if its wastewater were going through the normal
treatment process with normal charges.
5.4.2.Methodology
a) Industrial Wastewater Rate
The industrial wastewater rate is intended to recover the costs associated with constructing and
operating the industrial wastewater collection line and UASB treatment system. The IW rate is based
on flow (in ccf), even though the variable being treated is BOD. A rate based directly on BOD would
give industrial customers an incentive to do their own on-site pretreatment in order to minimize their
IW charges. Such an incentive would be negative for the City, because the UASB process depends on
high-sugar wastewater to operate effectively.
Operating Costs - Fixed operating costs include personnel, parts, and supplies. Variable operating
costs include chemicals and power costs associated with operating the IW collection line and the
UASB treatment system. Fixed and variable operating costs are projected to be nearly $400,000 per
year. In addition to these operating costs, a share of interfund overhead charges and interfund
insurance charges are included, which is applied as a 16% markup on the operating costs (the same
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relative share of these line items when compared to the Treatment budget unit). The interfund
allocated costs average $68,000 per year.
Capital Costs -The capital portion of the charge is an imputed debt service on the IW collection line
and UASB construction cost, which totals $8.7 million. The imputed debt service assumes the same
terms as the debt actually sold for this project. This method recognizes the entire investment the City
made in these facilities—both the equity part and the debt-financed part—but still gives the IW
customers the benefit of the extraordinarily good terms the City received from State loans. As a
result, the City will be recovering a capital charge consisting of$8.7 million spread over 20 years at
0.5% interest, which is projected to be nearly $460,000 per year.
Lastly, city and state taxes are calculated on both the operating and capital revenues to be recovered.
The average tax amount is roughly $267,000 per year. The operating and capital costs total $1.15
million in 2015, which is then converted into a volume rate of$7.69 per ccf of influent to the UASB.
b) Modified Retail Rates
The effluent from the UASB process will be treated within the conventional treatment plant. The
ready-to-serve and volume rate should be reduced by 40% to deduct the estimated part of the retail
rate that is collection- related. Exhibit 5-12 summarizes how the 60%/40u/o split was estimated.
Exhibit 5-12: Estimatin Treatment vs.Collection Share of Retail Rates
Developing %of Domestic Rate 2015
Service Unit 232-Wastewater Treatment + IV $ 6,465,118
Existing Debt Service -WWTP related 2,249,820
New Debt Service -WWTP related 41,652
City & State Taxes 2,477,739
Total Treatment Costs $ 11,234,330
Total Operating Budget $ 15,744,880
Total Debt Service 2,932,431
$ 18,677,311
Treatment as a Percentage of Total 60%
5.4.3.Results
Exhibit 5-13 shows how Industrial Wastewater customers would be charged starting in 2015. First, a
customer would be charged the Industrial Wastewater volume rate. Then they would also pay the
modified retail rates on the UASB effluent that eventually goes through the conventional treatment
plant. They would also pay strong waste surcharges on the UASB effluent. Even though the
combined volume rate (industrial wastewater rate and the modified retail volume rate) would be
nearly triple the volume rate currently paid by IW customers, a typical customer can save on their
overall bill because of the reduced strong waste surcharge for BOD. UASB effluent is expected to
contain 20% of the original pounds of BOD, so the savings in the BOD surcharge are significant.
Exhibit 5-13: Example of Charge Components for IW Customers
Modified
_
IW Collection&UASB Conventional Treatment Plant(treats effluent -
Total
Treatment from UASB treatment process) `". Charge
•60%of stated inside retail RTS charge
Rate per CCF •60%of stated inside retail volume charge
•100%of Strong Waste surcharges
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Exhibit 5-14 shows the schedule of IW rates and modified retail rates for IW effluent.
Exhibit 5-14: Industrial Wastewater Rate Schedule
Year 2014 2015 2016 2017 2018 2019 2024
Industrial Wastewater Rate
Rate per CCF $7.69 $7.77 $7.84 $7.92 $8.00 $8.43
Conventional Treatment Plant Rates
60% of Retail Rates
Ready-to-Serve Charges
0.75 in. $20.62 $12.84 $13.23 $13.62 $14.03 $14.45 $16.76
1 in. $25.25 $15.72 $16.20 $16.68 $17.18 $17.70 $20.52
1.5 in. $31.61 $19.69 $20.28 $20.88 $21.51 $22.16 $25.69
2 in. $48.78 $30.38 $31.29 $32.23 $33.20 $34.19 $39.64
3 in. $175.15 $109.08 $112.35 $115.72 $119.19 $122.77 $142.32
4 in. $222.03 $138.27 $142.42 $146.69 $151.09 $155.63 $180.41
6 in. $331.40 $206.38 $212.58 $218.95 $225.52 $232.29 $269.29
8 in. $456.09 $284.04 $292.56 $301.34 $310.38 $319.69 $370.60
10 in. $908.67 $565.89 $582.87 $600.35 $618.36 $636.91 . $738.36
Rate per CCF $3.01 $1.87 $1.93 $1.99 $2.05 $2.11 $2.45
RTS Rate (60%of applicable meter size charge)
100%of Strong Waste Surcharges
Per Pound of BOD $0.4890 $0.5680 $0.5900 $0.6148 $0.6296 $0.6424 $0.6459
Per Pound of TSS $0.4910 $0.5266 $0.5470 $0.5700 $0.5837 $0.5956 $0.5988
Per Pound of FOG $0.2760 $0.3729 $0.3836 $0.3948 $0.4061 $0.4178 $0.4808
5.4.4.CaDoed Incustria Wastewater Rates
We recommend that the City adopt a capped Industrial Wastewater rate approach so that customers
that are connected to the IW system pay no more than the amount that they would have been charged
if they were not IW customers.
For example, with capped rates, if a customer would pay $100,000 in 2015 under the current charge
methodology but would pay$130,000 under the recommended IW rate structure, they would be
billed$100,000, IW customers with relatively low BOD loadings may fall into this example.
Because BOD could otherwise be a capacity constraint that would require plant expansion, it is to the
overall system's advantage to have these particular customers flow through the UASB process.
Therefore it is recommended that the City provide an upper limit to a customer's charge in order to
eliminate the financial risk for a customer to connect. The customer would likely view it as a no-risk
situation that may potentially save them money. The City would in turn be able to leverage its UASB
process which saves capacity at the conventional treatment plant. The capped charge reconciles two
competing City goals: provide an incentive for high-sugar customers to connect to UASB, and
recover the cost of the UASB from those customers. Of course, the City can control which customers
it allows (or requires) to connect to the IW collection line and UASB, so if the wastewater
characteristics of a prospective IW customer do not appear to provide much a to the City's overall
costs and revenues, it would not make sense to allow that customer to be connected to the IW line.
Based on several sample bill tests using projected 2015 rates, a customer would "break even"
between the two rate structures if BOD represented approximately 70% of their total bill under the
current billing method. This is intended to be an informational item only and a more detailed analysis
should be conducted if policy decisions are going to be made based upon this figure.
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Customers with higher concentrations of BOD are more likely to see overall savings under the IW
rates than under the regular retail method. For example, consider the following two sample monthly
bills in Exhibit 5-15. Both sample bills have total pounds of BOD near 40,000. However the first bill
would save nearly $8,000 while the second bill would see an increase of nearly $6,000. It could
conceivably be in the City's best interest to have both customers connected to the IW line, and by
having capped IW rates, the City would remove the financial risk for the second customer to connect.
Exhibit 5-15: Sample Industrial Wastewater Bills
Assumed Rates-> $0,5580 $3.10 $0.5680 $9.57
BOD Before Treatment BOD After Treatment Flow Traditional Retail IW Rates+Modified Retail
Monthly Pounds> Monthly Pounds> MG per Q(ccf per
BOD Flow Total BOD Flow j Total
PPM 300 ppm PPM 300 ppm Month month)
A 3,597 42,622 719 5,422 1.550 2,072 $24,208 $6,425 $30,633 $3,080 $19,623 $22,903
Et 1,799 38,744 360 1,544 3.100 4,144 $22,006 $12,849 $34,855 $877 $39,647 $40,524
5.4.5. mpact on Existing Inc ustrial Wastewater Customers
Exhibit 5-16 estimates the rate structure impact on the four customers that have already been
required to connect to UASB process. As can be seen, without a capped charge, Noel would see an
increase in their charges. Del Monte would see the most savings in their charges.
Exhibit 5-16: Com arin! Sam I le Char es Under Current vs.IW Rates
2015 Rates-Current Billing Structure 2015 Rates-IW Billing Structure
Customer BOD TSS RTS Flow Total BOD TSS RTS Flow Total Savings
$0.5680 $0.5266 Vanes $3.10 $0.5680 $0.5266 $9.57 Increase
Del Monte $772,000 $17,000 $4,000 $163,000 $956,000 $110,000 $17,000 $2,000 $503,000 $632,000 $ 324,000
Seneca $174,000 $ - $2,000 $ 38,000 $214,000 $ 24,000 $ - $1,000 $117,000 $142,000 $ 72,000
Jewel $595,000 $ - $6,000 $226,000 $827,000 $ 57,000 $ - $4,000 $699,000 $760,000 $ 67,000
Noel I$ 44,000 $ - $6,000 $ 38,000 $ 88,000 $ - $ - $3,000 $117,000 $120,000 $ (32,000)
*Rounded to nearest thousand
5.5. WHOLESALE AGREEMENT
The previous four-party agreement for wholesale wastewater service is being replaced by a three-
party agreement that is in the process of final approval by the Cities of Yakima, Terrace Heights, and
Union Gap. It is estimated that the three-party agreement will generate more revenue to the Yakima
wastewater utility than the previous agreement.
Revenues generated can be roughly split into two categories: treatment-related operating charges that
recover operating costs and capital-related charges that recover treatment capital investment and
replacement made by the City.
Operating revenue (related to the treatment charge) in 2014 was estimated based on six months of
actual bills that provided average revenue for each party that was extrapolated over an entire year.
Future years conservatively assume no increase in revenues above the projected 2014 level.
Capital revenue was estimated by analyzing two revenue streams: debt service and cash financed
capital. In simplified terms, Terrace Heights and Union Gap are to pay a percentage share of new and
existing debt service related to the wastewater treatment plant, and in addition to this, they are to pay
a percentage share of treatment capital that is cash-financed by the City. In addition, Union Gap is to
contribute a percentage of both operating and capital dollars related to the Rudkin Road Pump
Station.
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It is beyond our scope of services to provide an in-depth analysis and review of the agreement.
However, we should note that two factors cause future revenues to be difficult to estimate:
• The agreement has not been signed and finalized by all parties, so terms are subject to
change.
* The working draft has only been implemented since January 2014, which does not
provide a long history to see how the new methodology may affect revenues and usage
patterns over time.
An important question is how the projected wholesale revenues compare with historical revenues and
how this may impact the necessary level of retail rate increases. Looking back at the most recent two
years of history, wholesale revenue averaged nearly $870,000 per year. All parties acknowledged that
Terrace Heights and Union Gap had been previously subsidized by Yakima ratepayers, which
provided the impetus for creating a new agreement, so that the two wholesale customers could pay a
more equitable share of system costs. Using the most recent version of the agreement, we project that
annual revenue will average nearly $1.2 million per year, which represents a 40% increase in
wholesale revenue when compared to recent history. Our retail rate forecast with 3.0% increases per
year assumes this level of wholesale revenue. The difference between the historical and projected
revenue roughly represents 2% of current retail rate revenues. So, for example, if the actual revenue
turned out to be at the historical average of$870,000 per year, then the retail rates would need a one-
time 2% increase on top of our forecast increases of 3% per year.
5.6. RETAIL RATES (READY-TO-SERVE, VOLUME CHARGE)
5.6. 1 .Capital Funding Strategy
Exhibit 5-17 summarizes the capital funding strategy assumed for the retail revenue requirement.
Exhibit 5-17: Ca iital Fundin Strate
Capital Funding Stralogy 2014. 2015 2016 2017 2018 2019 • 2024
Capital Expenditures(Escalated Dollars) $ 4,492,031 $ 4,688,550 $ 11,638,860 $ 6,453,974 $ 4,504,02B $ 3,414,59B $ 4,302,326
Capital Funding Strategy:
Beginning Fund Balance $ 3,182,816 $ 3,488,903 $ 2,972,668 $ 2,675,465 $ 2,746,322 $ 2,745,726 $ 3,060,122
plus: Grants/Outside Sources 2,049,900 3,751,414
plus: Annual Capital Charge Revenue 500,000 390,833 392,787 394,751 396,725 398,700 408,776
plus: Rate-Funded System Reinvestment 1,238,520 1,358,006 1,413,344 1,532,896 1,573,603 1,573,527 2,560,063
plus: Transfer of Surplus from Operating Fund 614,782 900,574 819,557 529,311 512,529 606,099 961,449
plus:Wholesale Capital Revenues 393,167 318,022 242,345 282,175 256,003 219,009 216,880
plus: Interest Earnings 2,546 5,233 7,432 7,189 6,866 6,864 7,670
plus: Net Debt Proceeds Available for Projects 1 199,647 4 914 778 5 57 559 1,757,705 658,871 1,234,204
Total Capital Resources $ 7,981,734 $ 7,661,218 S 14,514,324 $ 11,200,296 $ 7,249,753 $ 6,218,806 $ 6,457,165
less: Capital Expenditures 4,492,831 4,688,550 11,638,860 8,453,974 4,504,020 3,414,598 4,302,326
Ending Fund Balance 5 3 468,903 S 2,972,866 $ 22375,465 S 2,746,322 $ 2,745,726 5 2,804,208 $ 4,154,838
Approximately 5% of the capital inflows come from grants and forgivable loan principal, 7/0 from
the capital connection charge, 44% from cash, 5% from wholesale capital-related revenue, and 39%
from state loans and revenue bond issues.
The capital funding strategy assumes the following grants/forgivable loan principal:
" Grant G1400532: $249,900
• Grant G1400608: $500,000
• Grant for Project 13-1509R: $1,300,000
• Forgivable loan portion on L1200019: $697,150
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5.6.2. Annual Financial Forecast
As with the stormwater forecast, the purpose of the wastewater annual financial forecast is to
determine the rate revenue requirement. Exhibit 5-18 summarizes the annual forecast. ' It first looks
at total revenue under existing rates (including non-rate revenue) and compares it with cash operating
expenses, existing debt service, new debt service arising from the capital funding strategy, and the
planned rate-funded capital reinvestment. If projected revenue under existing rates are inadequate for
those costs, then there is a cash deficiency, and a rate increase is needed. Separately, there is also a
test for whether the revenue under existing rates would provide enough income to meet the
requirement for bonded debt service coverage. Either type of deficiency-a cash deficiency or a
coverage deficiency-can drive the need for rate increases. In this case, debt service coverage is the
binding constraint in all of the years except for 2024.
Exhibit 5-18: Wastewater Annual Financial Forecast
Revenue Requirements 2014 2015 2016 • 2017 • 2016 2019 2024 • -
1Assuming Existing Rates:
Revenue
Rate Revenues $ 16,457,628 $ 16,447,886 5 16,438,557 5 16,429,636 $ 16,421,131 $ 16,413,034 5 16,378,704
Non-Rate Revenues:
Pretreatment Charges $ 880,749 $ 972,034 $ 1,060,185 $ 1,201,915 $ 1,237,964 $ 1,275,410 $ 1,485,969
Strong Waste Surcharges 447,856 508,463 528,130 550,257 563,535 575,027 579,006
Industrial Waste Charges 1,769,322 1,609,776 1,638,740 1,669,461 1,696,275 1,722,744 1,837,047
Wholesale Revenue-Operating 8 Debt Svc 679,070 940,166 956,338 974,633 997,157 1,001,153 1,015,480
Miscellaneous Fees 381,979 144,268 149,872 151,111 152,570 153,164 36,955
Subtotal Non-Rate Revenues $ 4,158,975 $ 4,174,707 5 4,353,265 $ 4,547,376 $ 4,647,501 $ 4,727,499 $ 4,954,457
Total Revenue $ 20,616,603 $ 20,622,593 $ 20,791,822 $ 20,977,014 $ 21,068,531 $ 21,140,533 $ 21,333,161
Expenses
Cash Operating Expenses $ 15,455,672 $ 15,744,880 $ 16,079,757 $ 16,452,783 5 16,802,872 $ 17,158,506 $ 19,135,586
Existing Debt Service 2,949,000 2,829,043 2,660,785 2,538,960 2,540,544 2,535,477 1,279,077
New Debt Service 103,388 526,953 1,007,719 1,159,202 1,216,847 1,704,189
Rate Funded System Reinvestment 1,238,520 1,358,006 1,413,344 1,532,896 1,573,603 1,573,527 2,560,063
' Additions to Operating Reserve
Total Expenses $ 19,643,192 $ 20,035,316 $ 20,680,839 $ 21,532,360 $ 22,076,221 $ 22,484,357 $ 24,676,915
Cash Surplus/(Deficiency) S 973,411 5 587,277 $ 110,983 $ (555,345) $ (1,007,590) $ (1,343,824). $ (3,345,753)
Debt Svc Coverage Deficiency(if any) 5 - $ - $ - $ (632,244) $ (1,204,004) $ (1,599,727):$ (2,033,132)
... .....
Annual Rate Adjustment 300% 3.00% 3.00% 3.00% 3.00% 3.00%
Cumulative Annual Rate Adjustment 3.00% 6.09% 9.27% 12.55% 15.93% 34.39%
•After Rate Increases:
Rate Revenues 5 16,457,628 $ 16,941,323 5 17,439,665 $ 17,953,109 $ 18,482,127 $ 19,027,205 $ 22,011,609
Net Cash Flow 973,400 971,900 891,300 632,100 598,900 693,800 1,044,800
Debt Service Coverage-Revenue Bonds 3.26 3.14 2 61 2 22 2 15 2 16: 3 11
Debt Sawn Coverage'Alt Debt 1.75 1,80 1,73 1.61 1,59 1.61 241
Ending Fund.Balances. 2014 2015 2016 2017 2018 2019 2024
Operating Reserve $ 3,810,988 $ 3,882,299 $ 3,954,039 $ 4,056,851 $ 4,143,174 $ 4,230,864]$ 4,705,472
Capital Reserve 3,486,903 2,972,666 2,875,465 2,746,322 2,745,726 2,804,208 4,154,838
Debt Reserve 1,356,750 1,460,138 7,883,703 2,364,470 2,515,952 2,573,597 3,060,939
Total $ 8,656,641 $ 8,315,105 $ 8,713,206 $ 9,167,643 $ 9,404,852 $ 9,608,670 $ 11,921,249
Operating Reserve(Days of O&M Expense) 90 days 90 days 90 days 90 days 90 days 90 days 90 days
Target Capital Contingency $ 1,406,279 $ 1,453,164 $ 1,569,553 $ 1,654,092 $ 1,699,133 $ 1,733,279 $ 1,936,284
Capital Contingency Deficit(if any) S - S - $ - $ - $ - $ - '$
Capital Structure:%Debt 31% 29% 30% 32% 32% 30% 23%
,Capital Structure:%Equity 69% 71% 70% 68% 68% 70% , 77%
In this forecast, there is new debt service to be paid,beginning at $103,000 in 2015 and growing to
$1.7 million per year by 2024. At the same time, rate-funded system reinvestment grows from $1.2
1 Total revenue shown here is different from the total from Exhibit 5-1 earlier in this report.The purpose of this table
is to show costs and revenues that directly drive the rate revenue requirement, so capital-related income such as
grants,connection charges,and the wholesale share of cash-funded capital costs are excluded. With Exhibit 5-1, in
order to highlight the significance of the wholesale agreement as a funding source,we chose to include the
wholesale share of cash-funded capital costs.
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million in 2014 to nearly$2.6 million by 2024. However, there is a drop-off in current debt service in
2024, reducing annual debt service by nearly $1.2 million. In addition, continued water conservation
means that revenue under existing rates will slightly decline each year, at the same time as operating
costs increase with normal inflation. As a result, if there is no change in rates, the coverage
deficiency would be $1.6 million in 2019 and the cash deficiency would be $3.3 million in 2024.
In order to meet the cash requirements, debt service coverage requirements, and maintain minimum
operating reserves, annual rate increases of 3.0% are needed. After the rate increases, the lowest debt
service coverage would be 2.05 (in 2023, not shown in Exhibit 5-18), and total outstanding debt
would not rise above 32% of total capital assets.
Exhibit 5-19 graphically represents the revenue and expenditure trends throughout the ten year study
period. The solid black line represents retail revenue under existing rates as well as non-rate
revenues. The dashed black line represents retail rate revenues with the recommended rate increase
plus non-rate revenue. The colored columns represent different types of cash requirements.
Exhibit 5-19: Forecast Graph
Wastewater Revenue Requirement
$30,000,000
•
$25,000,000 •••*****
****""7 " •
$20000000
*: •
515,000,000 iill III
*WOO Additional Revenue for Debt Coverage
Additions to Reserves
tgatoxs*Rate Funded System Reinvestment
$10,000,00E1
New Debt Service
imiligst Existing Debt Service
IMPE Cash Operating Expenses
$5,000,000 •
—Revenues Under Existing Rates
— —Revenues After Rate Increases
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
5.6.3.Realignment of Out-of-City Multiplier
While the retail rates as a whole will increase by 3.0% in 2015, we recommend a slight adjustment in
the rate structure to create a true 1.50 out-of-City multiplier. The out-of-City multiplier implied in
the current rate ordinance ranges from 1.36— 1.52 depending upon the specific ready-to-serve or
volume charge. The recommended rate schedule shown in Exhibit 5-20 realigns all of the out-of-City
charges to be 1.50 times the inside-City rate as of 2015. From 2016 —2024, the 3.0% rate increase is
applied as an across-the-board increase so that every rate equally increases by the same percentage.
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Exhibit 5-20: Reali nment of Out-of-Cit Multi.lier
Monthly Rate Schedule Existing Projected
Sewer Utility 2014 2015
Other Than Multiple Unit Customers
Outside City-Monthly Sewer Charges OCM OCM
0.75 in. $29.11 1 41 631.85 1,50
1 in. $36,04 1 43 639.00 1,50
1.5 in. $45.52 1,44 $48,83 1,50
2 in, $71.18 1,46 $75.35 1 50
3 in. $260.02 1 18 $270.56 1.50
4 in, $330.06 1 45 $342.97 1 50
6 in. $493.49 1.49 $511.92 1.50
8 in, $679,76 1 49 $704.53 1.50
10 in. $1,356,07 1 46 $1,403 63 1 50
Volume Rate per CCF $4.57 1 62 $4,65 1,511
Multi Unit Customers
Outside City-Monthly Sewer Charges
Per Account $16 79 1 36 $19.13 1 50
Per Unit $12.32 1.50 $12,73 1.50
Multiple-unit customers outside the City now have an implied out-of-City multiplier of only 1.36
times the inside-City rate. Their account charge would increase by nearly 14%, although it is worth
noting that the largest part of their charge (the per unit charge) would see an increase much closer to
the overall increase of 3.0%. In addition to multiple-unit customers, outside-City customers with a
3/4" meter would also see a noticeable impact. Since their current implied out-of-City multiplier is
only 1.41, the effective increase in their ready-to-serve charge would be over 9% in 2015.
To avoid a divergence in out-of-City multipliers in the future, we suggest that only the inside-City
rates be stated in the rate ordinance, along with a simple statement that outside-City ready-to-serve
and volume charges will be 1.50 times the stated inside-City rates. This realignment does not change
the overall revenue profile of the utility. For reference, the City currently recovers 44% of its retail
rate revenue from fixed charges, while the remaining 56% is generated through the volume charge.
5.6.4. Recommendec Rate Schedule
The recommended rate schedule for the inside city rates is shown in the following Exhibit 5-21. As
noted above, we recommend that the City only publish the inside city rates in the ordinance. Below
the inside schedule, we recommend the City insert language stating that outside-City rates are 1.50
times the stated inside-City rates.
Exhibit 5-21: Recommended Retail Rate Schedule for Inside-Cl Customers
Monthly Rate Schedule Existing Projected Projected Projected Projected Projected Projected
Sewer Utility 2014 2015 2016 2017 2018 2019 2024
Annual Across the Board Increases(%) 3.0% 3.0y. 3.0% 3.0% 3.0% 3.0%
Cumulative Rate Increases(%) 3.0% 6./% 9.3% 12.8% 15.9% 34.4%
:Other Than Multiple Unit Customers
Inside aty-Monthly Sewer Charges ...
-
0.75 in. 520.62 $21.23 $21.87 622.53 523.20 $23.90 $27.71
1 in. $25,25 $26.00 $26.78 $27 59 $28,41 529.27 533.93
1 5 in $31 61 $32,55 533.53 $34 53 $35 57 $36.64 $42.47
2 in. 548.78 $50.23 $51.74 $53 29 $54 89 $56.54 $65.54
3 in. 3175.15 $180 37 $185.78 $191.36 $197,10 $203.01 $235.34
4 in. $222.03 $228.65 $235.51 $242.57 $249,05 $257 35 $298.33
6 in. $331.40 $341.28 $351.52 5362.06 $372,92 $384 11 $445.29
8 in, $456.09 $469.68 $483.78 6498.29 $513,24 $528.63 $612.83
10 in. $908.67 $935 75 $963 83 6992.74 $1,022 52 $1,053 20 $1,220 95
Volume,Rate per CCF $3.01 $3,10 $3,19 $3.29 $3,39 $3.49 $4.05
Inside City-Monthly Sewer Charges :
Per Account $12.38 $12.75 $13 13 $13 53 $13.93 $14 35 $16.64
Per Unit $8.24 $8.49 $8 74 $9.00 $9.27 $9,55 $11,07
....,..........
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City of Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Rate Study
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5.6.5.Rate Comparison
Exhibit 5-22 shows the results of a survey of wastewater rates from other comparable cities. The City
of Yakima is right in the middle of the comparison group, ranking below four other jurisdictions and
essentially even with Pullman. The City only slightly above the average rate in the survey, which is
$37.52 per month for a single-family customer with 6 ccf of water usage per month.
Exhibit 5-22: Sewer Rate Su rve Assuming 6 CCF in Flow
Single Family Residential
# Jurisdiction Rate
1 Wenatchee $23.22 MIN
2 Pasco $24.60 inn
3 Richland $25.60 MI
4 Ellensburg $32.43 INN
5 Moses Lake $32.70 NM
6 Pullman $38.15 111.111.
7 Yakima 2014 $38.68 =III
8 Yakima 2015 $39.84 MIS
9 West Richland $42.00
10 Cle Elum $44.65
11 Walla Walla $52.10 *
12 Roslyn $57.22 * :*
5.7. BILL IMPACT TO SAMPLE CUSTOMERS
The following series of exhibits show the combined impact of the 2015 wastewater and stormwater
rate increases on a hypothetical group of sample customers. Data such as usage, loadings, ERUs were
based on averages from those sample categories. The sample customer profiles include the following:
Single family customer using 6 ccf per month, assuming an average single family
residence for stormwater which equals one ERU.
Multi-unit residential with 10 units, using 5 ccf per unit, and four stormwater ERUs on
the parcel.
' Commercial customer with a 1" meter using 38 ccfs per month and having 90 billable
pounds of BOD per month, with seven stormwater ERUs.
• Industrial customer with a 2" meter using 385 ccfs per month having 750 billable pounds
of BOD per month, with 25 stormwater ERUs.
Exhibit 5-23 assumes stormwater Scenario 1, which has an annual 9% increase in the stormwater
charge. In this scenario, the combined increase for our hypothetical single family customer would be
$1.48 per month, or 3.5% of the total bill. However, in this scenario the stormwater charge would
keep increasing by 9% each year for the next ten years. The multi-family customer increase would be
about the same in percentage terms. Because a proportionately larger share of their total bill comes
from stormwater, the commercial and industrial sample customers would see their total bills increase
by about 6.5%-7% in 2015.
Exhibit 5-23: Sam le Char:es Assumin Stormwater Scenario 1
Stormwater Scenario 1 Current 2014 Rates Proposed 2015 Rates $Change %Change
Monthly Charge Comparison Stormwater Wastewater Total Stormwater Wastewater Total Total Total
Single Family Customer $3.58 $38 68 $42.26 $3.91 $39.84 $43.74 $1.48 3.50%
(6 cc f/mo, I Storm ERU)
Multi Family Residential $14.33 $94 78 $109.11 $15.62 $97.62 $113.25 $4.13 3.79°A,
(5 ccf/mo/unif, 10 WU-Units,4 Stone ERUs)
Commercial $25.06 $183 64 $208.72 $27.34 $194.94 $222.28 $13.56 6.49%
(I"Motor,35 cc f/mo, 7 Storm ERUs,90 lbs/mo BOD)
Industrial $89.58 $1,666,47 $1,756.05 $97.65 $1,778.56 $1,876.20 $120.15 6.84%
(2"Meier 385 cc f/mo,25 Storm ERUs,750 lbslmo BOO)
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City of Yakima 2014 Wastewater, Industrial Wastewater and Stormwater Rote Study
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Exhibit 5-24 assumes stormwater Scenario 2 (the recommended scenario), which has a 55% rate
increase on the stormwater charge in 2015, with inflationary increases in subsequent years. For this
scenario, the single family sample customer would see a combined bill impact of$3.13 per month, or
7.4%. For the multi-family customer and industrial customer, the 2015 combined increase would be
9%-10%, and for the commercial customer, the 2015 combined increase would be about 12%,
including higher-than-inflation increases in the BOD surcharge and the stormwater charge. With this
scenario, the increases for all customers after 2015 would be 3% per year.
Exhibit 5-24: Sam.le Char:es Assumin Stormwater Scenario 2 'ecommended
*Stormwater Scenario 2(Recommended) Current 2014 Rates Proposed 2015 Rates
Monthly Charge'Conlearisen. Stormwater Wastewater Total Stormwater Wastewater Total Total
Single Family Customer $3.58 $38.68 $42.26 $5.55 $39.84 $45.39 $3.13 7.40%
(6 ccf/mo, 1 Storm ERU)
Multi Family Residential $14 33 $94 78 $109.11 $22.22 $97.62 $119.84 $10.73 9.83%
(5 cc f/mo/unit, 10 Multi-Units,4 Storm ERUs)
Commercial $25,08 $183 64 $208.72 $30.88 $194 94 $233.82 $25.09 12.02%
(I"Meter,35 ccf/mo, 7 Storm ERUs,90 ibs/mo BOO)
Industrial $89.58 $1,666.47 $1,756.05 5130.85 $1,778.56 $1,917.41] $161.36 9.19%
(2"Meter,385 c5f/mo,25 Storm ERUs,750 lbs/mo BOD)
Exhibit 5-25 assumes stormwater Scenario 3, which has a 106% rate increase in the stormwater
charge in 2015, with inflationary increases in subsequent years. For this scenario, the single family
sample customer would have a combined bill impact of$4.96 per month, or almost 12% of the total
bill. The multi-family customer would see an increase in 2015 of about 16.5% and the commercial
customer an increase of 18%. The overall increase to the industrial customer would be almost 12%,
similar to the single family customer. As with Scenario 2, the increases for all customers after 2015
would be 3% per year.
Exhibit 5-25: Sam u le Char es Assumin Stormwater Scenario 3
Stormwater Scenario 3 Current 2014 Rates Proposed 2015 Rates
Monthly Charge CeloParisen. Stormwater Wastewater Total Stormwater Wastewater Total Total
Single Family Customer $3 58 $38 68 $42.26 $7.38 $39.84 $47.22 $4.96 11.73%
(6 ccf/mo, 1 Storm ERU)
Multi Family Residential $14,33 $94,78 $109.11 $29.53 $97,62 $127.15 $18.04 16.53%
(5 ccf/mo/uni(, 10 Multi-Units,4 Storm ERUs)
Commercial $25,08 $183.64 5208.72 $51.67 $194.94 $246.61 $37.89 18.15%.
(I"Meter,35 ccf/mo, 7 Storm ERUs,90 lbs/mo BOO)
Industrial $09.58 $1,666,47 51,756.05 $184.54 $1,778.56 $1,963.10 $207.05 11.79%
(2"Meter,385 ccf/mo,25 Storm ERUs, 750 lbs/mo BOD)
5.8. CHANGING FROM 360 DAYS TO 365 DAYS
During the rate study process, City staff mentioned that they wanted to see the impact of changing
the way the ready-to-serve charge is billed. Currently, the fixed charge is converted into a daily rate
and charged against the number of days per bill, which can range from 50 to 70+ days. In the billing
system, the daily charge is currently calculated assuming 30 days per month(360 days per year)
instead of 30.417 days per month(365 days per year). By having a slightly smaller denominator, a
daily rate based on 30 days rather than 30.417 artificially increases the charge.
The rate ordinance explicitly states the equivalent daily rate for a 3/4" meter for 2014 that rate is
$0.6779 per day, based on a monthly rate of$20.62, For larger meter sizes, the ordinance states that
"daily rates for meters larger than three-quarters inch shall be calculated by dividing the monthly
charge by thirty." Interestingly, the stated daily rate in the ordinance for the 3/4" meter size is based
on 30.417 days per month, not 30 days per month. So there is a discrepancy in the rate ordinance
between the daily rate for 3/4" meters and larger meters, and for 3/4" meters, there is a discrepancy
between the billing system and the rate ordinance.
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City et Yakima 2014 Wastewater, Industrial Wastewater and Stermwater Rate Study
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Exhibit 5-26 shows the effect of the 360 day assumption on the current ready-to-serve charge for a
3/4" meter, which is $20.62 per month.
Exhibit 5-26: Comparison of 360 or 365 Da based Dail Rate
30 Days per Month (360 Days) 30.42 Days per Month(365 Days)
Monthly Rate Monthly Rate X Daily Annual Daily Annual
12 Months 30.00 365.00 30.42 365.00
$20.62 $247.44 $0.6873 $250.88 $0.6779 $247.44
This exhibit shows that the method currently used in the billing system recovers $3.44 above what
the monthly rate should generate over twelve months. Assuming that a typical customer is actually
billed for 365 days per year(no matter how the daily rate is calculated), customers are currently
being slightly overcharged throughout the year.
If these assumptions are correct and the City decides to change its billing system algorithm to a 365-
day year, it would mean a 1.4% decrease in the effective ready-to-serve charge for each customer.
Assuming that the City gets 44% of its retail rate revenue from the ready-to-serve charge, this may
cause a revenue decline of roughly 0.6%. The same 3.0% annual retail rate increases can be adopted
without significant negative impacts, although fund balances may be lower by roughly $100,000 and
debt service coverage would be slightly lower in each year, dipping to 1.97 in 2023 before increasing
to over 2.9 in 2024. We find that to be completely acceptable within the parameters of this study.
If the City wants to correct this small overcharge to customers, the ordinance can simply state that
"daily rates shall be calculated by dividing the monthly charge by 30.417." As with the out-of-City
multiplier, there is no need for the ordinance to explicitly state the daily rates. A sentence describing
how to calculate it is more than adequate. Alternatively, the ordinance can remain silent about daily
rates, since calculating daily rates is an administrative procedure that can easily be done by the
billing staff. Either way, the billing system should be corrected to divide the monthly rate by 30.417.
5.9. UNMETERED CUSTOMER ASSUMPTIONS
There are a handful of customers who receive sewer service without having a water meter, and the
City staff asked us to examine their current water usage assumptions for these customers. Currently,
the City assumes 11 ccf per month for unmetered residential customers. For unmetered commercial
customers, if there is no property-specific data about water usage, the City assumes 50 ccf per month.
5.9.1 .Residential Assumption
In 2013, average water consumption was about 6 ccf per month per dwelling unit for both single
family and multiple unit residential customers. Our experience with other jurisdictions is that that
unmetered customers tend to use more water than metered customers; in this case, we assumed a
factor of 25% above the average metered usage. That turns out to be 7.5 ccf per month. For that
reason, we suggest a standard assumption that unmetered residential customers use 7.5 ccf per month
per dwelling unit (either single family or multiple unit residential), much less than the current
assumption of 11 ccf per month.
5.9.2.Assumption for Commercial Customers
Exhibit 5-27 on the following page shows a current fixture unit schedule borrowed from the Midway
Sewer District, which bases it on the Uniform Plumbing Code. Fixture units used to be a common
method of estimating water demand for unmetered commercial customers (or not-yet-metered
commercial developments, for the purpose of calculating a connection charge). For many utilities,
this method has fallen out of favor because it is time-consuming to administer. However, it does
provide a consistent methodology that can be applied across a wide set of circumstances, which is the
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City of Yakima 2014 Waslewater, Industrial Wastewater and Stormwater Rale Study
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situation Yakima faces. Because there are less than a half dozen unmetered commercial accounts in
Yakima, the fact that it takes time to work through the fixture unit calculation should not be a
significant disadvantage. We suggest this approach for Yakima.
Exhibit 5-27: Fixture Unit Schedule for Unmetered Commercial Customers
20 points= 1 ERU=7.5 ccf/month
Source for fixture units: Midway Sewer District, based on Uniform Plumbing Code
Assumed ERU water usage per month based on Yakima average residential plus 25%.
Points
Bathtubs
Bidets 2
Dental Units or Cuspidors
Drinking Fountains
Oil/Water Separators
Grease Interceptors
Sand/Grit Traps 6
Laundry Tubs
Clothes Washer MIE
Floor Sinks(indirect waste receptors for refrigerators,coffee urns,water stations,etc.)
Receptors(indirect receptors for commercial sinks,dishwashers,air washers, etc.)
Showers, single stall
Showers,gang(per head)
Sinks,bar,residential
Sinks,bar, commercial
Sinks, commercial, industrial, schools, etc. (incl. dishwashers, wash-up sinks, wash fountains) NM
Sinks, flushing rim,clinic 6
Sinks and/or Dishwashers,residential 111M
11113111= MIE
Mobile Homes Park Traps (one per trailer) 6
Urinals,pedestal, trap arm only 6
Wash Basins (lavatories), single
Water Closet, private installation,trap arm only 4
Water Closet,public installation, trap arm only 4
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crr Y OF Yakima
2017 GENERAL INFORMATION*
Statistics Licenses and Permits Issued
Date of incorporation 1886 Business licenses-sliding scale starts at$42.90 for 1-2 employees,
Form of government Council-Manager maximum of$1,285.20 for over eighty employees 5,573
Type of government Charter City Regulatory licenses-
Location Central Washington Varies from$11.00 to$1,000 445
Land area 28.17 square miles
Rank in size-State 11
Rank in size-County 1 Fire Protection
Population 93,900 Commissioned firefighting personnel 100
Assessed valuation $5,957,828,341 Number of non-commissioned personnel 4
City employees(full-time equivalents) 765.70 Total number of Fire personnel 103
Election and voter registration
Number of precincts 60
Number of registered voters 42,560 Police Protection
Commissioned Police personnel 148
Non-commissioned Police personnel ,..47
Property Tax Levy Total number of Police personnel 195
Regular levy $18,367,991 Number of calls for service 145/day
Sales Tax Rates Utility and Franchise Tax Rates
State6.50% Electricity,Gas,Telephone 6°/0
Transit 0.30% Water,Wastewater 20%
City of Yakima 0.85% Stormwater 6%
Yakima County 0.15% Refuse 15%
Criminal Justice(County) 0.40% TV Cable 6%
Total Sales Tax Rate 8.20%
Utility Rates(2 months)
Parks and Recreation Water-average/family of 4 $57.19
Total acreage 402.55 Each unit $1.59
Number of parks 36 Wastewater-average/family of 4 $116.88
Number of playgrounds 20 Each unit $3.10
Major facilities:Fisher Golf course,two swimming pools,(one Refuse(carry-out available for additional charge)
indoor,one outdoor),two water playground areas,16 ball Automated collection
fields(eight lighted),two skate parks,24 tennis courts,eight 32 Gallon cart $34.30
soccer fields,Harman Center,Henry Beauchamp Community 96 Gallon cart $39.20
Center,Tahorna Cemetery,Dog park Yard waste
96 Gallon cart $29.64
Irrigation(per square foot) $.0352
Bus Passes(1 month)
Adult $25.00
Student $18.00 Utility Customer Bases
Senior citizen/disabled $9.00 Water(inside the City) 22,408
Water(outside the City 97
Total Water customers 22,505
Animal License Fees-Rabies Vaccination Required Wastewater residential(inside the City) 28,641
1 Year license-altered,new $15.00 Wastewater residential(outside the City) 66
1 Year license-altered,renewal $12.00 Wastewater commercial 2,462
Senior citizens lifetime-altered $25.00 Total Wastewater customers 31,169
Senior citizens lifetime-not altered $30.00 Irrigation customers 10,545
1 Year license-not altered $30.00 Refuse accounts 31,144
1 Year license-not altered,renewal $25.00
Disabled/guide dog Free
Replacement license $5.00
•For informational purposes only-not intended for official or legal purposes
Comprehensive Annual Financial Report(CAFR)-163
10/12/2018
..or
454.-
Franchise Fee- POLICY # •
Fees levied on private utilities to recoup city costs of administering the franchise and for the
right to use city streets, alleys, and other properties.
DInvestigate franchise fee options for commercial and recycling collection with Yakima Waste
URECYCLING
a We have optional recycling in Yakima through Yakima Waste @ $8.75/month
• Legal review WILL determine IF THE CITY CAN EVEN PROVIDE RECYCLING if it wanted
• In 1998, the City opted out of Recycling collection, thus Yakima Waste got authorization from UTC to
provide recycling.
• Can we even get/share recycling collection rights back?Yes, after seven years of notice.
• Can we negotiate a mitigation fee for use of infrastructure? Legal is looking into this.
CJCOMMERCIAL COLLECTION
• We have a 29 year old franchise agreement which legal is reviewing to determine what elements can
be renegotiate.
• Can we find a new partner?Yes, in seven years.
• Can we negotiate a franchise fee on this contract? Legal is looking into this option
• How could a franchise fee be used? Can be negotiated
10/12/2018
POLICY ®
A END STOR
ATER PLAN
II Add lley Paver project tote stormwater master plan.
• $500,000 in 2019 for stormwater capital fund
* Pave the east/west gravel alleys between Folsom Avenue and Fruitvale Blvd
from 16th to 6th Avenue.
10/12/2018