2016 Rate Study Preliminary Findings May 4, 2016 Presented by: - PowerPoint PPT Presentation

Tamalpais Community Services District 2016 Rate Study Preliminary Findings May 4, 2016 Presented by: Tom Gould HDR Engineering, Inc.

Overview of the Presentation • Review the discussion from the prior Board meeting • Review the analysis conducted and key policy direction needed from the Board – Revenue requirements (size and timing of rate adjustments) – Review the water usage data analysis – Overview of the cost analysis – Review the rate structure options • Currently developed as revenue neutral • Prop. 218 Notice and Public Hearing Date 2

Revenue Requirement 3

Overview of the Revenue Requirement Analysis • Objective: To compare the District’s sources of revenues to its expenses (O&M and capital) – Establishes the balance or deficiency of funds for a specific time period (e.g. FY 2016/17) – O&M includes local collection costs and the cost of treatment from SASM and SMCSD – Capital costs includes debt service (P+I) and any capital improvement projects funded from rates 4

Revenue Requirement – Key Assumptions • Started with the District’s FY 2016/17 budget – Revenues shown are at current rate levels (before any consideration of rate adjustments) – Projected expenses over the 5-year review period (FY 2016/17 – FY 2020/21) • Adjusted O&M expenses beyond 2016/17 by assumed annual escalation factors • Debt service taken from debt schedules • Included $300,000 for capital (renewal/replacement) • A major O&M expense for the District is related to wastewater treatment – Sausalito-Marin City Sanitary District (SMCSD) – Sewerage Agency of Southern Marin (SASM) 5

Wastewater Treatment - SMCSD • Sausalito-Marin City Sanitary District (SMCSD) – 2014/15 - $1.1 million (43%) of $2.5 million budget – SMCSD undertaking a $27 million treatment plant upgrade • Designed to provide health, safety and environmental benefits • Increase capacity, modernize treatment processes and treatment of storm-related flows to protect the Bay • Significant impact upon treatment rates/costs to the District (more than doubling of SMCSD treatment costs) 6

Wastewater Treatment - SASM • Sewerage Agency of Southern Marin (SASM) – Minor portion of the treatment costs for the District ( ≅ $50,000 in FY 2015/16) – SASM is also undergoing major treatment plant upgrades and improvements – Significant impact to the rates from SASM (roughly doubling of the treatment rate), but minimal financial impact to the District (additional $50k in expenses) 7

Projection of Costs of Wastewater Treatment ($000) • SMCSD Actual Budget Projected 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Annual Payments By Expense Categories Operations $958 $937 $1,033 $1,084 $1,139 $1,196 $1,255 $1,318 Annual Loan Repayment - SRF Loan 446 196 196 196 196 741 741 741 Annual Deferral Payments 0 94 157 291 409 486 694 820 TCSD Share of Annual Expenses $1,404 $1,226 $1,385 $1,571 $1,743 $2,422 $2,691 $2,879 Annual Reserve Payment $0 $0 $0 $504 $527 $577 $551 $690 Total Annual Payment With Reserves $1,404 $1,226 $1,385 $2,075 $2,270 $3,000 $3,242 $3,569 $/EDU at 2,580 EDUs $544 $475 $537 $804 $880 $1,163 $1,256 $1,383 % Change From Prior Year 50% 9% 32% 8% 10% Source: SMCSD Wastewater Facilities Financing Plan Update 2016 - Draft 3/30/16 • SASM Actual Budget Projected 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 SASM Proposed Annual Adjustments 28.0% 28.0% 8.0% 8.0% 6.0% SASM Treatment Costs ($000) $55 $50 $64 . Total Projected SASM Expenses ($000) $81 $104 $112 $121 $129 8

Summary of the Revenue Requirement ($000) Budget Projected 2016/17 2017/18 2018/19 2019/20 2020/21 Revenue Rate Revenue $2,733 $2,747 $2,760 $2,774 $2,788 Miscellaneous Revenue 30 31 32 33 33 -------------- -------------- -------------- -------------- -------------- Total Revenue $2,763 $2,777 $2,792 $2,807 $2,821 Expenses All Other O&M Expenses $1,512 $1,582 $1,669 $1,680 $1,858 SMCSD Treatment & Capital 1,571 1,743 2,422 2,691 2,879 Rate Funded Capital 300 300 300 300 300 Debt Service 445 445 445 445 445 Change in Working Capital (109) 188 38 26 (56) -------------- -------------- -------------- -------------- -------------- Total Expenses $3,719 $4,258 $4,875 $5,143 $5,426 Balance/Deficiency of Funds ($957) ($1,480) ($2,083) ($2,336) ($2,605) Proposed Rate Adjustment 35.0% 14.0% 14.0% 5.0% 5.0% Average Single Family Annual Bill ($/EDU) $1,111 Avg Annual Bill after Rate Ad. $1,500 $1,710 $1,949 $2,046 $2,148 Change $389 $210 $239 $97 $102 . . 9

Summary of the Revenue Requirement ($000) 10

Revenue Requirement – Summary • Additional rate revenue is required to adequately fund the District’s operation and capital needs – Primarily driven by increased costs from SMCSD • Projected deficiency in 2016/17 is 35% or about $389/EDU – Deficiency includes SMCSD debt reserve payment of $504,412 or $195/EDU • Board Policy Decision: Determine the size and timing of the proposed rate adjustments 11

Review of Customer Usage Data 12 12

Review of Customer Usage Data • Last year’s rate study analyzed customer usage patterns – What are the differences in contributed wastewater flows by customer class (living units)? – Formed the basis for flow (volume/variable) relationships – Selected the 6-year weighted average for volumes • Single-Family flow 100% • Duplex flow 68% of a SFR • Multi-family flow (3+ units) 57% of a SFR • HDR noted the challenges of working with the water consumption data and the impact upon usage from the drought 13

Review of the Data for the Current Year • Analysis was performed on water usage data provided by MMWD for Jan. 2015 – Feb. 2016 – Data was sorted by class (single-family, duplex, and multi-family) – Average use per unit figures were developed based on provided number of units – Developed class averages and relationships to each class – HDR was concerned with the drought, mandated reductions and usage relationships • Reasonable and reflective of “normal” use? 14

Usage Data – Usage Profile Single Family - Customer Count by Block (CY 2015) Duplex - Customer Count by Block (CY 2015) 350 30 300 25 # of Customers # of Customers 250 20 200 15 150 10 100 5 50 0 0 1 2 3 4 5 6 7 8 9 10 10 + 1 2 3 4 5 6 7 8 9 10 10 + Total Total 13 14 28 21 14 11 9 7 1 5 6 73 131 239 262 277 234 208 145 111 62 310 CCF / Mo. CCF / Mo. / LU Multi-Family - Customer Count by Block (CY 2015) 14 12 # of Customers 10 8 6 4 2 0 1 2 3 4 5 6 Total 2 12 11 8 3 2 CCF / Mo. / LU 15

Conclusions on the Usage Analysis • Conclusion: Overall usage lower, but relationships not dissimilar to six year averages – Additionally, the use of a rolling six-year average would not lead to a significantly different conclusion • Movement to a volumetric rate structure would likely require the volumetric portion of the billing be based upon the most current data for each customer – A multi-year average is not typically used for billing purposes when volumetric rates are used • Board Policy Decision – Continue to utilize the six-year average and existing relationships for establishing any revised rates 16

Review of the Cost Analysis 17

Overview of the Prior Cost Analysis • Last year’s rate study reviewed the issue of costing; fixed and variable costs – Final approach used a very conservative definition of a “fixed” cost; salaries and benefits and debt service – Result: 30% fixed and 70% variable – Rates were structured to reflect these cost differences . 18

Considering Alternative Costing Methods • The majority of the District’s costs are fixed – Wastewater treatment costs are not 100% variable • SMCSD O&M is volume-related • SMCSD capital and reserve payments are EDU- related • Developed costing analyses to compare different methods 19