City of Vallejo Water Department and Recommended Water Rate Plan 218 Notice Request
Agenda Vallejo Water System (not Green Valley or Travis) 1. Recap Rate Study Goals & Process 2. Water System Challenges 3. Proposed Financial Plan 4. Proposed Capital Plan 5. Plan Rate Adjustment 6. Next Steps 7. Questions
Water Department Water Director Mike Malone Water Admin & Conservation 9 Employees Water Operations Manager Beth Schoenberger Water Engineering Treatment Water Distribution Water Facilities Manager Superintenden t Quality/Laboratory Superintendent Superintendent Mark Quady Joe Abitong (Acting) Danielle Bonham Oscar Alcantar John Palesi 11.5 Employees 21 Employees 5 Employees 36 Employees 17 Employees
Water System Challenges • Insufficient capital spending to replace aging infrastructure • Deferred maintenance due to insufficient funding • Mounting regulatory requirements (without funding) • Out-of-date information technology • Vacancies, retention, and failed recruitments • Increasing security requirements
Challenges: Increased Regulatory Requirements (without funding for staffing to do the work) Recent example: Lead Fixture Testing - State requires all Water agencies to test drinking fountains and faucets in all public schools K-12 for lead. Staff time is required for training, planning, coordination, implementation, sampling, testing. No funding is provided to carry out the work, so staff works longer hours to ensure compliance.
Challenges: Aged Infrastructure & Deferred Maintenance Mineral corrosion (a common problem in old pipes) is not a health hazard, but reduces water flow and pipe life. Reduced flow increases electrical pumping costs. Aged Pipe : New Pipe Treatment Plant mineral deposits Aged Basin Flocculation Trough Skyview Water Tank In Need of Cleaning Cache Main Pipeline Break and Maintenance
Challenges: Vallejo Pipeline Breaks & Leaks vs. National Rankings • Mile for Mile, Vallejo Pipes Break and Leak More Often Than “Worst Case” Water Agencies Nationally Number of Pipeline Breaks and Leaks Per 100 Miles of Pipe 2017 American Water Works Association National Benchmark Survey
Water System Challenges: Vallejo Pipe Replacement vs Industry Standard American Water Works Association industry standard pipeline replacement cycle is 75 - 100 years. 23% of Vallejo’s 475 miles of pipeline is over 70 Years Old • Vallejo’s current pipeline replacement cycle is 450 years. • Vallejo Water’s goal is to establish a pipeline replacement cycle of 100 years.
Vallejo Water’s Capital Spending vs. Industry Standard of 1 % Total System Value • Vallejo’s Current 5 -Year Avg Annual Capital Spending: $4.7 Million • Industry Standard for System Capital Investment/Spending: 1 % of Estimated System Valuation • Vallejo’s Estimated System Valuation: $ 1 Billion • Applying Industry Standard to Vallejo’s $1 Billion System Valuation: $10 Million Annual Capital Investment ( 1 % of $ 1 Billion) • Proposed Rates Would Increase Annual Capital Investment From $6.6M (Proposed FY 19-20 CIP) to $ 12 M
Infrastructure and Capital Projects Funded By Proposed Rates • Pipe Replacement • Meter Replacement • Pump Station Improvements • Treatment Plant Upgrades • Emergency Generators/Redundancy
Phase II Water Rates Goals and Process • Phase I Emergency Rate Setting: 2016-17 – Meet bond covenants and operating costs – Council direction to address infrastructure and deferred maintenance in Phase II • Phase II Goals – Address Infrastructure and Deferred Maintenance – Create Long Term Financial Stability – Establish Targets for Reserves and Fund & Maintain Reserves – Ensure Sufficient Staffing to Deliver Services – To finance capital projects, balance debt vs “pay as you go” – Engage Community – Phase-In Rate Increases to Mitigate Community Impact • Phase II Process: Community Engagement and Financial Planning 2017-19 – Hired Financial Consultants, Raftelis Inc. to Create Financial Model for Rate-Setting – Developed Necessary Data – Engaged the Community: • Establish City Council Ad Hoc Water Rate Committee • Establish Citizen Water Rate Working Group
Engaged Council & Community • City Council Ad Hoc Water Rate Committee – 3 members of City Council: Mayor, Sunga, Brown, Malgapo (former member) – Focused on in-depth understanding of Vallejo Water System – 8 workshops/meetings and 5 Water System tours over 12 months – Will recommend Rate Plan to Full Council • Citizen Water Rate Working Group – 10 Vallejo residents (23 applied) selected by Council Ad Hoc Committee – Included representatives from local businesses, and financial, and water industries – Year-long investment to understand Vallejo’s water system – 12 workshops/meetings, 5 water systems tours over 12 months – Work with staff to develop recommended rate plan • Other Community Engagement Activities – Introduction to Your Water Department – 22 events – Conservation Outreach – 13 events
Tours and Workshops Citizen Water Rate Working Group & City Council Water Rate Ad Hoc Committee Cordelia Reservoir and Pump Station Fleming Hill Facilities Maintenance Shop Workshops and Rates Discussions in Fleming Hill Water Treatment Plant Meeting Room
Phase II Financial Goals • Financial Stability – Raftelis Financial Consultants Develop Vallejo Enterprise’s 15 year Financial Plan – Meet bond covenants – Meet debt service requirements (current and future) – Balance Debt vs Pay-Go – Phase-in rate increases to minimize community impact • Establish and Fund Reserve Targets – 120 days of Operating Reserves – Fully fund Rate Stabilization Reserve – Capital Reserve • Address Infrastructure and Deferred Maintenance – Progress toward 100 year replacement cycle • Address Service Delivery Requirements & Staffing – Needs assessment
5-Year Water Financial Plan (Million $) USE OF FUNDS FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Water Supply and O&M Expenses $31,890,000 $34,130,000 $35,150,000 $36,660,000 $38,430,000 $40,440,000 Debt Service $5,170,000 $5,320,000 $6,550,000 $6,550,000 $6,550,000 $6,550,000 Pay as you go Capital Spending $6,830,000 $6,130,000 $0 $180,000 $5,350,000 $12,350,000 Additions to Reserves $0 $0 $2,670,000 $4,290,000 $360,000 $0 Total $43,890,000 $45,580,000 $44,370,000 $47,680,000 $50,690,000 $59,340,000
Rate Study Capital Financing Plan (Million $) City System
Operating Fund Balance (5 Years) (Million $)
Proposed Rate Plan & Deliverables Highlights 5 Year Plan Rate Adjustments FY19/20 FY20/21 FY21/22 FY22/23 FY23/24 4.3% 10% 7% 6% 5% Pipe Replacement 150 years in 5-year plan Cycle 100 years in 10-year forecast $30.7M Budget (City) Facilities Investment 12% of 30-year project list Water Treatment, Pump Stations, SCADA, Storage, Dams $48.7M Budget (City & Lakes) Total Capital Investment Meets target of 1% of system value investment in 5 th year Funding Reserves Projected at end of FY 2023/24 Operating Reserve Target ($13.5M): 100% Met Operating Reserve Target: 120 days operations Rate Stabilization Target: 15% Revenue Rate Stabilization Reserve Target ($7.5M): 38% Met ($2.9M) $27.0M in FY 2020/21 New Debt New Debt Rating Assumption: Standard and Poor’s A+ Water Revenue Bonds Aiming toward accelerated hiring to support the Staffing Plan Capital Investment Plan and overall service delivery
Proposed Pipe Replacement Plan 5 th Year: 150-year replacement cycle • Ramp up capital investment 3 over 5 years 9.3 miles total 2.72 • 9.3 miles replaced by 5 th year 2.5 5-year plan Miles of Pipe Replaced • ~28 miles replaced by 10 th year 2.19 2 • 100-year replacement cycle by 10 th 1.83 year (with second ramp up in years 6-10) 1.5 1.46 1.1 1 0.5 Year CIP Budget 2020 $1.6M 0 2020 2021 2022 2023 2024 2021 $2.1M 2022 $2.8M More than doubles the budget of current Water Main CIP! 2023 $3.4M Current CIP Budget (5 years): $2.3M (average) 2024 $5.1M Current Pipe Replacement Cycle: ~450 years Total $15.0M
Debt Coverage (5 Years) : Proposed rates allow Vallejo Water Department to meet all bond and other debt requirements City System
Water Rate Study Parameters • Uniform Water Usage (Consumption) Charge for Multi-Family, Commercial, Industrial, Institutional, Irrigation, and Construction • Uniform Service Charge for all customer classes per meter size and billing frequency • Meter Size Factors are set by American Water Works Association Manual 22 • Single Family Residential Tier 1 lowered from 11 HCF (hundred cubic feet) to 7 HCF per month – Meets California standards for indoor residential use at 55 gallons per capita daily (GPCD)
Proposed Rate Plan: Sample Water Bills Regular Bill For Current Proposed Water Bill October 24 As of July 1 Increase $105.90 $100.06 These bills are based upon single family residential, bi-monthly, average usage of 16 units (12Kgallons)
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