Municipal & Financial Municipal & Financial Services Group - PowerPoint PPT Presentation

Municipal & Financial Municipal & Financial Services Group Services Group Washington Suburban Sanitary Commission Water and Sewer Rate Study WSSC Commissioner Briefing February 26, 2014

Contents National Trends Water and Sewer Affordability Guidelines Customers and Usage Analysis Rate Analysis and Rate Alternatives Recommendations and Customer Impacts

National Trends – Rate Increases Since 2002 70-89% Increase WSSC rates have increased 85% since 2002 90-129% Increase 130-233% Increase 3

National Trends Significant Capital Investments in Water and Sewer Infrastructure Majority of water and sewer systems were constructed 70 plus years ago • Nationwide estimated replacement costs over next 30 years • (Water Systems $1.0 trillion, Sewer Systems $2.5 trillion) Declining Water Use - Declines of per capita consumption of 20% to 30% over past decade resulting from: Water fixture replacement • Declines in average household size • Conservation ethic • Increases in rates • Economic conditions • To stabilize revenues there has been a national trend to increase fixed portion of the utility revenues (increased fixed charges) 4

National Trends Sell Less Water Customers Use Less Reduced Water Water Sales Revenue Need for Higher Water Rates Increased Escalating Affordability CIP Costs Concerns 5

WSSC Current Revenues Other Revenues $55,000,000 9% Account Maintenance Fees $22,900,000 3% Usage Charges $558,980,000 88% WSSCs current revenues are highly dependent on water usage • Fixed revenues represent only 3% of total system revenues • Typical range for fixed revenues is 10% to 30% • 6

Affordability Guidelines

Financial Analysis Assumptions and Findings Rate study is predicated on a cash needs based analysis of WSSC’s water and sewer fund Allocation of costs between water and sewer activities • Allocation of CIP projects (if not clearly defined) • Annual cash needs drive rates – including any contributions to • reserves Data is based on the most recent financial information available Incorporates findings and recommendations contained within the Bi-County Infrastructure Funding Working Group Report (May 2012) Assumes new debt will mature in 30 years • Financial analysis is in agreement with WSSC’s Spending Affordability model 8

WSSC Affordability Guidelines (in Thousands) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Combined Rate Increase 6.0% 10.4% 8.8% 8.4% 7.2% Total Operating Budget $678,591 $721,343 $775,209 $834,956 $895,742 Debt Service Expense $227,042 $250,013 $267,835 $282,596 $292,612 New Debt $384,622 $364,894 $335,620 $310,226 $241,952 9

Additional Financial Metrics FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Debt as a Percentage of Revenue 33.5% 34.7% 34.4% 33.7% 32.5% Operating Reserve Balance (% of Revenues) 10% 10% 10% 11% 11% End of Year Operating Reserve Balance $55,600 $65,600 $73,600 $81,600 $89,600 (in Thousands) Unrestricted End of Year Fund Balance $21,175 $10,675 $5,175 $3,675 $2,175 (in Thousands) New Debt Service Coverage 2.29 2.50 2.62 2.77 2.92 (Revenues / Debt Service) 10

Customers and Usage Analysis

FY 2010 - 2012 Customers and Usage FY 2010 FY 2011 FY 2012 Average Daily Use (GPD) Average Daily Use (GPD) Average Daily Use (GPD) Meter Size # of Meters Commercial Residential Commercial Residential Commercial Residential 5/8" 144,318 171 155 172 154 164 150 3/4" 193 165 198 164 193 159 238,612 1" 490 202 491 202 470 194 47,363 1,182 1,609 1,175 1,622 1,142 1,623 1 1/2" 4,453 1,906 3,064 1,887 3,088 1,937 3,088 2" 3,763 3" 4,979 10,687 5,076 10,998 4,856 11,069 924 4" 6,650 14,990 6,783 15,714 6,790 15,338 638 6" 10,540 27,064 10,390 27,298 8,389 26,043 1,146 25,474 46,579 27,277 46,063 25,351 43,359 8" 644 38,407 84,288 41,210 85,120 36,946 83,511 10" 119 12" 67,974 - 79,311 - 70,969 - 6 Average customer users between 160 and 150 gallon per day (GPD) • Gradual decline in per account usage for average user 2010 - 2012 • 12

Actual FY 2012 Customers and Usage Rate Block (GPD) % of Total Bills Commercial Residential 0 - 49 12.9% 7.4% 50 - 99 11.3% 21.1% 100 - 149 9.2% 25.2% 150 - 199 7.0% 19.3% 200 - 249 5.4% 11.7% 250 - 299 4.1% 6.5% 300 - 349 3.0% 3.4% 350 - 399 2.4% 1.8% 400 - 449 2.1% 1.1% 450 - 499 1.6% 0.6% 500 - 749 6.5% 1.2% 750 - 999 4.3% 0.3% 1,000 - 3,999 16.9% 0.4% 4,000 - 6,999 4.5% 0.0% 7,000 - 8,999 1.8% 0.0% 9,000 & Greater 7.0% 0.0% Over 91% of Residential bills fell below 299 GPD • 50% of Commercial bills fell below 299 GPD • 13

Actual FY 2012 Customer Bill Distribution 600,000 500,000 # of Total Bills 400,000 300,000 200,000 100,000 - Average Quarterly Consumption Residential Commercial Average 13,000 30,000 Median 10,000 11,000 14

Actual FY 2012 Revenue Distribution $160,000,000 $140,000,000 $120,000,000 Total Annual Revenue $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- Meter Size 15

Top 10 Revenue Generating Accounts Annual Meter Account # Customer Consumption FY 2012 Revenue Size (1,000 gal.) 6312 National Institute of Health 8” 630,845 $4,087,876 2586147 Andrews Air Force Base 10” 203,102 $1,316,101 4553640 Gaylord Hotel 8” 157,727 $1,022,071 12716 University of Maryland 6” 111,015 $719,377 20248 Pepsi Cola 6” 109,732 $711,063 2823847 United States Navy 10” 103,756 $672,339 183,543 3681 Leisure World of Maryland Trust 10” $646,636 7500 NIST 10” 92,679 $600,560 2882421 University of Maryland 10” 91,820 $594,994 6338 United States Navy 10” 90,934 $589,252 16

Rate Analysis and Alternative Rate Designs

Rate Design – Methodology Reconstruction Fee MFSG developed the fee to recover 100% of future annual debt • service costs (FY 2015 issues and beyond) associated with large and small water and sewer line reconstruction Account Maintenance Fee Quarterly fixed charge per account • Designed to recover the costs of customer service, billing, meter • services and (where applicable) fire protection Usage Rates Designed to capture the cost of water and sewer treatment • (chemicals), pumping (electricity / line maintenance), and other operating and capital costs 18

Reconstruction Fee

Reconstruction Fee Reconstruction Fee would be set to fund the debt service expense related to water and sewer line reconstruction (both small and large diameter) beginning in FY 2015 (in thousands) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Water Reconstruction Funding Target 6,659 15,501 24,270 32,716 42,560 Sewer Reconstruction Funding Target 3,434 7,128 12,234 17,143 22,300 Total Reconstruction Fee Target Revenue $10,092 $22,628 $36,504 $49,858 $64,860 Five Year Average Target $36,789 $36,789 $36,789 $36,789 $36,789 20

Reconstruction Fee Analysis There are several methods that can be used to collect the desired revenue, of which three were modeled by MFSG: Option A - Fixed Quarterly Charge per meter based on Actual Average GPD Five year Average Fee per Equivalent Meter: $11.00 • Option B - Fixed Quarterly Charge per meter based on AWWA Flow Differentials Five year Average Fee per Equivalent Meter: $12.00 • Option C - Volumetric Rate per 1,000 Gallons Five Year Average: $0.80 per 1,000 gallons • 21

Reconstruction Fee Recommendation - Option A Fixed Charge Five Year Average # of Meters Revenue Based on Actual Average GPD 5/8" $11.00 145,330 $6,394,512 3/4" 12.00 240,285 $11,260,589 1" 14.00 47,695 $2,722,819 1 1/2" - Residential 119.00 1,944 $926,687 1 1/2“ – Non-Residential 84.00 2,541 $852,846 2" 185.00 3,544 $2,616,231 3" 585.00 930 $2,177,162 4" 813.00 511 $1,659,902 6" 1,265.00 137 $692,860 10" 4,425.00 1 $17,823 Flow Meter - 4" 499.00 73 $144,663 Flow Meter - 6" 616.00 802 $1,976,042 Flow Meter - 8" 2,524.00 554 $5,591,497 Flow Meter - 10" 2,714.00 103 $1,115,177 Flow Meter - 12" 5,214.00 6 $126,008 22

Account Maintenance Fee

Account Maintenance Fee Account Maintenance Fee designed to capture the costs associated with: Customer Service • Billing • Meter Replacement • Fire Protection (if applicable) • Projected FY 2015 AMF revenue: $23.0 million • Account Maintenance and Fire Protection Expenditures In Thousands FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Customer Service / Billing 24,605 25,835 27,127 28,483 29,908 Meter Replacement 6,344 6,661 6,994 7,344 7,711 Fire Protection 1,186 1,268 1,377 1,500 1,632 Total $32,135 $33,764 $35,498 $37,327 $39,251 Five-Year Average $35,595 $35,595 $35,595 $35,595 $35,595 24