public utilities rate evaluation & financial services …...2016-17 2017-18 2018-19 2019-20...

Public Utilities Rate Evaluation & Financial Services

RFP ‘17/33/P

Listed below are the questions that have been raised concerning the aforementioned RFP.

1. Has the City of Santa Fe conducted previous cost of Service and rate studies?yes

2. If so, how many, by whom, and can you provide a copy of the most recent study?See attached.

February 2016

City of Santa Fe 2015-16 Financial Water, Wastewater, and Environmental Services Divisions Public Utility Commission

Agenda

• Financial Panning 101 • Water Division • Wastewater Division • Environmental Services Division

2

Presenter

Presentation Notes

W, WW, ES

The Utilities financial plans balance sources and uses of cash

Uses of Funds

Sources of Funds

3

The primary purpose is to determine the level of user charges needed

Uses of Funds

Sources of Funds

4

When we balance the plan we can show future costs and rates, and impacts from policies

Uses of Funds

Sources of Funds

User Charge Revenues

Debt and Loans Issued

GRT and Other Revenues

Fund Balance

Debt Service

CIP

O&M

Policy Target

5

Utilities’ financial goals

• Maintain debt service coverage at target levels

• Maintain reserve requirements

• Minimize revenue increases

• Find the optimal combination of debt and rate increases to fund capital improvements

6

Financial Plan Policy Decision Parameters

Revenue increases Use of reserves Debt issuance

7

Water Division

The 2015-16 financial update shows strong overall projected performance. 4 Scenarios were developed during the update.

Scenario 1: Without PILOT; With No Change in Debt Scenario 2: Without PILOT; Defease Series 2006 Scenario 3: With PILOT; With No Change in Debt Scenario 4: With PILOT; Defease Series 2006 Debt

8

Presenter

Presentation Notes

Four Scenarios for Water 1-4

Water Division: Rate Requirements With No PILOT

34.80 34.83 34.87 34.90 34.94

32.97 33.00 33.04 33.07 33.10 33.12

(5.00)

5.00

15.00

25.00

35.00

45.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions

Last Year's Update Scenario 1 Scenario 2

With no PILOT, the City can defease its bonds as planned without any impact on the water rates.

Annual User Charge Revenue Requirements- With No PILOT

9

Water Division: Rate Requirements With PILOT

34.80 34.83 34.87 34.90 34.94

33.88 34.69 32.97 33.00 33.04 33.07 33.10 33.12

(5.00)

5.00

15.00

25.00

35.00

45.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions


To charge a PILOT and avoid a rate increase, the City will have to defease the 2006 revenue bonds.

Annual User Charge Revenue Requirements- With PILOT

10

Water Division: Debt Coverage With No PILOT

2.35 2.30 2.24 2.19 2.13 2.10 2.04 1.99 1.93 1.87 1.77

3.77 3.66 3.55 3.45 3.25

0.000.501.001.502.002.503.003.504.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio

Last Year's Update Scenario 1 Scenario 2 Min. Needed Mgt. Target

The City can defease the bonds and improve its debt service coverage with no PILOT payments.

Annual Debt Service Coverage- With No PILOT

11

Water Division: Debt Coverage With PILOT

2.35 2.30 2.24 2.19 2.13 2.10

1.62 1.57 1.50 1.52 1.50

3.00 2.87 2.76 2.65 2.46

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio


Debt coverage is substantially affected by charging a PILOT, and more substantially by not defeasing the bonds.

Annual Debt Service Coverage- With PILOT

12

90.46 87.57 85.79

77.86 74.40

-

88.01 91.04 85.96

80.35 74.12 67.91 64.34 63.44 62.04 60.04

58.09

-

20.0

40.0

60.0

80.0

100.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns

Last Year's Update Scenario 1 Scenario 2 Mgt. Target

Water Division: Fund Balance With No PILOT

Targets: 90-days O&M ($6M), Capital Reserve ($3M) Rate Stabilization ($2M)

If the bonds are defeased you can expect a lower fund balance, but the balance will still be higher than the targeted level.

Annual Fund Balance- With No PILOT

13

90.46 87.57 85.79 77.86 74.40

87.07 77.98

68.32 58.79

50.05

88.01

60.37 55.46 50.01

43.94 37.98

-

20.0

40.0

60.0

80.0

100.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Water Division: Fund Balance With PILOT


The PILOT will result in lower fund balances in general, and defeasing the bonds even more so, but balances still above minimum

Annual Fund Balance- With PILOT

14

Wastewater Division

• Two scenarios were developed:

Scenario 1: With No PILOT Scenario 2: With PILOT

• Council previously approved five years of 4.9% revenue adjustments starting in Fiscal Year 2014-15

• Additional rate increase is needed with PILOT

15

Wastewater Division: Rate Requirements

10.98 11.32

11.68

12.05 12.28

10.66 10.98

11.32

11.67 11.73 11.79

11.25

11.70

12.19

12.66

13.16

10.00

10.50

11.00

11.50

12.00

12.50

13.00

13.50

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions


To charge a PILOT, rate increase is required in order to meet the debt service coverage.

Annual User Charge Revenue Requirements

16

Wastewater Division: Rate Increases

4.9% 4.9% 4.9% 4.9% 4.9%

2.4%

9.8%

6.6% 6.6% 5.9% 5.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21


Higher increases are necessary besides the approved five- year 4.9% rate increase (FY2015-2019) to meet debt service coverage if charging a PILOT.

Annual Rate Increase

Appr

oved

Appr

oved

Appr

oved

Appr

oved

17

Wastewater Division: Debt Coverage

1.58 1.58 1.58 1.54 1.50

1.90 1.89 1.88 1.83 1.73 1.56 1.50 1.51 1.50 1.53 1.50

- 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio


Debt coverage is substantially affected by charging a PILOT. In turn, this requires higher rate increases.

Annual Debt Service Coverage

18

Wastewater Division: Fund Balance Scenario 1

21.72 18.88 19.22

16.92 18.35

24.62 22.91 23.30 23.56 24.46 25.83

21.89 21.30 20.65 20.99 22.19

-

5.00

10.00

15.00

20.00

25.00

30.00

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Targets: 90-days O&M ($2.2M), Capital Reserve ($3M) Rate Stabilization ($2M)

Expect lower fund balances in Wastewater if a PILOT is charged, but those balances will still be above the target level.

Annual Fund Balance

19

Presenter

Presentation Notes

Reserve targets: 90 days O&M; capital reserve ($3m); rate stabilization ($2m)

Environmental Services Division



• Council previously approved increases of 14% on residential and 2% on commercial effective July 2016

• Additional rate increase is needed if PILOT takes place.

20

Environmental Services: Rate Requirements

10.87 11.41 11.97

12.56 13.18 12.18 12.24 12.27

10.68 12.06 12.12

12.74 13.05 13.33

- 2.00 4.00 6.00 8.00

10.00 12.00 14.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions



Rate increases will be necessary in order to fund the PILOT and maintain necessary debt coverage.

21

Environmental Services: Rate Increases

3.2% 4.4% 4.4% 4.4% 4.4%

12.7%

4.6%

1.9% 1.9%

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21


Appr

oved

Higher increases are necessary in addition to those already approved to meet debt service coverage and the PILOT.


22

Environmental Services: Debt Coverage

1.79 1.95 2.12

1.82 2.00

2.38 2.45 2.37 2.01

1.91 1.79 1.72 1.54 1.50 1.50 1.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio



Debt coverage is substantially affected by charging a PILOT thus placing upward pressure on rates.

23

Environmental Services: Fund Balance

7.0 6.3 5.4 4.8 4.4

12.0 14.1

15.4 17.1

18.4 18.9

12.8 12.7 13.4 14.0 13.9

-

5.0

10.0

15.0

20.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Targets: 90-days O&M ($2.6M), Capital Reserve ($1M)


Expect lower fund balances with a PILOT in place, but the balances will still be higher than the targeted levels.

24

Presenter

Presentation Notes

Difference in Fund Balance between this update and previous update: $2M budgeted in 2015 CIP expenditures while the actual spent is only $1M 12.7% weighted average rate increase in 2017 (14% in residential and 2% in commercial) that was not captured in previous update $1.5M difference (less) in O&M 2016 budgeted from last year’s update.

Conclusion

Water Fund • With no PILOT, the City can defease its bonds as planned without

any impact on the water rates. • With PILOT, the City need to defease the bond in order to avoid a

rate increase till FY2021.

Wastewater Fund & Environmental Services Fund • Both fund’s DSC and fund balance are dramatically impacted by

charging a PILOT • Additional rate increases are needed to meet requirements when

PILOT takes place.

25

Thank you for your time

Questions?

26

February 2016

City of Santa Fe 2015-16 Financial Water, Wastewater, and Environmental Services Divisions Public Utility Commission

Agenda

• Financial Panning 101 • Water Division • Wastewater Division • Environmental Services Division

Presenter

Presentation Notes

W, WW, ES

The Utilities financial plans balance sources and uses of cash

Uses of Funds

Sources of Funds

The primary purpose is to determine the level of user charges needed

Uses of Funds

Sources of Funds

When we balance the plan we can show future costs and rates, and impacts from policies

Uses of Funds

Sources of Funds

User Charge Revenues

Debt and Loans Issued

GRT and Other Revenues

Fund Balance

Debt Service

CIP

O&M

Policy Target

Utilities’ financial goals

• Maintain debt service coverage at target levels

• Maintain reserve requirements

• Minimize revenue increases

• Find the optimal combination of debt and rate increases to fund capital improvements

Financial Plan Policy Decision Parameters

Revenue increases Use of reserves Debt issuance

Water Division

The 2015-16 financial update shows strong overall projected performance. 4 Scenarios were developed during the update.

Scenario 1: Without PILOT; With No Change in Debt Scenario 2: Without PILOT; Defease Series 2006 Scenario 3: With PILOT; With No Change in Debt Scenario 4: With PILOT; Defease Series 2006 Debt

Presenter

Presentation Notes

Four Scenarios for Water 1-4

Water Division: Rate Requirements With No PILOT

34.80 34.83 34.87 34.90 34.94

32.97 33.00 33.04 33.07 33.10 33.12

(5.00)

5.00

15.00

25.00

35.00

45.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions


With no PILOT, the City can defease its bonds as planned without any impact on the water rates.

Annual User Charge Revenue Requirements- With No PILOT

Water Division: Rate Requirements With PILOT

34.80 34.83 34.87 34.90 34.94

33.88 34.69 32.97 33.00 33.04 33.07 33.10 33.12

(5.00)

5.00

15.00

25.00

35.00

45.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions


To charge a PILOT and avoid a rate increase, the City will have to defease the 2006 revenue bonds.

Annual User Charge Revenue Requirements- With PILOT

Water Division: Debt Coverage With No PILOT

2.35 2.30 2.24 2.19 2.13 2.10 2.04 1.99 1.93 1.87 1.77

3.77 3.66 3.55 3.45 3.25

0.000.501.001.502.002.503.003.504.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio


The City can defease the bonds and improve its debt service coverage with no PILOT payments.

Annual Debt Service Coverage- With No PILOT

Water Division: Debt Coverage With PILOT

2.35 2.30 2.24 2.19 2.13 2.10

1.62 1.57 1.50 1.52 1.50

3.00 2.87 2.76 2.65 2.46

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio


Debt coverage is substantially affected by charging a PILOT, and more substantially by not defeasing the bonds.

Annual Debt Service Coverage- With PILOT

90.46 87.57 85.79

77.86 74.40

-

88.01 91.04 85.96

80.35 74.12 67.91 64.34 63.44 62.04 60.04

58.09

-

20.0

40.0

60.0

80.0

100.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Water Division: Fund Balance With No PILOT


If the bonds are defeased you can expect a lower fund balance, but the balance will still be higher than the targeted level.

Annual Fund Balance- With No PILOT

90.46 87.57 85.79 77.86 74.40

87.07 77.98

68.32 58.79

50.05

88.01

60.37 55.46 50.01

43.94 37.98

-

20.0

40.0

60.0

80.0

100.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Water Division: Fund Balance With PILOT


The PILOT will result in lower fund balances in general, and defeasing the bonds even more so, but balances still above minimum

Annual Fund Balance- With PILOT

Wastewater Division



• Council previously approved five years of 4.9% revenue adjustments starting in Fiscal Year 2014-15

• Additional rate increase is needed with PILOT

Wastewater Division: Rate Requirements

10.98 11.32

11.68

12.05 12.28

10.66 10.98

11.32

11.67 11.73 11.79

11.25

11.70

12.19

12.66

13.16

10.00

10.50

11.00

11.50

12.00

12.50

13.00

13.50

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions


To charge a PILOT, rate increase is required in order to meet the debt service coverage.


Wastewater Division: Rate Increases

4.9% 4.9% 4.9% 4.9% 4.9%

2.4%

9.8%

6.6% 6.6% 5.9% 5.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21


Higher increases are necessary besides the approved five- year 4.9% rate increase (FY2015-2019) to meet debt service coverage if charging a PILOT.


Appr

oved

Appr

oved

Appr

oved

Appr

oved

Wastewater Division: Debt Coverage

1.58 1.58 1.58 1.54 1.50

1.90 1.89 1.88 1.83 1.73 1.56 1.50 1.51 1.50 1.53 1.50

- 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio


Debt coverage is substantially affected by charging a PILOT. In turn, this requires higher rate increases.


Wastewater Division: Fund Balance Scenario 1

21.72 18.88 19.22

16.92 18.35

24.62 22.91 23.30 23.56 24.46 25.83

21.89 21.30 20.65 20.99 22.19

-

5.00

10.00

15.00

20.00

25.00

30.00

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Targets: 90-days O&M ($2.2M), Capital Reserve ($3M) Rate Stabilization ($2M)

Expect lower fund balances in Wastewater if a PILOT is charged, but those balances will still be above the target level.

Annual Fund Balance

Presenter

Presentation Notes

Reserve targets: 90 days O&M; capital reserve ($3m); rate stabilization ($2m)

Environmental Services Division



• Council previously approved increases of 14% on residential and 2% on commercial effective July 2016

• Additional rate increase is needed if PILOT takes place.

Environmental Services: Rate Requirements

10.87 11.41 11.97

12.56 13.18 12.18 12.24 12.27

10.68 12.06 12.12

12.74 13.05 13.33

- 2.00 4.00 6.00 8.00

10.00 12.00 14.00

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

$ in

Mill

ions



Rate increases will be necessary in order to fund the PILOT and maintain necessary debt coverage.

Environmental Services: Rate Increases

3.2% 4.4% 4.4% 4.4% 4.4%

12.7%

4.6%

1.9% 1.9%

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21


Appr

oved

Higher increases are necessary in addition to those already approved to meet debt service coverage and the PILOT.


Environmental Services: Debt Coverage

1.79 1.95 2.12

1.82 2.00

2.38 2.45 2.37 2.01

1.91 1.79 1.72 1.54 1.50 1.50 1.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2016 2017 2018 2019 2020 2021

Cov

erag

e R

atio



Debt coverage is substantially affected by charging a PILOT thus placing upward pressure on rates.

Environmental Services: Fund Balance

7.0 6.3 5.4 4.8 4.4

12.0 14.1

15.4 17.1

18.4 18.9

12.8 12.7 13.4 14.0 13.9

-

5.0

10.0

15.0

20.0

2016 2017 2018 2019 2020 2021

$ M

illio

ns


Targets: 90-days O&M ($2.6M), Capital Reserve ($1M)


Expect lower fund balances with a PILOT in place, but the balances will still be higher than the targeted levels.

Presenter

Presentation Notes

Difference in Fund Balance between this update and previous update: $2M budgeted in 2015 CIP expenditures while the actual spent is only $1M 12.7% weighted average rate increase in 2017 (14% in residential and 2% in commercial) that was not captured in previous update $1.5M difference (less) in O&M 2016 budgeted from last year’s update.

Conclusion

Water Fund • With no PILOT, the City can defease its bonds as planned without

any impact on the water rates. • With PILOT, the City need to defease the bond in order to avoid a

rate increase till FY2021.

Wastewater Fund & Environmental Services Fund • Both fund’s DSC and fund balance are dramatically impacted by

charging a PILOT • Additional rate increases are needed to meet requirements when

PILOT takes place.

Thank you for your time

Questions?

WASTEWATER COST OF SERVICE STUDY

CITY OF SANTA FE // APRIL 2014 // 1

April 1, 2014

To the City of Santa Fe

MWH Global, is pleased to provide this Wastewater Cost-of-Service Rate Study Report for your review and comment.

We are very thankful of the time and dedication put into the study by the City of Santa Fe, without which we would not

have been able to complete our work.

The report includes a summary of our findings with respect to the cost-of-service evaluation of the City of Santa Fe

wastewater system.

Our efforts were completed using standard cost allocation and rate setting principles published by the Water Environment

Federation.

The enclosed report is a comprehensive but not exhaustive description of our analysis and findings. The report body is

meant to provide the overall information and describe the basis for our findings. The report appendix is a summary the

wastewater bill usage by class analysis.

Sincerely,

Jason Mumm

Director of Financial, Commercial, and Risk Services



Table of Content

Executive Summary .......................................................................................................................................... 4

Recommended Wastewater Rates ........................................................................................................................... 4

Table A: Proposed FY2014-15 Wastewater Rates .................................................................................................... 4

Introduction .................................................................................................................................................... 5

System Overview ...................................................................................................................................................... 5

Purpose of the Report .............................................................................................................................................. 5

Project Approach ...................................................................................................................................................... 5

Report Date .............................................................................................................................................................. 5

Intended Use and Users of this Report .................................................................................................................... 5

Sources of Information Used in this Report ............................................................................................................. 5

How to Read This Report .......................................................................................................................................... 6

Revenue Requirements .................................................................................................................................... 7

Overview of Funds .................................................................................................................................................... 7

Revenue Requirements ............................................................................................................................................ 7

Methodology for Determining Revenue Requirements ........................................................................................... 7

Selection of the Test Year ......................................................................................................................................... 8

Determining Cash-need Revenue Requirements ..................................................................................................... 8

Customer Demand Analysis ............................................................................................................................ 11

Wastewater Utility Demands, Customers, and Classes .......................................................................................... 11

Cost Allocations ............................................................................................................................................. 15

Allocation of O&M and Capital Costs – Wastewater System ................................................................................. 15

Cost-of-Service Rates ..................................................................................................................................... 19



List of Tables and Figures

Table 1: Test Year O&M Expenses – Wastewater Fund ............................................................................................... 8

Table 2: FY 2014-15 Test Year Non-Rate Revenues – Wastewater Fund ..................................................................... 9

Table 3: FY 2014-15 Test Year Capital Costs - Wastewater Division ............................................................................ 9

Table 4: FY 2014-15 Projected User-Charge Revenue Requirements for Wastewater Fund ..................................... 10

Table 5: Total Projected Wastewater Flows by Class (MG) FY2014-15 ..................................................................... 12

Table 6: Wastewater Flows and Loads Used in Study ................................................................................................ 12

Table 7: Domestic Strength Samples .......................................................................................................................... 13

Table 8: Surcharge Program Summary ....................................................................................................................... 13

Table 9: Wastewater FY 2014-15 Test Year O&M Expenses by Function .................................................................. 16

Table 10: Wastewater Net Assets by Function 6/30/2013 ........................................................................................ 16

Table 11: Summary of Wastewater Allocation of Functional Costs to by Class FY 2014-15 Test Year – O&M Costs 17

Table 12: Summary of Wastewater Allocation of Functional Costs by Class FY 2014-15 Test Year – Capital Costs .. 17

Table 13: Summary of Wastewater Allocation of Operating, Capital and Specific Non-Rate Revenues by Class by

Functional Cost FY 2014-15 Test Year – Non-Rate Revenue Credits .......................................................................... 18

Table 14: Summary of Wastewater Revenue Requirements by Class FY 2014-15 Test Year ..................................... 18

Table 15: FY 2014-15 Cost-of-Service Rates by Class ................................................................................................. 19

No table of figures entries found.



Executive Summary

In October 2013, the City of Santa Fe (City) engaged MWH Global to study the City’s wastewater Division costs and

develop a model to reflect the City’s costs of service and equitably allocate costs among the various classes of

customers. The results of the study are summarized in Tables A.

MWH Global used standard wastewater ratemaking practices to calculate the proposed rates as described by the Water

Environment Federation (WEF). The WEF standards include the following steps:

1. Determine the revenue requirements for a specified annual period referred to as a test year. Revenue

requirements are defined as the amount of money the Wastewater Division must recover from the rates charged

to customers in order to meet all of the funds' operating and capital expenditures anticipated for the test year.

The revenue requirements are described in more detail in Section 1 of this report.

2. Allocate the revenue requirements to wastewater customer classes. Following standard procedures, the

revenue requirements of the wastewater systems are allocated to specific customer classes based on how the

various classes actually use the wastewater systems. The customer classes and the demand characteristics of

each class are described in Section 2 of the report; the allocation of the revenue requirements to those classes is

described in Section 3.

3. Determine rates for service. The rates are based on the allocated costs of service for each customer class,

meaning that the recommended rates for a given class reflect the cost of serving that class. The recommended

rates are presented at Section 4 of the report.

Recommendations pertaining to the City’s rates are summarized in the following subsections:

Recommended Wastewater Rates

The recommended wastewater rates were determined using the City’s financial projections and revenue requirements.

For the test year FY 2014-15 the revenue requirements for wastewater increased by 5%. The recommended rates for the

City’s wastewater system are provided in Table A.

Table A: Proposed FY2014-15 Wastewater Rates

Customer $/Kgals $/Unit/Mo.

Inside City $3.82 $6.22

Wholesale County $3.95 $4.48

Extra-Strength Surcharge $0.54



Introduction

System Overview

The City of Santa Fe, New Mexico is located 60 miles north east of Albuquerque in Santa Fe County with a metropolitan

population of approximate 70,000 people. The City covers an area of 37.45 square miles. The City of Santa Fe provides

wastewater services to the citizens of the city. The wastewater Division serves 32,662 customers. The wastewater Utility

Division system has the following characteristics:

37.45 square miles of service area

32,662 customers

6.5 MGD average treatment

13 MGD of designed treatment capacity

348 miles of sewer lines

8,811 manholes

3 pump stations

Purpose of the Report

In October 2013, the City of Santa Fe (City) engaged MWH Global to study the City’s wastewater Division costs and

develop recommendations for adjusting the rates to reflect the City’s costs of service and equitably allocate costs among

the various classes of customers.

The purpose of this report is to summarize the procedures utilized as well as the findings and recommendations of the

cost-of-service and rate design study (Study).

Project Approach

MWH Global used standard wastewater ratemaking practices to calculate the proposed rates as described by the Water

Environment Federation (WEF).

Report Date

The date of this report is April 1, 2014.

Intended Use and Users of this Report

This report is intended to provide a summarized discussion of the analysis developed by MWH Global in completing the

listed steps shown in the Purpose of the Report. As such, this report explains our methodologies, materials considered,

key assumptions, findings and recommendations. No other use is intended or implied.

The report has been completed for the City of Santa Fe under a Professional Services Agreement between the City and

MWH Global. The report and its contents are the property of the City of Santa Fe and the City is the only intended user of

the report. The City of Santa Fe may choose to distribute this report to others. However, the report itself was prepared

solely for the use of the City of Santa Fe.

Sources of Information Used in this Report

We have reviewed a number of documents provided by the City of Santa Fe during the course of our study. Where

applicable, we have made a works-cited notation indicating the source and date of the documents within the body of this

report. A summary of the key information reviewed for our report is as follows:

Detailed line-item budgets for the Wastewater Division.



Capital improvement plan for the Wastewater Division.

Wastewater Division Financial Plan prepared by MWH

Customer billing data by customer class.

Detailed wastewater asset registers from the City's files.

Wastewater Flows and Load Data

Wastewater strength survey data.

How to Read This Report

The body of the report is meant to be a summarized narrative of the technical analysis completed by MWH Global during

our study. It is not meant to provide extremely detailed figures, calculations, or discuss every aspect of our work.



Section 1

Revenue Requirements

Overview of Funds

The City of Santa Fe operates the Wastewater Utility Division as part of the City’s Utilities. The Division is a separate

enterprise fund. The wastewater Division enterprise fund’ primary revenue source comes from the rates and charges

assessed to wastewater customers.

The wastewater Division’ normal expenditures include operating and capital expenditures. Capital expenditures include

cash-financing of system improvements, and increases, if any, to the Division’s reserves.

Revenue Requirements

Revenue requirements are the total operating and capital costs the Division must recuperate from its rates to properly

operate, maintain, and develop the infrastructure for the wastewater system. The first step in the ratemaking process is

to determine the revenue requirements for a given year, called a test year. Both the determination of revenue

requirements and the selection of the test year are important because the rates developed need to recover the revenue

requirements in the year in which those costs are expected to occur (the test year). In addition, the method of calculating

revenue requirements has bearing on the total revenue requirements and the subsequent rates.

Methodology for Determining Revenue Requirements

Under existing industry standards, there are two generally accepted approaches to calculating revenue requirements: the

cash-needs approach and the utility approach. Under the cash-needs approach, total revenue requirements are the

annual expenditures necessary to meet operating and maintenance costs, debt service requirements, and any cash-

funded capital expenditures. Government-owned utilities, such as the City’s, typically use the cash-needs approach to

calculate revenue requirements since the approach lends itself to actual requirements for expenditures, which in turn

supports the governmental budgeting process. The City of Santa Fe operates its wastewater Division as an enterprise for

the City and sets its revenue structure based on the cost of operating the system. It has historically used the cash-needs

approach to determine its revenue requirements.

The utility approach differs from the cash-needs approach in that debt service and cash-funded capital expenditures are

removed from the total and replaced with depreciation expense as well as a component that allows the utility owners to

earn a return on investment in the rate base. Under the utility approach, the “rate base” is essentially the used and useful

utility plant-in-service net of accumulated depreciation, less allowances for contributed assets and other adjustments, and

includes allowances for working capital. The utility approach is typically used by investor-owned/private utilities and in

cases where municipal utilities serve customers who are outside of its jurisdictional boundary.

The City provides wastewater services within and outside its corporate boundaries. Given the City’s history and

objectives for this study, MWH Global recommends using the cash-needs approach to calculate revenue requirements for

customers within the City limits and the utility approach for the customers that will be annexed by Santa Fe County which

will be outside the City limits.



Selection of the Test Year

The City’s fiscal year runs from July 1st through June 30th. There are three typical approaches to selection of a test year:

a historical test year, a historical test year with adjustments for known and measurable changes, and a projected test

year. MWH recently updated the Wastewater Division’s financial plan which has financial projections of the costs of

future operations and capital expenditures. We will be using the financial plan projection for fiscal year 2014-15 as the

test year for this study.

Determining Cash-need Revenue Requirements

The overall cash-needs revenue requirement for the wastewater utility was determined based on the Division’s financial

plan projections. The cash-needs revenue requirements for the test year consist of the projected levels for operating and

maintenance costs, debt service, and cash-funded capital expenditures. The rates, however, are based on the need for

user charges, which include adjustments (deductions from the revenue requirements) for sources of income that are not

derived from the rates. Such non-rate revenues include miscellaneous revenues (e.g., penalties and fees), impact fees,

and interest earnings. Accordingly, there is a need to separate total revenue requirements from the user-charge revenue

requirements. Both are defined as follows:

Total Revenue Requirements: The total operating and maintenance, debt service, and cash-funded capital

expenditures required to sustain operations in the test year. The City targets recovering total revenues from all

sources equal to or exceeding the total revenue requirements in order to meet its financial goals, but is willing to

draw down its unrestricted cash reserves in years of unusually high capital expenditures.

User-Charge Revenue Requirements: The total revenue requirements less any income derived from sources

other than the rates charged to the City's retail and wholesale customers. The City must recover the user-charge

revenue requirements from the proposed rates.

Operating and Maintenance Costs

Operations and maintenance (O&M) expenses are those costs incurred to operate and maintain the wastewater system,

as well as fund administrative and general expenses. Table 1 presents projections of the City’s O&M expenses as of the

date of the report. The table separate O&M costs by utility function.

Table 1: Test Year O&M Expenses – Wastewater Fund

Description Department

Projected

FY2014-15

Management 52251 $1,631,766

Treatment 52452 3,443,942

Laboratory 52254 366,949

Collection 52455 1,506,215

Engineering & Environmental 54456 581,705

Pretreatment 52458 252,480

Compost 52460 588,822

1,107,437

Billing Costs 52251 1,107,437

Total $10,586,753



Non-rate Revenues

Non-rate revenues are those revenues generated by the Wastewater Division’s that are not derived from the charging of

wastewater rates. The purpose of this Study is to develop the wastewater rates that will be charged to the Division’s retail

customers. As such, revenue generated from connection fees, fines, and penalties are considered as non-rate revenues

for the purposes of calculating the revenue requirements for the test year. Table 2 summarizes the non-rate revenues for

the wastewater funds. Revenues from private fire protection customers are not included in the non-rate revenues

because those costs will be calculated in the cost-of-service study.

Table 2: FY 2014-15 Test Year Non-Rate Revenues – Wastewater Fund

Capital Costs

Capital costs are driven by the City’s plans for capital improvements. Under the cash-needs approach, capital costs fall

into two categories: debt service and cash-funded capital expenditures. The Division has an existing budget in place for

capital improvements spending, which includes funding from net revenue from current operations and use of existing fund

balances. The annual revenue requirement for cash-needs capital costs is included in the Division’s financial plan

projections, and we used this number as the cash-needs capital costs for the Wastewater Division. Table 5 represents

the cash-needs capital costs as of the report date.

Table 3: FY 2014-15 Test Year Capital Costs - Wastewater Division

Projected Cash-Needs Revenue Requirements

The total revenue requirements for the City’s wastewater Division, as well as the user-charge revenue requirements, are

shown on Table 4. The wastewater rates (including the high-strength surcharges) are designed to recover the user-

charge revenue requirements. The Wastewater Division’s existing rates will recover $10.8M. The revenue requirements

for test year FY 2014-15 represent an increase of about 5%.

Revenue Source

Projected

FY 2014-15

Enviromntal GRT $1,800,000

Septic Fees 48,000

Service Adjustment (220,104)

Interest 81,779

Development Fee 166,547

MP2 Cripple Creek Solar Loan 14,917

Total $1,891,139

Description

Projected

FY 2014-15

Annual Debt Service - Outstanding Debt $2,475,050

Capital Projects 4,470,000

Change in Fund Balance (3,101,995)

$3,843,055



Table 4: FY 2014-15 Projected User-Charge Revenue Requirements for Wastewater Fund

Description

Test Year

Amount

Operating and Maintenance Expenses $9,479,316

Annual Debt Service - Outstanding Debt 2,475,050

Capital Projects 4,470,000

Change in Fund Balance (3,101,995)

Total Revenue Requirement $13,322,371

(Less) Non-User Charge Revenue

Other Revenues $1,642,813

Total Development Fees 166,547

Interest Earnings 81,779

Total User-Charge Requirement $11,431,232



Section 2

Customer Demand Analysis

Cost-of-service ratemaking is a process of allocating the utility system user-charge revenue requirements to customers

based on their demands. Individual customer demands can vary depending on the nature of the wastewater use at the

location where service is provided. For example, wastewater demand for a family residing in a typical single-family home

is different than the wastewater demand for a large commercial customer. As a practical matter, it is not feasible to

allocate system revenue requirements to the individual account level. As such, the standard ratemaking practice is to

group customers with similar demands into classes. Rates are then developed for each customer class with each

individual customer paying the class’ average allocated cost of service for each unit of specific usage.

Wastewater Utility Demands, Customers, and Classes

Wastewater utility customers place various demands on a wastewater system. The number of customers connected to a

wastewater system presents one level of demand that is typically related to the utility’s need to provide for customer

services such as bill processing, customer service support, meter reading, and other administrative services. Actual

wastewater demands are typically measured in terms of each class’ billed flows use. We included the following customer

classes in the Study:

Residential: Residential customers include single-family homes used as domiciles.

Multi-Family: Multi-family service is characterized by multiple dwelling units at a single service location. Typical

Multi-Family customers are apartment buildings, condominiums, and multi-plex (townhome) units.

Commercial: Commercial customers includes all businesses including schools, hospitals, nursing homes,

government agencies, restaurants etc..

Wholesale County: These are about 700 customers that the City used to provide retail service but the

customers were annexed by Santa Fe County and will now be served as wholesale customer outside the City’s

boundaries.

Wastewater Utility Cost Allocation Methodology

There are two generally accepted methods for allocating the costs of wastewater treatment for the purposes of

ratemaking: the surcharge method and the quantity-quality method. The City historically has used a surcharge method

which is characterized by assigning standardized wastewater strength loadings for COD and TSS to customer classes

and assigning any additional wastewater loads to an “Extra-Strength surcharge.” Under the surcharge method,

residential and commercial customers are charged for contributions of normal domestic strength loads to the wastewater

system; other customers, typically commercial and/or industrial customers, are required to pay a surcharge on

wastewater contributed to the system that is in excess of the normal domestic strength. This latter category of customers

constitutes a surcharge class, or Extra-Strength class. The City currently manages approximately 280 such customers.

Analysis of Wastewater Flows by Class

Unlike water service, sewer service usually is not metered. As such, we can only estimate the amount of wastewater flow

each customer class contributes to the wastewater system. The City, like many wastewater utilities, bills customers

based on a measure of water demand. For residential customers, the City calculates the average water demand during

the winter months of December, January, and February and uses that average monthly water demand as an estimate for

wastewater flows (often referred to as Winter Quarter Average [WQA] or Average Winter Consumption [AWC]);

Commercial and multi-family customers are billed for wastewater flows based on actual monthly water demand. For

customers with no water service the City assesses a flat monthly charged, based on an assumed level of sewer flow.

Table 5 summarizes the projected billed sewer flows for the City customers in FY2014-15.



Table 5: Total Projected Wastewater Flows by Class (MG) FY2014-15

Notes:

The Extra-Strength class is not assigned any values for flow because Extra-Strength is a surcharge class for extra BOD and TSS loadings only.

Extra-Strength customers are actually commercial customers, and those customers' flows are billed as part of the regular rate for the

Commercial class - the Extra-Strength surcharge is additive.

Analysis of Wastewater Strengths

Establishing a normal domestic loading assumption is important for the purposes of ratemaking because the purpose of

the Study is to allocate costs, including the costs of wastewater treatment, to the various customer classes. A normal

domestic strength load – a concentration measured in mass per volume – is assigned to each customer class; when

multiplied by each class’ billed sewer flow, the result is an estimate of total COD, TSS, and TKN for each class (measured

in pounds). Any COD, TSS, or TKN not accounted for through these calculations are assumed to be contributed by the

Extra-Strength customers, and the cost of treating those excess amounts is charged through the Extra-Strength

surcharge. It follows that establishing a normal domestic strength that is too low will result in an over allocation of

treatment costs to the customers who pay the Extra-Strength surcharge; a normal domestic strength level that is too high

results in increased charges to the other customer classes and a lower Extra-Strength surcharge.

MWH Global analyzed data provided by the City to determine an appropriate level of normal domestic strength for use in

the Study. The following is a summary of the average flows and loads to be used for our analysis:

Table 6: Wastewater Flows and Loads Used in Study

Normal Domestic Strength We have reviewed and analyzed sample data provided by City. The data consisted of 5 samples gathered in residential

areas between January and February of 2012. Table 7 presents the summary of the samples.

Class Total Flows (MG)

Residential 1,318

Multi-Family 246

Commercial 627

Wholesale County 27

Total 2,218

Total Flows (MG)

Concentration

(mg/l) Total Loads (lbs)

Flows (MG) 2,218

COD 1,000 23,148,707

TSS 438 8,111,501

TKN 71 1,320,694



Table 7: Domestic Strength Samples

Based on the sample data the average domestic strength used in this analysis for COD has been rounded to 1,000

milligrams per liter.

Current High Strength Surcharge Program Extra-Strength customers are those customers who contribute surplus COD to the wastewater system. Customers

exhibiting wastewater concentrations in excess of the normal domestic levels are considered Extra-Strength customers.

The additional costs for treating these surplus flows are appropriately assigned to Extra-Strength customers.

The City has identified approximately 280 current Extra-Strength customers, and all fall within the definition of the

Commercial class. Under the surcharge method of cost allocation, it is customary to establish a secondary customer

class called an “Extra-Strength” or “Surcharge” class. The Extra-Strength class accounts for the excess COD and allows

for the calculation of the Extra-Strength surcharge. As such, customers identified as Extra-Strength contributors are billed

once for their normal domestic loads and also are billed the surcharge for the Extra-Strength contributions above and

beyond the normal domestic level. The purpose of the Extra-Strength surcharge is to recover the costs of treating excess

COD.

The City has a high-strength program that samples 280 restaurants of this about 124 have been surcharged in the past

fiscal year. The surcharge consists of $0.51 per pounds for sampled customers with COD concentrations over the

assumed domestic strength of 550 mg/l. The City calculates the pounds by using the sampled concentration and 90% of

the water usage. Currently the program produces on average revenues of $351,000 a year which represents 681,422

pounds high strength COD.

Plant Balancing

Based on the billing data provided by the City and the assumed domestic strength of 1,000 mg/l we were able to

determine the total loads the different classes provide to the plant. Table 8 summarizes the total flows by class

and the corresponding total loads.

Table 8: Surcharge Program Summary

Sample Location Date COD (mg/l)

Valley Drive 1/25/2012 1,038

Arroyo Chamiso 1/25/2012 976

Governor Miles 2/1/2012 736

Plaza Central 2/1/2012 1,197

Casa Solana 2/8/2012 1,468

Average 1,000

Class Flows (MG) COD (mg/l) COD (Lbs)

Residential 1,318 1,000 10,999,151

Multi-Family 246 1,000 2,051,785

Commercial 627 1,000 5,231,596

Wholesale County 27 1,000 229,013

Total 2,218 18,511,545

Average Plant Loadings 2,218 1,251 23,148,707

Unaccounted Loads 4,637,162



The total calculated flow by class presented in Table 8 includes an inflow & infiltration adjustment of 3.6%. If we

compared the total loads calculated using the domestic strength with the total plant loads we find 4.6 million

pounds unaccounted for. Of the total unaccounted pounds 681,422 pounds can be accounted and traced to the

high-strength customers that are part of the City’s program. With this there still 3.9 million pounds unaccounted

for. There are a few reasons for the unaccounted pounds in our analysis:

1) The high-strength customers that are part of the City’s program might have higher load factors

than the sampled loads. Since the customers are sample every few years the samples might not

reflect the right loads for these customers. The customers might know when their sampled and

change some of their behavior causing the sample to be lower than their regular loads.

2) There might be high-strength customers that are not part of the program and that are not been

sampled. The City’s program includes only 280 commercial restaurants and there are a total of

2,537 commercial customers that might have high strength loads.

3) Improper classification of customers as residential. For example schools are classified as

residential even when they might have cafeterias with high strength loading.



Section 3

Cost Allocations

System cost allocations are determined for the various customer classes, as defined in the previous sections of this

report, based on each class’ service requirements. This is a primary step in any cost-of-service study, and in order to

accomplish it one must first determine and analyze the system revenue requirements and customer characteristics. As a

result of the findings, O&M and capital costs are allocated to the appropriate customer classes.

To determine the revenue requirements, MWH Global utilized the City’s FY 2014-15 financial projections. Once the

revenue requirements and customer characteristics (as described in Section 2 of the report) were determined, the

procedures described below were completed:

Procedure 1: Functionalize Costs

Procedure 2: Assign Functionalized Costs to Groups

Procedure 3: Allocate Costs Based on Customer Service Characteristics

Procedure 4: Allocate Non-Rate Revenues to Customer Classes

Procedure 5: Distribute Total Costs to Specific Customer Classes

Allocation of O&M and Capital Costs – Wastewater System

Procedure 1: Functionalize Costs

In this procedure, the O&M costs of wastewater service were analyzed and segregated by system function. The

functional categories and their associated values were instrumental in determining the proper allocation of the O&M costs

to the various classes of customers based on their characteristics. MWH Global and City staff determined that the major

functions to be included in the cost-of-service study would be as follows:

Treatment: Costs associated with treatment of sewage

Collection: Costs associated with conveying sewage from the customer site to the treatment plant.

Pumping/Lifting: Costs associated with lifting sewage within the collection system

Billing: Costs associated with billing customers for wastewater services

Customer Service: Costs associated with the Wastewater Division administrative and customer related costs.

O&M With Help from the City MWH allocated the test-year O&M cost to the different cost functions. A summary of the FY

2014-15 test year O&M expenses by function can be found in Table 9.

Capital Costs Similar to the O&M procedure discussed above, the capital costs of the wastewater utility were analyzed and segregated

by system function. Again, as noted above, the functional categories, and their associated values, were instrumental in

determining the proper allocation of the capital costs to the various classes of customers based on their characteristics.



Table 9: Wastewater FY 2014-15 Test Year O&M Expenses by Function

The functions were determined by reviewing the City’s capital assets listing for the wastewater utility as of June 30, 2012

and functionalizing those assets, net of depreciation, in the established categories. The functionalized asset listing was

prepared by City staff and was utilized, in large part, to determine the test year capital costs attributable to each function.

A summary of the 2012 net capital assets by function can be found in Table 10.

Table 10: Wastewater Net Assets by Function 6/30/2013

Procedure 2: Assign Functionalized Costs to Groups

O&M/Capital Costs In this procedure the functionalized O&M and capital costs are assigned to specific customer groups or jointly to all

customer classes. A customer group consists of one or more customer classes that would share responsibility for certain

costs incurred by the utility. Joint costs are shared among all customers in the system proportionately based on their

characteristics; specific costs are shared among specific classes based on the characteristics of that group alone. The

wholesale county customer will not share the collection costs because is expected that Santa Fe County will provide

maintenance to the collection system of the customers that will be absorb by them.

Procedure 3: Allocate Costs Based on Customer Service Characteristics

O&M/Capital Costs After functionalizing the O&M and capital costs and determining that the costs would be jointly shared by all customer

classes, the costs of the wastewater service were analyzed by system function in order to properly allocate the costs to

the various classes of customers, based on their demand/usage characteristics. In this analysis, costs were assigned to

the basic functional components of Flows, Loadings (COD/TSS/TKN), and Customer (Services and Billing). The

functional components utilized for this study, and their basic definitions, are as follows:

Function

Projected

FY 2014-15

Collection System 1,506,215

Treatment 4,578,802

Customer Service 2,286,861

Billing Costs 1,107,437

Total 9,479,316

Function Net Assets

Collection System $5,552,629

Interceptors & Mains 2,835,140

Pumping / Lifts 32,114

Treatment 26,088,138

General Plant 715,069

Customer Service 50,940

TOTALS $35,274,028



Flows: Costs that vary with the hydraulic flow of sewage. Flow costs typically include the operating and capital

costs associated with treatment, collection lines and lift stations, which are typically designed to accommodate

maximum hydraulic flow rates. These costs were assigned to the customer classes based on each class'

demand characteristics.

Loadings: Costs associated with sewer loadings. Loadings are measures of the concentrations and mass of

wastes contributed to the wastewater system. Although the composition of the wastewater could be placed into

numerous categories of wastes, the City, measures waste composition for just three such categories: COD, TSS,

and TKN. Customer classes contribute to the concentration and mass of wastes in the wastewater, which in turn

must be treated in order for the water to be returned to the environment to required standards. These costs were

assigned to the customer classes based on each class' demand characteristics.

Billing: Costs associated with billing, collections and accounting expenses. These costs were assigned to the

billing classes based on the number of bills served.

Customers: Costs associated with the administration of the Wastewater Division and with the engineering

department. These costs were assigned to the customers based on the number of customers served.

Based on the customer characteristics discussed in Section 3 of this report and the use of the functional components

listed in the above bullets, O&M and capital costs were assigned to the customer classes. A summary of the FY 2014-15

test year assignments of O&M and capital costs to each of the customer classes can be found in Table 11 and Table 12.

Table 11: Summary of Wastewater Allocation of Functional Costs to by Class FY 2014-15 Test Year – O&M Costs

Table 12: Summary of Wastewater Allocation of Functional Costs by Class FY 2014-15 Test Year – Capital Costs

Procedure 4: Allocate Non-Rate Revenues to Customer Classes

O&M/Capital Costs After completing the procedures above, non-rate revenues are allocated to specific customer classes. The method for

allocation is identical to that described for Procedure 3. Non-rate revenues are applied as credits for each of the

customer classes based on those allocations. While reviewing non-rate revenues, it is necessary on occasion to allocate

certain non-rate revenues to specific classes or groups of classes. Total FY 2014-15 test year non-rate revenue credits

by class are shown in Table 14. Again, these credits will reduce the total revenue requirements for each class.

System Function Flow Costs Loadings Billing Customers Total

Residential $1,648,555 $1,779,396 $1,004,813 $1,720,140 $6,152,905

Multi-Family 307,522 331,929 14,784 387,449 1,041,684

Commercial 784,113 846,346 87,837 150,369 1,868,664

Wholesale County 15,457 37,049 3 40,067 92,576

Extra-Strength Surcharge 0 323,487 0 0 323,487

TOTALS $2,755,648 $3,318,207 $1,107,437 $2,298,024 $9,479,316


Residential $471,108 $1,129,181 $0 $69,165 $1,669,453

Multi-Family 88,145 211,271 0 15,626 315,041

Commercial 221,342 530,526 0 5,972 757,840

Wholesale County 12,777 30,624 0 2,098 45,500

Extra-Strength Surcharge 793,371 120,390 0 0 913,761

TOTALS $1,586,741 $2,021,992 $0 $92,861 $3,701,594



Table 13: Summary of Wastewater Allocation of Operating, Capital and Specific Non-Rate Revenues by Class by Functional Cost FY 2014-15 Test Year – Non-Rate Revenue Credits

Procedure 5: Distribute Total Costs to Specific Customer Classes

O&M/Capital Costs In Procedure 5 the revenue requirement for each of the classes is determined by adding the total O&M and capital costs

for each class and subtracting the credits for non-rate revenues for each class. The total revenue requirement calculated

for each class, along with each class’ customer characteristics, was utilized to determine the rate structure necessary to

meet the individual class and overall revenue requirement for the utility. Total revenue requirements by class can be

found in Table 14.

Table 14: Summary of Wastewater Revenue Requirements by Class FY 2014-15 Test Year


Residential $213,927 $512,754 $177,139 $315,437 $1,219,258

Multi-Family 39,953 95,761 2,606 71,058 209,378

Commercial 101,270 242,729 15,485 27,561 387,045

Wholesale County (571) (1,369) (0) (853) (2,793)

Extra-Strength Surcharge 0 78,251 0 0 78,251

TOTALS $354,578 $928,127 $195,230 $413,204 $1,891,139

System Function

(a)

Total O&M

Costs

Requirements

(b)

Total Capital

Costs

Requirements

(c)

Total Non-Rate

Revenue

Credits

(a) + (b) - (c)

Total Revenue

Requirements

By Class

Residential $6,152,905 $2,233,647 $1,219,258 $7,167,294

Multi-Family 1,041,684 420,602 209,378 1,252,908

Commercial 1,868,664 1,022,916 387,045 2,504,535

Wholesale County 92,576 45,500 (2,793) 140,868

Extra-Strength Surcharge 323,487 120,390 78,251 365,626

TOTALS $9,479,316 $3,843,055 $1,891,139 $11,431,231



Section 4

Cost-of-Service Rates

The cost-of-service rates are based on the allocated cost of service for each customer class as described in Sections 2

and 3 of the report. In all cases, the proposed rates are designed to recover the revenue requirement particular to a

customer class such that each class pays its own fair share of the wastewater system costs.

Unit costs per thousand gallons of wastewater generated and base monthly service charges were developed for each

class (classes developed were described in earlier sections of this report) based on the class’ revenue requirement and

characteristics. The majority of costs included in the unit cost per thousand gallons of wastewater generated include flow

and normal strength loadings costs. The costs associated with extra-strength loadings were considered independently as

discussed in Section 2 and 3 of this report. Costs included in the base monthly charge for each class include all billing,

administrative and customer service related costs. The results are shown in the recommended Wastewater rates

schedule, located in Table 15.

Table 15: FY 2014-15 Cost-of-Service Rates by Class

Customer $/Kgals $/Unit/Mo.

Inside City $3.82 $6.22

Wholesale County $3.95 $4.48

Extra-Strength Surcharge $0.54

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