City of Vallejo · (CIP) Finances Conservation Key Contact Information . Questions ? Appendix....

City of VallejoWater 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 DirectorMike Malone

Water Admin & Conservation

9 Employees

Water Engineering Manager

Mark Quady

11.5 Employees

Treatment Superintendent

Joe Abitong (Acting)

21 Employees

Water Quality/Laboratory

Danielle Bonham

5 Employees

Distribution Superintendent

Oscar Alcantar

36 Employees

Water Facilities Superintendent

John Palesi

17 Employees

Water Operations Manager

Beth Schoenberger

Water Department

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• Out-of-date information technology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

Aged Pipe: mineral deposits

New Pipe

Skyview Water TankIn Need of Cleaning

and Maintenance

Treatment Plant Aged Basin Flocculation Trough

Cache Main Pipeline Break

Mineral corrosion (a common problem in old pipes)is not a health hazard, but reduces water flow andpipe life. Reduced flow increases electrical pumping costs.

Challenges: Vallejo Pipeline Breaks & Leaks vs. National Rankings

Number of Pipeline Breaks and LeaksPer 100 Miles of Pipe

2017 American Water Works Association National Benchmark Survey

• Mile for Mile, Vallejo Pipes Break and Leak More Often Than “Worst Case” Water Agencies Nationally

Water System Challenges: Vallejo Pipe Replacement vs Industry Standard

• Vallejo’s current pipeline replacement cycle is 450 years.

• Vallejo Water’s goal is to establish a pipeline replacement cycle of 100 years.

23% of Vallejo’s 475 miles of pipeline is over 70 Years Old

American Water Works Association industry standard pipeline replacement cycle is 75-100 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 $1Billion 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 $12M

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 WorkshopsCitizen Water Rate Working Group & City Council Water Rate Ad Hoc Committee

Fleming Hill Facilities Maintenance Shop

Workshops and Rates Discussions in Fleming Hill Water Treatment Plant Meeting Room

Cordelia Reservoir and Pump Station

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 & DeliverablesHighlights 5 Year Plan

Rate Adjustments

Pipe ReplacementCycle

150 years in 5-year plan100 years in 10-year forecast

Facilities Investment $30.7M Budget (City) 12% of 30-year project listWater Treatment, Pump Stations, SCADA, Storage, Dams

Total Capital Investment $48.7M Budget (City & Lakes)Meets target of 1% of system value investment in 5th year

Funding ReservesOperating Reserve Target: 120 days operationsRate Stabilization Target: 15% Revenue

Projected at end of FY 2023/24Operating Reserve Target ($13.5M): 100% MetRate Stabilization Reserve Target ($7.5M): 38% Met ($2.9M)

New Debt Water Revenue Bonds

$27.0M in FY 2020/21New Debt Rating Assumption: Standard and Poor’s A+

Staffing Plan Aiming toward accelerated hiring to support the Capital Investment Plan and overall service delivery

FY19/204.3%

FY20/2110%

FY21/227%

FY22/236%

FY23/245%

Proposed Pipe Replacement Plan

• Ramp up capital investment

over 5 years

• 9.3 miles replaced by 5th year

• ~28 miles replaced by 10th year

• 100-year replacement cycle by 10th

year (with second ramp up in years 6-10)

1.1

1.46

1.83

2.19

2.72

0

0.5

1

1.5

2

2.5

3

2020 2021 2022 2023 2024

Mile

s o

f P

ipe

Re

pla

ced

9.3 miles total5-year plan

Year CIP Budget

2020 $1.6M

2021 $2.1M

2022 $2.8M

2023 $3.4M

2024 $5.1M

Total $15.0M

5th Year: 150-year replacement cycle

More than doubles the budget of current Water Main CIP!

Current CIP Budget (5 years): $2.3M (average)Current Pipe Replacement Cycle: ~450 years

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

These bills are based upon single family residential, bi-monthly, average usage of 16 units (12Kgallons)

Regular Current

Water BillAs of July 1

Bill For Proposed

October 24 Increase

$100.06$105.90

Vallejo’s Current Water Rates Among Lowest in RegionRegional Comparison: Average Residential Monthly Bill RateFor ¾” Meter, 8 Units of Water (5,984 gallons), which is the average single family monthly use

$0 $10 $20 $30 $40 $50 $60 $70

Napa

Fairfield

Suisun

Vallejo Current

Vallejo - New Proposed

Benicia

American Canyon

EBMUD

Pittsburg

Sonoma

Contra Costa Water

Martinez

$41.82

$44.86

$47.49

$50.03

$52.87

$54.45

$55.38

$56.25

$59.14

$61.20

$66.53

$68.79

Amounts Based on

Monthly Service Charge

1 Unit = 748 Gallons

Rates Effective July 1, 2019 (3.5%)

New Proposed Rates Effective Oct 24, 2019

Your Vallejo Tap Water:

Less Than 1 ¢ per Gallon

Delivered Directly To Your Home!

How Much Does 1 Gallon Cost?

Latte: $31.50 Gas: $3.90 Milk: $3.40

Bottled Water: $2.75

Approved & Proposed Rate Adjustments

Approved 2017: Current rate structure includes a

scheduled increase of 3.5% that goes into effect July 1, 2019. (Approved by Council in 2017 Phase I emergency rates process.)

Proposed Rate Plan:

Fiscal Year Revenue

Adjustment Date Effective

FY 2020 4.3% October 24, 2019

FY 2021 10.0% July 1, 2020

FY 2022 7.0% July 1, 2021

FY 2023 6.0% July 1, 2022

FY 2024 5.0% July 1, 2023

Next: Proposition 218 Calendar

07-09-2019 City Council Direction on Prop 218 Noticing

07-26-2019 Deadline for Prop 218 Mailing (for 09-10-19 Council Meeting)

09-10-2019 City Council Rate Consideration, Public Hearing, Prop 218 1st Reading

09-24-2019 City Council 2nd Reading of Water Rates Ordinance

10-24-2019 New Rates Effective Date

– Meets 30 day minimum from 2nd Reading of Ordinance

– Subsequent years: July 1st

– Effective Dates to be included in proposed Water Rates Ordinance

Rates Outreach

• Community Engagement on Rate Adjustment– 22 stakeholder meetings held to date

– Additional invitations to community groups in progress

– Scheduled to present at VCUSD School Board meeting August 21st

– 2 general information community meetings to be scheduled

• Informational Flyers

Accountability ZoneComing Soon to the Water Department Website “Accountability Zone”

You will be able to easily find out more about:

• Annual budget and audit information

• Past water rate information

• How your rates are spent and audited

• Proposed and completed capital improvement projects

• Project infrastructure status updates

Access this information and more at vallejowater.org

Capital

Projects

(CIP)

Finances Conservation Key Contact

Information

Questions ?

Appendix

5-Year CIP FY 19/20 - FY 23/24DRAFTWATERDEPT5-YEARCAPITALIMPROVEMENTPLAN(5.10.19)

ProjectTitle FY2019-20 FY2020-21 FY2021-22 FY2022-2023 FY2023-2024 4YearTotal 5YearTotal

Water

GreenValleyDiversionDamRepairs $350,000 -$ 350,000$

GreenValleyWaterTreatmentPlantCorrosionControl $250,000 -$ 250,000$

SiebeandRockvilleTankReplacement $350,000 400,000$ 1,500,000$ 1,250,000$ 3,150,000$ 3,500,000$

MareIslandReservoirDisinfectantBy-Product(DBP)

DestructionUnit $80,000-$ 80,000$

NewCapitolZonePumpStation $200,000 600,000$ 600,000$ 600,000$ 1,800,000$ 2,000,000$

NewEnterpriseResourcePlanningProject(HTEReplacement) $280,000 280,000$ 280,000$ 280,000$ 280,000$ 1,120,000$ 1,400,000$

NewEnterpriseResourcePlanningProject(HTEReplacement) $35,000 35,000$ 35,000$ 35,000$ 35,000$ 140,000$ 175,000$

NewEnterpriseResourcePlanningProject(HTEReplacement) $35,000 35,000$ 35,000$ 35,000$ 35,000$ 140,000$ 175,000$

PumpStationEquipmentRenovation $100,000 -$ 100,000$

WaterMainReplacementFY19-20 $1,500,000 -$ 1,500,000$

WaterMainReplacementFY20-21 2,000,000$ 2,000,000$ 2,000,000$




LakeChabotDamImprovementProject 100,000$ 200,000$ 200,000$ 400,000$ 500,000$

AssetManagementProject(CMMS) 75,000$ -$ 75,000$

LakesFacilitiesRenovation 100,000$ -$ 100,000$

CordeliaUnitNo3Emergency 500,000$ 500,000$ 500,000$ 500,000$ 2,000,000$ 2,000,000$

FlemingHillFilterMediaReplacement 650,000$ -$ 650,000$

SolanoTransitAuthorityandCaltransPipeReplacement 300,000$ 400,000$ 400,000$ 400,000$ 400,000$ 1,600,000$ 1,900,000$

SacramentoBridgeWaterline 100,000$ -$ 100,000$

Trans-VallejoPipelineandGridPumps 175,000$ 175,000$ 350,000$ 350,000$ 875,000$ 1,050,000$

LakeCurryValve&PipeRepair/Replace 100,000$ 100,000$ 100,000$

DistributionSystemSCADARenovation 150,000$ -$ 150,000$

DistributionSamplingStations 85,000$ -$ 85,000$

FlemingHillChemicalSystemReplacement 100,000$ 100,000$ 100,000$ 100,000$ 300,000$ 400,000$

Flocculation&SedimentationBasinConversion/Replace 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 3,000,000$ 4,000,000$

LakeCurryDamImprovementProject 500,000$ 500,000$ 500,000$ 500,000$ 500,000$ 2,000,000$ 2,500,000$

SwingCheckValveReplacement 75,000$ 75,000$ 75,000$ 75,000$ 300,000$ 300,000$

MeterReplacementProject 563,084$ 600,000$ 600,000$ 600,000$ 600,000$ 2,400,000$ 2,963,084$

LakeFreyDamImprovement 200,000$ 200,000$ 100,000$ 500,000$ 500,000$

LakeMadiganDamImprovement 100,000$ 100,000$ 100,000$

SUBTOTAL 7,078,084$ 7,300,000$ 8,875,000$ 8,825,000$ 6,725,000$ 31,725,000$ 38,803,084$

Fundsavailablefromclosedprojects 513,084$

NETCIP 6,565,000$

Water Use by Customer Class

Water Use by Customer Class and Tier (FY 2019 Projected)

CCF= hundred acre feetAF = acre feet

Service ChargesBi-Monthly Single Family Rate (SFR) Charges: Current & Proposed

Monthly Other* Charges: Current & Proposed

Meter Current Proposed Proposed Proposed Proposed Proposed

Size July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023

5/8" or 3/4" $41.66 $44.96 $49.46 $52.93 $56.11 $58.92

1" $62.54 $66.93 $73.63 $78.79 $83.52 $87.70

1 1/2" $104.32 $121.86 $134.05 $143.44 $152.05 $159.66

2" $154.46 $187.77 $206.55 $221.01 $234.28 $246.00

Meter Current Proposed Proposed Proposed Proposed Proposed

Size July 1, 2019 Oct 10,2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023

5/8" or 3/4" $29.88 $28.48 $31.33 $33.53 $35.55 $37.33

1" $42.92 $39.47 $43.42 $46.46 $49.25 $51.72

1 1/2" $71.41 $66.93 $73.63 $78.79 $83.52 $87.70

2" $111.93 $99.89 $109.88 $117.58 $124.64 $130.88

3" $206.52 $204.25 $224.68 $240.41 $254.84 $267.59

4" $341.49 $358.05 $393.86 $421.44 $446.73 $469.07

6" $679.31 $726.06 $798.67 $854.58 $905.86 $951.16

8" $1,084.62 $1,549.96 $1,704.96 $1,824.31 $1,933.77 $2,030.46

10" $1,557.41 $2,318.94 $2,550.84 $2,729.40 $2,893.17 $3,037.83

12" $2,908.31 $2,923.14 $3,215.46 $3,440.55 $3,646.99 $3,829.34

* Current 7/1/2019 rates are for “Non-Residential” Accounts.

Rate Classes

Rate Classes/Tiers Adjustments

Uniform Rate applies to these classes:

Multi-Family Residential, Commercial, Industrial, Institutional, Irrigation, and Construction

Meter

Size

2018-19

Bi-Monthly

Service

Charge

July 1, 2019

Bi-Monthly

Service

Charge

5/8" or

3/4" $40.24 $41.66

1" $60.42 $62.54

1 1/2" $100.80 $104.32

2" $149.24 $154.46

Current Proposed Proposed Proposed Proposed Proposed

July 1, 2019 October 10, 2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023

Tiered Water Rates

SFR Tier 1 $3.65 $3.62 $3.99 $4.27 $4.53 $4.76

SFR Tier 2 $6.84 $5.13 $5.65 $6.05 $6.42 $6.75

Uniform Water Rate $4.47 $4.76 $5.24 $5.61 $5.95 $6.25

Raw Water $2.58 $3.22 $3.55 $3.80 $4.03 $4.24

Customer Class/Tier

Proposed Rate Adjustments

Service Charges

Bi-Monthly Fire Service: Current & Proposed

Meter Size July 1, 2019 Oct 24,

2019 July 1, 2020 July 1, 2021 July 1, 2022 July 1, 2023

5/8" or 3/4" $41.54 $13.57 $14.93 $15.98 $16.94 $17.79

1" $49.38 $15.33 $16.87 $18.06 $19.15 $20.11

1 1/2" $65.34 $21.67 $23.84 $25.51 $27.05 $28.41

2" $84.58 $32.61 $35.88 $38.40 $40.71 $42.75

3" $129.40 $71.85 $79.04 $84.58 $89.66 $94.15

4" $193.22 $139.53 $153.49 $164.24 $174.10 $182.81

6" $353.02 $382.43 $420.68 $450.13 $477.14 $501.00

8" $544.72 $801.40 $881.54 $943.25 $999.85 $1,049.85

10" $768.58 $1,431.60 $1,574.76 $1,685.00 $1,786.10 $1,875.41

GIS Maps: Pipe Age & Pipe ReplacementMI Pipeline replacements will be completed in conjunction with development at Mare Island.

City of Vallejo · (CIP) Finances Conservation Key Contact Information . Questions ? Appendix....

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