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PH 2 WTR SALE RATE 06-15-81
DATE: June 5, 1981 PUBLIC HEARINGS 6-15-81 Inter-Corn TO: FROH: SUBJECT: HONORABLR MAYOR AND CITY COUNCIL CHA~T,P.c: ~tAYER, INTERIM CITY ADMINISTRATOR ~ATER S~nR RATE PROPOSED INCREASE ~TION: Continue public hearings c~ recommended water sales rate increase of 12% at the Council's June 15, 1981 meeting. During the first public hearing cn the water sales rate increases, a question was posed to Staff as to the justification for the water sales reco~nended increase of 12%. Secondly, Mr. Bill Davenport, District No. 4 East Orange County Water District, indicated that: His district anticipated .no increase in water rates this year. (there is in fact a 5% increase from MWD in wholesale water costs) He felt there could possibly he a reductioa in wholesale water rates. (there is a savings in interruptable water pricing - the City applied for participation in the progran but has not received c~,n,~nt or our application f~o., He did not want the City of Tustin to tie any rate increase to water users to an increase in wholesale water prices. (The City has no duoice but to increase water rates based in part or whole due to increased wholesale water rates) DISCUSSION: During the public hearing, the justifications for the 12% increase in water rates to users was explained as a: 1. 27% increase in purchase power. 2. 10% increase in pumping costs. 3. 40% increase in purchased water costs. The increase in purchased water costs was the issue that caused the continuance of the public hearing. I have been able to ascertain that the 40% increase that was referred to during the Council m~cting was, in fact, a projected increase of 1500 acre feet of water. ~nis water is r~cde~ for the forthcoming fiscal year due to projected increases in custcmer useage and development of Residential, Con]nercial an~ Inaustrial property within our servioe area. ~nis 1500 acre feet is equivalent to a ~ increase in water to be purchased. ~ ~ Effective July 1st, Metropolitan Water District of Southern California will be increasing their water rates by $6 per acre foot which will be equivalent to +5% over the present price paid per acre foot of wholesale water. Should further questions concerning water rates be addressed, Reed Jensen of the Water Service will be present to provide historical backgroun~ aha data on how the 12% rate increase was projected. Attached is additional data which helped determine the 12% rate increase - as you will note the increase will cnly offset FY 81/82 costs due to external cost increases which are beyor~ the control of the City. The average effect of this increase is + $1.32 per household per month. DATE: TO: FROH: SUBJECT: June 3, 1981 Inter - C om Charles Thayer, Interim C~anager Ron Nault, Finance Directo~ Water Fund Budget Analysis 40% purchased water costs is a comparison with calendar year 1980 and fiscal year 1981-82. The statistical is as follows: $ 808,312 1,128,250 $ 319,938 estimated water purchase costs 1980 estimated water purchase costs 1981-82 increase INCREASED COST BREAKDOWN $192,750 50,000 77,188 $319,938 anticipated 1500 AF of increased sales equity assessment credit allowance for 5% rate increase from EOCWD/allowance for increased water purchase - January-June 1981 27% purchased costs is a figure given by Southern California Edison $217,000 to $276,000. 10% pump tax is based on increase in purchased water tax assessment. This figure is based on most current information at the time the budget was prepared. $109,000 to $120,000. Additional savings of $70,000 in purchased water costs is accomplished in this budget through the purchase of 6% of the city's water needs through an inter- ruptable water pricing agreement with MWDSC. This allows the City to save $35 an acre foot by agreeing to pump more water in the event that MWDSC should not have the capacity to sell water to the City. The current pricing for purchased water is $128.50 per acre foot. There is a potential for a $6 per acre foot increase effective July 1, 1981 which has been accommodated in the 1981-82 budget. IMPACT OF 12% RATE INCREASE Current Charges In 100 cu. ft. First 6 at .263 Ail over 6 at .417 Added to this is the bi-monthly service charge basedon meter size: A - 5/8 5.80 6.50 B - 1 8.70 9.74 C - 1 1/2 11.70 13.10 D - 2" 15.94 17.85 E - 3" 29.50 33.04 F - 4" 39.78 44.55 G - 6" 66.52 74.50 Fire Protection Sur-charge: Fireline and Detector Checks F - 4" 28.00 31.36 G - 6" 42.00 47.04 I - 8" 56.00 62.72 J - 10" 70.00 78.40 K - 12" 84.00 94.00 L - 5" 35.00 39.20 Average current residential bi-monthly billing With 12% increase Bi-monthly increase Annual increase 12% Increase .295 .467 22.00 24.64 2.64 15.84 DATE: April 21, 1981 Inter-Corn TO: ;ROM: Dan Blankenship, Bob Ledendecker, Earl Rowenhorst and Ron Nault. Reed Jensen, Water Service Analyst Water Supply Costs - 1981-82 Some significant changes in water pricing for the fiscal year 1981-82 are being formulated by the various water agencies. On the evening of April 15th, I attended the Orange County Water District (OCWD) public board meeting at which the new rates for 1981-82 were approved. Following are the comparrison rates that will affect'the Cost of Water to the City of Tustin Water Service (CTWS) . 1981-82 1980-81 Replenishment Assessment $21.00/AF (Pump Tax) Basin Equity Assessment $49.00/AF Basin Production Percentage 70% City of Tustin Water Service Production Requirement or Limitation 60% $30.00/AF $40.00/AF 70% 60% As you will notice, their is a $9.00 per acre foot reduction in the replenishment assessment pump tax and an increase of $9.00 per acre foot Credit over the prior year. Because there are several variables in calculating our projected water supply cost , I have prepared an analysis using different assumptions and this schedule is attached for information and study. Also new, this coming fiscal year, is interruptible water pric- ing by Metropolitan Water District of Southern California (MWDSC). This pricing method is expected to be passed through to the Munici- pal Water District of Orange County (MWDOC) and thereby will be an item that we should consider in our water management planning. The quantity of water that we agree is interruptible will be priced $35/acre foot less than non-interruptible water. However, if we are not able to meet our co~,uL~ittment during a water shortage year, this water would cost $325/acre foot or $204/acre foot more than the normal price. I have also included this interruptible water program the analysis schedule in several of the assumptions. into Enclosed also is copy of correspondence from Boyle Engineering addressed from EOCWD*to CTWS, attention Earl, dated April 14, 1981, regarding Interruptible Water Pricing. It should be noted that EOCWD's next Board Meeting is ADril 23, at 7:00 p.m. and they have requested a response from us. EOCWD must respond to MWDOC prior to May 10, 1981. As we are the primary agency of EOCWD, they will be most interested in our response. I have been in communication with * East ©range County Water Distr~ct. DATE: April 21, 1981 Inter-Corn TO: FROM: SUBJECT: Water Supply Costs - 1981-82 Page 2 Harvey Gobas of Boyle Engineering and plan to attend the April 23rd meeting. In addition to the above, MWDSC has increased their water rates by $6.00 per acre foot effective July 1. It is anticipated that the subagencies will pass through this increase, resulting in our pur- chased water cost rising from $128.50 to $134.50 per acre foot. This added cost is reflected in the schedule attached. Following are comments regarding the schedule. Assumption A Reflects Water Suply Cost based on usage and rates as estab- lished by OCWD and EOCWD without particiDation in the Interruptible water program. Under t~is plan 60% of our water would be pumped, 40% purchased thereby utilizing the full 10% Basin Equity Assessment Credit. The Total Water Supply Cost would be $1,233.420. Assumption B This is the same as "A" plus the implementation of the Inter- ruptible Water pricing of 15% of our water requirement or 2,000 acre f~eet. The total cost under this assumption would be $1,163,420 or $70,000 less than assumption "A", and the least cost of all the assumptions.except "G". Assumption C Same as "B" except less water would be pumped from the basin and the more costly imported water would be required. A ratio of 50% pumped and 50% purchased with an interruptible amount of ].5% would give a total water supply cost of $1,249,018 or $85,598 greater than "B". Assumption D This shows a Pro-Forma results for the calendar year 1980 using the 1981-82 water rates and without effect of interruptible water. Total Cost would be $1,299,378 or $135,958 greater than "B" Assumption E Same as "D" except projected water usage for fiscal year 1981-82 was used. Total Cost $1,361,817 or $62,439 greater than "D" or OATE: April 21, 1981 Inter-Corn TO: FROM: SUBJECT: Water Supply Costs - 1981-82 Page 3 $198,397 greater than "B". Assumptio~ F This example shows results if a greater percent of water is pumped over the Basin Production Reauirement as established by OCWD. This would require less purchased water but would require paying the Basin Assessment Charge in lieu of a credit. The total water supply Cost would be $1,194,328 or $30,908 greater than "B" Assumption G Same as "F" with the additional advantage of interruptible pricing for 10% (1,348 acre feet) of the total water requirement. The total Cost would be $1,147,148 or $47,180 less than "F" or $16,272 less than "B". This would be an impossible situation as CTWS could not physically supply 80 or 90% of its water requirement from its current well supply. Columns H & I These two columns are for comparison purposes. Column H shows the preliminary budget'for the year 1981-82 for Water Supply Costs at a total of $1,594,250 or $430,830 greater than Assumption "B", and $232,433 greater than "E", (Proforma 1981-82% Column "I", actual water supply Costs for year 1980, shows a total Cost of $1,234,149. This is $70,729 greater than Assumption "B" or $360,101 less than the preliminary budget for Year 1981-82, Column H. Conclusions The analysis schedule was prepared as a "tool" to use in water management possibilities. Although some of the assumptions are physically impossible to accomplish at this time, it may be advisable to plan for future water supply from added well development. From the various assumptions used it is evident that assumptions "B" and "G" show the lowest water supply Cost per acre foot, however these conditions may not be i~m.ediately practicable. There are many vari- ables that make up the final supply cost and these variables may and probably will change from year to year and therefore must be ana- lyzed and reviewed on a year to year basis as well as for the long term. It should be realized that the Water Supply Cost is the lar- gest cost making up the operating costs of the Utility and as such should be managed closely, as is evidenced by the schedule. This Water Utility has been fortunate to have had a balance water supply between well water and imported water and this has ]ed to a great / DATE: April 21, 1981 Inter-Corn TO: FROM: SUBJECT: Water Supply Costs - 1981-82 Page 4 degree of flexability in selecting the correct ratio for the great- est cost effectiveness of the total water supply. However, recently this balance has shifted to a higher degree of reliance on imported water and it may be advisable to seek additional well capacity in the near future, especially with the new interruptible water pric- ing option.