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HomeMy WebLinkAboutITEM 14 - WATER RATEPublic Hearing Proposed Water Rate Adjustment December 5, 2023 Process / Public Outreach 2 •Sept. 5th Mailed Water Rate Engagement Postcard •Sept. 19th Public Water Rate Workshop •Oct. 3rd Presentation 7-year Capital Improvement Plan •Oct. 20th Mailed Proposition 218 Notice •Oct. 24th Ad Hoc Water Committee Meeting •Oct. 30th Published the Draft Cost-of-Service Rate Study online •Nov. 1st 1st Community Meeting •Nov. 16th 2nd Community Meeting •Nov. 28th Ad Hoc Water Committee Meeting •Multiple social media posts, emails, and updates to website •Tonight, December 5th –Public Hearing •If approved, water bill insert with details for water rates Important to Note •Tustin Water Service is a stand alone Enterprise operating within the organization of City governance. •Water Services is operated as a not-for-profit business and the costs of operating the system is funded completely by rates charged to customers for service. •Cost-of-Service Rate Study is the financial planning document that identifies the Enterprise revenue requirements and allocates cost equitably across all customer classes. •Prop. 218 allow rates models to be adopted up-to five year increments. •Rate methodology follows AWWA M1 Principals of Water Rates, Fees, and Charges. Proposition 218 •1996, California voters passed Proposition 218, the “Right to Vote on Taxes Act”, limits the methods by which local governments can create or increase taxes, fees and charges. •Requires individual notices be mailed to affected property owners, and requires a formal protest hearing prior to increasing rates. •Controls local governments process for imposing fees for services like solid waste, water and sewer services. Also requires that fees charged may not exceed the cost of providing the service. Water Service Overview 5 City limits served by Irvine Ranch Water District City limits served by Tustin Water (approx. 60% of service area) Unincorporated County area served by Tustin Water (approx. 40% of service area) •Population served: 66,600 •Roughly 14K Customers •Average water produced: 9.3 million gallons per day (MGD) •183 miles of water pipeline •9 active groundwater wells •7 storage reservoirs (13.8 million gallons (MG) •7 imported water connections •5 inter-agency emergency connections Past Investments in Water Projects 6 Two Sources of Water Supply 7 $487 $487 $507 $558 $624 $653 $673 $693 $714 $- $100 $200 $300 $400 $500 $600 $700 $800 FY 2020 Actual FY 2021 Actual FY 2022 Actual FY 2023 Actual FY 2024 Budget FY 2025 Projected FY 2026 Projected FY 2027 Projected FY 2028 Projected Local Groundwater Costs per Acre-Feet 28% increase in rate from FY 2020 to FY 2024 Two Sources of Water Supply (cont.) 8 Imported water costs ~2X as much as local groundwater $1,064 $1,091 $1,124 $1,176 $1,233 $1,288 $1,352 $1,420 $1,490 $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 FY 2020 Actual FY 2021 Actual FY 2022 Actual FY 2023 Actual FY 2024 Budget FY 2025 Projected FY 2026 Projected FY 2027 Projected FY 2028 Projected Imported Water Cost per Acre-Feet 16% increase in rate from FY 2020 to FY 2024 Effects of PFAS & Supply Shift •In 2020 the State Water Board lowered the Response Level for Per –and Polyfluorinated Substances (PFAS) in drinking water •5 groundwater wells were shut down that were operating near the new Response Level 9 Water Supply Shift 10 What Changed: •5 groundwater wells were taken offline due to changes in State PFAS regulations. •Operational costs approx. $3M/year higher than adopted rate model. •Largely due to purchasing more imported water, but all costs have increased, energy, equipment, chemicals, etc. What is the Plan? •The City has partnered with Orange County Water District to construct a new PFAS Treatment Plant •Anticipated operational in 2024. This site will remove PFAS from groundwater wells •Allows the City to continue providing high-quality,reliable drinking water from own sources 11 Cost-of-Service Water Rate Study 12 Cost-of-Service Rate Study (cont.) 13 •Updated the Cost-of-Service Rate Study •Builds foundation of long-range financial plan •7-year Capital Improvement Plan •2023 Water Master Plan (20 year) •Establishes projected expense and revenue requirements over a five-year period •Allocates costs equitably among customers Where Your Dollar Goes •Every dollar collected goes back into providing water service to the customer base. •Not-for-profit operation. •Prop. 218 requires only costs of providing service can be recovered through rates. 14 Revenue and Expenses Includes $3.8 M loan from GF Impacts of New Rates on Customers 16 Usage % of Customer 20 or less HCF 30% 21-40 HCF 23% 41-60 HCF 19% 61-80 HCF 12% 81-100 HCF 8% 100+ HCF 9% 100% 71% of SF Residential customers use 60 hundred cubic feet (HCF) or less $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00 Tustin - Old Tustin - Proposed Huntington Beach Fountain Valley Garden Grove Irvine Ranch WD * Irvine Ranch WD (9% increase)* Mesa Consolidated Water Newport Beach Orange Santa Ana Residential Monthly Water Bill for Customers using 30 HCF Monthly Water Bill Regional Average How Tustin Water Compares 17 •IRWD: Capital charges collected as part of the property tax bills. Above amount includes an estimated monthly property tax amount and assumes 30 HCF as the allocation for the month. Regional Average of $138.30 Next Steps •The proposed rate adjustments as defined in the draft Cost-of- Service Rate Study sets the maximum rate increase of 9% for each operating year. •Staff recommends an annual update and presentation at a publicly noticed meeting to provide a comprehensive update on the performance of the Water Enterprise. •In the event that the Enterprise out preforms the estimates outlined in the rate model, the City Council may consider and potentially adopt a lower rate for the following year. Questions 19 THANK YOU!