2011/03/08 City Council Resolution 2011-19RESOLUTION NO. 2011-19
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROHNERT
PARK ACCEPTING THE SEWER FINANCIAL PLAN AND RATE STUDY
PREPARED BY THE REED GROUP, INC.,WHICH RECOMMENDS NEW
SEWER FEES AND NEW RATE STRUCTURE
WHEREAS, the City of Rohnert Park operates a sanitary sewer utility collecting and
transporting wastewater to the Santa Rosa Subregional System for treatment, disposal, and
recycling; and
WHEREAS, the City Council of the City of Rohnert Park has retained the services of
The Reed Group, Inc. to analyze the financial operations of the sanitary sewer system and make
recommendations on a new rate structure that would bring the sanitary sewer utility to revenue
sufficiency and financial stability so that it can be operated in conformance with the City's
contractual obligations and State and Federal Law; and
WHEREAS, The Reed Group, Inc. has now submitted to the City the City of Rohnert
Park Sewer Financial Plan and Rate Study ( "the Reed Report") dated March 3, 2011, a copy of
which is on file with the City Clerk of the City of Rohnert Park; and
WHEREAS, Robert Reed, President of The Reed Group, Inc. and author of the Reed
Report, is a licensed civil engineer in the State of California with masters' degrees in Water
Resources Engineering and Public Policy and Management from the University of California at
Davis with over 25 years of experience in providing financial and management consulting
services to public agencies in the areas of water and wastewater utility management, as more
particularly set forth in Appendix C of the Reed Report; and
WHEREAS, the financial analysis in the Reed Report confirms that since 2009, annual
expenses for sanitary sewer services have exceeded revenue, resulting in rapid reduction in the
balance of the sewer operating fund and a projected exhaustion of that fund in fiscal year 2011-
2012 unless fee revenues are increased; and
WHEREAS, on April 3, 1975, the City entered into an Agreement Between the City of
Santa Rosa and the City of Rohnert Park, the City of Sebastopol and the South Park County
Sanitation District for Use of the Santa Rosa Subregional Sewer System ( "Subregional Sewer
System Agreement ") to treat the City's sewage as required by State an d Federal Law; and
WHEREAS, Section 20 of the Subregional Sewer System Agreement requires that the
City adopt a sewerage service revenue program which shall, at a minimum, meet the applicable
requirements of the California Clean Water Grant Program and of the Environmental Protection
Agency ( "EPA "), which in turn require that the City adopt a revenue program that will fund
operations, maintenance and replacement of the sewer system; and
WHEREAS, on May 1, 2005, as a step in the. issuance of Certificates of Participation,
the City signed an Installment Purchase Agreement in order to secure funds for essential capital
OAK #4843 - 2701 -9016 v4
improvements to repair and restore the existing sewer operation as well as to provide for future
system expansion; and
WHEREAS, Section 6.14 of the Installment Purchase Agreement contains two
covenants regarding sewer rates and charges made by the City for the benefit of holders of the
Certificates of Participation that it issued in 2005; and
WHEREAS, the first covenant requires that the City fix, prescribe and collect rates and
charges for Sewer Service which will yield, in any Fiscal Year, Net Revenues equal to 120% of
the Debt Service, as those capitalized terms are defined in the Installment Purchase Agreement;
and
. WHEREAS, the second covenant requires that the City fix, prescribe and collect rates
and charges for Sewer Service that will yield Net Revenues, exclusive of Connection Fees, equal
to 115% of Debt Service; and
WHEREAS, Exhibit I1 -4 of the Reed Report demonstrates that for Fiscal Year 2010-
2011 the City is in breach of those debt coverage covenants because there is no Net Revenue at
all, because Operations and Maintenance Costs exceed Revenues; and .
WHEREAS, the lack of Net Revenue demonstrated in the Reed Report will also prevent
the City from meeting its obligations under Section 20 of the Subregional Sewer System
Agreement, including the City's obligation to adopt a sewer service revenue program that, at a
minimum, meets the applicable requirements of the California Clean Water Grant Program and
of the EPA; and
WHEREAS, the City has paid its operating expenses for Fiscal Year 2009 -2010 and
Fiscal Year 2010 -2011 by spending down its Sewer Operating Fund, and the Reed Report
projects that the City will completely exhaust the Sewer Operating Fund in Fiscal Year 2011-
2012 if it continues to use its present rate structure; and
WHEREAS, the Reed Report recommends that the existing sewer rate structure be
replaced by a new sewer rate and rate structure that will improve revenue stability and/or
improve proportionality in rates by assigning a greater portion of revenue to fixed monthly rates;
apportion fixed rates to meter size in recognition of the increase potential for demands upon the
system from larger meters; establish new usage rates that take into account the relative "strength"
of the wastewater and the varying costs for treating various wastewater loadings; retain a fee
component which will be apportioned by system usage, which is another important factor in
allocating costs of service proportionately; and calculate usage for schools based on adjusted
metered water consumption; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Rohnert
Park as follows:
Section 1. The City Council hereby accepts the City of Rohnert Park Sewer Financial
Plan and Rate Study dated March 3, 2011 and prepared by The Reed Group, Inc. and attached
hereto as Exhibit "A" as an accurate representation of the financial operations of the City's
OAK #4843 - 2701 -9016 v4
sanitary sewer enterprise and sound recommendation for a new sewer rate and rate structure that
will permit the City to operate its sanitary sewer system in compliance with State and Federal
Law and its contractual obligations.
Section 2. The City Council hereby finds that the new sewer rate structure recommended
in the Reed Report will:
(1) provide revenues that will not be in excess of those needed to provide
sanitary sewer service;
(2) allocate charges among parcels and as an incident of property ownership in
an amount that will not exceed the proportional cost of providing the service
attributable to that parcel and/or customer; and
(3) will not impose any fee or charge unless the sewer service is actually used
by, or immediately available to, the owner of the property in question.
Section 3. The City Manager and City Attorney are directed to prepare and bring to the
City Council for its consideration those documents necessary to implement the proposed new
rate structure including, but not limited to, the conduct of a hearing on a new sewer rate structure
pursuant to Article XIII D of the California Constitution and the Proposition 218 Omnibus
Implementation Act.
DULY AND REGULARLY ADOPTED this 8th day of March, 2011
Attorney
AHANOTU: AYE CALLINAN: AYE MACKENZIE: AYE STAFFORD: AYE BELFORTE: AYE
AYES: (5) NOES: (0) ABSENT: (0) ABSTAIN: (0)
OAK #4843 - 2701 -9016 v4
City of Rohnert Park
SEWER FINANCIAL PLAN
AND RATE STUDY
March 3, 2011
3053 Freeport Boulevard #158 • Sacramento, CA 95818 -4346 • (916) 444 -9622 • www.TheReedGroup.org
EXHIBIT A
TABLE OF CONTENTS
1W *( ltftLTI-4 &-i4iTif f--1
INTRODUCTION......................................................................................................... ............................... 1
FIVE-YEAR FINANCIAL PLAN ..................................................................................... ............................... 4
NEW SEWER RATE STRUCTURE ............................................................................... ............................... 6
FIVE -YEAR RATE PLAN ............................................................................................. ............................... 7
II. FIVE -YEAR SEWER FINANCIAL PLAN ........................................... .............................11
ROHNERT PARK'S SEWER UTILITY ......................................................................... ....:.......................... 11
FUND /RESERVE STRUCTURE AND CASH FLOWS ...................................................... .............................14
FINANCIAL PLAN ASSUMPTIONS ............................................................................... .............................17
SEWER SYSTEM FINANCIAL PLAN .......................................................................... ............................... 26
III. NEW SEWER RATE STRUCTURE ................................................ ............................... 32
EXISTING SEWER RATE STRUCTURE ...................................................................... ............................... 32
NEW RATE STRUCTURE OBJECTIVES ..................................................................... ...........................:... 34
CUSTOMER ACCOUNT DATA AND WASTEWATER FLOW AND LOADING ESTIMATES . ............................... 35
NEW SEWER RATE STRUCTURE AND RATE PLAN .................................................... .............................45
APPENDIX A - LIST OF REFERENCES
APPENDIX B - DATA ON SEWER USER STRENGTH CLASSIFICATIONS
APPENDIX C - CONSULTANT QUALIFICATIONS
THE REED GROUP, INC.
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
It ti-v:- L I7117-1t
The City of Rohnert Park (City) retained the Reed Group to undertake a comprehensive
analysis of the financial operations of the City's sewer system and recommend a new rate
structure that will (1) efficiently and effectively fund sewer operations in conformance with
state and federal law; (2) meet the City's contractual obligations with regard to the Santa
Rosa Subregional System and Certificates of Participation; (3) be proportional to the cost
of providing service to ratepayers; (4) respond to the changing economic and ecological
environment in which the system operates (i.e., shift to greater reliance on fixed service
charges and strength -based usage charges); and (5) exclude costs of system expansion
to serve new development.
The collection, treatment, and disposal of wastewater is an essential service to the
community that must be provided to ensure the health and safety of the City's residents.
The City has the lowest sewer rates in the region. As a result, the City works each day
with increasingly limited resources to ensure that the sewer system is properly operated
and maintained to avoid sewage overflows, protect public health, and protect the
environment. Unfortunately, however, the revenues generated from sewer operations
are insufficient to cover operating and maintenance costs, debt service obligations, and
capital program needs. The sewer utility is operating at a financial deficit, and the City is
currently in violation of certain debt covenants. If the current trend continues, operating
cash reserves may be exhausted in 2012. At that point, the City will no longer be able to
meet other legal obligations, both under contract and under statute, exposing the City to
significant litigation risk and its residents to substantial health and safety issues.
The funding problems facing the City's sewer operations arise from insufficient revenue
and changing consumer practices. Since December 2008, the City's sewer operation
has been in the vulnerable position of not generating sufficient revenues with current
rates to cover operating and maintenance costs and meet contractual debt service
coverage obligations. During this same period, declining customer water usage has
further reduced revenues (about 99 percent of sewer rate revenue is tied to water usage
and only about 1 percent is fixed). The slowdown in the economy, concerns about water
THE REED GROUP, INC. PAGE 1
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
supply conditions, weather patterns, and water conservation efforts have all contributed to
reduced demand, and a further decline in revenue.
The City engaged The Reed Group, Inc. to review the sewer utility's operating and
maintenance costs, debt service obligations, and capital program needs, and to develop
a multi -year financial plan including recommendations for a new sewer rate structure to
meet these obligations. The new sewer rate structure is the foundation for a new five-
year rate plan that will enable the City to continue to provide sewer services to the
community, without threatening the City's ability to continue providing other essential
services to residents. In addition, the recommended sewer rate structure will also
enhance proportionality among customers by applying a new approach to the manner in
which rates are calculated.
Financial viability is a prerequisite to ensuring the City is able to continue providing
essential sewer, services in accordance with state, federal, and regional regulations. To
ensure long -term financial viability, four important needs must be met: (1) covering
ongoing operation and maintenance costs of wastewater collection, treatment, and
disposal; (2) meeting certain debt covenants, which include both making annual principal
and interest payments (debt service) and meeting debt service coverage requirements
(described below); (3) maintaining adequate and prudent financial reserves for working
capital, emergencies, and variable capital program needs; and (4) providing ongoing
funding. for the long -term rehabilitation and upgrade of the sewer system.
The vast majority of the operations and maintenance costs associated with the City's
sewer operations are charged by the Santa Rosa Subregional System (Subregional
System) for wastewater treatment and disposal, and are thus beyond the control of the
City. The Subregional System provides treatment and disposal for the cities of Santa
Rosa, Rohnert Park, Cotati, and Sebastopol, as well as South Park County Sanitation
District. The relationship between these agencies, as well as the agencies' contractual
payment obligations, are set by the Subregional Agreement dated April 3, 1975, and
subsequent amendments (Subregional Agreement). Under the Subregional Agreement,
the City is required to pay for its proportionate share of operating and maintenance costs
of treatment and disposal operations based on wastewater flow and loading factors, as
well as a portion of annual debt service related to capital facility needs based on
contracted capacity.
THE REED GROUP, INC. PAGE 2
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Annual payments to the Subregional System (for operating, maintenance, and debt
service costs) account for about 80 percent of sewer utility annual operating and
maintenance costs, and the City has limited control over the amount of these costs. The
remaining 20 percent of sewer system operating and maintenance costs is related to the
City's collection system, as well as administrative costs of the utility, including utility billing.
Current (FY 10 -11) operating and maintenance costs, including payments to the
Subregional System, total about $11.1 million, while general sewer rate revenues are
estimated at about $7.3 million and total sewer operating fund revenues are about $8.8
million
In addition, the City is also legally obligated to make annual debt service payments of
nearly $820,000 on sewer revenue certificates of participation (COPs) issued in 2005. As
required by the Installment Purchase Agreement, the City is also contractually obligated
to fix, prescribe, and collect sewer rates and charges such that annual revenues would
cover annual operating and maintenance costs and provide net operating revenues equal
to at least 1.20 times annual debt service. This debt service coverage test is a debt
covenant intended to provide lenders with additional security that the City will be able to
meet its debt repayment obligations. A second test requires the annual net operating
revenues, exclusive of connection fee revenue, to cover operating and maintenance
costs, as well as 1.15 times annual debt service.
As a result of inadequate rate revenues, the City is currently in breach of the debt service
coverage covenants, putting the City in a vulnerable legal and financial condition. This
problem cannot be solved with transfers from other City funds, because the City's debt
covenants require adequate sewer revenue to cover system costs. The City has been
able to make annual principal and interest payments by relying on available financial
reserves in the sewer funds. However, these reserves are estimated to be exhausted in
2012 with currently available revenues. At that time, not only will the sewer utility be
unable to adequately fund capital program needs and unable to meet the debt service
coverage covenants, but it will also be unable to make annual principal and interest
payments, or even cover ongoing operating costs.
The five -year rate plan presented in this report focuses primarily on covering operating
and maintenance costs, and meeting debt service obligations. The third and fourth
financial obligations listed above are maintaining adequate reserves and funding a long-
THE REED GROUP, INC. PAGE 3
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
term rehabilitation and upgrade capital program. Both of these needs were deemed
secondary to ongoing operations and meeting debt repayment obligations. However,
once rates are adjusted to meet the debt service coverage covenants an adequate
operating reserve can be maintained, and most of the City's sewer capital improvement
program can be funded. The limitation on funding the entire capital improvement
program is described in greater detail in Section II of the report.
This report documents the financial planning and rate analyses performed to look at the
next five years for the sewer utility, which in turn forms the basis for recommendations for
a new rate structure that reflects the cost of providing service, enhances proportionality,
and improves revenue stability, as well as a comprehensive rate plan to cover the five-
year planning period.
Because of the requirements: of Proposition 218 on public notification, it may be July 2011
before the new sewer rate structure and the initial phase of the rate plan can be
implemented. As a result, the City will not meet debt service coverage covenants in FY
10 -11. However, the sewer rate plan presented herein is intended provide the necessary
revenues to cover all operating and maintenance costs, as well as debt service coverage
covenants, in FY 11 -12 and beyond.
The remainder of this Executive Summary summarizes the financial planning and rate
study analyses supporting the new sewer rate structure and five -year rate plan. Other
sections of the. report provide additional details of the study. Section II presents
information and assumptions related to development of the sewer financial plan. Section
III describes recommendations for a new rate structure.
Fnre~Yew Financial Plan
The five -year financial plan for the sewer utility covers the period from FY 10-11 through
FY 14 -15. The model is based on the City's FY 10-11 budget, 5 -year capital
improvement plan, and existing debt service obligations. The financial plan model is
intended to serve as planning and management tool, and enables the City to take a multim
year look at its financial needs.
As with other cities, the sewer utility is intended to be a self - supporting enterprise of the
City. That is, the utility is expected to generate the revenues (through user charges,
THE REED GROUP, INC. PAGE 4
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
capacity fees, and other revenues) to cover the ongoing costs of. (1) operations,
maintenance, and administration, (2) debt service, (3) capital improvements to provide
needed capacity and to rehabilitate and upgrade of the utility system, and (4) maintaining
prudent financial reserves.
The sewer utility is running an operational deficit. At present, annual operating costs,
including debt service payments, exceed operating revenues by about $3.4 million. The
sewer utility has been able to cover operating and debt service costs by drawing down
limited financial reserves. However, it is estimated that, without an increase in sewer
revenues, financial reserves in the operating fund may be exhausted in early 2012.
The financial plan model estimates the annual sewer revenue requirements necessary to
cover operating and maintenance costs, as well as debt obligations. The City is
contractually obligated to satisfy debt covenants under the Installment Purchase.
Agreement. The primary covenants affecting rate analyses are the promises (1) to make
annual principal and interest payments, and (2) to meet specific debt service coverage
tests. Failure to meet these contractual obligations could result in costly and protracted
litigation and also impair the City's ability to borrow money in the future. The new rate
plan proposed herein focuses on meeting the cash needs of utility operations, as well as
meeting these debt covenants throughout the planning period. Section II of this report
presents details of the five -year. financial plan for the sewer utility. The financial plan is
used to. identify the annual sewer rate revenue requirements, which are subsequently
used to develop recommendations for a new sewer rate structure, as well as the new rate
plan.
In order to meet the critical financial needs of the sewer utility, significant additional
revenue is required. Because the new rate structure would result in higher rates, it is
recommended that an overall rate plan be implemented in five phases: in July 2011,
January 2012, January 2013, January 2014, and January 2015, as shown below. The
first two phases (July 2011 and January 2012) together are critical to bringing the utility to
a financially stable condition where it can meet financial obligations in FY 11 -12.
Subsequent adjustments to the new rate structure are necessary to maintain revenue
sufficiency through the planning period.
THE REED GROUP, INC. PAGE 5
CITY OF ROHNERT PARK
New Sewer. Rate Structure
SEWER FINANCIAL PLAN AND RATE STUDY
A proposed new rate structure is intended to assist the City with meeting financial
obligations and achieving rate setting objectives. The following rate setting objectives
have guided the development of the proposed new rate structure for the sewer utility.
• Rates should generate sufficient revenues to meet the utility's financial obligations
related to operations, debt service, and the capital improvement program, as
reflected in the multi -year financial plan
• Rates should reflect the cost of providing service by proportionately allocating
costs to each customer class; and
• Rates should improve revenue stability.
The City also has policies and programs to encourage water conservation, and the new
sewer rate structure helps to achieve this objective as well.
The rates proposed under the new rate structure reflect the cost of providing service and
are based on the annual revenue needs beginning in July 2011. While the rate setting
objectives listed above guided the review and recommendations in this report, it is hoped
that the analysis and explanations contained in this report will also assist customers'
understanding regarding the need for a new rate structure to address urgent and
fundamental deficiencies with the City's current sewer rates and the financial health of the
utility.
Sewer rate calculations are based on estimated wastewater flows from each customer
class, as well as wastewater strength characteristics for biochemical oxygen demand
(BOD) and total suspended solids (TSS). Under the current rate structure, all customers
pay the same fixed service charge ($1.08 per month), which represents customer - related
costs such as utility billing. About 1 percent of the annual sewer rate revenue is
generated through this charge. This service charge approach does not reflect the fact
that different customers can place very different demands on the sewer system. The
proportionate distribution of the costs of providing service could be better achieved if
service charges also include a portion of fixed capacity-related costs. The proposed rate
structure makes this change.
THE REED GROUP, INC. PAGE 6
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
The proposed new rate structure would establish the fixed service charge based on the
size of the water meter (similar to water rates) for multi - family and non - residential
customers. All single family residential customers would pay the same fixed service
charge. Under the new rate structure, about 15 percent of annual rate revenue would
come from fixed service charges, and about 85 percentfrom usage charges.
Usage charges for each customer will be determined based on wastewater flow, as well
as strength characteristics for each customer class. Residential wastewater flows are
estimated based on the lower of either (1) the average monthly water usage from the
prior December through February period, or (2) actual water usage for the month. Non-
residential wastewater flows are based on actual monthly water usage, as most non-
residential irrigation is separately metered. The usage rate for residential accounts is
based on typical residential wastewater strength characteristics. Non - residential sewer
rates are proposed for low, medium, and high strength categories, with each rate
reflecting a proportionate share of costs associated with treatment based on loading
characteristics associated with different types of businesses. Section 111 of this report
further describes the rate setting methodology, as well as the basis and rationale for
strength -based rates.
While the overall revenue increase from proposed new sewer rates in July 2011 would be
25 percent, the actual bill changes for individual customers would vary depending on
customer class, meter size, and usage. Because this would be a new rate structure, and
not simply the application of an across -the board rate increase to the current rates, some
bills would increase more, and others less, than of overall revenue increase. In all cases,
however, it is believed that the proposed new rate structure would provide an improved
distribution of costs to each customer and the proposed rates would be justified on a cost
of service basis. The potential impact of the new rate structure on various "typical' sewer
customers is presented in Exhibits 111 -7 and III-8, at the end of Section III.
Five -Year Rate Plan
It is proposed that the City adopt a new five -year rate plan based on the new sewer rate
structure. Under this plan, the sewer utility would return to financial stability, meet its
contractual and legal obligations for revenue sufficiency, and continue to provide
THE REED GROUP, INC. PAGE 7
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
essential sewer services for the protection of health and safety in a financially responsible
manner.
The five -year rate plan is summarized in Exhibit 1 -1 and includes the adoption and
implementation of a new sewer rate structure in July 2011, followed by adjustments to the
new rates each January from January 2012 through January 2015. Exhibit 1-1 presents
the proposed new sewer rates as they would be implemented and adjusted during the
five -year period.
Exhibit 1 -1
City of Rohnert Park
New sewer Kate structure ana rive. year Kate rian
(Votes:
(1) The percentage shown for July 2011 reflects the overall increase in sewer rate revenue resulting from the first phase in
implementing the new rate plan. Subsequent percentages reflect the rate adjustments in subsquent phases of the plan
necessary to meet annual revenue needs. Annual rate revenue growth is also affected by growth in the customer base,
as well as changes in customer demand.
(2) Residential sewer flow is based on the lower of actual monthly water use or the average water use during the
prior December - February period. Non - residential sewer flow is estimated equal to monthly water usage.
The proposed five -year rate plan meets the sewer utility's sewer rate revenue needs as
identified with the five -year financial plan (described in Section 11 of this report), as well as
replaces the existing sewer rate structure with an entirely new structure that meets the
City's rate - setting objectives, particularly improving the manner in which the costs of
THE REED GROUP, INC. PAGE 8
July 2011
Jan. 2012
Jan. 2013
Jan. 2014
Jan. 2015
See Note (1) Below - ->
25%
25%
3%
3%
3%
Monthly Service Charges
Residential Customers (per dwelling unit)
Single Family
$
6.88
$ 8.60
$
8.86
$
9.13
$
9.40
Multi - Family and Non - Residential Customers
Up to 3/4" meter
$
18.52
$ 23.15
$
23.84
$
24.56
$
25.30
1" meter
$
28.34
$ . 35.43
$
36.49
$
37.58
$
38.71
1 1/2" meter
$
52.68
$ 65.85
$
67.83
$
69.86
$
71.96
2" meter
$
82.00
$ 102.50
$
105.58
$
108.75
$
112.01
3" meter
$
150.48
$ 188.10
$
193.74
$
199.55
$
205.54
4" meter
$
248.27
$ 310.34
$
319.65
$
329.24
$
339.12
6" meter
$
492.54
$ 615.68
$
634.15
$
653.17
$
672.77
8" meter
$
785.79
$ 982.24
$
1,011.71
$
1,042.06
$
1,073.32
Sewer Usage Rate ($/gal.)
(2)
Residential
$
0.00801
$ 0.01001
$
0.01031
$
0.01062
$
0.01094
Non- Residential
Low Strength
$
0.00837
$ 0.01046
$
0.01077
$
0.01109
$
0.01142
Medium Strength
$
0.01122
$ 0.01403
$
0.01445
$
0.01488
$
0.01533
High Strength
$
0.01690
$ 0.02113
$
0.02176
$
0.02241
$
0.02308
(Votes:
(1) The percentage shown for July 2011 reflects the overall increase in sewer rate revenue resulting from the first phase in
implementing the new rate plan. Subsequent percentages reflect the rate adjustments in subsquent phases of the plan
necessary to meet annual revenue needs. Annual rate revenue growth is also affected by growth in the customer base,
as well as changes in customer demand.
(2) Residential sewer flow is based on the lower of actual monthly water use or the average water use during the
prior December - February period. Non - residential sewer flow is estimated equal to monthly water usage.
The proposed five -year rate plan meets the sewer utility's sewer rate revenue needs as
identified with the five -year financial plan (described in Section 11 of this report), as well as
replaces the existing sewer rate structure with an entirely new structure that meets the
City's rate - setting objectives, particularly improving the manner in which the costs of
THE REED GROUP, INC. PAGE 8
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
sewer operations are proportionately distributed to customers and recovered through the
sewer rates (described in Section III of this report). The five -year rate plan has the
following four major features and benefits:
1. In July 2011 the current sewer rate structure would be replaced with a new sewer
rate structure. The new rate structure would help improve revenue stability by
increasing the proportion of revenue coming from fixed service charges, and also
establishing new sewer usage charges that more proportionately recover the
costs of collection, treatment, and disposal . based on use of the system
(wastewater flow), as well as sewer strength characteristics (BOD and TSS) for
each customer class. The new sewer rates also take a critical step in increasing
sewer rate revenues to meet the financial needs and obligations of the utility.
With the first phase of the proposed new rates for July 2011, sewer rate revenues
are estimated to increase by about 25 percent.
2. In order to fully meet the sewer utility's contractual and legal obligations for
maintaining sufficient sewer rates and revenues, a second phase in the new rate
plan is.proposed for January 2012. At that time, the new sewer rates would be
adjusted by increasing all rate components (fixed service charges and sewer flow
charges) by 25 percent. It is the combination of the first and second phases of
the new rate plan in July 2011 and January 2012 that bring the sewer utility to a
place of revenue sufficiency in terms providing revenues to cover all operating
and maintenance costs, and existing debt service obligations. The second phase
in the new rate plan also ends the sewer utility's financial deficit, which must be
abated.
To provide sufficient revenues in FY 11 -12 to meet the sewer utility's contractual
and legal obligations it is not possible to extend the new rates implemented
through the first and second phases of the new rate plan over a longer period of
time.
3. In January 2013, January 2014, and January 2015 the last elements of the
proposed five -year rate plan would be implemented. These include additional
adjustments to the new sewer rates of 3 percent per year. Based on financial
plan analyses, these modest rate adjustments are necessary in order to sustain
THE REED GROUP, INC. PAGE 9
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
sewer rate revenues at levels required to meet financial needs for operation,
maintenance, and debt service, as well as maintain prudent financial reserve and
fund the current capital improvement program, as reflected in the financial plan.
4. To help ensure that existing rate payers are not paying costs related to new
development, the proposed rate plan also includes continuing to use sewer
capacity fee revenue to pay for Subregional System debt service related to
capacity expansion, as well as use a portion of PFFP fee revenues to cover the
expansion portion of 2005 COP debt service costs.
Details of the assumptions, analyses, methodology, and rationale supporting the
proposed five -year rate plan are contained in the remainder of this report. '
O
In conclusion, based on financial plan assumptions and estimates, the sewer utilibr is
expected to be financially stable if the proposed new sewer rate structure and the new
five -year rate plan are adopted and implemented. While the assumptions and
information used in the preparation of the sewer financial plan are based on expert
analysis and reasoning, as well as staff review and concurrence, no assurances can be
made that actual financial results will be as presented herein. City staff should continue
to monitor the financial condition of the sewer utility, as well as changes in wastewater
demands and related rate revenues, to ensure that the utility moves forward on a sound
financial course.
THE REED GROUP, INC. PAGE 10
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
This section of the report describes the five -year financial plan developed for the City's
sewer utility. The financial plan reflects the City's current operation and maintenance
costs, debt service obligations, and capital improvement plans, as well as various
sources of revenues and the reserves maintained by the City for various purposes.
The financial plan is intended to serve as planning and management tool and enable the
City to take a multi -year look at its financial needs. In order of priority, these needs
include funding of ongoing operation and maintenance, meeting debt service obligations
(including debt service coverage covenants), maintaining prudent financial reserves, and
supporting the utility's current capital improvement program. The financial plan model
also provides a means to examine ways to minimize utility rate increases, while still
meeting financial objectives.
The financial plan model is based on information provided by the City and assumptions
reviewed with City staff. Efforts have been made to make the analyses as complete. and
accurate as possible. However, the City's sewer utility operates in a dynamic
environment in which economic conditions, customer demands, external costs, and other
factors are outside of the City's direct control. Future conditions and events cannot be
known at this time. The financial plan is intended to help shape and inform decisions to
be made by the City. It is not a prediction of the future.
Rohnert Paris's Sewer Utility
The City is responsible for the operation and maintenance of the City's sewer utility. The
wastewater produced by the City's customers is delivered by the City's collection system
to a regional wastewater treatment and disposal system (Subregional System), which
treats and disposes the wastewater. The Subregional System is owned and operated by
the City of Santa Rosa and serves the City, Santa Rosa and the nearby cities of Cotati,
Sebastopol, and the South Park County Sanitation District through contractual
agreements with Santa Rosa and those public agencies. Through the City's collection
system and the Subregional System, the City provides sewer services throughout
Rohnert Park and certain adjacent areas.
THE REED GROUP, INC. PAGE 11
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Operations of the sewer utility are carried out under the general supervision of the Public
Works Director. The sewer utility is operated as an enterprise fund of the City, with a
separate and independent set of accounting records and financial transactions. As a
condition of the COPs the City is required to set rates and charges sufficient to cover all
operating and maintenance costs of the utility without support of the General Fund. It is
through establishing appropriate rates and charges that the sewer utility can operate in
compliance with this requirement
The entire City is included within the area currently served by the sewer utility. This
service area includes the 7.3 square miles of the City. The utility serves approximately
8,350 accounts in the City and two additional customers (Sonoma State University and
Sonoma County's Canon Manor Assessment District) outside the City limits in Sonoma
County.
The sewer utility currently consists of wastewater collection and conveyance facilities. All
wastewater is treated and disposed through the Subregional System. The Qty has
approximately 411,000 lineal feet (nearly 78 miles) of gravity sewer pipe ranging in size
from 6 -inch to 30 -inch. In addition, the sewer trunk system, which delivers wastewater to
the Subregional System, consists of approximately 20,000 lineal feet of 24 -inch gravity
sewer installed in the 1970's, as well as a second trunk line of approximately 18,000
lineal feet with a 30 -inch diameter installed in 2006. Both trunk lines are now operated as
pressurized pipelines. The City's sewer collection sysbm operates under gravity flow to
a pump station, which then pumps the wastewater through the trunk system to the
Subregional Systems's treatment plant. Currently, the average aggregate wastewater
treatment demand in the City's service area is approximately 2.8 mgd (average dry
weather flow). The current treatment capacity of the Subregional System allocated to the
City is 3.43 mgd (average dry weather flow).
Untreated wastewater from the City's collection system is delivered to the Subregional
System where it is treated. Primary treatment consists of screening, grit removal and
primary sedimentation. In the primary treatment tanks, suspended material in the
wastewater is allowed to settle out. The settled material (primary sludge) is removed to
digesters while the liquid effluent flows to the secondary treatment facility.
THE REED GROUP, INC. PAGE 12
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
In secondary treatment, the primary effluent is aerated and bacteria consume most of the
organic material. The resulting mixture then flows into secondary clarifiers where
additional settlement occurs. The secondary sludge is either re- circulated to the aeration
tanks or removed for sludge thickening while the liquid effluent flows to the tertiary
treatment facility.
The tertiary treatment facility consists of filtration of the secondary effluent through
anthracite coal beds that remove any remaining organic material. After filtration, the
tertiary effluent is disinfected by ultraviolet light, which eliminates any remaining bacteria
or viruses. After disinfection, the effluent is pumped through pipelines to storage ponds
for subsequent re-use or for discharge to Laguna de Santa Rosa.
The solids generated during the wastewater treatment process (sludge) are thickened to
remove excess water and then pumped to four anaerobic digesters tD degrade, stabilize
and to produce methane gas to help meet treatment plant power needs. The product of
this process, called biosolids, is further dewatered and then transported for agricultural
land application, for landfill disposal, or further processed by composting which produces
a marketable product.
Tertiary treated, recycled water is currently disposed by the Subregional System in three
ways: irrigation, Geysers Recharge (geothermal power plant), and Laguna de Santa
Rosa discharge. By managing these three disposal methods, the Subregional System
can. remain in regulatory compliance independent of weather. The City of Santa Rosa is
currently expanding its reuse capacity into urban areas. Revenues generated from the
sale of treatment bi- products, including recycled water, is used to offset the cost of
operation and maintenance that otherwise would need to be recovered from member
agencies, including Rohnert Park.
The Subregional System operates in a heavily regulated environment with strict limits on
treatment and discharge. The primary regulatory body is the North Coast Regional Water
Quality Control Board. Other regulatory agencies impacting Subregional System
operations include: US Environmental Protection Agency, California. State Water
Resources Control Board, California Department of Fish and Game, US Fish and Wildlife
Service, US Army Corp of Engineers, and others.
THE REED GROUP, INC.. PAGE 13
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
The City is required to establish and maintain sewer rates and revenues that meet the
financial needs of the utility. Section 20 of the Subregional Agreement requires Rohnert
Park to "adopt a sewerage service revenue program which shall meet, as a minimum,
applicable requirements of the California Clean Water Grant Program and of the EPA"
These state and federal requirements (as specified in the State Water Resources Control
Board's Revenue Program Guidelines) include establishing a revenue program "designed
to provide a source of revenue for operation, maintenance, and replacement (O. M. & R.)
costs of the wastewater system." In addition, sewer rates are to be "set based on the
identification of users and their respective contribution to the wastewater loading of the
treatment works." Beyond these state and federal requirements, pursuant to the
Installment Purchase Agreement for the 2005 COPs, the City is also required to fix,
prescribe, and collect rates and charges for sewer service that generate net revenues
(defined as gross system revenues minus operating and maintenance expense) at a level
that exceeds annual debt service. This debt service covenant is explained in greater
detail later in this report.
FundlReseme Sibv=Wm and Cash Flows
The financial plan is a multi -year cash flow model. As a cash flow model, it differs from
financial accounting income statements and balance sheets that present financial
information on an accrual accounting basis in conformance with the Governmental
Accounting Standards Board (GASB). The financial plan models the sources and uses of
funds into and out of the various funds and reserves of the City's sewer utility.
The sewer utility is an independent enterprise operated by the Public Works Department.
As an enterprise, the utility has an independent set of financial accounts contained within
the City's overall budget. The financial plan was developed to reflect the fund and
account structure used by the City. The financial plan is used to model the cash inflows
and outflows of the sewer utility, as well as transfers between the various sewer funds.
Exhibit I1-1, on the following page, schematically illustrates the fund and reserve structure
used for financial .planning and analysis purposes, as well as the major revenue inflows
and expenditure outflows. An understanding of the fund /reserve structure is helpful in
understanding the financial plan exhibits that model the. flow of funds through the utility
from one year to the next. Each of the funds and reserves is described below.
THE REED GROUP, INC. PAGE 14
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit 11 -1
City of Rohnert Park
11 Includes service revenues from SSU and Canon Manor, penalties, refunds from the Subregional System, and PFFP revenues.
The PFFP revenues are transferred in from another City fund and used for a portion of annual COP debt service.
(2) Sewer capacity fee revenue is transferred to the operations fund and used to pay Subregional expansion debt service.
• ODeratina Funds — The operating fund is the primary fund for the sewer utility.
Most sewer revenues, including user rates and other service revenues, flow into
this fund. All operating and maintenance expenditures, including administrative
costs and debt service payments, are paid out of the operating fund.
o Operating Reserves— The primary purposes of an operating reserve is to
provide working capital sufficient to pay expenses as needed and to
provide for unanticipated or emergency expenditures that could not be
reasonably foreseen. The financial plan seeks to maintain a minimum
operating reserve throughout the 5 -year planning period. Operating
reserves equal to from 10 percent to 50 percent of annual operating
expenses is common and accepted within the water and wastewater
industry. Given the size and nature of the City's sewer operation, as well
THE REED GROUP, INC. PAGE 15
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
as relative risks (e.g., high revenue volatility and limited ability to control
Subregional System costs), a 33 percent operating reserve is
recommended. At present, it is estimated that the balance in the
operating fund will be slightly above the recommended minimum balance
at the end of FY 10 -11. The new rate structure would help maintain the
minimum balance for the remainder of the planning period.
o Available Balance — The balance in the operating funds in excess of the
operating reserve is shown in the financial plan model as the available
balance. When the total fund balance exceeds the target reserve amount
the available balance is positive. If the fund balance dips below the
desired minimum reserve the available balance is negative. This is a
convenient way to monitor the status of the operating fund over the
planning period as various scenario analyses are performed.
• Capital Replacement Fund — The capital replacement fund is used to track capital
outlay items and capital program expenditures, as well as the monies available
for capital rehabilitation and upgrade projects. Grant or debt proceeds obtained
for capital projects are also shown in the capital replacement fund. At present,
about $2.6 million in this fund represents remaining proceeds from the issuance
of COPs in 2005. In addition, the fund is supported through annual transfers from
the operating fund. Contributions to the capital program from operating revenues
are reflected in the financial plan models as annual transfers from the operating to
the capital replacement fund.
• Capacity Fee Fund — The sewer capacity fee fund is used to track revenues from
new development when capacity fees are paid. Sewer capacity fees are used to
pay costs due to the Subregional System related to providing capacity in the
wastewater treatment and disposal system owned and operated by the City of
Santa. Rosa. Capacity fee revenue cannot be used to cover general operating
and maintenance costs of the utility. The purpose of capacity fees is described in
the Sewer Capacity Charge Analysis report prepared by the City in 2006.
The City also receives development fee revenue under the Public Facilities
Financing Plan (PFFP) fee structure. These revenues are accounted for in a
separate fund (outside of the sewer utility). Their use in covering certain sewer
THE REED GROUP, INC. PAGE 16
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
system costs is described later in this section, but is not part of the funds flowing
through the capacity fee fund.
Financial Plan Assumptions
The five -year financial plan reflects a number of assumptions. The financial plan was
developed based on the City's FY 10-11 budget, existing long -term debt obligations and
debt service schedules as reflected in the Official Statement for the 2005 COPs, and the
current five -year capital improvement plan (CIP).
General Assumptions
A number of general assumptions are reflected in the financial plans, including inflation
rates, interest rates, customer growth rates, water demand estimates, etc. Primary
assumptions are described below, and also shown in Exhibit II -2. City staff members
reviewed the assumptions used in the analyses, and concur with their reasonableness for
the time period covered.
• Inflation and Interest Rates The financial plan model includes the following
assumptions for annual inflation and interest:
o Approximately two- thirds of the current operating and maintenance cost to
the City's sewer utility is the cost of treatment and disposal operations and
maintenance provided by the Subregional System (excluding Subregional
System debt service). The City of Santa Rosa's planning efforts have
assumed Subregional System operating costs will increase by 5 percent
each year. However, like other cities, they are under pressure to reduce
costs as much as possible, and have been directed to reduce costs for
FY 11 -12. For this reason, the analysis herein assumes that Subregional
System operating and maintenance costs to the City of Rohnert Park will
be unchanged in FY 11 -12 (relative to FY 10 -11), will increase by 3
percent in FY 12 -13, and then increase by 5 percent each year for the
remainder of the planning period.
THE REED GROUP, INC. PAGE 17
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit II -2
City of Rohnert Park
Financial Assumptions
Interest Earnings
0.5% 1.0%
1.0%
1.5%
1.5%
General Inflation
3.0%
3.0%
3.0%
3.0%
Subregional O &M Inflation
0.0%
3.0%
5.0%
5.0%
Construction Inflation
2.0% 3.0%
4.0%
4.0%
4.0%
Fund(Reserve Policies
959
Customer Growth Rate
0.0%
0.1%
Min. Operating Reserve
33% of operating expenses, including
debt service
1.0%
Wastewater Treatment and Disposal
Cap. Replacement Fund
Maintain positive balance
Preservation
$ 2,488,129
Capacity Fee Fund
Maintain positive balance
$4,628,412
$5,115,000
$5,120,000
CustomerAccountand Water Usage Assumptions
No. of Sewer Accounts
8,349
8,357
8,365
8,407
8,491
8,576
No. of Sewer ESFDs
11,595
11,603
11,611
11,653
11,737
11,822
Annual Sewer Flow (MG)
933
934
935
940
949
959
Customer Growth Rate
0.0%
0.1%
0.1%
0.5%
1.0%
1.0%
Wastewater Treatment and Disposal
Preservation
$ 2,488,129
$ 2,394,090
Subregional O&M
$4,628,412
$5,115,000
$5,120,000
$5,300,000
$5,621,000
$5,961,000
Subregional DS Preservation
$3,197,575
$2,854,000
$2,289,000
$2,637,000
$2,637,000
$2,983,000
Subregional DS Expansion
$1,085,354
$ 877,000
$ 877,000
$ 877,000
$ 877,000
$1,094,000
Capacity Fees
$ 348,081
$ 348,081
$
694,086
Sewer Capacity Fees ($ /ESFD)
$ 12,4211
$ 12,421
$ 12,421
$ 12,421
$ 12,421
RP Subregional Debt Service Details
Existing Based on 15 MGD Base Capacity
Preservation
$ 709,446
$ 460,299
$ 460,299
$ 460,299
$ 460,299
$
460,299
Expansion
$ 521,864
$ 324,036
$ 324,036
$ 324,036
$ 324,036
$
324,036
Existing Based on 21.34 INGD Base Capacity (through
2008 bonds)
Preservation
$ 2,488,129
$ 2,394,090
$1,828,566
$1,828,566
$1,828,566
$1,828,566
Expansion
$ 563,490
$ 553,062
$ 553,062
$ 553,062
$ 553,062
$
553,062
Future Issues
Preservation
$ 348,081
$ 348,081
$
694,086
Expansion
$ -
$ -
$
217,022
Estimated Future Funds Needed
$46,190,000
$
100,540,000
Annual Debt Service
$3,041,000
$6,540,000
RP Shr
% Preservation
16.07%
% of issue - ->
71.23%
32.92%
% Expansion
37.07%
% of issue - ->
0.00%
8.95%
RP Preservation
$ 348,081
$
346,005
RP Expansion
$ -
$
217,022
o General inflation is assumed to be 3 percent per year of the planning
period. This is a long -term average of general inflation trends in the San
Francisco bay area, as compiled by the US Bureau of Labor Statistics.
This assumed general inflation rate applies to the City's sewer operating,
maintenance, and administrative costs.
o Construction inflation is assumed to be 2 percent for FY 10-11, 3 percent
in FY 11 -12, and 4 percent per year thereafter. Lower inflation is initially
THE REED GROUP, INC. PAGE 18
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
assumed due to the current economic climate. The 4 percent inflation is
reflective of long -term norms, based on data from the Engineering News
Record, which maintains a historical construction cost index. These
Construction inflation rates apply to capital project costs contained in the
City's 5 -year capital improvement program covering through FY 13-14.
o Interest earnings on the City's investment of available cash are at historic
lows, based on rates paid on the State Treasurer's Local Agency
Investment Fund (LAIF). Interest on general cash balances is assumed
to be 0.5 percent in FY 10-11, 1.0 percent in FY 11 -12 and FY 12 -13, and
then 1.5 percent in FY 13 -14 and FY 14 -15. This interest rate applies to
each fund's beginning -of -year balances and accrues to each fund.
• Current Customer Base — The City currently has about 8,350 sewer accounts.
The City also provides sewer services to Sonoma State University (SSU) and to
the Canon Manor development, each under special contracts. Customer account
and water use data were obtained from the City's utility billing. system for the
period from September 2009 through August 2010. Customer account, water
use, and estimated wastewater flow data are presented in greater detail in
Section III of this report.
• Growth Projections — The financial plan conservatively assumes annual growth of
about 0.1 percent (equivalent to about 8 new homes) each year through FY 11-
12, and then increasing to 0.5 percent in FY 1213 and to 1.0 percent thereafter.
Actual growth will be a function of economic conditions, the City's development
policies, and the status of specific development projects. While the growth
assumption is low it is reasonable given the current economic climate. The
growth rate affects capacity fee revenues, as well as ongoing rate revenues.
• Wastewater Demand — Water demand, as well as wastewater flows, have been
reduced in recent years due to the effects of the current economy, weather
conditions, and water conservation awareness and programs. Reduced
demands have had an adverse impact on sewer revenues. Statewide policies
are increasing the emphasis on water conservation and efficient water use as
well. While new connections will be added to the sewer system as the economy
recovers, no increases or decreases in wastewater demands, on a per account
THE REED GROUP, INC. PAGE 19
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
basis, are included in the financial plan analyses presented herein. This is a
reasonable assumption given the relatively short (5 -year) planning period. Actual
demands may fluctuate, upwards or downwards, due to changing conditions.
• Service Revenue from SSU and Canon Manor — Sonoma State University pays
for sewer service under a special agreement with the City. Sewer service
revenue from the SSU is affected by the university's wastewater flows and O &M
cost changes from the Subregional System. SSU is also allocated a portion of
the City's collection system costs. For financial planning purposes, sewer service
revenue from SSU is assumed to be constant through the planning period
because of decreasing flows from the university, as well as cost saving efforts by
the Subregional System.
The Canon Manor development, outside the City limits, also receives sewer
service from the City under a special agreement. Sewer service revenue from
Canon Manor is assumed to increase as the City's overall costs of providing
service increase.
Because the agreements covering service to both SSU and Canon Manor result
in charges that reflect the costs of providing service, the City's ratepayers do not
subsidize these special contract users.
• Subregional System Costs — The Subregional System costs paid by the City for
wastewater treatment and disposal services are comprised of two components.
These are operating and maintenance costs, and debt service costs related to
capital preservation and expansion. As noted earlier, Subregional System
operating and maintenance costs are assumed to remain unchanged in FY 11 -12
(relative to FY 10 -11), increase by 3 percent in FY 12 -13, and increase by 5
percent per year thereafter.
Each year the City is billed for Subregional operating and maintenance costs
based on the budget for the upcoming year and estimated flow volumes. At the
end of each year, reconciliation to actual costs and flow volumes occur. This
generally results in a refund back to the City, which has averaged about $400,000
over the past. seven years. Consistent with the practice and trend, an annual
refund in the amount of $400,000 is included in the operating fund as additional
revenue.
THE REED GROUP, INC. PAGE 20
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Annual Subregional System debt service costs to Rohnert Park are as scheduled,
and currently include about $2.85 million annually for preservation, and about
$877,000 annually for capacity expansion. City staff believes that a temporary
transfer of capacity from Santa Rosa to Rohnert Park may no longer be needed,
and that the City may be able to reduce the amount paid to the Subregional
System by about $550,000 annually. The financial plan analyses contained
herein assumes this reduction in Subregional System debt service costs
beginning in FY 11 -12. It should be noted, however, that this change has not
been approved by the City of Santa Rosa.
• Sewer Capacity Fees and Fee Revenue — The current sewer capacity fee for a
single family residential dwelling is $12,421. Other fee amounts apply to other
types of development. The financial plan assumes the fee amount remains
constant during the planning period. The fee is applied to new connections (see
growth assumption above) and the revenue from the fee accrues to the sewer
capacity .fee fund. Capacity fee revenue can be used for two purposes: (1) to
pay for facilities providing capacity to serve new development, and (2) to pay debt
service related to this capacity. Analysis of sewer capacity fees and the manner
in which projects needed to meet the needs of new development may be funded
is beyond the scope of this study. To the extent capacity fee revenue is available,
for purposes of this study capacity fee revenue is used solely to pay for the
expansion portion of Subregional System debt service owed by the City.
Because of the current economic climate and reduced capacity fee revenue, the
capacity fee fund may not have sufficient funds for annual Subregional System
expansion debt service costs. Any shortfall is shown in the financial plan model
as a negative balance in capacity fee fund, and does not affect the sewer rate
calculations. The City should review the status of the sewer capacity fees, and
consider updating the fees based on anticipated revenue needs.
• Public Facilities Financing Plan (PFFP) Fees and Fee Revenue — The City
collects PFFP fees from new development within the City for a variety of
infrastructure purposes. These revenues are accounted for in a separate fund of
the City (outside of the sewer utility). As described in further detail below, a
majority of the sewer debt issued by the City in 2005 was used to fund the sewer
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CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
interceptor outfall project, and a portion of that project benefits new development.
As a result, the financial plan uses PFFP revenue to pay 30.3 percent of this
annual debt service. This is shown in the financial plan model as a transfer into
the Operating Fund from the PFFP Fund.
Existing Long -Term Debt Obligations
In 2005, the City of Rohnert Park issued $13.0 million in Certificates of Participation
(COPs) to provide funding for needed capital improvements to the sewer system,
primarily the sewer interceptor outfall project. Annual principal and interest payments on
the COPs total nearly $820,000 per year. This is a relatively modest amountof long -term
debt for a sewer utility, and use of COPs is a common form of financing for sewer system
improvements.
Exhibit II-3 summarizes the annual debt service payment obligations related to the 2005
sewer revenue COPs during the planning period.
Exhibit 11.3
City of Rohnert Park
RY
Series 2005 Sewer System Revenue COPs
Principal
255,000
265,000
275,000
280,000
295,000
305,000
Interest.
559,604
551,129
542 074
532,386
522,20
511,518
Total
814,604
816,129
817,074
812,386
817,205
816,518
Remaining Balance
12,030,000
11,765,000
11,490,000
11,210,000
10,915,000
10,610,000
In addition to making annual debt service payments, the COPs require the City to meet
specified debt service coverage covenants (i.e., establish rates and other revenues at
levels that exceed annual debt service by specific ratios). Debt service coverage
requirements are a common obligation in COPs that provide security to lenders regarding
the City's ability to repay the debt. One coverage covenant requires the City to establish
rates and other revenues of the sewer system sufficient to provide net revenues (defined
as gross revenues less operating and maintenance expenses) equal to at least 120
percent of annual debt service. A second covenant requires that net revenues, exclusive
of sewer connection fees, equal or exceed 115 percent of annual debt service (COP
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CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
documents use the term "connection fees ", which is synonymous with "capacity fees ").
The coverage covenants are intended to provide a buffer of surplus funds for debt service
payments. For the purpose of these covenants, both the City's sewer capacity fees and
the transfers into the sewer Operating Fund from the City's PFFP Fund are considered
"connection fees ".
Exhibit II-4 provides a.calculation of debt service coverage, with and without capacity fee
revenue, for both FY 10 -11 and FY 11 -12. Current revenues are insufficient to cover
existing operating and maintenance costs, and result in negative coverage factors. The
coverage calculations shown for FY 11 -12 assume that the new sewer rate structure is
adopted as proposed.
Exhibit 11-4
City of Rohnert Park
sewer system ueot service
Gross Sewer System Revenues (2)
With Capacity/PFFP Fees (3)
Without Capacity/PFFP Fees
Operating and Maintenance Expense
Rohnert Park - Collection & Admin.
Subregional - Treatment & Disposal
Subregional - Debt Service (4)
Total Oper. & Maint. Expense
Net Sewer System Revenues
With Capacity/PFFP Fees
Without Capacity/PFFP Fees
Annual Debt Service
2005 Sewer System Revenue COPS
Debt Service Coverage
With Capacity/PFFP Fees (required minimum is 1.20)
Without Capacity/PFFP Fees (required minimum is 1.15)
uaicuiavons
FY 10 -11 FY 11 -12
$ 8,894,200 $ 12,070,200
$ 8,539,700 $ 11,715,200
$ 2,370,303 $ 2,443,000
$ 5,115,000 $ 5,120,000
$ 3,731,000 $ 3,166,000
$ 11,216,303 $ 10,729,000
$ (2,322,103) $ 1,341,200
$ (2,676,603) $ 986,200
$ 816,100 $ 817,000
(2.85) 1.64
(3.28) 1.21
Notes:
(1) Assumes proposed new sewer rate schedule is adopted and implemented.
(2) Includes revenue accruing to all sewer system funds.
(3) Sewer capacity fees are counted as connection fee revenue when received by the utility. PFFP fees are
counted as connection fee revenue when transferred into the sewer enterprise from the PFFP Fund.
(4) Subregional debt service is considered an O &M expense for coverage purposes, as it is not a direct
debt obligation of the City but a contractual obligation under the terms of the Subregional Agreement.
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CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
A description of the City's obligations with respect to the 2005 COPs are contained in the
Official Statement — $13,000,000 City of Rohnert Park Sewer System Revenue
Certificates of Participation, Series 2005 dated May 27, 2005, and related legal
documents, such as the Installment Purchase Agreement.
Since sewer rates were reduced following a November 2008 ballot initiative, the City has
made every required debt service payment. However, the City has not met the required
debt service coverage covenants in the COPs. Accordingly, meeting debt service
covenants is a factor in designing a new sewer rate structure. Continued failure to meet
these covenants can harm the City's credit rating, and make it more costly to borrow
money in the future. There is also the potential for costly and protracted litigation against
the City for failure to meet its contractual obligations.
According to the 2006 Public Facilities Financing Plan, 38.9 percent of the sewer
interceptor outfall project is the responsibility of new development. In addition, about 82
percent of the COP proceeds were used for the interceptor outfall project. As a result,
30.3 percent (38.9% of 82 %) of the annual debt service is the responsibility of new
development. The financial plan model includes PFFP fee revenue (transferred in from
the PFFP Fund) in the operating fund, which is then used to pay this portion of the annual
debt service on the 2005 COPs.
Capital Improvement Plan
The capital improvement plan (CIP) set forth in the financial plan draws upon information
in the City's 5 -year CIP for FY 09 -10 through FY 13-14. Because of the magnitude of the
operational and debt service requirements, and the resulting rates under the new rate
structure, it was determined that capital improvement needs should be secondary. As a
result, the financial plan model CIP was modified to reflect those projects that could be
implemented with the funding available either through existing reserves or through
revenues generated from rates needed for operational and debt service requirements.
Exhibit II -5 summarizes the capital improvement plan reflected in the financial plan
model. This plan differs from the City's 5 -year CIP for FY 09 -10 through FY 13 -14 in the
following ways:
THE REED GROUP, INC. PAGE 24
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit II -5
City of Rohnert Park
FY 09-10 FY 10-11 FY 11 -12 FY 12 -13 FY 1
SEWER SYSTEM CIP
Sewer Rehab. Old Pipeline to S. Rosa
WW -08
$ 150,000
$ - $ -
Sewer Pipeline Replacement
WW -10
$1,200,000
$1,200,000 $1,200,000 $1,200,000 $1,200,000
Eastside Sewer Project - Phase 2
WW-11
$
College Trunk Sewer Improvements
WW -13
$ 457,333
Bruce Avenue Sewer line Replacement
WW-14
$ 149,600
$ 950,400
Inflow /Infiltration Reduction Program
WW -15
$ -
$ -
$ 100,0001 $ 100,000 $ 100,000 $ 100,000
Sewer Pump Station Pony Pump
WW -16
$ -
$ 61,000• $ 339,000
Vehicles & Equipment (capital outlay)
168,500
168,000
100,000 100,000 100,000 100,000
Sewer System CIP Totals $ 925,433 $2,318,400 $1,461,000 $1,739,000 $1,400,000 $1,400,000
Sewer Capital Replacement Fund (w/ inflation) $ 925,000 $2,365,000 $1,535,000 $1,900,000 $1,591,000 $1,654,000
Sewer Capacity Fee Fund (120) (w/ inflation) $ 1 $ -
• Rehabilitation of Old Pipeline from Rohnert Park to Subregional System —
Construction of the sewer rehabilitation of the old pipeline from Rohnert Park to
the Subregional System treatment plant has been deferred to beyond the
planning period reflected in the financial plan. This project was estimated at
about $5 million and would be funded through a combination of rate revenues
and new development revenues. Neither sewer rate revenues nor sewer
capacity fee revenues are sufficient to fund this project within the planning period.
• The Eastside Sewer Project - Phase 2 has been excluded from the financial plan
pending funding /financing from new development. This project has an estimated
cost of $11.2 million, and is not the responsibility of existing ratepayers.
• The inflow /Infiltration reduction program was budgeted at $100,000 per year
beginning in FY 10 -11. For purposes of the financial plan analysis, the ongoing
project is assumed to begin in FY 11 -12. The City had previously budgeted
spending $500,000 per year on this rehabilitation activity.
• The sewer pump station pony pump project is assumed to be delayed by 1 year
(from FY 10 -11 to FY 11 -12) from the schedule included in the 5 -year CIP.
• Ongoing rehabilitation and replacement projects for pipeline replacements,
inflow /infiltration reduction, and vehicles and equipment are shown to continue
THE REED GROUP, INC. PAGE 25
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
beyond the CIP planning horizon of FY 13-14 and through the financial plan's
planning horizon of FY 14-15.
The average annual capital program expenditure over the five -year planning period, as
reflected in the financial plan, is about $1.8 million, including inflation.
It is estimated that the combination of available reserves (about $3.4 million in the capital
replacement fund), as well as revenues under the new rate structure, would be sufficient
to fund the capital projects as outlined in Exhibit II-4. Funding under the new rate
structure, as a transfer to the replacement fund, is as follows: $0 in FY 10-11, $1,400,000
in FY 11 -12, and $1,500,000 per year thereafter. The rates proposed under the new
sewer rate structure may not be sufficient to fully support the future capital rehabilitation
and replacement needs of the sewer system. Because the financial plan does not fully
fund the planned CIP, the rates proposed under the new rate structure are, in effect,
below the true cost of providing and maintaining service to customers over the long-term.
It is recommended that the City develop a comprehensive capital improvement plan
based on system condition and need, and then consider how best to provide the funding
to meet that need. The City's Sewer System Management Plan (SSMP), updated in
2009, provides a description of the regulatory requirements, as well as goals for properly
managing, operating, and maintaining the sewer collection system. These requirements
include establishing a capital improvement program to address hydraulic deficiencies,
reduce infiltration and inflow, reduce the risk of overflows, and address other system
needs.
The manner in which new facilities needed to meet the needs of new development will be
funded was beyond the scope of this study. The study focused solely on meeting sewer
system costs that are the responsibility of existing ratepayers.
Sewer System Financial Plan
The sewer system financial plan is an annual cash flow model that reflects beginning
balances, revenues and transfers in, expenditures and transfers out, and ending
balances for each fund each year of the planning period. The financial plan includes
actual FY 09 -10 operating revenues and expenditures (for information purposes) from
THE REED GROUP, INC. PAGE 26
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
financial reports provided by the City, and then looks forward based on the budget for FY
10 -11. Future year operating and maintenance expenses are based on the FY 10-11
budget with adjustments for inflation and growth, as previously described
The sewer system financial plan model is presented in Exhibit II -6. The financial plan
analysis results in recommendations for a five -year rate plan, which includes
implementation of a new sewer rate structure (described in Section 111), as well as
phased -in adjustments to the new sewer rates during the planning period to meet the
utility's financial needs and obligations. The first phase of the rate plan provides for a 25
percent overall sewer rate revenue increase in July 2011, as the new sewer rate structure
is implemented. This would be followed by a 25 percent adjustment to the new rates in.
January 2012, and additional rate increases of 3 percent in January 2013, January 2014,
and January 2015 to meet the utility's financial needs throughout the planning period.
Current Situation
The cash balance in the sewer utility as of June 30, 2010 was about $11.32 million. The
distribution of this total across the three sewer funds is summarized below. The capital
replacement fund includes about $2.6 million in remaining debt proceeds from the
issuance of COPs in 2005. The additional $800,000 in the replacement fund has been
assigned to specific capital projects. Within the financial planning model, fund balances
are calculated for the end of each year based on annual revenues, expenditures, and
transfers using the information below as the starting point.
Sewer Utility (as of June 30, 2010)
Operating Fund
$6,390,000
Capital Replacement Fund
$3,400,000
Capacity Fee Fund
$1.530.000
Total Sewer
$11,320,000
THE REED GROUP, INC. PAGE 27
CITY OF ROHNERT PARK
Exhibit 114
City of Rohnert Park
Sewer Svatam Financial Plan
SEWER FINANCIAL PLAN AND RATE STUDY
Notes:
(1) The percentage shown for July 2011 reflects the overall increase in sewer rate revenue resulting from the first phase in
implementing the new rate plan. Subsequent percentages reflect the rate adjustments in subsquent phases of the plan
necessary to meet annual revenue needs. Annual rate revenue growth is also affected by growth in the customer base,
as well as changes in customer demand.
THE REED GROUP, INC. PAGE 28
FY 09-10
FY 10-11
FY 11 -12
FY 12.13
FY 13.14
FY 14-15
See Note (1) Below >
25%
250/6
3.0%
3.0%
3.0%
July 2011
Jan. 2012
Jan. 2013
Jan. 2014
Jan. 2015
SEWER OPERATING FUND
Beginning Balance
8,461,709
6,393,238
4,008,300
3,892,400
4,263,300
4,690,200
Revenues
Sewer User Charges `
7,319,383
7,319,000
10,490,000
11,682,000
12,128,000
12,617,000
Sonoma State University
668,431
668,000
668,000
668,000
668,000
668,000
Canon Manor
46,004
46,000
49,000
52,000
54,000
58,000
Penalties
83,283
50,000
50,000
50,000
50,000
50,000
Refunds from S Rosa
468,242`
400,000
400,000
400,000
400,000
400,000
Interest Earnings
93,728
32,000
40,100
38,900
63,900
70,400
Transfer from Sewer Cap. Fee Fund
1,085,354
877,000
877,000
877,000
877,000
1,094,000
Transfer from PFFP Fund
255,500
256,000
254,000
256,000
256,000
Total Revenues
9,764,425
9,647,500
12,830,100
14,021,900
14,496,900
15,213,400
Expenditures
Personnel
503,190
686,643
707,000
728,000
750,000
773,000
Administration
75,052
185,660
191,000
197,000
203,000
209,000
Operations
94,132
76,500
79,000
82,000
85,000
88,000
Maintenance
209,710
275,500
284,000
294,000
306,000
318,000
Laguna WWTP - O &M
4,628,412
5,115,000
5,120,000
5,300,000
5,621,000
5,961,000
Laguna WWTP - DS Preservation
3,197,575
2,854,000
2,289,000
2,637,000
2,637,000
2,983,000
Laguna WWTP - DS Expansion
1,085,354
877,000
877,000
877,000
877,000
1,094,000
Transfers Out
General Fund Recharge
930,400`
900,000`
928.000
961,000
1,000,000
1,040,000
Employee Retiree Medical Cost
108,332`
246,000`
254,000
263,000
274,000
285,000
2005 COP Debt Service
814,604`
816.100`
817,000
812,000
817,000
817,000
Capital Replac. Fund Transfer
186,135`
-
1,400,000
1,500,000
1,500,000
1,500,000
Total Expenditures
11,832,896
12,032,403
12,946,000
13,651,000
14,070,000
15,068,000
Ending Balance
6,3!3,238
4,008,300
3,892,400
4 63 300
4,690200
41833,600
Operating Reserve (33 %)
3,843,000
3,971,000
3,810,000
4,010,000
4,148,000
4,477,000
Available Balance
2,550,238
37,300
82,400
253,300
542,200
358,600
DS Coverage (min. =1.20 w/ CFs)
(2.64)
(2.85)
.1.64
2.88
3.57
2.98
DS Coverage (min. =1.15 w/o CFs)
(2.64)
(3.28)
1.21
1.92
1.98
1.37
SEWER CAPITAL REPLACEMENT FUND
BegNudngBalance
3,396,081
1,048,100
923,600
532,800
449,800
Revenues
Interest Earnings
17,000
10,500
9,200
8,000
6,700
Transfer In From Sewer Oper. Fund
-
1,400,000
1,500,000
1,500,000
1,500,000
Total Revenues
17,000
1,410,500
1,509,200
1,508,000
1,506,700
Capita! Project Expenditures
Rehab. /Upgrade Projects
2,365,000
1,535,000
1,900,000
1,591,000
1,654,000
Total Expenditures
2,365,000
1,535,000
1,900,000
1,591,000
1,654,000
ending Balance
1,048,100
923,600
R1800
440,000
302,500
SEWER CAPACITY FEE FUND
Beginning Balance
1,530,317
760,000
(10,400)
(365,400)
(199,400)
Revenues
Sewer Capacity Fee Revenue
99,000
99,000
522,000
1,043,000
1,056,000
Interest Earnings
7,700
7,600
-
-
-
Total Revenues
106,700
106,600
522,000
1,043,000
1,056,000
Capital Project Expendfdnes
Expansion Projects
-
-
-
-
-
Trans. to Oper. Fund - Subreg. Expan. DS
877,000
877,000
877,000
877,000
1,094,000
Total Expenditures
877,000
877,000
877,000
877,000
1,094,000
Ending Balance
760,000
10,400
365,400
199 400
237,400
Notes:
(1) The percentage shown for July 2011 reflects the overall increase in sewer rate revenue resulting from the first phase in
implementing the new rate plan. Subsequent percentages reflect the rate adjustments in subsquent phases of the plan
necessary to meet annual revenue needs. Annual rate revenue growth is also affected by growth in the customer base,
as well as changes in customer demand.
THE REED GROUP, INC. PAGE 28
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
By the end of FY 10 -11, the sewer operating fund is estimated to only have a balance of
about $4.0 million, or just $37,000 more than the recommended target operating reserve
minimum. This estimate is based on the information and assumptions used in the
financial analyses, as previously described. This deficit situation is clearly unsustainable.
Sewer System Conclusions and Recommendations
Should the City continue to operate the sewer system without an increase in revenues
the utility could exhaust the operating fund in FY 1.1 -12 (most likely in early 2012).
Remaining proceeds from the issuance of COPs in 2005, as well as capacity fee revenue
within the capacity fee fund, cannot be used for sewer operations. When.the operating
fund becomes depleted, utility operations could face dire consequences. The implication
of that potential event is beyond the scope of this study.
The financial plan was used to design a new rate structure that would reverse the current
deficit situation and bring the sewer utility to a point of financially stable operations, thus
ensuring health, safety, and financial integrity for the utility, the City, and its residents.
The. requirements of ongoing operation and maintenance, as well as debt obligations,
were the controlling factors. Capital program needs and reserve requirements were
viewed as secondary.
While initial analyses suggested that the new rate structure would need to provide for an
immediate rate revenue increase of about 65 percent to provide financial stability, upon
review certain assumptions were modified. In addition, City staff suggested reducing
payments to the Subregional System for treatment capacity by about $555,000 per year
(terminating a transfer of capacity from Santa Rosa). These and other changes allow for
a phasing of the new rate plan and a reduction in the overall magnitude of the required
revenue increase. In order to meet the financial needs of the sewer utility, as well as
soften the potential burden on ratepayers, a phased implementation of the new sewer
rate plan is recommended.
The following recommendations are presented for the City's consideration with regards to
meeting the ongoing financial needs of the sewer utility:
THE REED GROUP, INC. PAGE 29
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
■ A new sewer rate structure, described in Section III of the report, and a new rate
plan based on that structure, are recommended that will increase overall rate
revenue by 25 percent in July 2011, followed by subsequent rate increases of 25
percent in January 2012, and 3 percent in January of 2013, 2014, and 2015 to
eliminate the current financial deficit, return the utility to financial stability, and
meet existing debt service obligations.
■ The City should closely monitor sewer revenues and expenses. While estimates
and assumptions used in the analyses are believed reasonable, there is no
guarantee that actual revenues and expenses will be as estimated herein, and
adjustments.to the new rate structure may be necessary. Of particular concern is
the sensitivity of sewer rate revenues to changes in customer demands. This
issue is addressed in greater detail in Section III of this report, and the new rate
structure includes measures to help moderate the current potential for revenue
volatility. In addition, the City has limited ability to influence Subregional System
costs, and the Subregional System operates in a heavily regulated environment.
Because Subregional System costs comprise a majority of the sewer utility's
costs, the need to adjust the new rates may be largely dictated by outside factors.
■ The City should use remaining debt proceeds on planned capital projects, and
then plan to support planned capital program needs with a portion of ongoing
sewer rate revenues. Further rate analyses, as well as adjustments to the new
rate structure, may be needed to fund the utility's long -term capital replacement
and rehabilitation needs. Such an undertaking should be considered following a
comprehensive review of the replacement and rehabilitation needs of the utility.
■ The City should seek to maintain the minimum operating fund balance equal to
33 percent of annual operating and maintenance costs, including debt service, as
a source of working capital, for unanticipated expenditures, and to counter the
affects of revenue volatility.
■ As is current practice, sewer capacity fee revenue should be used to help pay for
debt service payments to the Subregional System for capacity expansion. Also, a
portion of PFFP fee revenue and /or reserves should be used to pay 30.3 percent
of annual debt service payments related to the City's 2005 sewer revenue COPs.
THE REED GROUP, INC. PAGE 30
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
An evaluation of the adequacy of these funding sources is beyond the scope of
this study, and this may be an area for further study by the City.
In conclusion, based on financial plan assumptions and estimates, the sewer utility is
expected to be financially stable if the proposed new sewer rate structure and the new
five -year rate plan are adopted and implemented. While the assumptions and
information used in the preparation of the sewer financial plan are based on expert
analysis and reasoning, as well as staff review and concurrence, no assurances can be
made that actual financial results will be as presented herein. City staff should continue
to monitor the financial condition of the sewer utility, as Well as changes in wastewater
demands and related rate revenues, to ensure that the utility moves forward on a sound
financial course.
THE REED GROUP, INC. I PAGE 31
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
This section of the report describes and presents recommendations for a new sewer rate
structure for implementation in July 2011. The new rate structure, along with the
proposed new rate plan based on that structure would provide sufficient revenues for the
utility's ongoing operations and debt obligations, as well as support the capital
improvement program and maintain prudent reserves, based on cost of service and other
rate setting objectives.
Annual sewer rate revenue requirements were presented in Section II of the report as a
result of.the development of the 5-year financial plan. The annual sewer rate revenue
requirement for FY 11 -12 was used to perform rate analyses and to develop the new
sewer rate structure presented herein. The sewer rate calculations presented in the
exhibits that follow relate to the sewer rate revenues needed beginning in July 2011,
which reflects a 25 percent increase in overall rate revenue.
The new sewer rate schedule presented herein includes a new structure to improve the
proportionate distribution of costs across customer classes, reflect the cost of providing
service, and help improve revenue stability. The analyses and explanations provided
herein are also intended to explain to customers the need for a new rate structure to
address urgent and fundamental problems with the sewer system's current financial
structure.
Existing Sewer Rate Structure
Upon review of the current rate structure, four weaknesses were identified. These
include:
• With very low service charges ($1.08 per month for each account) nearly 99
percent of rate revenue is tied to water usage patterns, with only about 1 percent
of rate revenue derived from fixed service charges. This results in unnecessary
revenue volatility and financial risk.
• All accounts pay the same monthly service charge, regardless of size of
connection or use of the system. The fixed charge appears to represent fixed
THE REED GROUP, INC. PAGE 32
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
customer costs (e.g., utility billing), but does not -include fixed capacity costs.
Service charges should reflect, in part, fixed capacity-related costs of sewer
service. This standard utility rate setting practice improves the proportionate
distribution of capacity - related costs across customer classes and to customers
within each class.
• Current usage -based rates for non - residential accounts do not reflect the full
variety of business types, and the different strength characteristics that are found
among different types of businesses. Usage rates should reflect the strength
characteristics of different types of users. An approach that categorizes non-
residential customers into low, medium, and high strength categories is proposed
as a way to more equitably assign wastewater treatment costs to system
customers.
• Sewer rates for schools are based on the number of students and staff within
each school. This approach may have been necessary before water meters were
installed on .all accounts, but is not necessary at this time. Schools should be
included within the low strength category of non - residential users.
Because the existing rates have these weaknesses, as well as provide insufficient
revenues for the utility, a new sewer rate is proposed, rather than a simple increase in the
existing rates.
Exhibit III -1, on the following page, summarizes the current sewer rates of the City's
sewer utility. Sewer rates were last changed in December 2008 with a reduction of about
30 percent pursuant to a ballot initiative in November 2008.
The City also provides sewer services to the Sonoma State. University (SSU). The
amount paid by SSU for sewer service is determined under a special agreement and is
related to the volume of waste discharged, the costs of treatment and disposal provided
by the Subregional System, and a portion of the City's collection system costs. The City
also provides service to the Canon Manor development located outside the City limits.
Charges to Canon Manor are also determined under a separate arrangement based on
cost of service. The specific arrangements with and charges to these customers were
beyond the scope of this study.
THE REED GROUP, INC. PAGE 33
CITY OF ROHNERT PARK
Exhibit 111.1
City of Rohnert Park
Current Sewer Rates
SEWER FINANCIAL PLAN AND RATE STUDY
Notes:
(1) Residential sewer flow is based on the lower of actual monthly water use or the average water use
during the prior December - February period. Non - residential sewer flow is assumed equal to
monthly water usage.
(2) Rate for each school based on number of pupils as determined by average daily
attendance (ADA), plus faculty and all other personnel.
New Rate Structure Objectives
The development of recommendations for a new sewer rate structure has been guided
by several objectives. These objectives were reviewed with City staff and include:
• Rates should generate sufficient revenues to meet the utility's financial obligations
related to operations, debt service, and the capital improvement program, as
reflected in the multi -year financial plan
• Rates should reflect the cost of providing service by proportionately allocating
costs to each customer class; and
• Rates should improve revenue stability.
The City also has policies and programs to encourage water conservation, and the new
sewer rate structure helps to achieve this objective as well. These objectives guided the
review of and recommendations on sewer rates and rate structures. It is hoped that the
THE REED GROUP, INC. PAGE 34
Monthly
Service
Charge
Flow Charge
1
Sewer Charges
Single Family Residential
$
1.08
$ 7.30 per 1,000 gal.
Multi- Family and Mobile Home Parks
$
1.08
$ 7.30 per 1,000 gal.
Churches
$
1.08
$ 10.00 per 1,000 gal.
Public Libraries
$
1.08
$ 10.00 per 1,000 gal.
Bakery & Restaurants
$
1.08
$ 12.70 per 1,000 gal.
Industrial
$
1.08
$ 9.60 per 1,000 gal.
All Other
$
1.08
$ 10.00 per 1,000 gal.
Schools (2)
Elementary Schools
$
9.16
per pupil (ADA) + staff
Junior High Schools
$
12.18
per pupil (ADA) + staff
Senior High Schools
$
16.76
per pupil (ADA) + staff
Notes:
(1) Residential sewer flow is based on the lower of actual monthly water use or the average water use
during the prior December - February period. Non - residential sewer flow is assumed equal to
monthly water usage.
(2) Rate for each school based on number of pupils as determined by average daily
attendance (ADA), plus faculty and all other personnel.
New Rate Structure Objectives
The development of recommendations for a new sewer rate structure has been guided
by several objectives. These objectives were reviewed with City staff and include:
• Rates should generate sufficient revenues to meet the utility's financial obligations
related to operations, debt service, and the capital improvement program, as
reflected in the multi -year financial plan
• Rates should reflect the cost of providing service by proportionately allocating
costs to each customer class; and
• Rates should improve revenue stability.
The City also has policies and programs to encourage water conservation, and the new
sewer rate structure helps to achieve this objective as well. These objectives guided the
review of and recommendations on sewer rates and rate structures. It is hoped that the
THE REED GROUP, INC. PAGE 34
CITY OF ROHNERT
SEINER FINANCIAL PLAN AND RATE STUDY
following analyses and explanations assist customers in understanding the need to adopt
a new rate structure td address urgent and fundamental deficiencies in the City's sewer
system financial structure, as described in Section II.
Customer Account Data and Wastewater Flow and Loading Estimates
The calculations supporting the new sewer rate structure are based on a number of
factors related to the City's customers and the wastewater they generate. Factors
include the number of customers, customer classes, water usage and estimated
wastewater flows, meter size, and strength characteristics of wastewater as determined
by biochemical oxygen demand (BOD) and total suspended solids (TSS). Exhibit 111 -2
summarizes customer account and water usage data obtained from the City's utility billing
system for the period from September 2009 through August 2010, as well as estimates of
resulting wastewater flow and loading characteristics.
Water Use as an Estimator of Wastewater Flow
No utility is able to measure the actual flow discharged into the sewer system by each
individual customer. The material content (loading) of wastewater, and the challenges
with metering wastewater make this impractical. Instead, wastewater flows are estimated
based on water usage characteristics.
Residential wastewater flows are typically estimates by considering winter water usage
patterns. The City currently averages residential water usage (single family and multi-
family) for billing cycles covering the months of December, January, and February.
These months are chosen because it is the period when irrigation demands are minimal
(or non - existent) and it is reasonable to assume that water entering the home will end up
in the sewer system. Using winter water usage as a proxy for sewer flow is a standard
technical used in sewer rate setting. Beyond this, the City uses the winter average
monthly water usage as a sewer flow cap. That is, if a customer's actual monthly usage
is less than the winter average, then the lower amount is used for determining sewer
usage.
THE REED GROUP, INC. PAGE 35
M
.X
rn
m
0
t7
0
c
v
z
ExhM {ti -2
City of Rohnert Park
Sewer customer Account Data and_EsUmated Sewer Flows and Loadings
Estimated
200
112,343
400
Single Family
7,537
No. of No. of Anna Water Rate of Annual
Estimated
SOD
Annual
TSS
Annual
Accts. ESFDs Usage Return Sewer Flow
Annual
Strengths
BOD
Strength
TSS
Customer Class 1 2r 1 4 3
Sewer Flow
5:
Loading
5
Loading
1,000 Gal. 1,000 Gal.
MG
mg1l
Ibs
mg /l
Ibs
Single Fan►ily Residential
200
112,343
400
Single Family
7,537
7,540
603,200
70%
Multi- Family and Non
- Residential
Multi- Family
405
2,455
451,179
83%
Low Strength
300
1,160
67,352
100%
Medium Strength
77
334
60,318
100%
High Strength
30
105
9,603
100%
Totals
8,349
11,595
1,191,653
422,810 422.81
373,205
67,352
60,318
9,603
933,288
373.21
67.35
60.32
9.60
933.29
175 617,091
r
175 544,693
200 112,343
400 201,221
1,000 80,092
200 1,555,440
175 617,091 1
175 544,693
200
112,343
400
201,221
600
48,055
196 1,523,403'
Notes:
1) From City's billing system for Sept. 200.9 thru Aug. 2010.
(2) ESFDs = equivalent single family dwellings, based on meter capacity for multi- family and non - residential accounts.
(3) Based on lesser of average winter water use or actual monthly use for residential accounts, and total annual water use for non - residential accounts.
(4) Estimate of percent of water usage becoming sewer flow.
(5) Assigned for defined customer Gasses based on compiled industry data and SWRCB guidelines.
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CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Average wastewater flow for single family dwellings during the most recent winter period
available (December 2009 through February 2010) was about 4.7 thousand gallons (tg)
per month (about 156 gpd).
Non - residential sewer flows are based on actual monthly water usage through domestic
water connections (for indoor water usage). Most irrigation within the City is separately
metered through irrigation meters. As a result, it is reasonable to assume that water
usage through water meters on domestic connections enters the sewer system. The City
allows any customer that irrigates off of a domestic water connection to install a new
irrigation connection for purposes of avoiding excess sewer billing.
These existing practices for estimates wastewater flow volumes for each customer are
reasonable and are continued with the new sewer rates proposed in this report.
Wastewater Loading
The cost of treating wastewater is in direct relation to the loading characteristics of the
waste stream. The entire wastewater treatment process is operated to remove unwanted
constituents from wastewater. The Subregional Agreement, in Section 13.132b,
specifies that operation and maintenance costs of treatment and disposal. are to be
allocated to each member agency on the basis of the flow volume, BOD, and TSS.
Through ongoing sampling of the wastewater received from each member agency over
many years, it was found that the wastewater concentrations of BOD and TSS from each
member agency were effectively the same. As a result, operation and maintenance costs
are allocated based on each agency's proportionate share of flow volume coming into the
Subregional treatment plant. Because the loading concentrations are the same, the
proportioning of cost based on flow also achieves the requirement that costs also be
allocated based on BOD and TSS.
Individual customers of the sewer system contribute wastewater with varying
concentrations of BOD and TSS. The proportioning of costs to customers in relation to
cost of service therefore requires that customers generating wastewater of lower or
higher strength be charged in relation to the strength characteristics. The City's current
sewer rates only achieves this in a limited way, with bakeries and restaurants assigned a
THE REED GROUP, INC. PAGE 37
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
higher rate and industrial customers a lower rate, relative to all other non - residential
accounts. With the new sewer rates it is proposed that a more robust segregation of non-
residential accounts by strength characteristics be achieved.
During the rate study, City staff reviewed all non - residential customers and, with our
assistance, all were assigned into a low, medium, or high strength category based on
published industry data on typical loading characteristics for various types of businesses.
Appendix B, at the end of this report, includes of compilation of industry data that aided
this process, and can be used as a guideline in assigning customers to appropriate
strength categories in the future. Examples of how various types of businesses have
been categorized for sewer rate purposes are summarized below (the list is not all
inclusive). The assignment of customers to appropriate strength categories should be
made administratively by Public Works staff.
Low Strength
Medium Strength
High Strength
Bar w/o food
Auto repair facilities
Bakery
Beauty salon
Auto service stations
Bar w/ food
Car wash
Commercial laundry
Butcher
Church
Hotel /motel w/ restaurant
Grocery w/ bakery, butcher,
Convalescent home
Mixed use, incl. restaurants
or food waste grinder
Dry cleaner
Restaurant w/ grease
Mortuary
Health club /spa
interceptor
Restaurant w/o grease
Hospital
Retail w/ food service
interceptor
Hotel /motel w/o restaurant
Laundromat
Manufacturing w/o proc. disch.
Office building
Publictmunicipal building
Retail stores
Schools
The percentage of non - residential accounts assigned to the low, medium, and high
strength categories is about 74 percent, 19 percent, and 7 percent, respectively.
Meter Capacity for Allocating Capacity Costs
As described in greater detail later in this section, meter size is also a factor in the
proposed rates under the new rate structure. The size of the water meter reflects the
potential demand a customer can place on both water and sewer systems. Meter
THE REED GROUP, INC. PAGE 38
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
capacity (hydraulic flow capacity) is frequently used as a basis for proportionately
allocating capacity- related costs to customers of both water and sewer utilities. Hydraulic
capacity factors were determined based on meter capacity information published by the
American Water Works Association. As an example, a 3" meter has ten times the
capacity of a standard %" residential meter. Therefore, a 3" meter is considered equal to
ten equivalent single family dwellings (ESFDs) for rate setting purposes. The conversion
of multi - family and non - residential accounts into ESFDs is also presented in Exhibit III-2,
based on the number of accounts of various meter sizes, as well as published hydraulic
capacity factors.
Calculation of the New Rates
There are three steps that were used to determine the proposed rates under the new rate
structure. These were:
• Determine annual overall sewer rate revenue requirements;
■ Analyze the relative cost of providing service and allocate costs to each customer
class; and
■ Design sewer rates to recover costs proportionately from customers in each
customer class.
Sewer Rate Revenue Requirements
The 5 -year financial plan was used to identify the overall revenue needs for each fiscal
year of the five -year planning period. The financial plan shows overall sewer rate
revenue needs in FY 11 -12 of $10.49 million (see Exhibit II -6), with the amount growing
slightly each subsequent year. However, as described previously, the new rate plan
would be phased -in in a five -step process, with the first two phases occurring in FY 11-
12. With this proposal, the first phase would be implemented in July 2011 (beginning of
the fiscal year) to partially address revenue needs, and the second phase would occur in
January 2012 (midway through the fiscal year). Combined, these two phases would
meet the full revenue needs of the sewer utility in FY 11 -12. The overall revenue
requirement for the new rate structure, beginning in July 2011, is $9.154 million. This is
THE REED GROUP, INC. PAGE 39
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
the estimated amount of annual revenue that the new rate structure would generate if it
were in effect for a 12 -month period.
Cost of Service Analysis
Once the annual overall rate revenue requirement is determined, the next step in the rate
setting process is to evaluate the cost of providing service. Sewer rate calculations
contained herein are intended. to generate the level of revenue commensurate with the
revenue requirement from the City's sewer service customers. This includes the City's
general sewer customers, but excludes SSU and Canon Manor. The manner in which
each customer is responsible for the sewer utility's costs is the subject of the cost of
service analysis.
To develop equitable sewer rates, the revenue requirement is proportionately allocated to
various customer classifications according to the services provided and the demands
placed on the sewer system. A majority of sewer costs have been allocated to customer
classifications on the basis of estimated wastewater flows, with a portion of costs also
allocated based on BOD and TSS loading factors. This information was summarized in
Exhibit III -2 for each customer class.
In order to improve revenue stability, the new rates structure would generate about 15
percent of rate revenue from service charges (rather than the current 1 percent). This will
result in usage charges generating about 85 percent of sewer rate revenues. As much
as 50 percent of the sewer utility's costs are fixed (i.e., do not vary with usage), but it is
not unreasonable to recover fixed costs on the basis of system usage. As an example,
the cost of a treatment operator is generally considered a fixed cost, however, it is
reasonable to recover this cost on the basis of use. With these considerations in mind, it
is proposed that the City adopt a new sewer rate structure under which 15 percent of the
rate revenue is recovered from fixed service charges.
Exhibit III -3 summarizes how the new rate structure would allocate the revenue
requirement for July 2011 to fixed charges as well as to flow, BOD, and TSS components
that end up in usage charges.
THE REED GROUP, INC. PAGE 40
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Exhibit III -3
City of Rohnert Park
Determination of Unit Costs
Notes:
(1) Allocation of the overall revenue requirement includes 156/o to fixed charges to improve revenue stability, with the remaining 85% being
allocated between collection and treatment, with 32% to collection and 68% to treatment (32% of 85% is 27 %, and 68% of 85% is 58 %).
(2) Allocation of treatment costs is based on review of Subregional System budget by activity for FY 10 -11.
(3) Annual quantities obtained from Exhibit III -2.
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Allocation of
Parameter
Annual Cost
Total
Revenue
Allocation
Allocated to
Annual
Unit Cost
Requirement
Percentages
Each
Quantities
for Each
Cost Category
1)
2
Parameter
3
Parameter
Fixed Allocation for O &M and Capital
15%
Flow (MG)
100%
$
1,373,100
933.29
MG
$ 1,471.25 /MG
Variable Allocation Costs for Collection
27%
Flow (MG)
100%
$
2,513,386
933.29
MG
$ 2,693.04 /MG
Variable Allocation Costs for Treatment
58%
Flow (MG)
50%
$
2,633,757
933.29
MG
$ 2,822.02 /MG
BOD (Ibs)
25%
$
1,316,878
1,555,440
Ibs
$ 0.847 /lb
TSS (Ibs)
25%
$
1,316,878
1,523,403
Ibs
$ 0.864 /lb
Total Annual Overall Revenue Requirement for July 2011 Rates
$
9,154,000
Notes:
(1) Allocation of the overall revenue requirement includes 156/o to fixed charges to improve revenue stability, with the remaining 85% being
allocated between collection and treatment, with 32% to collection and 68% to treatment (32% of 85% is 27 %, and 68% of 85% is 58 %).
(2) Allocation of treatment costs is based on review of Subregional System budget by activity for FY 10 -11.
(3) Annual quantities obtained from Exhibit III -2.
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CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
A review of sewer operation and maintenance costs (City collection and administration
and Subregional System treatment and disposal) indicates that about 68 percent of these
costs are related to the Subregional System, and about 32 percent to the City's collection
and administration (this analysis excludes Subregional System debt service paid by the
City). Once total costs are allocated, unit costs were determined by dividing the total cost
for each component by the number of units identified in Exhibit III-2. These unit costs are
the basis for then assigning costs to customer classes.
The cost of service analysis for sewer utilities is more complicated than for water utilities
in that treatment costs are separated from collection system costs. Collection system
costs are allocated entirely on the basis of flow, whereas treatment costs are allocated on
the basis of flow, BOD, and TSS. The allocation of treatment costs shown in Exhibit 111-3
were derived based on a review of the Subregional System operation and maintenance
budget for FY 10 -11, with costs allocated between flow, BOD, and TSS. This review
resulted in an allocation of 50 percent to flow, 25 percent to BOD, and 25 percent to TSS.
Unit costs are applied to the annual wastewater flows, as well as BOD and TSS loadings
associated with each customer class to arrive at the allocation of total costs to each
customer class. Exhibit III-4 presents the allocation of overall costs to each user class,
and uses information brought forward from Exhibits 111-2 and III -3.
Exhibit 111 -5 presents the proposed sewer rates for July 2011 under the new sewer rate
structure for each customer class. Rates for single family residential customers include a
fixed service charge for each dwelling unit, plus a .usage charge to be applied to the
lesser of average monthly winter water usage, or actual monthly water usage. Multi-
family and non - residential (low, medium, and high) customers are subject to a service
charge based on the size of the water meter. In this calculation, 5 percent of allocated
fixed costs are distributed equally to each customer (reflecting fixed customer costs) and
95 percent of allocated fixed costs are distributed proportionately to each customer based
on ESFDs (reflecting fixed capacity costs). Sewer usage charges for multimfamily
customers are determined the same way as single family customers. That is, based on
the lesser of average monthly winter water usage or actual monthly water usage. Non-
residential sewer usage charges are determined based on actual monthly water usage.
THE REED GROUP, INC. PAGE 42
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Exhibit III -4
City of Rohnert Park
of Overall Sewer Costs to User Classifications
Fixed Costs I Usage Based Costs
O&M and CaD. I Collection I Treatment
No. of
Accts.
Customer Class
$
Flow
Unit Cost =
1,471.25
/MG
$
Flow
Unit Cost =
2,693.04
/MG
$
Flow
Unit Cost =
2,822.02
/MG
$
BOD
Unit Cost =
0.847
/lb
$
TSS
Unit Cost =
0.864
/lb
Allocation
of Total
Costs
Single Family Residential
7,537
Single Family
$
622,059
$
1,138,645
$
1,193,177
$
522,446
$
533,433
$
4,009,759
Multi - Family and Non - Residential
405
Multi - Family
$
549,078
$
1,005,058
$
1,053,192
$
461,152
$
470,850
$
3,539,330
300
Low Strength
$
99,092
$
181,382
$
190,069
$
95,113
$
97,113
$
662,769
77
Medium Strength
$
88,743
$
162,439
$
170,219
$
170,359
$
173,942
$
765,702
30
High Strength
$
14,129
$
25,862
$
27,101
$
67,808
$
41,540
$
176,440
$
1,373,100
$
2,513,386
$
2,633,757
$
1,316,878
$
1,316,878
$
9,154,000
8,349 Totals
Notes
(1) Unit costs at the top of each column, and obtained from Exhibit III -3, are multiplied by the sewer flow, BOD loading, or TSS loading
for each customer class from Exhibit III -2.
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Exhibit III -5
City of Rohnert Park
ueterminanon Ot t'roposea July zu77 Sewer Kates (New Kate Structure)
No. of
ESFDs
Customer Class
Estimated
Annual
Sewer Flow
BOD
Strength
TSS
Strength
Monthly
Fixed
Charge 1
Usage
Rate 2
Fixed
Charge
Revenue
Usage
Charge
Revenue
Total
Annual
Revenue
1,000 gal.
mg /l
mg /I
$ /DU
$ /gal.
Single Family Residential
7,540
Single Family
422,810
175
175
$ 6.88
$ 0.00801
$
622,059
$ 3,387,701
$ 4,009,759
Multi- Family and Non - Residential
2,455
Multi - Family
373,205
175
175
$ 0.00801
$
549,078
$ 2,990,252
$ 3,539,330
1,160
Low Strength
67,352
200
200
See
$ 0.00837
$
99,092
$ 563,677
$ 662,769
334
Medium Strength
60,318
400
400
Below
$ 0.01122
$
88,743
$ 676,959
$ 765,702
105
High Strength
9,603
1,000
600
$ 0.01690
$
14,129
$ 162,311
$ 176,440
11,595
Totals
933,288
$ 1,373,100
$ 7,780,900
$ 9,154,000
Notes:
(1) The single family service charge ($ /DU) is calculated by dividing the allocated single family fixed charge cost by the number of dwelling units.
The multi - family and non - residential service charges are calculated for each meter size based on the number of ESFDs (see text of report).
(2) Sewer usage rates for residential customers are to be applied to the lesser of the average monthly winter water usage or actual monthly usage,
and the rates for non - residential customers (low, medium, and high) are to be applied to each gallon of actual monthly water usage.
Multi- Family and Non - Residential
Fixed Service Charges
($ /month)
Up to 3/4" Mtr. $ 18.52
1" Mtr. $ 28.34
1 1/2" Mtr. $ 52.68
2" Mtr. $ 82.00
3" Mtr. $ 150.48
4" Mtr. $ 248.27
6" Mtr. $ 492.54
8" Mtr. $ 785.79
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CITY OF ROHNERT PARK
Sewer Rate Design
SEWER FINANCIAL PLAN AND RATE STUDY
The new rate structure would make major structural improvements to the City's sewer
rates. Primarily, the portion of revenue generated by fixed service charges would be
increased. At present only about 1 percent of rate revenue comes from service charges,
resulting in a significant potential for revenue volatility. The rates proposed under the new
rate structure would increase service charge revenue to 15 percent of rate revenue.
Under the new rate structure, all single family residential customers would pay the same
monthly service charge. Service charges for multifamily and non- residential customers
would vary with the size of the water meter. As a result, customers able to place larger
demands on the sewer system would bear a larger responsibility for capacity costs.
Certain aspects of the rate structure, however, would not change. As with the current
rate structure, all customers would pay for sewer service based on usage. Residential
customers would continue to pay the usage rate based on the lesser of average monthly
winter water usage or actual water usage. Non - residential customers would pay for
sewer usage based on actual water usage (more irrigation usage occurs through
separate water meters). The reasons that wastewater flows are estimated on this basis
were described earlier in this section. The proposed usage rates vary between
residential customers .(single and multi - family) and non - residential (low, medium, and
high strength categories) based on strength characteristics for each group. This
improved categorization of customers based on wastewater strength factors would
provide enhanced proportionality in sewer billing.
New Sewer Rate Structure and Rate Plan
Exhibit III-6 presents the proposed sewer rate schedules under the new sewer rate
structure and the proposed new rate plan. The rates proposed for July 2011 are based
on the cost of service analysis and the new rate restructure described above. Proposed
rates for subsequent periods are adjusted to meet the revenue needs of the utility, as
reflected in the financial plan. The first two rate adjustments (July 2011 and January
2012) are critical to bringing the utility to a financially stable condition where it can meet
current financial obligations. Subsequent adjustments are necessary to maintain revenue
sufficiency through the planning period.
THE REED GROUP, INC. PAGE 45
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit III-6
City of Rohnert Park
See Note (1) Below - -
$
250/6
Monthly Service Charges
24.56
$
Residential Customers (per dwelling unit)
Single Family
$
6.88 $
Multi- Family and Non - Residential Customers
Up to 3/4" meter
$
18.52 $
1" meter
$
28.34 $
1 1/2" meter
$
52.68 $
2" meter
$
82.00 $
3" meter
$
150.48 $
4" meter
$
248.27 $
6" meter
$
492.54 $
8" meter
$
785.79 $
Sewer Usage Rate ($✓gal.)
(2)
319.65
Residential
$
0.00801 $
Non - Residential
615.68
$
Low Strength
$
0.00837 $
Medium Strength
$
0.01122 $
High Strength
$
0.01690 $
25% 3%
8.60 $ 8.86 $
3% 3%
9.13 $ 9.40
23.15
$
23.84
$
24.56
$
25.30
35.43
$
36.49
$
37.58
$
38.71
65.85
$
67.83
$
69.86
$
71.96
102.50
$
105.58
$
108.75
$
112.01
188.10
$
193.74
$
199.55
$
205.54
310.34
$
319.65
$
329.24
$
339.12
615.68
$
634.15
$
653.17
$
672.77
982.24
$
1,011.71
$
1,042.06
$
1,073.32
0.01001
$
0.01031
$
0.01062
$
0.01094
0.01046
$
0.01077
$
0.01109
$
0.01142
0.01403
$
0.01445
$
0.01488
$
0.01533
0.02113
$
0.02176
$
0.02241
$
0.02308
(1) The percentage shown for July 2011 reflects the overall increase in sewer rate revenue resulting from the first phase in
implementing the new rate plan. Subsequent percentages reflect the rate adjustments in subsquent phases of the plan
necessary to meet annual revenue needs. Annual rate revenue growth is also affected by growth in the customer base,
as well as changes in customer demand.
(2) Residential sewer flow is based on the lower of actual monthly water use or the average water use during the
prior December - February period. Non - residential sewer flow is estimated equal to monthly water usage.
Impact of Proposed Rates on Representative Customer Bills
Exhibit III -7 summarizes the impact of the new sewer rate structure for a variety of
"typical" sewer customers, based on proposed rates for July 2011 and January 2012.. In
addition, Exhibit 111-8 provides information on how bills for single family residential
customer with various levels of usage would be affected by the new rate structure.
THE REED GROUP, INC. PAGE 46
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit 111 -7
City of Rohnert Park
Summary of Potential Bill Imoacts of New Sewer Rate Structure
Notes:
(1) Restaurant with grease interceptor.
(2) Restaurant without grease interceptor.
Because the new sewer rate structure involves different methodologies and criteria than
the existing rates, the new rate structure will result in changes in customer bills, even if
they were applied in a revenue neutral situation. All rate structure changes are proposed
to occur with the proposed rates for July 2011. The specific change to an individual
customer will depend on customer class, meter size, usage, and strength characteristics.
If the new rate structure is adopted, subsequent rate adjustments called for in the
proposed five -year rate plan would affect all customers equally (on a percentage basis),
as no additional changes to the structure are currently contemplated. In all cases, it is
believed that the new rate structure would provide greater proportionality by improving the
distribution of costs across customer classes, as well as within each class.
THE REED GROUP, INC. PAGE 47
Typical Monthly Sewer Bills
Current
Proposed
New Rates
July 2011
Jan. 2012
Customer Mtr. Sz. Usage
Rates
(tg)
Single Family
3/4"
5
$
37.58
$
46.93
$
58.65
Small Multi - Family
1"
20
$
147.08
$
188.54
$
235.63
Large Multi - Family
2"
120
$
877.08
$
1,043.20
$
1,303.70
Very Lrg Multi- Family
1 ", 4 -2"
2,200
$
16,061.08
$
17,978.34
$
22,467.43
MH Park
4"
1,200
$
8,761.08
$
9,860.27
$
12,322.34
Small Office (L)
1"
6
$
61.08
$
78.56
$
98.19
Small Retail (L)
1"
8
$
81.08
$
95.30
$
119.11
Restaurant (M) (1)
1 1/2"
80
$
1,017.08
$
950.28
$
1,188.25
Restaurant (H) (2)
2"
250
$
3,176.08
$
4,307.00
$
5,385.00
Large Retail (M)
3"
200
$
2,001.08
$
2,394.48
$
2,994.10
Hotel (M)
4"
300
$
3,001.08
$
3,614.27
$
4,519.34
Hotel (M)
6"
600
$
6,001.08
$
7,224.54
$
9,033.68
Notes:
(1) Restaurant with grease interceptor.
(2) Restaurant without grease interceptor.
Because the new sewer rate structure involves different methodologies and criteria than
the existing rates, the new rate structure will result in changes in customer bills, even if
they were applied in a revenue neutral situation. All rate structure changes are proposed
to occur with the proposed rates for July 2011. The specific change to an individual
customer will depend on customer class, meter size, usage, and strength characteristics.
If the new rate structure is adopted, subsequent rate adjustments called for in the
proposed five -year rate plan would affect all customers equally (on a percentage basis),
as no additional changes to the structure are currently contemplated. In all cases, it is
believed that the new rate structure would provide greater proportionality by improving the
distribution of costs across customer classes, as well as within each class.
THE REED GROUP, INC. PAGE 47
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Exhibit III -8
City of Rohnert Park
Summary of Impacts of the New Sewer Rate Structure on Sinale Familv Customers
Monthly Usage
Monthly Sewer Bills
Bill Change
Current
Proposed New Rates
1,000s of Gal.
Rates
July 2011
Jan. 2012
July
2011
Jan. 2012
1
$
' 8.38
$
14.89
$
18.61
$
6.51
$
3.72
2
$
15,68
$
22.90
$
28.62
$
7.22
$
5.72
3
$
22.98
$
30.91
$
38.63
$
7.93
$
7.72
4
$
30.28
$
38.92
$
48.64
$
8.64
$
9.72
5
$
37.58
$
46.93
$
58.65
$
9.35
$
11.72
6
$
44.88
$
54.94
$
68.66
$
10.06
$
13.72
7
$
52.18
$
62.95
$
78.67
$
10.77
$
15.72
8
$
59.48
$
70.96
$
88.68
$
11.48
$
17.72
9
$
66.78
$
78.97
$
98.69
$
12.19
$
19.72
10
$
74.08
$
86.98
$
108.70
$
12.90
$
21.72
THE REED GROUP, INC. PAGE 48
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Agreement Between City of Santa Rosa and City of Rohnert Park, City of Sebastopol,
South Park County Sanitation District for Use of Santa Rosa Subregional Sewerage
System, dated April 3, 1975, along with 5 amendments thereto
California State Treasure's Office, Local Agency Investment Fund (LAIF) Quarterly
Appropriations Rates (updated quarterly on the State Treasurer's website)
City of Rohnert Park, 2006 Update Public Facilities Financing Plan, prepared by Winzler
& Kelly Consulting Engineers, June 2006
City of Rohnert Park, 5 -Year Capital Improvement Program FY 09-10 to FY 13 -14,
project descriptions for sewer system projects
City of Rohnert Park, Ordinance 729 — An Ordinance Amending Title 13 of the Rohnert
Park Municipal Code to Increase Sewer Service Charges (Sewer Use Ordinance),
Uncodified
City of Rohnert Park, Ordinance 774 — An Uncodified Ordinance of the City of Rohnert
Park Regarding Sewer Service Charges
City of Rohnert Park, Sewer Capacity Charge Analysis, prepared by Winzler & Kelly
Consulting Engineers, November 2006
City of Rohnert Park Sewer System Management Plan, updated January 2009
Engineering News Record, 20- Cities Construction Cost Index, updated monthly on the
ENR website
Installment Purchase Agreement -Sewer System Dated May 1, 2005 Relating to Sewer
System Revenue Certificates of Participation Series 2005
Manual M6 — Water Meters. Selection, Installation, Testing, and Maintenance, American
Water Works Association
Official Statement: $13,000,000 City of Rohnert Park Sewer System Revenue
Certificates of Participation, Series 2005, May 27, 2005 .
Revenue Program Guidelines for the Small Community Wastewater Grant (SCWG)
Program, State of California, State Water Resources Control Board, Division of Financial
Assistance
Updating the Sewer Capacity Charge for All Development in the City of Rohnert Parr
City of Rohnert Park Council Agenda Item for August 12, 2008, including Resolution
2008 -127
US Bureau of Labor Statistics, Consumer Price Index, San Francisco-Oakland -San Jose,
All Urban Consumers (CPI -U), updated monthly at the BLS website
THE REED GROUP, INC.
CITY OF ROHNERT PARK
SEWER FINANCIAL PLAN AND RATE STUDY
Information in this Appendix was used as an aid in classifying customers into low,
medium, and high strength user classifications. It is a compilation of data generated from
a variety of sources (state agency, large regional wastewater utilities, etc.) regarding
strength characteristics related to wastewater from a variety of business types.
THE REED GROUP, INC.
Appendix B
Compilation of Published Data on Sewer User Strenath Classifications
The Reed Group, Inc. Page B -1
Pro osad Strenc th mg/I
Percent of
Weighted
Single
User Classification Description
BOD
SS
Average
Family
Data Source
Strength Weighting Factor
50%
50%
Residential Single Family and Multi - Family
175
175
175
100%
SWRCB
`LOW STRENGTH CLASSICATION.
-
Low I Strength:
Soft Water Service
3
55
29
17%
SWRCB
Office With Public Access
80
80
80
46%
SWRCB
Car Wash
20
150
85
49 %
SWRCB
Veterinarian
130
80
105
60%
Los Angeles
Business Equipment Rental
130
80
105
60%
Los Angeles
Business Services -- Other
130
80
105
60%
Los Angeles
Office (Finance, Insurance, etc.)
130
80
105
60%
Los Angeles
Office (No Public Access)
130
80
105
60%
SWRCB
Office (Medical Services)
130
80
105
60%
Los Angeles
Personal Services (Other)
130
80
105
60%
Los Angeles
Photo & Portrait Studios
130
80
105
60%
Los Angeles
Manufacturing - Textile Mill Products
115
115
115
66%
Metcalf & Eddy
Schools
130
100
115
66%
SWRCB
Low 11 Strength:
Laundromat - Public
150
110
130
74%
SWRCB
Landscaping Services
150
150
150
86%
Los Angeles
Amusement & Recreation: Indoor & Out
150
150
150
86 %
Los Angeles
Auto Parking
150
150
150
86%
Los Angeles
Barber Shop
150
150
150
86%
Los Angeles
Beauty Shop
150
150
150
86%
Los Angeles
Church (No Kitchen)
150
150
150.
86%
Los Angeles
Community Center (No Kitchen)
150
150
150
86%
Los Angeles
Grocery Market (No Butcher or Baker)
150
150
150
86%
Los Angeles
Health Spa
150
150
150
86%
Los Angeles
Kennel
150
150
150
86%
Los Angeles
Malls /Dept. Stores (No Food Svcs)
150
150
150
86%
SWRCB
Manufacturing (Other)
150
150
150
86%
Los Angeles
Manufacturing (Apparel & Other Textiles)
150
150
150
86%
Los Angeles
Manufacturing (Furniture)
150
150
150
86%
Los Angeles
Membership Organizations
150
150
150
86%
Los Angeles
Museum /Art Gallery
150
150
150
86%
Los Angeles
Nursery/Greenhouse
150
150
150
86%
Los Angeles
Office (Construction)
150
150
150
86%
Los Angeles
Massage Parlor
150
150
150
86%
Los Angeles
Retail Apparel and Accessory Store
150
150
150
86%
Los Angeles
Retail Bldg. (Materials & Gardening)
150
150
150
86%
Los Angeles
Retail (Packaged) Food (No Sewer Disposal)
150
150
150
86%
Los Angeles
Retail Furniture & Home Furnishings
150
150
150
86%
LACSD
General Merchandise — Retail/Wholesale
150
150
150
86%
SWRCB
Retail Trade -- Misc. (Except Food /Drink)
150
150
150
86%
SWRCB
Storage, Warehouse & Outdoor
150
150
150
86%
Los Angeles
Studio /Recording Sound Stage
150
150
150
86%
Los Angeles
Theater /Auditorium (No Food)
150
150
150
86%
Los Angeles
The Reed Group, Inc. Page B -1
Appendix B - Continued
Compilation of Published Data on Sewer User Strenoth Classifications
The Reed Group, Inc. Page B -2
Pro osed Strength m /l
Percent of
Weighted
Single
User Classification Description
BOD
SS
Average
Family
Data Source
Low III (Residential) Strength:
Convalescent Homes
250
100
175
100%
SWRCB
Hospital
250
100
175
100%
SWRCB
Other Health Services
250
100
175
100%
SWRCB
Transp. & Utilities (SIC 400 through 489)
200
150
175
100%
Metcalf & Eddy
Agricultural Production
150
250
200
114%
Metcalf & Eddy
Agricultural Services - Other
250
150
200
114%
Metcalf & Eddy
Bar Without Restaurant
200
200
200
114%
SWRCB
Restaurant -- Preprocessed Only
200
200
200
114%
Los Angeles
Social Services
200
200
200
114%
SWRCB
- ; MEDIUM STRENGTH
CIASSICATI,ON
Medium 1 Strength:
Hotel (No Restaurant)
310
120
215
123%
SWRCB
Prison With Food Service
310
120
215
123%
Los Angeles
Auto Repair (No Steam Cleaning)
180
280
230
131%
SWRCB
Auto Service Station (No Steam Cleaning)
180
280
230
131%
SWRCB
Agricultural Services —Animal
350
150
250
143%
Metcalf & Eddy
AutoNehicle Sales
300
200
250
143%
Metcalf & Eddy
Repair Services -- Misc.
250
250
250
143%
Metcalf & Eddy
Manufacturing -- Rubber /Plastic Products
200
350
275
157%
Metcalf & Eddy
Medium 11 Strength:
Manufacturing -- Electric/Electronic Equipment
300
350
325
186%
Metcalf & Eddy
Manufacturing - Instruments
300
350
325
186%
Metcalf & Eddy
Manufacturing -- Fabricated Metal Products
300
350
325
186%
Metcalf & Eddy
Manufacturing -- Transport Equipment
400
250
325
186%
Metcalf & Eddy
Laundromat, Commercial
450
240
345
197%
SWRCB
Transportation — Bus /Air Terminal
350
350
350
200%
Metcalf & Eddy
Medium III Strength:
Malls /Shopping (Including Food Sales)
400
400
400
229%
Los Angeles
Manufacturing — Machine Shops
290
550
420
240%
Los Angeles
Manufacturing -- Metal Industry
290
550
420
240%
Los Angeles
Manufacturing -- Lumber & Wood Products
431
431
431
246%
Los Angeles
Manufacturing -- Stone, Clay, Glass Products
200
700
450
257%
Metcalf & Eddy
Reproduction /Mailing Service
500
400
450
257%
Metcalf & Eddy
Hotel (With Restaurant)
500
600
550
314%
SWRCB
Manufacturing -- Paper /Containers
700
500
600
343%
Metcalf & Eddy
Manufacturing -- Printing & Publishing
700
500
600
343%
Metcalf & Eddy
Laundry (Industrial)
670
680
675
338%
SWRCB
" HIGHSTRENGTH
=CLASSICATION
._-`
°
High I Strength:
Agricultural Production - Livestock
1,200
350
775,
443%
Metcalf & Eddy
Mortuary
800
800
800
457%
SWRCB
Grocery (W /Butcher or Baker)
800
800
800
457%
SWRCB
Manufacturing — Baked Foods
1,000
600
800
457%
SWRCB
RestaurantlBar(W /Food Preparation)
1,000
600
800
457%
SWRCB
Manufacturing -- Beverages
1,500
300
900
514%
Metcalf & Eddy
Manufacturing -- Paint
1,300
1,100
1,200
686%
Metcalf & Eddy
Manufacturing -- Other Chemical Products
1,300
1,100
1,200
686%
Metcalf & Eddy
High II Strength:
Manufacturing -- Dairy Products
2,369
922
1,646
940%
Los Angeles
Steam Cleaning - -Auto
1,150
2,150
1,650
943%
SWRCB
Manufacturing -- Other Food Products
2,213
1,453
1,833
1047%
Los Angeles
High III Strength:
Septage
5,400
12,000
8,700
4971%
SWRCB
The Reed Group, Inc. Page B -2
CITY OF ROHNERT PARK SEWER FINANCIAL PLAN AND RATE STUDY
Information in this Appendix presents firm qualifications, partial list of past clients, and
resume for the consultant retained by the City at the time he was retained to assist with
the sewer financial plan and rate analysis.
THE REED GROUP, INC.
The Reed Group, Inc.
Summary and Qualifications
THE REED GROUP, INC.
The Reed Group, Inc. (TRGI) is a Sacramento -based management consulting firm specializing in
financial management services for local governments'. Our mission is to provide clients with
an exceptional level of service and responsiveness, to develop creative yet practical solutions to
clients needs, and to broaden understanding and facilitate consensus on complex issues. As
such, we believe we are uniquely qualified to offer services for municipal utilities in the
following areas:
• - Water and wastewater rate studies
• Cost of service analyses
• Capacity charge nexus studies
• Long -range financial and strategic planning
• Public participation and facilitation
• Litigation support
The firm brings the following strengths to client engagements:
• Extensive California and national experience in water and wastewater utility
operations, management, finance, and planning.
• Broad knowledge of traditional practices and innovative techniques in water and
wastewater rates, fees, and cost of service analyses.
• Familiarity with legal and regulatory requirements affecting public agency
management and finance.
• Leadership in developing public participation and consensus - oriented
approaches to rate and fee setting.
• A network of resources and an ability to coordinate and manage multi-
disciplinary project teams on broad ranging engagements. .
Robert Reed is President of TRGI. He brings more than 25 years of experience as an engineer
for a major water/ wastewater agency and a management consultant to local governments. He
has provided a diverse range of services to more than 60 clients. Approximately two- thirds of
the engagements have been for clients for whom Robert has provided multiple services.
TRGI is. a certified small business with the California Department of General Services and with
the Sacramento Office of Business Development.
TRGI consultants have performed more than 100 projects with various public and private
entities. A partial listing of clients and projects is provided below.
' The firm was originally organized as a sole proprietorship in May 1998 under the name Reed
Consulting Group. It incorporated in January 2002.
Page 1
The Reed Group, Inc.
Summary and Qualifications
Client
Engagement
City of Sacramento
Water system development fee study
•
Metered water rate development
•
Water service annexation stud
City of Roseville
Meter retrofit program development
•
Water, sewer, solid waste rate studies
•
Development of stormwater mgmt. program
and funding strategy
•
Recycled water cost and rate analysis
•
Water shortage rate development
City of West Sacramento
Financial plan, water rate, and connection fee
study
•
Metering implementation plan
City of Santa Rosa
Water conservation pricing analysis
•
Water rate and demand fee studies
•
Water shortage contingency planning
•
Financial reserve policy analysis
•
Recycled water economic and rate analyses
City of Folsom
Meter retrofit program development
•
Water system long -range plan and rate study
•
Sewer and solid waste rate and impact fees
City of Santa Monica
•
Water/ wastewater rate studies
•
Water connection fee studies
City of Oceanside
•
Capacity charge update study
•
Long-range plan and water rate stud
San Juan Water District
•
Retail and wholesale water rate studies
•
Retail and wholesale connection fee studies
•
Multi-year financial planning
Fair Oaks Water District
•
Meter retrofit program development
•
Water rate study
•
Special rate setting issues
Carmichael Water District
Water rate study and annual updates
•
Proposition 218 litigation support
•
Business financial plan development
Solano Irrigation District
•
Long -range financial plan and rate studies
•
Organization, job classification and
compensation stud
Amador Water Agency
AWS long-range plan, rates, and fee studies
•
CAWP long-range plan, rates, and fees
Millview County Water District
•
Water financial plan and rate stud
Sacramento Suburban Water District
•
CIP, financial plan, and water rate studies
•
Facilities development charge studies
•
Wheeling water rates
Northridge Water District
•
Long-range plan, water rate, and capacity
Page 2
The Reed Group, Inc.
Summary and Qualifications
Page 3
charge study
•
Development of wheeling rates
Arcade Water District
•
Irrigation Task Force facilitation and
incentive pricing program development
Rio Linda /Elverta Community Water
•
Rate/ fee survey
District
•
Long -range plan,. water rate /fee study
•
Citizen committee facilitation
Quincy Community Services District
•
Long -range plan
•
Water/ wastewater rates & capacity charges
•
Grant application assistance
East Bay Municipal Utility District
Water capacity charge study.
Contra Costa Water District
•
Metering policy & procedure development
•
Wheeling water rate presentation
•
Litigation support
•
Wholesale water rates
City of Dixon
DSMWS long -range plan, water rate and
connection fee study
•
Wastewater financial plan, rate and
connection fee studies
City of Lathrop
Water/ wastewater rate /fee studies
•
Citywide capital facilities fee studies
City of Suisun Study
•
SSWA long -range plan, water rate and
connection fee studies
City of St. Helena
Water and wastewater rate studies and
financial plans
Town of Windsor
•
Water and wastewater rate study and
financial plan
•
Water capacity charge stud
City of Del Mar
•
Water rate and connection fee studies
Nipomo Community Services District
•
Water and sewer financial plans, rates, and
capacity charge studies
•
Water rate structure analysis
Olivenhain Municipal Water District
•
Water rate update study
•
Strategic planning and operations review
Trabuco Canyon Water District
•
Water rate stud
San Elio Joint Power Authority
•
Recycled water program financial assessment
Page 3
The Reed Group, Inc.
Summary and Qualifications
Robert Reed The Reed Group, Inc.
Mr. Reed is President of The Reed Group, Inc. (TRGI). He has over 25 years of experience
providing a broad range of financial and management consulting services to local governments
in the areas of water and wastewater utility management, as well as public works and
engineering functions. The mission of TRGI is to provide clients with an exceptional level of
service and responsiveness, to develop creative yet practical solutions to client needs, and to
broaden understanding and facilitate consensus on complex issues. Areas of specialty include:
Utility Rate/Fee Studies - water, wastewater, stormwater, and solid waste cost of service and
rate design studies; wholesale and retail rates; marginal cost pricing; community -based rate
setting methodologies.
Capital Facility Financing Studies - evaluation of the economic and financial feasibility of
capital improvement programs;- capital facility financial planning; development impact fee and
capacity charge studies
Resources Management - meter retrofit programs, water conservation planning; drought impact
studies; urban water management plan preparation; water rate conservation incentives; water
supply yield and water availability studies.
Litigation Support - litigation support, including expert witness testimony in matters related to
water and wastewater rates and charges including Proposition 218; provided technical support
during SWRCB water rights proceedings.
Representative Projects
• City of Santa Rosa, CA (since 1997) -- Water and wastewater rate. study. Performed a water and
wastewater rate study for the City of Santa Rosa's retail operations. The study included detailed cost
of service analyses, refinement of current rate structures, development of a five -year financial plan,
and review of financial policies and practices. During the study we performed. two day -long
workshops with City staff to explore rate and financial issues in detail. Mr. Reed also performed
studies pertaining to demand fees (capacity charges), water shortage rates, water conservation
incentives embodied in rate structures, and financial reserve policies. Recently, he helped the City
address critical economic and cost sharing issues related to expansion of the recycled water system
into urban areas.
• City of Sacramento (since 1999) - Mr. Reed has assisted the City of Sacramento Utilities Department
with several projects over a number of years. Currently, he is assisting the City with the
development of metered water rates applicable to both residential and non - residential customers.
The rates reflect the cost of providing water service, address financial stability and fairness issues,
and will assist the City in meeting requirements associated with the implementation of the meter
retrofit program.. Mr. Reed previously assisted the City with updating water system impact fees.
• City of Roseville (since 1999) - In 1999 Mr. Reed assisted with a controversial study to develop a water
meter retrofit program, including developing a strategy whereby customers would pay for water
meters. This study involved working with a citizens advisory committee, and conducting
community meetings, prior to taking recommendations to the City Council. Mr. Reed also assisted
with the development of the City's stormwater management program with particular focus of cost
estimating and identifying potential funding sources. For the past eight years, Mr. Reed has assisted
in preparing biennial rate recommendations for water, wastewater, and solid waste. He has also
Page 4
The Reed Group, Inc.
Summary and Qualifications
assisted in revising water rates to better achieve conservation objectives, and helped develop water
shortage rates to be implemented during periods of water shortage.
■ Nipomo Community Services District (since 2004) - Prepared water and wastewater financial plans, as
well as developed water and wastewater capacity charges for the District in multiple studies.
Restructured water and wastewater rates to meet District rate setting objectives, including
encouraging water conservation and reflecting the cost of providing service. Studies have included
workshops with the Board of Directors and community meetings.
■ Town of Windsor (since 2006) - Developed multi -year financial plans for the Town's water and
reclaimed water utilities prepared user rate studies to recommend water and reclaimed water rates
that reflect the cost of providing service and meet each utilities revenue needs. This study included
workshops with the Town Council and consideration of special cost of service issues, as well as
assessing the potential rate impacts of future capital project financing.
■ City of Healdsburg - Conducted a wastewater rate study, including development of a multi -year
financial plan. This study resulted in increases to the City's wastewater rates to meet operating,
capital program, and debt service obligations. The wastewater rate structure for residential was
modified such that user rates reflect the winter water use characteristics of each customer. This
change improved equity among customers and helped to encourage water conservation.
■ Millview County Water District - Currently developing a 10 -year financial plan, consistent with the
District's capital improvement program, and evaluating potential water rate and debt financing
scenarios. The purpose of the study is to develop a financial strategy to meet operating and capital
program needs, as well as meet obligations of future debt service, while minimizing water rate
increases. This study may result in the first increase in the District's water rates in nearly 15 years.
■ San Juan Water District (since 1998) - Multiple retail and wholesale financial plans and rate studies.
Retail rate analyses included developing a metered water rate structure while working closely with a
citizens advisory committee and members of the Board. Wholesale rate analyses have included
developing an equitable cost of service methodology and working both with the District and family
member agencies. More recently, The Reed Group, Inc. has assisted the District in updating retail
connection fees and developing new wholesale connection fees.
■ Carmichael Water District - Water rate study and 5 -year financial plan. Conducted 10 workshops with
an 11- member citizen advisory committee (including 2 Board members). Focus of study was on cost
of service issues and rate design with a transition from flat to metered rates. The District's largest
customers were represented on the committee. Mr. Reed has continued to assist the District with
water rate and financial plan updates, as well as litigation support services. He also assisted the
District in successfully rebutting a legal challenge to the District's water rates on Proposition 218
grounds.
■ Solano Irrigation District (since 1998) - Water rate and financial plan studies. Assisted the District in
three separate studies to address policy issues related to rate structures, revenue strategies, financial
policies, and long -range financial planning. Separate studies were performed for the Dixon - Solano
Municipal Water Service (joint water system with City of Dixon), the Suisun - Solano Water Authority
(joint water system with the City of Suisun City), and SID's General Fund. Public workshops have
been conducted with elected officials and the public in each study. In 2000, Mr. Reed served as
Project Manager on a classification, compensation, and organization study for the District. The study
included interviews with about one -half of the staff throughout the organization and focused on
organizational structure issues to improve operational effectiveness. A compensation survey was
performed to compare the District with its labor market, and job descriptions were updated to reflect
the work performed for each of about 40 staff positions.
Page 5
The Reed Group, Inc.
Summary and Qualifications
• Sacramento Suburban Water District, CA (since 1996) - Mr. Reed worked with the Sacramento Suburban
Water District to prepare an update to their capital improvement plan, multi -year financial plan, and
water rates. Mr. Reed worked with the predecessor Northridge Water District on to develop two
previous five -year water rate plans and FDC calculations. He also developed recommendations on
wheeling charges whereby other entities could wheel water through the District's transmission
facilities. Mr. Reed also assisted the Arcade Water District (also a predecessor to SSWD) in working.
with their Irrigation Task Force and developing an alternative conservation - oriented water rate
structure for public agency irrigation customers.
• City of Del Mar - In 1993, Mr. Reed participated in a major water and wastewater rate structure
review study involving city staff, a citizens advisory committee, and the City Council. The study
resulted in rate restructuring and multi-year financial planning that was widely accepted by
customers and the City Council. Mr. Reed has since participated in water rate updates every few
years since the original study, most recently in 2004.
• City of Santa Monica (since 1996) - Served as project manager for a comprehensive water and
wastewater rate study. We conducted five workshops with a citizen advisory committee during the
study to assure that rate recommendations achieve desired community objectives. In 2002, assisted
as Project Manager with an update to the water and wastewater rate study, including calculation of
connection fees.
• City of Folsom - Assisted the Public Works Department with the development of a meter retrofit
program and water rate structure study, and also performed wastewater and solid waste rate and fee
studies. Each study includes technical, financial, and public outreach aspects. Mr. Reed's has
included long -range financial planning assistance, and extensive involvement with the City's Utility
Advisory Committee.
•. Contra Costa Water District - Wholesale (raw) water rate structure study affecting the District's
municipal and industrial customers. Working with a Technical. Advisory Committee (TAC), we
developed recommendations for modifying the water rate structure to better achieve District
objectives. Also provided litigation support or expert witness assistance in litigation on the District's
Facilities Reserve Charges.
Education
B.S., Engineering, University of California, Los Angeles, 1982
M.S., Water Resources Engineering, University of California, Davis, 1990
M.B.A, Public Policy and Management, University of California,.Davis,1990
Licensed Civil Engineer in California (Lic. No. 41064)
Professional Background
East Bay Municipal Utility District, Water Resources Planning, 1983 -1988
Ernst & Young, Governmental Consulting Practice, 1990 -1992
David M. Griffith & Associates, Utility Consulting Practice, 1992 -1996
Hilton Farnkopf & Hobson, Water/ Wastewater Practice, 1996 -1998
The Reed Group, Inc., President, 1998- present
Page 6