CC 2019-10-29_4 AG Rate Study Final Draft ReportReport for:
City of Arroyo Grande
300 E Branch Street
Arroyo Grande, CA 93420
(805) 473-5400
Submitted By:
Tuckfield & Associates
Contact: Mr. Clayton Tuckfield
2549 Eastbluff Dr, #450B
Newport Beach, CA 92660
(949) 760-9454
www.tuckfieldassociates.com
October 2019
Report on
Water, Wastewater, and
Storm Water Rate Study
FINAL
DRAFT
Item 4 - Page 1
iucl<i:iiLirl
ASSOCIAiil'
MANAGEMENT CONSULTING
FINAL DRAFT
[This Page Intentionally Left Blank for Two-sided Printing]
Item 4 - Page 2
Tuckfield & Associates
2549 Eastbluff Drive, Suite 450B, Newport Beach, CA 92660
Phone (949) 760-9454 Fax (949) 760-2725
Email ctuckfield@tuckfieldassociates.com
FINAL DRAFT
October 25, 2019
Mr. Shane Taylor
Utilities Manager
City of Arroyo Grande
300 E Branch Street
Arroyo Grande, CA 93420
Dear Mr. Taylor:
I am pleased to present this Water, Wastewater, and Storm Water Rate Study (Study) report for the City of Arroyo
Grande (City). The water, wastewater, and storm water rates presented in this report have been developed based
on cost of service principles and industry methods that result in fair and equitable rates for the users of the
systems in accordance with Proposition 218.
This study included a review and analysis of the water, wastewater, and storm water revenue and revenue
requirements, number of customers, volumes, and current rate structure. The major objectives of the Study
include the following.
Generate positive levels of income in the Study period
Maintain operating and capital reserves at or greater than target levels
Maintain debt service coverage ratios at or greater than the minimum required
Meet annual capital replacement spending from the water and wastewater rates and charges
This report presents the findings and recommendations for the financial plans and rates for the City’s water,
wastewater, and storm water systems. Tables and figures throughout the report are provided to demonstrate
the calculations.
It has been a pleasure to work with City staff during the performance of this study. If there are any questions,
please contact me at (949) 760-9454.
Very Truly Yours,
TUCKFIELD & ASSOCIATES
G. Clayton Tuckfield
President/Project Consultant
Item 4 - Page 3
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents
Page
FINAL DRAFT
Executive Summary ............................................................................................... 1
Enterprise Financial Plans ............................................................................................................................... 1
Proposed Water Rates without Central Coast Blue ........................................................................................ 2
Proposed Water Rate Structure and Rates ............................................................................................. 2
Water Bill Impacts without Central Coast Blue ................................................................................................ 3
Water Bill Impacts with Central Coast Blue ..................................................................................................... 5
Proposed Wastewater Rates .......................................................................................................................... 6
Proposed Wastewater Rate Structure and Rates.................................................................................... 6
Wastewater Bill Impacts .................................................................................................................................. 7
Proposed Storm Water Rates ......................................................................................................................... 8
Introduction ........................................................................................................... 10
Background ................................................................................................................................................... 10
Objectives ...................................................................................................................................................... 10
Scope of Study .............................................................................................................................................. 11
Assumptions ......................................................................................................... 11
Reserve Policy .............................................................................................................................................. 11
Operating Reserve ................................................................................................................................. 11
Capital Reserve ..................................................................................................................................... 12
Facility Fund Reserve ............................................................................................................................ 12
Lopez Fund Reserve ............................................................................................................................. 12
Beginning Balances and Reserve Targets .................................................................................................... 13
Water Financial Planning ..................................................................................... 13
Current Water Rates ..................................................................................................................................... 13
Water User Classifications ............................................................................................................................ 14
Number of Customers............................................................................................................................ 14
Number of Water Meters ....................................................................................................................... 15
Water Sales Volumes ............................................................................................................................ 15
Water Financial Plan ..................................................................................................................................... 16
Revenues ............................................................................................................................................... 16
Miscellaneous Revenues ....................................................................................................................... 16
Revenue Requirements ......................................................................................................................... 17
Operation and Maintenance Expense ............................................................................................ 17
Transfer to Lopez Fund .................................................................................................................. 17
Item 4 - Page 4
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
FINAL DRAFT
Annual CIP Funding ....................................................................................................................... 17
Debt Service ................................................................................................................................... 17
Water Capital Improvement Program .................................................................................................... 18
Water Financial Plan .............................................................................................................................. 18
Proposed Revenue Adjustments.................................................................................................... 20
Water Cost of Service .......................................................................................... 21
Industry Methodology .................................................................................................................................... 21
Costs of Service to be Allocated ................................................................................................................... 22
Water Rate Design ................................................................................................ 22
Proposed Rate Structure ............................................................................................................................... 22
Proposed Fixed Charges ..................................................................................................................... 23
Proposed Private Fire Protection Charges ..................................................................................... 24
Proposed Service Fee per Additional Unit Charge ........................................................................ 24
Proposed Variable Charges ................................................................................................................. 24
Water Supply Costs........................................................................................................................ 24
Deliver Costs .................................................................................................................................. 24
Peaking Costs ................................................................................................................................ 24
Proposed Single-family Residential Variable Rates ............................................................................ 25
Proposed Multifamily and Non-Residential Variable Rates ................................................................. 26
Proposed Water Rates .................................................................................................................................. 26
Water Bill Impact Analysis ................................................................................... 27
Water Rate Survey ................................................................................................ 29
Water Rates with Central Coast Blue ................................................................. 29
Water Financial Plan Revenue Increases with Central Coast Blue .............................................................. 30
Water Rates with Central Coast Blue ............................................................................................................ 31
Water Bill Impacts with Central Coast Blue ................................................................................................... 31
Wastewater Financial Planning ........................................................................... 35
Current Wastewater Rates ............................................................................................................................ 35
Wastewater User Classifications ................................................................................................................... 35
Number of Customers............................................................................................................................ 35
Water Sales Volumes of Wastewater Customers ................................................................................. 36
Wastewater Financial Plan ............................................................................................................................ 37
Revenues ............................................................................................................................................... 37
Item 4 - Page 5
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
FINAL DRAFT
Miscellaneous Revenues ....................................................................................................................... 37
Revenue Requirements ......................................................................................................................... 38
Operation and Maintenance Expense ........................................................................................................... 38
Annual CIP Funding ....................................................................................................................... 39
Wastewater Capital Improvement Program........................................................................................... 39
Wastewater Financial Plan .................................................................................................................... 39
Proposed Revenue Adjustments.................................................................................................... 39
Wastewater Cost of Service ................................................................................ 41
Industry Methodology .................................................................................................................................... 41
Costs of Service to be Allocated ................................................................................................................... 41
Cost Allocation to Wastewater Parameters ................................................................................................... 42
Unit Costs of Service ..................................................................................................................................... 42
User Class Costs ........................................................................................................................................... 43
Wastewater Rates ................................................................................................. 43
Proposed Wastewater Rates ........................................................................................................................ 43
Wastewater Fixed Charges ............................................................................................................ 44
Wastewater Variable Charges ....................................................................................................... 44
Wastewater Bill Impact Analysis ......................................................................... 45
Wastewater Rate Survey ...................................................................................... 45
Storm Water Charges ........................................................................................... 47
Storm Water Management in California ........................................................................................................ 47
Storm Water Financial Plan........................................................................................................................... 47
Storm Water Operation and Maintenance Expense ...................................................................... 48
Storm Water Capital Improvement Plan......................................................................................... 48
Storm Water Fund and Financial Plan ........................................................................................... 49
Storm Water Cost of Service ......................................................................................................................... 50
Storm Water Rate Structures and Rates ....................................................................................................... 50
Storm Water Rate Structures ......................................................................................................... 50
Proposed Storm Water Rates ........................................................................................................ 51
Equivalent Residential Unit Calculation........................................................................... 52
Proposed Storm Water Charges ..................................................................................... 53
Future Storm Water Issues ............................................................................................................ 53
Annual Parcel Database Review..................................................................................... 53
Parcels Not Charged ....................................................................................................... 53
Item 4 - Page 6
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
FINAL DRAFT
Site Planning, Source Control, Impervious Area Reductions .......................................... 53
Storm Water Fee Calculations ...................................................................................................................... 54
List of Tables
Table ES-1 Proposed Revenue Increases ........................................................................................................ 1
Table ES-2 Single-family Existing and Proposed Tiers .................................................................................... 2
Table ES-3 Proposed Water Fixed and Variable Charges without Central Cost Blue ...................................... 3
Table ES-4 Comparison of Current Single-family Residential Bi-Monthly Bill with 5/8 -inch Meter with
Proposed Bill Using January 2020 Water Rates without Central Coast Blue ................................ 4
Table ES-5 Single-family Residential Bi-monthly Water Bill Impacts with 5/8-inch Meter at 16 HCF
Bi-monthly without Central Coast Blue ........................................................................................... 4
Table ES-6 Impacts to Single-family Residential Bi-monthly Water Bills with and without
Central Coast Blue Project at 16 HCF ........................................................................................... 5
Table ES-7 Proposed Wastewater Fixed and Variable Charges ...................................................................... 6
Table ES-8 Comparison of Current Single-family Residential Bi-monthly Wastewater Bill with
Proposed Bill Using January 2020 Wastewater Rates................................................................... 7
Table ES-9 Single-family Residential Bi-monthly Wastewater Bill Impacts at 16 HCF ..................................... 7
Table ES-10 Proposed Storm Water Rates ........................................................................................................ 9
Table 1 Assumptions and Planning Factors .............................................................................................. 12
Table 2 June 30, 2019 Beginning Cash Balances and Reserve Targets .................................................. 13
Table 3 Current Water Rates .................................................................................................................... 14
Table 4 Historical and Projected Average Number of Water Customers by Classification ....................... 14
Table 5 Historical and Projected Average Number of Water Customers by Meter Size ........................... 15
Table 6 Historical and Projected Water Consumption (in HCF) ................................................................ 15
Table 7 Projected Rate-based Water Revenue Using Existing Rates ...................................................... 16
Table 8 Projected Miscellaneous Revenue ............................................................................................... 16
Table 9 Projected Water Operation and Maintenance Expense ............................................................... 17
Table 10 Water Capital Improvement Program ........................................................................................... 18
Table 11 Water Financial Plan .................................................................................................................... 19
Table 12 Allocation of Revenue Requirements to Cost Component ........................................................... 22
Table 13 Design of Fixed Charges .............................................................................................................. 23
Table 14 Design of Fixed Charges by Meter Size ....................................................................................... 23
Table 15 Design of 6-inch Private Fire Protection Charges ........................................................................ 24
Item 4 - Page 7
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
FINAL DRAFT
Table 16 Design of Private Fire Protection Charges by Hydrant Size ........................................................ 24
Table 17 Design of Single-family Tiered Rate Structure ............................................................................. 25
Table 18 Single-family Residential Tiered Water Rates .............................................................................. 26
Table 19 Design of Multifamily and Non-Residential Variable Rates .......................................................... 26
Table 20 Proposed Water Fixed Charges and Variable Charges ............................................................... 27
Table 21 Comparison of Current Single-family Residential Bi-Monthly Bill with 5/8-inch Meter with
Proposed Bill Using January 2020 Water Rates .......................................................................... 28
Table 22 Single-family Residential Bi-monthly Water Bill Impacts at 16 HCF Bi-monthly .......................... 28
Table 23 Annual Revenue Increases with and without Central Coast Blue Project .................................... 30
Table 24 Proposed Water Fixed and Variable Charges with Central Coast Blue ....................................... 32
Table 25 Comparison of Current Single-family Residential Bi-monthly Water Bill with 5/8-inch Meter Size
with Proposed Bill Using January 2020 Water Rates with Central Coast Blue ............................ 32
Table 26 Single-family Residential Bi-monthly Water Bill Impacts at 16 HCF Bi-monthly
with Central Coast Blue Project .................................................................................................... 33
Table 27 Impacts to Single-family Residential Bi-monthly Water Bills of Central Cost Blue Project
at 16 HCF ..................................................................................................................................... 33
Table 28 Current Wastewater Rates ........................................................................................................... 35
Table 29 Historical and Projected Average Number of Wastewater Customers by Classification ............. 36
Table 30 Historical and Projected Water Consumption of Wastewater Customers (HCF) ......................... 36
Table 31 Projected Rate-based Wastewater Revenue Using Existing Rates............................................. 37
Table 32 Projected Miscellaneous Revenue ............................................................................................... 37
Table 33 Projected Wastewater Operation and Maintenance Expense ..................................................... 38
Table 34 Wastewater Capital Improvement Program ................................................................................. 39
Table 35 Wastewater Financial Plan ........................................................................................................... 40
Table 36 Allocation of Wastewater Revenue Requirement to Cost Component ........................................ 42
Table 37 FY 2018-19 Development of Unit Costs ....................................................................................... 43
Table 38 Distribution of Costs to Customer Classes ................................................................................... 43
Table 39 Design of Variable Rates .............................................................................................................. 44
Table 40 Proposed Wastewater Fixed and Variable Charges .................................................................... 44
Table 41 Comparison of Current Single-family Residential Bi-monthly Wastewater Bill
with Proposed Bill Using January 2020 Wastewater Rates ......................................................... 45
Table 42 Single-family Residential Bi-monthly Wastewater Bill Impacts at 16 HCF ................................... 45
Table 43 Storm Water Operation and Maintenance Expense .................................................................... 48
Table 44 Storm Water Capital Improvement Plan ....................................................................................... 48
Table 45 Storm Water Financial Plan .......................................................................................................... 49
Item 4 - Page 8
Water, Wastewater, and Storm Water Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
FINAL DRAFT
Table 46 Storm Water Costs to be Recovered ........................................................................................... 50
Table 47 Maximum Lot Coverage by Land Use Type ................................................................................. 51
Table 48 Calculation of Storm Water Units ................................................................................................. 52
Table 49 Calculation of Number of ERUs and Annual Charge ................................................................... 53
Table 50 Proposed Storm Water Rates ...................................................................................................... 54
List of Figures
Figure 1 Water Financial Plan Comparison of Revenue with Annual Obligations ..................................... 20
Figure 2 Water Debt Coverage Ratio ......................................................................................................... 21
Figure 3 Water Debt Coverage Ratio with Central Coast Blue .................................................................. 31
Figure 4 Wastewater Financial Plan Comparison of Revenue with Annual Obligations ............................ 41
List of Charts
Chart ES-1 Single-family Residential Bi-Monthly Water Bills Using 16 HCF without Central Coast Blue ........ 5
Chart ES-2 Single-family Residential Bi-Monthly Water Bills Using 16 HCF with Central Coast Blue Bills ...... 6
Chart ES-3 Single-family Residential Bi-Monthly Wastewater Bills at 16 HCF ................................................. 8
Chart 1 Single-family Residential Bi-Monthly Water Bills Using 16 HCF without Central Coast Blue ...... 29
Chart 2 Single-family Residential Bi-Monthly Water Bills Using 16 HCF with Central Coast Blue ........... 34
Chart 3 Single-family Residential Bi-Monthly Wastewater Bills at 16 HCF ............................................... 46
List of Appendices
Appendix A Water System Tables ................................................................................................................... 55
Appendix B Wastewater System Tables ......................................................................................................... 60
Item 4 - Page 9
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 1
Executive Summary
In February 2019, the City of Arroyo Grande (City) retained Tuckfield & Associates to conduct a comprehensive
Water, Wastewater, and Storm Water Rate Study (Study). The objectives of the Study included determining water
and wastewater rates for FY 2019-20 to FY 2023-24 (the “Study Period”) through development of pro forma
statements of revenues and revenue requirements for each system and analyses to determine the costs of
providing service. A second objective was to provide recommendations to improve the equity among ratepayers
while incorporating local requirements and state laws. Additionally, the Study sought to develop a new storm
water fee that recovers the City’s costs related to storm water management activities over the Study Period.
Enterprise Financial Plans
Forward-looking financial plans were developed for the water, wastewater, and storm water systems that
projected revenue requirements (costs) of each system. The amount of revenue needed to recover the
revenue requirements was determined for each system for FY 2019-20. This revenue was then increased
annually by various percentages that will create sustainable enterprises for each system. A summary of the
proposed annual revenue increases for the three systems for the Study Period are provided in Table ES-1.
The percentages in Table ES-1 are an indication of the increases needed in user charges of the utility systems.
The increases are necessary to maintain the financial health of each system while funding the operation and
maintenance (O&M) expenses, capital funding needs, debt service, and reserve requirements.
For the water system, the revenue increases were determined with and without the Central Coast Blue (CCB)
project. CCB is a water sustainability project that will create a new, high quality, and reliable water supply for the
City of Arroyo Grande and other agencies. The CCB project will provide a new advanced water purification facility
to create a high-quality water source to supplement local supplies. The CCB project will allow these communities
to have sufficient supplies even in times of water shortage or drought.
As shown in Table ES-1, it is proposed to create a new Storm Water Fund in FY 2020-21 to account for the
expenses and capital funding needs of storm water activities. A new storm water fee is developed in this Study
based on parcels and it is proposed that these storm water charges be placed on the County of San Luis Obispo
Table ES-1
Proposed Revenue Increases
[1] Increases this year do not match Tables ES-5 and ES-9 due to rate structure change and cost of service adjustments.
[2] Central Coast Blue project.
[3] First time implementation of new storm water charges.
January 20 January 1 January 1 January 1 January 1
Utility System FY 19-20 [1] FY 20-21 FY 21-22 FY 22-23 FY 23-24
Water System (without CCB [2])6.8% 6.8% 6.8% 6.8% 6.8%
Water System (with CCB [2])9.6% 9.6% 9.6% 9.6% 9.6%
Wastewater System 14.8% 14.8% 14.8% 6.0% 6.0%
Storm Water System [3]0.0% 0.0% 0.0%
Item 4 - Page 10
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 2
(County) tax rolls for billing purposes, as storm water runoff is directly related to parcels. In addition to the
storm water charges determined in this Study, the County charges $2.00 per parcel for billing and collection
services. The first implementation of storm water rates become effective July 1, 2020 with subsequent
increases effective each July thereafter. The City will be required to submit changes to the storm water charges
annually to the County to be included on the tax rolls.
Proposed Water Rates without Central Coast Blue
Proposed Water Rate Structure and Rates
The City provided water billing information that was analyzed to determine user class characteristics and to
project water revenue. The results indicate that total water consumption has declined since the last rate study
in 2014. For the Single-family Residential (SFR) classification, the decline in consumption resulted in a reduction
of water sold in the upper tiers as well as a reduction in the peaking factor of customers in Tier 3 as related to Tier
1. In addition, the existing Tier 2 break point that was established as the summer peak average consumption has
declined from 36 hundred cubic feet (HCF) bi-monthly to 20 HCF bi-monthly. For the SFR classification, it is
recommended that the tier break points be reduced to reflect the new classification consumption patterns. It is
proposed that Tier 1 be revised from zero to 18 HCF to zero to 10 HCF, reflecting current indoor water
consumption as follows.
It is further recommended that the upper Tier 2 break point be revised from 36 HCF to 20 HCF. The recommended
SFR Tier restructuring is provided in Table ES-2 below.
For Multifamily Residential (MFR), the analyses showed that there is very little consumption (less than 1.5
percent) above the current Tier 1 breakpoint of 18 HCF and that over 87 percent of the water consumed is in the
zero to 10 HCF block per dwelling unit. Additionally, the MFR classification analyses show uniformity in the
consumption per dwelling unit. Therefore, it is recommended that the MFR Tiers be eliminated and replaced
with a uniform volume rate similar to the current non-residential classifications. Outdoor consumption for MFR
units and non-residential customers is captured in separate landscape irrigation meters for most of these
customers.
𝑇𝑖𝑒𝑟 1 = 2.39 𝑝𝑝ℎ∗55 𝑔𝑝𝑐𝑑∗365 𝑑𝑎𝑦𝑠
𝑦𝑒𝑎𝑟∗1 𝐻𝐶𝐹
748 𝑔𝑎𝑙∗1 𝑦𝑒𝑎𝑟
6 𝑏𝑖𝑙𝑙𝑠=~ 10 𝐻𝐶𝐹
pph = persons per household
gpcd = gallons per capita per day
Table ES-2
Single-family Residential Current and Proposed Tiers
Current Proposed
Tier Tiers Tiers
Tier 1 0 - 18 HCF 0 - 10 HCF
Tier 2 19 - 36 HCF 11 - 20 HCF
Tier 3 Over 36 HCF Over 20 HCF
Item 4 - Page 11
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 3
The proposed water rate structure and rates without CCB are provided in Table ES-3 for implementation
beginning January 20, 2020 and each January 1 thereafter.
Water Bill Impacts without Central Coast Blue
Table ES-4 presents the impacts to SFR bills from the implementation of the proposed January 20, 2020 water
rates without CCB. For a SFR customer using the average consumption of 16 HCF bi-monthly, the bill will increase
from $119.50 to $127.12, an increase of $7.62, or 6.4 percent.
Table ES-5 provides how SFR bills with a 5/8-inch meter using 16 HCF bi-monthly will escalate over time with
implementation of the proposed water rates from Table ES-3.
Table ES-3
Proposed Water Fixed and Variable Charges without Central Coast Blue
Current January 20, January 1, January 1, January 1, January 1,
Rate FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $27.81 $29.70 $31.72 $33.88 $36.18
3/4" $31.67 $30.49 $32.56 $34.77 $37.13 $39.65
1"$38.12 $38.52 $41.14 $43.94 $46.93 $50.12
1.5" $46.73 $49.24 $52.59 $56.17 $59.99 $64.07
2"$70.41 $78.70 $84.05 $89.77 $95.87 $102.39
3" $244.74 $295.63 $315.73 $337.20 $360.13 $384.62
4" $309.31 $375.98 $401.55 $428.86 $458.02 $489.17
6" $459.96 $563.46 $601.78 $642.70 $686.40 $733.08
8" $632.14 $777.72 $830.60 $887.08 $947.40 $1,011.82
Service Fee per Add'l Unit $7.99 $8.59 $9.18 $9.80 $10.47 $11.18
Variable Charge ($ per HCF)
Single-Family
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 36 units $4.16
Tier 3 - Over 36 $5.55
Tier 1 - 0 to 10 units $4.30 $4.59 $4.90 $5.23 $5.59
Tier 2 - 11 to 20 units $4.75 $5.07 $5.41 $5.78 $6.17
Tier 3 - Over 20 $4.99 $5.33 $5.69 $6.08 $6.49
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
MFR All Consumption $4.38 $4.68 $5.00 $5.34 $5.70
Commercial $3.95 $4.38 $4.68 $5.00 $5.34 $5.70
Irrigation $4.21 $5.31 $5.67 $6.06 $6.47 $6.91
Hydrant $6.13 $4.67 $4.99 $5.33 $5.69 $6.08
Wheeling $2.04 $1.71 $1.82 $1.94 $2.07 $2.21
Item 4 - Page 12
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 4
Chart ES-1 has been prepared to compare Arroyo Grande’s average SFR water bill with those of other
communities at the same consumption. The chart indicates that with the January 2020 rates, an Arroyo Grande
SFR customer with a bi-monthly consumption of 16 HCF will experience a bill that is in the mid-range of the
communities listed.
Table ES-4
Comparison of Current Single-family Residential Bi-Monthly Bill with 5/8 -inch Meter with
Proposed Bill Using January 2020 Water Rates without Central Coast Blue
Current Bill Proposed FY 19-20 Bill
Service Volume Current Service Volume Proposed Dollar Percent
Description Use (HCF) Charge Charge Bill Charge Charge Bill Difference Change
0 $59.02 $0.00 $59.02 $55.62 $0.00 $55.62 ($3.40) -5.8%
Very Low 5 $59.02 $18.90 $77.92 $55.62 $21.50 $77.12 ($0.80) -1.0%
Low 10 $59.02 $37.80 $96.82 $55.62 $43.00 $98.62 $1.80 1.9%
Median 13 $59.02 $49.14 $108.16 $55.62 $57.25 $112.87 $4.71 4.4%
Average 16 $59.02 $60.48 $119.50 $55.62 $71.50 $127.12 $7.62 6.4%
High 20 $59.02 $76.36 $135.38 $55.62 $90.50 $146.12 $10.74 7.9%
Very High 30 $59.02 $117.96 $176.98 $55.62 $140.40 $196.02 $19.04 10.8%
50 $59.02 $220.62 $279.64 $55.62 $240.20 $295.82 $16.18 5.8%
Table ES-5
Single-family Residential Bi-monthly Water Bill Impacts with 5/8-inch Meter
at 16 HCF Bi-monthly without Central Coast Blue
Proposed
SFR Charges Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges $59.02 $55.62 $59.40 $63.44 $67.76 $72.36
Variable Charges $60.48 $71.50 $76.32 $81.46 $86.98 $92.92
Total Charges $119.50 $127.12 $135.72 $144.90 $154.74 $165.28
Dollar Change $7.62 $8.60 $9.18 $9.84 $10.54
Percent Change 6.4% 6.8% 6.8% 6.8% 6.8%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges Variable Charges
$119.50 $127.12
$135.72
$144.90
$154.74 $165.28
Item 4 - Page 13
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 5
Water Bill Impacts with Central Coast Blue
Table ES-6 provides a comparison of the SFR bi-monthly bills with and without the CCB project at the average
SFR consumption, including the dollar difference and the percentage difference in the bills. The average SFR
customer with a 5/8-inch meter using 16 HCF will pay $3.03 more bi-monthly with the CCB project in FY 2019-
20 and $22.56 more bi-monthly in FY 2023-24.
Chart ES-2 provides a comparison of SFR bi-monthly bills with CCB to bills of other communities at the same
consumption. The chart shows that Arroyo Grande SFR bills with CCB remains in the mid-range of the bills.
Chart ES-1
Single-family Residential Bi-Monthly Water Bills Using 16 HCF without Central Coast Blue
Note: Above table uses water rates in effect July 2019. Arroyo Grande January 2020 bill is based on the rate
structure and rates in Table ES-3.
Table ES-6
Impacts to Single-family Residential Bi-monthly Water Bills
with and without Central Cost Blue Project at 16 HCF
January 20 January 1 January 1 January 1 January 1
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Average Bill w/o CCB $127.12 $135.72 $144.90 $154.74 $165.28
Average Bill with CCB $130.15 $142.62 $156.30 $171.36 $187.84
Difference $3.03 $6.90 $11.40 $16.62 $22.56
Item 4 - Page 14
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 6
Proposed Wastewater Rates
Proposed Wastewater Rate Structure and Rates
It is recommended that the current wastewater rate structure be retained for the proposed wastewater rates.
The current rate structure places an emphasis on recovering the City’s wastewater costs on a volumetric basis.
Table ES-7 presents the wastewater rates for the next five years.
Table ES-7
Proposed Wastewater Fixed and Variable Charges
Fixed Charges
January 20, January 1, January 1, January 1, January 1,
Meter Size Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.70 $3.10 $3.56 $3.77 $4.00
Variable Charges
January 20, January 1, January 1, January 1, January 1,
Classification Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.77 $0.89 $1.02 $1.08 $1.15
Multifamily Residential $0.94 $1.09 $1.25 $1.44 $1.52 $1.61
Non-Residential $1.32 $1.53 $1.76 $2.02 $2.14 $2.27
[1] Fixed charge per month per account and to each additional unit.
[2] Charged on the basis of water consumption read through the meter.
Chart ES-2
Single-family Residential Bi-Monthly Water Bills Using 16 HCF with Central Coast Blue
For Rates in Effect July 2019
Note: Above table uses water rates in effect July 2019. Arroyo Grande January 2020 bill is based on the rate
structure and rates in Table 24.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Wastewater Bill Impacts
As shown in Table ES-8, a SFR customer using 16 HCF bi-monthly will have a wastewater bill that will increase
from $66.48 to $68.68, an increase of $2.20, or 3.3 percent. The current and proposed bills include the current
South San Luis Obispo County Sanitation District (SSLOCSD) wastewater treatment charge of $25.48 monthly.
Table ES-9 below provides how wastewater bills will escalate over the next five years with the implementation
of the wastewater rates from Table ES-7.
Table ES-8
Comparison of Current Single-family Residential Bi-monthly Wastewater Bill with
Proposed Bill Using January 2020 Wastewater Rates
Current Bill Proposed Bill
Service San District Volume Current Service San District Volume Proposed Dollar Percent
Use (HCF) Charge Charge Charge Bill Charge Charge Charge Bill Difference Change
0 $4.80 $50.96 $0.00 $55.76 $5.40 $50.96 $0.00 $56.36 $0.60 1.1%
5 $4.80 $50.96 $3.35 $59.11 $5.40 $50.96 $3.85 $60.21 $1.10 1.9%
10 $4.80 $50.96 $6.70 $62.46 $5.40 $50.96 $7.70 $64.06 $1.60 2.6%
13 $4.80 $50.96 $8.71 $64.47 $5.40 $50.96 $10.01 $66.37 $1.90 2.9%
16 $4.80 $50.96 $10.72 $66.48 $5.40 $50.96 $12.32 $68.68 $2.20 3.3%
20 $4.80 $50.96 $13.40 $69.16 $5.40 $50.96 $15.40 $71.76 $2.60 3.8%
30 $4.80 $50.96 $20.10 $75.86 $5.40 $50.96 $23.10 $79.46 $3.60 4.7%
50 $4.80 $50.96 $33.50 $89.26 $5.40 $50.96 $38.50 $94.86 $5.60 6.3%
Table ES-9
Single-family Residential Bi-monthly Wastewater Bill Impacts at 16 HCF
Note: Assumes constant South San Luis Obispo County Sanitation District (SSLOCSD) charges.
Proposed
SFR Charges Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges $4.80 $5.40 $6.20 $7.12 $7.54 $8.00
Variable Charges $10.72 $12.32 $14.24 $16.32 $17.28 $18.40
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $66.48 $68.68 $71.40 $74.40 $75.78 $77.36
Dollar Change $2.20 $2.72 $3.00 $1.38 $1.58
Percent Change 3.3% 4.0% 4.2% 1.9% 2.1%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges Variable Charges
$66.48 $68.68 $71.40 $74.40 $75.78 $77.36
Item 4 - Page 16
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Chart ES-3 has been prepared to compare Arroyo Grande’s average SFR wastewater bill with those of other
communities at 16 HCF. The chart indicates that Arroyo Grande’s SFR wastewater bill is among the lowest of the
communities listed.
Proposed Storm Water Rates
A new storm water fee is proposed for implementation to recover storm water costs currently being supported
by the Local Sales Tax Fund. In order to fund the requirements of the City’s National Pollution Discharge
Elimination System (NPDES) permit and meet state and federal regulations, the City must impose a user charge
for storm drainage service. This new storm water fee will create a dedicated revenue stream to pay for storm
water activities and costs while providing a reliable and fair method for collecting funds.
Senate Bill 231, which went into effect on January 1, 2018 as Government Code Sections 53750 and 53751,
classifies storm water systems as part of the wastewater/sewer system. Senate Bill 231 provides that storm water
fees are now part of the Proposition 218 rate-setting process and may be implemented in a similar manner.
Several methods to recover storm water costs were discussed with City staff. The methods include setting fees
based on a flat fee approach, parcel land area, and impervious surface area of parcels. The methods discussed
are in increasing order of accuracy and level of effort. The minimum and least accurate is the flat fee approach.
The most accurate is measuring the impervious area of all properties and requires the highest level of effort.
City staff has been in contact with the Department of Water Resources (DWR), whereas the DWR is undertaking
a project that could provide the City with impervious area of parcels. However, City staff indicates that such
information will not be readily available in sufficient time to determine a storm water charge with this Study.
Chart ES-3
Single-family Residential Bi-Monthly Wastewater Bills at 16 HCF
For Rates in Effect July 2019
Note: Above table uses wastewater rates in effect July 2019. Arroyo Grande January 2020 bill is based on the
rate structure and rates in Table ES-7.
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City staff was able to provide a list of all parcels in the City with attributes that include land use type and parcel
size. Research of the City’s municipal code revealed that the City has codified “Maximum Lot Coverage”
percentages for various land use types. By multiplying the maximum lot coverage percentages of land use type
by the list of parcel sizes by land use type, an estimate of impervious area was developed and defined as Storm
Water Units for this Study.
Storm water fees were determined by first defining an Equivalent Residential Unit (ERU). One ERU is the average
parcel size of all SFR land use types multiplied by the weighted average Maximum Lot Coverage of the SFR land
use types identified from the City’s municipal code. One ERU is equal to 0.30 acres x 35.5% = 0.1065 Storm Water
Units. The majority of the City’s parcels (67%) are single-family residential parcels.
Three classifications are developed for this Study consisting of SFR, MFR, and All Other parcels. The calculation
described above is applied to the average MFR and All Other parcel sizes to calculate Storm Water Units for these
three classifications. The number of ERUs for each of SFR, MFR, and All Other classifications are then determined
by dividing their Storm Water Units by one ERU of 0.1065.
The storm water charge per ERU is equal to the annual storm water cost of service divided by the total number
of ERUs. Charges to each classification are calculated by multiplying the charge per ERU by an ERU ratio developed
for each classification. Storm water charges for SFR, MFR, and All Other parcels are developed such that they
have the same fixed charges by these classifications.
𝐶ℎ𝑎𝑟𝑔𝑒 𝑏𝑦 𝑐𝑙𝑎𝑠𝑠 =[𝑎𝑣𝑔 𝑐𝑙𝑎𝑠𝑠 𝑝𝑎𝑟𝑐𝑒𝑙 𝑠𝑖𝑧𝑒 (𝑎𝑐𝑟𝑒𝑠)∗ 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑀𝑎𝑥 𝐿𝑜𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 (%)]
0.1065 ∗ $/𝐸𝑅𝑈
The Storm Water Management section of this report provides additional discussion and detail of the method
used to calculate storm water fees for the City. Table ES-10 provides the proposed storm water fees by
classification developed for this Study Period. In addition to the charges shown in the table, the County will
charge $2.00 per parcel for billing and collection services. By comparison, the City of Grover Beach has a storm
water charge of $4.85 per month per account.
Table ES-10
Proposed Storm Water Rates
Customer Equivalent ERU July 1, July 1, July 1, July 1,
Classification Ratio Ratio FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Annual Fixed Charges ($ per year)
Charge Per ERU [1]$69.37 $69.37 $69.37 $69.37
Storm Water Classification
Single-family Residential 1.00 $69.37 $69.37 $69.37 $69.37
Multifamily Residential 0.70 $48.56 $48.56 $48.56 $48.56
All Other 4.21 $292.05 $292.05 $292.05 $292.05
[1] One Equivalent Residential Unit (ERU) is equal to 0.30 acres multiplied by 35.5% Maximum Lot Coverage.
Does not include County charge of $2.00 per parcel.
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Introduction
The City of Arroyo Grande (City) retained Tuckfield & Associates to conduct a comprehensive Water, Wastewater,
and Storm Water Rate Study (Study) for its water, wastewater, and storm water enterprise systems. This Study
develops pro forma statements of revenues and revenue requirements for each enterprise, determines the cost
of providing service to customers, and designs new water, wastewater, and storm water rates and charges for
implementation.
Background
The City of Arroyo Grande was incorporated as a general law City in 1911 and is located in San Luis Obispo County
along the Arroyo Grande Creek, more than 180 miles northwest of Los Angeles. The City provides water and
wastewater service to a 5.5 square mile service area serving a population of approximately 17,900. Water and
wastewater revenues and expenses are accounted for separately in enterprise funds of the City. The storm water
enterprise is currently supported through sales tax revenues.
The water utility obtains its water supply from nine wells and from surface water obtained from the Lopez
Reservoir Project. Groundwater is extracted from the Paso Robles and Careaga Formations of the Arroyo Grande
Plain, Tri-Cities Mesa (AGP-TCM) sub-basin of the Santa Maria Ground Water Basin. Based on an agreement with
other agencies pumping groundwater from the AGP-TCM basin, the City is allocated an annual basin extraction
from these wells of 1,316 acre-feet. Groundwater is also extracted from the Pismo Formation that allows
pumping of up to 200 acre-feet per year.
The City also receives an allocation of 2,290 acre-feet of surface water from the Lopez Reservoir Project through
an August 2000 agreement with the San Luis Obispo County Flood Control and Water Conservation District.
Surplus water from the reservoir may also be purchased by the City when such supplies are available, though it is
not considered to be a firm supply for the City.
Storage facilities presently include six above ground or partially buried water tanks with a storage capacity of
approximately 6.7 million gallons. The transmission and distribution system include over 87 miles of pipeline
ranging in size from 2-inch to 16-inch, six booster pump stations, approximately 6,755 meters, and about 900
public fire hydrants.
The wastewater system consists of sewer pipe, lift stations, and general utility assets used to collect the City’s
wastewater. The wastewater is collected through a system of 5 lift stations and sewer pipe ranging in size from
6-inch to 24-inch and is delivered to a trunk sewer provided by the South San Luis Obispo County Sanitation
District (SSLOCSD). The City has contracted with SSLOCSD to provide wastewater collection (via the trunk sewer),
wastewater treatment, and disposal services. Arroyo Grande is one of three member agencies of SSLOCSD
receiving similar services.
Objectives
The objectives of this Study are to (1) review the current and future financial status of each of the water and
wastewater enterprises, (2) make any adjustments to the revenue being received to ensure that the financial
obligations are being met now and in the future, including adequate reserves and debt service coverage, and (3)
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design water and wastewater rates that generate the required revenue while being fair and equitable for its
customers.
Additionally, an objective of the Study was to develop new storm water charges that recover storm water system
costs equitably based on an appropriate methodology. The charges applicable to users of the storm water system
should generate sufficient revenue to sustain the storm water enterprise.
Scope of the Study
This Study includes the findings and recommendations of analyzing each of the water, wastewater, and storm
water system’s financial status and related Capital Improvement Program (CIP) projects. Historical trends were
analyzed from data supplied by the City showing the number of customers, volumes, revenue, and revenue
requirements.
Revenue requirements of each enterprise includes operation and maintenance (O&M) expense, routine capital
outlays, CIP funding, debt service, and additions to reserves. Changing conditions such as additional facilities,
system growth, employee additions/reductions, and non-recurring maintenance expenditures are recognized.
Inflation for ongoing expenditures is included to reflect cost escalation.
The financial plan and rates developed herein are based on funding of the CIP and estimates of O&M expenses
provided by the City. Deviation from the financial plans, construction cost estimates and funding requirements,
major operational changes, or other financial policy changes that were not foreseen, may result in the need for
lower or higher revenue than anticipated. It is suggested that the City conduct an update to the rate study at
least every three years for prudent rate planning.
Assumptions
Several assumptions were used to conduct the Study for the period FY 2019-20 to FY 2023-24. The assumptions
included growth rates in customer accounts and related consumption, expense inflation factors, financing and
other assumptions used for projecting revenue and expense and estimating debt service payments. The financial
planning assumptions are provided in Table 1.
Reserve Policy
The City’s reserve policy goals were developed in the previous rate study in 2014. These policies regarding the
level of reserves to be maintained for the water and wastewater utilities have been extended to include the storm
water system. The reserve goals provide a means to meet unanticipated reductions in revenues, meet changes
in the costs of providing services, provide for fixed asset repair and replacement, natural disaster needs, and other
issues. The reserves also provide guidelines to maintain the financial health and stability of the enterprise funds.
The reserve types and the amount of reserves used in this Study are discussed below.
Operating Reserve
The purpose of the Operating Reserve is to provide working capital to meet cash flow needs during normal
operations and support the operation, maintenance and administration of the utility. This reserve ensures that
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operations can continue should there be significant events that impact cash flows. The target balance to be
maintained is 90 days (25 percent) of the current annual operating expense budget.
Capital Reserve
The purpose of the Capital Reserve is to fund future replacement of assets and CIP projects. The Capital reserves
are used to fund the construction of the projects as the projects progress and the funds are expended. The
reserve target has been established at $500,000 each for the water and wastewater systems and $235,000 for
the storm water system.
Facility Fund Reserve
Revenue from water and wastewater development fees (capacity charges) are received and set aside to be used
only for system expansion. The reserves remain in a separate account and are only spent on capital improvement
projects that are specifically identified for which the fee was collected. There are no specific target balances for
the funds.
Lopez Fund Reserve
The Lopez Fund accounts for the revenue and expenditures of the surface water purchases from the County.
Revenues are collected through the water rates in sufficient amounts to provide for a transfer of revenue to meet
Table 1
Assumptions and Planning Factors
Description Value
Annual Account & Demand growth [1]
Single-family Residential 0.5%
All Other 0.0%
Interest earnings on fund reserves (annual)1.50%
Cost Escalation
Personnel Services [2]2.0%
Benefits 8.0%
Electrical Power 3.0%
Chemicals 3.0%
Purchased Water 4.0%
Personnel Transfers 4.0%
All Other Operations & Maintenance 2.0%
Capital 3.0%
[1] Annualized growth in water accounts is based on historical
information provided by staff.
[2] Personnel Services growth in staffing, promotions, and inflation
is 2.0% annually.
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the expenses in the Lopez Fund. A reserve is maintained in the fund at least equal to annual Lopez debt service
of $1,373,500.
Beginning Balances and Reserve Targets
As of June 30, 2019, the City’s beginning reserve balances are listed in the table below. The reserves are used in
developing the financial plans for the water, wastewater, and storm water utility systems. The Target Reserves
are also provided in the table.
Water Financial Planning
Financial planning for the water system includes identifying and projecting revenues and revenue requirements
for a five-year planning period. This section discusses current water rates, current user classifications, projected
revenues and revenue requirements, capital improvement expenditures and financing sources, and proposed
revenue adjustments.
Current Water Rates
Table 3 provides the current water rates of the water system. The current rate structure was established with
the City’s last rate study in 2014. The water rates consist of fixed and variable charges to residential and non-
residential customers. Fixed charges are shown in the table as monthly charges and bills are mailed to customers
bi-monthly. All customers are charged a fixed charge that varies by meter size.
Single-family residential (SFR) and Multifamily residential (MFR) customers are charged for consumption using a
bi-monthly three-tier variable rate structure. Tier 1 for both residential types includes usage per dwelling unit
from zero to 18 hundred cubic feet (HCF). Tier 2 is consumption from 19 to 36 HCF for SFR and 19 to 27 units for
MFR. Tier 3 is consumption over Tier 2. Non-residential customers are charged a uniform rate for water
consumed.
Table 2
June 30, 2019 Beginning Fund Balances and Reserve Targets
Water Wastewater Storm Water
Reserve Reserve Reserve Reserve Reserve Reserve
Reserve Type Balance Target Balance Target Balance Target
Operating Fund Reserve $2,687,700 $838,000 $384,500 $206,000 $0 $91,800
Capital Reserve $500,000 $500,000 $500,000 $500,000 $0 $235,000
Facility Fund Reserve $743,700 $0 $309,600 $0 $0 $0
Lopez Fund $1,582,000 $1,373,500
Total $5,513,400 $2,711,500 $1,194,100 $706,000 $0 $326,800
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Water User Classifications
Number of Customers
The City classifies water customers as SFR, MFR, Commercial, Irrigation, Hydrant (construction), and Wheeling.
SFR customers account for about 90 percent of the total customers (excluding fire accounts) served by the water
system. Growth is projected to occur only in SFR accounts at a rate of 0.50 percent annually or about 30 SFR
accounts added each year, following the assumptions listed in Table 1. Table 4 provides the historical and
projected average number of customers by classification.
Table 3
Current Water Rates
Fixed Variable
Meter Size Charge Customer Class Rate
($/Bi-mo)($/HCF)
5/8" $59.02 Single-Family
3/4" $63.34 Tier 1 - 0 to 18 units $3.78
1" $76.24 Tier 2 - 19 to 36 units $4.16
1.5" $93.46 Tier 3 - Over 36 units $5.55
2" $140.82 Multifamily
3" $489.48 Tier 1 - 0 to 18 units $3.78
4" $618.62 Tier 2 - 19 to 27 units $4.16
6" $919.92 Tier 3 - Over 27 units $5.55
Service Fee Commercial $3.95
for Add'l Unit Irrigation $4.21
Hydrant $6.13
Wheeling $2.04
$7.99
Table 4
Historical and Projected Average Number of Water Customers by Classification
Historical Projected
Customer Class FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Number of Accounts
Single-Family [1]6,060 6,090 6,120 6,151 6,182 6,213
Multifamily 117 117 117 117 117 117
Commercial 416 416 416 416 416 416
Irrigation 160 160 160 160 160 160
Hydrant 1 1 1 1 1 1
Wheeling 1 1 1 1 1 1
Total Accounts 6,755 6,785 6,815 6,846 6,877 6,908
Fire Protection
Public Fire Protection 909 909 909 909 909 909
Private Fire Protection 132 132 132 132 132 132
Total Fire Protection Accounts 1,041 1,041 1,041 1,041 1,041 1,041
Number of Dwelling Units
Single-Family [1]6,060 6,090 6,120 6,151 6,182 6,213
Multifamily 1,606 1,606 1,606 1,606 1,606 1,606
[1] Residential accounts/units are forecast to increase based on the assumed growth rate of 0.5% annually.
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Number of Water Meters
Table 5 provides a summary of the current and projected average number of water customers by meter size. The
majority of customers have 5/8-inch meters (83 percent) installed at the service location. It is assumed that all
new SFR customers will have 1-inch meters installed and this is the minimum size for new meter installations for
the City’s customer base.
Water Sales Volumes
Table 6 provides the historical and projected water sales volume by customer classification. Water sales volumes
were projected by recognizing the growth in the number of accounts and the FY 2018-19 water use per customer.
Table 5
Historical and Projected Average Number of Water Customers by Meter Size
Historical Projected
Description FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Active Water Meters/Accounts [1]
5/8"5,664 5,664 5,664 5,664 5,664 5,664
3/4" 345 345 345 345 345 345
1"541 571 601 632 663 694
1.5"105 105 105 105 105 105
2"73 73 73 73 73 73
3"18 18 18 18 18 18
4"5 5 5 5 5 5
6"4 4 4 4 4 4
Total Accounts 6,755 6,785 6,815 6,846 6,877 6,908
[1] Historical water accounts for FY 18-19 were provided through City billing records.
Table 6
Historical and Projected Water Consumption (in HCF)
Historical Projected [1]
Description FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Single-Family 587,895 590,805 593,716 596,723 599,731 602,738
Multifamily 97,588 97,588 97,588 97,588 97,588 97,588
Commercial 125,768 125,768 125,768 125,768 125,768 125,768
Irrigation 72,007 72,007 72,007 72,007 72,007 72,007
Hydrant 45 45 45 45 45 45
Wheeling 11,000 11,000 11,000 11,000 11,000 11,000
Total Consumption 894,303 897,213 900,124 903,131 906,139 909,146
[1] Forecast assumes that the use per customer from FY 18-19 is applied to the number of customers.
Consumption increases due to the growth in customers.
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Water Financial Plan
The financial plan provides the means of analyzing the revenue and revenue requirements of the water system
and its impact on reserves as well as the ability to fund on-going O&M expense and capital infrastructure
requirements. This section of the Report discusses the projection of revenue, O&M expenses, capital
improvement needs of the water system and its financing, debt service requirements, and revenue adjustments
needed to maintain a sustainable water enterprise.
Revenues
The Water Fund receives revenue from several sources. Operating revenue is received from rates and charges
for water service. Revenue from water rates is projected by applying the current water rates to the projected
number of accounts and consumption volume. Table 7 presents the projected revenue from current water rates
of the water system.
Miscellaneous Revenue
Miscellaneous revenues are received from several sources including collections from delinquent accounts, meter
installations, late payment fees, and other sources. Table 8 below provides sources of miscellaneous revenue.
Table 7
Projected Rate-based Water Revenue Using Existing Rates
Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Water Service Revenues
Fixed Charges [1]$2,612,107 $2,625,830 $2,640,011 $2,654,192 $2,668,372
Variable Charges [2]3,546,747 3,558,349 3,570,331 3,582,319 3,594,303
Subtotal Revenues From Current Rates $6,158,854 $6,184,179 $6,210,342 $6,236,511 $6,262,675
Fire Protection Revenues 71,756 71,756 71,756 71,756 71,756
Total Revenues From Current Rates $6,230,610 $6,255,935 $6,282,098 $6,308,267 $6,334,431
[1] FY 19-20 and forecast revenue calculated by multiplying current water service rate by the number of projected meters.
[2] FY 19-20 and forecast revenue calculated by multiplying projected water sales by the current variable rates.
Table 8
Projected Miscellaneous Revenue
Budget Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Collections Credit Bureau $2,000 $2,000 $2,000 $2,000 $2,000
Meter Installation 10,000 10,000 10,000 10,000 10,000
Utility Billing Late Payment Fees 45,000 45,000 45,000 45,000 45,000
Expense Recovery 30,000 30,000 30,000 30,000 30,000
Total Miscellaneous Revenues $87,000 $87,000 $87,000 $87,000 $87,000
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Revenue Requirements
Revenue requirements of the water system include operation and maintenance (O&M) expense, Transfer to
Lopez Fund for purchased water, annual CIP funding, and debt service. Each of these items are discussed below.
Operation and Maintenance Expense
O&M expenses are an on-going obligation of the water system and such costs are normally met from water
service revenue. O&M includes the cost to operate and maintain the water supply, reservoirs, and distribution
system facilities. Costs also include technical services and other general and administrative expenses.
O&M has been projected recognizing the major expense categories of personnel services, electric power expense,
chemicals, all other expenses, and capital outlay. Personnel costs consist of salaries and benefits expense of
those personnel directly involved with providing water service. Salaries and wages are projected to increase
by 3 percent annually, while benefits expense is projected to increase by 8 percent annually. Electric power
expense is projected to increase annually by 3 percent while chemicals expense increases also by 3 percent
annually. All other O&M expense is projected to increase by 2 percent annually. Capital outlay is projected to
increase by 3 percent annually. Table 9 provides a summary of the O&M expenses for the Study period. A detailed
summary of the budgeted and projected O&M expense is provided in Appendix A-1.
Transfer to Lopez Fund
The Water Fund makes a transfer of funds to the Lopez Fund for purchased water expense. The total expenses
for Lopez water supply include Lopez O&M, capital outlay, Lopez Dam 2011A bond debt service, and State
Revolving Fund (SRF) loan debt service. Lopez O&M expense and capital outlay are projected to increase by 3
percent annually while the debt service payments remain constant.
Annual CIP Funding
The Water Fund pays for annual capital needs or the water system as identified in the City’s CIP plan. The amount
spent annually is irregular and depends on other financing sources to meet the expenditure needs of the City’s
CIP. The amount identified for expenditure in each year of the Study is further discussed below in the Water CIP
section.
Debt Service
The City does not have any outstanding debt on the water system other than the debt service payments
associated with the Lopez purchased water expense. Under the City’s contract with the County, the City is
required to set water rates to provide a debt service coverage ratio of at least 1.25 on the Lopez Dam 2011A
bonds.
Table 9
Projected Operation and Maintenance Expense
Budget Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Administration 2,284,555 2,352,613 2,423,147 2,496,271 2,572,099
Water Production 252,100 262,638 273,789 285,596 298,106
Water Distribution 816,685 1,035,179 1,078,593 1,111,356 1,133,252
Total Water System O&M Expense 3,353,340 3,650,430 3,775,529 3,893,223 4,003,457
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Additionally, if the City pursues construction of the Central Coast Blue (CCB) project, it is anticipated the City
would incur new debt service in FY 2024-25 to fund construction. This scenario is not included in this discussion
of the water rate adjustments in this section but is discussed further below under the section heading Water
Rates with Central Coast Blue.
Water Capital Improvement Program
The City has developed a CIP provided in Table 10 that lists capital expenditures for FY 2019-20 through FY 2023-
24. Over this period the City projects that it would spend over $2.7 million. The major improvements include
Reservoir 3 and 4 Coating and Seismic, Water Reservoir No. 7, and Phased Main Replacements at South Halcyon.
Other projects include corporation yard upgrades, service line replacements, and studies. The CIP is planned to
be funded from the Water Fund.
Water Financial Plan
A financial plan has been prepared that includes the revenues and revenue requirements that were identified
for the water system. The financial plan, presented in Table 11, incorporates specific financial planning goals
to provide guidance to maintain the health of the water utility on an on-going basis. The goals included the
following.
Generate positive levels of income in each year of the Study period
Maintain the operating, capital, and Lopez Fund reserves at or greater than target levels
Maintain debt service coverage ratios at or greater than the minimum required
Maintain the annual capital funding requirement
Table 10
Water Capital Improvement Program
Budget Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Current Capital Improvement Program (CIP) Projects [1]
Corporation Yard Upgrades $735 $15,000 $15,000 $15,000 $15,000
Financial Management Software 75,000 - - - -
Phased Main Replace - Fair Oaks - 215,700 - - -
Phased Main Replace - S Halcyon - - 358,400 - -
Phased Main Replace - Cornwall - - - 268,100 -
Water Reservoir No. 7 254,741 145,400 - - -
Water Well No. 11 Facilities 42,261 - - - -
Galvanized Service Replacements 129,850 - - - -
Coach & Garden Pipe Bridges Evaluation 56,876 - - - -
Well Siting Study 29,721 - - - -
Water Meter Software Upgrade 35,000 - - - -
Phased Main Replacement - Hwy 101 - - - - 202,400
Reservoir 3 and 4 Coating & Seismic - - - - 799,300
Water Master Plan Update - - 100,000 - -
Utilities Rate Study Update - - - - 20,000
Total Water CIP $624,184 $376,100 $473,400 $283,100 $1,036,700
[1] CIP Source: FY 19-20 City CIP document. Represents only Water Fund portion of project.
Item 4 - Page 27
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 19
Table 11
Water Financial Plan
Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Proposed Revenue Increase (January 20)6.8%
Proposed Revenue Increase (January 1)6.8% 6.8% 6.8% 6.8%
Water Fund - 640
Revenue
Revenues from Existing Water Rates [1]$6,230,610 $6,255,935 $6,282,098 $6,308,267 $6,334,431
Total Additional Water Sales Revenue [2]141,227 614,709 1,086,437 1,594,111 2,140,312
Miscellaneous Income 87,000 87,000 87,000 87,000 87,000
Interest Income [3]47,934 29,555 11,112 4,635 400
Total Revenues $6,506,771 $6,987,199 $7,466,647 $7,994,013 $8,562,143
Expenditures
Operation and Maintenance Expense $3,353,340 $3,650,430 $3,775,529 $3,893,223 $4,003,457
Transfer to Lopez Fund 3,744,197 3,852,080 3,912,034 3,973,782 4,037,389
Capital Improvement Funding 624,184 376,100 473,400 283,100 1,036,700
Total Expenditures $7,721,721 $7,878,610 $8,160,963 $8,150,105 $9,077,546
Net Funds Available ($1,214,950) ($891,411) ($694,316) ($156,092) ($515,403)
Available Reserves
Beginning available reserves [4]$3,187,700 $1,972,750 $1,081,340 $387,024 $230,931
Ending available reserves $1,972,750 $1,081,340 $387,024 $230,931 ($284,471)
Target Reserves [5]1,338,000 1,413,000 1,444,000 1,473,000 1,501,000
Lopez Fund - 641
Revenues
Transfer In from Water Fund $3,744,197 $3,852,080 $3,912,034 $3,973,782 $4,037,389
Interest Income [2]23,900 24,300 24,600 25,000 25,400
Total Lopez Revenues $3,768,097 $3,876,380 $3,936,634 $3,998,782 $4,062,789
Expenditures
Lopez Water Expense $2,370,676 $2,478,559 $2,538,513 $2,600,261 $2,663,868
Lopez Dam Bonds - 2011A Debt Service 445,475 445,475 445,475 445,475 445,475
SRF Loan Debt Service 928,046 928,046 928,046 928,046 928,046
Total Lopez Expenditures 3,744,197 3,852,080 3,912,034 3,973,782 4,037,389
Net Lopez Funds Available $23,900 $24,300 $24,600 $25,000 $25,400
Lopez Available Reserves
Lopez Beginning available reserves 1,582,000 1,605,900 1,630,200 1,654,800 1,679,800
Lopez Ending available reserves $1,605,900 $1,630,200 $1,654,800 $1,679,800 $1,705,200
Lopez Target Reserves [6]1,373,500 1,373,500 1,373,500 1,373,500 1,373,500
Combined Reserves
Total Reserves (Fund 640 and 641)$3,578,650 $2,711,540 $2,041,824 $1,910,731 $1,420,729
Target Total Reserves (Fund 640 and 641) $2,711,500 $2,786,500 $2,817,500 $2,846,500 $2,874,500
Debt Service Coverage
Total Revenues (Fund 640 and 641)$6,530,671 $7,011,499 $7,491,247 $8,019,013 $8,587,543
Total Expenses (Fund 640 and 641)$7,097,537 $7,502,510 $7,687,563 $7,867,005 $8,040,846
Net Revenues ($121,391) ($45,536) $249,159 $597,483 $992,172
Lopez Dam Bonds - 2011A Debt Service 445,475 445,475 445,475 445,475 445,475
Debt Service Coverage [7]-27% -10% 56% 134% 223%
[1] Projected using the existing rates.
[2] Additional revenue from proposed rate adjustments.
[3] Interest earnings on the average fund balance calculated at 1.5%.
[4] The available beginning FY 19-20 cash balance provided by City. Includes operating and capital funds.
[5] Target reserve estimated at 90 days of operation and maintenance expense and capital reserves target.
[6] Equal to Lopez annual debt service.
[7] Minumum coverage is 125 percent.
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Tuckfield & Associates FINAL DRAFT 20
Proposed Revenue Adjustments
Table 11 provides the annual revenue increases recommended to meet the financial planning criteria for the
five-year Study Period. The financial plan indicates that 6.8 percent revenue increases are recommended on
January 20, 2020 and on each January 1 through FY 2023-24, with inflationary increases of 3.0 percent
thereafter. The increases are necessary to meet the planning criteria discussed above.
A graphical depiction of the revenue and revenue requirements from Table 11 are presented in Figure 1.
Revenue using the current rates is shown as the black line while revenue with revenue adjustments is shown
as the red line. The green line represents the cash reserve balance at the end of year (which includes operating,
capital and Lopez reserves) while the purple line indicates the Target Reserve level for these reserves.
Figure 1 shows that the revenue increases in Table 11 are necessary to meet annual O&M expense, Lopez
purchased water expense, CIP funding, and the Target reserve maintenance level. The figure shows that the
reserve balance (green line) declines in the middle years of the Study but returns above the Target reserve
level in later years.
Figure 2 shows the debt service coverage ratio of the Lopez Dam Bonds 2011A debt service. The figure shows
that the coverage requirement is not currently being met, however is met in FY 2022-23 and in later years with
the revenue increases proposed in the water financial plan in Table 11.
Figure 1
Water Financial Plan
Comparison of Revenue with Annual Obligations
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
$0
$2
$4
$6
$8
$10
$12
FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28 Target and Ending Cash ($ Millions)Sources and Uses ($ Millions)O&M Lopez Water Capital Improvement Funding
Revenue with Increases Revenue w/o Increases Total Reserve (Excl Expansion)
Target Reserve
Item 4 - Page 29
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 21
Water Cost of Service
This section of the report discusses the allocation of the water system’s operating and capital costs for use in
designing water rates. The agency responsible for imposing property-related fees in California is required to
establish rates that create a nexus between the cost of providing service and the rates to be imposed.
Industry Methodology
This Study uses methodologies from the American Water Works Association (AWWA) to allocate costs in an
appropriate manner. AWWA is an industry trade organization that provides guidance on operations and
management of water utilities. AWWA provides general principles to assist agencies in the design of water rates
such that they are consistent with local requirements as well as recognizing state laws. The AWWA guidelines
have been used to conduct this Study and have been used in the design of the City’s water rates while also
following Proposition 218 and the recent San Juan Capistrano court decision.
The annual costs of providing water service from the financial plan are allocated to cost components following
guidelines provided in the AWWA Manual M1. The methodology provides the basis to design rates to generate
sufficient revenue to meet estimated annual revenue requirements from the financial plan. Costs are then
recovered through fixed charges and variable charges to water system users.
Figure 2
Water Debt Service Coverage Ratio
0%
50%
100%
150%
200%
250%
300%
350%
400%
FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28
Debt Service Coverage Ratio Target Ratio
Item 4 - Page 30
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Costs of Service to be Allocated
The annual water cost of service consists of the O&M expenses and capital costs of the water system. O&M
expenses include costs related to Lopez water supply, water distribution, operation and maintenance of the
facilities, and general and administrative costs. Capital costs include capital improvement program funding and
debt service discussed in the financial plan.
Costs are first allocated to water system cost component based on the operating characteristics and design of the
water system facilities. Cost allocations consider the average quantity of water consumed as well as the peak
rate at which water is consumed. The water system is designed to serve average and peak demands, and costs
that are related to serving average and peak demands are allocated in a manner such that they may be recovered
appropriately.
The cost allocation components for water service for this Study are Water Supply (groundwater and Lopez water),
Delivery, Peaking, Meters and Services, Customer, and Direct Fire Protection. The parameters have been further
expanded to recognize those costs that are common to all customers, and those that exclude Wheeling
customers. Wheeling customers do not pay for water supply costs. FY 2019-20 was used as the Test Year for
assigning the operating and capital costs of the water system to each of these parameters. The total cost to be
recovered from the users of the water system by cost component for FY 2019-20 is presented in Table 12.
Appendix A-2 provides a detailed allocation.
Water Rate Design
The cost of service analyses described in the previous section provides the basis for water rate design. The intent
of the rate design is to achieve fairness and ensure that each customer class pays its fair share of costs. Rates
should be simple to administer, easy to understand, and comply with regulatory requirements. This section
describes how water rates and charges are designed and includes the proposed schedule of water rates for
implementation.
Proposed Rate Structure
The recommended water rate structure includes maintaining the fixed charge structure, however modifying the
variable rate structure to (1) revise the tier break points for SFR customers and (2) provide an individual uniform
volume charge for MFR and other customers.
Table 12
Allocation of Water Revenue Requirements to Cost Component
FY 19-20 Common to All Except Wheeling
Revenue Common to All Direct Fire Water
Requirement Delivery Peaking Meters/Serv Customer Protection Supply Delivery Peaking Lopez Debt
$6,654,292 $710,569 $1,367,760 $82,704 $83,705 $144,429 $2,273,841 $218,576 $192,352 $1,580,356
Item 4 - Page 31
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Tuckfield & Associates FINAL DRAFT 23
Proposed Fixed Charges
The proposed fixed charges recover the Customer, Meters and Services, and Lopez debt service costs of service
identified from Table 12 and also recovers costs allocated to public fire protection. Customer costs are recovered
based on the number of bills issued. Meters and Services, Lopez debt service, and public fire protection costs are
recovered based on meter and service ratios provided by AWWA.
Tables 13 below presents the design of the proposed monthly fixed charges for customers for FY 2019-20 for a
5/8-inch meter. The current fixed charges generate about 42 percent of revenue from water rates. The proposed
fixed charges generate approximately 38 percent of the revenue from water rates.
Fixed charges for meter sizes greater than 5/8-inch are increased as shown below in Table 14 for FY 2019-20. The
Meter and Services charge, Lopez Debt Service, and Public Fire Protection increase with meter and service cost
ratios while the Customer charge does not increase with meter size.
Table 13
Design of Fixed Charges
Customer Service Cost FY 19-20
Customer Cost $83,705
Number of Bills 40,704
Customer Cost per Unit $2.06
Meters and Services Cost FY 19-20
Meters and Services Cost $82,704
Lopez Debt Service $1,580,356
Public Fire Protection $771,333
Meters and Services Cost $2,434,393
Number of Equivalent Meters & Services 45,448
Meters and Services Cost per Unit $53.56
Base Fixed Charge - 5/8" Meter $55.62
Table 14
Design of Fixed Charges by Meter Size
FY 19-20
Meter & Meter &Public Total
Meter Service Services Fire Customer Bi-Monthly
Size Ratio Charge Protection Charge Charge
inches
5/8"1.00 $1.82 $34.77 $16.97 $2.06 $55.62
3/4" 1.10 $2.00 $38.25 $18.67 $2.06 $60.98
1"1.40 $2.55 $48.68 $23.76 $2.06 $77.05
1.5"1.80 $3.28 $62.59 $30.55 $2.06 $98.48
2"2.90 $5.28 $100.84 $49.22 $2.06 $157.39
3"11.00 $20.02 $382.50 $186.69 $2.06 $591.27
4"14.00 $25.48 $486.82 $237.61 $2.06 $751.96
6"21.00 $38.22 $730.24 $356.41 $2.06 $1,126.93
Lopez Debt
Service
Item 4 - Page 32
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Proposed Private Fire Protection Fixed Charges
Annual costs allocated to the Fire Protection cost component are separated into Public and Private Fire Protection
costs. Public Fire Protection costs are included into the monthly service charges as shown in Table 13. Private
Fire Protection costs are recovered from those customers that receive the direct fire protection benefit. The
monthly cost by equivalent hydrant size is provided in Table 15 and the monthly private fire protection charges
are designed as shown in Table 16.
Proposed Service Fee per Additional Unit Charge
The City charges for additional dwelling units that are connected to SFR customers. The charge is established as
2 HCF of water consumption bi-monthly at the Tier 1 rate. The additional unit charge is shown on Table 20.
Proposed Variable Charges
Variable charges are designed to recover the costs that were allocated to the Water Supply, Delivery, and Peaking
components shown in Table 12. Consumption and peaking characteristics of water system customers were
analyzed to allocate costs to customer classification as well as between each tier. The water supply, delivery, and
peaking costs are discussed below.
Water Supply Costs
The City’s water supply costs consist of those costs related to groundwater and Lopez water. Water supply costs
are shared uniformly by all customers of the water system.
Delivery Costs
Delivery costs are operating and capital costs of the water system related to delivering water to all customers at
an average rate of use. Delivery costs tend to vary with the total quantity of water consumed under average
demand conditions. These costs are also shared uniformly by all customers of the system.
Peaking Costs (Max Day and Max Hour)
Peaking costs are costs associated with meeting peak rates of demand requirements of the water system and
include operating and capital costs beyond that required for average rates of use. Water system facilities are
designed to meet peak demand requirements and are apportioned to customer classes based on their system
Table 16
Design of Private Fire Protection Charges
FY 19-20
Bi-Monthly
Hydrant Hydrant Hydrant
Size Ratio Charge
2"0.06 $6.39
3"0.16 $18.57
4"0.34 $39.57
6"1.00 $114.94
8"2.13 $244.95
10" 3.83 $440.50
Table 15
Design of 6-Inch Private Fire Protection Charges
Fire Protection FY 19-20
Private Fire Protection Cost $58,607
Private Fire Protection Eq. 6" Hydrants 510
Private Fire Protection 6" Charge $114.94
Item 4 - Page 33
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Tuckfield & Associates FINAL DRAFT 25
use characteristics. Peaking costs may be assigned to tiers in a tiered-rate structure based on the customers
within the tier that are causing the peak demand.
Proposed Single-family Residential Variable Rates
For this Study it is proposed that the current three-tier rate structure be maintained for SFR customers, however
the tier break points are proposed to be modified. For SFR customers, Tier 1 is defined as consumption to provide
basic indoor water use and is based on 2.39 persons per household (pph) using 55 gallons per capita per day
(gcpd) resulting in a Tier 1 breakpoint of 10 HCF (2.39 pph x 55 gpcd x 365 days per year ÷ 748 gal per HCF ÷ 6
billing periods per year). Tier 2 is defined as consumption related to outdoor water use up to the average SFR
summer peak demand which was determined from billing information to be 20 HCF. Tier 3 is defined as water
use above Tier 2.
Table 17 provides a summary of the variable rate components applicable to the SFR classification consisting of
Water Supply, Delivery, and Peaking costs. Water Supply and Delivery costs are allocated to tiers based on water
consumption in each tier. Peaking costs are allocated to the defined tiers based on the peaking factors that occur
from customers within the tiers based on the tier break points discussed above. Tier 1 is considered to have a
peaking factor of 1.0, Tier 2 and Tier 3 have peaking factors that reflect the average use per customer within these
tiers as a ratio to Tier 1.
The sum of the three component’s unit rates equals the water rates in the tiers for the SFR classification. Table
18 provides the resulting water rate by tier from summing the Water Supply, Delivery, and Peaking unit rates.
Table 17
Design of Single-Family Tiered Rate Structure
FY 19-20
Water Supply Water Component of Variable Charge
Tier % Water Supply Unit Rate
Line No. Tier Range Consumption Share Costs $/HCF
1 Tier 1 0 - 10 306,445 51.9%$786,274 $2.57
2 Tier 2 11 - 20 153,276 25.9%$393,275 $2.57
3 Tier 3 Over 20 131,085 22.2%$336,336 $2.57
4 590,805 100.0% $1,515,885
Delivery Component of Variable Charge
Tier % Base Fixed Unit Rate
Line No. Tier Range Consumption Share Costs $/HCF
5 Tier 1 0 - 10 306,445 51.9%$318,277 $1.04
6 Tier 2 11 - 20 153,276 25.9%$159,195 $1.04
7 Tier 3 Over 20 131,085 22.2%$136,146 $1.04
8 590,805 100.0% $613,618
Peaking Component of Variable Charge
Tier Peaking Weighted Peaking Unit Rate
Line No. Tier Range Factor Consumption Costs $/HCF
9 Tier 1 0 - 10 1.00 306,445 $211,960 $0.69
10 Tier 2 11 - 20 1.65 253,391 $175,264 $1.14
11 Tier 3 Over 20 2.00 262,170 $181,336 $1.38
12 822,005 $568,559
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SFR customers pay for the same Water Supply and Delivery costs per HCF, however they pay for their individual
peaking requirements and associated costs depending on which tier their consumption falls into.
Proposed Multifamily and Non-Residential Variable Rates
For MFR and Non-Residential customers, it is proposed that these classes have an individual uniform volume rate
structure that recognizes a blending of the three components of Water Supply, Delivery, and Peaking costs.
However, each classification will recognize the individual peaking characteristics of its class in their variable rate.
MFR is proposed to have a uniform variable charge because it was found that there is very little water use above
the current Tier 1 break point of 18 HCF and that over 87 percent of MFR water use is consumed in the zero to 10
HCF block per dwelling unit. A uniform variable rate structure is recommended for MFR and other Non-residential
classes as they are intended to have separate irrigation meters. Table 19 below provides the MFR and non-
residential variable rates.
Proposed Water Rates
Table 20 presents the proposed fixed charges and variable charges for the water system for the next five years.
Table 20 includes the current fixed and variable rates as well as future water rates for implementation beginning
Table 18
Single-family Residential Tiered Water Rates
FY 19-20
Water Total
Tier Range Supply Delivery Peaking Rate
HCF $/HCF $/HCF $/HCF $/HCF
Tier 1 0 - 10 $2.57 $1.04 $0.69 $4.30
Tier 2 11 - 20 $2.57 $1.04 $1.14 $4.75
Tier 3 Over 20 $2.57 $1.04 $1.38 $4.99
Table 19
Design of MFR and Non-Residential Volume Rates
FY 19-20
Total Uniform
Description Costs Volume Rate
Ccf $/HCF
Multifamily 427,401 97,588 $4.38
Commercial 550,895 125,768 $4.38
Irrigation 382,502 72,007 $5.31
Hydrant 210 45 $4.67
Wheeling 18,759 11,000 $1.71
Item 4 - Page 35
Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 27
on January 20, 2020 and each January 1 through FY 2023-24. The table also includes the current variable charges
by rate tier and the new rate structure for January 20, 2020. Water system fixed and variable charges beyond
January 20, 2020 are increased by the percentages shown in the financial plan in Table 11.
Water Bill Impact Analysis
An impact analysis was performed to evaluate the change in SFR customer bills that would occur from the
implementation of the proposed water rates for the January 20, 2020 rate structure implementation. As shown
in Table 21, a SFR customer with a 5/8-inch meter using the average consumption of 16 HCF bi-monthly will
Table 20
Proposed Water Fixed and Variable Charges without Central Coast Blue
Current January 20, January 1, January 1, January 1, January 1,
Rate FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $27.81 $29.70 $31.72 $33.88 $36.18
3/4" $31.67 $30.49 $32.56 $34.77 $37.13 $39.65
1"$38.12 $38.52 $41.14 $43.94 $46.93 $50.12
1.5" $46.73 $49.24 $52.59 $56.17 $59.99 $64.07
2"$70.41 $78.70 $84.05 $89.77 $95.87 $102.39
3" $244.74 $295.63 $315.73 $337.20 $360.13 $384.62
4" $309.31 $375.98 $401.55 $428.86 $458.02 $489.17
6" $459.96 $563.46 $601.78 $642.70 $686.40 $733.08
8" $632.14 $777.72 $830.60 $887.08 $947.40 $1,011.82
Service Fee per Add'l Unit $7.99 $8.59 $9.18 $9.80 $10.47 $11.18
Variable Charge ($ per HCF)
Single-Family
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 36 units $4.16
Tier 3 - Over 36 $5.55
Tier 1 - 0 to 10 units $4.30 $4.59 $4.90 $5.23 $5.59
Tier 2 - 11 to 20 units $4.75 $5.07 $5.41 $5.78 $6.17
Tier 3 - Over 20 $4.99 $5.33 $5.69 $6.08 $6.49
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
MFR All Consumption $4.38 $4.68 $5.00 $5.34 $5.70
Commercial $3.95 $4.38 $4.68 $5.00 $5.34 $5.70
Irrigation $4.21 $5.31 $5.67 $6.06 $6.47 $6.91
Hydrant $6.13 $4.67 $4.99 $5.33 $5.69 $6.08
Wheeling $2.04 $1.71 $1.82 $1.94 $2.07 $2.21
Item 4 - Page 36
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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experience a bill that will increase from $119.50 to $127.12 an increase of $7.62 or 6.4 percent. Table 22 provides
future SFR bills calculated using the proposed rates in Table 20 at the average consumption of 16 HCF bi-monthly.
Table 21
Comparison of Current Single-family Residential Bi-monthly Water Bill with 5/8-inch
Meter Size with Proposed Bill Using January 2020 Water Rates
Current Bill Proposed FY 19-20 Bill
Service Volume Current Service Volume Proposed Dollar Percent
Description Use (HCF) Charge Charge Bill Charge Charge Bill Difference Change
0 $59.02 $0.00 $59.02 $55.62 $0.00 $55.62 ($3.40) -5.8%
Very Low 5 $59.02 $18.90 $77.92 $55.62 $21.50 $77.12 ($0.80) -1.0%
Low 10 $59.02 $37.80 $96.82 $55.62 $43.00 $98.62 $1.80 1.9%
Median 13 $59.02 $49.14 $108.16 $55.62 $57.25 $112.87 $4.71 4.4%
Average 16 $59.02 $60.48 $119.50 $55.62 $71.50 $127.12 $7.62 6.4%
High 20 $59.02 $76.36 $135.38 $55.62 $90.50 $146.12 $10.74 7.9%
Very High 30 $59.02 $117.96 $176.98 $55.62 $140.40 $196.02 $19.04 10.8%
50 $59.02 $220.62 $279.64 $55.62 $240.20 $295.82 $16.18 5.8%
Table 22
Single-family Residential Bi-monthly Water Bill Impacts at 16 HCF Bi-monthly
Proposed
SFR Charges Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges $59.02 $55.62 $59.40 $63.44 $67.76 $72.36
Variable Charges $60.48 $71.50 $76.32 $81.46 $86.98 $92.92
Total Charges $119.50 $127.12 $135.72 $144.90 $154.74 $165.28
Dollar Change $7.62 $8.60 $9.18 $9.84 $10.54
Percent Change 6.4% 6.8% 6.8% 6.8% 6.8%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges Variable Charges
$119.50 $127.12
$135.72
$144.90
$154.74 $165.28
Item 4 - Page 37
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Water Rate Survey
A water rate survey was conducted for neighboring communities to the City of Arroyo Grande. Chart 1 compares
the Arroyo Grande SFR estimated bi-monthly water bill with those of neighboring communities at the same
consumption of 16 HCF bi-monthly. The rate survey includes rate schedules in effect July 2019. Water bills for
Arroyo Grande are shown using the current rates and the proposed January 20, 2020 rates. The chart indicates
that with the January 2020 water rate structure change, an Arroyo Grande SFR customer using the average bi-
monthly consumption of 16 HCF will experience a bill that is in the mid-range of the communities listed.
Water Rates with Central Coast Blue
Central Coast Blue (CCB) is a water sustainability project that will create a new, high quality, and reliable water
supply for the City of Arroyo Grande and other agencies. The CCB project will provide a new advanced water
purification facility to create a high-quality water source to supplement local supplies. Originally, the
communities of Pismo Beach, Arroyo Grande, Grover Beach, Oceano, and South San Luis Obispo County
Sanitation District (SSLOCSD) were in discussions regarding each agencies’ share of the project. However, only
the cities of Arroyo Grande, Pismo Beach, and Grover Beach are currently in discussions to design and build the
project. The CCB project will allow these communities to have sufficient supplies even in times of water shortage
or drought.
Chart 1
Single-family Residential Bi-Monthly Water Bills Using 16 HCF without Central Coast Blue
Note: Above table uses water rates in effect July 2019. Arroyo Grande January 2020 bill is based on the rate
structure and rates in Table 20.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Current discussions indicate that the City of Arroyo Grande would likely need to support 39% of the overall project
cost. City staff has assumed that the water enterprise fund will support the City’s share of the project cost and
the water rates designed in this section will support the CCB project pipelines, storage, advance treatment,
recycled water pump station, and injection wells.
Water Financial Plan Revenue Increases with Central Coast Blue
With the addition of the CCB project, the City will incur additional operating and capital costs. The City’s share of
operating costs of the project are estimated at about $881,400 beginning in FY 2024-25 when the CCB project is
expected to be operational. The annual O&M costs escalate with inflation after this year.
Prior to FY 2024-25, the City will incur capital costs related to permitting, applications, program management,
and design which will occur prior to construction, shown in Appendix A-3. These costs are assumed to be funded
with water rate revenue and cash reserves. The City will incur new debt service from loan proceeds to fund its
share of Phase 1 construction of the CCB project in FY 2024-25. It is assumed that this amount is financed at 2.5
percent for 30 years and will have annual debt service payments of about $624,000 beginning in FY 2024-25.
Table 23 below provides a comparison of the water revenue increases required without the CCB project to the
increases required with the CCB project. The increases with the CCB project are necessary to meet the additional
O&M costs of the CCB project of about $881,400, meet the debt service payments of the CCB project of about
$624,000, and to provide debt service coverage of 1.25 times beginning in FY 2024-25. The water financial plan
with the CCB project is provided in Appendix A-4.
Table 23
Annual Revenue Increases with and without Central Coast Blue Project
January 1 of
Fiscal Year
Annual Increases
without Central
Coast Blue
Annual Increases
with Central Coast
Blue
FY 2019-20 [1] 6.8% 9.6%
FY 2020-21 6.8% 9.6%
FY 2021-22 6.8% 9.6%
FY 2022-23 6.8% 9.6%
FY 2023-24 6.8% 9.6%
[1] Increases this year do not match Tables 22 and 26 due to rate structure change and cost of service adjustments.
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Figure 3 shows the debt service coverage ratio that includes the annual debt service payment related to the CCB
project. The figure illustrates that debt service coverage is met in the year of debt issuance and is maintained
through the Study Period.
Water Rates with Central Coast Blue
Table 24 presents the water rates that include the CCB project. The water rates were designed in the same
manner as water rates without the project as discussed above in the Water Rate Design section.
Water Bill Impacts with Central Coast Blue
Table 25 provides the bi-monthly bills at various usage levels for a SFR customer with a 5/8-inch meter compared
with the bills using current water rates. Table 26 shows how the bills would escalate over time with the revenue
increases that include the CCB project.
Table 27 provides a comparison of the SFR bi-monthly bills with and without the CCB project at various use levels
while also providing the dollar difference and the percentage difference in the bills. The average SFR customer
with a 5/8-inch meter using 16 HCF will pay $3.03 more bi-monthly in FY 2019-20 with the CCB project than
without the project, increasing to $22.56 more in FY 2023-24.
Figure 3
Water Debt Service Coverage Ratio with Central Coast Blue
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28
Debt Service Coverage Ratio Target Ratio
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Table 24
Proposed Water Fixed and Variable Charges with Central Coast Blue
Current January 20, January 1, January 1, January 1, January 1,
Rate FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $28.33 $31.05 $34.03 $37.30 $40.88
3/4" $31.67 $31.06 $34.04 $37.31 $40.89 $44.82
1"$38.12 $39.25 $43.02 $47.15 $51.68 $56.64
1.5" $46.73 $50.18 $55.00 $60.28 $66.07 $72.41
2"$70.41 $80.24 $87.94 $96.38 $105.63 $115.77
3" $244.74 $301.54 $330.49 $362.22 $396.99 $435.10
4" $309.31 $383.51 $420.33 $460.68 $504.91 $553.38
6" $459.96 $574.77 $629.95 $690.43 $756.71 $829.35
8" $632.14 $793.35 $869.51 $952.98 $1,044.47 $1,144.74
Service Fee per Add'l Unit $7.99 $8.81 $9.66 $10.59 $11.61 $12.72
Variable Charge ($ per HCF)
Single-Family
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 36 units $4.16
Tier 3 - Over 36 $5.55
Tier 1 - 0 to 10 units $4.41 $4.83 $5.29 $5.80 $6.36
Tier 2 - 11 to 20 units $4.90 $5.37 $5.89 $6.46 $7.08
Tier 3 - Over 20 $5.16 $5.66 $6.20 $6.80 $7.45
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
MFR All Consumption $4.50 $4.93 $5.40 $5.92 $6.49
Commercial $3.95 $4.50 $4.93 $5.40 $5.92 $6.49
Irrigation $4.21 $5.50 $6.03 $6.61 $7.24 $7.94
Hydrant $6.13 $4.91 $5.38 $5.90 $6.47 $7.09
Wheeling $2.04 $1.83 $2.01 $2.20 $2.41 $2.64
Table 25
Comparison of Current Single-family Residential Bi-monthly Water Bill with 5/8-inch
Meter Size with Proposed Bill Using January 2020 Water Rates with Central Coast Blue
Current Bill Proposed FY 19-20 Bill
Service Volume Current Service Volume Proposed Dollar Percent
Description Use (HCF) Charge Charge Bill Charge Charge Bill Difference Change
0 $59.02 $0.00 $59.02 $56.65 $0.00 $56.65 ($2.37) -4.0%
Very Low 5 $59.02 $18.90 $77.92 $56.65 $22.05 $78.70 $0.78 1.0%
Low 10 $59.02 $37.80 $96.82 $56.65 $44.10 $100.75 $3.93 4.1%
Median 13 $59.02 $49.14 $108.16 $56.65 $58.80 $115.45 $7.29 6.7%
Average 16 $59.02 $60.48 $119.50 $56.65 $73.50 $130.15 $10.65 8.9%
High 20 $59.02 $76.36 $135.38 $56.65 $93.10 $149.75 $14.37 10.6%
Very High 30 $59.02 $117.96 $176.98 $56.65 $144.70 $201.35 $24.37 13.8%
50 $59.02 $220.62 $279.64 $56.65 $247.90 $304.55 $24.91 8.9%
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Chart 2 provides a comparison of SFR bi-monthly bills with CCB to bills of other communities at the same
consumption. The chart shows that Arroyo Grande SFR bills with CCB remains in the mid-range of the bills.
Table 26
Single-family Residential Bi-monthly Water Bill Impacts at 16 HCF Bi-monthly
with Central Coast Blue
Proposed
SFR Charges Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges $59.02 $56.65 $62.10 $68.06 $74.60 $81.76
Variable Charges $60.48 $73.50 $80.52 $88.24 $96.76 $106.08
Total Charges $119.50 $130.15 $142.62 $156.30 $171.36 $187.84
Dollar Change $10.65 $12.47 $13.68 $15.06 $16.48
Percent Change 8.9% 9.6% 9.6% 9.6% 9.6%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges Variable Charges
$119.50 $130.15
$142.62
$156.30
$171.36 $187.84
Table 27
Impacts to Single-family Residential Bi-monthly Water Bills
With and without Central Cost Blue Project at 16 HCF
January 20 January 1 January 1 January 1 January 1
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Average Bill w/o CCB $127.12 $135.72 $144.90 $154.74 $165.28
Average Bill with CCB $130.15 $142.62 $156.30 $171.36 $187.84
Difference $3.03 $6.90 $11.40 $16.62 $22.56
Item 4 - Page 42
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Chart 2
Single-family Residential Bi-Monthly Water Bills Using 16 HCF with Central Coast Blue
Note: Above table uses water rates in effect July 2019. Arroyo Grande January 2020 bill is based on the rate
structure and rates in Table 24.
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Wastewater Financial Planning
Financial planning for the wastewater enterprise includes identifying and projecting revenues and revenue
requirements of the wastewater system for a five-year planning period. Estimates of revenue from various
sources are compared with the projected revenue requirements. This comparison allows the review of the
adequacy of existing revenue to meet annual obligations and provide the basis for revenue adjustments. New
wastewater rates and charges are created to recover all of the City’s annual operating and capital costs associated
with the wastewater system.
This section discusses the assumptions, current wastewater rates, user classifications, revenues and revenue
requirements, planned CIP projects and financing sources, and proposed revenue adjustments.
Current Wastewater Rates
The current wastewater rates consist of fixed and variable charges to residential and non-residential customers.
All customers are charged the same fixed charged bi-monthly. Residential and Non-residential customers are
charged different variable rates. The current rates are presented in Table 28.
Wastewater User Classifications
Number of Customers
The City currently classifies wastewater customers as SFR, MFR, and one of seven classifications for non-
residential customers. Residential customers, including SFR and MFR, account for about 94 percent of the total
accounts served by the wastewater system. Table 29 provides the historical and projected average number of
customers by classification.
Table 28
Current Wastewater Rates
Fixed Variable
Classification Charges Charges
[1]
$/month $/HCF
Single-family Residential [2]$2.40 $0.67
Multifamily Residential [2]2.40 0.94
Business 2.40 1.32
Church 2.40 1.32
School 2.40 1.32
Hospital 2.40 1.32
Motel 2.40 1.32
Convalescent Home [2]2.40 1.32
Non-Residential $2.40 $1.32
[1] Charged based on water consumption.
[2] Charged to each dwelling unit including additional units.
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Water Sales Volumes of Wastewater Customers
Table 30 provides the historical and projected water sales volumes of wastewater customers by classification.
Water sales volumes were projected by recognizing the growth in the number of accounts and the FY 2018-19
use per customer. Residential (SFR and MFR) customers account for more than 84 percent of the water sales
volumes of wastewater customers.
The water sales volumes of wastewater customers are used to calculate projected wastewater revenue and
estimate wastewater discharge volumes. The wastewater discharge volumes are used for cost allocation
purposes to assign cost responsibility based on wastewater flow of each class.
Table 29
Historical and Projected Average Number of Wastewater Customers by Classification
Historical Projected
Customer Class FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Number of Accounts
Single-family Residential [1] 6,060 6,090 6,120 6,151 6,182 6,213
Multifamily Residential 117 117 117 117 117 117
Business 373 373 373 373 373 373
Church 14 14 14 14 14 14
School 14 14 14 14 14 14
Hospital 3 3 3 3 3 3
Motel 9 9 9 9 9 9
Convalescent Home 3 3 3 3 3 3
Total Accounts 6,593 6,623 6,653 6,684 6,715 6,746
Number of Units
Multifamily Residential [2]1,606 1,606 1,606 1,606 1,606 1,606
Convalescent Home [2]153 153 153 153 153 153
[1] Accounts/units are forecast to increase based on the assumed growth rate of 0.5% annually.
[2] Multifamily reflects number of dwelling units. Convalescent reflects number of beds.
Table 30
Historical and Projected Water Consumption of Wastewater Customers (HCF)
Historical Projected [1]
Description FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Single-family Residential 587,895 590,805 593,716 596,723 599,731 602,738
Multifamily Residential 97,588 97,588 97,588 97,588 97,588 97,588
Business 78,342 78,342 78,342 78,342 78,342 78,342
Church 7,808 7,808 7,808 7,808 7,808 7,808
School 15,336 15,336 15,336 15,336 15,336 15,336
Hospital 5,770 5,770 5,770 5,770 5,770 5,770
Motel 13,662 13,662 13,662 13,662 13,662 13,662
Convalescent Home 4,850 4,850 4,850 4,850 4,850 4,850
Total Projected Consumption 811,251 814,161 817,072 820,079 823,087 826,094
[1] Forecast based on application of FY 18-19 use per customer to the number of customers.
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Wastewater Financial Plan
The financial plan provides the means of analyzing the revenue and revenue requirements of the wastewater
system and its impact on reserves as well as the ability to fund on-going O&M expense and capital infrastructure
requirements. This section of the report discusses the projection of revenue, O&M expenses, CIP needs of the
wastewater system and its financing, and revenue adjustments needed to maintain a sustainable wastewater
enterprise.
Revenues
The Sewer Fund receives revenue from several sources. Operating revenue is received from rates and charges
for wastewater service. Table 31 presents the projected fixed and variable rate revenue from current wastewater
rates of the wastewater system. The revenue is projected by applying the current wastewater rates from Table
28 to the projected number of accounts and consumption volume.
Miscellaneous Revenue
Miscellaneous revenues are received from late payment fees and expense recovery. Table 32 below provides
sources of miscellaneous revenue.
Table 31
Projected Rate-based Wastewater Revenue Using Existing Rates
Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Wastewater Service Revenues
Fixed Charge Revenue [1]$237,945 $238,809 $239,702 $240,595 $241,488
Variable Consumption Revenue [2] 653,586 655,536 657,551 659,566 661,581
Total Revenues From Current Rates $891,531 $894,345 $897,253 $900,161 $903,069
[1] Current fixed charge multiplied by the number of customers.
[2] Current non-residential variable rates multiplied by projected non-residential water volumes.
Table 32
Projected Wastewater Miscellaneous Revenue
Budget Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Utility Billing Late Payment Penalty $8,000 $8,000 $8,000 $8,000 $8,000
Expense Recovery 5,000 5,000 5,000 5,000 5,000
Total Miscellaneous Revenues $13,000 $13,000 $13,000 $13,000 $13,000
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Revenue Requirements
Revenue requirements of the wastewater system include O&M expense and CIP funding. Each of these items are
discussed below.
Operation and Maintenance Expense
O&M are an on-going obligation of the wastewater system and such costs are normally met from wastewater
service revenue. O&M includes the cost to operate and maintain the wastewater collection system, lift stations,
and treatment and disposal facilities. Costs also include technical services and other general and administrative
expenses.
O&M has been projected recognizing the major expense categories of personnel services, electric power expense,
capital outlay, and all other expenses. Personnel costs consist of salaries and benefits expense of those
personnel directly involved with providing wastewater service. Salaries expense is projected to increase by 3
percent annually while benefits expense is projected to increase by 8 percent annually. Electric power expense
is projected to increase annually at 3 percent while chemicals expense increases by 3 percent. All other O&M
expense is projected to increase by 2 percent annually. Capital outlay is projected to increase by 3 percent
annually. Table 33 provides a summary of the wastewater O&M expenses for the Study period.
Table 33
Projected Wastewater Operation and Maintenance Expense
Budget Projected
Desription FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Salaries and Benefits
Salaries $155,600 $173,410 $176,879 $180,416 $184,024
Benefits 111,800 131,759 142,134 153,332 165,427
Subtotal Salaries and Benfits $267,400 $305,169 $319,013 $333,748 $349,451
Wastewater Operations
Office Supplies $2,000 $2,040 $2,081 $2,123 $2,165
Contractual Services 59,600 60,792 62,008 63,248 64,513
Power 22,000 22,660 22,660 22,660 22,660
Bank Charges 7,500 7,650 7,803 7,959 8,118
Maintenance - Vehicles 3,000 3,060 3,121 3,183 3,247
Maintenance - Office Equipment 500 510 520 530 541
Maintenance - Machinery and Equip 7,186 7,330 7,477 7,627 7,780
Gas & Oil 6,000 6,120 6,242 6,367 6,494
Maintenance Lines & Pumps 25,000 25,500 26,010 26,530 27,061
Lease Purchase Payments 17,700 25,660 17,252 0 0
Personnel Transfers 294,700 306,243 318,243 330,718 343,687
Cost Allocation Transfers 96,000 97,920 99,878 101,876 103,914
Transfers Out - USDA City Hall Loan 5,000 5,100 5,202 5,306 5,412
All Other 5,200 5,304 5,409 5,516 5,627
Subtotal Operations $551,386 $575,889 $583,906 $583,643 $601,219
Capital Outlay
Machinery & Equipment 3,314 3,413 3,515 3,620 3,729
Subtotal Capital Outlay $3,314 $3,413 $3,515 $3,620 $3,729
Total Wastewater O&M Expense $822,100 $884,471 $906,434 $921,011 $954,399
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Annual CIP Funding
The Sewer Fund pays for CIP needs of the wastewater system as identified in the City’s CIP plan. The annual
amount required is provided from the Sewer Fund to aid in funding these improvements. The amount spent
annually is discussed below.
Wastewater Capital Improvement Program
The City has developed a CIP that lists wastewater capital expenditures for FY 2019-20 through FY 2023-24,
presented in Table 34. Major projects include the Lift Station No. 1 Force Main, trenchless rehabilitation projects,
and Huasna Road Sewer Upgrade. The City projects that it would expend approximately $2.4 million over this
period. The CIP is funded through funds from the Sewer Fund.
Wastewater Financial Plan
A financial plan has been prepared for the wastewater utility that includes the revenues and revenue
requirements that were identified for the wastewater system. The plan is presented in Table 35 and
incorporates specific financial planning goals to provide guidance to maintain the health of the wastewater
utility on an on-going basis. The goals included the following items.
Generate positive levels of income in each year of the Study period
Maintain the operating and capital reserves at or greater than target levels
Maintain debt service coverage ratios at or greater than the minimum required
Meet the annual capital funding requirement
Proposed Revenue Adjustments
Table 35 provides the annual revenue increases recommended to meet the financial planning goals for the five-
year Study period. The financial plan indicates that a 14.8 percent revenue increase is recommended on
January 20, 2020 and on each January 1 through FY 2021-22 followed by 6.0 percent revenue increases each
January 1 through FY 2023-24. The increases are necessary to meet the planning goals discussed above.
Table 34
Wastewater Capital Improvement Program
Fiscal Year
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Current Capital Improvement Program (CIP) Projects [1]
Corporation Yard Upgrades $735 $15,000 $15,000 $15,000 $15,000
Financial Management Software 75,000 - - - -
Lift Station No. 1 Force Main 731,370 - - - -
Trenchless Rehabilitation - Alpine/Halcyon/Wood/Vernon 77,200 - - - -
Manhole Rehabilitation - 200,000 - - -
Trenchless Rehabilitation - Alder/Cameron - - 235,600 - -
Wastewater Master Plan Update - - 100,000 - -
The Pike Sewer Line Replacement 24,977 - - - -
Woodland Drive Sewer Upgrade 48,124 - 62,700 - -
Huasna Road Sewer Upgrade - - - - 694,600
Utilities Rate Study Update - - - - 20,000
Total Wastewater CIP $957,406 $215,000 $413,300 $15,000 $729,600
[1] CIP Source: FY 19-20 City CIP document. Represents only Sewer Fund portion of project.
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A graphical depiction of the revenue and revenue requirements from Table 35 are presented in Figure 4.
Revenue using the current rates is shown as the black line while revenue with increases is shown as the red
line. The green line represents the cash reserve balance at the end of year while the purple line indicates the
Target Reserve level.
The figure shows that the revenue received from the current rates need to be increased to meet annual
obligations, fund the CIP program, and maintain reserves. The figure shows that the operating and capital fund
reserve balance (green line) is below the Target Reserve (purple line) in the interim years of the Study Period,
however, returns to meet or exceed the target reserve in all years of the Study.
Table 35
Wastewater Financial Plan
Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Proposed Revenue Increase (January 20)14.8%
Proposed Revenue Increase (January 1)14.8% 14.8% 6.0% 6.0%
Sewer Fund - 612
Revenue
Rate-based Revenues, Existing Rates [1]$891,531 $894,345 $897,253 $900,161 $903,069
Total Additional Wastewater Revenue [2]43,982 195,677 358,161 495,789 581,418
Miscellaneous Income 13,000 13,000 13,000 13,000 13,000
Interest Income [3]11,988 6,417 6,753 10,541 13,465
Total Revenue $960,501 $1,109,439 $1,275,167 $1,419,491 $1,510,952
Expenditures
Operation and Maintenance Expense $822,100 $884,471 $906,434 $921,011 $954,399
Capital Improvement Funding 957,406 215,000 413,300 15,000 729,600
Total Expenditures $1,779,506 $1,099,471 $1,319,734 $936,011 $1,683,999
Net Funds Available ($819,005) $9,968 ($44,567) $483,480 ($173,047)
Available Reserves
Beginning available reserves [4]$884,500 $65,495 $75,463 $30,896 $514,376
Ending available reserves $65,495 $75,463 $30,896 $514,376 $341,329
Target Reserves [5]$706,000 $721,000 $727,000 $730,000 $739,000
[1] Projected using the existing rates.
[2] Additional revenue from rate adjustments.
[3] Interest earnings on the average fund balance calculated at 1.5% plus Sewer Facility Fund interest income.
[4] The available FY 19-20 cash balance provided by the City. Includes operating and capital fund reserves
[5] Target reserve estimated at 90 days of operation and maintenance expense plus capital reserve.
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Wastewater Cost of Service
This section of the report discusses how the wastewater system’s operating and capital costs are allocated for
use in designing rates. Establishing rates in California requires that the agency responsible for imposing property-
related fees create a nexus between the cost of providing service and the rates to be imposed.
Industry Methodology
Methodology from the Water Environment Federation (WEF) is used in this Study to allocate wastewater costs in
an appropriate manner. Similar to AWWA, WEF is an industry trade organization that provides guidance on
operations, technical training, education, and management of wastewater utilities. General principles are
provided to assist agencies with the design of wastewater rates and charges that are consistent with local
requirements while also recognizing state laws and legal framework.
Costs of Service to be Allocated
The annual revenue requirement for FY 2019-20 are defined as the Test Year and are the cost of providing service
for wastewater rate setting. The annual costs this year will be used to evaluate the fairness and equity of the
current wastewater rates and will form the basis for the proposed rates.
Figure 4
Wastewater Financial Plan
Comparison of Revenue with Annual Obligations
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
FY 19-20 FY 21-22 FY 23-24 FY 25-26 FY 27-28 Target and Ending Cash ($ Millions)Sources and Uses ($ Millions)Operating Exp Capital Improvement Funding Revenue with Increases
Revenue w/o Increases Target Reserve Operating Reserve
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The cost of service consists of O&M expense and capital funding needs. To establish the cost of providing service
to the users of the wastewater system, costs need to first be allocated to wastewater parameters.
Cost Allocation to Wastewater Parameters
For the approach used for this Study, the cost allocation components for wastewater service are Flow and
Customer. The SSLOCSD provides wastewater collection (for the trunk sewer only), wastewater treatment, and
disposal services to City customers which are billed separately for these services on the customer bill. Because
the City does not provide these services, the City’s costs are only related to Flow (wastewater collection) and
Customer (billing). Operating and capital costs are assigned to each parameter based on the functional operation
and design of the facilities.
The total cost to be recovered in FY 2019-20 from the users of the wastewater system is presented in Table 36.
The annual revenue requirement is allocated to each wastewater parameter based on a detailed review of
expenses and capital requirements and is used in calculating the unit costs of service. A detailed allocation is
provided in Appendix B-1.
Unit Costs of Service
Each customer classification’s responsibility for a portion of the cost of service is established through developing
unit costs of service for each of the wastewater parameters described above. Costs of service are then distributed
to each user classification by identifying how each group uses the wastewater system, or their units of service.
By applying the unit costs to each customer classes units of service, the cost of service by customer class is
established.
A wastewater mass balance was performed that reconciled estimated wastewater flow from City customers to
the influent flow received by SSLOCSD. The units of service for each customer classification are provided in
Appendix B-2. The units of service for wastewater flow by customer classification were identified from an analysis
of the estimated influent flow received by SSLOCSD for FY 2018-19.
Table 37 presents the unit costs of providing service for the wastewater system. Unit costs are determined by
dividing the costs by parameter from Table 36 and by the units of service from Appendix B-2.
Table 36
Allocation of Wastewater Revenue Requirement to Cost Component
Revenue
Fiscal Year Requirement Flow Customer
FY 19-20 $1,023,478 $755,972 $267,506
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User Class Costs
The unit costs from Table 37 are applied to each customer classifications’ flow and customer units of service from
Appendix B-2 to establish user class costs. The resulting cost of service responsibility of each class is provided in
Table 38.
Wastewater Rates
The goal of the rate design is to achieve fairness while ensuring that each customer class pays its fair share of
costs. Rates should be simple to administer, easy to understand, and comply with regulatory requirements. This
section describes how wastewater rates and charges are designed and includes the proposed schedule of
wastewater rates for implementation.
Proposed Wastewater Rates
It is proposed to use the current rate structure as the basis for the wastewater rates for the next five years. The
rate structure consists of monthly fixed charges for all customers and individual class variable charges based on
water consumption applicable to each customer classification.
Table 37
FY 19-20 Development of Wastewater Unit Costs
FY 19-20
Description Total Costs Flow Customer
Total Costs of Service $1,023,478 $755,972 $267,506
Units of Service 430,169 99,144
Unit Costs of Service $1.75738 $2.69816
Units of Measure HCF Bills
Table 38
Distribution of Costs to Customer Classes FY 19-20
Allocated
Description Total Cost Flow Customer
Unit Costs of Service $1.75738 $2.69816
Units of Measure HCF Bills
Single-family Residential
Units of Service 260,098 73,080
Allocated Cost of Service $654,273 $457,092 $197,181
Multifamily Residential
Units of Service 60,478 19,272
Allocated Cost of Service $158,282 $106,283 $51,999
Non-Residential
Units of Service 109,593 6,792
Allocated Cost of Service $210,923 $192,597 $18,326
Total Costs of Service $1,023,478 $755,972 $267,506
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Wastewater Fixed Charges
Fixed charges are stated as the unit cost per bill from Table 37 since these costs do not increase with meter size.
All customers are charged the same monthly charge.
Wastewater Variable Charges
The wastewater flow costs that were allocated to customer class in Table 38 are divided by metered water
consumption of each class to establish the variable rate. Table 39 provides the calculations to establish the
variable rates by class. A summary of the fixed and variable rates for implementation is provided in Table 40.
Table 39
Design of Variable Rates
FY 19-20
Water
Total Sales Variable
Classification Costs Volume Rate
$/HCF
Single-family Residential $457,092 590,805 $0.77
Multifamily Residential 106,283 97,588 $1.09
Non-Residential 192,597 125,768 $1.53
Total $755,972 814,161
[1] From Table 38
Table 40
Proposed Wastewater Fixed and Variable Charges
Fixed Charges
January 20, January 1, January 1, January 1, January 1,
Meter Size Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.70 $3.10 $3.56 $3.77 $4.00
Variable Charges
January 20, January 1, January 1, January 1, January 1,
Classification Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.77 $0.89 $1.02 $1.08 $1.15
Multifamily Residential $0.94 $1.09 $1.25 $1.44 $1.52 $1.61
Non-Residential $1.32 $1.53 $1.76 $2.02 $2.14 $2.27
[1] Fixed charge per month per account and to each additional unit.
[2] Charged on the basis of water consumption read through the meter.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Wastewater Bill Impact Analysis
An impact analysis was performed to evaluate the change in SFR customer wastewater bills that would occur
from the implementation of the proposed wastewater rates for the January 20, 2020 increase. As shown in Table
41, a SFR customer using the average consumption of 16 HCF bi-monthly will experience a bill that will increase
from $66.48 to $68.68, an increase of $2.20 or 3.3 percent.
Table 42 provides future SFR wastewater bills calculated using the proposed rates from Table 40 at the average
consumption of 16 HCF bi-monthly.
Table 41
Comparison of Current Single-family Residential Bi-monthly Wastewater Bill with Proposed Bill
Using January 2020 Wastewater Rates
Current Bill Proposed Bill
Service San District Volume Current Service San District Volume Proposed Dollar Percent
Use (HCF) Charge Charge Charge Bill Charge Charge Charge Bill Difference Change
0 $4.80 $50.96 $0.00 $55.76 $5.40 $50.96 $0.00 $56.36 $0.60 1.1%
5 $4.80 $50.96 $3.35 $59.11 $5.40 $50.96 $3.85 $60.21 $1.10 1.9%
10 $4.80 $50.96 $6.70 $62.46 $5.40 $50.96 $7.70 $64.06 $1.60 2.6%
13 $4.80 $50.96 $8.71 $64.47 $5.40 $50.96 $10.01 $66.37 $1.90 2.9%
16 $4.80 $50.96 $10.72 $66.48 $5.40 $50.96 $12.32 $68.68 $2.20 3.3%
20 $4.80 $50.96 $13.40 $69.16 $5.40 $50.96 $15.40 $71.76 $2.60 3.8%
30 $4.80 $50.96 $20.10 $75.86 $5.40 $50.96 $23.10 $79.46 $3.60 4.7%
50 $4.80 $50.96 $33.50 $89.26 $5.40 $50.96 $38.50 $94.86 $5.60 6.3%
Table 42
Single-family Residential Bi-monthly Wastewater Bill Impacts at 16 HCF
Note: Assumes constant South San Luis Obispo County Sanitation District (SSLOCSD) charges.
Proposed
SFR Charges Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges $4.80 $5.40 $6.20 $7.12 $7.54 $8.00
Variable Charges $10.72 $12.32 $14.24 $16.32 $17.28 $18.40
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $66.48 $68.68 $71.40 $74.40 $75.78 $77.36
Dollar Change $2.20 $2.72 $3.00 $1.38 $1.58
Percent Change 3.3% 4.0% 4.2% 1.9% 2.1%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Current FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Fixed Charges Variable Charges
$66.48 $68.68 $71.40 $74.40 $75.78 $77.36
Item 4 - Page 54
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Wastewater Rate Survey
A wastewater rate survey was conducted for neighboring communities to the City of Arroyo Grande. Chart 3
compares the Arroyo Grande SFR bi-monthly wastewater bill using 16 HCF with those of neighboring
communities. The rate survey includes rate schedules in effect July 2019. Wastewater bills for Arroyo Grande
are shown using the current rates and the proposed rates for implementation January 20, 2020. The chart
indicates that an Arroyo Grande SFR customer will experience a bill that is among the lowest of the communities
listed.
Chart 3 Single-family Residential Bi-Monthly Wastewater Bills at 16 HCF
Note: Above table uses wastewater rates in effect July 2019. Arroyo Grande January 2020 bill is based on the
rate structure and rates in Table 40.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Storm Water Charges
Storm Water Management in California
Storm water is defined by the United States Environmental Protection Agency (EPA) as the runoff generated when
precipitation from rain and snowmelt flows over land and impervious surfaces without percolating into the
ground. In 1987, amendments to the Federal Clean Water Act of 1972 (CWA) added language to address the
water quality impacts of storm water discharges from industrial facilities and large to medium municipal separate
storm sewer systems (MS4s). Large to medium MS4s are defined as communities serving a population of 100,000
or more and are regulated by the EPA. In 1999, these regulations were expanded to include discharges in MS4s
in urbanized areas serving populations less than 100,000 and stormwater discharges from construction activities
that disturb more than one acre of land.
The EPA has authorized the California State Water Resources Control Board (SWRCB) to administer and regulate
storm water discharges through National Pollution Discharge Elimination System (NPDES) permits. California
generally follows the federal permitting regulations and has given authority to its nine regional water boards to
administer the permits. Cities that operate a municipal storm water system must obtain NPDES permits that
cover discharges of municipal storm water to waters of the United States. The City of Arroyo Grande has obtained
a Phase II MS4 permit issued by the local Regional Water Quality Control Board.
The City has been supporting its storm water costs from the Local Sales Tax Fund to comply with these regulations.
The cost of the City’s storm water management services competes for dollars of this fund with other activities
supported by the Local Sales Tax Fund. In order to fund the requirements of the City’s National Pollution
Discharge Elimination System (NPDES) permit and meet state and federal regulations, the City must impose a user
charge for storm drainage service. This fee will provide a reliable and fair method for collecting funds in order to
allow the City to provide increased and improved storm water management services that meet storm water
regulations.
Senate Bill 231, which went into effect on January 1, 2018 as Government Code Sections 53750 and 53751,
classifies storm water systems as part of the wastewater/sewer system. Senate Bill 231 provides that storm water
fees are now part of the Proposition 218 rate-setting process and may be implemented in a similar manner.
Storm Water Financial Plan
To comply with the City’s NPDES permit, the City will be required to operate, maintain, replace, and construct
facilities of the storm water system which will collect storm and surface water runoff, and convey and treat such
runoff in a safe manner to an acceptable point of discharge. It is also necessary to inspect, monitor, and take
enforcement action related to illegal dumping, illicit discharges, and various water quality concerns. In order to
fund the requirements of the NPDES permit and meet state and federal regulations, the City must impose a user
charge for storm drainage service.
As this is the City’s first implementation of storm water charges, time was spent working with City staff to identify
storm water costs by discussing methods for calculating the charge as well as methods for billing the users of the
storm water system. The storm water administration and management costs, the storm water financial plan, the
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
Tuckfield & Associates FINAL DRAFT 48
cost of service and design of the proposed storm water rates, and proposed mechanisms to bill users of the
system is discussed below.
Storm Water Operation and Maintenance Expense
Storm water operation and maintenance expenses were identified from the City’s FY 2018-20 Budget and consist
of the administration, operation, compliance, training, professional services, billing, labor, and materials and
supplies costs to operate and maintain the storm water system. Projection of expenses include inflation of budget
year expenses by 3 percent annually. The projected expenses are provided in Table 43.
Storm Water Capital Improvement Plan
The City has developed a CIP spending plan for the infrastructure needs of the storm water system. The CIP
includes storm drain facility improvements and planning studies. Table 44 provides the CIP plan for the storm
water system.
Table 43
Storm Water Operation and Maintenance Expense
Projected
Description FY 2019-20 [1] FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
2NForm Software $4,862 $5,008 $5,158 $5,313 $5,472
303(d) and QAAP 410 422 435 448 461
FC/EC Sampling 4,490 4,625 4,764 4,907 5,054
Illicit Discharge Review 30 31 32 33 34
Maintenance Review 1,100 1,133 1,167 1,202 1,238
On-going Support 1,660 1,710 1,761 1,814 1,868
Trash Capture Maintenance - 2,000 4,000 6,500 9,000
Spill Response Plan 2,300 2,369 2,440 2,513 2,588
Fuel 1,000 1,030 1,061 1,093 1,126
Personnel Transfer 129,584 134,767 140,158 145,764 151,595
Salaries [2]144,375 147,270 150,220 153,230 156,300
Benefits [2]61,875 66,830 72,170 77,940 84,170
Total Storm Water O&M $351,686 $367,195 $383,366 $400,757 $418,906
[1] Currently paid by Local Sales Tax Fund. Information provided by the City.
[2] Reflects 1.25 FTE's of Maintenance Worker and 0.25 FTE's of Engineering staff.
Table 44
Storm Water Capital Improvement Plan
Projected
Description FY 2019-20 [1] FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Capital Improvement Program (CIP) Projects [2]
Creek Preservation/Drainage Imp $53,500
Corp Yard Stormwater Compliance 71,118 20,000 20,000 20,000 20,000
Vard Loomis Properties Drainage 50,000
Open Channel Maintenance 29,801
Sierra/Hillcrest Drainage 92,756
Annual Vegetation Management Plan 20,000
Corrugated Metal Pipe (CMP) Lining Projects 343,498 57,500 45,000 45,000 82,500
Drainage/Watershed Management Plan 172,500
Trash Capture Devices 4,000 4,000 103,000 103,000
Clark Project Sedimentation Basin 15,000 15,000 15,000 15,000
South Halcyon Undergrounding 153,700
Utilities Rate Study Update 20,000
Total Storm Water CIP $660,673 $269,000 $84,000 $183,000 $394,200
[1] Currently paid by Local Sales Tax Fund.
[2] CIP Source: Information provided by City. Represents only Storm Water portion of project.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Public agencies are required to develop a Storm Water Resource Plan (SWRP) as a condition of receiving grant
funds for storm water and dry weather runoff capture projects. The City of Arroyo Grande received a grant award
through the Proposition 1 Storm Water Grant Program administered by the SWRCB to develop a SWRP for Arroyo
Grande Creek and Pismo Creek watersheds. The City will continue to pursue grant opportunities as they become
available to assist in financing storm water projects.
Storm Water Fund and Financial Plan
This Study proposes to create a Storm Water enterprise fund that identifies the activities of the storm water
system and to account for the revenues and expenses related to those activities. The financial plan for the
proposed Storm Water Fund includes the projected O&M and CIP requirements identified above.
The revenue required to meet the annual obligations are provided in the financial plan in Table 45. The revenue
required is developed such that the annual obligations are met and a sufficient cash balance is created over a ten-
year period equal to at least 90 days of O&M expenses as an operating reserve, and additionally to provide for a
capital reserve equal to $230,000, equal to about the average annual CIP spending of the last several years in
Table 44.
As shown in Table 45, implementation of the proposed storm water rates will provide an annual storm water
capital contribution to fund future CIP beyond the Study Period.
Table 45
Storm Water Financial Plan
Projected
Description FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Proposed Revenue Increase (July 1)0.0% 0.0% 0.0%
Proposed Storm Water Fund
Revenue
Estimated Revenue Required [1]$659,941 $659,941 $659,941 $659,941
Local Sales Tax Fund $1,012,359 - - - -
Interest Income [2]- 179 1,817 3,875 3,352
Total Revenues $1,012,359 $660,120 $661,758 $663,816 $663,293
Revenue Requirements
Operation and Maintenance Expense $351,686 $367,195 $383,366 $400,757 $418,906
Storm Water Capital Funding 660,673 269,000 84,000 183,000 394,200
Total Revenue Requirements $1,012,359 $636,195 $467,366 $583,757 $813,106
Net Funds Available $0 $23,925 $194,392 $80,059 ($149,813)
Available Reserves
Beginning available reserves [3]$0 $0 $23,925 $218,317 $298,376
Additions (reductions)- 23,925 194,392 80,059 (149,813)
Ending available reserves $0 $23,925 $218,317 $298,376 $148,563
Target Reserves [4]$0 $37,140 $74,280 $111,420 $148,560
Above (below) Target $0 ($13,215) $144,037 $186,956 $3
[1] Estimated Revenue to meet annual obligations.
[2] Interest earnings on the average fund balance calculated at 1.5%.
[3] The available beginning FY 2019-20 cash balance provided by City.
[4] Target reserve estimated at 90 days of operation and maintenance expense achieved in 10 years plus $235,000 capital reserve.
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Storm Water Cost of Service
The storm water cost of providing service is equal to the operation and maintenance expense and capital needs
of the storm water system including additions to cash balance, less interest income generated. Table 46 below
provides the cost of service for FY 20-21.
Storm Water Rate Structure and Rates
Storm Water Rate Structures
Storm water costs may be recovered through a number of storm water user fee structure methodologies. The
most common methods include the following.
Flat Fee
Land Area or Parcel Size
Impervious Area Measurements for all Properties
The methods provided above are listed in increasing order of accuracy and level of effort. The minimum and least
accurate is the flat fee approach. The most accurate is measuring the impervious area of all properties and
requires the highest level of effort. The California Storm Water Quality Association (CASQA) states that most of
the storm water fee structures across the Unites States (US) are based on the amount of impervious area on a
parcel, due to its proportionality to runoff of the parcel. Additionally, CASQA indicates that the majority of storm
Table 46
Storm Water Costs To Be Recovered
Description FY 2020-21
Operating Expense
Operation and Maintenance Expense $367,195
Subtotal $367,195
Capital Spending
Storm Water Capital Funding $269,000
Subtotal $269,000
Interest Income ($179)
Subtotal ($179)
Adjustments
Adjustments for Annual Cash Balance $23,925
Subtotal $23,925
Total Cost of Service $659,941
Met From Other Sources
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water charges are in the form of an Equivalent Residential Unit (ERU), based on the impervious area, land use,
and total parcel size as metrics to establish a charge.
Determining impervious area includes accounting for rooftops, pavement, etc. of each parcel using GIS,
photogrammetry, and other sources of information. All non-residential properties should be evaluated whereas
residential properties may be estimated from a random sample of single-family properties. Unimproved parcels
may also benefit from storm water management and therefore may be assigned some fraction of an ERU. Parcels
that have storm water facilities on-site may be exempt from storm water charges.
City staff has been in contact with the Department of Water Resources (DWR), whereas the DWR is undertaking
a project that could provide the City with impervious area of parcels. However, City staff indicates that such
information will not be readily available in sufficient time to determine a storm water charge with this Study.
Proposed Storm Water Rates
City Staff was able to provide a list of all parcels within the City that included parcel attribute information
consisting of land use type, parcels that were developed or undeveloped, and whether the parcel had existing
storm water management facilities on-site.
Research of the City’s municipal code revealed that
the City has codified “Maximum Lot Coverage”
percentages for various land use types. Table 47
provides a summary of the maximum lot coverage
percentages for each land use type for the City.
By application of the maximum lot coverage
percentages by land use type to the list of parcels by
land use type, an estimate of impervious area was
developed as shown in Table 48, defined as Storm
Water Units. For this Study, it is proposed to use the
calculation of Storm Water Units as a proxy for
impervious area for the storm water charge. While
it should be recognized that the maximum lot
coverage percentages from the municipal code
reflect only the structure on the parcel, (as it
excludes driveways, patios, and other impervious
areas), it is believed that this estimate of impervious
area is more defensible than using total parcel size
or the number of accounts as the basis for storm
water charges.
In some cases, maximum lot coverage percentages
could not be directly identified. In these instances, a
maximum lot coverage percentage was assigned
based on judgement.
Table 47
Maximum Lot Coverage by Land Use Type
Max
Land Lot
Use Code Land Use Type Description Coverage
[1]
RE Residential Estate 35%
RH Residential Hillside 35%
RR Rural Residential 35%
RS Residential Suburban 30%
SF Single-family Residential 40%
VR Village Residential 40%
MF Condo/Townhouse 40%
MFA Multifamily Apartment 45%
MFVH Multifamily Very High Density 60%
MHP Mobile Home Park 50%
IMU Industrial and Mixed Use 50%
TMU Trafficway Mixed Use 75%
VCD Village Core Downtown 100%
VMU Village Mixed Use 100%
GMU Gateway Mixed Use 75%
FOMU Fair Oaks Mixed Use 70%
HMU Highway Mixed Use 75%
OMU Office Mixed Use 70%
RC Regional Commercial 100%
PD Planned District 30%
D Design District 70%
SP Specific Plan [2]
PF Publi/Quasi Public 45%
[1] From City Municipal Code.
[2] As specified in proposed specific plan.
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Water, Wastewater, and Storm Water Rate Study City of Arroyo Grande
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Equivalent Residential Unit Calculation
Table 48 has been summarized in Table 49 to develop three storm water user classifications consisting of SFR,
MFR, and All Other. Table 49 shows that over 67 percent of the City’s parcels are single-family residential with
an average size of 0.30 acres. Since this represents the majority of the City’s parcels, one ERU is defined as the
runoff from a 0.30 acre SFR parcel and is equal to 0.30 acres x 35.5% Weighted Maximum Lot Coverage = 0.1065
Storm Water Units.
Table 49 provides a summary of the number of Storm Water Units, number of ERUs, ERU Ratio, and the calculated
annual storm water charge per ERU by classification. The ERU Ratio for the three classifications is determined by
dividing the number of Storm Water Units by one ERU, or 0.1065 Storm Water Units. The storm water charge
per ERU is calculated by dividing the cost of service from Table 46 by the total number of ERUs from Table 49.
Storm water charges for the three classifications are calculated as the ERU Ratio multiplied by the storm water
charge per ERU.
𝐶ℎ𝑎𝑟𝑔𝑒 𝑏𝑦 𝑐𝑙𝑎𝑠𝑠 =[𝑎𝑣𝑔 𝑐𝑙𝑎𝑠𝑠 𝑝𝑎𝑟𝑐𝑒𝑙 𝑠𝑖𝑧𝑒 (𝑎𝑐𝑟𝑒𝑠)∗ 𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑀𝑎𝑥 𝐿𝑜𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 (%)]
0.1065 ∗ $/𝐸𝑅𝑈
Table 48
Calcuation of Storm Water Units
Percent of Average Maximum Storm
Number of Total Parcel Parcel Lot Water
Land Use Type Parcels Parcels Size Size Coverage Units [1]
acres acres %acres
Single Family Very Low Density 16 0.2%47.59 2.97 30%14.28
Single Family Low Density 336 4.8%336.68 1.00 30%101.00
Single Family Low-Medium Density 1,520 21.6%502.97 0.33 35%176.04
Single Family Medium Density 2,844 40.5%513.80 0.18 40%205.52
Multi-Family High Density 320 4.6%44.63 0.14 45%20.08
Multi-Family Medium-High Density 726 10.3%140.62 0.19 40%56.25
Multi-Family Very High Density 13 0.2%5.43 0.42 60%3.26
Medium-Density Residential 1 0.0%0.16 0.16 30%0.05
Medium-High Density Residential 5 0.1%0.74 0.15 45%0.33
Mixed-Use 536 7.6%196.19 0.37 75%147.14
Office Professional 79 1.1%29.17 0.37 70%20.42
Regional Commercial 18 0.3%62.08 3.45 100%62.08
Community Facility 67 1.0%288.08 4.30 45%129.64
Village Core 165 2.4%35.87 0.22 100%35.87
Agriculture 100 1.4%190.02 1.90 0%0.00
Unclassified 4 0.1%102.99 25.75 40%41.20
Open Space
Open Space 1 0.0%13.97 13.97 0%0.00
Conservation/Open Space 27 0.4%276.03 10.22 0%0.00
Single Family Low Density/Conservation/Open Space 7 0.1%33.39 4.77 0%0.00
Single Family Low Density/Planned Development/Open Space 2 0.0%50.88 25.44 0%0.00
Single Family Low-Medium Density/Conservation/Open Space 109 1.6%79.35 0.73 0%0.00
Single Family Medium Density/Conservation/Open Space 60 0.9%22.71 0.38 0%0.00
Multi-Family Medium-High Density/Conservation/Open Space 4 0.1%12.71 3.18 0%0.00
Mixed-Use/Conservation/Open Space 1 0.0%0.46 0.46 0%0.00
Office Professional/Conservation/Open Space 1 0.0%1.14 1.14 0%0.00
Community Facility/Conservation/Open Space 13 0.2%78.24 6.02 0%0.00
Agriculture/Conservation/Open Space 19 0.3%153.65 8.09 0%0.00
Village Core/Conservation/Open Space 23 0.3%15.52 0.67 0%0.00
Undefined 4 0.1%4.08 1.02 0%0.00
Total 7,021 100.0% 3,239.15 1,013.16
[1] Used as an estimate of impervious area. Rounded to two decimals.
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Proposed Storm Water Charges
Table 50 provides the proposed storm water rates for the next five years. The table indicates that the charges
are the same within the SFR and MFR land use types. Storm water charges for All Other parcels are also charged
the same charge per parcel. By comparison, the City of Grover Beach has a storm water charge of $4.85 per
month per account.
It is proposed that the storm water charges in Table 50 be placed on the County tax rolls as storm water runoff is
directly related to parcels within the City. Under this billing mechanism, the date of storm water rates
implementation is July 1, 2020 of FY 2020-21.
Future Storm Water Issues
There may be several issues that may have an impact on the revenue and costs of the storm water financial plan
in the future. These are discussed below.
Annual Parcel Database Review
As parcels are developed, subdivided, or experience a change of use, the City should expect that adjustments will
need to be made to the parcel database from time to time. The County may also request the City to modify
certain charges on parcels as these changes will occur on an annual basis. The City will likely need to perform this
task in June of each year prior to submission of annual charges to the County in August.
Parcels Not Charged
Certain parcels have been excluded from the storm water charge calculations due to assumptions concerning
their applicability regarding such charges. For example, open space and Agricultural parcels are not charged for
storm water service with this Study. Should better information become available that determines there is some
applicability, Tables 48 through Table 50 may be modified to account for such changes.
Site Planning, Source Control, Impervious Area Reductions (Low Impact Development)
Certain parcels may have storm water detention/retention facilities or perform best management practices that
reduces or eliminates storm water runoff. While every effort has been made to account for these parcels, a parcel
owner may come forward with information to substantiate an exemption to the charges. The City’s Engineer may
Table 49
Calcuation of Number of ERUs and Annual Charge
Percent of Average Maximum Storm Number of Annual Monthly
Number of Total Number Parcel Lot Water ERU's ERU Charge Storm Water
Land Use Type Parcels Parcels of Acres Size Coverage Units 1 ERU = .1065 Ratio @ $69.37 / ERU Charge
acres % [1] acres [2][3]
Single-family Residential [4] 4,716 67.2% 1,401.04 0.30 35.5% 496.84 4,665.164 1.00 $69.37 $5.78
Multifamily Residential [5]1,065 15.2% 191.58 0.18 41.7% 79.97 750.892 0.70 $48.56 $4.05
All Other [6]969 13.8% 904.40 0.93 48.2% 436.35 4,097.183 4.21 $292.05 $24.34
Open Space 271 3.9% 742.13 2.74 0.0%- - - $0.00 $0.00
7,021 3,239.15 1,013.16 9,513.239
[1] Weighted average maximum lot coverage for the classification.
[2] Used as an estimate of impervious area. Rounded to two decimals.
[3] Average parcel size multiplied by Mamimum Lot Coverage divided by one ERU.
[4] Includes all single-family residential land use types.
[5] Includes all multifamily residential land use types including medium density and medium-high density residential.
[6] Includes all other non-residential land use types except open space.
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need to make estimates of the number of ERUs applicable to specific parcels on a case by case basis and update
the parcel database.
Storm Water Fee Calculations
A complete list of all parcels by Assessor’s Parcel Number (APN) with the corresponding storm water charge for
FY 20-21 for various land use types and parcel size has been provided to City staff. This initial storm water fee roll
is intended to be used as the City’s database for assignment of storm water charges. The charges will need to be
modified annually around June of each year for submission to the County in August of the same year in addition
to any changes to the parcel database.
Table 50
Proposed Storm Water Rates
Customer Equivalent ERU July 1, July 1, July 1, July 1,
Classification Ratio Ratio FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24
Annual Fixed Charges ($ per year)
Charge Per ERU [1]$69.37 $69.37 $69.37 $69.37
Storm Water Classification
Single-family Residential 1.00 $69.37 $69.37 $69.37 $69.37
Multifamily Residential 0.70 $48.56 $48.56 $48.56 $48.56
All Other 4.21 $292.05 $292.05 $292.05 $292.05
[1] One Equivalent Residential Unit (ERU) is equal to 0.30 acres multiplied by 35.5% Maximum Lot Coverage.
Does not include County charge of $2.00 per parcel.
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Appendix A
Water System Operation and Maintenance Expense, Cost of Service Allocation, Water Capital Improvement
Program with Central Coast Blue, and Water Financial Plan with Central Coast Blue are provided in Appendix A.
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Appendix A-1
Historical and Projected Operation and Maintenance Expense
Line Historical Budget Projected
No. Description FY 17-18 FY 18-19 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Water Fund
Administration
1 Salaries $54,436 $57,954 $65,000 $66,300 $67,626 $68,979 $70,358
2 Benefits 65,292 64,692 66,400 71,712 77,449 83,645 90,336
3 Contractual Services 155,607 149,739 159,700 162,894 166,152 169,475 172,864
4 Personnel Transfers 839,803 735,445 760,833 791,266 822,917 855,834 890,067
5 Personnel Transfers - Utility Billing 87,261 92,459 97,967 101,886 105,961 110,199 114,607
6 Cost Allocation Transfers 830,296 978,096 997,700 1,017,654 1,038,007 1,058,767 1,079,942
7 Transfers Out - CIP Fund 24,525 - - - - - -
8 Transfers Out - USDA City Hall Loan 8,800 - 8,800 8,800 8,800 8,800 8,800
9 Transfers Out - OPEB 20,726 22,603 23,055 24,899 26,891 29,042 31,365
10 All Other 119,259 110,448 105,100 107,202 109,344 111,530 113,760
11 Total Water Administration $2,206,005 $2,211,437 $2,284,555 $2,352,613 $2,423,147 $2,496,271 $2,572,099
Water Production
12 Salaries $56,975 $52,329 $68,000 $69,360 $70,747 $72,162 $73,605
13 Benefits 74,548 68,955 79,100 85,428 92,262 99,643 107,615
14 Power (electricity)26,159 9,664 75,000 77,250 79,568 81,955 84,414
15 Services and Supplies 14,093 7,774 30,000 30,600 31,212 31,836 32,472
16 Total Water Production $171,775 $138,721 $252,100 $262,638 $273,789 $285,596 $298,106
Water Distribution
17 Salaries $202,781 $223,062 $263,900 $336,473 $343,202 $350,066 $357,067
18 Benefits 229,231 291,013 282,100 380,835 411,302 444,206 479,742
19 Supplies - Water Meters 36,777 34,122 35,000 35,700 36,414 37,142 37,885
20 Chemicals 18,713 11,153 20,000 20,600 21,218 21,855 22,511
21 Power 75,332 72,483 60,000 61,800 63,654 65,564 67,531
22 Maintenance - Vehicles 6,551 5,439 7,000 7,140 7,283 7,429 7,578
23 Maintenance - Mach & Equip 3,733 3,742 5,185 5,289 5,395 5,503 5,613
24 Maintenance - Bldgs 1,564 74 3,000 3,060 3,121 3,183 3,247
25 Gas and Oil 11,973 13,324 20,000 20,400 20,808 21,224 21,648
26 Maintenance - Reservoirs 13,717 12,619 15,000 15,300 15,606 15,918 16,236
27 Maintenance - Wells/lines/pumps 50,783 37,126 55,000 56,100 57,222 58,366 59,533
28 Maintenance - Meters 2,758 5,010 6,000 6,120 6,242 6,367 6,494
29 All Other 151,256 46,591 44,500 86,362 87,126 74,533 48,167
30 Subtotal $805,169 $755,757 $816,685 $1,035,179 $1,078,593 $1,111,356 $1,133,252
31 Total O&M Expense $3,182,949 $3,105,915 $3,353,340 $3,650,430 $3,775,529 $3,893,223 $4,003,457
Lopez Fund
Lopez Water Supply
32 Lopez Contract O&M $3,419,571 $3,576,800 $2,163,841 $2,385,038 $2,343,888 $2,405,636 $2,335,280
33 Lopez Dam Bonds - 2011A Debt Service - - 445,475 445,475 445,475 445,475 445,475
33 SRF Loan Debt Service - - 928,046 928,046 928,046 928,046 928,046
34 Lopez Capital Outlay - - 206,835 93,521 194,625 194,625 328,588
35 Total Lopez Water Expense [1] $3,419,571 $3,576,800 $3,744,197 $3,852,080 $3,912,034 $3,973,782 $4,037,389
36 Total Water System O&M Expense $6,602,520 $6,682,715 $7,097,537 $7,502,510 $7,687,563 $7,867,005 $8,040,846
[1] Lopez water expense provided by San Luis Obispo County for FY 20-21 through FY 23-24.
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Appendix A-2
Allocation of Water Revenue Requirements to Cost Component
FY 19-20 Common to All Except Wheeling
Revenue Common to All Direct Fire Water
Requirement Delivery Peaking Meters/Serv Customer Protection Supply Delivery Peaking Lopez Debt
Administration
Salaries and Benefits $131,400 $38,596 $57,189 $5,040 $0 $8,802 $0 $11,581 $10,192 $0
Contractual Services 152,900 44,909 66,547 5,865 - 10,243 - 13,476 11,860 -
Contractual Services - Billing 5,000 - - - 5,000 - - - - -
Contractual Services - Meter Reading 1,800 - - - 1,800 - - - - -
Water Treatment Services (sampling & testing) 15,000 - - - - - 15,000 - - -
Personnel Transfers 760,833 223,466 331,138 29,187 - 50,970 - 67,059 59,013 -
Personnel Transfers - Utility Billing 97,967 - - - 97,967 - - - - -
Cost Allocation Transfers 997,700 293,040 434,228 38,273 - 66,838 - 87,936 77,385 -
Transfers Out - USDA City Hall Loan 8,800 2,583 3,830 338 - 590 - 776 683 -
Other 113,155 27,362 40,544 3,573 20,000 6,239 - 8,210 7,227 -
Total General and Administration $2,284,555 $629,956 $933,476 $82,276 $124,767 $143,682 $15,000 $189,038 $166,360 $0
Water Production
Salaries and Benefits $147,100 $0 $0 $0 $0 $0 $0 $78,244 $68,856 $0
Contractual Services 10,000 - - - - - - 5,319 4,681 -
Power (electricity)75,000 - - - - - 75,000 - - -
Maintenance - Machinery & Equipment 20,000 - - - - - - 10,638 9,362 -
Total Water Production $252,100 $0 $0 $0 $0 $0 $75,000 $94,201 $82,899 $0
Water Distribution
Salaries and Benefits $546,000 $137,772 $381,628 $0 $0 $26,600 $0 $0 $0 $0
Supplies - Water Meters 35,000 - - 35,000 - - - - - -
Chemicals 20,000 - - - - - 20,000 - - -
Contractual Services 20,000 5,305 14,695 - - - - - - -
Power 60,000 51,855 8,145 - - - - - - -
Maintenance - Vehicles 7,000 1,857 5,143 - - - - - - -
Maintenance - Office Equip $0 - - - - - - - - -
Maintenance - Mach & Equip 5,185 1,376 3,809 - - - - - - -
Maintenance - Bldgs $3,000 796 2,204 - - - - - - -
Maintenance - Reservoirs 15,000 1,500 13,500 - - - - - - -
Maintenance - Wells/lines/pumps $55,000 7,979 7,021 - - 40,000 - - - -
Maintenance - Meters 6,000 - - 6,000 - - - - - -
Equipment $9,600 1,220 3,380 - - 5,000 - - - -
All Other 34,900 9,258 25,642 - - - - - - -
Total Water Distribution $816,685 $218,918 $465,167 $41,000 $0 $71,600 $20,000 $0 $0 $0
Lopez Water Expense $3,744,197 $0 $0 $0 $0 $0 $2,163,841 $0 $0 $1,580,356
Total Operation and Maintenance Expense $7,097,537 $848,874 $1,398,643 $123,276 $124,767 $215,282 $2,273,841 $283,239 $249,259 $1,580,356
Capital Costs
Capital Improvement Funding $624,184 $141,069 $429,432 $0 $0 $0 $0 $28,555 $25,128 $0
Total Capital Costs $624,184 $141,069 $429,432 $0 $0 $0 $0 $28,555 $25,128 $0
Adjustments
Revenue Offsets ($158,834) ($41,570) ($68,496) ($6,037) ($6,110) ($10,543) $0 ($13,871) ($12,207) $0
Adjustments for Annual Cash Balance (1,191,050) (311,731) (513,623) (45,271) (45,818) (79,058) - (104,014) (91,535) -
Adjustments to Annualize Rate Increase 282,454 73,926 121,804 10,736 10,866 18,748 - 24,667 21,707 -
Total Adjustments ($1,067,429) ($279,374) ($460,315) ($40,572) ($41,062) ($70,853) $0 ($93,218) ($82,035) $0
Total Cost of Service $6,654,292 $710,569 $1,367,760 $82,704 $83,705 $144,429 $2,273,841 $218,576 $192,352 $1,580,356
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Appendix A-3
Water Capital Improvement Program with Central Coast Blue
Budget Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
Current Capital Improvement Program (CIP) Projects [1]
Corporation Yard Upgrades $735 $15,000 $15,000 $15,000 $15,000
Financial Management Software 75,000 - - - -
Phased Main Replace - Fair Oaks - 215,700 - - -
Phased Main Replace - S Halcyon - - 358,400 - -
Phased Main Replace - Cornwall - - - 268,100 -
Water Reservoir No. 7 254,741 145,400 - - -
Water Well No. 11 Facilities 42,261 - - - -
Galvanized Service Replacements 129,850 - - - -
Coach & Garden Pipe Bridges Evaluation 56,876 - - - -
Well Siting Study 29,721 - - - -
Water Meter Software Upgrade 35,000 - - - -
Phased Main Replacement - Hwy 101 - - - - 202,400
Reservoir 3 and 4 Coating & Seismic - - - - 799,300
Water Master Plan Update - - 100,000 - -
Central Coast Blue Project 226,200 709,800 495,300 85,800 42,900
Utilities Rate Study Update - - - - 20,000
Total Water CIP $850,384 $1,085,900 $968,700 $368,900 $1,079,600
[1] CIP Source: FY 19-20 City CIP document. Represents only Water Fund portion of project.
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Appendix A-4
Water Financial Plan with Central Coast Blue
Projected
Description FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Proposed Revenue Increase (January 20)9.6%
Proposed Revenue Increase (January 1)9.6% 9.6% 9.6% 9.6% 3.0%
Water Fund - 640
Revenue
Revenues from Existing Water Rates [1]$6,230,610 $6,255,935 $6,282,098 $6,308,267 $6,334,431 $6,360,595
Total Additional Water Sales Revenue [2]199,380 874,830 1,565,904 2,328,976 3,171,248 3,824,040
Miscellaneous Income 87,000 87,000 87,000 87,000 87,000 87,000
Interest Income [3]46,664 23,598 1,547 0 7,369 12,700
Total Revenues $6,563,654 $7,241,363 $7,936,549 $8,724,243 $9,600,048 $10,284,335
Expenditures
Operation and Maintenance Expense $3,353,340 $3,650,430 $3,775,529 $3,893,223 $4,003,457 $4,147,734
Central Coast Blue - - - - - 881,400
Transfer to Lopez Fund 3,744,197 3,852,080 3,912,034 3,973,782 4,037,389 4,005,851
Capital Improvement Funding 850,384 1,085,900 968,700 368,900 1,079,600 500,000
Central Coast Blue Debt Service - - - - - 624,000
Total Expenditures $7,947,921 $8,588,410 $8,656,263 $8,235,905 $9,120,446 $10,158,985
Net Funds Available ($1,384,267) ($1,347,047) ($719,714) $488,338 $479,602 $125,350
Available Reserves
Beginning available reserves [4]$3,187,700 $1,803,433 $456,387 ($263,327) $225,010 $704,613
Ending available reserves $1,803,433 $456,387 ($263,327) $225,010 $704,613 $829,963
Target Reserves [5]1,338,000 1,413,000 1,444,000 1,473,000 1,501,000 1,757,000
Lopez Fund - 641
Revenues
Transfer In from Water Fund $3,744,197 $3,852,080 $3,912,034 $3,973,782 $4,037,389 $4,005,851
Interest Income [2]23,900 24,300 24,600 25,000 25,400 25,800
Total Lopez Revenues $3,768,097 $3,876,380 $3,936,634 $3,998,782 $4,062,789 $4,031,651
Expenditures
Lopez Water Expense $2,370,676 $2,478,559 $2,538,513 $2,600,261 $2,663,868 $2,632,330
Lopez Dam Bonds - 2011A Debt Service 445,475 445,475 445,475 445,475 445,475 445,475
SRF Loan Debt Service 928,046 928,046 928,046 928,046 928,046 928,046
Total Lopez Expenditures 3,744,197 3,852,080 3,912,034 3,973,782 4,037,389 4,005,851
Net Lopez Funds Available $23,900 $24,300 $24,600 $25,000 $25,400 $25,800
Lopez Available Reserves
Lopez Beginning available reserves 1,582,000 1,605,900 1,630,200 1,654,800 1,679,800 1,705,200
Lopez Ending available reserves $1,605,900 $1,630,200 $1,654,800 $1,679,800 $1,705,200 $1,731,000
Lopez Target Reserves [6]1,373,500 1,373,500 1,373,500 1,373,500 1,373,500 1,373,500
Combined Reserves
Total Reserves (Fund 640 and 641)$3,409,333 $2,086,587 $1,391,473 $1,904,810 $2,409,813 $2,560,963
Target Total Reserves (Fund 640 and 641) $2,711,500 $2,786,500 $2,817,500 $2,846,500 $2,874,500 $3,130,500
Debt Service Coverage
Total Revenues (Fund 640 and 641)$6,587,554 $7,265,663 $7,961,149 $8,749,243 $9,625,448 $10,310,135
Total Expenses (Fund 640 and 641)$7,097,537 $7,502,510 $7,687,563 $7,867,005 $8,040,846 $9,034,985
Net Revenues ($64,508) $208,628 $719,061 $1,327,713 $2,030,077 $1,720,625
Lopez Dam Bonds - 2011A Debt Service 445,475 445,475 445,475 445,475 445,475 445,475
Central Coast Blue Debt Service 0 0 0 0 0 624,000
Total Debt Service $445,475 $445,475 $445,475 $445,475 $445,475 $1,069,475
Debt Service Coverage [7]-14% 47% 161% 298% 456% 161%
[1] Projected using the existing rates.
[2] Additional revenue from proposed rate adjustments.
[3] Interest earnings on the average fund balance calculated at 1.5%.
[4] The available beginning FY 19-20 cash balance provided by City. Includes operating and capital funds.
[5] Target reserve estimated at 90 days of operation and maintenance expense and capital reserves target.
[6] Equal to Lopez annual debt service.
[7] Minumum coverage is 125 percent.
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Appendix B
Wastewater System Cost of Service Allocation and Units of Service are provided in Appendix B.
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Appendix B-1
Allocation of Wastewater Revenue Requirements to Cost Component
FY 19-20
Description Total Cost Flow Customer
Direct Operation and Maintenance Expense
Salaries and Benefits $267,400 $240,660 $26,740
Power 22,000 22,000 0
Maintenance Lines & Pumps 25,000 22,500 2,500
Personnel Transfers - Billing 12,245 0 12,245
Capital Outlay 3,314 3,007 307
Indirect Operation and Maintenance Expense 492,141 355,238 136,903
Total Operation and Maintenance Expense $822,100 $643,405 $178,695
Capital Improvement Funding $957,406 $868,595 $88,811
Adjustments
Revenue Offsets ($24,988) ($24,988)$0
Adjustments for Annual Cash Balance (819,005) (819,005)0
Adjustments to Annualize Rate Increase 87,965 87,965 0
Total Adjustments ($756,028) ($756,028)$0
Total Revenue Requirement $1,023,478 $755,972 $267,506
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Appendix B-2
FY 19-20 Units of Service
Overall Total
FY 19-20 Return Wastewater
Customer Class Annual Use Factor Volume Bills
HCF HCF Bills
Single-family Residential 590,805 44% 260,098 73,080
Multifamily Residential 97,588 62% 60,478 19,272
Non-Residential 125,768 87% 109,593 6,792
Total System 814,161 430,169 99,144
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