CC 2021-11-09_10a Water and Wastewater Rate Study
MEMORANDUM
TO: CITY COUNCIL
FROM: BILL ROBESON, ASSISTANT CITY MANAGER/PUBLIC WORKS
DIRECTOR
NICOLE VALENTINE, ADMINISTRATIVE SERVICES DIRECTOR
SHANE TAYLOR, UTILTIES MANAGER
SUBJECT: DRAFT WATER AND WASTEWATER RATE STUDY
DATE: NOVEMBER 9, 2021
SUMMARY OF ACTION:
Review and provide feedback on the Draft Water and Wastewater Rate Study. The study
proposes water rate increases of 10% on March 21, 2022, January 1, 2023, and January
1, 2024, followed by a 6% increase on January 1, 2025, and no increase on January 1,
2026, with costs included for the Central Coast Blue project. A Wastewater rate increase
of 8.3% annually over the next 5 years is also proposed. These increases reflect the
anticipated real costs of providing Water and Wastewater services. This Study also
includes information about Water and Wastewater Drought Rates that can be used during
a Stage 1 Water Shortage Emergency.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The cost of the Study is approximately $69,300, which was included in the FY 2019-20
through FY 2021-22 Budgets. An estimated 150 hours was required to complete the final
draft report.
RECOMMENDATION:
It is recommended that the City Council review and provide feedback on the Draft Water
and Wastewater Rate Study.
BACKGROUND:
Water and sewer services are a foundational aspect of City services and protect the
public health, safety, and general welfare of the community. A shared water and sewer
system allows for more efficient land use patterns, prevents water borne diseases,
avoids conflicts between wells and septic systems, reduces individual large capital
investments and allows for consistently clean, treated and tested water to be delivered
to all residents and businesses regardless of property geography. The water system also
includes a citywide fire hydrant system.
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In order to gain these foundational benefits, the water system and related infrastructure
needs to be managed, maintained and funded by the users of the system through six
utility bills per year. Every 5 years, City staff produce a study of costs and needed
revenue to operate the water and wastewater system. Once completed, the City Council
reviews the study and makes a determination of rates needed to operate the two
systems during the next five years.
The previous Water and Wastewater Rate Study was completed in 2014 and set updated
Water rates for services for Fiscal Years 2014-15 through 2018-19. The Wastewater
rates were projected to maintain fiscal sustainability and solvency under the rates during
the 2014 study and no rate adjustments were necessary at that time. The Wastewater
rates have not been adjusted since 2009.
On January 22, 2019, the City Council approved an agreement with Tuckfield &
Associates to prepare a Water, Wastewater and Storm Water Rate Study Update. The
study was intended to set rates for the next 5-year period, beginning in 2020.
On October 29, 2019, the City Council held a Special Study Session to receive a
presentation of the Draft Study by Clayton Tuckfield from Tuckfield & Associates. The
Study Session provided an opportunity for the Council and citizens to receive
information, ask questions, and discuss the Water, Wastewater and Storm Water rate
study.
Effective January 1, 2018, Senate Bill 231 classified Storm W ater systems as part of the
Wastewater/Sewer System and provided that storm water fees may be collected using
a Proposition 218 Rate Setting Process. A letter was sent to the City dated December
19, 2019, from the Howard Jarvis Taxpayers Association. The letter argued that Senate
Bill 231 conflicts with case law interpreting the California Constitution, and that the ability
to propose a storm drainage fee is subject to a vote by the property owners or the voting
residents of the affected area. The City Attorney confirmed this interpretation and
recommended that staff remove the Storm Water component from the current draft rate
study.
Central Coast Blue
The City of Pismo Beach is the lead agency for the Central Coast Blue Project (CCB).
The Project has been a multi-agency effort between three of the four Northern Cities
Management Area agencies (the Cities of Arroyo Grande, Grover Beach, and Pismo
Beach) and the South San Luis Obispo County Sanitation District (SSLOCSD) to
construct a regional recycled water project that will enhance supply reliability by injecting
advanced purified water into the Santa Maria Groundwater Basin (SMGB). The Project
will reduce vulnerability to drought and seawater intrusion by creating a seawater intrusion
barrier and supplementing the naturally occurring groundwater. Phase 1 of the Project
will treat wastewater from the City of Pismo Beach to an advanced purification level and
inject the treated water into the Basin at key locations near the coast, resulting in 900-
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1,000 acre-feet per year of additional water for use by the participating parties. Phase 2
is anticipated to treat wastewater from the SSLOCSD and may occur at a later date.
The Cities of Arroyo Grande, Grover Beach, and Pismo Beach have conducted several
meetings and discussions regarding CCB and each party’s share and role in the project.
Through these discussions, the parties have arrived at an agreed-upon framework for
sharing costs and operating the project, most recently revised in September 2021 and
presented to each city council in September and October 2021. A draft cost-sharing
agreement is underway, along with a Joint Powers Agreement that would form a Joint
Powers Authority to operate the project following completion of construction and
commissioning.
Under the current framework, the City will seek a 25% share of the Project and the
remaining shares of the Project are anticipated to be allocated as follows:
PROJECT Contributing
Water Purveyors
Cost Share
Percentage
Arroyo Grande 25%
Grover Beach 36%
Pismo Beach 20%
Unsubscribed 19%
Total 100%
As indicated in the table above, 19% of the project is currently unsubscribed by the three
participating cities. Until that 19% is subscribed by one of the cities or other customers, it
is anticipated that it will be split equally among the three cities, 6.33% to each. The City
of Arroyo Grande’s total project estimated percentage would be 25% + 6.33% = 31.33%.
The City of Pismo Beach is currently evaluating whether it will subscribe to a greater share
of the Project, which will result in a lower unsubscribed portion and therefore a lower cost
share for the City of Arroyo Grande. It is anticipated that the Pismo Beach will provide
direction on this issue at its November 16, 2021 City Council meeting. The cost-sharing
agreement currently being developed by staff will reflect the final percentages arrived at
following that meeting.
It is anticipated that the Project will be heavily funded by Federal and State grants. To
date, $4,496,094 in Federal and State grants have been awarded to fund the Project. On
September 7, 2021, Water Systems Consulting, Inc. (WSC) submitted an application
seeking approximately $28.6 million in grant funding for the Project from the Proposition
1 Groundwater Grant Program (Prop 1 GWGP) administered by the State Water
Resources Control Board. If awarded, these grant funds will provide funding for more than
50% of the costs of constructing the Project. Updated Project cost estimates were
prepared as part of the Prop 1 grant application and WSC has supplied the following
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updated estimated total Project costs, as well as the total costs to participating agencies
when accounting for previously-awarded grants, and the total potential grant funding
opportunities for the Project:
Overall Costs
Total Project Costs $56,681,853
Grant or outside
agency funding
contributions spent to-
date
$2,489,576 Prop 1 GWGP (Round 1),
Zone 3 Reserves,
SSLOCSD EIR
Contribution
Awarded and Unspent
Grant Funds
$2,496,094 Title XVI WRRG
Total Participating
agency obligations
$51,696,183
Future Grant Opportunities
Prop 1 GWGP (Round
3)
$28,625,746 Submitted concept
proposal and waiting on
invite to apply
Title XVI WRRG $11,220,526 Project can apply to future
funding opportunities and
receive 25% cost share of
eligible costs up to $20Mil
Total Future Grant Opportunities $39,846,272
Total Participating Agency
Obligation after Potential Grant
Funds
$11,849,911
Stage 1 Water Shortage Emergency
At its October 12, 2021 regular meeting, Council conducted a continued Public Hearing
and adopted a resolution declaring a Stage 1 Water Shortage Emergency and
implementing Emergency Water Shortage Restrictions and Regulations in accordance
with the California Water Code and the Arroyo Grande Municipal Code. The resolution
imposes the following reduction requirements for Arroyo Grande water customers:
• For Single Family Residential (SFR) and Multi-Family Residential (MFR)
customers using of 0-9 units, the reduction allocation is 0%
• For SFR and MFR customers using 10-18 units, the reduction allocation is 7%
• For SFR and MFR customers using 19 or more units, the reduction allocation is
14%
• Commercial customers are exempt from the overall water restrictions unless they
have an irrigation meter
• Irrigation customers will be required to reduce water usage by 25%
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The calculations used to develop this revised recommendation are shown in the table
below.
Water and Sewer Fund Budgets
During the FY 2021-22 and FY 2022-23 Biannual Budget, process the Water and Sewer
fund revenue was shown as a flat amount to reflect that the updated Water and
Wastewater Rate Study =had not yet been adopted. The Biannual Budget included the
following information regarding the Water and Sewer Funds:
Fund 612 Sewer FY 2021-22 and FY 2022-23 Biannual Budget
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..
Fund 640 Water FY 2021-22 and FY 2022-23 Biannual Budget
The Reserve Target balance for both of these funds is 90 days (25%) of the current
annual operating expense budget plus $500,000 to fund CIP Projects. The Reserve
Target for Fund 612 Sewer for FY 2022-23 is $739,200. At the end of FY 2022-23 the
ending fund balance for Fund 614 is projected to be $531,069, approximately $208,000
under the Reserve Target. The FY 2022-23 Reserve Target for Fund 649 Water is
$2,716,600. At the end of FY 2022-23, the ending fund balance for Fund 640 is projected
to be $1,920,414, approximately $796,100 under the Reserve Target.
ANALYSIS OF ISSUES:
A number of issues impact funding needs in the enterprise system. These include:
the ongoing infrastructure maintenance and upgrades identified in the Water Master
2021-22 2022-23
BUDGET BUDGET
Beginning Working Capital 1,011,446$ (512,682) 801,521$ (209,925)
Revenues:
Revenues 947,000 (49,542) 947,000 -
Transfers In - - - -
Total Revenues 947,000 (49,542) 947,000 -
Expenses:
Salaries and Benefits 245,000 (5,100) 239,800 (5,200)
Services and Supplies 168,045 827 172,040 3,995
Debt Service 8,500 (9,200) - (8,500)
Operating Equipment 3,500 (31,000) 2,500 (1,000)
Capital Improvement Program 243,140 (300,966) 260,412 17,272
Transfers Out 488,740 (6,860) 542,700 53,960
Total Expenditures 1,156,925 (352,299) 1,217,452 60,527
Ending Available Working Capital 801,521$ (209,925) 531,069$ (270,452)
Increase/
(Decrease)
Increase/
(Decrease)
2021-22 2022-23
BUDGET BUDGET
Beginning Working Capital 3,923,733$ (65,843) 2,873,883$ (1,049,850)
Revenues:
Revenues 6,882,488 - 6,882,488 -
Transfers In - (1,606,471) 232,750 232,750
Total Revenues 6,882,488 (1,606,471) 7,115,238 232,750
Expenses:
Salaries and Benefits 795,100 (58,600) 778,000 (17,100)
Services and Supplies 753,945 60,553 736,940 (17,005)
Debt Service 13,500 (13,700) - (13,500)
Capital Outlay 67,500 57,000 1,200 (66,300)
Capital Improvement Program 366,040 (985,352) 470,250 104,210
Transfers Out 5,936,253 317,635 6,082,316 146,063
Total Expenditures 7,932,338 (622,464) 8,068,706 136,368
Ending Available Working Capital 2,873,883$ (1,049,850) 1,920,414$ (953,468)
Increase/
(Decrease)
Increase/
(Decrease)
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Plan and the City's Capital Improvement Program; the recent economic downturn
related to the Covid-19 pandemic and the resulting need to wait to increase fees;
important capital needs that impact costs for operation of the Lopez reservoir and
treatment facility; the ongoing operational costs of City staff; and potential impacts of
the current drought condition and from conservation efforts. The current rates
adopted by the City Council have put the enterprise system in a solid financial position
with each fund able to meet its minimum reserve policy. However, as operational
costs continue to increase and with expenses arising from new regulations and
mandates, without future revenue adjustments, the enterprise system is currently
drawing down reserves to offset annual shortfalls. These challenges are not unique
to the City of Arroyo Grande, as many agencies throughout the State face similar
circumstances.
The goal of the Study is to determine water and wastewater rates for FY 2021-22 to
FY 2025-26. The major objectives of the Study include the following:
• Review the current and future financial status of each of the water and
wastewater enterprises
• 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
• Design water and wastewater rates that generate the required revenue for
the cost of service while being proportionate and equitable for customers
Water Rates
The rate structure for water service has two components: (1) a fixed monthly charge; and
(2) a variable (water consumption-based) charge. The first component is a fixed amount
calculated to recover a portion of the City’s fixed costs of operating and maintaining the
City’s water system and is established on the basis of the customer water meter size. The
variable component of the rate structure is based on water consumption. The variable
component is structured in such a way as to capture the costs of providing water and to
deter waste and encourage conservation. For residential customers, the variable charges
are further apportioned between three distinct tiers. The goal of the first tier is to provide
for basic indoor water use; the second tier is to provide for outdoor irrigation; and the third
tier is for excessive use. Together, the components are calculated to recover the
proportionate cost of providing water service attributable to parcels within each customer
class.
In determining the cost to provide water service, the total cost is analyzed by function
and then equitably distributed to the various classes of customers. In this case, the costs of service are broken down into functional components of base cost, extra
capacity or peaking cost, and customer-service related costs. Some of these are
fixed and do not change regardless of the amount of water used by a customer;
others are variable and depend on the amount of water consumed.
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For example, meter reading and billing are done for every account, regardless of how much water is used by the customer; these are categorized as fixed costs.
However, chemicals and water treatment costs increase or decrease depending on
the amount of water that is used by customers; these are categorized as variable
costs. The City's current fixed water charge generates approximately 40% of the
total revenue. The proposed rate structure maintains a similar percentage of
revenue from the fixed monthly charge to preserve the current level of revenue
stability (37% fixed / 63% variable).
Customer classes are groups of customers with similar use characteristics. In the
City's case, these have been determined to be: Single-family Residential (SFR), Multifamily Residential (MFR), non-residential, and irrigation. While there can be differences in use within a customer class (i.e. not all SFR customers use the same
amount of water each month), the class overall shares similar characteristics. The cost of providing water service is allocated to each customer class, which
determines how much revenue should be generated by each class. Rates are then derived based on the number of accounts, fixed and variable cost components, and usage characteristics, of each class.
The recommended water rate structure includes maintaining the fixed charge
structure but, 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.
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), utilizing the standards recommended by the California Department of
Finance and the California Water Board. These criteria result in a Tier 1 breakpoint
of 10 Hundred Cubic Feet (HCF) per billing period.
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 42 HCF.
Tier 3 is defined as water use above Tier 2.
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For MFR there is very little consumption (less than 2.0%) above the current Tier 1
breakpoint of 18 HCF. Over 82% of the water consumed by MFR customers is in the zero
to 10 HCF block 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.
For the water system, the anticipated revenue needs were determined with and
without the Central Coast Blue (CCB) Project to ensure that the Council and the
public are provided the most complete information possible. As the City Council has
directed that staff negotiate agreements necessary to enable the City to participate
in the CCB Project, all information provided in this staff report will focus on anticipated
water rates with CCB. As indicated in the Background section above, the Project is
anticipated to be heavily funded by grants from the Federal and State governments.
However, it is currently unknown how much will ultimately be awarded to the Project.
Increases in the City’s water rates may be reduced as additional grants are received.
As presented, the CCB project is currently estimated to cost $43,407,577. The City
will incur new debt service from loan proceeds to fund its share of Phase 1
construction of the CCB project. It is assumed that this amount is financed at 1% for
30 years and will have an annual debt service payments of approximately $511,000
beginning in FY 2022-23.
The proposed water rate structure and rates with CCB are provided in the table below:
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Proposed Water Fixed and Variable Charges with Central Coast Blue
Current March 21, Ja nuary 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8"$29.51 $29.45 $32.40 $35.64 $37.78 $37.78
3/4" $31.67 $32.31 $35.54 $39.09 $41.44 $41.44
1"$38.12 $40.87 $44.96 $49.46 $52.43 $52.43
1.5"$46.73 $52.29 $57.52 $63.27 $67.07 $67.07
2"$70.41 $83.68 $92.05 $101.26 $107.34 $107.34
3"$244.74 $314.85 $346.34 $380.97 $403.83 $403.83
4"$309.31 $400.47 $440.52 $484.57 $513.64 $513.64
6"$459.96 $600.25 $660.28 $726.31 $769.89 $769.89
8"$632.14 $828.57 $911.43 $1,002.57 $1,062.72 $1,062.72
Service Fee per Add'l Unit $7.99 $8.26 $9.08 $9.98 $10.58 $10.58
Fireline Size
2" $3.74 $4.40 $4.84 $5.32 $5.64 $5.64
3" $10.88 $12.79 $14.07 $15.48 $16.41 $16.41
4" $23.18 $27.25 $29.98 $32.98 $34.96 $34.96
6" $67.33 $79.16 $87.08 $95.79 $101.54 $101.54
8" $143.48 $168.69 $185.56 $204.12 $216.37 $216.37
10" $258.03 $303.37 $333.71 $367.08 $389.10 $389.10
Variable Charge ($ 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 $4.13 $4.54 $4.99 $5.29 $5.29
Tier 2 -11 to 38 units $4.82 $5.30 $5.83 $6.18 $6.18
Tier 3 -Over 38 $5.96 $6.56 $7.22 $7.65 $7.65
Multifamily
Tier 1 -0 to 18 units $3.78
Tier 2 -19 to 27 units $4.16
Tier 3 -Over 27 $5.55
Tier 1 -0 to 10 units $4.13 $4.54 $4.99 $5.29 $5.29
Tier 2 -11 to 38 units $4.82 $5.30 $5.83 $6.18 $6.18
Tier 3 -Over 38 $5.96 $6.56 $7.22 $7.65 $7.65
Commercial $3.95 $4.50 $4.95 $5.45 $5.78 $5.78
Irrigation $4.21 $5.10 $5.61 $6.17 $6.54 $6.54
Hydrant $6.13 $8.36 $9.20 $10.12 $10.73 $10.73
Wheeling $2.04 $2.42 $2.66 $2.93 $3.11 $3.11Item 10.a. - Page 10
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The following table shows the impacts to SFR bills water rates with a 5/8-inch meter using
19 HCF bi-monthly over time with the implementation of the proposed water rates from
the previous table with CCB:
The following chart compares Arroyo Grande’s average SFR water bill with those of other
communities at the same consumption, assuming adoption of the proposed water rate
increases:
Table 26
SFR Bi-monthly Water Bill Impacts at 19 HCF Bi-Monthly
With Central Coast Blue
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $59.02 $58.90 $64.80 $71.28 $75.56 $75.56
Variable Charges $72.20 $84.68 $93.10 $102.37 $108.52 $108.52
Total Charges $131.22 $143.58 $157.90 $173.65 $184.08 $184.08
Dollar Change $12.36 $14.32 $15.75 $10.43 $0.00
Percent Change 9.4% 10.0% 10.0% 6.0% 0.0%
$131.22
$143.58
$157.90
$173.65
$184.08 $184.08
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges Variable Total
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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.
With Central Coast Blue
Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF with Central Coast Blue
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate structure and rates
above. Pismo Beach includes Special Water Tax.
$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300 $320 $340 $360 $380
Grover Beach
Arroyo Grande Current Bill
Arroyo Grande March 21, 2022 Bill
Paso Robles
Pismo Beach
Atascadero
Oceano CSD
San Luis Obispo
Morro Bay
Cayucos CSD - CSA 10A
Avila Beach CSD
Cambria CSD
Proposed Stage 1 Drought Wastewater Fixed and Variable Charges
Current March 21, Ja nuary 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.62 $2.84 $3.08 $3.34 $3.62
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.72 $0.78 $0.84 $0.91 $0.99
Multifamily Residential $0.94 $1.04 $1.12 $1.21 $1.31 $1.42
Non-Residential $1.32 $1.40 $1.52 $1.65 $1.79 $1.94
[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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The impact to an average SFR customer (using 19 HCF) will be an increase of $1.39 bi-
monthly as shown in the following table. Wastewater Rates are increasing due to
expenditure increases related to inflation and personnel services. The current and
proposed bills include the current South San Luis Obispo County Sanitation District
(SSLOCSD) wastewater treatment charge of $25.48 monthly.
The following chart compares Arroyo Grande’s average wastewater bill with those of other
communities at the same consumption:
SFR Bi-monthly Wastewater Bill Impacts at 19 HCF
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $4.80 $5.24 $5.68 $6.16 $6.68 $7.24
Variable Charges $12.73 $13.68 $14.82 $15.96 $17.29 $18.81
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $68.49 $69.88 $71.46 $73.08 $74.93 $77.01
Dollar Change $1.39 $1.58 $1.62 $1.85 $2.08
Percent Change 2.0% 2.3% 2.3% 2.5% 2.8%
$68.49 $69.88 $71.46 $73.08 $74.93 $77.01
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges Variable Charges
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Water and Wastewater Drought Rates
The City requested that water and wastewater rates be developed to address the City’s
implementation of a Stage 1 drought declaration. The City’s Stage 1 drought declaration
requires residential and irrigation customers to reduce consumption from calendar year
2020 levels by 10 percent overall and 25 percent respectively. To compensate for the
revenue decline that will occur with usage cutbacks, Stage 1 drought rates for the water
and wastewater systems were calculated to recover the lost revenue and to restore the
financial planning to the same sustainability as provided with the normal rates presented
in the earlier sections of this report assuming a sustained drought. The Stage 1 drought
rates were calculated for a five-year period with the same implementation dates of the
normal water and wastewater rates with March 21, 2022 for the first year and subsequent
increases each January 1. The following table shows Stage 1 drought water rates with
Central Coast Blue:
Single-family Residential Bi-Monthly Wastewater Bills of Local Communities Using 19 HCF
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate structure and rates
above.
$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300
Atascadero
Arroyo Grande Current Bill
Arroyo Grande March 21, 2022 Bill
Oceano CSD
Grover Beach
Pismo Beach
Paso Robles
Morro Bay
San Luis Obispo
Cambria CSD
Cayucos CSD
Avila Beach CSD
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Proposed Stage 1 Drought Water Fixed and Variable Charges
with Central Coast Blue
Current March 21, Ja nuary 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8"$29.51 $33.46 $36.81 $40.49 $42.92 $42.92
3/4" $31.67 $36.70 $40.37 $44.41 $47.08 $47.08
1"$38.12 $46.43 $51.07 $56.19 $59.56 $59.56
1.5"$46.73 $59.40 $65.34 $71.87 $76.19 $76.19
2"$70.41 $95.06 $104.57 $115.03 $121.94 $121.94
3"$244.74 $357.67 $393.44 $432.78 $458.75 $458.75
4"$309.31 $454.93 $500.43 $550.47 $583.50 $583.50
6"$459.96 $681.88 $750.08 $825.09 $874.60 $874.60
8"$632.14 $941.26 $1,035.38 $1,138.92 $1,207.25 $1,207.25
Service Fee per Add'l Unit $7.99 $9.38 $10.32 $11.34 $12.02 $12.02
Fireline Size
2"$3.74 $5.00 $5.50 $6.04 $6.41 $6.41
3"$10.88 $14.53 $15.98 $17.59 $18.64 $18.64
4"$23.18 $30.96 $34.06 $37.47 $39.71 $39.71
6"$67.33 $89.93 $98.92 $108.82 $115.35 $115.35
8"$143.48 $191.63 $210.80 $231.88 $245.80 $245.80
10"$258.03 $344.63 $379.08 $416.99 $442.01 $442.01
Variable Charge ($ 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 $4.69 $5.16 $5.67 $6.01 $6.01
Tier 2 -11 to 38 units $5.48 $6.02 $6.62 $7.02 $7.02
Tier 3 -Over 38 $6.77 $7.45 $8.20 $8.69 $8.69
Multifamily
Tier 1 -0 to 18 units $3.78
Tier 2 -19 to 27 units $4.16
Tier 3 -Over 27 $5.55
Tier 1 -0 to 10 units $4.69 $5.16 $5.67 $6.01 $6.01
Tier 2 -11 to 38 units $5.48 $6.02 $6.62 $7.02 $7.02
Tier 3 -Over 38 $6.77 $7.45 $8.20 $8.69 $8.69
Commercial $3.95 $5.11 $5.62 $6.19 $6.57 $6.57
Irrigation $4.21 $5.79 $6.37 $7.01 $7.43 $7.43
Hydrant $6.13 $9.50 $10.45 $11.50 $12.19 $12.19
Wheeling $2.04 $2.75 $3.02 $3.33 $3.53 $3.53
Item 10.a. - Page 15
CITY COUNCIL
DRAFT WATER AND WASTEWATER RATE STUDY
NOVEMBER 9, 2021
PAGE 16
The following table shows the impacts to SFR bills with the implantation of the drought
water rates identified above for customers with a 5/8-inch meter using 19 HCF bi-monthly:
The following chart compares Arroyo Grande’s average SFR drought water bill with those
of other communities at the same consumption:
SFR Bi-monthly Water Bill Impacts with Drought Rates at 19 HCF
with Central Coast Blue
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $59.02 $66.92 $73.62 $80.98 $85.84 $85.84
Variable Charges $72.20 $96.22 $105.78 $116.28 $123.28 $123.28
Total Charges $131.22 $163.14 $179.40 $197.26 $209.12 $209.12
Dollar Change $31.92 $16.26 $17.86 $11.86 $0.00
Percent Change 24.3% 10.0% 10.0% 6.0% 0.0%
$131.22
$163.14
$179.40
$197.26 $209.12 $209.12
$0
$50
$100
$150
$200
$250
Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges Variable Charges
Item 10.a. - Page 16
CITY COUNCIL
DRAFT WATER AND WASTEWATER RATE STUDY
NOVEMBER 9, 2021
PAGE 17
Wastewater rates under a Stage 1 drought declaration are provided in the following table:
Proposed Stage 1 Drought Wastewater Fixed and Variable Charges
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.98 $3.23 $3.50 $3.80 $4.12
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.82 $0.89 $0.96 $1.03 $1.13
Multifamily Residential $0.94 $1.18 $1.27 $1.38 $1.49 $1.61
Non-Residential $1.32 $1.60 $1.73 $1.88 $2.04 $2.21
[1] Fixed charge per month per account and to each additional unit.
[2] Charged on the basis of water consumption read through the meter.
Item 10.a. - Page 17
CITY COUNCIL
DRAFT WATER AND WASTEWATER RATE STUDY
NOVEMBER 9, 2021
PAGE 18
The drought rate impact to an average SFR customer (Using 19 HCF) will be an increase
of $4.01 bi-monthly as shown in the following table. The current and proposed bills include
the current South San Luis Obispo County Sanitation District (SSLOCSD) wastewater
treatment charge of $25.48 monthly.
The following chart compares Arroyo Grande’s average drought wastewater bill with
those of other communities at the same consumption:
SFR Bi-monthly Wastewater Bill Impacts with Drought Rates at 19 HCF
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $4.80 $5.96 $6.46 $7.00 $7.60 $8.24
Variable Charges $12.73 $15.58 $16.91 $18.24 $19.57 $21.47
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $68.49 $72.50 $74.33 $76.20 $78.13 $80.67
Dollar Change $4.01 $1.83 $1.87 $1.93 $2.54
Percent Change 5.9% 2.5% 2.5% 2.5% 3.3%
$68.49 $72.50 $74.33 $76.20 $78.13 $80.67
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges Variable Charges
Item 10.a. - Page 18
CITY COUNCIL
DRAFT WATER AND WASTEWATER RATE STUDY
NOVEMBER 9, 2021
PAGE 19
Next Steps
The Draft Water and Wastewater Rate Study is being presented at this time for review
and discussion. Feedback received during the discussion will be incorporated into the
final Study, along with any updated information regarding the CCB Project cost sharing
agreement.
During the next few months, next steps for the Water and Wastewater Rate Study will
include:
• December 14, 2021 – Presentation of the Final Water and Wastewater Rates
Study for approval for Fiscal Year 2021-22 through Fiscal Year 2025-26, and
schedule a Proposition 218 public hearing
• February 8, 2022 – Conduct a public hearing to consider protests regarding the
proposed rate adjustments identified in the Proposition 218 hearing notice and
outlined in the Water and Wastewater Rate Study
• March 21, 2022 – If approved, rates go into effect
ALTERNATIVES:
1. Review and provide feedback on the Draft Water and Wastewater Rate Study
including direction on preferred rate options which are:
a. Water Rates with CCB and Wastewater Rates
Item 10.a. - Page 19
CITY COUNCIL
DRAFT WATER AND WASTEWATER RATE STUDY
NOVEMBER 9, 2021
PAGE 20
b. Water Rates with CCB and Drought Wastewater Rates
c. Drought Water Rates with CCB and Wastewater Rates
d. Drought Water Rates with CCB and Drought Wastewater Rates
e. Water Rates without CCB and Wastewater Rates
f. Water Rates without CCB and Drought Wastewater Rates
g. Drought Water Rates without CCB and Wastewater Rates
h. Drought Water Rates without CCB and Drought Wastewater Rates; or
2. Provide direction to staff.
ADVANTAGES:
Review and discussion of the Draft Water and Wastewater Rate Study will provide the
City Council and residents with the most up-to-date and comprehensive information
regarding the revenue needs for the City’s water and wastewater systems, as well as the
rate adjustments necessary to ensure ongoing service to City customers.
DISADVANTAGES:
There are no disadvantages to reviewing the Draft Water and Wastewater Rate Study.
However, the Study describes the increased water and wastewater rates that are
necessary to continue ensuring ongoing and reliable water and wastewater services to
the City’s customers, which will increase costs to the public.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachments:
1. Water and Wastewater Rate Study Final Draft
Item 10.a. - Page 20
Report 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
November 2021
Report on
Water and Wastewater
Rate Study
DRAFT
Attachment 1
Item 10.a. - Page 21
DRAFT
[This Page Intentionally Left Blank for Two-sided Printing]
Item 10.a. - Page 22
Tuckfield & Associates
2549 Eastbluff Drive, Suite 450B, Newport Beach, CA 92660
Phone (949) 760-9454 Fax (949) 760-2725
Email ctuckfield@tuckfieldassociates.com
DRAFT
November 4, 2021
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 and Wastewater Rate Study (Study) report for the City of Arroyo Grande (City).
The water and wastewater 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 and wastewater 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 and
wastewater 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 10.a. - Page 23
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents
Page
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
Introduction ............................................................................................................. 9
Background ..................................................................................................................................................... 9
Objectives ........................................................................................................................................................ 9
Scope of Study .............................................................................................................................................. 10
Assumptions ......................................................................................................... 10
Reserve Policy .............................................................................................................................................. 11
Operating Reserve ................................................................................................................................. 11
Capital Reserve ..................................................................................................................................... 11
Facility Fund Reserve ............................................................................................................................ 11
Lopez Fund Reserve ............................................................................................................................. 11
Beginning Balances and Reserve Targets .................................................................................................... 11
Water Financial Planning ..................................................................................... 12
Current Water Rates ..................................................................................................................................... 12
Water User Classifications ............................................................................................................................ 13
Number of Customers............................................................................................................................ 13
Number of Water Meters ....................................................................................................................... 13
Water Sales Volumes ............................................................................................................................ 14
Water Financial Plan ..................................................................................................................................... 14
Water Revenues .................................................................................................................................... 15
Miscellaneous Water Revenues ............................................................................................................ 15
Water Revenue Requirements .............................................................................................................. 15
Water Operation and Maintenance Expense ................................................................................. 15
Transfer to Lopez Fund .................................................................................................................. 16
Water Annual CIP Funding ............................................................................................................ 16
Item 10.a. - Page 24
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
DRAFT
Debt Service ................................................................................................................................... 16
Water Capital Improvement Program .................................................................................................... 16
Water Financial Plan .............................................................................................................................. 17
Proposed Revenue Adjustments.................................................................................................... 29
Water Cost of Service .......................................................................................... 20
Industry Methodology .................................................................................................................................... 20
Costs of Service to be Allocated ................................................................................................................... 21
Water Rate Design ................................................................................................ 21
Proposed Water Rate Structure .................................................................................................................... 21
Proposed Water Fixed Charges .......................................................................................................... 22
Proposed Private Fire Protection Fixed Charges ........................................................................... 23
Proposed Service Fee per Additional Unit Charge ........................................................................ 23
Proposed Water Variable Charges ...................................................................................................... 23
Water Supply Costs........................................................................................................................ 23
Deliver Costs .................................................................................................................................. 23
Peaking Costs ................................................................................................................................ 23
Proposed Single-family Residential Variable Water Rates .................................................................. 24
Proposed Multifamily and Non-Residential Variable Water Rates ...................................................... 25
Proposed Water Rates .................................................................................................................................. 25
Water Bill Impact Analysis ................................................................................... 26
Water Rate Survey ................................................................................................ 28
Water Rates with Central Coast Blue ................................................................. 28
Water Financial Plan Revenue Increases with Central Coast Blue .............................................................. 29
Water Rates with Central Coast Blue ............................................................................................................ 30
Water Bill Impacts with Central Coast Blue ................................................................................................... 30
Wastewater Financial Planning ........................................................................... 34
Current Wastewater Rates ............................................................................................................................ 34
Wastewater User Classifications ................................................................................................................... 34
Number of Customers............................................................................................................................ 34
Water Sales Volumes of Wastewater Customers ................................................................................. 35
Wastewater Financial Plan ............................................................................................................................ 36
Wastewater Revenues .......................................................................................................................... 36
Miscellaneous Wastewater Revenues ................................................................................................... 36
Item 10.a. - Page 25
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
DRAFT
Wastewater Revenue Requirements ..................................................................................................... 36
Wastewater Operation and Maintenance Expense....................................................................................... 37
Wastewater Annual CIP Funding ................................................................................................... 37
Wastewater Capital Improvement Program........................................................................................... 38
Wastewater Financial Plan .................................................................................................................... 38
Proposed Revenue Adjustments.................................................................................................... 38
Wastewater Cost of Service ................................................................................ 40
Industry Methodology .................................................................................................................................... 40
Costs of Service to be Allocated ................................................................................................................... 40
Cost Allocation to Wastewater Parameters ................................................................................................... 41
Unit Costs of Service ..................................................................................................................................... 41
User Class Costs ........................................................................................................................................... 42
Wastewater Rates ................................................................................................. 42
Proposed Wastewater Rate Structure........................................................................................................... 43
Proposed Wastewater Fixed Charges ........................................................................................... 43
Proposed Wastewater Variable Charges ....................................................................................... 43
Proposed Wastewater Rates ........................................................................................................................ 43
Wastewater Bill Impact Analysis ......................................................................... 44
Wastewater Rate Survey ...................................................................................... 45
Water and Wastewater Drought Rates ............................................................... 46
List of Tables
Table ES-1 Proposed Revenue Increases ........................................................................................................ 1
Table ES-2 Single-family Current 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 March 2022 Water Rates without Central Coast Blue ................................... 4
Table ES-5 Single-family Residential Bi-monthly Water Bill Impacts with 5/8-inch Meter at 19 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 at 19 HCF ....................................................................................................... 5
Table ES-7 Proposed Wastewater Fixed and Variable Charges ...................................................................... 6
Item 10.a. - Page 26
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
DRAFT
Table ES-8 Comparison of Current Single-family Residential Bi-monthly Wastewater Bill with
Proposed Bill Using March 2022 Wastewater Rates ..................................................................... 7
Table ES-9 Single-family Residential Bi-monthly Wastewater Bill Impacts at 19 HCF ..................................... 7
Table 1 Assumptions and Planning Factors .............................................................................................. 10
Table 2 June 30, 2019 Beginning Cash Balances and Reserve Targets .................................................. 12
Table 3 Current Water Rates .................................................................................................................... 12
Table 4 Historical and Projected Average Number of Water Customers by Classification ....................... 13
Table 5 Historical and Projected Average Number of Water Customers by Meter Size ........................... 14
Table 6 Historical and Projected Water Consumption (in HCF) ................................................................ 14
Table 7 Projected Rate-based Water Revenue Using Existing Rates ...................................................... 15
Table 8 Projected Miscellaneous Water Revenue .................................................................................... 15
Table 9 Projected Water Operation and Maintenance Expense ............................................................... 16
Table 10 Water Capital Improvement Program ........................................................................................... 17
Table 11 Water Financial Plan .................................................................................................................... 28
Table 12 Allocation of Water Revenue Requirements to Cost Component ................................................ 21
Table 13 Design of Water Fixed Charges ................................................................................................... 22
Table 14 Design of Water Fixed Charges by Meter Size ............................................................................ 22
Table 15 Design of 6-inch Private Fire Protection Charges ........................................................................ 23
Table 16 Design of Private Fire Protection Charges ................................................................................... 23
Table 17 Design of Single-family Tiered Water Rate Structure................................................................... 24
Table 18 Single-family Residential Tiered Water Rates .............................................................................. 25
Table 19 Design of Multifamily and Non-Residential Variable Water Rates ............................................... 25
Table 20 Proposed Water Fixed Charges and Variable Charges without Central Coast Blue ................... 25
Table 21 Comparison of Current Single-family Residential Bi-Monthly Bill with 5/8-inch Meter with
Proposed Bill Using March 2022 Water Rates ............................................................................. 27
Table 22 Single-family Residential Bi-monthly Water Bill Impacts at 19 HCF Bi-monthly .......................... 28
Table 23 Annual Revenue Increases with and without Central Coast Blue Project .................................... 29
Table 24 Proposed Water Fixed and Variable Charges with Central Coast Blue ....................................... 31
Table 25 Comparison of Current Single-family Residential Bi-monthly Water Bill with 5/8-inch Meter Size
with Proposed Bill Using March 2022 Water Rates with Central Coast Blue ............................... 32
Table 26 Single-family Residential Bi-monthly Water Bill Impacts at 19 HCF Bi-monthly
with Central Coast Blue ................................................................................................................ 32
Table 27 Impacts to Single-family Residential Bi-monthly Water Bills of Central Cost Blue
at 19 HCF ..................................................................................................................................... 33
Table 28 Current Wastewater Rates ........................................................................................................... 34
Item 10.a. - Page 27
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
DRAFT
Table 29 Historical and Projected Average Number of Wastewater Customers by Classification ............. 35
Table 30 Historical and Projected Water Consumption of Wastewater Customers (HCF) ......................... 35
Table 31 Projected Rate-based Wastewater Revenue Using Existing Rates............................................. 36
Table 32 Projected Miscellaneous Wastewater Revenue ........................................................................... 36
Table 33 Projected Wastewater Operation and Maintenance Expense ..................................................... 37
Table 34 Wastewater Capital Improvement Program ................................................................................. 38
Table 35 Wastewater Financial Plan ........................................................................................................... 39
Table 36 Allocation of Wastewater Revenue Requirement to Cost Component ........................................ 41
Table 37 FY 2020-21 Development of Unit Costs ....................................................................................... 42
Table 38 Distribution of Costs to Customer Classes FY 20-21 ................................................................... 42
Table 39 Design of Variable Wastewater Rates ......................................................................................... 43
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 March 2022 Wastewater Rates ............................................................ 44
Table 42 Single-family Residential Bi-monthly Wastewater Bill Impacts at 19 HCF ................................... 45
Table 43 Proposed Stage 1 Drought Water Fixed and Variable Charges without Central Coast Blue ...... 47
Table 44 Proposed Stage 1 Drought Water Fixed and Variable Charges with Central Coast Blue ........... 48
Table 45 Proposed Stage 1 Drought Wastewater Fixed and Variable Charges ......................................... 49
List of Figures
Figure 1 Water Financial Plan Comparison of Revenue with Annual Obligations ..................................... 19
Figure 2 Water Debt Coverage Ratio ......................................................................................................... 20
Figure 3 Water Debt Coverage Ratio with Central Coast Blue .................................................................. 30
Figure 4 Wastewater Financial Plan Comparison of Revenue with Annual Obligations ............................ 40
List of Charts
Chart ES-1 Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF
without Central Coast Blue ............................................................................................................. 5
Chart ES-2 Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF
with Central Coast Blue .................................................................................................................. 6
Chart ES-3 Single-family Residential Bi-Monthly Wastewater Bills of Local Communities at 19 HCF ............. 9
Chart 1 Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF
Item 10.a. - Page 28
Water and Wastewater Rate Study
City of Arroyo Grande
Table of Contents (continued)
Page
DRAFT
without Central Coast Blue .......................................................................................................... 28
Chart 2 Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF
with Central Coast Blue ............................................................................................................... 33
Chart 3 Single-family Residential Bi-Monthly Wastewater Bills of Local Communities at 19 HCF ........... 45
List of Appendices
Appendix A Water System Tables ................................................................................................................... 46
Appendix B Wastewater System Tables ......................................................................................................... 51
Item 10.a. - Page 29
Water and Wastewater Rate Study City of Arroyo Grande
Tuckfield & Associates DRAFT 1
Executive Summary
The City of Arroyo Grande (City) retained Tuckfield & Associates to conduct a comprehensive Water and
Wastewater Rate Study (Study). The objectives of the Study included determining water and wastewater rates
for FY 2021-22 to FY 2025-26 (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.
Enterprise Financial Plans
Forward-looking financial plans were developed for the water and wastewater 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 2021-22. 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 water and wastewater 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 a more sustainable groundwater supply especially during multiple dry years.
Table ES-1
Proposed Revenue Increases
[1] Increases this year may not match Tables ES-5 and ES-9 due to rate structure change and cost of service adjustments.
[2] Central Coast Blue project.
March 21 January 1 January 1 January 1 January 1
Utility System FY 21-22 [1] FY 22-23 FY 23-24 FY 24-25 FY 25-26
Water System (without CCB [2])4.0% 4.0% 4.0% 4.0% 4.0%
Water System (with CCB [2])10.0% 10.0% 10.0% 6.0% 0.0%
Wastewater System 8.3% 8.3% 8.3% 8.3% 8.3%
Item 10.a. - Page 30
Water and Wastewater Rate Study City of Arroyo Grande
Tuckfield & Associates DRAFT 2
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 from a high of over 1.4
million hundred cubic feet (HCF) since FY 2013-14. For the Single-family Residential (SFR) and Multifamily
Residential (MFR) classifications, the decline in consumption resulted in a reduction of water sold in all tiers
though an increase in the peaking factor has occurred for customers in both Tier 2 and 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
increased from 36 HCF bi-monthly to 38 HCF bi-monthly.
It is recommended that the tier break points be changed to reflect the new SFR and MFR 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 aggregated over the service area and not by individual home.
It is further recommended that the upper Tier 2 break point be revised from 36 HCF to 38 HCF. The recommended
SFR Tier restructuring is provided in Table ES-2 below.
The proposed water rate structure and rates without CCB are provided in Table ES-3 for implementation
beginning March 21, 2022 and each January 1 thereafter for the Study Period.
𝑇𝑖𝑒𝑟 1 = 2.31 𝑝𝑝ℎ∗55 𝑔𝑝𝑐𝑑∗365 𝑑𝑎𝑦𝑠
𝑦𝑒𝑎𝑟∗1 𝐻𝐶𝐹
748 𝑔𝑎𝑙∗1 𝑦𝑒𝑎𝑟
6 𝑏𝑖𝑙𝑙𝑠=~ 10 𝐻𝐶𝐹
pph = persons per household from California Department of Finance estimates for 2021
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 - 38 HCF
Tier 3 Over 36 HCF Over 38 HCF
Item 10.a. - Page 31
Water and Wastewater Rate Study City of Arroyo Grande
Tuckfield & Associates DRAFT 3
Water Bill Impacts without Central Coast Blue
Table ES-4 presents the impacts to SFR bills from the implementation of the proposed March 21, 2022 water rates
without CCB. For a SFR customer using the average consumption of 19 HCF bi-monthly, the bill will increase from
$131.22 to $136.53, an increase of $5.11, or 4.0 percent.
Table ES-3
Proposed Water Fixed and Variable Charges without Central Coast Blue
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $28.41 $29.55 $30.73 $31.96 $33.24
3/4" $31.67 $31.15 $32.40 $33.70 $35.05 $36.45
1"$38.12 $39.35 $40.92 $42.56 $44.26 $46.03
1.5" $46.73 $50.30 $52.31 $54.40 $56.58 $58.84
2"$70.41 $80.39 $83.61 $86.95 $90.43 $94.05
3" $244.74 $302.01 $314.09 $326.65 $339.72 $353.31
4" $309.31 $384.09 $399.45 $415.43 $432.05 $449.33
6" $459.96 $575.61 $598.63 $622.58 $647.48 $673.38
8" $632.14 $794.49 $826.27 $859.32 $893.69 $929.44
Service Fee per Add'l Unit $7.99 $7.86 $8.18 $8.50 $8.84 $9.20
Fireline Size
2"$3.74 $3.66 $3.81 $3.96 $4.12 $4.28
3"$10.88 $10.63 $11.06 $11.50 $11.96 $12.44
4"$23.18 $22.66 $23.57 $24.51 $25.49 $26.51
6"$67.33 $65.81 $68.44 $71.18 $74.03 $76.99
8" $143.48 $140.24 $145.85 $151.68 $157.75 $164.06
10" $258.03 $252.20 $262.29 $272.78 $283.69 $295.04
Variable Charge ($ 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 $3.93 $4.09 $4.25 $4.42 $4.60
Tier 2 - 11 to 38 units $4.49 $4.67 $4.86 $5.05 $5.25
Tier 3 - Over 38 $5.41 $5.63 $5.86 $6.09 $6.33
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
Tier 1 - 0 to 10 units $3.93 $4.09 $4.25 $4.42 $4.60
Tier 2 - 11 to 38 units $4.49 $4.67 $4.86 $5.05 $5.25
Tier 3 - Over 38 $5.41 $5.63 $5.86 $6.09 $6.33
Commercial $3.95 $4.22 $4.39 $4.57 $4.75 $4.94
Irrigation $4.21 $4.75 $4.94 $5.14 $5.35 $5.56
Hydrant $6.13 $7.70 $8.01 $8.33 $8.66 $9.01
Wheeling $2.04 $2.07 $2.15 $2.24 $2.33 $2.42
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Water and Wastewater Rate Study City of Arroyo Grande
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Table ES-5 provides how SFR bills with a 5/8-inch meter using 19 HCF bi-monthly will escalate over time with
implementation of the proposed water rates from Table ES-3.
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 March 2022 rates, an Arroyo Grande
SFR customer with a bi-monthly consumption of 19 HCF will experience a bill that is among the lowest 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 March 2022 Water Rates without Central Coast Blue
Current Bill Proposed March 21, 2022 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 $56.82 $0.00 $56.82 ($2.20) -3.7%
Very Low 5 $59.02 $18.90 $77.92 $56.82 $19.65 $76.47 ($1.45) -1.9%
Low 10 $59.02 $37.80 $96.82 $56.82 $39.30 $96.12 ($0.70) -0.7%
Median 15 $59.02 $56.70 $115.72 $56.82 $61.75 $118.57 $2.85 2.5%
Average 19 $59.02 $72.20 $131.22 $56.82 $79.71 $136.53 $5.31 4.0%
20 $59.02 $76.36 $135.38 $56.82 $84.20 $141.02 $5.64 4.2%
High 30 $59.02 $117.96 $176.98 $56.82 $129.10 $185.92 $8.94 5.1%
Very High 50 $59.02 $220.62 $279.64 $56.82 $229.94 $286.76 $7.12 2.5%
Table ES-5
Single-family Residential Bi-monthly Water Bill Impacts with 5/8-
inch Meter at 19 HCF Bi-monthly without Central Coast Blue
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $59.02 $56.82 $59.10 $61.46 $63.92 $66.48
Variable Charges $72.20 $79.71 $82.93 $86.24 $89.65 $93.25
Total Charges $131.22 $136.53 $142.03 $147.70 $153.57 $159.73
Dollar Change $5.31 $5.50 $5.67 $5.87 $6.16
Percent Change 4.0% 4.0% 4.0% 4.0% 4.0%
$131.22 $136.53 $142.03 $147.70 $153.57 $159.73
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges Variable Charges
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Water and Wastewater Rate Study City of Arroyo Grande
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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 19 HCF will pay $7.05 more bi-monthly with the CCB project beginning
March 21, 2022 and $30.51 more bi-monthly beginning January 1, 2025 for that fiscal year.
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 remains among the lowest communities listed.
Chart ES-1
Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF without
Central Coast Blue
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate
structure and rates in Table ES-3. Pismo Beach includes Special Water Tax.
Table ES-6
Impacts to Single-family Residential Bi-monthly Water Bills
with and without Central Coast Blue at 19 HCF
March 21 January 1 January 1 January 1 January 1
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Average Bill w/o CCB $136.53 $142.03 $147.70 $153.57 $159.73
Average Bill with CCB $143.58 $157.90 $173.65 $184.08 $184.08
Difference $7.05 $15.87 $25.95 $30.51 $24.35
Item 10.a. - Page 34
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Proposed Wastewater Rates
Proposed Wastewater Rate Structure and Rates
It is recommended that the current wastewater rate structure be retained for the proposed wastewater rates.
The current rate structure places an emphasis on recovering the City’s wastewater costs on a volumetric basis.
Table ES-7 presents the wastewater rates for the next five years.
Table ES-7
Proposed Wastewater Fixed and Variable Charges
March 21, January 1, January 1, January 1, January 1,
Meter Size Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.62 $2.84 $3.08 $3.34 $3.62
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.72 $0.78 $0.84 $0.91 $0.99
Multifamily Residential $0.94 $1.04 $1.12 $1.21 $1.31 $1.42
Non-Residential $1.32 $1.40 $1.52 $1.65 $1.79 $1.94
[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 of Local Communities Using 19 HCF with
Central Coast Blue
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate
structure and rates in Table 24. Pismo Beach includes Special Water Tax.
Item 10.a. - Page 35
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Wastewater Bill Impacts
As shown in Table ES-8, a SFR customer using 19 HCF bi-monthly will have a wastewater bill that will increase
from $68.49 to $69.88, an increase of $1.39 or 2.0 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 March 2022 Wastewater Rates
Current Bill March 21, 2022
Service San District Volume Current Service San District Volume Proposed Dollar Percent
Description Use (HCF) Charge Charge Charge Bill Charge Charge Charge Bill Difference Change
0 $4.80 $50.96 $0.00 $55.76 $5.24 $50.96 $0.00 $56.20 $0.44 0.8%
Very Low 5 $4.80 $50.96 $3.35 $59.11 $5.24 $50.96 $3.60 $59.80 $0.69 1.2%
Low 10 $4.80 $50.96 $6.70 $62.46 $5.24 $50.96 $7.20 $63.40 $0.94 1.5%
Median 13 $4.80 $50.96 $8.71 $64.47 $5.24 $50.96 $9.36 $65.56 $1.09 1.7%
Average 19 $4.80 $50.96 $12.73 $68.49 $5.24 $50.96 $13.68 $69.88 $1.39 2.0%
20 $4.80 $50.96 $13.40 $69.16 $5.24 $50.96 $14.40 $70.60 $1.44 2.1%
High 30 $4.80 $50.96 $20.10 $75.86 $5.24 $50.96 $21.60 $77.80 $1.94 2.6%
Very High 50 $4.80 $50.96 $33.50 $89.26 $5.24 $50.96 $36.00 $92.20 $2.94 3.3%
Table ES-9
Single-family Residential Bi-monthly Wastewater Bill Impacts at 19 HCF
Note: Assumes constant South San Luis Obispo County Sanitation District (SSLOCSD) charges.
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $4.80 $5.24 $5.68 $6.16 $6.68 $7.24
Variable Charges $12.73 $13.68 $14.82 $15.96 $17.29 $18.81
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $68.49 $69.88 $71.46 $73.08 $74.93 $77.01
Dollar Change $1.39 $1.58 $1.62 $1.85 $2.08
Percent Change 2.0% 2.3% 2.3% 2.5% 2.8%
$0
$10
$20
$30
$40
$50
$60
$70
$80
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges Variable Charges
$68.49 $69.88 $71.46 $73.08 $74.93 $77.01
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Water and Wastewater 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 19 HCF. The chart indicates that Arroyo Grande’s SFR wastewater bill is among the lowest of the
communities listed.
Chart ES-3
Single-family Residential Bi-Monthly Wastewater Bills of Local Communities at 19 HCF
For Rates in Effect August 2021
Note: Above table uses wastewater rates in effect August 2021. Arroyo Grande March 2022 bill is based on
the rate structure and rates in Table ES-7.
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Water and Wastewater Rate Study City of Arroyo Grande
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Introduction
The City of Arroyo Grande (City) retained Tuckfield & Associates to conduct a comprehensive Water and
Wastewater Rate Study (Study) for its water and wastewater 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 and wastewater 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 water utility obtains its water supply from nine wells and from surface water obtained from the Lopez
Reservoir Project. Groundwater is pumped from the Santa Maria Ground Water Basin. Based on the current
Groundwater Management Agreement, the City has an entitlement to 1,323 acre-feet. Groundwater is also
pumped from the Pismo Formation and the current pumping capability from this source is 160 acre-feet per year.
The City also receives an entitlement of 2,290 acre-feet of surface water from the Lopez Reservoir Project through
an August 2000 water supply contract 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 is a member agency of the 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)
design water and wastewater rates that generate the required revenue while being fair and equitable for its
customers.
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Water and Wastewater Rate Study City of Arroyo Grande
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Scope of the Study
This Study includes the findings and recommendations of analyzing each of the water and wastewater 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 2021-22 to FY 2025-26. 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.
Table 1
Assumptions and Planning Factors
Description Value
Annual Account & Demand growth [1]
Single-family Residential 0.50%
All Other 0.00%
Interest earnings on fund reserves (annual)0.50%
Cost Escalation
Personnel Services [2]3.5%
Benefits 8.0%
Electrical Power 3.0%
Chemicals 3.0%
Purchased Water 3.0%
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 3.5% annually.
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Water and Wastewater Rate Study City of Arroyo Grande
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Reserve Policy
The City’s reserve policy goals were developed in the previous rate study in 2014. 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
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.
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
the expenses in the Lopez Fund. A reserve is maintained in the fund at least equal to annual Lopez debt service.
Beginning Balances and Reserve Targets
As of June 30, 2021, the City’s beginning reserve balances are listed in Table 2. The reserves are used in developing
the financial plans for the water and wastewater utility systems. The Target Reserves are also provided in the
table.
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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.
Table 3
Current Water Rates
Meter Variable
Fixed Fireline Variable
Meter Size Charge Charge Customer Class Rate
($/mo)($/mo)($/HCF)
5/8" $29.51 Single-Family
3/4" $31.67 Tier 1 - 0 to 18 units $3.78
1" $38.12 Tier 2 - 19 to 36 units $4.16
1.5" $46.73 Tier 3 - Over 36 units $5.55
2" $70.41 $3.74 Multifamily
3" $244.74 $10.88 Tier 1 - 0 to 18 units $3.78
4" $309.31 $23.18 Tier 2 - 19 to 27 units $4.16
6" $459.96 $67.33 Tier 3 - Over 27 units $5.55
8" $632.14 $143.48 Commercial $3.95
10"$258.03 Irrigation $4.21
Service Fee Hydrant $6.13
for Add'l Unit Wheeling $2.04$7.99
Table 2
June 30, 2021 Beginning Fund Balances and Reserve Targets
Water Wastewater
Reserve Reserve Reserve Reserve
Reserve Type Balance Target Balance Target
Operating Fund Reserve $3,423,733 $950,000 $511,446 $228,000
Capital Reserve $500,000 $500,000 $500,000 $500,000
Facility Fund Reserve $202,040 $0 $334,917 $0
Lopez Fund $1,703,434 $1,280,100 $0 $0
Total $5,829,207 $2,730,100 $1,346,363 $728,000
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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 include 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.
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.
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.
Table 4
Historical and Projected Average Number of Water Customers by Classification
Historical Projected
Customer Class FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Number of Accounts
Single-Family [1]6,007 6,037 6,067 6,097 6,127 6,158
Multifamily 117 118 118 119 119 120
Commercial 434 436 436 436 436 436
Irrigation 165 165 165 165 165 165
Hydrant 1 1 1 1 1 1
Wheeling 1 1 1 1 1 1
Total Accounts 6,725 6,758 6,788 6,819 6,849 6,881
Fire Protection
Public Fire Hydrants 909 909 909 909 909 909
Private Firelines 132 132 132 132 132 132
Total Fire Protection 1,041 1,041 1,041 1,041 1,041 1,041
Number of Dwelling Units
Single-Family [1]6,007 6,037 6,067 6,097 6,127 6,158
Multifamily [1]1,697 1,705 1,714 1,723 1,731 1,740
[1] Residential accounts/units are forecast to increase based on the assumed growth rate of 0.5% annually.
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Water and Wastewater Rate Study City of Arroyo Grande
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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 2020-21 water use per customer.
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
Table 5
Historical and Projected Average Number of Water Customers by Meter Size
Historical Projected
Description FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Active Water Meters/Accounts [1]
5/8"5,633 5,633 5,633 5,633 5,633 5,633
3/4" 326 326 326 326 326 326
1"530 561 591 622 652 683
1.5"127 127 127 127 127 128
2"77 79 79 79 79 79
3"23 23 23 23 23 23
4"5 5 5 5 5 5
6"4 4 4 4 4 4
Total Accounts 6,725 6,758 6,788 6,819 6,849 6,881
[1] Historical water accounts for FY 20-21 were provided through City billing records.
Table 6
Historical and Projected Water Consumption (in HCF)
Historical Projected [1]
Description FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Single-Family 686,416 689,844 693,272 696,700 700,128 703,671
Multifamily 104,384 104,876 105,430 105,983 106,475 107,029
Commercial 110,492 111,001 111,001 111,001 111,001 111,001
Irrigation 91,207 91,207 91,207 91,207 91,207 91,207
Hydrant 114 114 114 114 114 114
Wheeling 11,000 11,000 11,000 11,000 11,000 11,000
Total Consumption 1,003,613 1,008,042 1,012,024 1,016,005 1,019,925 1,024,022
[1] Forecast assumes that the use per customer from FY 20-21 is applied to the number of customers.
Consumption increases due to the growth in customers.
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improvement needs of the water system and its financing, debt service requirements, and revenue adjustments
needed to maintain a sustainable water enterprise.
Water 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 Water Revenue
Miscellaneous revenues are received from several sources including collections from delinquent accounts, meter
installations, late payment fees, ARPA funds, and other sources. Table 8 below provides sources of miscellaneous
revenue.
Water Revenue Requirements
Revenue requirements of the water system include O&M expense, Transfer to Lopez Fund for purchased water,
annual CIP funding, and debt service. Each of these items are discussed below.
Table 7
Projected Rate-based Water Revenue Using Existing Rates
Estimated Projected
Description FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Water Service Revenues
Fixed Charges [1]$2,607,244 $2,621,425 $2,635,148 $2,649,329 $2,663,052 $2,677,793
Variable Charges [2]4,004,629 4,022,315 4,038,225 4,054,133 4,069,809 4,086,181
Subtotal Revenues From Current Rates $6,611,873 $6,643,740 $6,673,373 $6,703,462 $6,732,861 $6,763,974
Fire Protection Revenues 71,756 71,756 71,756 71,756 71,756 71,756
Total Revenues From Current Rates $6,683,629 $6,715,496 $6,745,129 $6,775,218 $6,804,617 $6,835,730
[1] FY 21-22 and forecast revenue calculated by multiplying current water service rate by the number of projected meters.
[2] FY 21-22 and forecast revenue calculated by multiplying projected water sales by the current variable rates.
Table 8
Projected Miscellaneous Water Revenue
Budget Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Collections Credit Bureau $1,500 $1,500 $1,500 $1,500 $1,500
Meter Installation 15,000 15,000 15,000 15,000 15,000
Utility Billing Late Payment Fees 45,000 45,000 45,000 45,000 45,000
ARPA Funds 332,750 147,500 - 578,700 291,200
Total Miscellaneous Revenues $394,250 $209,000 $61,500 $640,200 $352,700
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Water 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 3.5 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. Personnel Transfers increase annually by 4 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 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 equal to the cost of 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. The transfer in FY 2021-22 and FY 2022-23 are as
budgeted by the City. Future Lopez O&M expense is projected to increase by 3 percent annually and capital
outlay and debt service payments are projected to remain constant.
Water 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 25% coverage factor on the Lopez Dam 2011A bonds debt service. The
required coverage ratio is 100 percent after inclusion of this factor.
Additionally, if the City pursues construction of the Central Coast Blue project, it is anticipated the City would
incur new debt service in FY 2022-23 to fund construction. This scenario is not included in the discussion of the
Table 9
Projected Water Operation and Maintenance Expense
Budget Budget Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Administration $2,748,945 $2,662,640 $2,744,189 $2,828,821 $2,916,686
Water Production 205,800 209,700 227,138 241,250 256,355
Water Distribution 845,500 783,800 815,371 848,556 883,494
Total Water System O&M Expense $3,800,245 $3,656,140 $3,786,698 $3,918,627 $4,056,535
Item 10.a. - Page 45
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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 2021-22 through FY 2025-
26. Over this period the City projects that it would spend over $2.6 million. The major improvements include
Phased Main Replacements at South Halcyon, Cornwall, and Highway 101 exchange. Other projects include
service line replacements, SCADA software acquisition, 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 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Current Capital Improvement Program (CIP) Projects [1]
Galvanized Service Replacement $96,826 $0 $0 $0 $0
Phased Main Replacement - Fair Oaks, Elm-Alder 232,750 - - - -
Andre Drive / Los Ciervos Court Interconnect 100,000 - - - -
SCADA Software/Electronics Upgrade 240,100 - - - -
Corporation Yard Renovations 15,000 15,000 15,000 15,000 15,000
Reservoir 4 Exterior Coating - 147,500 - - -
Financial Managment Software - 75,000 20,000 - -
Phased Main Replacement - S Halcyon Road, Cornwall-Fair Oaks - - 673,500 - -
Water Master Plan Update - - 100,000 - -
Phased Main Replacement - Cornwall, S Halycon-El Camino Real - - - 578,700 -
Phased Main Replacement - Hwy 101 Xng, El Camino Real-W Branch - - - - 291,200
Rate Study Update - - - - 30,000
Total Water CIP $695,616 $237,500 $808,500 $593,700 $336,200
[1] CIP Source: FY 21-22 City CIP document. Represents only Water Fund portion of project.
Item 10.a. - Page 46
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Table 11
Water Financial Plan
Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Proposed Revenue Increase (March 21)4.0%
Proposed Revenue Increase (January 1)4.0% 4.0% 4.0% 4.0%
Water Fund - 640
Revenue
Revenues from Existing Water Rates [1]$6,715,496 $6,745,129 $6,775,218 $6,804,617 $6,835,730
Total Additional Water Sales Revenue [2]44,770 386,721 674,993 977,223 1,294,388
Miscellaneous Income [3]394,250 209,000 61,500 640,200 352,700
Interest Income [4]17,357 16,219 9,853 7,138 7,062
Total Revenues $7,171,873 $7,357,069 $7,521,564 $8,429,178 $8,489,880
Expenditures
Operation and Maintenance Expense $3,800,245 $3,656,140 $3,786,698 $3,918,627 $4,056,535
Transfer to Lopez Fund 3,740,113 3,852,316 3,926,482 4,002,873 4,081,556
Capital Improvement Funding 695,616 237,500 808,500 593,700 336,200
Total Expenditures $8,235,974 $7,745,956 $8,521,680 $8,515,200 $8,474,291
Net Funds Available ($1,064,101) ($388,887) ($1,000,116) ($86,022) $15,589
Available Reserves
Beginning available reserves [5]$3,923,733 $2,859,632 $2,470,745 $1,470,629 $1,384,607
Ending available reserves $2,859,632 $2,470,745 $1,470,629 $1,384,607 $1,400,196
Target Reserves [6]$1,450,000 $1,414,000 $1,447,000 $1,480,000 $1,514,000
Lopez Fund - 641
Revenues
Transfer In from Water Fund $3,740,113 $3,852,316 $3,926,482 $4,002,873 $4,081,556
Interest Income [4]8,500 8,600 8,600 8,700 8,700
Total Lopez Revenues $3,748,613 $3,860,916 $3,935,082 $4,011,573 $4,090,256
Expenditures
Lopez Water Expense $2,239,161 $2,472,198 $2,546,364 $2,622,755 $2,701,438
Lopez Dam Bonds - 2011A Debt Service 420,749 434,981 434,981 434,981 434,981
SRF Loan Debt Service 845,137 845,137 845,137 845,137 845,137
Lopez Capital Outlay 235,066 100,000 100,000 100,000 100,000
Total Lopez Expenditures $3,740,113 $3,852,316 $3,926,482 $4,002,873 $4,081,556
Net Lopez Funds Available $8,500 $8,600 $8,600 $8,700 $8,700
Lopez Available Reserves
Lopez Beginning available reserves $1,703,434 $1,711,934 $1,720,534 $1,729,134 $1,737,834
Lopez Ending available reserves $1,711,934 $1,720,534 $1,729,134 $1,737,834 $1,746,534
Lopez Target Reserves [7]$1,265,900 $1,280,100 $1,280,100 $1,280,100 $1,280,100
Combined Reserves
Total Reserves (Fund 640 and 641)$4,571,566 $4,191,279 $3,199,763 $3,122,441 $3,146,730
Target Total Reserves (Fund 640 and 641) $2,715,900 $2,694,100 $2,727,100 $2,760,100 $2,794,100
Debt Service Coverage
Total Revenues (Fund 640 and 641)$7,180,373 $7,365,669 $7,530,164 $8,437,878 $8,498,580
Total Expenses (Fund 640 and 641)($7,540,358) ($7,508,456) ($7,713,180) ($7,921,500) ($8,138,091)
25% Coverage Factor Lopez 2011A Bonds [8] ($105,187) ($108,745) ($108,745) ($108,745) ($108,745)
Net Revenues ($465,172) ($251,532) ($291,761) $407,633 $251,744
Lopez Coverage [9]94% 97% 96% 105% 103%
[1] Projected using the existing rates.
[2] Additional revenue from proposed rate adjustments.
[3] Includes collection fees, meter installations, late fees, ARPA Funds, and Water Availbility Transfers In.
[4] Interest earnings on the average fund balance calculated at 0.5%.
[5] The available beginning FY 21-22 cash balance provided by City. Includes operating and capital funds.
[6] Target reserve estimated at 90 days of operation and maintenance expense and capital reserves target.
[7] Equal to Lopez annual debt service.
[8] For Lopez 2011A Bonds, pledge of gross revenues requires Coverage Factor of 25 percent of Lopez 2011A Bonds debt service.
[9] Minimum coverage is 100 percent.
Item 10.a. - Page 47
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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 4.0 percent revenue increases are recommended on
March 21, 2022 and on each January 1 through FY 2025-26, with increases of 4.0 percent thereafter for the
next five years after the Study Period. 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 meets the Target reserve level by the
last year of the Study.
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 by the end of FY 2025-26 and in the
later years with implementation of 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
$12
FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 Target and Ending Cash ($ Millions)Sources and Uses ($ Millions)O&M Lopez Water Capital Improvement Funding
Revenue with Increases Revenue w/o Increases Target Reserve
Total Reserve
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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%
20%
40%
60%
80%
100%
120%
FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Debt Service Coverage Ratio Target Ratio
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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 2021-22 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 2021-22 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 Water 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 21-22 Common to All Except Wheeling
Revenue Common to All Direct Fire Water
Requirement Delivery Peaking Meters/Serv Customer Protection Supply Delivery Peaking Lopez Debt
$6,984,116 $844,018 $1,519,331 $117,594 $84,860 $172,425 $2,342,661 $213,975 $188,300 $1,500,952
Item 10.a. - Page 50
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Proposed Water Fixed Charges
The proposed fixed charges recover the Customer, Meters and Services, and Lopez debt service costs of service
identified from Table 12 and 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 2021-22 for a
5/8-inch meter. The current fixed charges generate about 40 percent of revenue from water rates. The proposed
fixed charges generate approximately 37 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 2021-22. 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 Water Fixed Charges
Customer Service Cost FY 21-22
Customer Cost $84,860
Number of Monthly Bills 81,096
Customer Cost per Unit $1.05
Meters and Services Cost FY 21-22
Meters and Services Cost $117,594
Lopez Debt Service $1,500,952
Public Fire Protection $890,279
Meters and Services Cost $2,508,825
Number of Monthly Eq. Meters & Services 91,700
Meters and Services Cost per Unit $27.36
Monthly Base Fixed Charge - 5/8" Meter $28.41
Table 14
Design of Water Fixed Charges by Meter Size
FY 21-22
Meter & Meter &Public Total
Meter Service Services Fire Customer Monthly
Size Ratio Charge Protection Charge Charge
inches
5/8"1.00 $1.28 $16.37 $9.71 $1.05 $28.41
3/4" 1.10 $1.41 $18.01 $10.68 $1.05 $31.15
1"1.40 $1.79 $22.92 $13.59 $1.05 $39.35
1.5"1.80 $2.30 $29.47 $17.48 $1.05 $50.30
2"2.90 $3.71 $47.47 $28.16 $1.05 $80.39
3"11.00 $14.08 $180.07 $106.81 $1.05 $302.01
4"14.00 $17.92 $229.18 $135.94 $1.05 $384.09
6"21.00 $26.88 $343.77 $203.91 $1.05 $575.61
8"29.00 $37.12 $474.73 $281.59 $1.05 $794.49
Lopez Debt
Service
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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 (fireline) size is provided in Table 15 and the monthly private fireline 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 Water 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 include groundwater and Lopez water costs. Total water supply costs are shared
uniformly by all customers and are not allocated to rate tiers to differentiate the water supply costs on use
because 96 percent of the water produced by the City is from Lopez water and the impact to rates is small.
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
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 15
Design of 6-Inch Private Fire Protection Charge
Fire Protection FY 21-22
Private Fire Protection Cost $70,135
Private Fire Protection Eq. 6" Firelines 1,066
Private Fire Protection 6" Monthly Charge $65.81
Table 16
Design of Private Fireline Charges
FY 21-22
Monthly
Fireline Fireline Fireline
Size Ratio Charge
2"0.06 $3.66
3"0.16 $10.63
4"0.34 $22.66
6"1.00 $65.81
8"2.13 $140.24
10"3.83 $252.20
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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 and Multifamily Residential Variable Water Rates
For this Study it is proposed that the current three-tier rate structure be maintained for SFR and MFR customers,
however the tier break points are proposed to be modified. Tier 1 is defined as consumption to provide basic
indoor water use and is based on 2.31 persons per household (pph) from the California Department of Finance
estimates using 55 gallons per capita per day (gcpd) resulting in a Tier 1 breakpoint of 10 HCF (2.31 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 of the combined SFR and MFR summer peak demand which was determined
from billing information to be 38 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.
Table 17
Design of Single-Family and Multifamily Tiered Water Rate Structure
FY 21-22
Water Supply Water Component of Variable Charge
Tier % Water Supply Unit Rate
Tier Range Consumption Share Costs $/HCF
Tier 1 0 - 10 407,204 51.2%$956,771 $2.35
Tier 2 11 - 38 328,388 41.3%$771,585 $2.35
Tier 3 Over 38 59,128 7.4%$138,927 $2.35
794,720 100.0% $1,867,283
Delivery Component of Variable Charge
Tier % Delivery Unit Rate
Tier Range Consumption Share Costs $/HCF
Tier 1 0 - 10 407,204 51.2%$428,336 $1.05
Tier 2 11 - 38 328,388 41.3%$345,430 $1.05
Tier 3 Over 38 59,128 7.4%$62,196 $1.05
794,720 100.0% $835,962
Peaking Component of Variable Charge
Tier Peaking Weighted Peaking Unit Rate
Tier Range Factor Consumption Costs $/HCF
Tier 1 0 - 10 1.00 407,204 $215,245 $0.53
Tier 2 11 - 38 2.06 676,480 $357,582 $1.09
Tier 3 Over 38 3.80 224,685 $118,767 $2.01
1,308,369 $691,594
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The sum of the three component’s unit rates equals the water rates in the tiers for the SFR and MFR classifications.
Table 18 provides the resulting water rate by tier from summing the Water Supply, Delivery, and Peaking unit
rates. SFR and MFR 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 Non-Residential Variable Water Rates
For 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. A uniform
variable rate structure is recommended for Non-residential classes as they are intended to have separate
irrigation meters. Table 19 below provides the 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
on March 21, 2022 and each January 1 through FY 2025-26. The table also includes the current variable charges
by rate tier and the new rate structure for March 21, 2022. Water system fixed and variable charges beyond
March 21, 2022 are increased by the percentages shown in the financial plan in Table 11.
Table 18
Single-family amd Multifamily Residential Tiered Water Rates
FY 21-22
Water Total
Tier Range Supply Delivery Peaking Rate
HCF $/HCF $/HCF $/HCF $/HCF
Tier 1 0 - 10 $2.35 $1.05 $0.53 $3.93
Tier 2 11 - 38 $2.35 $1.05 $1.09 $4.49
Tier 3 Over 38 $2.35 $1.05 $2.01 $5.41
Table 19
Design of MFR and Non-Residential Variable Water Rates
FY 21-22
Total Uniform
Description Costs Volume Rate
HCF $/HCF
Commercial 468,797 111,001 $4.22
Irrigation 432,980 91,207 $4.75
Hydrant 878 114 $7.70
Wheeling 22,802 11,000 $2.07
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Water Bill Impact Analysis
An impact analysis was performed to evaluate the change in SFR customer bills that would occur from the
implementation of the proposed water rates for the March 21, 2022 rate structure implementation. As shown in
Table 20
Proposed Water Fixed and Variable Charges without Central Coast Blue
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $28.41 $29.55 $30.73 $31.96 $33.24
3/4" $31.67 $31.15 $32.40 $33.70 $35.05 $36.45
1"$38.12 $39.35 $40.92 $42.56 $44.26 $46.03
1.5" $46.73 $50.30 $52.31 $54.40 $56.58 $58.84
2"$70.41 $80.39 $83.61 $86.95 $90.43 $94.05
3" $244.74 $302.01 $314.09 $326.65 $339.72 $353.31
4" $309.31 $384.09 $399.45 $415.43 $432.05 $449.33
6" $459.96 $575.61 $598.63 $622.58 $647.48 $673.38
8" $632.14 $794.49 $826.27 $859.32 $893.69 $929.44
Service Fee per Add'l Unit $7.99 $7.86 $8.18 $8.50 $8.84 $9.20
Fireline Size
2"$3.74 $3.66 $3.81 $3.96 $4.12 $4.28
3"$10.88 $10.63 $11.06 $11.50 $11.96 $12.44
4"$23.18 $22.66 $23.57 $24.51 $25.49 $26.51
6"$67.33 $65.81 $68.44 $71.18 $74.03 $76.99
8" $143.48 $140.24 $145.85 $151.68 $157.75 $164.06
10" $258.03 $252.20 $262.29 $272.78 $283.69 $295.04
Variable Charge ($ 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 $3.93 $4.09 $4.25 $4.42 $4.60
Tier 2 - 11 to 38 units $4.49 $4.67 $4.86 $5.05 $5.25
Tier 3 - Over 38 $5.41 $5.63 $5.86 $6.09 $6.33
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
Tier 1 - 0 to 10 units $3.93 $4.09 $4.25 $4.42 $4.60
Tier 2 - 11 to 38 units $4.49 $4.67 $4.86 $5.05 $5.25
Tier 3 - Over 38 $5.41 $5.63 $5.86 $6.09 $6.33
Commercial $3.95 $4.22 $4.39 $4.57 $4.75 $4.94
Irrigation $4.21 $4.75 $4.94 $5.14 $5.35 $5.56
Hydrant $6.13 $7.70 $8.01 $8.33 $8.66 $9.01
Wheeling $2.04 $2.07 $2.15 $2.24 $2.33 $2.42
Item 10.a. - Page 55
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Table 21, a SFR customer with a 5/8-inch meter using the average consumption of 19 HCF bi-monthly will
experience a bill that will increase from $131.22 to $136.53 an increase of $5.31 or 4.0 percent.
Table 22 provides future SFR bills calculated using the proposed rates in Table 20 at the average consumption of
19 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 March 2022 Water Rates Without Central Coast Blue
Current Bill Proposed March 21, 2022 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 $56.82 $0.00 $56.82 ($2.20) -3.7%
Very Low 5 $59.02 $18.90 $77.92 $56.82 $19.65 $76.47 ($1.45) -1.9%
Low 10 $59.02 $37.80 $96.82 $56.82 $39.30 $96.12 ($0.70) -0.7%
Median 15 $59.02 $56.70 $115.72 $56.82 $61.75 $118.57 $2.85 2.5%
Average 19 $59.02 $72.20 $131.22 $56.82 $79.71 $136.53 $5.31 4.0%
20 $59.02 $76.36 $135.38 $56.82 $84.20 $141.02 $5.64 4.2%
High 30 $59.02 $117.96 $176.98 $56.82 $129.10 $185.92 $8.94 5.1%
Very High 50 $59.02 $220.62 $279.64 $56.82 $229.94 $286.76 $7.12 2.5%
Table 22
Single-family Residential Bi-monthly Water Bill Impacts at 19 HCF Bi-monthly
Without Central Coast Blue
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $59.02 $56.82 $59.10 $61.46 $63.92 $66.48
Variable Charges $72.20 $79.71 $82.93 $86.24 $89.65 $93.25
Total Charges $131.22 $136.53 $142.03 $147.70 $153.57 $159.73
Dollar Change $5.31 $5.50 $5.67 $5.87 $6.16
Percent Change 4.0% 4.0% 4.0% 4.0% 4.0%
$131.22 $136.53 $142.03 $147.70 $153.57 $159.73
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges Variable Charges
Item 10.a. - Page 56
Water and Wastewater 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 19 HCF bi-monthly. The rate survey includes rate schedules in effect August 2021. Water bills
for Arroyo Grande are shown using the current rates and the proposed March 21, 2022 rates. The chart indicates
that with the March 2022 water rate structure change, an Arroyo Grande SFR customer using the average bi-
monthly consumption of 19 HCF will experience a bill that is among the lowest 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 agency’s share of the project. However, only the
cities of Arroyo Grande, Pismo Beach, and Grover Beach are currently in discussions to design and build Phase 1
of the project. The CCB project will allow these communities to have a more sustainable groundwater supply
especially during multiple dry years.
Chart 1
Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF without
Central Coast Blue
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate
structure and rates in Table 20. Pismo Beach includes Special Water Tax.
Item 10.a. - Page 57
Water and Wastewater Rate Study City of Arroyo Grande
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Current discussions indicate that the City of Arroyo Grande will support 25 percent of the overall project cost.
However, 19 percent of the project costs are uncommitted and Arroyo Grande, Grover Beach, and Pismo Beach
will absorb these costs on an equal sharing basis, indicating that Arroyo Grande will support 31.3 percent of the
project costs, however the 19 percent or a portion thereof may be purchased by another party. 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 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 $657,000 annually beginning in FY 2022-23 when the CCB
project is expected to be operational. The annual O&M costs escalate with inflation after this year.
Prior to FY 2022-23, 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. It is assumed that this amount is financed at 1.0 percent for 30
years and will have annual debt service payments of about $511,000 beginning in FY 2022-23. Table 23 below
provides a comparison of the water revenue increases required without the CCB project to the increases required
with the CCB project. There has been a major effort to apply and receive substantial grant funding from state and
federal agencies to construct this project. If the efforts are successful, the increases with CCB will be reduced
based on the amount of grant funding we receive.
Table 23
Annual Revenue Increases with and without Central Coast Blue Project
July 1 of
Fiscal Year
Annual Increases
without Central
Coast Blue
Annual Increases
with Central Coast
Blue
FY 2021-22 [1] 4.0% 10.0%
FY 2022-23 4.0% 10.0%
FY 2023-24 4.0% 10.0%
FY 2024-25 4.0% 6.0%
FY 2025-26 4.0% 0.0%
[1] Increases this year occur in March and may not match Tables 22 and 26 due to rate structure
change and cost of service adjustments.
Item 10.a. - Page 58
Water and Wastewater Rate Study City of Arroyo Grande
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The increases with the CCB project are necessary to meet the additional annual O&M costs of the CCB project of
about $657,000, meet annual debt service payments of the CCB project of about $511,000, and to provide debt
service coverage ratio of 1.25 within the Study period. The water financial plan with the CCB project is provided
in Appendix A-4.
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 year FY 2024-25 and is maintained through the
remainder of the 10-year 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 25 shows that a SFR customer with a 5/8-inch meter
using the average consumption of 19 HCF bi-monthly will experience a bill that will increase from $131.22 to
$143.58, an increase of $12.36 or 9.4 percent.
Figure 3
Water Debt Service Coverage Ratio with Central Coast Blue
0%
50%
100%
150%
200%
250%
300%
FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31
Debt Service Coverage Ratio Target Ratio
Item 10.a. - Page 59
Water and Wastewater Rate Study City of Arroyo Grande
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Table 24
Proposed Water Fixed and Variable with Central Coast Blue
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $29.45 $32.40 $35.64 $37.78 $37.78
3/4" $31.67 $32.31 $35.54 $39.09 $41.44 $41.44
1"$38.12 $40.87 $44.96 $49.46 $52.43 $52.43
1.5" $46.73 $52.29 $57.52 $63.27 $67.07 $67.07
2"$70.41 $83.68 $92.05 $101.26 $107.34 $107.34
3" $244.74 $314.85 $346.34 $380.97 $403.83 $403.83
4" $309.31 $400.47 $440.52 $484.57 $513.64 $513.64
6" $459.96 $600.25 $660.28 $726.31 $769.89 $769.89
8" $632.14 $828.57 $911.43 $1,002.57 $1,062.72 $1,062.72
Service Fee per Add'l Unit $7.99 $8.26 $9.08 $9.98 $10.58 $10.58
Fireline Size
2"$3.74 $4.40 $4.84 $5.32 $5.64 $5.64
3"$10.88 $12.79 $14.07 $15.48 $16.41 $16.41
4"$23.18 $27.25 $29.98 $32.98 $34.96 $34.96
6"$67.33 $79.16 $87.08 $95.79 $101.54 $101.54
8" $143.48 $168.69 $185.56 $204.12 $216.37 $216.37
10" $258.03 $303.37 $333.71 $367.08 $389.10 $389.10
Variable Charge ($ 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 $4.13 $4.54 $4.99 $5.29 $5.29
Tier 2 - 11 to 38 units $4.82 $5.30 $5.83 $6.18 $6.18
Tier 3 - Over 38 $5.96 $6.56 $7.22 $7.65 $7.65
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
Tier 1 - 0 to 10 units $4.13 $4.54 $4.99 $5.29 $5.29
Tier 2 - 11 to 38 units $4.82 $5.30 $5.83 $6.18 $6.18
Tier 3 - Over 38 $5.96 $6.56 $7.22 $7.65 $7.65
Commercial $3.95 $4.50 $4.95 $5.45 $5.78 $5.78
Irrigation $4.21 $5.10 $5.61 $6.17 $6.54 $6.54
Hydrant $6.13 $8.36 $9.20 $10.12 $10.73 $10.73
Wheeling $2.04 $2.42 $2.66 $2.93 $3.11 $3.11
Item 10.a. - Page 60
Water and Wastewater Rate Study City of Arroyo Grande
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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
Table 25
Comparison of Current Single-family Residential Bi-monthly Water Bill with 5/8-inch
Meter Size with Proposed Bill Using March 2022 Water Rates with Central Coast Blue
Current Bill Proposed March 21, 2022 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 $58.90 $0.00 $58.90 ($0.12) -0.2%
Very Low 5 $59.02 $18.90 $77.92 $58.90 $20.65 $79.55 $1.63 2.1%
Low 10 $59.02 $37.80 $96.82 $58.90 $41.30 $100.20 $3.38 3.5%
Median 15 $59.02 $56.70 $115.72 $58.90 $65.40 $124.30 $8.58 7.4%
Average 19 $59.02 $72.20 $131.22 $58.90 $84.68 $143.58 $12.36 9.4%
20 $59.02 $76.36 $135.38 $58.90 $89.50 $148.40 $13.02 9.6%
High 30 $59.02 $117.96 $176.98 $58.90 $137.70 $196.60 $19.62 11.1%
Very High 50 $59.02 $220.62 $279.64 $58.90 $247.78 $306.68 $27.04 9.7%
Table 26
Single-family Residential Bi-monthly Water Bill Impacts at 19 HCF Bi-monthly
with Central Coast Blue
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $59.02 $58.90 $64.80 $71.28 $75.56 $75.56
Variable Charges $72.20 $84.68 $93.10 $102.37 $108.52 $108.52
Total Charges $131.22 $143.58 $157.90 $173.65 $184.08 $184.08
Dollar Change $12.36 $14.32 $15.75 $10.43 $0.00
Percent Change 9.4% 10.0% 10.0% 6.0% 0.0%
$131.22
$143.58
$157.90
$173.65
$184.08 $184.08
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges Variable Charges
Item 10.a. - Page 61
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with a 5/8-inch meter using 19 HCF will pay $7.05 more bi-monthly with the CCB project beginning March 21,
2022 and $30.51 more bi-monthly beginning January 1, 2025 for that fiscal year.
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 among the lowest of the bills
listed.
Table 27
Impacts to Single-family Residential Bi-monthly Water Bills
With and without Central Coast Blue at 19 HCF
March 21 January 1 January 1 January 1 January 1
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Average Bill w/o CCB $136.53 $142.03 $147.70 $153.57 $159.73
Average Bill with CCB $143.58 $157.90 $173.65 $184.08 $184.08
Difference $7.05 $15.87 $25.95 $30.51 $24.35
Chart 2
Single-family Residential Bi-Monthly Water Bills of Local Communities Using 19 HCF with
Central Coast Blue
Note: Above table uses water rates in effect August 2021. Arroyo Grande March 2022 bill is based on the rate
structure and rates in Table 24. Pismo Beach includes Special Water Tax.
Item 10.a. - Page 62
Water and Wastewater Rate Study City of Arroyo Grande
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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 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.
The rates have not been increased since 2009. 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
Non-Residential $2.40 $1.32
[1] Charged based on water consumption.
[2] Charged to each dwelling unit including additional units.
Item 10.a. - Page 63
Water and Wastewater Rate Study City of Arroyo Grande
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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 2020-21
use per customer. Residential (SFR and MFR) customers account for more than 87 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 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Number of Accounts
Single-family Residential [1] 6,007 6,037 6,067 6,097 6,127 6,158
Multifamily Residential 117 118 118 119 119 120
Business 392 394 394 394 394 394
Church 14 14 14 14 14 14
School 13 13 13 13 13 13
Hospital 3 3 3 3 3 3
Motel 9 9 9 9 9 9
Convalescent Home 3 3 3 3 3 3
Total Accounts 6,558 6,591 6,621 6,652 6,682 6,714
Number of Units
Multifamily Residential [2]1,697 1,705 1,714 1,723 1,731 1,740
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 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Single-family Residential 686,416 689,844 693,272 696,700 700,128 703,671
Multifamily Residential 104,384 104,876 105,430 105,983 106,475 107,029
Business 67,804 68,150 68,150 68,150 68,150 68,150
Church 6,168 6,168 6,168 6,168 6,168 6,168
School 11,082 11,082 11,082 11,082 11,082 11,082
Hospital 5,578 5,578 5,578 5,578 5,578 5,578
Motel 13,913 13,913 13,913 13,913 13,913 13,913
Convalescent Home 5,947 5,947 5,947 5,947 5,947 5,947
Total Projected Consumption 901,292 905,558 909,540 913,521 917,441 921,538
[1] Forecast based on application of FY 20-21 use per customer to the number of customers.
Item 10.a. - Page 64
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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.
Wastewater 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 Wastewater Revenue
Miscellaneous revenues are received from late payment fees and ARPA funds. Table 32 below provides the
sources of miscellaneous revenue.
Wastewater Revenue Requirements
Revenue requirements of the wastewater system include O&M expense and CIP funding. Each of these items are
discussed below.
Table 31
Projected Rate-based Wastewater Revenue Using Existing Rates
Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Wastewater Service Revenues
Fixed Charge Revenue [1]$239,616 $240,710 $241,833 $242,956 $244,080
Variable Consumption Revenue [2] 707,085 709,903 712,719 715,478 718,373
Total Revenues From Current Rates $946,701 $950,613 $954,552 $958,434 $962,453
[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 Miscellaneous Wastewater Revenue
Budget Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Utility Billing Late Payment Penalty $7,000 $7,000 $7,000 $7,000 $7,000
ARPA Funds 217,200 50,000 - 282,200 -
Total Miscellaneous Revenues $224,200 $57,000 $7,000 $289,200 $7,000
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Wastewater 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 3.5
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. Personnel
Transfers increase annually by 4 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.
Wastewater 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 in the Wastewater CIP section.
Table 33
Histoprical and Projected Wastewater Operation and Maintenance Expense
Historical Budget Projected
Desription FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Salaries and Benefits
Salaries $132,800 $132,200 $134,900 $150,276 $153,279 $156,344
Benefits 117,300 112,800 104,900 142,928 153,952 165,849
Subtotal Salaries and Benfits $250,100 $245,000 $239,800 $293,203 $307,231 $322,193
Wastewater Operations
Office Supplies $1,100 $1,100 $1,100 $1,122 $1,144 $1,167
Contractual Services 70,818 63,445 64,740 66,035 67,356 68,703
Power 25,000 30,000 31,000 30,900 30,900 30,900
Bank Charges 10,000 11,000 11,000 11,220 11,444 11,673
Maintenance - Vehicles 8,000 8,200 8,400 8,568 8,739 8,914
Maintenance - Office Equipment 500 600 600 612 624 636
Maintenance - Machinery and Equip 10,000 10,300 10,600 10,812 11,028 11,249
Gas & Oil 7,000 7,200 7,400 7,548 7,699 7,853
Maintenance Lines & Pumps 30,000 31,000 32,000 32,640 33,293 33,959
Debt Principal - 8,000 - - - -
Debt Interest - 500 - - - -
Lease Purchase Payments - - - - 100,000 100,000
Personnel Transfers 303,000 331,700 321,600 334,172 347,242 360,829
Cost Allocation Transfers 96,000 126,100 126,100 128,622 131,194 133,818
Transfers Out - CIP Fund 91,600 25,940 90,000 91,800 93,636 95,509
Transfers Out - USDA City Hall Loan 5,000 5,000 5,000 5,100 5,202 5,306
All Other 22,500 5,200 5,200 5,304 5,409 5,517
Subtotal Operations $680,518 $665,285 $714,740 $734,455 $854,910 $876,033
Capital Outlay
Machinery & Equipment 34,500 3,500 2,500 2,575 2,652 2,732
Subtotal Capital Outlay $34,500 $3,500 $2,500 $2,575 $2,652 $2,732
Total Wastewater O&M Expense $965,118 $913,785 $957,040 $1,030,233 $1,164,793 $1,200,958
Item 10.a. - Page 66
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Wastewater Capital Improvement Program
The City has developed a CIP that lists wastewater capital expenditures for FY 2021-22 through FY 2025-26,
presented in Table 34. The majority of the CIP includes trenchless rehabilitation projects. The City projects that
it would expend approximately $1.3 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.
Generat`e 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 8.3 percent revenue increases are recommended beginning
on March 21, 2022 and on each January 1 through FY 2025-26, with 2.0 percent revenue increases thereafter
for the next five years. The increases are necessary to meet the financial planning goals discussed above.
Table 34
Wastewater Capital Improvement Program
Fiscal Year
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Current Capital Improvement Program (CIP) Projects [1]
Fuel Management System/Dispenser Replacement $10,940 $0 $0 $0 $0
Corporation Yard Renovations 15,000 15,000 15,000 15,000 15,000
Financial Managment Software - 75,000 20,000 - -
Rate Study Update - - - - 30,000
Maintenance Hole Rehabilitation 60,000 - - - -
The Pike Sewer Line Replacement 24,977 - - - -
Trenchless Rehab - Alpine/Halcyon/Wood/Vernon 217,200 - - - -
Trenchless Rehab - Woodland/Ash - 120,412 - - -
Trenchless Rehab - Woodland Backyards - 50,000 - - -
Trenchless Rehab - Alder/Cameron - - 254,315 - -
Wastewater Master Plan Update - - 100,000 - -
Trenchless Rehab - Pilgrim/Orchard/Cherry/California - - - 282,000 -
Total Wastewater CIP $328,117 $260,412 $389,315 $297,000 $45,000
[1] CIP Source: FY 21-22 City CIP document. Represents only Sewer Fund portion of project.
Item 10.a. - Page 67
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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 later years.
Table 35
Wastewater Financial Plan
Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Proposed Revenue Increase (March 21)8.3%
Proposed Revenue Increase (January 1)8.3% 8.3% 8.3% 8.3%
Sewer Fund - 612
Revenue
Rate-based Revenues, Existing Rates [1] $946,701 $950,613 $954,552 $958,434 $962,453
Total Additional Wastewater Revenue [2] 13,096 114,505 203,750 301,109 407,352
Miscellaneous Income 224,200 57,000 7,000 289,200 7,000
Interest Income [3]6,725 6,474 5,831 5,541 6,314
Total Revenue $1,190,722 $1,128,592 $1,171,133 $1,554,284 $1,383,119
Expenditures
Operation and Maintenance Expense $913,785 $957,040 $1,030,233 $1,164,793 $1,200,958
Capital Improvement Funding 328,117 260,412 389,315 297,000 45,000
Total Expenditures $1,241,902 $1,217,452 $1,419,548 $1,461,793 $1,245,958
Net Funds Available ($51,180) ($88,860) ($248,415) $92,491 $137,161
Available Reserves
Beginning available reserves [4]$1,011,446 $960,266 $871,406 $622,991 $715,482
Ending available reserves $960,266 $871,406 $622,991 $715,482 $852,643
Target Reserves [5]$728,000 $739,000 $758,000 $791,000 $800,000
[1] Projected using the existing rates.
[2] Additional revenue from rate adjustments.
[3] Interest earnings on the average fund balance calculated at 0.5% plus Sewer Facility Fund interest income.
[4] The available FY 21-22 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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Water and Wastewater Rate Study City of Arroyo Grande
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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 requirements for FY 2021-22 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
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 Target and Ending Cash ($ 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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Water and Wastewater Rate Study City of Arroyo Grande
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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 2021-22 from the users of the wastewater system is presented in Table 36.
The annual revenue requirements are 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 from the City for FY 2020-21.
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 21-22 $1,025,277 $763,405 $261,872
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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.
Table 37
FY 21-22 Development of Wastewater Unit Costs
FY 21-22
Description Total Costs Flow Customer
Total Costs of Service $1,025,277 $763,405 $261,872
Units of Service 543,508 99,936
Unit Costs of Service $1.40459 $2.62040
Units of Measure HCF Bills
Table 38
Distribution of Costs to Customer Classes FY 21-22
Allocated
Description Total Cost Flow Customer
Unit Costs of Service $1.40459 $2.62040
Units of Measure HCF Bills
Single-family Residential
Units of Service 355,128 72,444
Allocated Cost of Service $688,641 $498,809 $189,832
Multifamily Residential
Units of Service 77,542 20,460
Allocated Cost of Service $162,528 $108,915 $53,613
Non-Residential
Units of Service 110,838 7,032
Allocated Cost of Service $174,108 $155,682 $18,427
Total Costs of Service $1,025,277 $763,405 $261,872
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Water and Wastewater Rate Study City of Arroyo Grande
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Proposed Wastewater Rate Structure
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.
Proposed 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.
Proposed 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.
Proposed Water Rates
Table 40 presents the proposed fixed charges and variable charges for the wastewater system for the next five
years. Table 40 includes the current fixed and variable rates as well as future wastewater rates for
implementation beginning on March 21, 2022 and each January 1 through FY 2025-26. Wastewater system fixed
and variable charges beyond March 21, 2022 are increased by the percentages shown in the financial plan in
Table 35.
Table 39
Design of Variable Wastewater Rates
FY 21-22
Water
Flow Sales Variable
Classification Cost [1]Volume Rate
$/HCF
Single-family Residential $498,809 689,844 $0.72
Multifamily Residential 108,915 104,876 $1.04
Non-Residential 155,682 110,838 $1.40
Total $763,405 905,558
[1] From Table 38.
Item 10.a. - Page 72
Water and Wastewater 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 March 21, 2022 increase. As shown in Table
41, a SFR customer using the average consumption of 19 HCF bi-monthly will experience a bill that will increase
from $68.49 to $69.65, an increase of $1.16 or 1.7 percent. The current and proposed bills include the current
South San Luis Obispo County Sanitation District (SSLOCSD) wastewater treatment charge of $25.48 monthly.
Table 42 provides future SFR wastewater bills calculated using the proposed rates from Table 40 at the average
consumption of 19 HCF bi-monthly.
Table 40
Proposed Wastewater Fixed and Variable Charges
March 21, January 1, January 1, January 1, January 1,
Meter Size Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charge ($ per month)
All Customers [1]$2.40 $2.62 $2.84 $3.08 $3.34 $3.62
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.72 $0.78 $0.84 $0.91 $0.99
Multifamily Residential $0.94 $1.04 $1.12 $1.21 $1.31 $1.42
Non-Residential $1.32 $1.40 $1.52 $1.65 $1.79 $1.94
[1] Fixed charge per month per account and to each additional unit.
[2] Charged on the basis of water consumption read through the meter.
Table 41
Comparison of Current Single-family Residential Bi-monthly Wastewater Bill with Proposed Bill
Using March 2022 Wastewater Rates
Current Bill March 21, 2022
Service San District Volume Current Service San District Volume Proposed Dollar Percent
Description Use (HCF) Charge Charge Charge Bill Charge Charge Charge Bill Difference Change
0 $4.80 $50.96 $0.00 $55.76 $5.24 $50.96 $0.00 $56.20 $0.44 0.8%
Very Low 5 $4.80 $50.96 $3.35 $59.11 $5.24 $50.96 $3.60 $59.80 $0.69 1.2%
Low 10 $4.80 $50.96 $6.70 $62.46 $5.24 $50.96 $7.20 $63.40 $0.94 1.5%
Median 13 $4.80 $50.96 $8.71 $64.47 $5.24 $50.96 $9.36 $65.56 $1.09 1.7%
Average 19 $4.80 $50.96 $12.73 $68.49 $5.24 $50.96 $13.68 $69.88 $1.39 2.0%
20 $4.80 $50.96 $13.40 $69.16 $5.24 $50.96 $14.40 $70.60 $1.44 2.1%
High 30 $4.80 $50.96 $20.10 $75.86 $5.24 $50.96 $21.60 $77.80 $1.94 2.6%
Very High 50 $4.80 $50.96 $33.50 $89.26 $5.24 $50.96 $36.00 $92.20 $2.94 3.3%
Item 10.a. - Page 73
Water and Wastewater 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 19 HCF with those of neighboring
communities. The rate survey includes rate schedules in effect August 2021. Wastewater bills for Arroyo Grande
are shown using the current rates and the proposed rates for implementation March 21, 2022. The chart indicates
that an Arroyo Grande SFR customer will experience a bill that is among the lowest of the communities listed.
Table 42
Single-family Residential Bi-monthly Wastewater Bill Impacts at 19 HCF
Note: Assumes constant South San Luis Obispo County Sanitation District (SSLOCSD) charges.
Proposed
SFR Charges Current FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charges $4.80 $5.24 $5.68 $6.16 $6.68 $7.24
Variable Charges $12.73 $13.68 $14.82 $15.96 $17.29 $18.81
SSLOCSD Charge $50.96 $50.96 $50.96 $50.96 $50.96 $50.96
Total Charges $68.49 $69.88 $71.46 $73.08 $74.93 $77.01
Dollar Change $1.39 $1.58 $1.62 $1.85 $2.08
Percent Change 2.0% 2.3% 2.3% 2.5% 2.8%
$0
$10
$20
$30
$40
$50
$60
$70
$80
Current FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Fixed Charges Variable Charges
$68.49 $69.88 $71.46 $73.08 $74.93 $77.01
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Water and Wastewater Drought Rates
The City requested that water and wastewater rates be developed to address the City’s implementation of a Stage
1 drought declaration. The City’s Stage 1 drought declaration includes requesting residential and irrigation
customers to reduce consumption from calendar year (CY) 2020 levels by an overall 10 percent as well as other
targeted efforts to achieve reductions in water consumption.
To compensate for the revenue decline that occurs from the reduction in consumption, Stage 1 drought rates
increase the normal water and wastewater rates to recover the lost revenue and to restore the revenue back to
the same levels provided in the water and wastewater financial plans in the earlier sections of this report
assuming there is a sustained drought at CY 2020 annual consumption levels. The Stage 1 drought rates increase
the normal condition water rates by an overall 13.6 percent and increase the normal condition wastewater rates
by a an overall 13.7.
The drought rates were determined for a five-year period with the same implementation dates of the normal
water and wastewater rates with March 21, 2022 for the first year with subsequent increases each January 1.
The drought rates apply when the Arroyo Grande City Council declares a Stage 1 drought declaration.
Tables 43 and 44 provide Stage 1 drought water rates without and with Central Coast Blue respectively and Table
45 provides wastewater rates under a Stage 1 drought declaration.
Chart 3 Single-family Residential Bi-Monthly Wastewater Bills of Local Communties at 19 HCF
Note: Above table uses wastewater rates in effect August 2021. Arroyo Grande March 2022 bill is based on
the rate structure and rates in Table 40.
Item 10.a. - Page 75
Water and Wastewater Rate Study City of Arroyo Grande
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Table 43
Proposed Stage 1 Drought Water Fixed and Variable Charges
without Central Coast Blue
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $32.27 $33.57 $34.91 $36.31 $37.76
3/4" $31.67 $35.39 $36.81 $38.28 $39.82 $41.41
1" $38.12 $44.70 $46.49 $48.35 $50.28 $52.29
1.5" $46.73 $57.14 $59.42 $61.80 $64.27 $66.84
2" $70.41 $91.32 $94.98 $98.78 $102.73 $106.84
3" $244.74 $343.08 $356.81 $371.07 $385.92 $401.36
4" $309.31 $436.33 $453.78 $471.93 $490.81 $510.44
6" $459.96 $653.89 $680.04 $707.25 $735.54 $764.96
8" $632.14 $902.54 $938.64 $976.19 $1,015.23 $1,055.84
Service Fee per Add'l Unit $7.99 $8.92 $9.30 $9.66 $10.04 $10.46
Fireline Size
2" $3.74 $4.16 $4.33 $4.50 $4.68 $4.86
3" $10.88 $12.08 $12.56 $13.06 $13.59 $14.13
4" $23.18 $25.74 $26.76 $27.83 $28.95 $30.10
6" $67.33 $74.76 $77.75 $80.86 $84.10 $87.46
8" $143.48 $159.31 $165.69 $172.31 $179.20 $186.37
10" $258.03 $286.50 $297.96 $309.88 $322.27 $335.17
Variable Charge ($ per HCF)
Single-Family
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 36 units $4.16
Tier 3 - 37 to 36 units $5.55
Tier 1 - 0 to 10 units $4.46 $4.65 $4.83 $5.02 $5.23
Tier 2 - 11 to 38 units $5.10 $5.31 $5.52 $5.74 $5.96
Tier 3 - Over 38 $6.15 $6.40 $6.66 $6.92 $7.19
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
Tier 1 - 0 to 10 units $4.46 $4.65 $4.83 $5.02 $5.23
Tier 2 - 11 to 38 units $5.10 $5.31 $5.52 $5.74 $5.96
Tier 3 - Over 38 $6.15 $6.40 $6.66 $6.92 $7.19
Commercial $3.95 $4.79 $4.99 $5.19 $5.40 $5.61
Irrigation $4.21 $5.40 $5.61 $5.84 $6.08 $6.32
Hydrant $6.13 $8.75 $9.10 $9.46 $9.84 $10.24
Wheeling $2.04 $2.35 $2.44 $2.54 $2.65 $2.75
Item 10.a. - Page 76
Water and Wastewater Rate Study City of Arroyo Grande
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Table 44
Proposed Stage 1 Drought Water Fixed and Variable Charges
with Central Coast Blue
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Meter Size Fixed Charge ($ per month)
5/8" $29.51 $33.46 $36.81 $40.49 $42.92 $42.92
3/4" $31.67 $36.70 $40.37 $44.41 $47.08 $47.08
1" $38.12 $46.43 $51.07 $56.19 $59.56 $59.56
1.5" $46.73 $59.40 $65.34 $71.87 $76.19 $76.19
2" $70.41 $95.06 $104.57 $115.03 $121.94 $121.94
3" $244.74 $357.67 $393.44 $432.78 $458.75 $458.75
4" $309.31 $454.93 $500.43 $550.47 $583.50 $583.50
6" $459.96 $681.88 $750.08 $825.09 $874.60 $874.60
8" $632.14 $941.26 $1,035.38 $1,138.92 $1,207.25 $1,207.25
Service Fee per Add'l Unit $7.99 $9.38 $10.32 $11.34 $12.02 $12.02
Fireline Size
2" $3.74 $5.00 $5.50 $6.04 $6.41 $6.41
3" $10.88 $14.53 $15.98 $17.59 $18.64 $18.64
4" $23.18 $30.96 $34.06 $37.47 $39.71 $39.71
6" $67.33 $89.93 $98.92 $108.82 $115.35 $115.35
8" $143.48 $191.63 $210.80 $231.88 $245.80 $245.80
10" $258.03 $344.63 $379.08 $416.99 $442.01 $442.01
Variable Charge ($ per HCF)
Single-Family
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 36 units $4.16
Tier 3 - 37 to 36 units $5.55
Tier 1 - 0 to 10 units $4.69 $5.16 $5.67 $6.01 $6.01
Tier 2 - 11 to 38 units $5.48 $6.02 $6.62 $7.02 $7.02
Tier 3 - Over 38 $6.77 $7.45 $8.20 $8.69 $8.69
Multifamily
Tier 1 - 0 to 18 units $3.78
Tier 2 - 19 to 27 units $4.16
Tier 3 - Over 27 $5.55
Tier 1 - 0 to 10 units $4.69 $5.16 $5.67 $6.01 $6.01
Tier 2 - 11 to 38 units $5.48 $6.02 $6.62 $7.02 $7.02
Tier 3 - Over 38 $6.77 $7.45 $8.20 $8.69 $8.69
Commercial $3.95 $5.11 $5.62 $6.19 $6.57 $6.57
Irrigation $4.21 $5.79 $6.37 $7.01 $7.43 $7.43
Hydrant $6.13 $9.50 $10.45 $11.50 $12.19 $12.19
Wheeling $2.04 $2.75 $3.02 $3.33 $3.53 $3.53
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Table 45
Proposed Stage 1 Drought Wastewater Fixed and Variable Charges
Current March 21, January 1, January 1, January 1, January 1,
Rate FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Fixed Charge ($ per month)
All Customers [1] $2.40 $2.98 $3.23 $3.50 $3.80 $4.12
Variable Charge ($ per HCF) [2]
Single-family Residential $0.67 $0.82 $0.89 $0.96 $1.03 $1.13
Multifamily Residential $0.94 $1.18 $1.27 $1.38 $1.49 $1.61
Non-Residential $1.32 $1.60 $1.73 $1.88 $2.04 $2.21
[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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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 Water Operation and Maintenance Expense
Line Budget Projected
No. Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Water Fund
Administration
1 Salaries $63,700 $65,000 $67,275 $69,630 $72,067
2 Benefits 163,100 133,500 144,180 155,714 168,172
3 Contractual Services 221,045 191,140 194,964 198,863 202,840
4 Personnel Transfers 909,621 875,626 910,651 947,077 984,960
5 Personnel Transfers - Utility Billing 94,879 98,674 102,621 106,726 110,995
6 Cost Allocation Transfers 1,156,900 1,156,900 1,180,038 1,203,639 1,227,712
7 Transfers Out - USDA City Hall Loan 8,800 8,800 8,800 8,800 8,800
8 All Other 130,900 133,000 135,660 138,372 141,140
9 Total Water Administration $2,748,945 $2,662,640 $2,744,189 $2,828,821 $2,916,686
Water Production
10 Salaries $75,700 $77,200 $79,902 $82,699 $85,593
11 Benefits 42,500 43,300 46,764 50,505 54,546
12 Power (electricity)56,700 57,400 68,036 74,962 82,470
13 Services and Supplies 30,900 31,800 32,436 33,084 33,746
14 Total Water Production $205,800 $209,700 $227,138 $241,250 $256,355
Water Distribution
15 Salaries $293,400 $296,000 $306,360 $317,083 $328,180
16 Benefits 156,700 163,000 176,040 190,123 205,333
17 Supplies - Water Meters 41,200 42,400 43,248 44,113 44,995
18 Chemicals 25,800 26,500 27,402 28,333 29,301
19 Power 90,000 92,700 95,857 99,113 102,497
20 Maintenance - Vehicles 10,300 10,600 10,812 11,028 11,249
21 Maintenance - Mach & Equip 7,200 7,400 7,548 7,699 7,853
22 Maintenance - Bldgs 5,200 5,400 5,508 5,618 5,730
23 Gas and Oil 20,600 21,200 21,624 22,056 22,497
24 Maintenance - Reservoirs 10,300 10,600 10,812 11,028 11,249
25 Maintenance - Wells/lines/pumps 57,000 59,000 60,180 61,384 62,612
26 Maintenance - Meters 10,000 10,000 10,200 10,404 10,612
27 All Other 117,800 39,000 39,780 40,574 41,386
28 Subtotal $845,500 $783,800 $815,371 $848,556 $883,494
29 Total O&M Expense $3,800,245 $3,656,140 $3,786,698 $3,918,627 $4,056,535
Lopez Fund
Lopez Water Supply
30 Lopez Contract O&M $2,239,161 $2,472,198 $2,546,364 $2,622,755 $2,701,438
31 Lopez Dam Bonds - 2011A Debt Service 420,749 434,981 434,981 434,981 434,981
32 SRF Loan Debt Service 845,137 845,137 845,137 845,137 845,137
33 Lopez Capital Outlay 235,066 100,000 100,000 100,000 100,000
34 Total Lopez Water Expense $3,740,113 $3,852,316 $3,926,482 $4,002,873 $4,081,556
35 Total Water System O&M Expense $7,540,358 $7,508,456 $7,713,180 $7,921,500 $8,138,091
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Appendix A-2
Allocation of Water Revenue Requirements to Cost Component
FY 21-22 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 $226,800 $69,637 $97,756 $11,045 $0 $16,196 $0 $17,109 $15,057 $0
Contractual Services 213,614 65,587 92,074 10,403 - 15,254 - 16,115 14,181 -
Contractual Services - Billing 5,464 - - - 5,464 - - - - -
Contractual Services - Meter Reading 1,967 - - - 1,967 - - - - -
Water Treatment Services (sampling & testing) 21,000 - - - - - 21,000 - - -
Personnel Transfers 909,621 279,287 392,072 44,300 - 64,956 - 68,620 60,386 -
Personnel Transfers - Utility Billing 94,879 - - - 94,879 - - - - -
Cost Allocation Transfers 1,156,900 355,212 498,655 56,343 - 82,614 - 87,274 76,802 -
Transfers Out - USDA City Hall Loan 8,800 2,702 3,793 429 - 628 - 664 584 -
Other 109,900 25,759 36,163 4,086 26,000 5,992 - 6,330 5,570 -
Total General and Administration $2,748,945 $798,184 $1,120,513 $126,606 $128,310 $185,640 $21,000 $196,112 $172,580 $0
Water Production
Salaries and Benefits $118,200 $0 $0 $0 $0 $0 $0 $62,872 $55,328 $0
Contractual Services 10,300 - - - - - - 5,479 4,821 -
Power (electricity)56,700 - - - - - 56,700 - - -
Maintenance - Machinery & Equipment 20,600 - - - - - - 10,957 9,643 -
Total Water Production $205,800 $0 $0 $0 $0 $0 $56,700 $79,308 $69,792 $0
Water Distribution
Salaries and Benefits $450,100 $113,581 $314,619 $0 $0 $21,900 $0 $0 $0 $0
Supplies - Water Meters 41,200 - - 41,200 - - - - - -
Chemicals 25,800 - - - - - 25,800 - - -
Contractual Services 20,600 5,465 15,135 - - - - - - -
Power 90,000 77,783 12,217 - - - - - - -
Maintenance - Vehicles 10,300 2,732 7,568 - - - - - - -
Maintenance - Office Equip $0 - - - - - - - - -
Maintenance - Mach & Equip 7,200 1,909 5,291 - - - - - - -
Maintenance - Bldgs $5,200 1,379 3,821 - - - - - - -
Maintenance - Reservoirs 10,300 1,030 9,270 - - - - - - -
Maintenance - Wells/lines/pumps $57,000 8,268 7,277 - - 41,455 - - - -
Maintenance - Meters 10,000 - - 10,000 - - - - - -
Lease Purchaase Payments $13,500 3,581 9,919 - - - - - - -
Equipment 67,500 14,795 40,986 - - 11,719 - - - -
All Other 36,800 9,764 27,036 - - - - - - -
Total Water Distribution $845,500 $240,288 $453,139 $51,200 $0 $75,073 $25,800 $0 $0 $0
Lopez Water Expense $3,740,113 $0 $0 $0 $0 $0 $2,239,161 $0 $0 $1,500,952
Total Operation and Maintenance Expense $7,540,358 $1,038,472 $1,573,652 $177,806 $128,310 $260,713 $2,342,661 $275,420 $242,372 $1,500,952
Capital Costs
Capital Improvement Funding $695,616 $157,213 $478,577 $0 $0 $0 $0 $31,822 $28,004 $0
Total Capital Costs $695,616 $157,213 $478,577 $0 $0 $0 $0 $31,822 $28,004 $0
Adjustments
Revenue Offsets ($420,107) ($118,014) ($178,834) ($20,207) ($14,581) ($29,629) $0 ($31,299) ($27,543) $0
Adjustments for Annual Cash Balance (1,055,601) (296,535) (449,354) (50,772) (36,639) (74,446) - (78,646) (69,209) -
Adjustments to Annualize Rate Increase 223,850 62,882 95,290 10,767 7,770 15,787 - 16,678 14,676 -
Total Adjustments ($1,251,858) ($351,667) ($532,898) ($60,212) ($43,450) ($88,288) $0 ($93,267) ($82,076) $0
Total Cost of Service $6,984,116 $844,018 $1,519,331 $117,594 $84,860 $172,425 $2,342,661 $213,975 $188,300 $1,500,952
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Appendix A-3
Water Capital Improvement Program with Central Coast Blue
Budget Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Current Capital Improvement Program (CIP) Projects [1]
Galvanized Service Replacement $96,826 $0 $0 $0 $0
Phased Main Replacement - Fair Oaks, Elm-Alder 232,750 - - - -
Andre Drive / Los Ciervos Court Interconnect 100,000 - - - -
SCADA Software/Electronics Upgrade 240,100 - - - -
Corporation Yard Renovations 15,000 15,000 15,000 15,000 15,000
Reservoir 4 Exterior Coating - 147,500 - - -
Financial Managment Software - 75,000 20,000 - -
Phased Main Replacement - S Halcyon Road, Cornwall-Fair Oaks - - 673,500 - -
Water Master Plan Update - - 100,000 - -
Phased Main Replacement - Cornwall, S Halycon-El Camino Real - - - 578,700 -
Phased Main Replacement - Hwy 101 Xng, El Camino Real-W Branch - - - - 291,200
Rate Study Update - - - - 30,000
Central Coast Blue Project Pre-Construction 720,000 700,000 - - -
Total Water CIP $1,415,616 $937,500 $808,500 $593,700 $336,200
[1] CIP Source: FY 21-22 City CIP document. Represents only Water Fund portion of project.
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Table 11
Water Financial Plan
Projected
Description FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26
Proposed Revenue Increase (March 21)10.0%
Proposed Revenue Increase (January 1)10.0% 10.0% 6.0% 0.0%
Water Fund - 640
Revenue
Revenues from Existing Water Rates [1]$6,715,496 $6,745,129 $6,775,218 $6,804,617 $6,835,730
Total Additional Water Sales Revenue [2]111,925 983,665 1,764,380 2,478,753 2,808,527
Miscellaneous Income [3]1,114,250 909,000 61,500 640,200 352,700
Interest Income [4]17,526 15,123 7,241 5,356 7,112
Total Revenues $7,959,197 $8,652,917 $8,608,339 $9,928,926 $10,004,069
Expenditures
Operation and Maintenance Expense $3,800,245 $3,656,140 $3,718,662 $3,843,665 $3,974,065
Central Coast Blue O&M - 657,111 676,824 697,129 718,043
Transfer to Lopez Fund 3,740,113 3,852,316 3,926,482 4,002,873 4,081,556
Capital Improvement Funding 1,415,616 937,500 808,500 593,700 336,200
Central Coast Blue Debt Service - 511,665 511,665 511,665 511,665
Total Expenditures $8,955,974 $9,614,732 $9,642,133 $9,649,032 $9,621,529
Net Funds Available ($996,777) ($961,815) ($1,033,794) $279,894 $382,540
Available Reserves
Beginning available reserves [5]$3,923,733 $2,926,956 $1,965,141 $931,347 $1,211,241
Ending available reserves $2,926,956 $1,965,141 $931,347 $1,211,241 $1,593,781
Target Reserves [6]$1,450,000 $1,578,000 $1,599,000 $1,635,000 $1,673,000
Lopez Fund - 641
Revenues
Transfer In from Water Fund $3,740,113 $3,852,316 $3,926,482 $4,002,873 $4,081,556
Interest Income [4]8,500 8,600 8,600 8,700 8,700
Total Lopez Revenues $3,748,613 $3,860,916 $3,935,082 $4,011,573 $4,090,256
Expenditures
Lopez Water Expense $2,239,161 $2,472,198 $2,546,364 $2,622,755 $2,701,438
Lopez Dam Bonds - 2011A Debt Service 420,749 434,981 434,981 434,981 434,981
SRF Loan Debt Service 845,137 845,137 845,137 845,137 845,137
Lopez Capital Outlay 235,066 100,000 100,000 100,000 100,000
Total Lopez Expenditures $3,740,113 $3,852,316 $3,926,482 $4,002,873 $4,081,556
Net Lopez Funds Available $8,500 $8,600 $8,600 $8,700 $8,700
Lopez Available Reserves
Lopez Beginning available reserves $1,703,434 $1,711,934 $1,720,534 $1,729,134 $1,737,834
Lopez Ending available reserves $1,711,934 $1,720,534 $1,729,134 $1,737,834 $1,746,534
Lopez Target Reserves [7]$1,265,900 $1,280,100 $1,280,100 $1,280,100 $1,280,100
Combined Reserves
Total Reserves (Fund 640 and 641)$4,638,890 $3,685,675 $2,660,481 $2,949,075 $3,340,315
Target Total Reserves (Fund 640 and 641) $2,715,900 $2,858,100 $2,879,100 $2,915,100 $2,953,100
Debt Service Coverage
Total Revenues (Fund 640 and 641)$7,967,697 $8,661,517 $8,616,939 $9,937,626 $10,012,769
Total Expenses (Fund 640 and 641)($7,540,358) ($8,165,567) ($8,321,968) ($8,543,667) ($8,773,664)
25% Coverage Factor Lopez 2011A Bonds [8] ($105,187) ($108,745) ($108,745) ($108,745) ($108,745)
Net Revenues $322,152 $387,205 $186,226 $1,285,214 $1,130,360
Lopez Coverage [9]104% 105% 102% 115% 113%
Central Coast Blue Debt Service $0 $511,665 $511,665 $511,665 $511,665
Debt Service Coverage [10]n/a 76% 36% 251% 221%
[1] Projected using the existing rates.
[2] Additional revenue from proposed rate adjustments.
[3] Includes collection fees, meter installations, late fees, ARPA Funds, and Water Availbility Transfers In.
[4] Interest earnings on the average fund balance calculated at 0.5%.
[5] The available beginning FY 21-22 cash balance provided by City. Includes operating and capital funds.
[6] Target reserve estimated at 90 days of operation and maintenance expense and capital reserves target.
[7] Equal to Lopez annual debt service.
[8] For Lopez 2011A Bonds, pledge of gross revenues requires Coverage Factor of 25 percent of Lopez 2011A Bonds debt service.
[9] Minimum coverage is 100 percent.
[10] Minimum 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 21-22
Description Total Cost Flow Customer General
Direct Operation and Maintenance Expense
Salaries and Benefits $245,000 $217,511 $27,489 $0
Power 30,000 30,000 0 0
Maintenance Lines & Pumps 31,000 27,522 3,478 0
Personnel Transfers - Billing 13,746 0 13,746 0
Capital Outlay 3,500 3,175 325 0
All Other O&M 590,539 0 49,974 540,565
Total Operation and Maintenance Expense $913,785 $278,208 $95,012 $540,565
Reallocation of General Expense 0 404,142 136,423 (540,565)
Total Operation and Maintenance Expense $913,785 $682,350 $231,435 $0
Capital Improvement Funding $328,117 $297,680 $30,437 $0
Adjustments
Revenue Offsets ($230,925) ($230,925)$0 $0
Adjustments for Annual Cash Balance (51,180) (51,180)0 0
Adjustments to Annualize Rate Increase 65,480 65,480 0 0
Total Adjustments ($216,625) ($216,625)$0 $0
Total Revenue Requirement $1,025,277 $763,405 $261,872 $0
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Appendix B-2
FY 21-22 Units of Service
Overall Total
FY 21-22 Return Wastewater
Customer Class Annual Use Factor Volume Bills
HCF HCF Bills
Single-family Residential 689,844 51% 355,128 72,444
Multifamily Residential 104,876 74% 77,542 20,460
Non-Residential 110,838 100% 110,838 7,032
Total System 905,558 543,508 99,936
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