11
Evaluating a Rate Structure:Evaluating a Rate Structure:
How to Complete a Rate AnalysisHow to Complete a Rate Analysis...
22
What is RCAP?What is RCAP?
RRuralural CCommunityommunity AAssistancessistance PProgramrogram
Technical assistance provi...
33
Rate AnalysisRate Analysis
Is your community charging enough forIs your community charging enough for
water or sewer?wa...
44
Rate AnalysisRate Analysis
These are the key questions we will beThese are the key questions we will be
answering in th...
55
What This Presentation CoversWhat This Presentation Covers
Introduction / Types of Rate StructuresIntroduction / Types ...
66
Why Analyze Rates?Why Analyze Rates?
Small towns face a greater challenge inSmall towns face a greater challenge in
pro...
77
Key QuestionsKey Questions
Are revenues covering current expenses?Are revenues covering current expenses?
Will revenues...
88
Evaluating Types ofEvaluating Types of
Rate StructuresRate Structures
Types of rates to consider:Types of rates to cons...
99
Evaluating Types ofEvaluating Types of
Rate StructuresRate Structures
Types of proportional-to-use rates to consider:Ty...
1010
Developing Needed DataDeveloping Needed Data
Hand Calculations:Hand Calculations:

Can be done. Initially faster tha...
1111
Developing Needed DataDeveloping Needed Data
Use an Existing SpreadsheetUse an Existing Spreadsheet

There are a num...
1212
Developing Needed DataDeveloping Needed Data
Use some kind of accounting softwareUse some kind of accounting software...
1313
Key RatiosKey Ratios
Operating ratio.Operating ratio.
Coverage ratio.Coverage ratio.
Affordability index.Affordabilit...
1414
Key RatiosKey Ratios
Operating RatioOperating Ratio
Total System Operating Income /Total System Operating Income /
To...
1515
Key RatiosKey Ratios
What to include in the income forWhat to include in the income for
operating ratio:operating rat...
1616
Key RatiosKey Ratios
What to include in the expenses forWhat to include in the expenses for
operating ratio:operating...
1717
Key RatiosKey Ratios
What does the operating ratio mean?What does the operating ratio mean?

= 1 and the system is b...
1818
Key RatiosKey Ratios
Coverage Ratio:Coverage Ratio:
Income Available for Debt Service /Income Available for Debt Serv...
1919
Key RatiosKey Ratios
What does the coverage ratio mean?What does the coverage ratio mean?

It is an indicator of the...
2020
Key RatiosKey Ratios
A useful way to look at these two ratios:A useful way to look at these two ratios:

A strongA s...
2121
Key RatiosKey Ratios
Affordability Index:Affordability Index:
Fees for a 5,000 gallon per month user /Fees for a 5,00...
2222
Key RatiosKey Ratios
What does the affordability index mean?What does the affordability index mean?

<0.5% Rates are...
2323
Key Data - RevenuesKey Data - Revenues
Revenue Components to Include:Revenue Components to Include:

(Number of User...
2424
Key Data – RevenuesKey Data – Revenues
Example of Revenues Portion of SpreadsheetExample of Revenues Portion of Sprea...
2525
Key Data – RevenuesKey Data – Revenues
Example of Revenues Portion from Jarocki-Example of Revenues Portion from Jaro...
2626
Key Data - ExpensesKey Data - Expenses
Expense Components to Include:Expense Components to Include:

AdministrationA...
2727
Key Data – ExpensesKey Data – Expenses
Example of Expense Portion of SpreadsheetExample of Expense Portion of Spreads...
2828
Key Data – ExpensesKey Data – Expenses
Example of Revenues Portion from Jarocki-Example of Revenues Portion from Jaro...
2929
Running a ScenarioRunning a Scenario
FIRST: Key data has been obtainedFIRST: Key data has been obtained
SECOND: Softw...
3030
2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting
Key to Success #1: Set the rates higherKey to Succ...
3131
2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting
Key to Success #2: Analyze rates oftenKey to Succe...
3232
2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting
And when the local officials say:And when the loca...
3333
*** Projected rate increases if*** Projected rate increases if
current rate structure continuescurrent rate structure...
3434
*** Projected end-of-year balances*** Projected end-of-year balances
with current rate structurewith current rate str...
3535
*** In addition, the lowest volume users are paying*** In addition, the lowest volume users are paying
a high proport...
3636
*** What does this mean for Bay*** What does this mean for Bay
Area residents?Area residents?
Current water bills are...
3737
*** The selected alternative*** The selected alternative
Increasing block structureIncreasing block structure
Reduced...
3838
*** What are the benefits of the new*** What are the benefits of the new
rate structure?rate structure?
Will generate...
3939
Equitability of proposed user rates
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Low Middle High
User c...
4040
Equitability of current user rates
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Low Middle High
User Class
% ...
4141
*** Estimated end-of-year balance under*** Estimated end-of-year balance under
new rate structure with 6% reservesnew...
4242
*** How will it impact my rates?*** How will it impact my rates?
Households that use <1,500Households that use <1,500...
4343
*** Important things to know:*** Important things to know:
The price of clean water for the highestThe price of clean...
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Evaluating a rate structure presentation stubberfield

  1. 1. 11 Evaluating a Rate Structure:Evaluating a Rate Structure: How to Complete a Rate AnalysisHow to Complete a Rate Analysis Rose StubberfieldRose Stubberfield
  2. 2. 22 What is RCAP?What is RCAP? RRuralural CCommunityommunity AAssistancessistance PProgramrogram Technical assistance provided at no cost to ruralTechnical assistance provided at no cost to rural communitiescommunities  less than 10,000 in populationless than 10,000 in population  low to moderate incomelow to moderate income To assure safe drinking water and sanitary wasteTo assure safe drinking water and sanitary waste disposal for the low income, rural communities anddisposal for the low income, rural communities and individuals in Indianaindividuals in Indiana National non-profit organization formed in 1972National non-profit organization formed in 1972 Federal and State fundedFederal and State funded  USDA Rural Development - Rural Utilities ServiceUSDA Rural Development - Rural Utilities Service  US Health and Human ServicesUS Health and Human Services  US EPAUS EPA
  3. 3. 33 Rate AnalysisRate Analysis Is your community charging enough forIs your community charging enough for water or sewer?water or sewer? Do revenues and fees cover all expensesDo revenues and fees cover all expenses and debt?and debt? Do you have adequate financial reserves?Do you have adequate financial reserves? (Do you have(Do you have ANYANY financial reserves?)financial reserves?) Are your rates fair? (Is one user groupAre your rates fair? (Is one user group subsidizing others?)subsidizing others?)
  4. 4. 44 Rate AnalysisRate Analysis These are the key questions we will beThese are the key questions we will be answering in this presentation . . .answering in this presentation . . .
  5. 5. 55 What This Presentation CoversWhat This Presentation Covers Introduction / Types of Rate StructuresIntroduction / Types of Rate Structures Developing the DataDeveloping the Data Key RatiosKey Ratios Key DataKey Data Running ScenariosRunning Scenarios Conclusions / Keys to SuccessConclusions / Keys to Success
  6. 6. 66 Why Analyze Rates?Why Analyze Rates? Small towns face a greater challenge inSmall towns face a greater challenge in providing services (such as water andproviding services (such as water and sewer) because they have a smaller usersewer) because they have a smaller user base to pay for it.base to pay for it. It is critically important for small towns toIt is critically important for small towns to periodically evaluate rates to ensure thatperiodically evaluate rates to ensure that revenues cover expenses.revenues cover expenses.
  7. 7. 77 Key QuestionsKey Questions Are revenues covering current expenses?Are revenues covering current expenses? Will revenues cover future expenses?Will revenues cover future expenses? Is there money available for unexpectedIs there money available for unexpected expenses?expenses? Are we planning ahead for the future?Are we planning ahead for the future? Are the rates fair?Are the rates fair? Are we financially able to build new facilities?Are we financially able to build new facilities? Are we going to apply for grants and/or loans?Are we going to apply for grants and/or loans? What if the economy, inflation, or interest ratesWhat if the economy, inflation, or interest rates change?change? Is population increasing or declining?Is population increasing or declining?
  8. 8. 88 Evaluating Types ofEvaluating Types of Rate StructuresRate Structures Types of rates to consider:Types of rates to consider:  Flat rateFlat rate A flat rate on a per user basis, no matter what the level ofA flat rate on a per user basis, no matter what the level of usage is by individual users.usage is by individual users. A common wastewater rate structure in Indiana where usageA common wastewater rate structure in Indiana where usage is not metered.is not metered.  Proportional-to-use ratesProportional-to-use rates A rate that is based on a level of usage.A rate that is based on a level of usage. More on these rates in the next slide.More on these rates in the next slide. Recommended structure for two reasons: (1) The most fair;Recommended structure for two reasons: (1) The most fair; and (2) Easy for users to understand.and (2) Easy for users to understand.  Arbitrary RatesArbitrary Rates Just that . . . Arbitrary.Just that . . . Arbitrary.
  9. 9. 99 Evaluating Types ofEvaluating Types of Rate StructuresRate Structures Types of proportional-to-use rates to consider:Types of proportional-to-use rates to consider:  Decreasing block rateDecreasing block rate Cost per “x” gallons decreases the more water or wastewaterCost per “x” gallons decreases the more water or wastewater is usedis used Most common water rate structure in IndianaMost common water rate structure in Indiana  Single block rateSingle block rate Cost per “x” gallons costs the same regardless of the amountCost per “x” gallons costs the same regardless of the amount of water or wastewater is usedof water or wastewater is used Most common metered wastewater rate structure in IndianaMost common metered wastewater rate structure in Indiana  Increasing block rateIncreasing block rate Cost per “x” gallons increases the more water or wastewaterCost per “x” gallons increases the more water or wastewater is usedis used Effective rate structure for encouraging conservationEffective rate structure for encouraging conservation
  10. 10. 1010 Developing Needed DataDeveloping Needed Data Hand Calculations:Hand Calculations:  Can be done. Initially faster than a databaseCan be done. Initially faster than a database or spreadsheet. In the long run slower asor spreadsheet. In the long run slower as EVERY calculation must be done by hand.EVERY calculation must be done by hand. Develop a spreadsheet or databaseDevelop a spreadsheet or database  With basic information on cash in and out andWith basic information on cash in and out and a few equations a spreadsheet can bea few equations a spreadsheet can be developed. Negative is “reinventing thedeveloped. Negative is “reinventing the wheel” factor. Positive is designed specific towheel” factor. Positive is designed specific to system.system.
  11. 11. 1111 Developing Needed DataDeveloping Needed Data Use an Existing SpreadsheetUse an Existing Spreadsheet  There are a number of existing spreadsheetsThere are a number of existing spreadsheets that can be used (two examples are includedthat can be used (two examples are included in this presentation). No reinventing thein this presentation). No reinventing the wheel but not a precise fit for any onewheel but not a precise fit for any one community. Very helpful for runningcommunity. Very helpful for running comparisons and “what if” scenarios that arecomparisons and “what if” scenarios that are much more difficult with paper calculations.much more difficult with paper calculations.
  12. 12. 1212 Developing Needed DataDeveloping Needed Data Use some kind of accounting softwareUse some kind of accounting software  Simply examples include Intuit’s QuickBooksSimply examples include Intuit’s QuickBooks or Microsoft’s Money. The positive is thator Microsoft’s Money. The positive is that these software programs take into account allthese software programs take into account all accounting needed and can be user friendly.accounting needed and can be user friendly. Negative is that they are not a precise matchNegative is that they are not a precise match for a water or wastewater utilities accountingfor a water or wastewater utilities accounting needs.needs.
  13. 13. 1313 Key RatiosKey Ratios Operating ratio.Operating ratio. Coverage ratio.Coverage ratio. Affordability index.Affordability index.
  14. 14. 1414 Key RatiosKey Ratios Operating RatioOperating Ratio Total System Operating Income /Total System Operating Income / Total System Operating Expenses =Total System Operating Expenses = Operating RatioOperating Ratio Does not include debt, that comes later . . .Does not include debt, that comes later . . .
  15. 15. 1515 Key RatiosKey Ratios What to include in the income forWhat to include in the income for operating ratio:operating ratio:  User feesUser fees  Hook-up and impact feesHook-up and impact fees  InterestInterest  Cash carry-over and fund transfersCash carry-over and fund transfers  And income not dedicated to something elseAnd income not dedicated to something else
  16. 16. 1616 Key RatiosKey Ratios What to include in the expenses forWhat to include in the expenses for operating ratio:operating ratio:  AdministrationAdministration  Wages and benefitsWages and benefits  UtilitiesUtilities  SuppliesSupplies  Other operating expensesOther operating expenses  No debt! That comes next . . .No debt! That comes next . . .
  17. 17. 1717 Key RatiosKey Ratios What does the operating ratio mean?What does the operating ratio mean?  = 1 and the system is breaking even.= 1 and the system is breaking even.  <1 and the system is losing money (in the red)<1 and the system is losing money (in the red)  >1 revenues are ahead of expenses (in the>1 revenues are ahead of expenses (in the black)black)  1.15 is a normal target for systems with1.15 is a normal target for systems with >2,000 connections>2,000 connections  1.35+ is better for smaller systems with1.35+ is better for smaller systems with <1,000 connections<1,000 connections
  18. 18. 1818 Key RatiosKey Ratios Coverage Ratio:Coverage Ratio: Income Available for Debt Service /Income Available for Debt Service / Annual Debt Service Expenses =Annual Debt Service Expenses = Coverage RatioCoverage Ratio
  19. 19. 1919 Key RatiosKey Ratios What does the coverage ratio mean?What does the coverage ratio mean?  It is an indicator of the system’s financialIt is an indicator of the system’s financial ability to repay debt.ability to repay debt.  <1 and banks, bond buyers, and lending<1 and banks, bond buyers, and lending agencies are unlikely to lend the system theagencies are unlikely to lend the system the money.money.  1.25 is a normal target for larger systems.1.25 is a normal target for larger systems.  1.90 can often be preferred for smaller1.90 can often be preferred for smaller systems.systems.
  20. 20. 2020 Key RatiosKey Ratios A useful way to look at these two ratios:A useful way to look at these two ratios:  A strongA strong operating ratiooperating ratio will take care of thewill take care of the coverage ratiocoverage ratio..
  21. 21. 2121 Key RatiosKey Ratios Affordability Index:Affordability Index: Fees for a 5,000 gallon per month user /Fees for a 5,000 gallon per month user / Median Household Income (MHI) for theMedian Household Income (MHI) for the rate paying area =rate paying area = Affordability IndexAffordability Index
  22. 22. 2222 Key RatiosKey Ratios What does the affordability index mean?What does the affordability index mean?  <0.5% Rates are “very” affordable<0.5% Rates are “very” affordable  0.5% - 1.5% Rates are “fairly” affordable0.5% - 1.5% Rates are “fairly” affordable  >1.5% Rates are considered “high”>1.5% Rates are considered “high”
  23. 23. 2323 Key Data - RevenuesKey Data - Revenues Revenue Components to Include:Revenue Components to Include:  (Number of Users Per Class) x (Rate)(Number of Users Per Class) x (Rate)  Fees and Service ChargesFees and Service Charges  Hook-up ChargesHook-up Charges  Interest IncomeInterest Income  Other Revenue (Insurance Reimbursements,Other Revenue (Insurance Reimbursements, Rental Charges, Bank Reconciliation, Sale ofRental Charges, Bank Reconciliation, Sale of Assets)Assets)
  24. 24. 2424 Key Data – RevenuesKey Data – Revenues Example of Revenues Portion of SpreadsheetExample of Revenues Portion of Spreadsheet from “Show Me Rate Maker”from “Show Me Rate Maker”               Operating Incomes         User Charges (Actual or Projected Receipts)     Surcharges         Working Capital Carried Over From Previous Year   (for Operating Expenses)       Working Capital Interest Earned (or Paid)     Hookup Fees Devoted to Operating Costs       Other Charges (late payments, forfeited deposits, etc.)   Transfers From Capital Improvements Reserve   Withdrawals From Debt Reserve       Debt Reserve Interest Earned (or Paid)     Withdrawals From Other Reserves       Other Reserve Interest Earned (or Paid)     Other Income fund transfer from General Revenue   Other Income     Other Adjust. (+ or -) Describe Total Actual or Projected Operating Revenues 
  25. 25. 2525 Key Data – RevenuesKey Data – Revenues Example of Revenues Portion from Jarocki-Example of Revenues Portion from Jarocki- Environmental Finance Center SpreadsheetEnvironmental Finance Center Spreadsheet Water Rates [assumes increase based on new customers] Fees and Service Charges Hookup Charges [Enter Average Charge] Revenues Derived from Rental Charges hydrant rental Interest Income Other Revenues TOTAL REVENUES AVAILABLE (Lines 6 through 13) insurance reimbursement, bank reconcilliation, sale of truck
  26. 26. 2626 Key Data - ExpensesKey Data - Expenses Expense Components to Include:Expense Components to Include:  AdministrationAdministration  Wages and benefitsWages and benefits  UtilitiesUtilities  SuppliesSupplies  Other operating expensesOther operating expenses
  27. 27. 2727 Key Data – ExpensesKey Data – Expenses Example of Expense Portion of SpreadsheetExample of Expense Portion of Spreadsheet from “Show Me Rate Maker”from “Show Me Rate Maker” Item Total Annual  Cost for  Each Item Fixed  Cost  Percen- tage for  Each Item Costs  Adjusted for  Surcharge- able Service  & Water  Loss Adjusted  Fixed Cost Salaries & Benefits for Administration Staff $6,000 100% X $4,486 = $4,486  Billing, Office Operation & Utilities, Rent &  Other Overhead $4,000 100% X $2,990 = $2,990  Insurance & Bonding $1,000 100% X $748 = $748  Accounting, Legal, Engineering & Other  Professional Services $900 100% X $673 = $673  Debt Repayment & Related Expenses $12,000 50% X $12,000 = $6,000  Debt Reserve Payments $0 50% X $0 = $0  Other Reserve Payments $200 0% X $200 = $0  Salaries & Benefits for Operations Staff $12,000 0% X $8,971 = $0  Electricity & Utilities for Operations $8,500 0% X $6,355 = $0  Operating Supplies & Equipment $4,500 0% X $3,364 = $0  Chemicals $2,000 0% X $1,495 = $0  Equipment Leases $0 0% X $0 = $0  Regular Maintenance & Repairs $8,500 0% X $6,355 = $0  Auto & Other Rolling Stock $3,000 0% X $2,243 = $0  Permits, Training $1,500 0% X $1,121 = $0  Taxes and Franchise Fees $3,000 0% X $2,243 = $0  Payment to R & R Account $12,900 0% X $9,644 = $0  Surchargeable Services (Adjustment) N.A. N.A. X $2,000  = N.A. Water Loss (Adjustment) N.A. 100% X $15,113 = $15,113 
  28. 28. 2828 Key Data – ExpensesKey Data – Expenses Example of Revenues Portion from Jarocki-Example of Revenues Portion from Jarocki- Environmental Finance Center SpreadsheetEnvironmental Finance Center Spreadsheet EXPENSES Operating and Maintenance Salaries and Benefits 18679 Purchased power* 141 Chemicals and Testing* 6576 Contracted work-non grant related work 1819 Materials, Supplies, and Parts 7542 Wellhead protection plan 2000 Miscellaneous* 0    Total Operating and Maintenance (Lines 17 through 23) 36757 General and Administrative Rent 920 Postage* 1201 Insurance 3299 Membership dues 132 SBA audit 2035 0 Miscellaneous* 0    Total General and Administrative (Lines 26 through 32) 7587 Other Expenses Other Deductions, Fees and Expenses Income Taxes Public Utilities Excise Tax [enter to override excise tax rate] Sales Tax, Gross Tax 2764    Total Other Expenses (Lines 35 through 38) 2764 Subtotal Expenses (Lines 24, 33 and 39) 47108 Emergency Reserve *According to NETC, Emergency Reserve is 1/8 of non-debt expenditures (Jarocki calls this Operating reserve/OMGA reserve) Operating Reserve should be sufficient to OMGA Reserve Target 5889 meet 1/8 of annual O&M expenses, plus Current Year OMGA Reserve Balance 0 general and administrative expenses (OMGA) Required  OMGA Reserve Amount 5889 Budgeted  OMGA Reserve Amount 0 TOTAL EXPENSES (Lines 40 + 45)  47108
  29. 29. 2929 Running a ScenarioRunning a Scenario FIRST: Key data has been obtainedFIRST: Key data has been obtained SECOND: Software has been selectedSECOND: Software has been selected THIRD: Data entryTHIRD: Data entry FOURTH: Analysis and scenariosFOURTH: Analysis and scenarios
  30. 30. 3030 2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting Key to Success #1: Set the rates higherKey to Success #1: Set the rates higher that you think you will need them to be.that you think you will need them to be. This extra money will help weatherThis extra money will help weather unexpected “bumps”—an upturn in costs,unexpected “bumps”—an upturn in costs, a downturn in revenue, an unexpecteda downturn in revenue, an unexpected equipment failure.equipment failure.
  31. 31. 3131 2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting Key to Success #2: Analyze rates oftenKey to Success #2: Analyze rates often and adjust them as needed without delay.and adjust them as needed without delay. Somewhere between annually and everySomewhere between annually and every two years is best. This ensures realitytwo years is best. This ensures reality meets projections and detects neededmeets projections and detects needed changes before a crisis arrives.changes before a crisis arrives.
  32. 32. 3232 2 Keys to Successful Rate Setting2 Keys to Successful Rate Setting And when the local officials say:And when the local officials say: “You“You want me to set the rates HIGHwant me to set the rates HIGH andand recheck them often!!!”recheck them often!!!” You say:You say: “Planning ahead will keep a“Planning ahead will keep a crisis away. The negatives of ONEcrisis away. The negatives of ONE financial crisis will overshadow ANY shortfinancial crisis will overshadow ANY short term savings from setting rates low.”term savings from setting rates low.”
  33. 33. 3333 *** Projected rate increases if*** Projected rate increases if current rate structure continuescurrent rate structure continues Current   Year Year 2 Year 3 Year 4 Year 5 Year 6 END OF YEAR BALANCE $14,809 $11,722 $7,913 $2,461 ($3,787) ($11,751) Revenues - Expenses [Result should be equal to or greater than 0] FORECASTED NET REVENUES AVAILABLE $121,702 $64,367 $61,807 $57,614 $52,689 $46,057 ADDITIONAL REVENUES NEEDED $0 $0 $0 $0 $3,787 $11,751 REVENUES NEEDED TO MEET BUDGETED  EXPENSES $106,893 $52,645 $53,894 $55,153 $56,476 $57,808 Revenues needed to meet Operations, Capital, Reserve and other Expenses PROJECTED MONTHLY BILL (Estimated  average) $11.91  $11.98  $11.91  $11.91  $12.90  $15.00 
  34. 34. 3434 *** Projected end-of-year balances*** Projected end-of-year balances with current rate structurewith current rate structure 1 2 3 4 5 6 $14,809 $11,722 -$11,751 -$3,787 $2,461 $7,913 -$15,000 -$10,000 -$5,000 $0 $5,000 $10,000 $15,000 Year End of Year Balance
  35. 35. 3535 *** In addition, the lowest volume users are paying*** In addition, the lowest volume users are paying a high proportion of revenues….a high proportion of revenues…. Equitability of current user rates 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Low Middle High User Class (by volume) % of usage % revenue (current)
  36. 36. 3636 *** What does this mean for Bay*** What does this mean for Bay Area residents?Area residents? Current water bills are not high enough toCurrent water bills are not high enough to sustain a healthy utilitysustain a healthy utility If rate increases are postponed, rates increasesIf rate increases are postponed, rates increases will become unavoidable just for the utility towill become unavoidable just for the utility to break evenbreak even With no reserves, the town cannot plan aheadWith no reserves, the town cannot plan ahead for emergencies and changes in regulationsfor emergencies and changes in regulations The lowest volume users (usually elderly users)The lowest volume users (usually elderly users) are paying more than they should beare paying more than they should be The solution: to evaluate the rate structureThe solution: to evaluate the rate structure
  37. 37. 3737 *** The selected alternative*** The selected alternative Increasing block structureIncreasing block structure Reduced minimum gallons per monthReduced minimum gallons per month  Will decrease from 2,500 to 1,500Will decrease from 2,500 to 1,500  Minimum bill will also decline from $6.85 to $4.50Minimum bill will also decline from $6.85 to $4.50 The new rate structureThe new rate structure  First 1,500 gallons: $3.00/1,000 gallonsFirst 1,500 gallons: $3.00/1,000 gallons  Next 8,500 gallons: $3.15/1,000 gallonsNext 8,500 gallons: $3.15/1,000 gallons  All use over 10,000 gallons: $3.31/1,000 gallonsAll use over 10,000 gallons: $3.31/1,000 gallons
  38. 38. 3838 *** What are the benefits of the new*** What are the benefits of the new rate structure?rate structure? Will generate revenue to cover allWill generate revenue to cover all operating expenses and reserves foroperating expenses and reserves for emergenciesemergencies Encourages water conservationEncourages water conservation  Reduces the burden on water and sewerReduces the burden on water and sewer systemssystems Reduces the burden on lowest volumeReduces the burden on lowest volume usersusers
  39. 39. 3939 Equitability of proposed user rates 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Low Middle High User class % of usage % of revenue (low ered min)
  40. 40. 4040 Equitability of current user rates 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Low Middle High User Class % of usage % revenue (current)
  41. 41. 4141 *** Estimated end-of-year balance under*** Estimated end-of-year balance under new rate structure with 6% reservesnew rate structure with 6% reserves 1 2 3 4 5 6 $14,809 $16,822 $13,121 $16,250 $17,583 $18,062 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Year End of Year Balance
  42. 42. 4242 *** How will it impact my rates?*** How will it impact my rates? Households that use <1,500Households that use <1,500 gallons/month will pay the new minimumgallons/month will pay the new minimum bill of $4.50bill of $4.50 The average household (about 4,000The average household (about 4,000 gallons/month) will now pay $12.37/monthgallons/month) will now pay $12.37/month (up from $9.37/month)(up from $9.37/month) Higher volume users will see a largerHigher volume users will see a larger increaseincrease  12,500 gallons: from $23.13 to $39.5412,500 gallons: from $23.13 to $39.54  26,000 gallons: from $41.77 to $84.2026,000 gallons: from $41.77 to $84.20
  43. 43. 4343 *** Important things to know:*** Important things to know: The price of clean water for the highestThe price of clean water for the highest volume users will increase from $0.001volume users will increase from $0.001 per gallon to $0.0033 per gallonper gallon to $0.0033 per gallon Users can reduce their bills by practicingUsers can reduce their bills by practicing water conservationwater conservation The new rates will take effect on JanuaryThe new rates will take effect on January 11 The new rate structure may require futureThe new rate structure may require future adjustmentadjustment

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