Title
Receive a presentation from Public Works on the City’s water and wastewater rate study.
Body
REQUESTOR:
Public Works Department
BACKGROUND:
On May 23, 2024, the City entered into a professional services agreement with NewGen Strategies & Solutions to create a water and wastewater rate model. This is the financial side of maintaining a reliable and sustainable water and wastewater system for the City. The Public Works and Finance Departments have collaborated on this project with the consultant.
DISCUSSION:
A rate model is a financial analysis method that allows decision makers to explore a variety of rate scenarios when setting utility base and volumetric rates. The model illustrates operational and capital infrastructure improvements and funding requirements into future years, pairing those with rate levels that cover capital infrastructure projects through cash, tax-backed General Obligation bonds, or utility system revenue bond funding options.
The model is developed to ensure that utility operations and capital improvements are scheduled and funded in a financially sound manner by considering long-term system requirements, with customers charged fairly for utility services. The primary goal is to determine appropriate rate levels and rate structures that generate sufficient revenue to cover annual operating costs and scheduled capital projects.
The model projects future operating expenses and capital requirements needed to meet regulatory requirements, aging infrastructure, and anticipated growth. It defines rates to allow for the accumulation of sufficient cash reserves to cover unexpected costs, emergencies, and future capital needs. The model considers the cost of providing services to different customer classes (such as residential, commercial, or industrial) and allocates these costs fairly based on customer class usage patterns and demands on the system. This prevents one customer group from subsidizing another.
The model examines and recommends the most appropriate rate structure (e.g., fixed fees, variable charges based on consumption) to ensure that customers pay for the services they use in a way that is understandable, equitable, and aligns with the system's financial objectives. A well-conducted rate study provides a defensible basis for proposed rate increases and ensures the system is self-supporting. The model is flexible and will be used at least twice a year to ensure that changing operational requirements, capital expenditure timing, and emergencies remain within financial plans, budgets, and rate levels.
ATTACHMENTS:
1. Presentation