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HomeMy WebLinkAboutOrdinance 6681113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Ordinance: 6681 File Number: 2022-319 AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES: AN ORDINANCE TO AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES TO CHANGE WATER AND SEWER RATES AS RECOMMENDED BY THE COST OF SERVICE STUDY CONDUCTED BY BLACK & VEATCH WHEREAS, the City of Fayetteville's current water and sewer rates were adopted in 2008 based on a Cost of Service Study conducted by HDR Engineering; and WHEREAS, on August 18, 2020, the City Council approved Resolution 212-20 authorizing a contract with Black & Veatch for an updated Cost of Service Study; and WHEREAS, the Black & Veatch Cost of Service Study recommends initial changes in both water and sewer rates that reflect the true cost of service by customer class and a 3% annual increase in rates each year thereafter until a new study is conducted; and WHEREAS, the City Council has determined, after the public hearing required by Ark. Code Ann. § 14-235-223, that the proposed rate changes reflecting the true cost of service should be adopted and that the new rates shall take effect on January 1, 2024. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby repeals §51.136 Water Monthly Rates and §51.137 Monthly Sewer Rates and enacts replacement §51.136 Monthly Water Rates and §51.137 Monthly Sewer Rates as shown on the attached "City of Fayetteville Final Amended Rate Schedules - September 19, 2023." PASSED and APPROVED on September 19, 2023 Page 1 Ordinance: 6681 File Number: 2022-319 Approved: Attest: K "A •ems =�. YfI?F��C .z7� Kara Paxton, City Clerk Treasurer may. y fit; :cP• Q '''��° -O Nei O� %��. 191 OFFICE OF THE CITY ATTORNEY DEPARTMENTAL CORRESPONDENCE TO: Kara Paxton, City Clerk, Treasurer Kit Williams City Attorney Blake Pennington Assistant City Attorney CC: Mayor Jordan Jodi a etal r Paul Becker, Chief Financial Officer FROM: Kit Williams, City Attorney DATE: September 25, 2023 RE: Scrivener's Error The City Clerk's Office brought to my attention that Paul's handout to the City Council during the City Council Meeting of "City of Fayetteville Final Amended Rate Schedule - September 19, 2023" which the City Council amended to replace the previous Exhibit A and Exhibit B was not denoted "Exhibit A." It is certainly very clear that it replaced both of these exhibits because Exhibit A refers to "§ 51.136 Monthly Water Rates" and Exhibit B refers to "§ 51.137 Monthly Sewer Rates," while the "Final Amended Rate Schedules refer to both these monthly water and sewer rates," while the "Final Amended Rate Schedules" refer to both these monthly water and sewer rates. Therefore, sections 1 and 2 of the ordinance need to be combined into a single section to read as follows: "Section 1: That the City Council of the City of Fayetteville, Arkansas hereby repeals § 51.136 Water Monthly Rates and § 51.137 Monthly Sewer Rates and enacts replacement § 51.136 Monthly Water Rates and § 51.137 Monthly Sewer Rates as shown on the attached City of Fayetteville Final Amended Rate Schedule - September 19, 2023." I have attached the ordinance which conforms with the City Council's Motion which amended the Water and Sewer Rate Schedules from their previous separate exhibits to the one unified exhibit. Please modify the old ordinance to this current one. Please retain this memo within the ordinance's agenda packet for any needed reference in the future. City of Fayetteville, Arkansas 113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Legislation Text File #: 2022-319 AN ORDINANCE TO AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES TO CHANGE WATER AND SEWER RATES: AN ORDINANCE TO AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES TO CHANGE WATER AND SEWER RATES AS RECOMMENDED BY THE COST OF SERVICE STUDY CONDUCTED BY BLACK & VEATCH WHEREAS, the City of Fayetteville's current water and sewer rates were adopted in 2008 based on a Cost of Service Study conducted by HDR Engineering; and WHEREAS, on August 18, 2020, the City Council approved Resolution 212-20 authorizing a contract with Black & Veatch for an updated Cost of Service Study; and WHEREAS, the Black & Veatch Cost of Service Study recommends initial changes in both water and sewer rates that reflect the true cost of service by customer class and a 3% annual increase in rates each year thereafter until a new study is conducted; and WHEREAS, the City Council has determined, after the public hearing required by Ark. Code Ann. § 14-235-223, that the proposed rate changes reflecting the true cost of service should be adopted and that the new rates shall take effect on January 1, 2024. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby repeals §51.136 Monthly Water Rates and enacts a new §51.136 as shown in Exhibit A attached to this Ordinance. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby repeals §51.137 Monthly Sewer Rates and enacts a new §51.137 as shown in Exhibit B attached to this Ordinance. Page 1 Received By: Paul Becker 09/19/2023 11:07 A.M. Final Draft WATER AND WASTEWATER COMPREHENSIVE RATE STUDY B&V PROJECT NO. 406577 PREPARED FOR City of Fayetteville, Arkansas 18 SEPTEMBER 2023 0 BLACK&VEATCH City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table of Contents 1.0 Executive Summary.............................................................................................................1-0 1.1 Summary of Findings.......................................................................................................1-0 1.1.1 Revenue Under Existing Rates.........................................................................1-0 1.1.2 Revenue Requirements....................................................................................1-1 1.1.3 Summary of Cash Flow Results........................................................................1-2 1.1.4 Cost of Service Analysis....................................................................................1-2 1.2 Proposed Recommendations...........................................................................................1-3 1.3 Disclaimer........................................................................................................................1-3 2.0 Introduction.......................................................................................................................2-0 2.1 Purpose............................................................................................................................2-0 2.2 Scope................................................................................................................................2-0 2.3 Study Methodology.........................................................................................................2-1 2.3.1 Financial Plan....................................................................................................2-1 2.3.2 Cost of Service..................................................................................................2-1 2.3.3 Rate Design.......................................................................................................2-2 3.0 Rate Structure Overview.....................................................................................................3-0 3.1 Fixed Charge.....................................................................................................................3-0 3.2 Volumetric (Usage) Charge..............................................................................................3-0 3.3 Existing Rate Structure.....................................................................................................3-0 3.3.1 Water Rate Structure.......................................................................................3-0 3.3.2 Wastewater Rate Structure..............................................................................3-1 4.0 Water Utility.......................................................................................................................4-1 4.1 Water Revenue Projections Under Existing Rates...........................................................4-1 4.1.1 Water Revenue Under Existing Rates..............................................................4-1 4.1.2 Projection of Water Service Revenue Under Existing Rates ............................4-3 4.1.3 Other Water Revenues.....................................................................................4-3 4.2 Water Capital Improvements Program............................................................................4-4 4.3 Water Revenue Requirements........................................................................................4-4 4.3.1 Water Operation and Maintenance Expenses.................................................4-4 4.3.2 Water Bad Debt................................................................................................4-5 4.3.3 Water Payment In Lieu of Taxes......................................................................4-5 4.3.4 Safe Drinking Water Fee Reimbursement........................................................4-5 4.3.5 Water Debt Service Requirements...................................................................4-5 4.3.6 Transfer to Shop Fund......................................................................................4-6 4.3.7 Transfer to Operating Reserve.........................................................................4-6 4.3.8 Water Cash Financed Capital...........................................................................4-6 4.3.9 Transfer to Capital Reserve..............................................................................4-6 4.4 Water Proposed Revenue Adjustments...........................................................................4-6 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5 Water Cost of Service......................................................................................................4-8 4.5.1 Determination of Cost of Service.....................................................................4-8 4.5.2 Determination of Functional Costs..................................................................4-9 4.5.3 Allocation of Costs to the Functional Cost Components...............................4-10 4.5.4 Distribution of Water Utility Costs to Customer Classes...............................4-11 5.0 Water Rate Design............................................................................................................5-14 5.1 Existing Water Rates......................................................................................................5-14 5.2 Proposed Water Rates...................................................................................................5-14 6.0 Wastewater Utility..............................................................................................................6-1 6.1 Wastewater Revenue Projections Under Existing Rates.................................................6-1 6.1.1 Wastewater Revenue Under Existing Rates.....................................................6-1 6.1.2 Projection of Wastewater Service Revenue Under Existing Rates...................6-3 6.1.3 Other Wastewater Revenue.............................................................................6-3 6.2 Wastewater Capital Improvements Program..................................................................6-3 6.3 Wastewater Utility Revenue Requirements....................................................................6-4 6.3.1 Wastewater Operation and Maintenance Expenses.......................................6-4 6.3.2 Wastewater Bad Debt......................................................................................6-5 6.3.3 Wastewater Payment In Lieu of Taxes.............................................................6-5 6.3.4 Wastewater Debt Service Requirements.........................................................6-5 6.3.5 Transfer to Shop Fund......................................................................................6-5 6.3.6 Transfer to Operating Reserve.........................................................................6-5 6.3.7 Wastewater Cash Financed Capital..................................................................6-6 6.3.8 Transfer to Capital Reserve..............................................................................6-6 6.4 Wastewater Proposed Revenue Adjustments.................................................................6-6 6.5 Wastewater Cost of Service.............................................................................................6-7 6.5.1 Determination of Cost of Service.....................................................................6-8 6.5.2 Determination of Functional Costs..................................................................6-8 6.5.3 Allocation of Costs to the Functional Cost Components.................................6-9 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes ......................6-11 6.5.5 Wastewater Utility Customer Class Costs of Service.....................................6-12 7.0 Wastewater Rate Design...................................................................................................7-13 7.1 Existing Wastewater Rates............................................................................................7-13 7.2 Proposed Wastewater Rates.........................................................................................7-13 8.0 Combined Water and Wastewater Utilities........................................................................8-15 9.0 Disclaimer.........................................................................................................................9-16 10.0 Appendix 1: Water Tables.................................................................................................10-1 11.0 Appendix 2: Wastewater Tables........................................................................................11-1 12.0 Appendix 3: Combined Tables...........................................................................................12-1 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF EXECUTIVE SUMMARY TABLES Table ES - 1—Water 2023 Cost of Service..................................................................................................1-2 Table ES - 2 —Wastewater 2023 Cost of Service........................................................................................1-3 LIST OF FIGURES Figure 4-1 - Historical and Projected Water Accounts...............................................................................4-2 Figure 4-2 - Historical and Projected Water Billed Volume.......................................................................4-2 Figure 4-3 - Historical and Projected Water Service Revenue...................................................................4-3 Figure 4-4 - Projected Annual Water O&M Expenses................................................................................4-5 Figure 4-5 - Water Revenues and Revenue Requirements........................................................................4-7 Figure 6-1- Historical and Projected Wastewater Accounts.....................................................................6-2 Figure 6-2 - Historical and Projected Wastewater Billed Volume.............................................................6-2 Figure 6-3 - Historical and Projected Wastewater Service Revenue.........................................................6-3 Figure 6-4 - Projected Annual Wastewater O&M Expense........................................................................ 6-5 Figure 6-5 - Wastewater Revenues and Revenue Requirements..............................................................6-7 Figure 8-1 - Water and Wastewater Revenues and Revenue Requirements ..........................................8-15 LIST OF WATER TABLES Table W - 1 - Water Projected Number of Accounts...............................................................................10-1 Table W - 2 - Water Projected Billed Volume (1,000 Gallons).................................................................10-2 Table W - 3 - Water Existing Rates...........................................................................................................10-3 Table W - 4 - Water Projected Revenues Under Existing Rates...............................................................10-4 Table W - 5 - Water Projected Other Revenues.......................................................................................10-4 Table W - 6 - Water Capital Improvement Program................................................................................10-5 Table W - 7 - Water Projected O&M Expenses........................................................................................10-5 Table W - 8 - Capital Program Financing..................................................................................................10-6 Table W - 9 - Water Operating Cash Flow................................................................................................10-7 Table W - 10 - Water Fund Balances........................................................................................................10-8 Table W - 11- Water 2023 Cost of Service..............................................................................................10-9 Table W - 12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components ........10-10 Table W - 13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components.................................................................................................................10-10 Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components ..................10-10 Table W - 15 - Water 2023 Estimated Units of Service..........................................................................10-11 Table W - 16 - Water 2023 Unit Cost of Service....................................................................................10-12 Table W - 17 - Water 2023 Cost of Service by Customer Class..............................................................10-13 Table W - 18 - Water Proposed 2024 Rates...........................................................................................10-14 Table W - 19 - Water 2023 Cost of Service Under Proposed Rates.......................................................10-15 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2024 Bill Impact...................................................................................................10-16 LIST OF WASTEWATER TABLES Table S - 1 - Wastewater Projected Accounts..........................................................................................11-1 Table S - 2 - Wastewater Projected Billed Volume (1,000 Gallons).........................................................11-2 Table S - 3 - Wastewater Existing Charges...............................................................................................11-3 Table S - 4 - Wastewater Projected Revenues at Existing Rates..............................................................11-4 Table S - 5 - Wastewater Projected Other Revenues...............................................................................11-4 Table S - 6 - Wastewater Capital Improvement Program........................................................................11-5 Table S - 7 - Wastewater Projected O&M Expenses................................................................................11-5 Table S - 8 - Wastewater Capital Program Financing...............................................................................11-6 Table S - 9 - Wastewater Operating Cash Flow........................................................................................11-7 Table S - 10 - Wastewater Projected Fund Balances...............................................................................11-8 Table S - 11 - Wastewater 2023 Cost of Service......................................................................................11-9 Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment....................................................11-10 Table S - 13 - Wastewater 2023 Allocation of Depreciation..................................................................11-11 Table S - 14 - Wastewater 2023 Allocation of O&M Expenses..............................................................11-12 Table S - 15 - Wastewater 2023 Units of Service...................................................................................11-13 Table S - 16 - Wastewater 2023 Unit Cost of Service............................................................................11-14 Table S - 17 - Wastewater 2023 Cost of Service by Customer Class........................................................11-1 Table S - 18 - Wastewater Proposed 2024 Charges.................................................................................11-2 Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates.................................................11-3 Table S - 20 - Wastewater 2024 Bill Impact.............................................................................................11-4 LIST OF COMBINED TABLES Table C - 1 - Combined Projected Fund Balances....................................................................................12-1 Table C - 2 - Combined Operating Cash Flow...........................................................................................12-2 Table C - 3 - Combined 2024 Bill Impact..................................................................................................12-3 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.0 Executive Summary The City of Fayetteville (City) provides water and wastewater services to retail and wholesale customers. The Water and Wastewater fund is an Enterprise Fund, which is funded by the operating and capital revenues from the users of the system. Due to multiple factors including increasing operating costs, significant capital investments to meet regulatory requirements, and the need for infrastructure rehabilitation and replacement, revenues under existing rates are not adequate to meet the annual revenue requirements. Therefore, to maintain financial sufficiency and to assure equitable cost recovery, the City engaged Black & Veatch Management Consulting, LLC (Black & Veatch) to perform a Water and Wastewater Comprehensive Rate Study (Study). The primary objectives of the Study are to develop a balanced financial plan, determine cost of service allocations for each customer class and design rates to recover costs from customer classes in reasonable accord with the allocated costs of service. The financial plan was developed for the six -year period of 2022 through 2027, also referred to as the study period or the forecast period. The city's fiscal year is a calendar year, starting on January 1 and ending on December 31. As a result of our evaluations and analyses, the following summary of findings and recommendations are offered for the City's consideration. 1.1 Summary of Findings 1.1.1 Revenue Under Existing Rates 1. The City provides retail water services to approximately 41,300 customers inside the City and about 7,400 customers outside the City. The number of retail water service customers inside the City is projected to increase to about 44,600 by 2027 and the number of outside City water customers is projected to increase to about 8,300. The City also provides treated water to four wholesale customers. Retail wastewater collection and treatment service is provided to approximately 36,600 customers inside the City and about 3,000 customers outside the City. The number of inside City wastewater service customers is projected to increase to about 39,700 by 2027 and the number of outside City wastewater service customers is projected to increase to about 3,200. 2. Treated water sales to inside City retail customers are projected to increase from approximately 3,454,000 kgals (1,000 gallons) in 2022 to approximately 3,664,400 kgals by 2027. Treated water sales to outside City retail customers are projected to increase from approximately 560,700 kgals in 2022 to approximately 629,300 kgals by 2027. Treated water sales to wholesale customers is projected to be approximately 224,200 kgals in 2022 and remain at that level through 2027. Billed wastewater volume from inside City retail customers is projected to increase from approximately 3,013,300 kgals in 2022 to approximately 3,190,000 kgals by 2027. Billed wastewater volume from outside City retail customers is projected to increase from 133,300 kgals in 2022 to about 114,200 kgals by 2027. Billed wastewater volume from wholesale customers is projected to remain at the 2022 level of 195,700 kgals through 2027. The City's current water rates became effective January 1, 2022. For both retail and wholesale customers, the water rates include a monthly base charge, which varies by meter size and a volume charge that varies by customer class. The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, the wastewater rates include BLACK & VEATCH I Executive Summary ES-1-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study a monthly base charge, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). The existing wastewater rate structure is described in Section 3.3.2. 4. Revenue is currently derived principally from charges for treated water and wastewater service, with some revenue also obtained fire protection charges and other miscellaneous sources. Revenue from treated water sales, under existing rates, is projected to increase from $23,380,300 in 2022 to about $25,129,700 in 2027, reflecting a 5-year cumulative increase of 7.3%. Miscellaneous water revenues are estimated to increase from $1,588,800 in 2022 to approximately $1,609,000 in 2027, reflecting a 5-year cumulative increase of 1.3%. Revenue for wastewater collection and treatment services is projected to increase from $26,571,400 in 2022 to about $28,119,400in 2027, under existing rates, reflecting a 5-year cumulative increase of 5.7%. Miscellaneous wastewater revenue is estimated at $1,420,200 per year from 2022 through 2027. 1.1.2 Revenue Requirements 1. Costs of service to be recovered from water and wastewater service charges include (1) operation and maintenance (O&M) expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) Safe Drinking Water Fee Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The water and wastewater utilities do not have any outstanding debt service; however, a future water debt issuance of $90,000,000 is projected in 2024. No transfers to the shop fund are planned over the study period. 2. The annual O&M expense includes the cost of labor, materials, power, chemicals, purchased water, contract services and other expenses associated with each utility's operation. In this study, FY 2021 is defined as the base budget year, based on which the O&M costs are projected for the forecast period. O&M expense for the water utility is projected to increase from $15,961,700 in 2021 to $20,686,900 by 2027 due to the combined effects of inflation and system growth. O&M expense for the wastewater utility is projected to increase from $15,662,800 in 2021 to $18,980,400 by 2027 due to the combined effects of inflation and system growth. Bad debt expense refers to outstanding balances from customers that are deemed uncollectible. The water and wastewater bad debt in 2019 was 0.5% of revenue. Bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for the water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027. Annual bad debt expense for the wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027. 4. The Payment In Lieu of Taxes (PILOT) are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires the water and wastewater funds to pay 4.25% of annual total gross sales revenues to the City. Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Annual PILOT amount for the wastewater utility is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. BLACK & VEATCH I Executive Summary ES-1-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5. The Safe Drinking Water Fee (SDWF) revenue collected for each metered customer is reimbursed to the state of Arkansas Department of Public Health. The SDWF reimbursement is projected to increase from $230,400 in 2022 to $250,600 in 2027. The SDWF is a pass -through fee and is treated as a "revenue reduction" by the City. 6. The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve for the water utility is projected to increase from $133,100 in 2022 to $256,600 in 2027. The transfer to operating reserve for wastewater is projected to increase from $129,500 in 2022 to $152,700 in 2027. 7. The City currently utilizes the following two sources of funding for the water and wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. A capital project meets the requirements of using impact fees if the existing water or wastewater capacity is expanded due to growth. The water capital improvement for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, and $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. The wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. 1.1.3 Summary of Cash Flow Results The cash flow analysis performed based on the projected annual revenues under existing rates and the projected annual revenue requirements indicates a funding gap for both utilities beginning in 2024. 2. A series of 6% annual revenue adjustment is needed in the water utility and a series of 3% annual revenue adjustment is needed in the wastewater utility, starting in 2024, to achieve the goal of the operating fund revenues being self-sufficient and adequate to cover all of the O&M expenses, cash financing of the capital program, required transfers, and to maintain the minimum reserve requirements. Table W - 9, in Appendix 1 presents the cash flow analysis and the proposed series of revenue increases for the water utility, and Table S - 9, in Appendix 2 presents the same for the wastewater utility. 1.1.4 Cost of Service Analysis 1. The revenue requirements less any revenues from other sources provides the "net" annual operating fund revenue requirements (also referred to as "cost of service") that needs to be recovered through user rates and charges. A summary of the projected annual cost of service for 2023 is shown for water and wastewater in tables ES-1 and ES-2, respectively. Table ES - 1—Water 2023 Cost of Service O&M Expenses 17,946,400 17,946,400 Depreciation 2,886,700 2,886,700 3 Return 2,926,500 2,926,500 4 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Executive Summary ES-1-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table ES - 2 —Wastewater 2023 Cost of Service O&M Expenses Depreciation 17,377,400 8,187,000 17,377,400 8,187,000 3 Return 1,195,100 1,195,100 4 Net Cost of Service 17,377,400 9,382,100 26,759,500 2. As a basis for design of a schedule of water and wastewater rates, the costs of service are allocated to the classes of customers in accordance with respective service requirements of each customer class. The resulting costs of service allocated to customer classes are summarized in Table W - 17 for water and Table S -17 for wastewater. 1.2 Proposed Recommendations Based on the financial planning and cost of service analysis performed for the study period, the Black & Veatch team proffers the following series of recommendations: 1. Implement new water and wastewater rate schedules in 2024 that are based on 2023 cost of service and reflect a 6% revenue increase in water and a 3% revenue increase in sewer. 2. Implement a series of 6% annual revenue increase from 2025 to 2027 for the water utility and a series of 3% annual revenue increases from 2025 to 2027 for the wastewater utility. 3. Transition the existing monthly Base charge to the proposed Base Charge, derived based on cost of service when the cost of service based proposed Base Charge is greater than the existing Base charge. 4. Eliminate the minimum volume charge billing of 1,000 gallons from the volumetric portion of the rate structure. 5. Continue with the existing tier block structure for customer classes that have an inclining block (residential) or a uniform block (industrial) for the volumetric rate structure. 6. Change to uniform block for customers that currently have a declining block (non-residential and irrigation) volumetric rate structure. These recommendations enable the water and wastewater utilities to meet all its financial obligations, so that the City can continue to provide reliable service to serve the needs of existing and future customers. 1.3 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, BLACK & VEATCH I Executive Summary ES-1-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Executive Summary ES-1-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.0 Introduction The City of Fayetteville water utility provides treated water and water distribution services to approximately 41,300 customers within the corporate limits of Fayetteville, and to approximately 7,400 customers in areas contiguous to, but outside of the City's corporate limits. The wastewater utility provides retail wastewater collection and treatment service to approximately 36,600 customers within the corporate city limits and to approximately 3,000 customers outside of the City's corporate limits. The City also provides treated water to four wholesale customers and wastewater treatment to two wholesale customers. In providing water and wastewater service, the City incurs considerable expense related to the ongoing operating and capital needs of the utilities. These operating and capital expenditures tend to increase annually due to the combined effects of inflation and the need to repair, replace, or extend existing service facilities to meet customer service requirements, as well as to meet more stringent state and federal water quality requirements and EPA requirements. The City of Fayetteville, recognizing the importance of financial planning and cost of service analysis to equitably recover the increasing costs to replace, renew, expand, improve, and operate its water and wastewater service facilities, retained Black & Veatch to perform this comprehensive study of revenue requirements, cost of service, and rates for potable water service and wastewater service. 2.1 Purpose This report examines the respective projected revenue and rate requirements of the water and wastewater systems of the City. The purpose of this report is (1) to project the future revenues of the water and wastewater utilities under existing rates and charges, as well as the operating expenses and capital financing revenue requirements of the two utilities, and to examine the adequacy of projected revenues to meet these revenue requirements through calendar year 2027; (2) to allocate these revenue requirements, or costs of service, for a representative test year to the various customer classes in accordance with the respective service requirements that each class places on the systems; and (3) to develop a suitable schedule of water and wastewater rates that will produce revenues adequate to meet the financial needs of the utility on a basis that recognizes customer costs of service, existing wholesale service agreements and practical bill impact considerations. 2.2 Scope This report presents the results of a comprehensive study of the projected revenue and revenue requirements, costs of service allocations, and proposed rates for treated water and wastewater service. Revenue and revenue requirements are projected for the six calendar years from 2022 through 2027, recognizing anticipated growth in number of customers, water use, and wastewater flows throughout the service area. The study of revenue requirements recognizes projected operation and maintenance expense, capital improvement requirements met from revenues, principal and interest payments on outstanding and proposed bond issues, and reserve fund requirements. Requirements of existing revenue bond indentures are also recognized. Costs of treated water and wastewater service are developed for each group of customers and type of service based on consideration of utility revenue needs and projected customer service requirements. Rate adjustments are designed for retail and wholesale customers in accordance with allocated costs of service, wholesale service agreement terms, and customer bill impact considerations. BLACK & VEATCH I Introduction 2-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.3 Study Methodology The development of user rates and charges requires the integration of three critical components: (i) financial plan; (ii) cost of service allocations; and (iii) rate design. 2.3.1 Financial Plan The development and update of a financial plan is necessary to continue to focus on financial discipline, build financial stability, and maintain sustainable financial planning Financial Planning practices. The financial planning process helps to establish a financial roadmap to meet all of the water and wastewater utility's obligations. As illustrated in Figure 2 - 1, the key components of a financial plan are: (i) projection of revenues from user rates and other sources; (ii) development of a capital financing plan to decide the mix of debt and cash funding of capital program; (iii) projection of revenue requirements (O&M and capital costs, and target reserves); and (iv) determination of the level and timing of revenue adjustments needed to maintain financial viability. The annual revenue requirements are typically developed on a cash - needs basis for public utility rate setting. The revenue requirements, under the cash -needs basis approach, include the following: Project Revenues Review ro-Forma FP Project Revenue Requirements Scenario Planning Develop Capital % Rev ancing Plan Adjustments Figure 2 -1: Financial Plan O&M expenditures; Debt service expenses; Cash financing of capital program; Contributions to operating reserves; and Other obligations such as payments and transfers for specific purposes. To establish financial stability, a financial plan is typically prepared for a multi -year period. A six -year financial plan was developed for the water and wastewater utility to achieve the financial objectives and target metrics defined to build and sustain financial integrity. 2022 through 2027 is the forecast period for both revenues and revenue requirement projections. The revenue adjustments represent the level of annual revenue increases necessary to meet the annual net revenue requirements. 2.3.2 Cost of Service Cost of service can be described as the revenue that the water and wastewater utility need to generate, net of funding from other miscellaneous sources of revenues. Therefore, Cost of Service is essentially the "net revenue requirement" that is to be recovered through user rates and charges. As illustrated in Figure 2 - 2, Cost of Cost of Service Analysis Allocate Costs Develop Units Unit Costs of Service Distribute Allocated Costs Based on Service Requirements Figure 2 - 2: Cost of Service service analysis enables an equitable apportioning of the net annual revenue requirements (also referred to as cost of service) to the various cost components and customer BLACK & VEATCH I Introduction 2-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study classes. The level and types of allocation performed depend on the existing and anticipated rate structure. As municipal utilities are public utilities that cannot make a profit, the equitable allocation of costs is a critical step that is necessary to establish a reasonable nexus between costs incurred in providing service and the fees charged from customers, and to establish defensible user rates and charges. 2.3.3 Rate Design The third and final component is an evaluation of the existing rate structure components and the development of proposed user rates and charges. The user rates and charge schedules typically include fixed charge, volumetric charge, and other special charge rate components. As illustrated in Figure 2 - 3, the rates and charges are designed to recover the annual cost of service allocated to these different rate components and based on local policy and practical considerations. The study methodology described above and used in the financial planning, cost of service and rate design analysis reflect the application of industry accepted rate setting approaches that are provided in the following two guidance manuals: American Water Works Association (AWWA) Manual M-1: Principles of Water Rates, Fees, and Charges for water rate setting; and Rate Design Review Develop COS Rates Scenario 1 Planning Develop Practical Rates Proposed Rates ---------------------------------- Figure 2 - 3: Rate Design Water Environment Foundation (WEF) Financing and Charges for Wastewater Systems for wastewater. BLACK & VEATCH I Introduction 2-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 3.0 Rate Structure Overview The revenue requirements of a water and wastewater utility, net of any miscellaneous sources of revenues, are recovered from user rates and charges. A water rate structure usually consists of two primary components, namely, a fixed charge and a volumetric charge. Similarly, a wastewater rate structure more commonly consists of a fixed charge, a volumetric charge, and pollutant charge (for wastewater pollutants such as Bio-chemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). Occasionally, a utility's water and wastewater rate structures may include special surcharges and/or special assessments to recover costs associated with certain service situations such as purchased water, pumping to elevations, drought conditions, readiness -to -serve, environmental conditions, and extra - strength wastewater discharges. 3.1 Fixed Charge A utility's annual revenue requirements comprise mostly of fixed costs such as salaries and benefits, pension obligations, debt service, cash financing for infrastructure renewal, and costs related to the provision of adequate capacity for service. These types of fixed costs occur on a recurring basis regardless of the amount of water used by the customer. Therefore, rate structures need to afford the ability to recover at least some of the fixed costs based on billing parameters that are not related to water usage or wastewater flow. The fixed charge, which is assessed regardless of the volume of water used, provides a mechanism to reliably recover some of the fixed annual operating costs of the utility, and provide for some level of revenue stability. In the utility industry, fixed charges are designed to recover one or more of the following types of costs, namely, (i) metering; (ii) billing; (iii) readiness -to -serve cost; (iv) specific capital investment; and (v) other specific costs. The costs of providing these functions vary among types of customers and/or by factors such as size and capacity of the meters. Therefore, to provide for equitable cost recovery, water and wastewater fixed charges are usually assessed based on meter size and also by customer class. 3.2 Volumetric (Usage) Charge In the utility industry, usage charges are designed to recover all other costs (except those that are recovered through fixed charge) associated with the treatment and delivery of water service and the collection, treatment, and disposal of wastewater. The three common types of volumetric charge are: (i) inclining block rate, where the usage in the next higher usage block is priced at a higher rate per unit; (ii) uniform block rate, where all units of usage are priced at the same unit rate; and (iii) declining block rate, where the usage in the next higher usage block is priced at a lower rate per unit. As usage patterns vary among customer classes and consequently different classes place different levels of service demands, different volumetric rates can be established for the various customer classes. In designing the volumetric rate structure, practical considerations including conservation, equity, affordability, and ease of administration are addressed. 3.3 Existing Rate Structure 3.3.1 Water Rate Structure Consistent with industry rate structures, the City's water rate structure comprises of both Fixed Charge and Volumetric Charge components. The water rate structure includes the following two components: BLACK & VEATCH I Rate Structure Overview 3-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Base Charge (Fixed Charge); and Volume Charge (Volumetric Charge). Some of these components are applicable to only specific customer classes. The revenues derived from the above charges are collectively referred to as water Service ttevenues. ■ Base Charge The existing Base Charge for all customer classes is based on meter size. ■ Volume Charge. The existing Volume Charge is based on the quantity of water used by the customers. ■ Safe Drinkine Water Fee: This is a regulatory charge per bill that is collected by the City on behalf of the state of Arkansas Department of Public Health. The customer classes to which the specific charge components apply is illustrated in Figure 3 -1. The existing water rate schedule for 2022, for these rate components, is presented in Table W - 3 in Appendix 1. All customers are billed monthly. Figure 3 - 1: Existing Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) Minimum Usage (1,000 Gallons) Volume Rate (2-Tier Declining Block) Minimum Usage (1,000 Gallons) Volume Rate (Uniform) Minimum Usage (1,000 Gallons) Volume Rate ( Uniform) 2 rates (Reduced Peak Demand and Peak Demand) Safe Drinking Water Fee (per month) 3.3.2 Wastewater Rate Structure Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential Retail Inside City Non -Residential, Irrigation; and Retail Outside City Non -Residential, Irrigation Retail Inside City Major Industrial Retail Outside City Major Industrial Wholesale • All customer classes The City's Operating Fund wastewater rate structure also comprises of both Fixed Charge and Volumetric Charge components. The wastewater rate structure includes the following three components: Base Charge (Fixed Charge); BLACK & VEATCH I Rate Structure Overview 3-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Volume Charge (Volumetric Charge); and BOD and TSS Charge (Surcharge). The revenues derived from all these three sources are collectively referred to as "Wastewater Service Kevenues. Some of these user rate components are applicable to only specific customer classes. ■ Base Charge: The existing Base Charge for all retail customers is based on meter size. ■ Volume Charge: The existing volume wastewater charge is based on the quantity of water used by the customer classes. Surcharge: The existing wastewater surcharge is based on the excess strengths of BOD and TSS, of certain customers. The customer classes to which the specific rate components are applicable is illustrated in Figure 3 - 2. The existing wastewater rate schedule for 2022 is presented in Table S - 3 in Appendix 2. Figure 3 - 2: Existing Wastewater Rate Structure • Base Charge by Meter Size • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); • Volume Rate (2-Tier Inclining Block) Retail Inside City Residential Based on winter water usage of December, January and February Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale 2 tiered rates (85% of metered water usage and Above 85% of metered water usage) BLACK & VEATCH I Rate Structure Overview 3-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.0 Water Utility The financial plan and rate design were developed to meet all the funding obligations of the water utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The water utility financial plan was developed for the six -year forecast period of 2022 through 2027, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 4.1 Water Revenue Projections Under Existing Rates The water utility revenues are derived from the following sources: Water Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Water Service Revenues under the 2022 existing rates are projected for the forecast period. 4.1.1 Water Revenue Under Existing Rates As described in Section 3.3.1, the Water Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual water usage by customer class and by applicable blocks of usage. 4.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and average usage trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and usage factor. The number of accounts is projected to grow in all customer classes except for Fire protection and wholesale where the number of accounts is anticipated to remain at the 2022 level. The total number of water accounts (not including private fire connections) is anticipated to increase from about 48,000 in 2022 to about 52,200 in 2027, at an overall annual system growth rate of 1.7%. The number of private fire connections is anticipated to remain at 727 throughout the study period. Table W - 1 in Appendix 1 presents the projected annual number of water accounts and private fire connections for the period of 2022 through 2027. BLACK & VEATCH I Water Utility 4-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 4-1 presents both the historical and projected number of accounts for the water utility. Water Utility Historical and Projected Accounts 60,000 50,000 40,000 30,000 20,000 10,000 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-1 - Historical and Projected Water Accounts 4.1.1.2 Projection of Water Usage Billed water volumes are projected based on estimates of the number of water accounts and the average billed usage per account. Average water use per account is determined based on historical usage. Customer water usage projections are based on 2022 actuals. Total system water usage is projected to increase from 4,238,900 kgals in 2022 to 4,517,900 kgals in 2027. Table W - 2 in Appendix 1 presents the projected annual volume for the period of 2022 through 2027. Figure 4-2 presents both the historical and projected annual billed volume for the water utility. Water Utility Historical and Projected Billed Volume (1,000 5,000,000 Gallons) 4,000,000 3,000,000 2,000,000 1,000,000 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-2 - Historical and Projected Water Billed Volume BLACK & VEATCH I Water Utility 4-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.1.2 Projection of Water Service Revenue Under Existing Rates Water service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected water usage for each customer class, and the application of the 2022 rate schedule. Water service revenue under existing rates is projected to increase slightly from $23.4 million in 2022 to $25.1 million in 2027. This growth is due to increase in water sales due to the growth in the number of accounts over the study period. Table W - 4 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. Figure 4-3 presents both the historical and projected annual service revenues under existing rates for the water utility. Water Utility Historical and Projected Water Service Revenues (Under Existing Rates) $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-3 - Historical and Projected Water Service Revenue 4.1.3 Other Water Revenues The other revenues include the following major components: Impact Fee Revenue; Water/Rural Water Connection Fees; Miscellaneous Fees (Water Sales Not on Computer, Trip Fees, Tampering -Billed Service); Penalties; and Safe Drinking Water Fee (pass -through) The annual revenues from water impact fees, water connection fees, miscellaneous fees, and penalties for 2022 to 2027 are projected based on historical three-year average revenues for each of the fees. Table W - 5 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. The Safe Drinking Water Fee (SDWF) is assessed for all water users in the state of Arkansas. The current rate is $0.40 per bill per month and is collected by all water utilities in the state. The SDWF revenue is BLACK & VEATCH I Water Utility 4-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study projected by applying the current rate to the number of meters for the period 2022 to 2027. The revenue collected as part of this fee is reimbursed to the state. 4.2 Water Capital Improvements Program The capital project costs provided by the City were based on 2023 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects. The water utility Capital Improvement Plan (CIP) provides for a total of $134.6 million of investments during the study period of 2022 through 2027. Table W - 6 in Appendix 1 presents the CIP list of projects and schedule for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. Included in the 2022 — 2027 Water capital program is $93.5 million for the West Water Transmission Line. This project consists of approximately 11.3 miles of 48" diameter pipeline to convey treated water from Beaver Water District to the City. This project is to be funded from a mix of bond financing and revenue from water rates. 4.3 Water Revenue Requirements Projection of reliable revenue requirements includes: (1) operation and maintenance expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) SDWF Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 4.3.1 Water Operation and Maintenance Expenses The O&M expenses for the water utility include the annual expenses associated with the water purchases from Beaver Water District; storage and distribution; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a water inspector (not included in the budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Purchased Water: 3.00% BLACK & VEATCH I Water Utility 4-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The annual O&M expenses for water utility are budgeted at $16.5 million in 2022 and are projected to grow to $20.7 million by 2027. Table W - 7 in Appendix 1 presents a summary of total projected operation and maintenance expense for the period 2022 through 2027. Figure 4-4 presents the historical and projected O&M expenses for the water utility. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Water Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Proiected Figure 4-4 - Projected Annual Water O&M Expenses 4.3.2 Water Bad Debt Bad debt expense refers to outstanding balances owed that are deemed uncollectible. The water bad debt in 2019 was 0.5% of revenue. Hence, bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table W - 9 in Appendix 1 presents the projected bad debt for the period 2022 through 2027. 4.3.3 Water Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the water utility is calculated by multiplying actual water revenues from prior year (Water sales on Computer and Water sales not on Computer/ Bulk Water Sales, and Fire Hydrant and Protection). Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Line 12 in Table W - 9 in Appendix 1 presents the projected PILOT expenses for the period 2022 through 2027. 4.3.4 Safe Drinking Water Fee Reimbursement The SDWF revenue collected for each metered customer is reimbursed to the state of Arkansas department of Public Health. The SDWF reimbursement is projected to increase from $230,400 in 2022 to $250,600 in 2027. Line 13 in Table W - 9 in Appendix 1 presents the projected SDWF reimbursement for the period 2022 through 2027. 4.3.5 Water Debt Service Requirements The water utility currently does not have any outstanding debt service obligations; however, it does anticipate a $90 million debt issuance in 2024 for the West Water Transmission Line. Projected debt BLACK & VEATCH I Water Utility 4-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study service is $3.2 million in 2024 and increasing to $ 6.3 million in 2025 as shown in Line 14 in Table W - 9 in Appendix 1. 4.3.6 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 16 in Table W - 9 in Appendix 1. 4.3.7 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $133,100 in 2022 to $256,600 in 2027 reflecting the growth in the O&M budget. Line 17 in Table W - 9 in Appendix 1 presents the projected transfers to the operating reserve for the period 2022 through 2027. 4.3.8 Water Cash Financed Capital The City currently utilizes the following two sources of funding for the water utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 4.2, the water capital improvement program for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. A capital project meets the requirements of using impact fees if the existing water capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table W - 8 in Appendix 1 presents the sources of funding for the water capital improvement program. Line 18 in Table W - 9 in Appendix 1 presents the projected transfers for cash financed capital for the period 2022 through 2027. 4.3.9 Transfer to Capital Reserve The water utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 19 in Table W - 9 in Appendix 1 presents the projected transfers to and from the capital reserve for the period 2022 through 2027. 4.4 Water Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table W - 9 in Appendix 1, provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates water utility revenues will increase from $23.8 million in 2022 to $25.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues are anticipated to increase from $645,600 in 2022 to $684,100 in 2027. This increase is due to the growth in SDWF, which is pass - through. It is anticipated that all other categories of other revenues will remain flat throughout the study period. BLACK & VEATCH I Water Utility 4-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Projected Expenses: Line 15 indicates the total annual expenses for the water utility are anticipated to increase from $17.8 million in 2022 to $28.7 million in 2027. Projected Transfers: Line 20 indicates the total annual transfers for the water utility are anticipated to decrease from $6.2 million in 2022 to $3.5 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the water utility, a series of revenue adjustments are proposed as follows: 2024: 6% effective (January 1, 2024) 2025: 6% effective (January 1, 2025) 2026: 6% effective (January 1, 2026) 2027: 6% effective (January 1, 2027) Lines 2 through 7 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 4-5 presents the projected revenue and revenue requirements through 2027 for the water utility. Water Utility Revenues and Revenue Requirements $50,000,000 $40,000,000 $30,000,000 IIIIIIII� � $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Debt Service Cash Financing of Capital Other Transfers — Revenues Under Existing Rates Revenues Under Proposed Rates Figure 4-5 - Water Revenues and Revenue Requirements Table W - 10 in Appendix 1 presents the water utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: BLACK & VEATCH I Water Utility 4-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table W -10, the proposed annual revenue adjustments will allow the water utility to meeting the minimum fund balance requirements for the O&M Reserve, Operating and Capital funds through 2027. The water utility Capital Reserve fund balance is negative beginning 2025, however, the combined water and wastewater utility Capital Reserve fund is positive through 2027. 4.5 Water Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 4.1 through 4.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The cost of service analysis provides a mechanism to defensibly allocate the total annual revenue requirements to the various customer classes. The cost of service is typically performed for a single year, referred to as the "Test Year" for which the rates are to be designed. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Water Utility Costs to Customer Classes 4.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table W -11 in Appendix 1 presents the derivation of the cost of service to be recovered through water charges. As Line 18 in Table W -11 indicates, the water cost of service for 2023 is projected to be $23.8 million. This cost of service consists of $17.9 million of net O&M expense and $5.8 million of net capital costs. Costs of service is apportioned among customer classes in this study on a "Utility Basis", that is, in terms of operating expense, depreciation expense, and return. For a municipal utility, the total of depreciation expense and return is equal to the capital cost related portion of the total cost of service. Depreciation is the loss in value of the original plant investment, not restored by current maintenance, due to wear, decay, inadequacy, and obsolescence. Annual depreciation is determined as a percentage of original investment based on expected service lives of the various facilities. Unless funds are provided for normal annual replacement of original plant items, operating reliability of the system, as well as the BLACK & VEATCH I Water Utility 4-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study value, will decrease. Depreciation funds are used to finance principal payments on bond issues and provide normal annual capital expenditures. The depreciation expense associated with the water utility is estimated in this study recognizing depreciation rates presently in use by the water utility. This results in a projected test year depreciation expense of $2.9 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return on the system investment provides funds for bond interest payments and any other costs that may be incurred. In developing the level of return on net plant serving the requirements of outside City customers, provisions for a reasonable margin should be made to meet interest on borrowed funds, and to recognize the business risk assumed by the City in providing reliable facilities to serve nonresident customers. Total return for the test year is projected to be $2,926,500 as shown on Line 17 of Table W - 11 in Appendix 1. 4.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a water system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes Functional Cost Centers Functional cost centers of a water utility represent the activities that contribute to the incurrence of O&M and capital costs. For a water utility, they often include source of water supply, pumping, treatment, storage, distribution, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 4.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W - 12 in Appendix 1. This plant investment data is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 4.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on the specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue BLACK & VEATCH I Water Utility 4-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study requirement) of $17.9 million, to the various functional cost centers, is presented in Table W -14 in Appendix 1. The various cost elements of water service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 4.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of Base Costs, Extra -Capacity Costs, and Customer Costs. Base costs are those which vary directly with the quantity of water used, as well as those costs associated with serving customers under average load conditions without the elements necessary to meet water use variations or peak demands. Base costs include purchased power and treatment chemicals, and other operating and capital costs of the water system associated with serving customers to the extent required for a constant, or average annual rate of use. Extra -Capacity costs represent those operating costs incurred due to demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demand. Customer Costs are defined as costs which tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collection and accounting costs, and maintenance and capital charges associated with meters and services. The delineation of costs of service into these principal categories provides the means of further allocating such costs to the various customer classes based on the respective base, extra capacity, and customer service requirements of each customer class. Wholesale customers generally do not use smaller water distribution mains as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 4.5.3.1 Water Utility Allocation to Cost Components The water utility is comprised of a variety of service facilities, each designed and operated to fulfill a given function. In order to provide adequate service to its customers at all times, the utility must be capable of not only providing the total amount of water used, but also supplying water at maximum rates of demand. Since all customers do not exert their maximum demand for water at the same time, capacities of water facilities are designed to meet the peak coincidental demands that all classes of customers, as a whole, place on the system. For every water service facility on the system, there is an underlying average demand, or uniform rate of usage exerted by the customers for which the base cost component applies. For those facilities designed solely to meet average day demand, costs are allocated 100% to the base cost component. Extra capacity requirements associated with coincidental demands in excess of average use are further related to maximum daily and maximum hourly demands. Analysis of historical system maximum day and maximum hour demands to average day demands results in appropriate ratios for the allocation of capital costs and operating expenses to base and extra BLACK & VEATCH I Water Utility 4-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study capacity cost components. A maximum day to average day ratio of 2.10 is used based on experienced demands in the water system. This indicates that approximately 47.6% of the capacity of facilities designed and operated to meet maximum day demand is required for average or base use. According, the remaining 52.4% is required for maximum day extra capacity requirements. The costs associated with facilities required to meet maximum hour demand are allocable to base, maximum day extra capacity, and maximum hour extra capacity. A ratio of maximum hour to annual average day water use of 2.73 is used, based on demands experienced by the system. This ratio indicates that 36.6% of the capacity of facilities designed and operated for maximum hour demand is needed for average or base use, while 40.3% is utilized for maximum day extra capacity uses, and the remaining 23.1% is required to meet maximum hour extra capacity demand in excess of maximum day needs. 4.5.3.2 Allocation of Net Water Plant Investment The estimated test year net plant investment in water facilities consists of net plant in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. As the wholesale customers have their own storage tanks, the plant investment associated with tanks was allocated to the retail customers only. The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W - 12 in Appendix 1. Plant investment is allocated to cost components on a design basis recognizing the principal function governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. 4.5.3.3 Allocation of Water Facilities Depreciation Expense Depreciation is a real part of the cost of operating a utility. In utility accounting, it is generally accepted practice to use depreciation funds to finance system replacements, improvements, and extensions. While such action does not restore the value lost in each property unit every year, the total value lost through depreciation is restored to the system as a whole. Depreciation funds can be reinvested in the system either by direct payment of routine capital additions and replacements or by principal payments on bonded debt. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the water system is $2.9 million, as presented on Line 9 in Table W - 13 in Appendix 1. As the wholesale customer have their own storage tanks, the depreciation costs associated with tanks was allocated to the retail customers only. 4.5.3.4 Allocation of Water Utility Operating Expenses Table W - 14 in Appendix 1 presents the allocation of O&M expense to functional cost components. Total test year O&M expense, as shown on Line 7 of this table, amounts to $17.9 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. 4.5.4 Distribution of Water Utility Costs to Customer Classes As a basis for determining the cost of water service to each customer class, the elements of cost of service previously allocated to functional cost components are distributed among the classes in proportion to their respective service requirements. Estimates of these requirements, or units of BLACK & VEATCH I Water Utility 4-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study service, reflect the average number of accounts with recognition to relative meter sizes serving each account, annual water sales, and estimated peak water demands placed on the system by each customer class. Analysis of resulting costs of service to each class and comparison of allocated costs with revenues under existing rates provide a basis for future water rate adjustments. 4.5.4.1 Water Customer Classification Customer classes consist of residential, non-residential, industrial, irrigation, wholesale, and public and private fire protection. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential, and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit classes. Industrial includes major and minor industrial. Outside City includes Farmington, Greenland, Washington/Growth Area, Johnson, and Goshen/ White River. Wholesale includes the communities of Elkins, West Fork, Mt. Olive, and RDA/WWA. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. 4.5.4.2 Water Units of Service The cost of service responsibility for base costs varies with the annual volume of water usage and is distributed to customer classes on that basis. Extra capacity costs are those costs associated with meeting peak rates of water use and are distributed to customer classes on the basis of their respective system capacity requirements in excess of average requirement rates. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of the number of equivalent meters and monthly bills. The estimated units of service for the various customer classifications are presented in Table W -15 in Appendix 1. Estimates of test year annual water volumes, shown in Column 1, are based on the projections of total water sales for the test year 2023. Average daily water use is presented in Column 2. Columns 3 through 8 present the estimated maximum day and maximum hour capacity factors for each customer class, the resulting demands, and extra capacity requirements, respectively. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 10) is estimated by relating typical costs for meters and services larger than 5/8 inch in size to the typical cost of a 3/4 inch meter and its related service line. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class in Column 11. Extra capacity requirements for fire protection service recognize, in part, peak fire flow requirements, and system capabilities established by the Insurance Service Office. One fire is estimated with peak fire flow requirements of 9,000 gallons per minute for 10 hours (maximum day) and 24 hours (maximum hour). Direct fire protection costs have been allocated between inside City and outside City customers in proportion to the number of equivalent 6-inch fire hydrants, as shown in Columns 12 and 13. 4.5.4.3 Water Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. BLACK & VEATCH I Water Utility 4-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The water utility has been built with provision for service to customers outside the City, yet the inside City customers must bear the responsibility for providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 7.0% (4.0% for future debt service plus 3.0% risk component) annual rate of return on the value of water facilities serving outside City customers is recognized for purposes of this study. Table W - 16 in Appendix 1 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 3 summarize the units of service developed in Table W - 15. Total allocated costs or investment shown on Lines 4, 6, and 8 were previously developed in Table W - 14, Table W - 13, and Table W - 12, respectively. Unit costs of service for each component are determined by dividing the allocated cost or investment by the total units of service. Total allocated unit costs of service for inside and outside City customers (Lines 15 and 16) are determined by adding the unit costs for net operating expense (Line 5) and depreciation expense (Line 7) to the respective inside and outside City unit costs for return on investment (Lines 10 and 11). These unit costs applied to the respective units of service shown on Lines 1 and 2 determine the allocated total costs of service for inside and outside City customers shown on Lines 17 and 18. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table W - 17 in Appendix 1 shows the resulting allocated and adjusted cost of service by customer class, revenue under existing rates, and the additional revenue required from each class. Costs associated with public fire protection are not recovered through direct charges, therefore, the cost of service for this class is reallocated to all other retail customers in proportion to their allocated cost of service as shown in Column 3. The test year adjusted cost of service, reflecting the reallocation of these costs, is shown in Column 4. The indicated increase or decrease in revenue required to meet adjusted cost of service is shown in Column 6. BLACK & VEATCH I Water Utility 4-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5.0 Water Rate Design The principal consideration in establishing water rate schedules is to establish rates to customers to recover costs that reasonably commensurate with the cost of providing water service. Theoretically, the only method of assessing entirely equitable rates for water service would be the determination of each customer's bill based upon each customer's particular service requirements. Since this is impractical, schedules of rates are normally designed to meet average conditions for groups of customers having similar service requirements. Rates should provide for equitable cost recovery, ease of customer understanding and be simple to administer. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting water rates. The revenue requirements reflect the need for adjustment and the level of revenue required. The cost of service analysis provides the unit costs of service used in the rate design process and gives a basis for determining whether resultant rates will develop revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 5.1 Existing Water Rates The existing schedule of rates for water service became effective on January 1, 2022. For both retail and wholesale customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. The existing water rate structure is described in Section 3.3.1. The existing schedule of base and volumetric water rates is shown in Table W - 3. 5.2 Proposed Water Rates The cost of service analysis described in the preceding sections of this report provides a basis for the design of a schedule of water rates to meet those costs. Proposed water base charge and volume rates have been designed to meet the 2024 allocated costs of service and are presented in Table W -18. The proposed rate structure eliminates the minimum volume charge associated with 1,000 gallons. Additionally, volumetric rate structure for non-residential and irrigation customers classes both inside and outside city were changed from declining block rates to uniform block rates Figure 5 - 1 below presents the proposed water rate structure. Figure 5 - 1 Proposed Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) • Volume Rate (Uniform) Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential • Retail Inside City Non -Residential, Major Industrial, Irrigation; and BLACK & VEATCH I Water Rate Design 5-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study • Retail Outside City Non -Residential, Irrigation Volume Rate ( Uniform) Wholesale Safe Drinking Water Fee (per month) All customer classes In developing proposed schedules of water rates, it must be recognized that the cost of service studies are the result of engineering estimates, based to some extent upon judgment and experience, and detailed results should not be used as literal and exact answers but as guides for potential rate adjustments. Practical considerations such as previous rate levels, bill impact on customers, and magnitude of cost of service shifts among customer classes, and past local practices are commonly recognized in making rate adjustments. A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is presented in Table W - 19 in Appendix 1. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical inside city and outside city customer water charges under existing rates and the rates proposed to become effective January 1, 2024, is presented in Table W - 20. BLACK & VEATCH I Water Rate Design 5-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.0 Wastewater Utility The financial plan and rate design were developed to meet all the funding obligations of the wastewater utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The wastewater utility financial plan was developed for the forecast period of 2022 through 2027, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 6.1 Wastewater Revenue Projections Under Existing Rates The wastewater utility revenues are derived from the following sources: Wastewater Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Wastewater Service Revenues under the 2022 existing rates are projected for the forecast period. 6.1.1 Wastewater Revenue Under Existing Rates As described in Section 3.3.2, the Wastewater Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual wastewater billed volumes by customer class and by applicable blocks of billable wastewater volume. 6.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and billed volume trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and volume factor. The number of accounts is projected to grow for residential customer classes Fayetteville (Inside City) and Farmington (Outside City), whereas all other customer classes are anticipated to remain at the 2022 level. The total number of wastewater accounts is anticipated to increase from about 39,603 in 2022 to about 42,900 in 2027, at an overall annual system growth rate of 1.6%. Table S - 1 in Appendix 2 presents the projected annual number of accounts for the period of 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 6-1 presents both the historical and projected number of accounts for the wastewater utility. Wastewater Utility Historical and Projected Accounts 44,000 43,000 42,000 41,000 00 40,000 dop 39,000 38,000 37,000 36,000 35,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-1 - Historical and Projected Wastewater Accounts 6.1.1.2 Projection of Wastewater Volume Billed wastewater volumes are projected based on estimates of the number of wastewater accounts and the average billed volume per account. Average billed volume per account is determined based on historical billed volume. Wastewater customer usage projections are based on 2022 actuals. Total system wastewater billed volume is projected to increase from 3,342,300 kgals in 2022 to 3,499,900 kgals in 2027. Table S - 2 in Appendix 2 presents the projected annual volume for the period of 2022 through 2027. Figure 6-2 presents both the historical and projected annual billed volume for the wastewater utility. Wastewater Utility Historical and Projected Billed Volume (1,000Gallons) 3,600,000 3,500,000 3,400,000 3,300,000 3,200,000 3,100,000 3,000,000 2,900,000 2,800,000 2,700,000 2,600,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-2 - Historical and Projected Wastewater Billed Volume BLACK & VEATCH I Wastewater Utility 6-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.1.2 Projection of Wastewater Service Revenue Under Existing Rates Wastewater service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected billed volume for each customer class, and the application of the 2022 rate schedule. Wastewater service revenue under existing rates is projected to increase slightly from $26.6 million in 2022 to $28.1 million in 2027. This growth is due to increase in wastewater sales due to the growth in the number of accounts over the study period. Table S - 4 in Appendix 2 presents the historical and projected annual service revenues for the period of 2022 through 2027. Figure 6-3 presents both the historical and projected annual service requirements under existing rates for the wastewater utility. Wastewater Utility Historical and Projected Wastewater Service Revenues (Under Existing Rates) $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-3 - Historical and Projected Wastewater Service Revenue 6.1.3 Other Wastewater Revenue The other revenues include the following major components: Impact Fee Revenue; Wastewater Connection Fees; Wastewater Sales Not on Computer; Penalties; and WWTP Fees (Hay Sales, Biosolids/ Fertilizer Sales & Water Treatment Residual) The annual miscellaneous revenues for 2022 to 2027 are projected based on historical three-year average revenues for each of the fees. Table S - 5 in Appendix 2 presents the projected annual other revenues for the period of 2022 through 2027. 6.2 Wastewater Capital Improvements Program The capital project costs provided by the City were based on 2023 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects. BLACK & VEATCH I Wastewater Utility 6-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The City's wastewater utility Capital Improvement Plan (CIP) provides for a total of $43.2 million of investments during the study period of 2022 through 2027. Major wastewater projects include sanitary wastewater rehabilitation totaling $20.5 million and Biosolids Dryer Replacement totaling $3.2 million. Table S - 6 in Appendix 2 presents the CIP list of projects for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. 6.3 Wastewater Utility Revenue Requirements Projection of reliable revenue requirements includes: (1) O&M expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) debt service (consisting of principal and interest payments); (5) transfer to shop fund; (6) transfer to operating reserve; (7) cash financed capital; and (8) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 6.3.1 Wastewater Operation and Maintenance Expenses The O&M expenses for the wastewater utility include the annual expenses associated with the wastewater conveyance, pumping, treatment and disposal; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a wastewater inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Wastewater Treatment Plant Contract: 3.00% The annual O&M expenses for wastewater utility are budgeted at $16.2 million in 2022 and are projected to grow to $19.0 million by 2027. Table S - 7 in Appendix 2 presents a summary of projected operation and maintenance expense for the period 2022 through 2027. Figure 6-4 presents the historical and projected O&M expenses for the wastewater utility. BLACK & VEATCH I Wastewater Utility 6-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study $20,000,000 $15,000,000 $10,000,000 $5,000,000 so Wastewater Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-4 - Projected Annual Wastewater O&M Expense 6.3.2 Wastewater Bad Debt Bad debt expense refers to outstanding balances owed that are deemed uncollectible. The wastewater bad debt in 2019 was 0.5% of revenue. Hence, the bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table S - 9 in Appendix 2 presents bad debt expense for the period 2022 through 2027. 6.3.3 Wastewater Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the wastewater utility is calculated by multiplying actual wastewater revenues from prior year (Wastewater sales on Computer and Wastewater sales not on Computer/ Dump Fees) and is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. Line 12 in in Appendix 2 presents PILOT expense for the period 2022 through 2027. 6.3.4 Wastewater Debt Service Requirements The wastewater utility does not have any outstanding debt service obligations. The City does not anticipate any debt issuances during the study period, therefore no projected debt service for future debt as shown in Line 18 in Table S - 9 in Appendix 2. 6.3.5 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 15 in Table S - 9 in Appendix 2 6.3.6 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $129,500 in 2022 to $152,700 in 2027 reflecting the growth in the O&M budget. Line 16 in Table S - 9 in Appendix 2 presents transfer to the operating reserve for the period 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.3.7 Wastewater Cash Financed Capital The City currently utilizes the following two sources of funding for the wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 6.2, the wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. A capital project meets the requirements of using impact fees if the existing wastewater capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table S - 8 in Appendix 2 presents the sources of funding for the wastewater capital improvement program. Line 22 in Table S - 9 in Appendix 2 presents transfer for cash financing of capital program for the period 2022 through 2027. 6.3.8 Transfer to Capital Reserve The wastewater utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 18 in Table S - 9 in Appendix 2 presents transfer to and from the capital reserve for the period 2022 through 2027. 6.4 Wastewater Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table S - 9 in Appendix 2 provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates wastewater utility revenues will increase from $26.6 million in 2022 to $28.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues and interest income are anticipated to increase from $726,000 in 2022 to $735,900 in 2027. It is anticipated that all categories of other revenues will remain flat throughout the study period. The slight growth is due to the increase in interest income on the operating reserve. Projected Expenses: Line 14 indicates the total annual expenses for the wastewater utility are anticipated to increase from $17.4 million in 2022 to $20.5 million in 2027. Projected Transfers: Line 19 indicates the total annual transfers for the wastewater utility are anticipated to increase from $9.9 million in 2022 to $11.8 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the wastewater utility, a series of revenue adjustments are proposed as follows: 2024: 3% effective (January 1, 2024) 2025: 3% effective (January 1, 2025) BLACK & VEATCH I Wastewater Utility 6-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2026: 3% effective (January 1, 2026) 2027: 3% effective (January 1, 2027) Lines 2 through 7 in Table S - 9 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 6-5 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Wastewater Utility Revenues and Revenue Requirements $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Cash Financing of Capital Other Transfers Revenues Under Existing Rates Revenues Under Proposed Rates Figure 6-5 - Wastewater Revenues and Revenue Requirements Table S - 10 in Appendix 2 presents the wastewater utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipate capital projects. As shown in Table S - 9, the proposed annual revenue adjustments will allow the water utility to meet the minimum fund balance requirements for all funds through 2027. 6.5 Wastewater Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 6.1 through 6.4 provides an estimate of the total annual revenue BLACK & VEATCH I Wastewater Utility 6-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study requirements for a given fiscal year. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Wastewater Utility Costs to Customer Classes 6.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table S - 11 in Appendix 2 presents the derivation of the cost of service to be recovered through the wastewater charges. As Line 18 in Table S - 11 indicated, wastewater cost of service for 2023 is projected to be $26.8 million. This cost of service consists of $17.4 million of net operation and maintenance expense and $9.4 million of net capital costs. As performed for the water utility, costs of services are apportioned among customer classes in this study on a Utility Basis. The depreciation expense and return on system investments that were already explained in Section 4.5.1 are applicable to the wastewater utility cost of service analysis as well. The depreciation expense associated with the wastewater utility is estimated in this study recognizing depreciation rates presently in use by the wastewater utility. This results in a projected test year depreciation expense of $8.2 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return for the test year is projected to be $ 1,195,100 as shown on Line 17 of Table S - 11. 6.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a wastewater system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes. Functional Cost Centers BLACK & VEATCH I Wastewater Utility 6-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Functional cost centers of a wastewater utility represent the activities that contribute to the incurrence of O&M and capital costs. For a wastewater utility, they often include source of collection, pumping, conveyance, treatment, disposal, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 6.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD value of the wastewater system is $196.8 million, as presented in Line 26 in Table S - 12 in Appendix 2. This plant investment is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 6.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.4 million, to the various functional cost centers is presented in Table S -14 in Appendix 2. The various cost elements of wastewater service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 6.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of volume related costs, strength related costs, and customer related costs. Volume costs are those which vary directly with the quantity of wastewater contributed. They consist of capital costs related to investment in system facilities which are sized on the basis of, or required because of, wastewater volume. This also includes operation and maintenance expense related to those facilities, and the expense of volume related treatment chemicals and purchased power. Wastewater strength costs consist of the operation and maintenance expense and capital costs related to system facilities which are designed principally to treat the wastewater pollutant loadings of pollutants such as BOD, TSS, and other pollutants. BOD costs reflect costs associated with the treatment of influent BOD and include costs related to activated sludge aeration and disposal of BOD related sludge. Suspended solids strength costs are those costs of wastewater treatment which tend to vary according to the quantity of suspended solids in the raw wastewater. Customer costs are those which tend to vary in proportion to the number of customer bills or customers served. These include the wastewater utility share of customer related meter reading, billing, collection, and account expense. The delineation of costs of service into functional components provides a means of distributing such costs to the various customer classes based on the respective total wastewater volume, strength, and customer cost requirements of each. BLACK & VEATCH I Wastewater Utility 6-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Wholesale customers generally do not use lateral wastewater lines as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 6.5.3.1 Wastewater Utility Cost Allocation to Cost Components In establishing the costs associated with each functional cost component, the return portion of the test year cost of service is distributed to cost functions based on an allocation of the estimated test year value of wastewater system facilities. The test year depreciation expense associated with each major element of plant facilities is allocated to cost functions in the same manner as the plant value. Operating expense is similarly allocated to cost functions based on the projected test year expense estimated for each wastewater system component. 6.5.3.2 Allocation of Net Wastewater Plant Investment The estimated test year value of wastewater facilities consists of net plan in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. Table S - 12 in Appendix 2 presents the allocation of the wastewater utility's total estimated plant value less contributions on an original cost less depreciation value basis. Total plant investment is estimated to be $196.8 million as indicated by Line 26 of the Table S - 12. Plant investment is allocated to cost components on a design basis recognizing the principal purpose governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. The Owl Creek Lift Station and Force Main serve only the City of Fayetteville, hence the plant investment associated with Owl Creek is allocated directly to the City of Fayetteville customers. Additionally, the outside City customers maintain their own wastewater connections, hence, the plant investment associated with wastewater connections is allocated 100% to the City of Fayetteville customers. Wastewater collection net plant is allocated 41% to both retail and wholesale (common to all) and 59% to retail only based on the ratio of interceptors (large diameter mains) which is 41% of the collection system. 6.5.3.3 Allocation of Wastewater Facilities Depreciation Expense As explained in Section 4.5.3.3, depreciation expense is a real part of the cost of operating a utility. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the wastewater system is $8.2 million as presented on Line 26 in Table S - 13 in Appendix 2. The items of expense are allocated to cost components on the same design or cost causative basis used to allocate plant investment. Hence, the depreciation expense associated with Owl Creek Lift Station and Force main and Wastewater connections is directly allocated to the City of Fayetteville customers. 6.5.3.4 Allocation of Wastewater Utility Operating Expenses Table S - 14 in Appendix 2 presents the allocation of operation and maintenance expense to functional cost components. Total test year operation and maintenance expense, as shown on Line 10 of this table, amounts to $17.4 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. BLACK & VEATCH I Wastewater Utility 6-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes The total cost responsibility of each customer class is determined by developing unit costs of service for each cost component and applying the unit costs to the respective service requirements of each class. In accomplishing this, each customer class is allocated the share of volume, strength, and customer costs for which it is responsible. 6.5.4.1 Wastewater Customer Classification Customer classes consist of residential, non-residential, industrial and wholesale. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit customers. Outside City includes Farmington, Greenland, Washington County/Growth Area and Johnson. Wholesale includes the community of Elkins and West Fork. 6.5.4.2 Wastewater Units of Service Derivation of the responsibility of customer classes for costs of service require that each class be allocated a portion of the volume, strength, and customer costs of service according to their respective service requirements. The cost of service responsibility for volume costs, which vary with the volume of wastewater contributed to the wastewater system, is distributed to customer classes on that basis. Strength costs are principally related to the function of reducing wastewater suspended solids, and BOD strength loading. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of equivalent meters and monthly bills. The estimated test year service requirements or units of service for the various customer classes are shown in Table S -15 in Appendix 2. Wastewater collected and treated consists of two elements: (1) sanitary wastewater flow and (2) infiltration/inflow (1/1) of ground water into the sewers. Contributed wastewater flow is that portion of the annual water use and/or other flows from each customer class that are discharged to the wastewater system. Estimates of the contributed volume of each class is generally based upon wastewater billing records. For residential customers, the billed wastewater volume is based on average water consumption for the preceding months of December, January and February. This methodology of using a winter quarter average for quantity of wastewater flows is used to exclude outdoor uses such as irrigation, which do not return water to the collection system. For all other customer classes, the billed wastewater volume is the same as the water volume. The difference between the measured plant influent and the customer contributed wastewater flow is attributed to Infiltration and Inflow (1/1) volume. Based on discussions with the City staff, 40% of the total treated volume is assumed to be 1/1 flows. Each customer class should bear its proportionate share of the costs associated with 1/I, as it is integral aspect of wastewater system costs. The number of customer connections to a wastewater collection system and the volume of customer flows conveyed both influence the extent of 1/1 in a system. Recognizing that the major cost responsibility for 1/1 is allocable on an individual connection basis, two-thirds of the total 1/1 volume projected is allocated to customer classes based on the number of customers with the remaining one-third allocated on the basis of contributed volume. Estimated total strength units shown for each customer class are based on an average BOD concentration of 365 milligrams per liter (mg/1) and an average suspended solids concentration of 285 mg/l. 1/1 strength allowances for BOD and suspended solids are assumed at 25 mg/I and 50 mg/I, BLACK & VEATCH I Wastewater Utility 6-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study respectively. Estimated BOD and suspended solids responsibilities of each customer class presented in Table S - 15 in Appendix 2 are based on the respective indicated average strength concentrations and contributed wastewater and 1/1 volumes for each class. The contributed flow from the wholesale customers (Elkins and West Fork) includes 1/1 and is transported directly from the metered pump station to the Noland Wastewater Treatment Plant. Therefore, system 1/1 is not allocated to these two wholesale customers. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class (Column 7) in Table S -15. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 8) is estimated by relating typical costs for meters and services larger than 3/4 inch in size to the typical cost of a 3/4 inch meter. 6.5.5 Wastewater Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. The wastewater utility has been built with the provision for service to customers outside the City, yet the inside City customers must bear the responsibility of providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 4.36% annual rate of return on the value of wastewater facilities serving outside City customers is recognized for purposes of this study. Table S - 16 in Appendix 2 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 6 summarize the units of service developed in Table S -15. Total allocated costs or investment shown on Lines 5, 7, and 9 were previously developed in Table S - 14, Table S - 13 and Table S -12, respectively. Total allocated unit costs of service for inside City and outside City customers (Line 18, Line 19, Line 20 and Line 21) are determined by adding the unit costs for net operating expense (Line 6) and depreciation expense (Line 8) to the respective inside and outside City unit costs for return on investment (Lines 11 and 12). These unit costs applied to the respective units of service shown on Lines 1,2 and 3 determine the allocated total costs of service for inside and outside City customers shown on Lines 18 through 21. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table S - 17 in Appendix 2 shows the resulting allocated cost of service by customer class, revenue under existing rates, and the indicated increase or decrease in revenue required to meet the allocated cost of service. BLACK & VEATCH I Wastewater Utility 6-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 7.0 Wastewater Rate Design The principal consideration in establishing wastewater rate schedules is to establish charges to recover costs that are reasonably commensurate with the cost of providing wastewater service. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting wastewater rates. The revenue requirements show the need for adjustment and the level of revenue required. This cost of service analysis provides the unit costs of service to be used in the rate design process and gives a basis for determining whether resultant rates will generate revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 7.1 Existing Wastewater Rates The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of BOD and TSS. The existing wastewater rate structure is described in Section 3.3.2. The existing schedule of base and volume rates for wastewater service is shown in Table S - 3 in Appendix 2. 7.2 Proposed Wastewater Rates The cost of service study described in preceding sections of this report provides a basis for the design of a schedule of wastewater rates to meet those costs. Proposed wastewater rates have been designed to meet the 2024 allocated costs of service and are presented in Table S - 18. The proposed rate structure presented in Figure 7 - 1 is similar to the existing structure. Figure 7 - 1 Proposed Wastewater Rate Structure • Base Charge by Meter Size Volume Rate (2-Tier Inclining Block) • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); Retail Inside City Residential Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale As already explained in Section 5.2, practical rate design should consider multiple factors including previous rate levels, customer bill impact, and magnitude of cost shifts among customer classes. BLACK & VEATCH I Wastewater Rate Design 7-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is shown in Table S - 19 in Appendix 2. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table S - 20. BLACK & VEATCH I Wastewater Rate Design 7-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 8.0 Combined Water and Wastewater Utilities Table C - 1 in Appendix 3 presents the combined operating reserve, capital reserve and impact fee fund balances. Table C - 2 in Appendix 3 provides a summary of the combined revenue and revenue requirements (financial plan) for the study period. The revenue under existing rates are not sufficient to meet the obligations of the two utilities. As discussed in Section 4 and Section 6, a series of annual 6% and 3% proposed revenue adjustments for water and wastewater respectively will enable the utilities to meet their operating, capital and reserve obligations. Figure 8-1 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Water and Wastewater Revenues and Revenue Requirements $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Debt Service Cash Financing of Capital Other Transfers • Revenues Under Existing Rates Revenues Under Proposed Rates Figure 8-1- Water and Wastewater Revenues and Revenue Requirements Table C - 2 in Appendix 3 presents the combined water and wastewater operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. Operating Fund Balance: A minimum target of $200,000. Capital Fund Balance: A minimum target of $1,000,000. Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table C - 2, the proposed annual revenue adjustments will allow the utilities on a combined basis to meet the minimum fund balance requirements for all funds through 2027. BLACK & VEATCH I Combined Water and Wastewater Utilities 8-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of combined water and wastewater typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table C - 3. 9.0 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Disclaimer 9-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 10.0 Appendix 1: Water Tables Table W - 1 - Water Projected Number of Accounts Inside City 1 Residential 35,800 36,400 37,000 37,700 38,300 39,000 2 Non -Residential 3,300 3,300 3,300 3,300 3,300 3,300 3 Industrial 21 21 21 21 21 21 4 Irrigation 1,500 1,500 1,600 1,600 1,600 1,600 5 Private Fire 713 713 713 713 713 713 6 Subtotal 41,334 41,934 42,634 43,334 43,934 44,634 Outside City 7 Residential 6,800 7,000 7,100 7,300 7,500 7,600 8 Non -Residential 400 400 400 500 500 500 9 Industrial 0 0 0 0 0 0 10 Irrigation 181 186 191 196 201 207 11 Private Fire 14 14 14 14 14 14 12 Subtotal 7,395 7,600 7,705 8,010 8,215 8,321 Wholesale 13 Elkins 1 1 1 1 1 1 14 Mount Olive 2 2 2 2 2 2 15 West Fork 1 1 1 1 1 1 16 RDA/WWA 4 4 4 4 4 4 17 Subtotal 8 8 8 8 8 8 18 Total 48,737 49,542 50,347 51,352 52,157 52,963 19 % Change 0.76% 1.65% 1.62% 2.00% 1.57% 1.54% 0 0 100 0 3,300 800 100 0 26 0 926 0 0 0 0 0 4,226 8.74% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 2 - Water Projected Billed Volume (1,000 Gallons) 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,984,500 2,019,200 2,054,500 2,090,500 2,127,100 2,164,300 2 Non -Residential 804,000 803,900 803,900 803,900 803,900 803,900 3 Industrial 327,500 327,500 327,500 327,500 327,500 327,500 4 Irrigation 338,000 343,900 350,000 356,100 362,300 368,700 5 Subtotal 3,454,000 3,494,500 3,535,900 3,578,000 3,620,800 3,664,400 Outside City 6 Residential 463,300 474,300 485,500 497,200 509,200 521,700 7 Non -Residential 62,300 63,200 64,200 65,300 66,400 67,500 8 Irrigation 35,100 36,000 37,000 38,000 39,000 40,100 9 Subtotal 560,700 573,500 586,700 600,500 614,600 629,300 Wholesale 10 Elkins 90,900 90,900 90,900 90,900 90,900 90,900 11 Mount Olive 67,300 67,300 67,300 67,300 67,300 67,300 12 West Fork 66,000 66,000 66,000 66,000 66,000 66,000 13 RDA/WWA 0 0 0 0 0 0 14 Subtotal 224,200 224,200 224,200 224,200 224,200 224,200 15 Total 4,238,900 4,292,200 4,346,800 4,402,700 4,459,600 4,517,900 16 % Change 5.92% 1.26% 1.27% 1.29% 1.29% 1.31% BLACK & VEATCH I Appendix 1: Water Tables 10-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 3 - Water Existing Rates Existing Water Rates Effective January 1, 2022 Inches $/month $/month $/month $/month $/month 5/8 6.59 7.54 8.31 3/4 6.59 7.54 8.31 1 9.14 10.52 11.49 9.75 11.68 1 1/2 15.93 18.31 20.00 10.17 12.10 2 23.20 26.66 29.07 20.33 23.37 3 54.05 62.18 64.38 30.48 35.06 4 89.50 102.93 112.25 60.97 70.11 6 178.99 205.82 212.76 169.34 197.74 8 268.41 308.67 332.91 355.65 409.00 10 609.68 701.11 1,000 ga I. 1, 000 ga I . 1, 000 gal. 1, 000 gal. Residential 0 - 2,000 Gal Ions 2,000 - 15,000 Gallons Over 15,000 Gallons 3.51 4.65 6.59 4.04 5.35 7.54 Non -Residential First 300,000 Gallons 3.79 4.38 Over 300,000 Gallons 3.39 3.90 Major Industrial All Usage 2.96 3.40 Irrigation First 300,000 Gallons 5.04 5.80 Over 300,000 Gallons 4.53 5.22 Wholesale Reduced Peak Demand 2.87 Peak Demand 3.20 BLACK & VEATCH I Appendix 1: Water Tables 10-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 4 - Water Projected Revenues Under Existing Ratl 1 Inside City Residential 11,982,900 12,222,300 12,436,200 12,653,800 12,875,200 13,100,600 1,117,700 2 Non -Residential 3,362,700 3,370,900 3,370,900 3,370,900 3,370,900 3,370,900 8,200 3 Industrial 977,500 980,000 980,000 980,000 980,000 980,000 2,500 4 Irrigation 1,833,700 1,870,400 1,903,100 1,936,400 1,970,300 2,W4,800 171,100 5 Private Fire 967,600 967,600 967,600 967,600 967,600 967,600 0 6 7 Subtotal Outside City Residential 19,124,400 3,045,300 19,411,200 3,124,000 19,657,800 3,197,500 19,908,700 3,273,300 20,164,000 3,351,700 20,423,900 3,432,600 1,299,500 387,300 8 Non -Residential 312,900 318,800 324,100 329,800 335,700 341,900 29,000 9 Industrial 0 0 0 0 0 0 0 10 11 Irrigation Private Fire 223,700 27,100 230,100 27,100 236,200 27,100 242,500 27,100 249,000 27,100 255,800 27,100 32,100 0 12 13 14 Subtotal Wholesale Elkins Mount Olive 3,609,000 261,700 194,900 3,700, 000 262,300 195,300 31784,900 262,300 195,300 3,872, 700 262,300 195,300 3,963, 500 262,300 195,300 4,057,400 262,300 195,300 448,400 600 400 15 West Fork 190,300 190,800 190,800 190,800 190,800 190,800 500 16 RDA/WWA 0 0 0 0 0 0 0 17 18 19 Subtotal Total % Change 646,900 23,380,300 8.05% 648,400 23,759,600 1.62% 648,400 24,091,100 1.40% 648,400 24,429,800 1.41% 648,400 24,775,900 1.42% 648,400 25,129,700 1.43% 1,500 1,749,400 8.08% (a) Reflects 3.0% revenue increase effective January 1, 2022. Table W - 5 - Water Projected Other Revenues 1 2 Water Impact Fee Revenue Water Sales Not on Computer S 976,300 300 S 976,300 300 S 976,300 300 5 976,300 300 5 976,300 300 S 976,300 300 3 Water Connection Fees 162,000 162,000 162,000 162,000 162,000 162,000 4 Rural Water Connection Fees 2,700 2,700 2,700 2,700 2,700 2,700 5 Service Charge/Trip Fee - Billed Service 9,500 9,500 9,500 9,500 9,500 9,500 6 Tampering Fee - Billed Service 200 200 200 200 200 200 7 8 Penalties Safe Drinking Water Fee 207,400 230,400 207,400 234,300 207,400 238,200 207,400 242,300 207,400 246,400 207,400 250,600 9 Total 1158818W 1,592,700 1,596,600 1,600,700 1,604,800 1,609,000 10 % Change 7.14% 0.25% 0.24% 0.26% 0.26% 0.26% BLACK & VEATCH I Appendix 1: Water Tables 10-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 6 - Water Capital Improvement Program 1 2 Water System Rehabilitation/Replacement Water Tank Improvements 0 1,060,900 2,185,500 1,092,700 2,533,500 1,266,800 2,687,800 1,159,300 2,388,100 1,194,100 2,459,700 1,229,900 3 Water Storage& Pump Station Maintenance 106,100 109,300 126,700 134,400 119,400 123,000 4 Water Meters 875,200 901,500 1,045,000 1,159,300 1,194,100 1,229,900 5 Backflow Prevention Assemblies 53,000 54,600 63,400 67,200 59,700 61,500 6 W/SImprovements defined byStudy (West Water Transmission Line) -Cash 636,500 4,237,800 675,300 695,6D0 716,400 737,900 7 W/SImprovements defined byStudy (West Water Transmission Line) -Bond 0 0 16,137,500 22,443,500 21,079,700 26,138,900 8 Water Impact Fee Improvements 424,400 437,100 506,700 537,600 477,600 491,900 9 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,400 3,100 10 Water/Sewer Relocations - BondProjects 265,200 273,200 316,700 289,800 298,500 307,500 11 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 12 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 13 Water/Sewer Building -Office Improvements 26,5W 27,300 31,600 33,600 59,700 61,500 14 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 15 Water &Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 16 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 17 Water& Sewer Technology Equipment Replacements 0 0 0 0 0 0 18 Water& Sewer Improvements Defined By Study 0 0 0 0 0 0 19 Huntsville Water Une Replacement (6 -inch upto 8-inch) 0 0 0 0 0 0 20 Benson Water Tank 338,200 0 0 0 0 0 21 East Water Service Improvements - Township 0 0 0 0 0 0 22 South Garland Ave Waterline Replacement 0 0 0 0 0 0 23 East Water Service Improvements CS 3 (Gulley, PS, Goshen Lines) 5,304,500 0 0 0 0 0 24 25 26 Ila/Oaks Manor/Persimmon Waterline Replacements Western Park Waterline Replacement N. College Waterline Replacement- upgrade from 8" to 12" 0 0 0 0 0 2,185,400 0 0 0 0 0 0 0 0 0 0 0 0 27 Total Capital Improvement Program 9,472,900 11,890,100 22,891,500 29,435,700 27,770,100 33,100,300 (a) Capital costs reflect 3%annual inflation starting in 2024. Table W - 7 - Water Projected O&M Expenses 1 Personal Costs 3,587,800 3,740,500 3,899,900 4,066,100 4,239,500 4,420,300 2 Materials and Supplies 998,100 1,028,000 1,058,800 1,090,600 1,123,300 1,157,000 3 Services and Charges 10,296,700 10,605,600 11,212,100 11,854,100 12,533,800 13,253,200 4 Motorpool 862,800 888,600 915,300 942,800 971,000 1,000,200 5 Cost Allocation 650,100 669,600 689,700 710,400 731,700 753,600 6 Maintenance 88,500 91,200 93,900 96,700 99,600 102,600 7 Total 16,484,000 17,023,500 17,869,700 18,760,700 19,698,900 20,686,900 8 % Change 3.27% 3.27% 4.97% 4.99% 5.00% 5.02% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 8 - Capital Program Financing S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 506,800 501,700 501,700 67,164,200 44,720,700 23,641,000 2 Revenue Bond or Loan Proceeds 0 0 90,000,000 0 0 0 3 Cash Financing of Capital Projects 9,050,000 10,442,200 6,152,300 6,353,900 6,123,200 9,377,300 4 Transfer from Impact Fee Fund 417,800 1,447,900 601,700 638,300 567,200 584,100 5 Subtotal 9,974,600 12,391,800 97,255,700 74,156,400 51,411,100 33,602,400 Application of Funds 6 Major Capital Improvements 9,472,900 11,890,100 22,891,500 29,435,700 27,770,100 33,100,300 7 Issuance Costs 0 0 900,000 0 0 0 8 Bond Reserve Funds 0 0 6,300,000 0 0 0 9 Subtotal 9,472,900 11,890,100 30,091,500 29,435,700 27,770,100 33,100,300 10 End of Year Balance 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 11 Capital Reserve EOY Balance - Cumulative 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 BLACK & VEATCH I Appendix 1: Water Tables 10-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 9 - Water Operating Cash Flow 1 Revenues Revenue Under Existing Rates 23,380,400 23,759,600 24,091,100 24,429,900 24,776,000 25,129,700 2 Revenue Increases 6.00 % Increase Effective January 1, 2024 1,325,000 1,465,800 1,486,600 1,507,800 3 6.00 % Increase Effective January 1, 2025 1,424,300 1,575,800 1,598,300 4 6.00 % Increase Effective January 1, 2026 1,531,100 1,694,100 5 6.00 % Increase Effective January 1, 2027 1,646,100 7 Total Revenue from Rates 23,380,400 23,759,600 25,416,100 27,320,000 29,369,500 31,576,000 8 Other Revenues (a) 645,600 648,600 656,200 665,100 674,300 684,100 9 10 Total Revenue Expenses Operating Expenses 24,026,000 16,484,000 24,408,200 17,023,500 26,072,300 17,869,700 27,985,100 18,760,700 30,043,800 19,698,900 32,260,100 20,686,900 11 Bad Debt 116,900 118,800 127,100 136,600 146,800 157,900 12 PILOT 993,700 1,009,800 1,080,200 1,161,100 1,248,200 1,342,000 13 Safe Drinking Water Fee 230,400 234,300 238,200 242o300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 16 Total Expenses Transfers Transfer to Shop Fund 17,825,000 0 18,386,400 0 22,515,200 0 26,600,700 0 27,640,300 0 28,737,400 0 17 Transferto Operating Reserve 133,100 208,600 219,700 231,400 243,600 256,600 18 19 Cash Financing of Capital Transferto/from Capital Reserve 9,050,000 -2,979,000 10,442,200 -4,630,000 6,152,300 -2,820,000 6,353,900 -5,200,000 6,123,200 -3,960,000 9,377,300 -6,110,000 20 21 Total Transfers Fund Balance Beginning Balance 6,204,100 104,900 6,020,800 101,800 3,552,000 102,800 1,385,300 107,900 2,406,800 107,000 3,523,900 103,700 22 Annual Operating Balance -3,100 1,000 5,100 -900 -3,300 -1,200 23 Ending Fund Balance 101,800 102,800 107,900 107,000 103,700 102,500 Performance Metrics 24 Debt Service Coverage (b) NA NA 2.56 1.46 1.64 1.84 25 O&M Reserve Balance (Days) (c) 0 900 900 900 900 900 90 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.0X the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOT and Safe Drinking Water Fee) (c) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 1: Water Tables 10-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 10 - Water Fund Balances $ $ $ $ $ $ Operating Funds 1 O&M Reserve Balance (a) 4,197,600 4,406,200 4,625,900 4,857,300 5,100,900 5,357,500 2 Operating Fund Balance (b) 101,800 102,800 107,900 107,000 103,700 102,500 3 Total (d) 4,299,400 4,509,000 4,733,800 4,964,300 5,204,600 5,460,000 Capital Funds 4 Capital Fund Balance (c) 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 5 Capital Reserve Fund Balance 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 6 Total (d) 10,840,700 6,210,700 70,053,200 42,409,700 17,370,000 -11,878,900 7 Impact Fee Fund Balance (d) 581,300 109,700 484,300 822,300 1,231,400 1,623,600 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000to account for any adjustments that may be needed to the 0&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) All balances are cumulative. BLACK & VEATCH I Appendix 1: Water Tables 10-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 11 - Water 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 O&M Expenses 2 Bad Debt Expense 3 PILOT 4 Debt Service R 17,023,500 R 17, 023, 500 118,800 118,800 1,009,800 1,009,800 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 5 Transferto Operating Reserve 208,600 208,600 6 Cash Funding of Capital Projects 10,442,200 10,442,200 7 Transfer to Capital Reserve -4,630,000-4,630,000 8 Subtotal 18,360,700 5,812,200 24,172,900 Less Revenue Requirements Met from Other Sources 9 Other Revenues 10 Interest Earned 11 Net Balance Available 12 Full Year Rate Adjustment 382,100 382,100 32,200 32,200 -1,000 -1,000 13 Subtotal 414,300 -1,000 413,300 14 Net Revenue Requirements to be Recovered by Rates 17,946,400 5,813,200 23,759,600 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 17,946,400 17,946,400 16 Depreciation 2,886,700 2,886,700 17 Return 2,926,500 2,926,500 18 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components s s s s s s s s s s Net Plant Investment: 1 Water Land and Land Rights 2,191,756 1,043,693 1,148,063 2 Water Supply 6,819,846 3,247,546 3,572,300 3 Water Storage and Pumping 6,090,361 2,900,172 3,190,189 4 Water Transmission 29,560,218 14,076,294 15,483,924 5 Water Distribution 47,479,642 17,391,810 9,565,496 5,478,420 15,043,916 6 Water Meters 3,306,241 3,306,241 7 Fire Hydrants 7,535,573 7,535,573 8 Water General System 4,537,618 809,302 890,232 894,096 562,035 241,388 808,536 332,029 9 Total Net Plant Investment 107,521,256 19,176,935 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 0 7,867,602 10 PercentofTotal 100.09/o 17.8% 19.6% 0.0% 19.7% 12.4% 5.3% 17.8% 0.0% 7.3% Table W -13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components s s s s s s s s s s Net Depreciation Expense: 1 Water Land and Land Rights 2 Water Supply 277,295 132,045 145,250 3 Water Storage and Pumping 219,139 104,352 114,787 4 Water Transmission 771,897 367,570 404,327 5 Water Distribution 1,134,421 415,539 228,546 130,895 359,441 6 Water Meters 170,293 170,293 7 Fire Hydrants 215,879 215,879 8 Water General System 97,816 17,523 19,275 18,234 12,042 4,591 18,579 7,571 9 Total Net Depreciation Expense 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 0 223,450 10 PercentofTotal 100% 18% 20% 0% 19% 12% 5% 19% 0% 8% Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components 5 s 5 5 5 5 S 5 5 5 1 Water Purchased 9,611,754 4,577,026 5,034,728 2 Water Storage and Pumping 269,987 98,896 108,786 62,305 3 Water Distribution (a) 3,105,785 1,005,654 1,251,415 716,720 100,938 31,058 4 Meter Services (b) 1,012,843 1,012,843 5 Customer Billing (c) 1,057,071 1,057,071 6 AlIOther Cost 3,303,260 1,004,095 1,104,505 242,313 298,397 170,900 222,195 231,897 22,144 6,813 7 Subtotal 18,360,700 5,581,121 6,139,233 1,346,864 1,658,598 949,925 1,235,038 1,288,968 123,082 37,871 Less: 8 Water Connection Fees (d) 164,700 164,700 9 Other Income Sources 249,600 92,661 83,458 18,310 22,547 12,914 17,523 1,673 515 10 Subtotal 414,300 92,661 83,458 18,310 22,547 12,914 164,700 17,523 1,673 515 it Net O&M Expenses 17,946,400 5,488,461 6,055,775 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 (a) 3.25%of 2020water repair costs was associated with hydrants. (b) Includes costs for Meter Reading and Meter Maintenance and Backflow prevention (c) Includes costs under Utilities Financial Services (d) Includes revenues from Water Connection Fees and Rural Water Connection Fees BLACK & VEATCH I Appendix 1: Water Tables 10-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -15 - Water 2023 Estimated Units of Service Equiv. Equiv. 1,000gal. 1,000gal. 1,000gal. 1,000gal. 1,000gal. Equiv. Meters Bills Hydrants Hydrants (1)/365 (2) x (3) (2) x (6) (7) - (4) Inside City 1 Residential 2,019,203 5,532 250% 13,830 370% 20,469 6,638 34,939 436,593 2 Non -Residential 803,940 2,203 240% 5,286 355% 7,819 2,533 6,761 39,012 3 Industrial 327,534 897 200% 1,795 295% 2,647 852 261 252 4 Irrigation 343,941 942 240% 2,262 355% 3,345 1,094 3,141 18,449 5 Subtotal 3,494,618 9,574 23,173 34,280 11,108 45,102 494,306 Fire Protection 6 Public 4,201 10,083 5,882 4,035 7 Private 491 1,179 688 472 8 Subtotal 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 Outside City Farmington 9 Residential 98,894 271 250% 677 370% 1,002 325 1,762 28,974 10 Non -Residential 19,943 55 240% 131 355% 194 63 245 2,142 11 Industrial 200% 295% 12 Irrigation 2,688 7 2400% 18 3559/ 26 8 46 256 13 Subtotal 121,525 333 826 1,223 396 2,053 31,373 Greenland 14 Residential 20,454 56 250% 140 370% 207 67 458 5,736 15 Non -Residential 2,847 8 240% 19 355% 28 9 59 552 16 Industrial 200% 295% 17 Irrigation 698 2 240% 5 355% 7 2 20 24 18 Subtotal 23,999 66 163 242 78 537 6,312 Washington County/Growth 19 Residential 242,049 663 250% 1,658 370% 2,454 796 2,618 33,223 20 Non -Residential 21,511 59 240% 141 3559/ 209 68 109 1,608 21 Industrial 200% 295% 22 Irrigation 22,197 61 240% 146 355% 216 70 188 1,270 23 Subtotal 285,757 783 1,945 2,879 933 2,915 36,101 Johnson 24 Residential 6,652 18 250% 46 370•� 67 22 158 2,064 26 Non -Residential 9,716 27 2409A 64 355% 94 31 35 240 27 Industrial 2001/6 295% 28 Irrigation 68 0 240% 0 355% 1 0 3 24 29 Subtotal 16,436 45 110 163 53 196 2,328 Goshen/White River 30 Residential 106,213 291 2509% 727 370% 1,077 349 1,054 13,898 31 Non -Residential 9,209 25 2401/6 61 35596 90 29 52 696 32 Industrial 200% 295% 33 Irrigation 10,382 28 240% 68 355% 101 33 86 655 34 Subtotal 125,804 345 856 1,267 411 1,192 15,249 Fire Protection 35 Public 696 1,669 973 668 36 Private 12 29 17 12 37 Subtotal 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 38 Total Retail 4,068,138 11,146 32,474 53,013 20,540 51,994 595,669 Wholesale 39 Elkins 90,935 249 240% 598 35591 884 287 23 12 40 Mount Olive 67,314 184 240•1/O 443 355% 655 212 38 24 41 West Fork 65,996 181 240% 434 355% 642 208 23 12 42 RDA/WWA 240% 355% 48 43 Subtotal 224,244 614 1,474 2,181 707 83 96 44 Subtotal (Inside Cit 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 45 Subtotal (Outside C 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 46 Subtotal (Wholesal 224,244 614 1,474 2,181 707 83 96 47 Total System 4,292,382 11,760 33,948 55,194 21,246 52,077 595,765 4,703 483 BLACK & VEATCH I Appendix 1: Water Tables 10-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -16 - Water 2023 Unit Cost of Service $ 1,000gal. 1,000gpd. 1,000gpd. 1,000gal. 1,000gpd. 1,000glad. Equiv. Meters Bills Hydrants Hydrants Units of Service 1 Inside City 3,494,618 18,290 17,678 3,494,618 18,290 17,678 45,102 494,306 4,035 472 2 Outside City 797,765 3,898 3,568 573,521 3,038 2,862 6,975 91,459 668 12 3 Total System 4,292,382 22,188 21,246 4,068,138 21,328 20,540 52,077 585,765 4,703 483 Costs of Service Net Operating Costs 4 Total - $ 17,946,400 5,488,461 6,055,775 0 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 5 Unit Cost - $/unit 1.28 272.93 0.00 0.33 76.71 45.62 20.55 2.17 25.82 77.28 Depreciation Expense 6 Total -$ 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 223,450 7 Unit Cost - $/unit 0.12 25.64 0.00 0.13 16.66 6.60 10.53 47.51 Net Plant Investment 8 Total -$ 107,521,256 19,176,835 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 7,867,602 9 Unit Cost - $/unit 4.47 950.71 0.00 5.21 624.42 278.48 367.89 1,672.89 Return on Investment 10 Inside City, Unit Return - $/unit 0.09 18.43 0.00 0.10 12.11 5.40 7.13 32.43 11 Outside City, Unit Return - $/Unit 0.31 66.55 0.00 0.36 43.71 19.49 25.75 117.10 Total Return 12 Inside City -$ 1,762,073 302,691 337,125 0 352,839 221,422 95,441 321,688 130,868 13 Outside City -$ 1,164,388 249,489 259,402 0 209,075 132,779 55,789 179,630 78,224 14 Total Return -$ 2,926,461 552,180 596,526 0 561,913 354,201 151,230 501,318 209,092 Total Unit Cost of Service 15 Inside City Unit Cost - $/unit 1.49 317.00 0.00 0.56 105.48 57.62 38.21 2.17 105.76 77.28 16 Outside City Unit Cost - $/unil 1.71 365.12 0.00 0.82 137.08 71.71 56.83 2.17 190.43 77.28 17 Inside City - Cost of Service -$ 19,153,831 5,192,113 5,797,984 0 1,956,356 1,929,210 1,018,497 1,723,535 1,072,927 426,744 36,465 18 Outside City -Cost of Service -$ 4,605,769 1,365,665 1,423,169 0 472,237 416,416 205,230 396,434 198,518 127,207 892 19 Total Cost of Service - $ 23,759,600 6,557,779 7,221,153 0 2,428,593 2,345,627 1,223,727 2,119,969 1,271,445 553,951 37,356 BLACK & VEATCH I Appendix 1: Water Tables 10-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 17 - Water 2023 Cost of Service by Customer Class Inside City 1 Residential 10,301,400 1,602,600 11,904,100 12,222,300 -2.6% 2 Non -Resident 3,436,200 534,600 3,970,800 3,370,900 17.8% 3 Industrial 1,108,700 172,500 1,281,200 980,000 30.7% 4 Irrigation 1,483,400 230,800 1,714,200 1,870,400 -8.4% Fire Protectio 5 Public 2,540,500 -2,540,500 6 Private 283,500 283,500 967,600 -70.7% 7 Subtotal 19,153,700 0 19,153,800 19,411,200 -1.3% Outside City 8 Residential 2,818,900 460,100 3,279,000 3,124,000 5.0% 9 Non-Resideni 336,200 54,900 391,100 318,800 22.7% 10 Industrial 0.0% 11 Irrigation 193,200 31,500 224,800 230,100 -2.3% Fire Protectio 12 Public 546,500 -546,500 13 Private 8,100 8,100 27,100 -70.1% 14 Subtotal 3,902,900 0 3,903,000 3,700,000 5.5% Wholesale 15 Elkins 284,300 284,300 262,300 8.4% 16 Mount Olive 211,700 211,700 195,300 8.4% 17 West Fork 206,700 206,700 190,800 8.3% 18 RDA/WWA 0 0 0 0.0% 19 Subtotal Whol 702,700 0 702,700 648,400 8.4% 20 Total Retail 23,056,600 0 23,056,800 23,111,200 -0.2% 21 Total Wholes; 702,700 0 702,700 648,400 8.4% 22 Total 23,759,300 0 23,759,500 23,759,600 0.0% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 18 - Water Proposed 2024 Rate Proposed Water Rates Effective January 1, 2024 Inches $/month $/month $/month $/month $/month 5/8 6.99 7.99 8.81 3/4 6.99 7.99 8.81 1 10.06 13.84 13.84 10.34 12.38 1.5 19.18 27.40 27.40 10.78 12.83 2 26.27 37.95 37.95 21.55 24.77 3 57.29 79.11 79.11 32.31 37.16 4 94.87 115.76 118.99 64.63 74.32 6 189.73 218.17 225.53 179.50 209.60 8 284.51 327.19 352.88 376.99 433.54 10 646.26 743.18 1,000 ga I. 1,000 gal. 1,000 ga I. 1,000 gal. Residential 0 - 2,000 Gallons 3.59 4.54 2,000 - 15,000 Gallons 4.75 6.01 Over 15,000 Gallons Non -Residential First 300,000 Gallons Over 300,000 Gallons Major Industrial All Usage Irrigation First 300,000 Gallons Over 300,000 Gallons Wholesale Reduced Peak Demand Peak Demand 6.74 8.52 4.20 5.11 4.20 5.11 3.14 3.49 4.75 5.89 4.75 5.89 3.30 3.30 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -19 - Water 2023 Cost of Service Under Proposed Rates 1 Inside City Residential 11,904,100 12,222,300 -2.6% 11,899,100 100•0 -3% -323,200 2 Non -Residential 3,970,800 3,370,900 17.8% 3,602,200 91% No 231,300 3 Industrial 1,281,200 980,000 30.7% 980,400 77% 00/u 400 4 Irrigation 1,714,200 1,870,400 -8.4% 1,712,800 1001yo -89/6 -157,600 5 6 Subtotal Outside City Residential 18,870,300 3,279,000 18,443,600 3,124,000 2.3% 5.0% 18,194,500 3,279,200 96% 100% -1% 5% -249,100 155,200 7 Non -Residential 391,100 318,800 22.7% 356,100 91% 12% 37,300 8 Irrigation 224,800 230,100 -2.3% 224,700 100•D -2% -5,400 9 Subtotal 3,894,900 3,672,900 6.0% 3,860,000 99% 5% 187,100 Private Fire 10 Inside City 283,500 967,600 -70.7% 967,600 341% 09/0 0 11 Outside City 8,100 27,100 -70.1% 27,100 335% 0% 0 12 Subtotal 291,600 994,700 -70.7% 994,700 341% 01/0 0 Wholesale 13 Elkins 284,300 262,300 8.4% 284,200 1000/0 89'o 21,900 14 Mount Olive 211,700 195,300 8.49/o 211,600 1001/0 8910 16,300 15 West Fork 206,700 190,800 8.3% 206,600 100% 8% 15,800 16 RDA/WWA 0 0 0 0000 0% 17 Subtotal 702,700 648,400 8.4% 702,400 100•0 89,o 54,000 18 Total 23,759,500 23,759,600 0.0% 23,751,600 100% 0% -8,000 BLACK & VEATCH I Appendix 1: Water Tables 10-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2024 Bill Impact Line No. Residential 1 Meter Size Inches 3/4 Monthly Usage 1,000gal. 0.5 Existing Rates $ 9.91 Inside Proposenirrn-cr-ea-se-1- Rates ME $ 8.79 City Decrease $ -1.12 increase/ Decrease -11.3% Existing Rates $ 11.36 Outside Proposed Rates $ 10.26 City increase Decrease $ -1.10 77 Decreasel -9.7% 2 3/4 2 13.42 14.17 0.75 5.6% 15.40 17.07 1.67 10.8% 3 3/4 4 22.72 23.67 0.95 4.2% 26.10 29.09 2.99 11.5% 4 3/4 8 41.32 42.67 1.35 3.3% 47.50 53.13 5.63 11.9% 5 3/4 10 50.62 52.16 1.54 3.0% 58.20 65.15 6.95 11.9% 6 3/4 15 73.87 75.91 2.04 2.8% 84.95 95.20 10.25 12.1% Non -Residential 7 3/4 10 44.30 48.96 4.66 10.5% 51.12 59.08 7.96 15.6% 8 3/4 20 82.20 90.94 8.74 10.6% 94.92 110.18 15.26 16.1% 9 1 50 198.37 219.94 21.57 10.9% 229.21 269.30 40.09 17.5% 10 1 100 387.87 429.82 41.95 10.8% 448.21 524.76 76.55 17.1% 11 1 1/2 50 204.97 229.06 24.09 11.8% 236.78 282.86 46.08 19.5% 12 11/2 100 394.47 438.94 44.47 11.3% 455.78 538.32 82.54 18.1% 13 2 100 401.52 446.03 44.51 11.1% 463.88 548.87 84.99 18.3% 14 2 500 1,837.52 2,125.07 287.55 15.6% 2,119.88 2,592.55 472.67 22.3% Industrial 15 2 100 318.52 340.03 21.51 6.8% 362.52 386.69 24.17 6.7% 16 2 1,000 2,982.52 3,163.87 181.35 6.1% 3,422.52 3,525.35 102.83 3.0% 17 4 500 1,566.89 1,663.67 96.78 6.2% 1,786.89 1,859.46 72.57 4.1% 18 4 1,500 4,526.89 4,801.27 274.38 6.1% 5,186.89 5,346.86 159.97 3.1% 19 6 2,500 7,573.78 8,033.73 459.95 6.1% 8,673.78 8,936.67 262.89 3.0% 20 6 5,000 14,973.78 15,877.73 903.95 6.0% 17,173.78 17,655.17 481.39 2.8% 21 6 10,000 29,773.78 31,565.73 1,791.95 6.0% 34,173.78 35,092.17 918.39 2.7% BLACK & VEATCH I Appendix 1: Water Tables 10-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 11.0 Appendix 2: Wastewater Tables Table S - 1 - Wastewater Projected Accounts Inside City 1 Residential 34,100 34,700 35,300 35,900 36,500 37,200 3,100 2 Non -Residential 2,500 2,500 2,500 2,500 2,500 2,500 0 0 3 Industrial 19 19 19 19 19 19 3,100 4 Subtotal 36,619 37,219 37,819 38,419 39,019 39,719 96.1% Outside City 5 Residential 2,800 2,900 2,900 3,000 3,000 3,000 200 6 Non -Residential 181 181 181 181 181 181 0 7 Industrial 0 0 0 0 0 0 0 8 Subtotal 2,981 3,081 3,081 3,181 3,181 3,181 200 114.8% Wholesale 9 Elkins 2 2 2 2 2 2 0 10 West Fork 1 1 1 1 1 1 0 0 11 Subtotal 3 3 3 3 3 3 11 Total 39,603 40,303 40,903 41,603 42,203 42,903 3,300 12 % Change 0.25% 1.77% 1.49% 1.71% 1.44% 1.66% 8.35% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table 5 - 2 - Wastewater Projected Billed Volume (1,000 Gallons) 1,000 ga 1. 1, 000 gal. 1,000 ga 1. 1, 000 gal. 1, 000 gal. Inside City 1 Residential 1,949,400 1,983,600 2,018,300 2,053,600 2,126,100 2 Non -Residential 740,400 740,400 740,400 740,400 740,400 3 Industrial 323,500 323,500 323,500 323,500 323,500 4 Subtotal 3,013,300 3,047,500 3,082,200 3,117,500 3,190,000 Outside City 5 Residential 114,700 93,600 94,900 96,300 99,000 6 Non -Residential 18,600 15,200 15,200 15,200 15,200 7 Industrial 0 0 0 0 0 8 Subtotal 133,300 108,800 110,100 111,500 114,200 Wholesale 8 Elkins 90,900 90,900 90,900 90,900 90,900 9 West Fork 104,800 104,800 IK800 104,800 104,800 10 Subtotal 195,700 195,700 195,700 195,700 195,700 10 Total 3,342,300 3,352,000 3,388,000 3,424,700 3,499,900 11 % Change 4.78% 0.29% 1.07% 1.08% 1.09% 176,700 0 0 176,700 -15,700 -3,400 0 -19,100 0 0 0 157,600 4.94% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 3 - Wastewater Existing Charges Existing Wastewater Rates Effective January 1, 2022 Inches $/month $/month $/month 5/8 18.28 18.28 16.74 3/4 18.28 18.28 16.74 1 23.74 33.92 31.28 1 1/2 38.77 60.37 55.50 2 55.43 79.73 73.45 3 128.73 184.24 169.29 4 212.13 303.44 278.93 6 420.39 601.46 553.70 8 628.73 899.76 826.81 1,000 gal. 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.35 > 2,000 Gallons 5.80 All Usage 8.18 7.52 Non -Residential All Usage 4.40 8.18 7.52 Major Industrial All Usage 4.71 8.18 7.52 Wholesale 85% of metered water usage 5.19 Above 85% of metered water 2.71 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.4352 TSS - $/Ib for strength in excess of 300 ppm 0.3056 BLACK & VEATCH l Appendix 2: Wastewater Tables 11-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 4 - Wastewater Projected Revenues at Existing Rates S S S S S S Inside City 1 Residential 17,544,700 17,895,800 18,208,900 18,527,600 18,851,800 19,181,700 2 Non -Residential 3,989,200 3,999,000 3,999,000 3,999,000 3,999,000 3,999,000 3 Industrial 1,543,800 1,547,600 1,547,600 1,547,600 1,547,600 1,547,600 4 Subtotal 23,077,700 23,442,400 23,755,500 24,074,200 24,398,400 24,728,300 Outside City 5 Residential 1,459,000 1,305,500 1,323,500 1,341,900 1,360,500 1,379,500 6 Non -Residential 186,900 161,300 161,300 161,300 161,300 161,300 7 Industrial 0 0 0 0 0 0 8 Subtotal 1,645,900 1,466,800 1,484,800 1,503,200 1,521,800 1,540,800 Wholesale 9 Elkins 470,800 472,000 472,000 472,000 472,000 472,000 10 West Fork 542,400 543,700 543,700 543,700 543,700 543,700 11 Subtotal 1,013,200 1,015,700 1,015,700 1,015,700 1,015,700 1,015,700 12 Surcharge 834,600 834,600 834,600 834,600 834,600 834,600 13 Total 26,571,400 26,759,500 27,090,600 27,427,700 27,770,500 28,119,400 14 % Change 6.09% 0.71% 1.24% 1.24% 1.25% 1.26% Table S - 5 - Wastewater Projected Other Revenues 1 Sewer Impact Fee Re S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 2 Sewer Sales Not on C 11,800 11,800 11,800 11,800 11,800 11,800 3 Sewer Connection Fe 47,900 47,900 47,900 47,900 47,900 47,900 4 WWTP Hay Sales 134,800 134,800 134,800 134,800 134,800 134,800 5 WWTP Biosolids/Feri 54,900 54,900 54,900 54,900 54,900 54,900 6 WWTP Water Treatm 180,800 180,800 180,800 180,800 180,800 180,800 7 Penalties 246,100 246,100 246,100 246,100 246,100 246,100 8 9 Total % Change 1,420,200 9.49% 1,420,200 0.00% 1,420,200 0.00•/0 1,420,200 0.0000 1,420,200 0.00% 1,420,200 0.00% 9,800 3,800 1, 650, 600 -25,600 0 -105,100 1 1,300 2,500 24,300 1,572,300 6.28% 0 0 0 0 0 0 0 0 0.00% BLACK & VEATCH I Appendix 2: Wastewater Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 6 - Wastewater Capital Improvement Program 1 Sanitary Sewer Rehabilitation 3,044,800 3,136,100 3,635,600 3,752,700 3,426,900 3,529,700 2 Plant Pumps and Equipment- W.W.T.P. 530,500 546,400 1,125,500 1,159,300 1,194,100 1,229,900 3 W.W.T.P. Building Improvements 1,750,500 163,900 190,000 347,800 358,200 369,000 4 Upgrade/Replace Lift Stations-W.W.T.P. 318,300 327,800 380,100 403,200 358,200 369,000 5 Lake Sequoyah Sediment Removal/Dredging 530,500 546,400 0 0 0 0 6 Wastewater Treatment/Water Quality lmprovem 106,100 109,300 126,700 134,400 119,400 123,000 7 Wastewater Impact Fee Improvements 318,300 327,800 380,100 347,800 358,200 369,000 8 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,100 3,000 9 Water/Sewer Relocations - Bond Projects 265,200 273,200 316,700 289,800 298,500 307,500 10 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 11 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 12 Water/Sewer Building -Office Improvements 26,500 27,300 31,600 33,600 59,700 61,500 13 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 14 Water&Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 15 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 16 Water& Sewer Technology EquipmentReplacem 0 0 0 0 0 0 17 Water& Sewer Improvements Defined By Study 0 0 0 0 0 0 18 Biosolids Dryer Replacement 0 0 3,172,100 0 0 0 19 Filter Cell Upgrade/Replacement at Noland WWT 0 0 0 0 0 0 20 Upgrade Automation at both WWTPs 0 0 0 0 0 0 21 CIPP of 36" Sewer Line from Armstrong Ave to Nc 0 0 0 0 0 0 22 Bypass Sewer Fulbright & North Gregg 0 0 0 0 0 0 23 Hamestring Lift Station Bottle Neck Resolution 848,700 0 0 0 0 0 24 Total Capital Improvement Program 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 (a) Capital costs reflect 3% annual inflation starting in 2024. Table S - 7 - Wastewater Projected O&M Expenses 1 Personal Costs 3,198,200 3,334,400 3,476,600 3,624,900 3,779,500 3,940,900 2 Materials and Supplies 745,400 767,800 790,800 814,500 839,000 864,200 3 Services and Charges 6,261,000 6,448,800 6,642,300 6,841,600 7,046,800 7,258,200 4 WWTP Contract 4,115,500 4,238,900 4,366,100 4,497,100 4,632,000 4,771,000 5 Motorpool 1,062,900 1,094,800 1,127,600 1,161,400 1,196,300 1,232,200 6 Cost Allocation 701,100 722,100 743,800 766,100 789,100 812,700 7 Maintenance 87,300 89,900 92,600 95,400 98,300 101,200 8 Total 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 9 %Change 3.25% 3.25% 3.25% 3.26% 3.26% 3.26% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 8 - Wastewater Capital Program Financing S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 501,900 506,700 506,700 506,700 506,700 506,700 2 Cash Financing of Capital Projects 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 3 Transferfrom Impact Fee Fund 1,246,600 409,800 475,100 448,500 447,800 461,200 4 Subtotal 8,628,500 6,350,600 10,053,400 7,202,900 6,862,400 7,123,800 Application of Funds 5 Major Capital Improvements 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 6 Subtotal 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 7 End of Year Balance 506,700 506,700 506,700 506,700 506,700 506,700 8 Capital Reserve ECYBalance-Cumulative 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 9 - Wastewater Operating Cash Flow 1 Revenues Revenues Under Existing Rates 26,571,600 26,759,500 27,090,700 27,427,700 27,770,600 28,119,500 2 Revenue Increases 3.00 % Increase Effective January 1, 2024 0 0 745,000 822,800 833,100 843,600 3 3.00 % Increase Effective January 1, 2025 0 0 0 776,900 858,100 868,900 4 3.00 % Increase Effective January 1, 2026 0 0 0 0 810,200 895,000 5 3.00 % Increase Effective January 1, 2027 0 0 0 0 0 845,000 7 Total Revenue from Rates 26,571,600 26,759,500 27,835,700 29,027,400 30,272,000 31,572,000 8 Other Revenues (a) 726,000 724,300 726,700 729,600 732,700 735,900 9 Total Revenues 27,297,600 27,483,800 28,562,400 29,757,000 31,004,700 32,307,900 Expenses 10 Operating Expenses 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 11 Bad Debt 132,900 133,800 139,200 145,100 151,400 157,900 12 PILOT 1,129,300 1,137,300 1,183,000 1,233,700 1,286,600 1,341,800 13 Debt Service 0 0 0 0 0 0 14 Total Expenses 17,433,600 17,967,800 18,562,000 19,179,800 19,819,000 20,480,100 Transfers 15 Transfer to Shop Fund 0 0 0 0 0 0 16 Transferto Operating Reserve 129,500 133,900 138,400 143,000 147,800 152,700 17 Cash Financing of Capital 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 18 Transferto/from Capital Reserve 2,850,000 3,950,000 790,000 4,180,000 5,130,000 5,520,000 19 Total Transfers 9,859,500 9,518,000 10,000,000 10,570,700 11,185,700 11,828,600 Fund Balance 20 Beginning Balance 100,000 104,500 102,500 102,900 109,400 109,400 21 Annual Operating Balance 4,500 -2,000 400 6,500 0 -800 22 Ending Fund Balance 104,500 102,500 102,900 109,400 109,400 108,600 Performance Metrics 23 Debt Service Coverage NA NA NA NA NA NA 24 0&M Reserve Balance (Days) (b) a 90.00 0 90.00 0 90.00 0 90.00 ® 90.00 0 90.00 (a) Includes interest income on operating fund balance. (b) Mininum requirement is 90 days of folIowing year's Operating Expenses. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 10 - Wastewater Projected Fund Balances Operating Funds 1 O&M Reserve Balance (a) 4,117,000 4,250,900 4,389,300 4,532,300 4,680,100 4,832,800 2 Operating Fund Balance (b) 104,500 102,500 102,900 109,400 109,400 108,600 3 Total (e) 4,221,500 4,353,400 4,492p200 4,641,700 4,789,500 4,941,400 Capital Funds 4 Capital Fund Balance (c) 506,700 506,700 506,700 506,700 506,700 506,700 5 Capital Reserve Fund Balance (d) 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 6 Total (e) 23,945,700 27,895,700 28,685,700 32,865,700 37,995,700 43,515,700 7 Impact Fee Fund Balance (e) 3,935,100 4,269,200 4,538,000 4,833,400 5,129,500 5,412,200 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000to account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022. (e) All balances are cumulative. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 11- Wastewater 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 O&M Expenses 2 Bad Debt 16,696,700 16,696,700 133,800 133,800 3 PILOT 1,137,300 1,137,300 4 Debt Sevice 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 0 0 5 Transfer to Operating Reserve 133,900 133,900 _ 6 Cash Funding of Capital Projects 5,434,100 5,434,100 7 Transfer to Capital Reserve 3,950,000 3,950,000 8 Subtotal 18,101,700 9,384,100 27,485,800 Less Revenue Requirements Met from Other Sources 11 Net Balance Available 12 Full Year Rate Adjustment 2,000 2,000 13 Subtotal 724,300 2,000 726,300 14 Net Revenue Requirements to be Recovered by Rate 17,377,400 9,382,100 26,759,500 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 17,377,400 17,377,400 16 Depreciation 8,187,000 8,187,000 17 Return 1,195,100 1,195,100 18 Net Cost of Service 17,377,400 9,382,100 26,759,SW BLACK & VEATCH I Appendix 2: Wastewater Tables 11-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment S S S S S S S S Net Plant Investment: 1 Sewer Collection 106,713,735 43,521,511 63,192,224 2 Sewer Connections 319,887 319,887 3 Water Meters 2,723,783 2,723,783 4 Owl Creek Lift Station and Force Main 14,103 14,103 5 Lift Stations 5,257,834 5,257,834 Sewer Treatment Plant- Noland 6 Sewage Pumping 229,919 229,919 7 Mechanical Bar Screens 172,282 51,685 120,597 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 1,684,829 1,684,829 11 Aeration Equipment 1,120,704 560,352 560,352 12 Sludge Handling 400,690 220,380 180,311 13 Other Plant and Misc Equipment 961,187 510,038 221,733 229,416 14 General Treatment 13,296,075 7,055,330 3,067,233 3,173,512 Sewer Treatment Plant- West 15 Sewage Pumping 921,333 921,333 16 Mechanical Bar Screens 169,727 50,918 118,809 17 Grit Removal 1,380,570 1,380,570 18 Primary Sedimentation 6,927,776 2,078,333 4,849,443 19 Disinfection 667,246 667,246 20 Aeration Equipment 1,490,202 745,101 745,101 21 Sludge Handling 34,604,278 19,032,353 15,571,925 22 Other Plant and Misc Equipment 3,425,729 1,799,980 1,625,749 23 General Treatment 6,163,399 3,238,433 2,924,966 24 Sewer Land and Land Rights 6,358,594 2,055,231 2,484,085 893,874 924,850 554 25 General Plant 1,768,105 608,158 592,278 286,604 252,406 25,529 3,130 26 Total Net Plant Investment 196,771,987 67,549,842 66,268,587 31,759,281 28,107,292 0 2,749,312 337,674 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 13 - Wastewater 2023 Allocation of Depreciation S s s s s S S S Net Depreciation Expense: 1 Sewer Collection 2,890,541 1,178,861 1,711,680 2 Sewer Connections 22,463 22,463 3 Water Meters 140,292 140,292 4 Owl Creek Lift Station and Force Main 6,509 6,509 5 Lift Stations 113,991 113,991 Sewer Treatment Plant- Noland 6 Sewage Pumping 42,418 42,418 7 Mechanical Bar Screens 33,421 10,026 23,395 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 282,757 282,757 11 Aeration Equipment 124,523 (1) 62,262 62,262 12 Sludge Handling 83,361 (1) 45,849 37,513 13 Other Plant and Misc Equipment 68,718 36,464 15,852 16,402 14 General Treatment 870,537 461,935 200,822 207,780 Sewer Treatment Plant- West 15 Sewage Pumping 117,218 117,218 16 Mechanical Bar Screens 55,071 16,521 38,550 17 Grit Removal 135,374 135,374 18 Primary Sedimentation 397,767 119,330 278,437 19 Disinfection 41,250 41,250 20 Aeration Equipment 140,345 (1) 70,173 70,173 21 Sludge Handling 2,080,224 1,144,123 936,101 22 Other Plant and Misc Equipment 320,819 168,568 152,251 23 General Treatment 47,759 25,094 22,665 24 Sewer Land and Land Rights 4,692 1,517 1,833 660 682 25 General Plant 166,936 57,419 55,920 27,060 23,831 2,410 296 26 Total Net Depreciation Expense 8,186,986 2,527,489 1,769,433 1,887,594 1,830,500 0 142,702 29,268 27 Percent of Total - Depreciation Expense 100.0% 30.9% 21.6% 23.1% 22.49/o 1.7% 0.4% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 14 - Wastewater 2023 Allocation of O&M Expenses S S S S S S S S 1 Sewer Mains Maintenance 2,527,372 1,030,749 1,496,623 2 Wastewater Treatment Plant 1,930,453 409,563 747,493 773,396 3 Wastewater Treatment Plant -Noland 5,578,707 1,183,574 2,160,139 2,234,994 4 Wastewater Treatment Plant -West 2,025,047 429,632 784,121 811,293 5 Lift Stations 990,432 990,432 6 Meter Operations (a) 1,705,258 1,705,258 7 Water& Sewer Connections 204,404 204,404 8 Operations and Administration 1,443,897 390,267 144,434 356,278 368,624 164,568 19,726 9 All Other O&M Cost 1,696,131 458,442 169,665 418,516 433,019 193,317 23,172 10 Subtotal 18,101,700 4,892,658 1,810,722 4,466,548 4,621,327 2,063,143 0 247,302 Less: Other Income Sources 11 Sewer Connection Fees 47,900 47,900 12 Other Income Sources 676,400 147,869 72,452 178,719 184,912 82,552 9,895 13 Subtotal 724,300 147,869 72,452 178,719 184,912 82,552 0 57,795 14 Net O&M Expenses 17,377,400 4,744,789 1,738,270 4,287,829 4,436,415 1,980,591 0 189,507 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 15 - Wastewater 2023 Units of Service 1,000gal. 1,000ga1. 1,000gal. Pounds Pounds Bills Equiv. Meters (2) + (3) Inside City 1 Residential 1,983,604 1,752,788 3,736,392 6,403,745 5,445,740 416,068 34,346 2 Non -Residential 740,356 265,819 1,006,175 2,309,140 1,870,599 29,508 5,157 3 Industrial 323,545 77,053 400,599 1,000,971 801,166 228 249 4 Subtotal 3,047,505 2,095,660 5,143,166 9,713,856 8,117,505 445,804 39,752 Outside City Farmington 5 Residential 75,955 102,336 178,291 252,550 223,210 27,338 1,603 6 Non -Residential 13,136 8,324 21,460 41,722 34,693 1,692 157 7 Industrial 8 Subtotal 89,090 110,660 199,751 294,272 257,903 29,030 Greenland 9 Residential 10,113 18,171 28,284 34,575 31,615 5,112 435 10 Non -Residential 1,995 1,805 3,800 6,450 5,496 432 22 11 Industrial 12 Subtotal 12,109 19,976 32,084 41,025 37,111 5,544 Washington County/ Growth Area 13 Residential 1,158 1,051 2,209 3,743 3,190 252 74 14 Non -Residential 74 74 15 31 24 15 Industrial 16 Subtotal 1,158 1,125 2,283 3,758 3,221 276 Johnson 17 Residential 6,357 7,132 13,489 20,837 18,083 1,824 151 18 Non -Residential 43 84 127 147 136 24 18 19 Industrial 20 Subtotal 6,399 7,216 13,615 20,984 18,219 1,848 21 Total Retail 3,149,862 2,227,422 5,377,284 10,052,911 8,415,740 480,654 39,752 Wholesale 22 Elkins 90,935 0 90,935 276,815 216,143 24 23 23 West Fork 104,762 0 104,762 318,905 249,008 12 23 24 Subtotal 195,697 0 195,697 595,720 465,151 36 45 25 Subtotal (Inside City) 3,047,505 2,095,660 5,143,166 9,713,856 8,117,505 445,804 39,752 26 Subtotal (Outside City) 108,756 138,978 247,733 360,039 316,454 36,698 0 27 Subtotal (Wholesale) 195,697 0 195,697 595,720 465,151 36 45 28 Surcharge Customers 1,282,742 910,900 29 Total System 3,351,958 2,234,638 5,586,596 11,952,357 9,810,010 482,538 42,258 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Fable S - 16 - Wastewater 2023 Unit Cost of Service $ 1,000gal. 1,000gal. Pounds Pounds Bills Equiv. Meters Bills Units of Service 1 Inside City 5,143,166 5,143,166 9,713,856 8,117,505 445,804 39,752 445,804 2 Outside City -w/o Farmington & Greenland 211,595 15,898 620,462 486,591 2,160 288 3 Outside City -Farmington 199,751 199,751 294,272 257,903 29,030 1,761 4 Outside City -Greenland 32,084 32,084 41,025 37,111 5,544 458 5 Surcharge 199,751 199,751 294,272 257,903 29,030 1,761 6 Total System 5,786,346 5,590,650 10,963,887 9,157,013 511,568 44,018 445,804 Costs of Service Net Operating Expense 7 Total -$ 17,377,400 4,744,789 1,738,270 $ 4,287,829 $ 4,436,415 1,980,591 189,507 8 Unit Cost - $/unit 0.85 0.32 $ 0.3587 $ 0.4522 4.10 0.43 Depreciation Expense: 9 Total -$ 10 Unit Cost - $/unit 8,186,987 2,527,489 1,769,433 $ 1,887,594 $ 1,830,500 0.45 0.33 $ 0.1579 $ 0.1866 $ 142,702 29,268 $ 3.3769 0.07 Net Plant Investment: 11 Total - $ 196,771,987 67,549,842 66,268,587 $ 31,759,281 $ 28,107,292 2,749,312 337,674 12 Unit Cost - $/unit 12.09 12.29 $2.6572 $2.8652 65.06 0.76 Return on Investment 13 Inside City, Unit Return - $/unit 0.04 0.04 $0.0089 $0.0096 0.22 0.00 14 Outside City (Exc Farmington & Greenland), Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 15 Farmington, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 16 Greenland, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 Total Return 17 Inside City 613,093 207,865 211,325 $ 97,667 $ 86,464 8,645 1,129 18 Outside City -w/o Farmington & Greenland 253,555 111,550 8,521 $ 71,882 $ 60,786 817 19 Outside City- Farmington 283,668 105,306 107,058 $ 34,092 $ 32,218 4,994 20 Outside City- Greenland 44,797 16,914 17,196 $ 4,753 $ 4,636 1,298 21 Total Return -$ 1,195,113 441,635 344,100 $ 208,394 $ 194,103 15,754 1,129 Total Unit Cost of Service 22 InsideCity- $/unit 1.34 0.69 $ 0.5256 $ 0.6484 4.10 3.59 0.49 23 Outside City (w/o Farmington & Greenland)- $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 24 OutsideCity- Farmington - $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 25 Outside City- Greenland - $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 Total Cost of Service 26 InsideCity- Retail -$ 23,021,915 6,902,913 3,557,834 5,105,131 5,263,434 1,829,815 142,883 219,904 27 InsideCity-Surcharge -$ 1,264,779 674,147 590,632 28 Outside City- Except Farmington - $ 1,180,603 386,991 18,866 392,456 371,634 8,866 1,790 29 Outside City- Farmington - $ 1,115,560 365,328 237,030 186,133 196,973 119,155 10,939 30 Outside City- Greenland 176,644 58,680 38,072 25,949 28,344 22,756 2,843 31 Total Cost of Service - $ 26,759,500 7,713,912 3,851,803 6,383,816 6,451,017 1,980,591 158,456 219,904 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 17 - Wastewater 2023 Cost of Service by Customer Class (1) (2) (3) (4) Inside City 1 Residential 16,532,489 17,895,771 -7.6% 2 Non -Residential 4,627,157 3,999,013 15.7% 3 Industrial 1,862,269 1,547,635 20.3% 4 Subtotal 23,021,915 23,442,418 -1.8% Outside City 5 Residential 1,234,084 1,305,506 -5.5% 6 Non -Residential 148,314 161,315 -8.1% 7 Industrial 8 Subtotal 1,382,398 1,466,821 -5.8% 9 Total Retail 24,404,313 24,909,239 -2.0% 10 Wholesale 1,090,407 1,015,665 7.4% 11 Surcharge 1,264,779 834,607 51.5% 12 Total 26,759,499 26,759,511 0.0% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 'able S - 18 - Wastewater Proposed 2024 Charges Proposed Wastewater Rates Effective January 1, 2024 Inches 5/8 $/month 12.75 $/month 15.71 3/4 12.75 16.01 1 24.45 31.32 1 1/2 44.81 63.14 2 61.64 87.88 3 132.59 184.50 4 218.49 270.52 6 433.00 501.48 8 647.59 558.03 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.94 > 2,000 Gallons 6.59 All Usage 7.59 Non -Residential All Usage 5.54 7.59 Major Industrial All Usage 5.85 7.59 Wholesale 85% of metered water usage 5.74 Above 85% of metered water 5.74 Surcharge BOD - $/lb for strength in excess of 300 ppm 0.5414 TSS - $/Ib for strength in excess of 300 ppm 0.6679 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates Inside City 1 Residential 16,532,500 17,895,800 -7.6% 16,532,300 100% -8% -1,363,500 2 Non -Residential 4,627,200 3,999,000 15.7% 4,623,700 100% 16% 624,700 3 Industrial 1,862,300 1,547,600 20.3% 1,861,800 100% 20% 314,200 4 Subtotal 23,022,000 23,442,400 -1.8% 23,017,800 100% -2% -424,600 Outside City 5 Residential 1,234,100 1,305,500 -5.5% 1,227,400 99% -6% -78,100 6 Non -Residential 148,300 161,300 -8.1% 155,200 105% -4% -6,100 7 Industrial 0% 0% 8 Subtotal 1,382,400 1,466,800 -5.8% 1,382,600 100% -6% -84,200 Wholesale 9 Elkins 506,700 472,000 7.4% 506,500 100% 7% 34,500 10 West Fork 583,700 543,700 7.4% 583,500 100% 7% 39,800 11 Subtotal 1,090,400 1,015,700 7.4% 1,090,000 100% 7% 74,300 12 Surcharge 1,264,800 834,600 51.5% 1,264,800 100% 52% 430,200 13 Total 26,759,600 26,759,500 0.0% 26,755,200 100% 0% -4,300 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 20 - Wastewater 2024 Bill Impact Line No. Residential 1 Meter Size 3/4 Monthly Usage 1,000gaI. 0.5 Existing Rates $ 22.10 Inside Proposed Rates $ 15.22 City Increase / Decrease $ -6.88 increase Decrease -31.1% Existing Rates $ 26.46 Outside Proposed Rates $ 19.80 City Increase / Decrease $ -6.66 Increase Decrease -25.2% 2 3/4 2 26.45 22.64 -3.81 -14.4% 34.64 31.19 -3.45 -10.0% 3 3/4 4 38.05 32.53 -5.52 -14.5% 51.00 46.37 -4.63 -9.1% 4 3/4 8 61.25 52.30 -8.95 -14.6% 83.72 76.74 -6.98 -8.3% 5 3/4 10 72.85 62.19 -10.66 -14.6% 100.08 91.92 -8.16 -8.2% 6 3/4 15 101.85 86.91 -14.94 -14.7% 140.98 129.87 -11.11 -7.9% Non -Residential 7 3/4 10 61.75 68.17 6.42 10.4% 100.08 91.92 -8.16 -8.2% 8 3/4 20 105.75 123.58 17.83 16.9% 181.88 167.83 -14.05 -7.7% 9 1 50 243.05 301.52 58.47 24.1% 442.92 410.88 -32.04 -7.2% 10 1 100 463.05 578.59 115.54 25.0% 851.92 790.43 -61.49 -7.2% 11 1 1/2 50 257.64 321.88 64.24 24.9% 469.37 442.69 -26.68 -5.7% 12 1 1/2 100 477.64 598.95 121.31 25.4% 878.37 822.25 -56.12 -6.4% 13 2 100 493.82 615.78 121.96 24.7% 897.73 846.99 -50.74 -5.7% 14 2 500 2,253.82 2,832.34 578.52 25.7% 4,169.73 3,883.43 -286.30 -6.9% Industrial 15 2 100 493.52 646.68 153.16 31.0% 897.73 846.99 -50.74 -5.7% 16 2 1,000 4,732.52 5,912.04 1,179.52 24.9% 8,259.73 7,678.98 -580.75 -7.0% 17 4 500 2,441.89 3,143.69 701.80 28.7% 4,393.44 4,066.07 -327.37 -7.5% 18 4 1,500 7,151.89 8,994.09 1,842.20 25.8% 12,573.44 11,657.17 -916.27 -7.3% 19 6 2,500 11,948.78 15,059.00 3,110.22 26.0% 21,051.46 19,479.22 -1,572.24 -7.5% 20 6 5,000 23,723.78 29,685.00 5,961.22 25.1% 41,501.46 38,456.97 -3,044.49 -7.3% 21 6 10,000 47,273.78 58,937.00 11,663.22 24.7% 82,401.46 76,412.47 -5,988.99 -7.3% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 12.0 Appendix 3: Combined Tables Table C - 1 - Combined Projected Fund Balances S S S S S S Operating Funds 1 O&M Reserve Balance (a) 8,314,600 8,657,100 9,015,200 9,389,600 9,781,000 10,190,300 2 Operating Fund Balance (b) 206,300 205,300 210,800 216,400 213,100 211,100 3 Subtotal Operating Funds Balance (d) 8,520,900 8,862,400 9,226,000 9,606,000 9,994,100 10,401,400 Capital Funds 4 Capital Fund Balance (c) 1,008,400 1,008,400 67,670,900 45,227,400 24,147,700 1,008,800 5 Capital Reserve Fund Balance 33,778,000 33,098,000 31,068,000 30,048,000 31,218,000 30,628,000 6 Subtotal Capital Funds Balance (d) 34,786,400 34,106,400 98,738,900 75,275,400 55,365,700 31,636,800 7 Impact Fee Fund Balance (d) 4,516,400 4,378,900 5,022,300 5,655,700 6,360,900 7,035,800 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target minimum combined balance is $200,OOOto account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target minimum combined balance is $1,000,000. Includes unspent revenue bond proceed amounts at the end of the fiscal years 2024 ($67M), 2025 ($44M) and 2026 ($23M). (d) All balances are cumulative. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 2 - Combined Operating Cash Flow 1 Revenues Revenues Under Existing Rates 49,952,000 50,519,100 51,181,800 51,857,600 52,546,600 53,249,200 2 Revenue Increases 4.4 % Increase Effective January 1, 2024 0 0 2,070,000 2,288,600 2,319,700 2,351,400 3 4.4% Increase Effective January 1, 2025 0 0 0 2,201,200 2,433,900 2,467,200 4 4.5 % Increase Effective January 1, 2026 0 0 0 0 2,341,300 2,589,100 5 4.5 % Increase Effective January 1, 2027 0 0 0 0 0 2,491,100 6 4.5 % Increase Effective January 1, 2028 0 0 0 0 0 0 7 8 Total Revenue from Rates Other Revenues (a) 49,952,000 1,371,600 50,519,100 1,372,900 53,251,800 1,382,900 56,347,400 1,394,700 59,641,500 1,407,000 63,148,000 1,420,000 9 Subtotal Revenues 51,323,600 51,892,000 54,634,700 57,742,100 61,048,500 64,568,000 Expenses 10 Operating Expenses 32,655,400 33,720,200 35,109,500 36,561,700 38,079,900 39,667,300 11 Bad Debt 249,800 252,600 266,300 281,700 298,200 315,800 12 PILOT 2,123,000 2,147,100 2,263,200 2,394,800 2,534,800 2,683,800 13 SDWF-ReimbursementtoADPH 230,400 234,300 238,200 242,300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 Total Expenses 35,258,600 36,354,200 41,077,200 45,780,500 47,459,300 49,217,500 Transfers 16 Transfer to Shop Fund 0 0 0 0 0 0 17 Transfer to Operating Reserve 262,600 342,500 358,100 374,400 391,400 409,300 18 Cash Financing of Capital 15,930,000 15,876,300 15,223,900 12,601,600 12,031,100 15,533,200 19 Transferto/from Capital Reserve -129,000 -680,000 -2,030,000 -1,020,000 1,170,000 -590,000 20 Total Transfers 16,063,600 15,538,800 13,552,000 11,956,000 13,592,500 15,352,500 Fund Balance 21 Beginning Balance 204,900 206,300 205,300 210,800 216,400 213,100 22 Annual Operating Balance 1,400 -1,000 5,500 5,600 -3,300 -2,000 23 Ending Fund Balance 206,300 205,300 210,800 216,400 213,100 211,100 Performance Metrics 24 Debt Service Coverage (b) NA NA a 6.100 3.36 0 3.65 @ 3.95 25 0&M Reserve Balance (Days)(c) a 90.000 90.00 a 90.00 Q 90.00 0 90.00 a 90.00 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.OX the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOTand Safe Drinking Water Fee) (c) Mininum requirement is 90days of following year's Operating Expenses. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 3 - Combined 2024 Bill Impact Inside City Outside City Line Monthly Existing TenegaMMMM No. Meter Residential 1 Size Inches 3/4 Usage 1,000gal. 1 Rates $ 32.01 Rates $ 24.01 Decrease $ -8.00 -25.0% $ 37.82 $ 30.06 $ -7.76 -20.5% 2 3/4 2 39.87 36.81 -3.06 -7.7% 50.04 48.26 -1.78 -3.6% 3 3/4 4 60.77 56.20 -4.57 -7.5% 77.10 75.46 -1.64 -2.1% 4 3/4 8 102.57 94.97 -7.60 -7.4% 131.22 129.87 -1.35 -1.0% 5 3/4 10 123.47 114.35 -9.12 -7.4% 158.28 157.07 -1.21 -0.8% 6 3/4 15 175.72 162.82 -12.90 -7.3% 225.93 225.07 -0.86 -0.4% Non -Residential 7 3/4 10 106.05 117.13 11.08 10.5% 151.20 151.00 -0.20 -0.1% 8 3/4 20 187.95 214.52 26.57 14.1% 276.80 278.01 1.21 0.4% 9 1 50 441.42 521.46 80.04 18.1% 672.13 680.18 8.05 1.2% 10 1 100 850.92 1,008.41 157.49 18.5% 1,300.13 1,315.19 15.06 1.2% 11 1.5 50 462.61 550.94 88.33 19.1% 706.15 725.55 19.40 2.8% 12 1.5 100 872.11 1,037.89 165.78 19.0% 1,334.15 1,360.57 26.42 2.0% 13 2 100 895.34 1,061.81 166.47 18.6% 1,361.61 1,395.86 34.25 2.5% 14 2 500 4,091.34 4,957.41 866.07 21.2% 6,289.61 6,475.98 186.37 3.0% Industrial 15 2 100 812.04 986.71 174.67 21.5% 1,260.25 1,233.68 -26.57 -2.1% 16 2 1,000 7,715.04 9,075.91 1,360.87 17.6% 11,682.25 11,204.33 -477.92 -4.1% 17 4 500 4,008.78 4,807.36 798.58 19.9% 6,180.33 5,925.53 -254.80 -4.1% 18 4 1,500 11,678.78 13,795.36 2,116.58 18.1% 17,760.33 17,004.03 -756.30 -4.3% 19 6 2,500 19,522.56 23,092.73 3,570.17 18.3% 29,725.24 28,415.89 -1,309.35 -4.4% 20 6 5,000 38,697.56 45,562.73 6,865.17 17.7% 58,675.24 56,112.14 -2,563.10 -4.4% 21 6 10,000 77,047.56 90,502.73 13,455.17 17.5% 116,575.24 111,504.64 -5,070.60 -4.4% BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-3 Received by: Tim Nyander 08/11/2023 10:48 AM Final Draft WATER AND WASTEWATER COMPREHENSIVE RATE STUDY B&V PROJECT NO. 406577 PREPARED FOR City of Fayetteville, Arkansas 11 AUGUST 2023 0 BLACK&VEATCH City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table of Contents 1.0 Executive Summary........................................................................................................ ES 1-0 1.1 Summary of Findings.................................................................................................. ES 1-0 1.1.1 Revenue Under Existing Rates.................................................................... ES 1-0 1.1.2 Revenue Requirements............................................................................... ES 1-1 1.1.3 Summary of Cash Flow Results................................................................... ES 1-2 1.1.4 Cost of Service Analysis............................................................................... ES 1-2 1.2 Proposed Rate Adjustments....................................................................................... ES 1-3 1.3 Disclaimer................................................................................................................... ES 1-3 2.0 Introduction.......................................................................................................................2-0 2.1 Purpose............................................................................................................................2-0 2.2 Scope................................................................................................................................2-0 2.3 Study Methodology.........................................................................................................2-1 2.3.1 Financial Plan....................................................................................................2-1 2.3.2 Cost of Service..................................................................................................2-1 2.3.3 Rate Design.......................................................................................................2-2 3.0 Rate Structure Overview.....................................................................................................3-0 3.1 Fixed Charge.....................................................................................................................3-0 3.2 Volumetric (Usage) Charge..............................................................................................3-0 3.3 Existing Rate Structure.....................................................................................................3-0 3.3.1 Water Rate Structure.......................................................................................3-0 3.3.2 Wastewater Rate Structure..............................................................................3-1 4.0 Water Utility.......................................................................................................................4-1 4.1 Water Revenue Projections Under Existing Rates...........................................................4-1 4.1.1 Water Revenue Under Existing Rates..............................................................4-1 4.1.2 Projection of Service Revenue Under Existing Rates.......................................4-2 4.1.3 Other Water Revenue......................................................................................4-3 4.2 Water Capital Improvements Program............................................................................4-4 4.3 Water Revenue Requirements........................................................................................4-4 4.3.1 Water Operation and Maintenance Expenses.................................................4-4 4.3.2 Water Bad Debt................................................................................................4-5 4.3.3 Water Payment In Lieu of Taxes......................................................................4-5 4.3.4 Safe Drinking Water Fee Reimbursement........................................................4-5 4.3.5 Water Debt Service Requirements...................................................................4-6 4.3.6 Transfer to Shop Fund......................................................................................4-6 4.3.7 Transfer to Operating Reserve.........................................................................4-6 4.3.8 Water Cash Financed Capital...........................................................................4-6 4.3.9 Transfer to Capital Reserve..............................................................................4-6 4.4 Water Proposed Revenue Adjustments...........................................................................4-6 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5 Water Cost of Service......................................................................................................4-8 4.5.1 Determination of Cost of Service.....................................................................4-8 4.5.2 Determination of Functional Costs..................................................................4-9 4.5.3 Allocation of Costs to the Functional Cost Components...............................4-10 4.5.4 Distribution of Water Utility Costs to Customer Classes...............................4-12 5.0 Water Rate Design............................................................................................................5-14 5.1 Existing Water Rates......................................................................................................5-14 5.2 Proposed Water Rates...................................................................................................5-14 6.0 Wastewater Utility..............................................................................................................6-1 6.1 Wastewater Revenue Projections Under Existing Rates.................................................6-1 6.1.1 Wastewater Revenue Under Existing Rates.....................................................6-1 6.1.2 Projection of Service Revenue Under Existing Rates.......................................6-2 6.1.3 Other Wastewater Revenue.............................................................................6-3 6.2 Wastewater Capital Improvements Program..................................................................6-4 6.3 Wastewater Utility Revenue Requirements....................................................................6-4 6.3.1 Wastewater Operation and Maintenance Expenses.......................................6-4 6.3.2 Wastewater Bad Debt......................................................................................6-5 6.3.3 Wastewater Payment In Lieu of Taxes.............................................................6-5 6.3.4 Wastewater Debt Service Requirements.........................................................6-5 6.3.5 Transfer to Shop Fund......................................................................................6-5 6.3.6 Transfer to Operating Reserve.........................................................................6-5 6.3.7 Wastewater Cash Financed Capital..................................................................6-6 6.3.8 Transfer to Capital Reserve..............................................................................6-6 6.4 Wastewater Proposed Revenue Adjustments.................................................................6-6 6.5 Wastewater Cost of Service.............................................................................................6-7 6.5.1 Determination of Cost of Service.....................................................................6-8 6.5.2 Determination of Functional Costs..................................................................6-8 6.5.3 Allocation of Costs to the Functional Cost Components.................................6-9 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes ......................6-11 6.5.5 Wastewater Utility Customer Class Costs of Service.....................................6-12 7.0 Wastewater Rate Design...................................................................................................7-13 7.1 Existing Wastewater Rates............................................................................................7-13 7.2 Proposed Wastewater Rates.........................................................................................7-13 8.0 Combined Water and Wastewater Utilities........................................................................8-14 9.0 Disclaimer.........................................................................................................................9-15 10.0 Appendix 1: Water Tables.................................................................................................10-1 11.0 Appendix 2: Wastewater Tables........................................................................................11-1 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF EXECUTIVE SUMMARY TABLES Table ES - 1—Water 2023 Cost of Service..................................................................................................1-2 Table ES - 2 —Wastewater 2023 Cost of Service........................................................................................1-3 LIST OF FIGURES Figure 4-1 - Historical and Projected Water Accounts...............................................................................4-2 Figure 4-2 - Historical and Projected Water Billed Volume.......................................................................4-2 Figure 4-3 - Historical and Projected Water Service Revenue...................................................................4-3 Figure 4-4 - Projected Annual Water O&M Expenses................................................................................4-5 Figure 4-5 - Water Revenues and Revenue Requirements........................................................................4-7 Figure 6-1- Historical and Projected Wastewater Accounts.....................................................................6-2 Figure 6-2 - Historical and Projected Wastewater Billed Volume.............................................................6-2 Figure 6-3 - Historical and Projected Wastewater Service Revenue.........................................................6-3 Figure 6-4 - Projected Annual Water O&M Expense................................................................................. 6-5 Figure 6-5 - Wastewater Revenues and Revenue Requirements..............................................................6-7 LIST OF WATER TABLES Table W - 1- Water Projected Number of Accounts...............................................................................10-1 Table W - 2 - Water Projected Billed Volume (1,000 Gallons).................................................................10-2 Table W - 3 - Water Existing Rates...........................................................................................................10-3 Table W - 4 - Water Projected Revenues Under Existing Rates...............................................................10-4 Table W - 5 - Water Projected Other Revenues.......................................................................................10-4 Table W - 6 - Water Capital Improvement Program................................................................................10-5 Table W - 7 - Water Projected O&M Expenses........................................................................................10-5 Table W - 8 - Capital Program Financing..................................................................................................10-6 Table W - 9 - Water Operating Cash Flow................................................................................................10-7 Table W - 10 - Water Fund Balances........................................................................................................10-8 Table W - 11- Water 2023 Cost of Service..............................................................................................10-9 Table W - 12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components ........10-10 Table W - 13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components.................................................................................................................10-10 Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components ..................10-10 Table W - 15 - Water 2023 Estimated Units of Service..........................................................................10-11 Table W - 16 - Water 2023 Unit Cost of Service....................................................................................10-12 Table W - 17 - Water 2023 Cost of Service by Customer Class..............................................................10-13 Table W - 18 - Water Proposed 2023 Rates...........................................................................................10-14 Table W - 19 - Water 2023 Cost of Service Under Proposed Rates.......................................................10-15 Table W - 20 - Water 2023 Bill Impact...................................................................................................10-16 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF WASTEWATER TABLES Table S - 1 - Wastewater Projected Accounts..........................................................................................11-1 Table S - 2 - Wastewater Projected Billed Volume (1,000 Gallons).........................................................11-2 Table S - 3 - Wastewater Existing Charges...............................................................................................11-3 Table S - 4 - Wastewater Projected Revenues at Existing Rates..............................................................11-4 Table S - 5 - Wastewater Projected Other Revenues...............................................................................11-4 Table S - 6 - Wastewater Capital Improvement Program........................................................................11-5 Table S - 7 - Wastewater Projected O&M Expenses................................................................................11-5 Table S - 8 - Wastewater Cash Financed Capital......................................................................................11-6 Table S - 9 - Wastewater Operating Cash Flow........................................................................................11-7 Table S - 10 - Wastewater Projected Fund Balances...............................................................................11-8 Table S - 11 - Wastewater 2023 Cost of Service......................................................................................11-9 Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment....................................................11-10 Table S - 13 - Wastewater 2023 Allocation of Depreciation..................................................................11-11 Table S - 14 - Wastewater 2023 Allocation of O&M Expenses..............................................................11-12 Table S - 15 - Wastewater 2023 Units of Service...................................................................................11-13 Table S - 16 - Wastewater 2023 Unit Cost of Service............................................................................11-14 Table S - 17 - Wastewater 2023 Cost of Service by Customer Class......................................................11-15 Table S - 18 - Wastewater Proposed 2023 Charges...............................................................................11-16 Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates...............................................11-17 Table S - 20 - Wastewater 2023 Bill Impact...........................................................................................11-17 LIST OF COMBINED TABLES Table C - 1- Combined Projected Fund Balances Table C - 2 - Combined Operating Cash Flow...... Table C - 3 - Combined 2022 Bill Impact ............. ......12-1 ......12-2 ......12-3 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.0 Executive Summary The City of Fayetteville (City) provides water and wastewater services to retail and wholesale customers. The Water and Wastewater fund is an Enterprise Fund, which is funded by the operating and capital revenues from the users of the system. Due to multiple factors including increasing operating costs, significant capital investments to meet regulatory requirements, and the need for infrastructure rehabilitation and replacement, revenues under existing rates are not adequate to meet the annual revenue requirements. Therefore, to maintain financial sufficiency and to assure equitable cost recovery, the City engaged Black & Veatch Management Consulting, LLC (Black & Veatch) to perform a Water and Wastewater Comprehensive Rate Study (Study). The primary objectives of the Study are to develop a balanced financial plan, determine cost of service allocations for each customer class and design rates to recover costs from customer classes in reasonable accord with the allocated costs of service. The financial plan was developed for the six -year period of 2022 through 2027, also referred to as the study period or the forecast period. The city's fiscal year is a calendar year, starting on January 1 and ending on December 31. As a result of our evaluations and analyses, the following summary of findings and recommendations are offered for the City's consideration. 1.1 Summary of Findings 1.1.1 Revenue Under Existing Rates 1. The City provides retail water services to approximately 41,300 customers inside the City and about 7,400 customers outside the City. The number of retail water service customers inside the City is projected to increase to about 44,600 by 2027 and the number of outside City water customers is projected to increase to about 8,300. The City also provides treated water to four wholesale customers. Retail wastewater collection and treatment service is provided to approximately 36,600 customers inside the City and about 3,000 customers outside the City. The number of inside City wastewater service customers is projected to increase to about 39,700 by 2027 and the number of outside City wastewater service customers is projected to increase to about 3,200. 2. Treated water sales to inside City retail customers are projected to increase from approximately 3,454,000 kgals (1,000 gallons) in 2022 to approximately 3,664,400 kgals by 2027. Treated water sales to outside City retail customers are projected to increase from approximately 560,700 kgals in 2022 to approximately 629,300 kgals by 2027. Treated water sales to wholesale customers is projected to be approximately 224,200 kgals in 2022 and remain at that level through 2027. Billed wastewater volume from inside City retail customers is projected to increase from approximately 3,013,300 kgals in 2022 to approximately 3,190,000 kgals by 2027. Billed wastewater volume from outside City retail customers is projected to increase from 133,300 kgals in 2022 to about 114,200 kgals by 2027. Billed wastewater volume from wholesale customers is projected to remain at the 2022 level of 195,700kgals through 2027. The City's current water rates became effective January 1, 2022. For both retail and wholesale customers, the water rates include a monthly base charge, which varies by meter size and a volume charge that varies by customer class. The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, the wastewater rates include BLACK & VEATCH I Executive Summary ES-1-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study a monthly base charge, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). The existing wastewater rate structure is described in Section 3.3.2. 4. Revenue is currently derived principally from charges for treated water and wastewater service, with some revenue also obtained fire protection charges and other miscellaneous sources. Revenue from treated water sales, under existing rates, is projected to increase from $23,380,300 in 2022 to about $25,129,700 in 2027, reflecting a 5-year cumulative increase of 7.3%. Miscellaneous water revenues are estimated to increase from $1,588,800 in 2022 to approximately $1,609,000 in 2027, reflecting a 5-year cumulative increase of 1.3%. Revenue for wastewater collection and treatment services is projected to increase from $26,571,400 in 2022 to about $28,119,400in 2027, under existing rates, reflecting a 5-year cumulative increase of 5.7%. Miscellaneous wastewater revenue is estimated at $1,420,200 per year from 2022 through 2027. 1.1.2 Revenue Requirements 1. Costs of service to be recovered from water and wastewater service charges include (1) operation and maintenance (O&M) expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) Safe Drinking Water Fee Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The water and wastewater utilities do not have any outstanding debt service; however, a future debt issuance of $90,000,000 is projected in 2024. No transfers to the shop fund are planned over the study period. 2. The annual O&M expense includes the cost of labor, materials, power, chemicals, purchased water, contract services and other expenses associated with each utility's operation. In this study, FY 2021 is defined as the base budget year, based on which the O&M costs are projected for the forecast period. O&M expense for the water utility is projected to increase from $15,961,700in 2021 to $20,686,900by 2027 due to the combined effects of inflation and system growth. O&M expense for the wastewater utility is projected to increase from $15,662,800in 2021 to $18,980,400 by 2027 due to the combined effects of inflation and system growth. Bad debt expense refer to outstanding balances from customers that are deemed uncollectible. The water and wastewater bad debt in 2019 was 0.5% of revenue. Bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for the water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027. Annual bad debt expense for the wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027. 4. The Payment In Lieu of Taxes (PILOT) are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires the water and wastewater funds to pay 4.25% of annual total gross sales revenues to the City. Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Annual PILOT amount for the wastewater utility is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. 5. The Safe Drinking Water Fee (SDWF) revenue collected for each metered customer is reimbursed to the state of Arkansas Department of Public Health. The SDWF reimbursement is BLACK & VEATCH I Executive Summary ES-1-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study projected to increase from $230,400 in 2022 to $250,600 in 2027. The SDWF is a pass -through fee and is treated as a "revenue reduction" by the City. 6. The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve for the water utility is projected to increase from $133,100 in 2022 to $256,600 in 2027. The transfer to operating reserve for wastewater is projected to increase from $129,500 in 2022 to $157,900 in 2027. 7. The City currently utilizes the following two sources of funding for the water and wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. A capital project meets the requirements of using impact fees if the existing water or wastewater capacity is expanded due to growth. The water capital improvement for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, and $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. The wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. 1.1.3 Summary of Cash Flow Results The cash flow analysis performed based on the projected annual revenues under existing rates and the projected annual revenue requirements indicates a funding gap for both utilities beginning in 2024. 2. A series of 6% annual revenue adjustment is needed in the water utility and a series of 3% annual revenue adjustment is needed in the wastewater utility, starting in 2024, to achieve the goal of the operating fund revenues being self-sufficient and adequate to cover all of the O&M expenses, cash financing of the capital program, required transfers, and to maintain the minimum reserve requirements. Table W - 9, in Appendix 1 presents the cash flow analysis and the proposed series of revenue increases for the water utility, and Table S - 9, in Appendix 2 presents the same for the wastewater utility. 1.1.4 Cost of Service Analysis 1. The revenue requirements less any revenues from other sources provides the "net" annual operating fund revenue requirements (also referred to as "cost of service") that needs to be recovered through user rates and charges. A summary of the projected annual cost of service for 2023 is shown for water and wastewater in tables ES-1 and ES-2, respectively. Table ES - 1—Water 2023 Cost of Service O&M Expenses 17,946,400 17,946,400 Depreciation 2,886,700 2,886,700 3 Return 2,926,500 2,926,500 4 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Executive Summary ES-1-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table ES - 2 —Wastewater 2023 Cost of Service O&M Expenses Depreciation 17,377,400 8,187,000 17,377,400 8,187,000 3 Return 1,195,100 1,195,100 4 Net Cost of Service 17,377,400 9,382,100 26,759,500 2. As a basis for design of a schedule of water and wastewater rates, the costs of service are allocated to the classes of customers in accordance with respective service requirements of each customer class. The resulting costs of service allocated to customer classes are summarized in Table W - 17 for water and Table S -17 for wastewater. 1.2 Proposed Recommendations Based on the financial planning and cost of service analysis performed for the study period, the Black & Veatch team proffers the following series of recommendations: 1. Implement a series of 6% annual revenue increase from 2024 to 2027 for the water utility and a series of 3% annual revenue increases from 2024 to 2027 for the wastewater utility. 2. Implement cost of service -based rates for water and wastewater utilities in 2023. 3. Transition the existing monthly Base charge to the proposed Base Charge, derived based on cost of service, if cost of service based proposed Base Charge is greater than the existing Base charge. 4. Eliminate the minimum volume charge billing of 1,000 gallons from the volumetric portion of the rate structure. 5. Continue with the existing tier block structure for customer classes that have an inclining block (residential) or a uniform block (industrial) for the volumetric rate structure. 6. Change to uniform block for customers that currently have a declining block (non-residential and irrigation) volumetric rate structure. These recommendations enable the water and wastewater utilities to meet all its financial obligations, so that the City can continue to provide reliable service to serve the needs of existing and future customers. 1.3 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable BLACK & VEATCH I Executive Summary ES-1-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Executive Summary ES-1-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.0 Introduction The City of Fayetteville water utility provides treated water and water distribution services to approximately 41,300 customers within the corporate limits of Fayetteville, and to approximately 7,400 customers in areas contiguous to, but outside of the City's corporate limits. The wastewater utility provides retail wastewater collection and treatment service to approximately 36,600 customers within the corporate city limits and to approximately 3,000 customers outside of the City's corporate limits. The City also provides treated water to four wholesale customers and wastewater treatment to two wholesale customers. In providing water and wastewater service, the City incurs considerable expense related to the ongoing operating and capital needs of the utilities. These operating and capital expenditures tend to increase annually due to the combined effects of inflation and the need to repair, replace, or extend existing service facilities to meet customer service requirements, as well as to meet more stringent state and federal water quality requirements and EPA requirements. The City of Fayetteville, recognizing the importance of financial planning and cost of service analysis to equitably recover the increasing costs to replace, renew, expand, improve, and operate its water and wastewater service facilities, retained Black & Veatch to perform this comprehensive study of revenue requirements, cost of service, and rates for potable water service and wastewater service. 2.1 Purpose This report examines the respective projected revenue and rate requirements of the water and wastewater systems of the City. The purpose of this report is (1) to project the future revenues of the water and wastewater utilities under existing rates and charges, as well as the operating expenses and capital financing revenue requirements of the two utilities, and to examine the adequacy of projected revenues to meet these revenue requirements through calendar year 2027; (2) to allocate these revenue requirements, or costs of service, for a representative test year to the various customer classes in accordance with the respective service requirements that each class places on the systems; and (3) to develop a suitable schedule of water and wastewater rates that will produce revenues adequate to meet the financial needs of the utility on a basis that recognizes customer costs of service, existing wholesale service agreements and practical bill impact considerations. 2.2 Scope This report presents the results of a comprehensive study of the projected revenue and revenue requirements, costs of service allocations, and proposed rates for treated water and wastewater service. Revenue and revenue requirements are projected for the six calendar years from 2022 through 2027, recognizing anticipated growth in number of customers, water use, and wastewater flows throughout the service area. The study of revenue requirements recognizes projected operation and maintenance expense, capital improvement requirements met from revenues, principal and interest payments on outstanding and proposed bond issues, and reserve fund requirements. Requirements of existing revenue bond indentures are also recognized. Costs of treated water and wastewater service are developed for each group of customers and type of service based on consideration of utility revenue needs and projected customer service requirements. Rate adjustments are designed for retail and wholesale customers in accordance with allocated costs of service, wholesale service agreement terms, and customer bill impact considerations. BLACK & VEATCH I Introduction 2-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.3 Study Methodology The development of user rates and charges requires the integration of three critical components: (i) financial plan; (ii) cost of service allocations; and (iii) rate design. 2.3.1 Financial Plan The development and update of a financial plan is necessary to continue to focus on financial discipline, build financial stability, and maintain sustainable financial planning Financial Planning practices. The financial planning process helps to establish a financial roadmap to meet all of the water and wastewater utility's obligations. As illustrated in Figure 2 - 1, the key components of a financial plan are: (i) projection of revenues from user rates and other sources; (ii) development of a capital financing plan to decide the mix of debt and cash funding of capital program; (iii) projection of revenue requirements (O&M and capital costs, and target reserves); and (iv) determination of the level and timing of revenue adjustments needed to maintain financial viability. The annual revenue requirements are typically developed on a cash - needs basis for public utility rate setting. The revenue requirements, under the cash -needs basis approach, include the following: Project Revenues Review CPro-Forma Project Revenue Requirements Scenario Planning Develop Capital % Rev ancing Plan Adjustments Figure 2 -1: Financial Plan O&M expenditures; Debt service expenses; Cash financing of capital program; Contributions to operating reserves; and Other obligations such as payments and transfers for specific purposes. To establish financial stability, a financial plan is typically prepared for a multi -year period. A six -year financial plan was developed for the water and wastewater utility to achieve the financial objectives and target metrics defined to build and sustain financial integrity. 2022 through 2027 is the forecast period for both revenues and revenue requirement projections. The revenue adjustments represent the level of annual revenue increases necessary to meet the annual net revenue requirements. 2.3.2 Cost of Service Cost of service can be described as the revenue that the water and wastewater utility need to generate, net of funding from other miscellaneous sources of revenues. Therefore, Cost of Service is essentially the "net revenue requirement" that is to be recovered through user rates and charges. As illustrated in Figure 2 - 2, Cost of Cost of Service Analysis Allocate Costs Develop Units Unit Costs of Service Distribute Allocated Costs Based on Service Requirements Figure 2 - 2: Cost of Service service analysis enables an equitable apportioning of the net annual revenue requirements (also referred to as cost of service) to the various cost components and customer BLACK & VEATCH I Introduction 2-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study classes. The level and types of allocation performed depend on the existing and anticipated rate structure. As municipal utilities are public utilities that cannot make a profit, the equitable allocation of costs is a critical step that is necessary to establish a reasonable nexus between costs incurred in providing service and the fees charged from customers, and to establish defensible user rates and charges. 2.3.3 Rate Design The third and final component is an evaluation of the existing rate structure components and the development of proposed user rates and charges. The user rates and charge schedules typically include fixed charge, volumetric charge, and other special charge rate components. As illustrated in Figure 2 - 3, the rates and charges are designed to recover the annual cost of service allocated to these different rate components and based on local policy and practical considerations. The study methodology described above and used in the financial planning, cost of service and rate design analysis reflect the application of industry accepted rate setting approaches that are provided in the following two guidance manuals: American Water Works Association (AWWA) Manual M-1: Principles of Water Rates, Fees, and Charges for water rate setting; and Rate Design Review Develop COS Rates Scenario 1 Planning Develop Practical Rates Proposed Rates ---------------------------------- Figure 2 - 3: Rate Design Water Environment Foundation (WEF) Financing and Charges for Wastewater Systems for wastewater. BLACK & VEATCH I Introduction 2-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 3.0 Rate Structure Overview The revenue requirements of a water and wastewater utility, net of any miscellaneous sources of revenues, are recovered from user rates and charges. A water rate structure usually consists of two primary components, namely, a fixed charge and a volumetric charge. Similarly, a wastewater rate structure more commonly consists of a fixed charge, a volumetric charge, and pollutant charge (for wastewater pollutants such as Bio-chemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). Occasionally, a utility's water and wastewater rate structures may include special surcharges and/or special assessments to recover costs associated with certain service situations such as purchased water, pumping to elevations, drought conditions, readiness -to -serve, environmental conditions, and extra - strength wastewater discharges. 3.1 Fixed Charge A utility's annual revenue requirements comprise mostly of fixed costs such as salaries and benefits, pension obligations, debt service, cash financing for infrastructure renewal, and costs related to the provision of adequate capacity for service. These types of fixed costs occur on a recurring basis regardless of the amount of water used by the customer. Therefore, rate structures need to afford the ability to recover at least some of the fixed costs based on billing parameters that are not related to water usage or wastewater flow. The fixed charge, which is assessed regardless of the volume of water used, provides a mechanism to reliably recover some of the fixed annual operating costs of the utility, and provide for some level of revenue stability. In the utility industry, fixed charges are designed to recover one or more of the following types of costs, namely, (i) metering; (ii) billing; (iii) readiness -to -serve cost; (iv) specific capital investment; and (v) other specific costs. The costs of providing these functions vary among types of customers and/or by factors such as size and capacity of the meters. Therefore, to provide for equitable cost recovery, water and wastewater fixed charges are usually assessed based on meter size and also by customer class. 3.2 Volumetric (Usage) Charge In the utility industry, usage charges are designed to recover all other costs (except those that are recovered through fixed charge) associated with the treatment and delivery of water service and the collection, treatment, and disposal of wastewater. The three common types of volumetric charge are: (i) inclining block rate, where the usage in the next higher usage block is priced at a higher rate per unit; (ii) uniform block rate, where all units of usage are priced at the same unit rate; and (iii) declining block rate, where the usage in the next higher usage block is priced at a lower rate per unit. As usage patterns vary among customer classes and consequently different classes place different levels of service demands, different volumetric rates can be established for the various customer classes. In designing the volumetric rate structure, practical considerations including conservation, equity, affordability, and ease of administration are addressed. 3.3 Existing Rate Structure 3.3.1 Water Rate Structure Consistent with industry rate structures, the City's water rate structure comprises of both Fixed Charge and Volumetric Charge components. The water rate structure includes the following two components: BLACK & VEATCH I Rate Structure Overview 3-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Base Charge (Fixed Charge); and Volume Charge (Volumetric Charge). Some of these components are applicable to only specific customer classes. The revenues derived from the above charges are collectively referred to as water Service Revenues. ■ Base Charge The existing Base Charge for all customer classes is based on meter size. ■ Volume Charge. The existing Volume Charge is based on the quantity of water used by the customers. ■ Safe Drinkine Water Fee: This is a regulatory charge per bill that is collected by the City on behalf of the state of Arkansas Department of Public Health. The customer classes to which the specific charge components apply is illustrated in Figure 3 -1. The existing water rate schedule for 2022, for these rate components, is presented in Table W - 3 in Appendix 1. All customers are billed monthly. Figure 3 - 1: Existing Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) Minimum Usage (1,000 Gallons) Volume Rate (2-Tier Declining Block) Minimum Usage (1,000 Gallons) Volume Rate (Uniform) Minimum Usage (1,000 Gallons) Volume Rate ( Uniform) 2 rates (Reduced Peak Demand and Peak Demand) Safe Drinking Water Fee (per month) 3.3.2 Wastewater Rate Structure Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential Retail Inside City Non -Residential, Irrigation; and Retail Outside City Non -Residential, Irrigation Retail Inside City Major Industrial Retail Outside City Major Industrial Wholesale • All customer classes The City's Operating Fund wastewater rate structure also comprises of both Fixed Charge and Volumetric Charge components. The wastewater rate structure includes the following three components: Base Charge (Fixed Charge); BLACK & VEATCH I Rate Structure Overview 3-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Volume Charge (Volumetric Charge); and BOD and TSS Charge (Surcharge). The revenues derived from all these three sources are collectively referred to as "Wastewater Service Kevenues. Some of these user rate components are applicable to only specific customer classes. ■ Base Charge: The existing Base Charge for all retail customers is based on meter size. ■ Volume Charge: The existing volume wastewater charge is based on the quantity of water used by the customer classes. Surcharge: The existing wastewater surcharge is based on the excess strengths of BOD and TSS, of certain customers. The customer classes to which the specific rate components are applicable is illustrated in Figure 3 - 2. The existing wastewater rate schedule for 2022 is presented in Table S - 3 in Appendix 2. Figure 3 - 2: Existing Wastewater Rate Structure • Base Charge by Meter Size • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); • Volume Rate (2-Tier Inclining Block) Retail Inside City Residential Based on winter water usage of December, January and February Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale 2 tiered rates (85% of metered water usage and Above 85% of metered water usage) BLACK & VEATCH I Rate Structure Overview 3-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.0 Water Utility The financial plan and rate design were developed to meet all the funding obligations of the water utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The water utility financial plan was developed for the six -year forecast period of 2021 through 2026, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 4.1 Water Revenue Projections Under Existing Rates The water utility revenues are derived from the following sources: Water Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Water Service Revenues under the 2022 existing rates are projected for the forecast period. 4.1.1 Water Revenue Under Existing Rates As described in Section 3.3.1, the Water Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual water usage by customer class and by applicable blocks of usage. 4.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and average usage trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and usage factor. The number of accounts is projected to grow in all customer classes except for Fire protection and wholesale where the number of accounts is anticipated to remain at the 2021 level. The total number of water accounts (not including private fire connections) is anticipated to increase from about 48,000 in 2022 to about 52,200 in 2027, at an overall annual system growth rate of 1.7%. The number of private fire connections is anticipated to remain at 727 throughout the study period. Table W - 1 in Appendix 1 presents the projected annual number of water accounts and private fire connections for the period of 2022 through 2027. BLACK & VEATCH I Water Utility 4-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 4-1 presents both the historical and projected number of accounts for the water utility. Water Utility Historical and Projected Accounts 60,000 50,000 — — — — — — — - 40,000 30,000 20,000 10,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-1 - Historical and Projected Water Accounts 4.1.1.2 Projection of Water Usage Billed water volumes are projected based on estimates of the number of water accounts and the average billed usage per account. Average water use per account is determined based on historical usage. Customer water usage projections are based on 2022 actuals. Total system water usage is projected to increase from 4,238,900 kgals in 2022 to 4,517,900 kgals in 2027. Table W - 2 in Appendix 1 presents the projected annual volume for the period of 2022 through 2027. Figure 4-2 presents both the historical and projected annual billed volume for the water utility. Water Utility Historical and Projected Billed Volume (1,000 Gallons) 5,000,000 4,500,000 — 4,000,000 — — — 3,S00,000 3,000,000 2,S00,000 2,000,000 1,500,000 1,000,000 500,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-2 - Historical and Projected Water Billed Volume 4.1.2 Projection of Water Service Revenue Under Existing Rates Water service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected water usage for each BLACK & VEATCH I Water Utility City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study customer class, and the application of the 2022 rate schedule. Water service revenue under existing rates is projected to increase slightly from $23.4 million in 2022 to $25.1 million in 2027. This growth is due to increase in water sales due to the growth in the number of accounts over the study period. Table W - 4 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. Figure 4-3 presents both the historical and projected annual service revenues under existing rates for the water utility. $30,000,000 $25,000,000 $20,000,000 $15,000,000 S 10,000,000 $5,000,000 $0 Water Utility Historical and Projected Water Service Revenues (Under Existing Rates) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-3 - Historical and Projected Water Service Revenue 4.1.3 Other Water Revenues The other revenues include the following major components: Impact Fee Revenue; Water/Rural Water Connection Fees; Miscellaneous Fees (Water Sales Not on Computer, Trip Fees, Tampering -Billed Service); Penalties; and Safe Drinking Water Fee (pass -through) The annual revenues from water impact fees, water connection fees and miscellaneous fees for 2022 to 2027 are projected based on historical three-year (2018 to 2020) average revenues for each of the fees. The penalties revenue in 2020 reflects only the first two and half months of revenues, as the City stopped assessing penalties for non-payment due to the pandemic. The revenue for penalties in 2021 is projected to be half of the historical three -year (2017 to 2019) average revenues due to continued waiver of the penalties as a result of the COVID pandemic during the first half for 2021. The revenue from penalties in 2022 and beyond is projected as the historical three-year average (2017 to 2019) average revenues. Table W - 5 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. BLACK & VEATCH I Water Utility 4-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The Safe Drinking Water Fee (SDWF) is assessed for all water users in the state of Arkansas. The current rate is $0.40 per bill per month and is collected by all water utilities in the state. The SDWF revenue is projected by applying the current rate to the number of meters for the period 2022 to 2027. The revenue collected as part of this fee is reimbursed to the state. 4.2 Water Capital Improvements Program The capital project costs provided by the City were based on 2020 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects for 2021 and beyond. The water utility Capital Improvement Plan (CIP) provides for a total of $134.6 million of investments during the study period of 2022 through 2027. Table W - 6 in Appendix 1 presents the CIP list of projects and schedule for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. Included in the 2022 — 2027 Water capital program is $93.5 million for the West Water Transmission Line. This project consists of approximately 11.3 miles of 48" diameter pipeline to convey treated water from Beaver Water District to the City. This project is to be funded from a mix of bond financing and revenue from water rates. 4.3 Water Revenue Requirements Projection of reliable revenue requirements includes: (1) operation and maintenance expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) SDWF Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 4.3.1 Water Operation and Maintenance Expenses The O&M expenses for the water utility include the annual expenses associated with the water purchases from Beaver Water District; storage and distribution; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a water inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Purchased Water: 3.00% BLACK & VEATCH I Water Utility 4-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The annual O&M expenses for water utility are budgeted at $16.5 million in 2022 and are projected to grow to $20.7 million by 2027. Table W - 7 in Appendix 1 presents a summary of total projected operation and maintenance expense for the period 2022 through 2027. Figure 4-4 presents the historical and projected O&M expenses for the water utility. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Water Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Proiected Figure 4-4 - Projected Annual Water O&M Expenses 4.3.2 Water Bad Debt Bad debt expense refer to outstanding balances owed that are deemed uncollectible. The water bad debt in 2019 was 0.5% of revenue. Hence, bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table W - 9 in Appendix 1 presents the projected bad debt for the period 2022 through 2027. 4.3.3 Water Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the water utility is calculated by multiplying actual water revenues from prior year (Water sales on Computer and Water sales not on Computer/ Bulk Water Sales, and Fire Hydrant and Protection). Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Line 12 in Table W - 9 in Appendix 1 presents the projected PILOT expenses for the period 2022 through 2027. 4.3.4 Safe Drinking Water Fee Reimbursement The SDWF revenue collected for each metered customer is reimbursed to the state of Arkansas department of Public Health. The SDWF reimbursement is projected to increase from $230,400 in 2022 to $250,600 in 2027. Line 13 in Table W - 9 in Appendix 1 presents the projected SDWF reimbursement for the period 2022 through 2027. BLACK & VEATCH I Water Utility 4-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.3.5 Water Debt Service Requirements The water utility does not have any outstanding debt service obligations; however, it does anticipate a $90 million debt issuance in 2024 for the West Water Transmission Line. Projected debt service is $3.2 million in 2024 and increasing to $ 6.3 million in 2025 as shown in Line 14 in Table W - 9 in Appendix 1. 4.3.6 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 16 in Table W - 9 in Appendix 1. 4.3.7 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $133,100 in 2022 to $256,600 in 2027 reflecting the growth in the O&M budget. Line 17 in Table W - 9 in Appendix 1 presents the projected transfers to the operating reserve for the period 2022 through 2027. 4.3.8 Water Cash Financed Capital The City currently utilizes the following two sources of funding for the water utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 4.2, the water capital improvement program for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. A capital project meets the requirements of using impact fees if the existing water capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table W - 8 in Appendix 1 presents the sources of funding for the water capital improvement program. Line 18 in Table W - 9 in Appendix 1 presents the projected transfers for cash financed capital for the period 2022 through 2027. 4.3.9 Transfer to Capital Reserve The water utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 19 in Table W - 9 in Appendix 1 presents the projected transfers to and from the capital reserve for the period 2022 through 2027. 4.4 Water Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table W - 9 in Appendix 1, provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates water utility revenues will increase from $23.8 million in 2022 to $25.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues are anticipated to increase from $645,600 in 2022 to $684,100 in 2027. This increase is due to the growth in SDWF, which is pass - BLACK & VEATCH I Water Utility 4-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study through. It is anticipated that all other categories of other revenues will remain flat throughout the study period. Projected Expenses: Line 15 indicates the total annual expenses for the water utility are anticipated to increase from $17.8 million in 2022 to $28.7 million in 2027. Projected Transfers: Line 20 indicates the total annual transfers for the water utility are anticipated to decrease from $6.2 million in 2022 to $3.5 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the water utility, a series of revenue adjustments are proposed as follows: 2024: 6% effective (January 1, 2024) 2025: 6% effective (January 1, 2025) 2026: 6% effective (January 1, 2026) 2027: 6% effective (January 1, 2027) Lines 2 through 7 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 4-5 presents the projected revenue and revenue requirements through 2027 for the water utility. Water Utility Revenues and Revenue Requirements $50,000,000 $40,000,000 $30,000,000 IIIIIIIII� � $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 0&M Expenses Debt Service Cash Financing of Capital Other Transfers Revenues Under Existing Rates Revenues Under Proposed Rates Figure 4-5 - Water Revenues and Revenue Requirements BLACK & VEATCH I Water Utility 4-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 10 in Appendix 1 presents the water utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table W -10, the proposed annual revenue adjustments will allow the water utility to meeting the minimum fund balance requirements for the O&M Reserve, Operating and Capital funds through 2027. The water utility Capital Reserve fund balance is negative beginning 2025, however, the combined water and wastewater utility Capital Reserve fund is positive through 2027. 4.5 Water Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 4.1 through 4.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The cost of service analysis provides a mechanism to defensibly allocate the total annual revenue requirements to the various customer classes. The cost of service is typically performed for a single year, referred to as the "Test Year" for which the rates are to be designed. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Water Utility Costs to Customer Classes 4.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table W -11 in Appendix 1 presents the derivation of the cost of service to be recovered through water charges. As Line 18 in Table W - 11 indicates, the water cost of service for 2023 is projected to be $23.8 million. This cost of service consists of $17.9 million of net O&M expense and $5.8 million of net capital costs. Costs of service is apportioned among customer classes in this study on a "Utility Basis", that is, in terms of operating expense, depreciation expense, and return. For a municipal utility, the total of depreciation expense and return is equal to the capital cost related portion of the total cost of service. BLACK & VEATCH I Water Utility 4-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Depreciation is the loss in value of the original plant investment, not restored by current maintenance, due to wear, decay, inadequacy, and obsolescence. Annual depreciation is determined as a percentage of original investment based on expected service lives of the various facilities. Unless funds are provided for normal annual replacement of original plant items, operating reliability of the system, as well as the value, will decrease. Depreciation funds are used to finance principal payments on bond issues and provide normal annual capital expenditures. The depreciation expense associated with the water utility is estimated in this study recognizing depreciation rates presently in use by the water utility. This results in a projected test year depreciation expense of $2.9 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return on the system investment provides funds for bond interest payments and any other costs that may be incurred. In developing the level of return on net plant serving the requirements of outside City customers, provisions for a reasonable margin should be made to meet interest on borrowed funds, and to recognize the business risk assumed by the City in providing reliable facilities to serve nonresident customers. Total return for the test year is projected to be $2,926,500 as shown on Line 17 of Table W - 11 in Appendix 1. 4.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a water system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes Functional Cost Centers Functional cost centers of a water utility represent the activities that contribute to the incurrence of O&M and capital costs. For a water utility, they often include source of water supply, pumping, treatment, storage, distribution, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 4.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W -12 in Appendix 1. This plant investment data is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 4.5.3.2. BLACK & VEATCH I Water Utility 4-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The O&M costs for the Test Year are allocated to the various functional cost centers based on the specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.9 million, to the various functional cost centers, is presented in Table W -14 in Appendix 1. The various cost elements of water service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 4.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of Base Costs, Extra -Capacity Costs, and Customer Costs. Base costs are those which vary directly with the quantity of water used, as well as those costs associated with serving customers under average load conditions without the elements necessary to meet water use variations or peak demands. Base costs include purchased power and treatment chemicals, and other operating and capital costs of the water system associated with serving customers to the extent required for a constant, or average annual rate of use. Extra -Capacity costs represent those operating costs incurred due to demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demand. Customer Costs are defined as costs which tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collection and accounting costs, and maintenance and capital charges associated with meters and services. The delineation of costs of service into these principal categories provides the means of further allocating such costs to the various customer classes based on the respective base, extra capacity, and customer service requirements of each customer class. Wholesale customers generally do not use smaller water distribution mains as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 4.5.3.1 Water Utility Allocation to Cost Components The water utility is comprised of a variety of service facilities, each designed and operated to fulfill a given function. In order to provide adequate service to its customers at all times, the utility must be capable of not only providing the total amount of water used, but also supplying water at maximum rates of demand. Since all customers do not exert their maximum demand for water at the same time, capacities of water facilities are designed to meet the peak coincidental demands that all classes of customers, as a whole, place on the system. For every water service facility on the system, there is an underlying average demand, or uniform rate of usage exerted by the customers for which the base cost component applies. For those facilities designed solely to meet average day demand, costs are allocated 100% to the base cost component. Extra capacity requirements associated with coincidental demands in excess of average use are further related to maximum daily and maximum hourly demands. BLACK & VEATCH I Water Utility 4-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Analysis of historical system maximum day and maximum hour demands to average day demands results in appropriate ratios for the allocation of capital costs and operating expenses to base and extra capacity cost components. A maximum day to average day ratio of 2.10 is used based on experienced demands in the water system. This indicates that approximately 47.6% of the capacity of facilities designed and operated to meet maximum day demand is required for average or base use. According, the remaining 52.4% is required for maximum day extra capacity requirements. The costs associated with facilities required to meet maximum hour demand are allocable to base, maximum day extra capacity, and maximum hour extra capacity. A ratio of maximum hour to annual average day water use of 2.73 is used, based on demands experienced by the system. This ratio indicates that 36.6% of the capacity of facilities designed and operated for maximum hour demand is needed for average or base use, while 40.3% is utilized for maximum day extra capacity uses, and the remaining 23.1% is required to meet maximum hour extra capacity demand in excess of maximum day needs. 4.5.3.2 Allocation of Net Water Plant Investment The estimated test year net plant investment in water facilities consists of net plant in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. As the wholesale customers have their own storage tanks, the plant investment associated with tanks was allocated to the retail customers only. The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W - 12 in Appendix 1. Plant investment is allocated to cost components on a design basis recognizing the principal function governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. 4.5.3.3 Allocation of Water Facilities Depreciation Expense Depreciation is a real part of the cost of operating a utility. In utility accounting, it is generally accepted practice to use depreciation funds to finance system replacements, improvements, and extensions. While such action does not restore the value lost in each property unit every year, the total value lost through depreciation is restored to the system as a whole. Depreciation funds can be reinvested in the system either by direct payment of routine capital additions and replacements or by principal payments on bonded debt. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the water system is $2.9 million, as presented on Line 9 in Table W - 13 in Appendix 1. As the wholesale customer have their own storage tanks, the depreciation costs associated with tanks was allocated to the retail customers only. 4.5.3.4 Allocation of Water Utility Operating Expenses Table W - 14 in Appendix 1 presents the allocation of O&M expense to functional cost components. Total test year O&M expense, as shown on Line 7 of this table, amounts to $17.9 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. BLACK & VEATCH I Water Utility 4-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5.4 Distribution of Water Utility Costs to Customer Classes As a basis for determining the cost of water service to each customer class, the elements of cost of service previously allocated to functional cost components are distributed among the classes in proportion to their respective service requirements. Estimates of these requirements, or units of service, reflect the average number of accounts with recognition to relative meter sizes serving each account, annual water sales, and estimated peak water demands placed on the system by each customer class. Analysis of resulting costs of service to each class and comparison of allocated costs with revenues under existing rates provide a basis for future water rate adjustments. 4.5.4.1 Water Customer Classification Customer classes consist of residential, non-residential, industrial, irrigation, wholesale, and public and private fire protection. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential, and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit classes. Industrial includes major and minor industrial. Outside City includes Farmington, Greenland, Washington/Growth Area, Johnson, and Goshen/ White River. Wholesale includes the communities of Elkins, West Fork, Mt. Olive, and RDA/WWA. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. 4.5.4.2 Water Units of Service The cost of service responsibility for base costs varies with the annual volume of water usage and is distributed to customer classes on that basis. Extra capacity costs are those costs associated with meeting peak rates of water use and are distributed to customer classes on the basis of their respective system capacity requirements in excess of average requirement rates. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of the number of equivalent meters and monthly bills. The estimated units of service for the various customer classifications are presented in Table W -15 in Appendix 1. Estimates of test year annual water volumes, shown in Column 1, are based on the projections of total water sales for the test year 2023. Average daily water use is presented in Column 2. Columns 3 through 8 present the estimated maximum day and maximum hour capacity factors for each customer class, the resulting demands, and extra capacity requirements, respectively. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 10) is estimated by relating typical costs for meters and services larger than 5/8 inch in size to the typical cost of a 3/4 inch meter and its related service line. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class in Column 11. Extra capacity requirements for fire protection service recognize, in part, peak fire flow requirements, and system capabilities established by the Insurance Service Office. One fire is estimated with peak fire flow requirements of 9,000 gallons per minute for 10 hours (maximum day) and 24 hours (maximum hour). Direct fire protection costs have been allocated between inside City and outside City customers in proportion to the number of equivalent 6-inch fire hydrants, as shown in Columns 12 and 13. 4.5.4.3 Water Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is BLACK & VEATCH I Water Utility 4-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study obtained by applying unit costs of service to the number of units for which the customer class is responsible. The water utility has been built with provision for service to customers outside the City, yet the inside City customers must bear the responsibility for providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 7.0% (4.0% for future debt service plus 3.0% risk component) annual rate of return on the value of water facilities serving outside City customers is recognized for purposes of this study. Table W - 16 in Appendix 1 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 3 summarize the units of service developed in Table W - 15. Total allocated costs or investment shown on Lines 4, 6, and 8 were previously developed in Table W - 14, Table W - 13, and Table W - 12, respectively. Unit costs of service for each component are determined by dividing the allocated cost or investment by the total units of service. Total allocated unit costs of service for inside and outside City customers (Lines 15 and 16) are determined by adding the unit costs for net operating expense (Line 5) and depreciation expense (Line 7) to the respective inside and outside City unit costs for return on investment (Lines 10 and 11). These unit costs applied to the respective units of service shown on Lines 1 and 2 determine the allocated total costs of service for inside and outside City customers shown on Lines 17 and 18. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table W - 17 in Appendix 1 shows the resulting allocated and adjusted cost of service by customer class, revenue under existing rates, and the additional revenue required from each class. Costs associated with public fire protection are not recovered through direct charges, therefore, the cost of service for this class is reallocated to all other retail customers in proportion to their allocated cost of service as shown in Column 3. The test year adjusted cost of service, reflecting the reallocation of these costs, is shown in Column 4. The indicated increase or decrease in revenue required to meet adjusted cost of service is shown in Column 6. BLACK & VEATCH I Water Utility 4-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5.0 Water Rate Design The principal consideration in establishing water rate schedules is to establish rates to customers to recover costs that reasonably commensurate with the cost of providing water service. Theoretically, the only method of assessing entirely equitable rates for water service would be the determination of each customer's bill based upon each customer's particular service requirements. Since this is impractical, schedules of rates are normally designed to meet average conditions for groups of customers having similar service requirements. Rates should provide for equitable cost recovery, ease of customer understanding and be simple to administer. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting water rates. The revenue requirements reflect the need for adjustment and the level of revenue required. The cost of service analysis provides the unit costs of service used in the rate design process and gives a basis for determining whether resultant rates will develop revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 5.1 Existing Water Rates The existing schedule of rates for water service became effective on January 1, 2022. For both retail and wholesale customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. The existing water rate structure is described in Section 3.3.1. The existing schedule of base and volumetric water rates is shown in Table W - 3. 5.2 Proposed Water Rates The cost of service analysis described in the preceding sections of this report provides a basis for the design of a schedule of water rates to meet those costs. Proposed water base charge and volume rates have been designed to meet the 2024 allocated costs of service and are presented in Table W -18. The proposed rate structure eliminates the minimum volume charge associated with 1,000 gallons. Additionally, volumetric rate structure for non-residential and irrigation customers classes both inside and outside city were changed from declining block rates to uniform block rates Figure 5 - 1 below presents the proposed water rate structure. Figure 5 - 1 Proposed Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) • Volume Rate (Uniform) Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential • Retail Inside City Non -Residential, Major Industrial, Irrigation; and BLACK & VEATCH I Water Rate Design 5-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study • Retail Outside City Non -Residential, Irrigation Volume Rate ( Uniform) Wholesale Safe Drinking Water Fee (per month) All customer classes In developing proposed schedules of water rates, it must be recognized that the cost of service studies are the result of engineering estimates, based to some extent upon judgment and experience, and detailed results should not be used as literal and exact answers but as guides for potential rate adjustments. Practical considerations such as previous rate levels, bill impact on customers, and magnitude of cost of service shifts among customer classes, and past local practices are commonly recognized in making rate adjustments. A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is presented in Table W - 19 in Appendix 1. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical inside city and outside city customer water charges under existing rates and the rates proposed to become effective January 1, 2024, is presented in Table W - 20. BLACK & VEATCH I Water Rate Design 5-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.0 Wastewater Utility The financial plan and rate design were developed to meet all the funding obligations of the wastewater utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The wastewater utility financial plan was developed for the forecast period of 2022 through 2027, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 6.1 Wastewater Revenue Projections Under Existing Rates The wastewater utility revenues are derived from the following sources: Wastewater Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Wastewater Service Revenues under the 2022 existing rates are projected for the forecast period. 6.1.1 Wastewater Revenue Under Existing Rates As described in Section 3.3.2, the Wastewater Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual wastewater billed volumes by customer class and by applicable blocks of billable wastewater volume. 6.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and billed volume trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and volume factor. The number of accounts is projected to grow for residential customer classes Fayetteville (Inside City) and Farmington (Outside City), whereas all other customer classes are anticipated to remain at the 2021 level. The total number of wastewater accounts is anticipated to increase from about 39,603in 2022 to about 42,900 in 2027, at an overall annual system growth rate of 1.6%. Table S - 1 in Appendix 2 presents the projected annual number of accounts for the period of 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 6-1 presents both the historical and projected number of accounts for the wastewater utility. Wastewater Utility Historical and Projected Accounts 44,000 43,000 42,000 41,000 i 40,000 Op 0 39,000 38,000 37,000 36,000 35,000 34,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2021 Historical — — Projected Figure 6-1 - Historical and Projected Wastewater Accounts 6.1.1.2 Projection of Wastewater Volume Billed wastewater volumes are projected based on estimates of the number of wastewater accounts and the average billed volume per account. Average billed volume per account is determined based on historical billed volume. Wastewater customer usage projections are based on 2022 actuals. Total system wastewater billed volume is projected to increase from 3,342,300 kgals in 2022 to 3,499,900 kgals in 2027. Table S - 2 in Appendix 2 presents the projected annual volume for the period of 2022 through 2027. Figure 6-2 presents both the historical and projected annual billed volume for the wastewater utility. Wastewater Utility Historical and Projected Billed Volume (1,000 Gallons) 3,500,000 3,000,000 — — — — — — — — — 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-2 - Historical and Projected Wastewater Billed Volume 6.1.2 Projection of Wastewater Service Revenue Under Existing Rates Wastewater service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected billed volume for each customer class, and the application of the 2022 rate schedule. Wastewater service BLACK & VEATCH I Wastewater Utility 6-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study revenue under existing rates is projected to increase slightly from $26.5 million in 2022 to $28.1 million in 2027. This growth is due to increase in wastewater sales due to the growth in the number of accounts over the study period. Table S - 4 in Appendix 2 presents the historical and projected annual service revenues for the period of 2022 through 2027. Figure 6-3 presents both the historical and projected annual service requirements under existing rates for the wastewater utility. Wastewater Utility Historical and Projected Wastewater Service Revenues (Under Existing Rates) $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-3 - Historical and Projected Wastewater Service Revenue 6.1.3 Other Wastewater Revenue The other revenues include the following major components: Impact Fee Revenue; Wastewater Connection Fees; Wastewater Sales Not on Computer; Penalties; and WWTP Fees (Hay Sales, Biosolids/ Fertilizer Sales & Water Treatment Residual) The annual revenues from wastewater impact fees, wastewater connection fees. wastewater sales not on computer, and WWTP Fees for 2022 to 2027 are projected based on historical three-year (2018 to 2020) average revenues for each of the fees. The penalties revenue in 2020 reflects only the first two and half months of revenues, as the City stopped assessing penalties for non-payment due to the pandemic. The revenue for penalties in 2021 is projected to be half of the historical three -year (2017 to 2019) average revenues due to continued waiver of the penalties as a result of the COVID pandemic during the first half for 2021. The revenue from penalties in 2022 and beyond is projected as the historical three-year average (2017 to 2019) average revenues. Table S - 5 in Appendix 2 presents the projected annual other revenues for the period of 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.2 Wastewater Capital Improvements Program The capital project costs provided by the City were based on 2020 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects for 2021 and beyond. The City's wastewater utility Capital Improvement Plan (CIP) provides for a total of $43.2 million of investments during the study period of 2022 through 2027. Major wastewater projects include sanitary wastewater rehabilitation totaling $20.5 million and Biosolids Dryer Replacement totaling $3.2 million. Table S - 6 in Appendix 2 presents the CIP list of projects for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. 6.3 Wastewater Utility Revenue Requirements Projection of reliable revenue requirements includes: (1) O&M expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) debt service (consisting of principal and interest payments); (5) transfer to shop fund; (6) transfer to operating reserve; (7) cash financed capital; and (8) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 6.3.1 Wastewater Operation and Maintenance Expenses The O&M expenses for the wastewater utility include the annual expenses associated with the wastewater conveyance, pumping, treatment and disposal; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a wastewater inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Wastewater Treatment Plant Contract: 3.00% The annual O&M expenses for wastewater utility are budgeted at $16.2 million in 2022 and are projected to grow to $19 million by 2027. Table S - 7 in Appendix 2 presents a summary of projected operation and maintenance expense for the period 2022 through 2027. Figure 6-4 presents the historical and projected O&M expenses for the wastewater utility. BLACK & VEATCH I Wastewater Utility 6-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study $20,000,000 $15,000,000 $10,000,000 $5,000,000 so Wastewater Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-4 - Projected Annual Wastewater O&M Expense 6.3.2 Wastewater Bad Debt Bad debt expense refer to outstanding balances owed that are deemed uncollectible. The wastewater bad debt in 2019 was 0.5% of revenue. Hence, the bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table S - 9 in Appendix 2 presents bad debt expense for the period 2022 through 2027. 6.3.3 Wastewater Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the wastewater utility is calculated by multiplying actual wastewater revenues from prior year (Wastewater sales on Computer and Wastewater sales not on Computer/ Dump Fees) and is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. Line 12 in in Appendix 2 presents PILOT expense for the period 2022 through 2027. 6.3.4 Wastewater Debt Service Requirements The wastewater utility does not have any outstanding debt service obligations. The City does not anticipate any debt issuances during the study period, therefore no projected debt service for future debt as shown in Line 18 in Table S - 9 in Appendix 2. 6.3.5 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 15 in Table S - 9 in Appendix 2 6.3.6 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $129,500 in 2022 to $152,700 in 2027 reflecting the growth in the O&M budget. Line 16 in Table S - 9 in Appendix 2 presents transfer to the operating reserve for the period 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.3.7 Wastewater Cash Financed Capital The City currently utilizes the following two sources of funding for the wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 6.2, the wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. A capital project meets the requirements of using impact fees if the existing wastewater capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table S - 8 in Appendix 2 presents the sources of funding for the wastewater capital improvement program. Line 22 in Table S - 9 in Appendix 2 presents transfer for cash financing of capital program for the period 2022 through 2027. 6.3.8 Transfer to Capital Reserve The wastewater utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 18 in Table S - 9 in Appendix 2 presents transfer to and from the capital reserve for the period 2022 through 2027. 6.4 Wastewater Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table S - 9 in Appendix 2 provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates wastewater utility revenues will increase from $26.6 million in 2022 to $28.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues and interest income are anticipated to increase from $726,000 in 2022 to $735,900in 2027. It is anticipated that all categories of other revenues will remain flat throughout the study period. The slight growth is due to the increase in interest income on the operating reserve. Projected Expenses: Line 14 indicates the total annual expenses for the wastewater utility are anticipated to increase from $17.4 million in 2022 to $20.5 million in 2027. Projected Transfers: Line 19 indicates the total annual transfers for the wastewater utility are anticipated to increase from $9.9 million in 2022 to $11.8 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the wastewater utility, a series of revenue adjustments are proposed as follows: 2024: 3% effective (January 1, 2024) 2025: 3% effective (January 1, 2025) BLACK & VEATCH I Wastewater Utility 6-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2026: 3% effective (January 1, 2026) 2027: 3% effective (January 1, 2027) Lines 2 through 7 in Table S - 9 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 6-5 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Wastewater Utility Revenues and Revenue Requirements $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Cash Financing of Capital Other Transfers Revenues Under Existing Rates Revenues Under Proposed Rates Figure 6-5 - Wastewater Revenues and Revenue Requirements Table S - 10 in Appendix 2 presents the wastewater utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipate capital projects. As shown in Table S - 9, the proposed annual revenue adjustments will allow the water utility to meet the minimum fund balance requirements for all funds through 2027. BLACK & VEATCH I Wastewater Utility 6-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.5 Wastewater Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 6.1 through 6.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Wastewater Utility Costs to Customer Classes 6.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table S - 11 in Appendix 2 presents the derivation of the cost of service to be recovered through the wastewater charges. As Line 18 in Table S - 11 indicated, wastewater cost of service for 2023 is projected to be $26.8 million. This cost of service consists of $17.4 million of net operation and maintenance expense and $9.4 million of net capital costs. As performed for the water utility, costs of services are apportioned among customer classes in this study on a Utility Basis. The depreciation expense and return on system investments that were already explained in Section 4.5.1 are applicable to the wastewater utility cost of service analysis as well. The depreciation expense associated with the wastewater utility is estimated in this study recognizing depreciation rates presently in use by the wastewater utility. This results in a projected test year depreciation expense of $8.2 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return for the test year is projected to be $ 1,195,100 as shown on Line 17 of Table S - 11. 6.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a wastewater system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes. BLACK & VEATCH I Wastewater Utility 6-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Functional Cost Centers Functional cost centers of a wastewater utility represent the activities that contribute to the incurrence of O&M and capital costs. For a wastewater utility, they often include source of collection, pumping, conveyance, treatment, disposal, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 6.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD value of the wastewater system is $196.8 million, as presented in Line 26 in Table S - 12 in Appendix 2. This plant investment is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 6.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.4 million, to the various functional cost centers is presented in Table S -14 in Appendix 2. The various cost elements of wastewater service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 6.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of volume related costs, strength related costs, and customer related costs. Volume costs are those which vary directly with the quantity of wastewater contributed. They consist of capital costs related to investment in system facilities which are sized on the basis of, or required because of, wastewater volume. This also includes operation and maintenance expense related to those facilities, and the expense of volume related treatment chemicals and purchased power. Wastewater strength costs consist of the operation and maintenance expense and capital costs related to system facilities which are designed principally to treat the wastewater pollutant loadings of pollutants such as BOD, TSS, and other pollutants. BOD costs reflect costs associated with the treatment of influent BOD and include costs related to activated sludge aeration and disposal of BOD related sludge. Suspended solids strength costs are those costs of wastewater treatment which tend to vary according to the quantity of suspended solids in the raw wastewater. Customer costs are those which tend to vary in proportion to the number of customer bills or customers served. These include the wastewater utility share of customer related meter reading, billing, collection, and account expense. The delineation of costs of service into functional components provides a means of distributing such costs to the various customer classes based on the respective total wastewater volume, strength, and customer cost requirements of each. BLACK & VEATCH I Wastewater Utility 6-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Wholesale customers generally do not use lateral wastewater lines as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 6.5.3.1 Wastewater Utility Cost Allocation to Cost Components In establishing the costs associated with each functional cost component, the return portion of the test year cost of service is distributed to cost functions based on an allocation of the estimated test year value of wastewater system facilities. The test year depreciation expense associated with each major element of plant facilities is allocated to cost functions in the same manner as the plant value. Operating expense is similarly allocated to cost functions based on the projected test year expense estimated for each wastewater system component. 6.5.3.2 Allocation of Net Wastewater Plant Investment The estimated test year value of wastewater facilities consists of net plan in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. Table S - 12 in Appendix 2 presents the allocation of the wastewater utility's total estimated plant value less contributions on an original cost less depreciation value basis. Total plant investment is estimated to be $196.8 million as indicated by Line 26 of the Table S - 12. Plant investment is allocated to cost components on a design basis recognizing the principal purpose governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. The Owl Creek Lift Station and Force Main serve only the City of Fayetteville, hence the plant investment associated with Owl Creek is allocated directly to the City of Fayetteville customers. Additionally, the outside City customers maintain their own wastewater connections, hence, the plant investment associated with wastewater connections is allocated 100% to the City of Fayetteville customers. Wastewater collection net plant is allocated 41% to both retail and wholesale (common to all) and 59% to retail only based on the ratio of interceptors (large diameter mains) which is 41% of the collection system. 6.5.3.3 Allocation of Wastewater Facilities Depreciation Expense As explained in Section 4.5.3.3, depreciation expense is a real part of the cost of operating a utility. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the wastewater system is $8.2 million as presented on Line 26 in Table S - 13 in Appendix 2. The items of expense are allocated to cost components on the same design or cost causative basis used to allocate plant investment. Hence, the depreciation expense associated with Owl Creek Lift Station and Force main and Wastewater connections is directly allocated to the City of Fayetteville customers. 6.5.3.4 Allocation of Wastewater Utility Operating Expenses Table S -14 in Appendix 2 presents the allocation of operation and maintenance expense to functional cost components. Total test year operation and maintenance expense, as shown on Line 10 of this table, BLACK & VEATCH I Wastewater Utility 6-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study amounts to $17.4 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes The total cost responsibility of each customer class is determined by developing unit costs of service for each cost component and applying the unit costs to the respective service requirements of each class. In accomplishing this, each customer class is allocated the share of volume, strength, and customer costs for which it is responsible. 6.5.4.1 Wastewater Customer Classification Customer classes consist of residential, non-residential, industrial and wholesale. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit customers. Outside City includes Farmington, Greenland, Washington County/Growth Area and Johnson. Wholesale includes the community of Elkins and West Fork. 6.5.4.2 Wastewater Units of Service Derivation of the responsibility of customer classes for costs of service require that each class be allocated a portion of the volume, strength, and customer costs of service according to their respective service requirements. The cost of service responsibility for volume costs, which vary with the volume of wastewater contributed to the wastewater system, is distributed to customer classes on that basis. Strength costs are principally related to the function of reducing wastewater suspended solids, and BOD strength loading. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of equivalent meters and monthly bills. The estimated test year service requirements or units of service for the various customer classes are shown in Table S -15 in Appendix 2. Wastewater collected and treated consists of two elements: (1) sanitary wastewater flow and (2) infiltration/inflow (1/1) of ground water into the sewers. Contributed wastewater flow is that portion of the annual water use and/or other flows from each customer class that are discharged to the wastewater system. Estimates of the contributed volume of each class is generally based upon wastewater billing records. For residential customers, the billed wastewater volume is based on average water consumption for the preceding months of December, January and February. This methodology of using a winter quarter average for quantity of wastewater flows is used to exclude outdoor uses such as irrigation, which do not return water to the collection system. For all other customer classes, the billed wastewater volume is the same as the water volume. The difference between the measured plant influent and the customer contributed wastewater flow is attributed to Infiltration and Inflow (1/1) volume. Based on discussions with the City staff, 40% of the total treated volume is assumed to be 1/1 flows. Each customer class should bear its proportionate share of the costs associated with 1/1, as it is integral aspect of wastewater system costs. The number of customer connections to a wastewater collection system and the volume of customer flows conveyed both influence the extent of 1/1 in a system. Recognizing that the major cost responsibility for 1/1 is allocable on an individual connection basis, two-thirds of the total 1/1 volume projected is allocated to customer classes based on the number of customers with the remaining one-third allocated on the basis of contributed volume. BLACK & VEATCH I Wastewater Utility 6-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Estimated total strength units shown for each customer class are based on an average BOD concentration of 365 milligrams per liter (mg/1) and an average suspended solids concentration of 285 mg/l. 1/1 strength allowances for BOD and suspended solids are assumed at 25 mg/I and 50 mg/I, respectively. Estimated BOD and suspended solids responsibilities of each customer class presented in Table S - 15 in Appendix 2 are based on the respective indicated average strength concentrations and contributed wastewater and 1/1 volumes for each class. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class (Column 7) in Table S - 15. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 8) is estimated by relating typical costs for meters and services larger than 3/4 inch in size to the typical cost of a 3/4 inch meter. 6.5.5 Wastewater Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. The wastewater utility has been built with the provision for service to customers outside the City, yet the inside City customers must bear the responsibility of providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 4.36% annual rate of return on the value of wastewater facilities serving outside City customers is recognized for purposes of this study. Table S - 16 in Appendix 2 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 6 summarize the units of service developed in Table S -15. Total allocated costs or investment shown on Lines 5, 7, and 9 were previously developed in Table S - 14, Table S - 13 and Table S -12, respectively. Total allocated unit costs of service for inside City and outside City customers (Line 18, Line 19, Line 20 and Line 21) are determined by adding the unit costs for net operating expense (Line 6) and depreciation expense (Line 8) to the respective inside and outside City unit costs for return on investment (Lines 11 and 12). These unit costs applied to the respective units of service shown on Lines 1,2 and 3 determine the allocated total costs of service for inside and outside City customers shown on Lines 18 through 21. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table S - 17 in Appendix 2 shows the resulting allocated cost of service by customer class, revenue under existing rates, and the indicated increase or decrease in revenue required to meet the allocated cost of service. BLACK & VEATCH I Wastewater Utility 6-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 7.0 Wastewater Rate Design The principal consideration in establishing wastewater rate schedules is to establish charges to recover costs that are reasonably commensurate with the cost of providing wastewater service. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting wastewater rates. The revenue requirements show the need for adjustment and the level of revenue required. This cost of service analysis provides the unit costs of service to be used in the rate design process and gives a basis for determining whether resultant rates will generate revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 7.1 Existing Wastewater Rates The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of BOD and TSS. The existing wastewater rate structure is described in Section 3.3.2. The existing schedule of base and volume rates for wastewater service is shown in Table S - 3 in Appendix 2. 7.2 Proposed Wastewater Rates The cost of service study described in preceding sections of this report provides a basis for the design of a schedule of wastewater rates to meet those costs. Proposed wastewater rates have been designed to meet the 2024 allocated costs of service and are presented in Table S - 18. The proposed rate structure presented in Figure 7 - 1 is similar to the existing structure. Figure 7 - 1 Proposed Wastewater Rate Structure • Base Charge by Meter Size Volume Rate (2-Tier Inclining Block) • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); Retail Inside City Residential Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale As already explained in Section 5.2, practical rate design should consider multiple factors including previous rate levels, customer bill impact, and magnitude of cost shifts among customer classes. BLACK & VEATCH I Wastewater Rate Design 7-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is shown in Table S - 19 in Appendix 2. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table S - 20. 8.0 Combined Water and Wastewater Utilities Table C -1 in Appendix 3 presents the combined operating reserve, capital reserve and impact fee fund balances. Table C - 2 in Appendix 3 provides a summary of the combined revenue and revenue requirements (financial plan) for the study period. The revenue under existing rates are not sufficient to meet the obligations of the two utilities. As discussed in Section 4 and Section 6, a series of annual 6% and 3% proposed revenue adjustments for water and wastewater respectively will enable the utilities to meet their operating, capital and reserve obligations. Figure 8-1 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Water and Wastewater Revenues and Revenue Requirements $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Debt Service Cash Financing of Capital Other Transfers Revenues Under Existing Rates Revenues Under Proposed Rates Figure 8-1- Water and Wastewater Revenues and Revenue Requirements Table C - 2 in Appendix 3 presents the combined water and wastewater operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: BLACK & VEATCH I Combined Water and Wastewater Utilities 8-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. Operating Fund Balance: A minimum target of $200,000. Capital Fund Balance: A minimum target of $1,000,000. Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table C - 2, the proposed annual revenue adjustments will allow the utilities on a combined basis to meet the minimum fund balance requirements for all funds through 2027. A comparison of combined water and wastewater typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table C - 3. 9.0 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. 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BLACK & VEATCH I Disclaimer 9-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 10.0 Appendix 1: Water Tables Table W - 1 - Water Projected Number of Accounts 1 2 Inside City Residential Non -Residential 35,800 3,300 36,400 3,300 37,000 3,300 37,700 3,300 38,300 3,300 39,000 3,300 3,200 0 3 Industrial 21 21 21 21 21 21 0 4 Irrigation 1,500 1,500 1,600 1,600 1,600 1,600 100 5 Private Fire 713 713 713 713 713 713 0 6 7 Subtotal Outside City Residential 41,334 6,800 41,934 7,000 42,634 7,100 43,334 7,300 43,934 7,500 44,634 7,600 3,300 800 8 Non -Residential 400 400 400 500 500 500 100 9 10 11 Industrial Irrigation Private Fire 0 181 14 0 186 14 0 191 14 0 196 14 0 201 14 0 207 14 0 26 0 12 13 14 15 16 Subtotal Wholesale Elkins Mount Olive West Fork RDA/WWA 7,395 1 2 1 4 7,600 1 2 1 4 7,705 1 2 1 4 8,010 1 2 1 4 8,215 1 2 1 4 8,321 1 2 1 4 926 0 0 0 0 17 18 19 Subtotal Total % Change 8 48,737 0.76% 8 49,542 1.65% 8 50,347 1.62% 8 51,352 2.00% 8 52,157 1.57% 8 52,963 1.54% 0 4,226 8.74% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 2 - Water Projected Billed Volume (1,000 Gallons) 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,984,500 2,019,200 2,054,500 2,090,500 2,127,100 2,164,300 2 Non -Residential 804,000 803,900 803,900 803,900 803,900 803,900 3 Industrial 327,500 327,500 327,500 327,500 327,500 327,500 4 Irrigation 338,000 343,900 350,000 356,100 362,300 368,700 5 Subtotal 3,454,000 3,494,500 3,535,900 3,578,000 3,620,800 3,664,400 Outside City 6 Residential 463,300 474,300 485,500 497,200 509,200 521,700 7 Non -Residential 62,300 63,200 64,200 65,300 66,400 67,500 8 Irrigation 35,100 36,000 37,000 38,000 39,000 40,100 9 Subtotal 560,700 573,500 586,700 600,500 614,600 629,300 Wholesale 10 Elkins 90,900 90,900 90,900 90,900 90,900 90,900 11 Mount Olive 67,300 67,300 67,300 67,300 67,300 67,300 12 West Fork 66,000 66,000 66,000 66,000 66,000 66,000 13 RDA/WWA 0 0 0 0 0 0 14 Subtotal 224,200 224,200 224,200 224,200 224,200 224,200 15 Total 4,238,900 4,292,200 4,346,800 4,402,700 4,459,600 4,517,900 16 % Change 5.92% 1.26% 1.27% 1.29% 1.29% 1.31% BLACK & VEATCH I Appendix 1: Water Tables 10-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 3 - Water Existing Rates Existing Water Rates Effective January 1, 2022 Inches $/month $/month $/month $/month $/month 5/8 6.59 7.54 8.31 3/4 6.59 7.54 8.31 1 9.14 10.52 11.49 9.75 11.68 1 1/2 15.93 18.31 20.00 10.17 12.10 2 23.20 26.66 29.07 20.33 23.37 3 54.05 62.18 64.38 30.48 35.06 4 89.50 102.93 112.25 60.97 70.11 6 178.99 205.82 212.76 169.34 197.74 8 268.41 308.67 332.91 355.65 409.00 10 609.68 701.11 1,000 ga I. 1, 000 ga I . 1, 000 gal. 1, 000 gal. Residential 0 - 2,000 Gal Ions 2,000 - 15,000 Gallons Over 15,000 Gallons 3.51 4.65 6.59 4.04 5.35 7.54 Non -Residential First 300,000 Gallons 3.79 4.38 Over 300,000 Gallons 3.39 3.90 Major Industrial All Usage 2.96 3.40 Irrigation First 300,000 Gallons 5.04 5.80 Over 300,000 Gallons 4.53 5.22 Wholesale Reduced Peak Demand 2.87 Peak Demand 3.20 BLACK & VEATCH I Appendix 1: Water Tables 10-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 4 - Water Projected Revenues Under Existing Rato Inside City 1 Residential 11,982,900 12,222,300 12,436,200 12,653,800 12,875,200 13,100,600 2 Non -Residential 3,362,700 3,370,900 3,370,900 3,370,900 3,370,900 3,370,900 3 Industrial 977,500 980,000 980,000 980,000 980,000 980,000 4 Irrigation 1,833,700 1,870,400 1,903,100 1,936,400 1,970,300 2,004,800 5 Private Fire 967,600 967,600 967,600 967,600 967,600 967,600 6 Subtotal 19,124,400 19,411,200 19,657,800 19,908,700 20,164,000 20,423,900 Outside City 7 Residential 3,045,300 3,124,000 3,197,500 3,273,300 3,351,700 3,432,600 8 Non -Residential 312,900 318,800 324,100 329,800 335,700 341,900 9 Industrial 0 0 0 0 0 0 10 Irrigation 223,700 230,100 236,200 242,500 249,000 255,800 11 Private Fire 27,100 27,100 27,100 27,100 27,100 27,100 12 Subtotal 3,609,000 3,700,000 31784,900 3,872,700 3,963,500 4,057,400 Wholesale 13 Elkins 261,700 262,300 262,300 262,300 262,300 262,300 14 Mount Olive 194,900 195,300 195,300 195,300 195,300 195,300 15 West Fork 190,300 190,800 190,800 190,800 190,800 190,800 16 RDA/WWA 0 0 0 0 0 0 17 Subtotal 646,900 648,400 648,400 648,400 648,400 648,400 18 Total 23,380,300 23,759,600 24,091,100 24,429,800 24,775,900 25,129,700 19 % Change 8.05% 1.62% 1.40% 1.41% 1.42% 1.43% (a) Reflects 3.0% revenue increase effective January 1, 2022. Table W - 5 - Water Projected Other Revenues 1 2 Water Impact Fee Revenue Water Sales Not on Computer S 976,300 300 S 976,300 300 S 976,300 300 S 976,300 300 S 976,300 300 S 976,300 300 3 Water Connection Fees 162,000 162,000 162,000 162,000 162,000 162,000 4 Rural Water Connection Fees 2,700 2,700 2,700 2,700 2,700 2,700 5 Service Charge/Trip Fee - Billed Service 9,500 9,500 9,500 9,500 9,500 9,500 6 Tampering Fee - Billed Service 200 200 200 200 200 200 7 Penalties 207,400 207,400 207,400 207,400 207,400 207,400 8 Safe Drinking Water Fee 230,400 234,300 238,200 242,300 246,400 250,600 9 10 Total %Change 1,588,800 7.14% 1,592,700 0.25% 1,596,600 0.24% 1,600,700 0.26% 1,604,800 0.26% 1,609,000 0.269/o BLACK & VEATCH I Appendix 1: Water Tables 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 6 - Water Capital Improvement Program 1 2 Water System Rehabilitation/Replacement Water Tank Improvements 0 1,060,900 2,185,500 1,092,700 2,533,500 1,266,800 2,687,800 1,159,300 2,388,100 1,194,100 2,459,700 1,229,900 3 Water Storage & Pump Station Maintenance 106,100 109,300 126,700 134,400 119,400 123,000 4 Water Meters 875,200 901,500 1,045,000 1,159,300 1,194,100 1,229,900 5 Backflow Prevention Assemblies 53,000 54,600 63,400 67,200 59,700 61,500 6 W/S Improvements defined by Study (West Water Transmission Line) -Cash 636,500 4,237,800 675,300 695,600 716,400 737,900 7 W/S Improvements defined by Study (West Water Transmission Line) -Bond 0 0 16,137,500 22,443,500 21,079,700 26,138,900 8 Water Impact Fee Improvements 424,400 437,100 506,700 537,600 477,600 491,900 9 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,400 3,100 10 Water/Sewer Relocations- Bond Projects 265,200 273,200 316,700 289,800 298,500 307,500 11 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 12 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 13 Water/Sewer Building -Office Improvements 26,500 27,300 31,600 33,600 59,700 61,500 14 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 15 Water & Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 16 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 17 Water & Sewer Technology Equipment Replacements 0 0 0 0 0 0 18 Water & Sewer Improvements Defined By Study 0 0 0 0 0 0 19 Huntsville Water Line Replacement (6 -inch upto 8-inch) 0 0 0 0 0 0 20 Benson Water Tank 338,200 0 0 0 0 0 21 East Water Service Improvements - Township 0 0 0 0 0 0 22 South Garland Ave Waterline Replacement 0 0 0 0 0 0 23 East Water Service Improvements CS 3 (Gulley, PS, Goshen Lines) 5,304,500 0 0 0 0 0 24 Ila/Oaks Manor/Persimmon Waterline Replacements 0 0 0 0 0 0 25 Western Park Waterline Replacement 0 0 0 0 0 0 26 N. College Waterline Replacement - upgrade from 8" to 12" 0 2,185,400 0 0 0 0 27 Total Capital Improvement Program 9,472,900 21,890,100 22,891,500 29,435,700 27,770,100 33,100,300 (a) Capital costs reflect 3%annual inflation starting in 2021. Table W - 7 - Water Projected O&M Expenses 1 Personal Costs 3,587,800 3,740,500 3,899,900 4,066,100 4,239,500 4,420,300 2 Materials and Supplies 998,100 1,028,000 1,058,800 1,090,600 1,123,300 1,157,000 3 Services and Charges 10,296,700 10,605,600 11,212,100 11,854,100 12,533,800 13,253,200 4 Motorpool 862,800 888,600 915,300 942,800 971,000 1,000,200 5 Cost Allocation 650,100 669,600 689,700 710,400 731,700 753,600 6 Maintenance 88,500 91,200 93,900 96,700 99,600 102,600 7 Total 16,484,000 17,023,500 17,869,700 18,760,700 19,698,900 20,686,900 8 % Change 3.27% 3.27% 4.97% 4.99% 5.00% 5.02% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 8 - Capital Program Financing S S S 5 S S Sources of Funds 1 Funds Available at Beginning of Year 506,800 501,700 501,700 67,164,200 44,720,700 23,641,000 2 Revenue Bond or Loan Proceeds 0 0 90,000,000 0 0 0 3 Cash Financing of Capital Projects 9,050,000 10,442,200 6,152,300 6,353,900 6,123,200 9,377,300 4 Transfer from Impact Fee Fund 417,800 1,447,900 601,700 638,300 567,200 584,100 5 Subtotal 9,974,600 12,391,800 97,255,700 74,156,400 51,411,100 33,602,400 Application of Funds 6 Major Capital Improvements 9,472,900 11,890,100 22,891,500 29,435,700 27,770,100 33,100,300 7 Issuance Costs 0 0 900,000 0 0 0 8 Bond Reserve Funds 0 0 6,300,000 0 0 0 9 Subtotal 9,472,900 11,890,100 30,091,500 29,435,700 27,770,100 33,100,300 10 End of Year Balance 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 11 Capital Reserve ECY Balance - Cumulative 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 BLACK & VEATCH I Appendix 1: Water Tables 10-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 9 - Water Operating Cash Flow _ 1 2 Revenues Revenue Under Existing Rates Revenue Increases 6.00 % Increase Effective January 1, 2024 23,380,400 23,759,600 24,091,100 1,325,000 24,429,900 1,465,800 24,776,000 1,486,600 25,129,700 1,507,800 3 4 5 6.00% Increase Effective January 1, 2025 6.00% Increase Effective January 1, 2026 6.00% Increase Effective January 1, 2027 1,424,300 1,575,800 1,531,100 1,598,300 1,694,100 1,646,100 7 Total Revenue from Rates 23,380,400 23,759,600 25,416,100 27,320,000 29,369,500 31,576,000 8 Other Revenues (a) 645,600 648,600 656,200 665,100 674,300 684,100 9 10 Total Revenue Expenses Operating Expenses 24,026,000 16,484,000 24,408,200 17,023,500 26,072,300 17,869,700 27,985,100 18,760,700 30,043,800 19,698,900 32,260,100 20,686,900 11 Bad Debt 116,900 118,800 127,100 136,600 146,800 157,900 12 PILOT 993,700 1,009,800 1,080,200 1,161,100 1,248,200 1,342,000 13 Safe Dri n ki ng Wate r Fee 230,400 234,300 238,200 242,300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 16 Total Expenses Transfers Transfer to Shop Fund 17,825,000 0 18,386,400 0 22,515,200 0 26,600,700 0 27,640,300 0 28,737,400 0 17 Transfer to Operating Reserve 133,100 208,600 219,700 231,400 243,600 256,600 18 Cash Financing of Capital 9,050,000 10,442,200 6,152,300 6,353,900 6,123,200 9,377,300 19 Transferto/from Capital Reserve -2,979,000 -4,630,000 -2,820,000 -5,200,000 -3,960,000 -6,110,000 20 Total Transfers 6,204,100 6,020,800 3,552,000 1,385,300 2,406,800 3,523,900 Fund Balance 21 Beginning Balance 104,900 101,800 102,800 107,900 107,000 103,700 22 Annual Operating Balance -3,100 1,000 5,100 -900 -3,300 -1,200 23 Ending Fund Balance 101,800 102,800 107,900 107,000 103,700 102,500 Performance Metrics 24 Debt Service Coverage (b) NA NA 2.56 1.46 1.64 1.84 25 O&M Reserve Balance (Days) (c) Q 900 900 90 Cd 900 900 90 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.OX the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOTand Safe Drinking Water Fee) (c) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 1: Water Tables 10-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 10 - Water Fund Balances $ $ S S S S Operating Funds 1 O&M Reserve Balance (a) 4,197,600 4,406,200 4,625,900 4,857,300 5,100,900 5,357,500 2 Operating Fund Balance (b) 101,800 102,800 107,900 107,000 103,700 102,500 3 Total (d) 4,299,400 4,509,000 4,733,800 4,964,300 5,204,600 5,460,000 Capital Funds 4 Capital Fund Balance (c) 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 5 Capital Reserve Fund Balance 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 6 Total (d) 10,840,700 6,210,700 70,053,200 42,409,700 17,370,000 -11,878,900 7 Impact Fee Fund Balance (d) 581,300 109,700 484,300 822,300 1,231,400 1,623,600 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000 to account for any adjustments that may be needed to the O&M balance at the end of the (c) Target mininum balance is $500,000. (d) All balances are cumulative. BLACK & VEATCH I Appendix 1: Water Tables 10-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 11 - Water 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 O&M Expenses 2 Bad Debt Expense 3 PILOT 4 Debt Service R 17,023,500 R 17, 023, 500 118,800 118,800 1,009,800 1,009,800 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 5 Transferto Operating Reserve 208,600 208,600 6 Cash Funding of Capital Projects 10,442,200 10,442,200 7 Transfer to Capital Reserve -4,630,000-4,630,000 8 Subtotal 18,360,700 5,812,200 24,172,900 Less Revenue Requirements Met from Other Sources 9 Other Revenues 10 Interest Earned 11 Net Balance Available 12 Full Year Rate Adjustment 382,100 382,100 32,200 32,200 -1,000 -1,000 13 Subtotal 414,300 -1,000 413,300 14 Net Revenue Requirements to be Recovered by Rates 17,946,400 5,813,200 23,759,600 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 17,946,400 17,946,400 16 Depreciation 2,886,700 2,886,700 17 Return 2,926,500 2,926,500 18 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components s s s s s s s s s s Net Plant Investment: 1 Water Land and Land Rights 2,191,756 1,043,693 1,148,063 2 Water Supply 6,819,846 3,247,546 3,572,300 3 Water Storage and Pumping 6,090,361 2,900,172 3,190,189 4 Water Transmission 29,560,218 14,076,294 15,483,924 5 Water Distribution 47,479,642 17,391,810 9,565,496 5,478,420 15,043,916 6 Water Meters 3,306,241 3,306,241 7 Fire Hydrants 7,535,573 7,535,573 8 Water General System 4,537,618 809,302 890,232 894,096 562,035 241,388 808,536 332,029 9 Total Net Plant Investment 107,521,256 19,176,935 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 0 7,867,602 10 Pe rce nt of Total 100.09/o 17.8% 19.6% 0.0% 19.7% 12.4% 5.3% 17.8% 0.0% 7.3% Table W -13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components s s s s s s s s s s Net Depreciation Expense: 1 Water Land and Land Rights 2 Water Supply 277,295 132,045 145,250 3 Water Storage and Pumping 219,139 104,352 114,787 4 Water Transmission 771,897 367,570 404,327 5 Water Distribution 1,134,421 415,539 228,546 130,895 359,441 6 Water Meters 170,293 170,293 7 Fire Hydrants 215,879 215,879 8 Water General System 97,816 17,523 19,275 18,234 12,042 4,591 18,579 7,571 9 Total Net Depreciation Expense 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 0 223,450 10 PercentofTotal 100•D 18% 20% 0% 19% 12% 5% 19% 0% 8% Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components 5 S S S S 5 S 5 5 5 1 Water Purchased 9,611,754 4,577,026 5,034,728 2 Water Storage and Pumping 269,987 98,896 108,786 62,305 3 Water Distribution (a) 3,105,785 1,005,654 1,251,415 716,720 100,938 31,058 4 Meter Services (b) 1,012,843 1,012,843 5 Customer Billing (c) 1,057,071 1,057,071 6 AlIOther Cost 3,303,260 1,004,095 1,104,505 242,313 298,397 170,900 222,195 231,897 22,144 6,813 7 Subtotal 18,360,700 5,581,121 6,139,233 1,346,864 1,658,598 949,925 1,235,038 1,288,968 123,082 37,871 Less: 8 Water Connection Fees (d) 164,700 164,700 9 Other Income Sources 249,600 92,661 83,458 18,310 22,547 12,914 17,523 1,673 515 10 Subtotal 414,300 92,661 83,458 18,310 22,547 12,914 164,700 17,523 1,673 515 it Net O&M Expenses 17,946,400 5,488,461 6,055,775 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 (a) 3.25%of 2020water repair costs was associated with hydrants. (b) Includes costs for Meter Reading and Meter Maintenance and Backflow prevention (c) Includes costs under Utilities Financial Services (d) Includes revenues from Water Connection Fees and Rural Water Connection Fees BLACK & VEATCH I Appendix 1: Water Tables 10-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -15 - Water 2023 Estimated Units of Service Equiv. Equiv. 1,000gal. 1,000gal. 1,000gal. 1,000gal. 1,000gal. Equiv. Meters Bills Hydrants Hydrants (1)/365 (2) x (3) (2) x (6) (7) - (4) Inside City 1 Residential 2,019,203 5,532 250% 13,830 370% 20,469 6,638 34,939 436,593 2 Non -Residential 803,940 2,203 240% 5,286 355% 7,819 2,533 6,761 39,012 3 Industrial 327,534 897 200% 1,795 295% 2,647 852 261 252 4 Irrigation 343,941 942 240% 2,262 355% 3,345 1,094 3,141 18,449 5 Subtotal 3,494,618 9,574 23,173 34,280 11,108 45,102 494,306 Fire Protection 6 Public 4,201 10,083 5,882 4,035 7 Private 491 1,179 688 472 8 Subtotal 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 Outside City Farmington 9 Residential 98,894 271 250% 677 370% 1,002 325 1,762 28,974 10 Non -Residential 19,943 55 240% 131 355% 194 63 245 2,142 11 Industrial 200% 295% 12 Irrigation 2,688 7 2400% 18 3559/ 26 8 46 256 13 Subtotal 121,525 333 826 1,223 396 2,053 31,373 Greenland 14 Residential 20,454 56 250% 140 370% 207 67 458 5,736 15 Non -Residential 2,847 8 240% 19 355% 28 9 59 552 16 Industrial 200% 295% 17 Irrigation 698 2 240% 5 355% 7 2 20 24 18 Subtotal 23,999 66 163 242 78 537 6,312 Washington County/Growth 19 Residential 242,049 663 250% 1,658 370% 2,454 796 2,618 33,223 20 Non -Residential 21,511 59 240% 141 3559/ 209 68 109 1,608 21 Industrial 200% 295% 22 Irrigation 22,197 61 240% 146 355% 216 70 188 1,270 23 Subtotal 285,757 783 1,945 2,879 933 2,915 36,101 Johnson 24 Residential 6,652 18 250% 46 370•� 67 22 158 2,064 26 Non -Residential 9,716 27 2409A 64 355% 94 31 35 240 27 Industrial 2001/6 295% 28 Irrigation 68 0 240% 0 355% 1 0 3 24 29 Subtotal 16,436 45 110 163 53 196 2,328 Goshen/White River 30 Residential 106,213 291 2509% 727 370% 1,077 349 1,054 13,898 31 Non -Residential 9,209 25 2401/6 61 35596 90 29 52 696 32 Industrial 200% 295% 33 Irrigation 10,382 28 240% 68 355% 101 33 86 655 34 Subtotal 125,804 345 856 1,267 411 1,192 15,249 Fire Protection 35 Public 696 1,669 973 668 36 Private 12 29 17 12 37 Subtotal 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 38 Total Retail 4,068,138 11,146 32,474 53,013 20,540 51,994 595,669 Wholesale 39 Elkins 90,935 249 240% 598 35591 884 287 23 12 40 Mount Olive 67,314 184 240•1/O 443 355% 655 212 38 24 41 West Fork 65,996 181 240% 434 355% 642 208 23 12 42 RDA/WWA 240% 355% 48 43 Subtotal 224,244 614 1,474 2,181 707 83 96 44 Subtotal (Inside Cit 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 45 Subtotal (Outside C 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 46 Subtotal (Wholesal 224,244 614 1,474 2,181 707 83 96 47 Total System 4,292,382 11,760 33,948 55,194 21,246 52,077 595,765 4,703 483 BLACK & VEATCH I Appendix 1: Water Tables 10-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -16 - Water 2023 Unit Cost of Service $ 1,000gal. 1,000gpd. 1,000gpd. 1,000gal. 1,000gpd. 1,000glad. Equiv. Meters Bills Hydrants Hydrants Units of Service 1 Inside City 3,494,618 18,290 17,678 3,494,618 18,290 17,678 45,102 494,306 4,035 472 2 Outside City 797,765 3,898 3,568 573,521 3,038 2,862 6,975 91,459 668 12 3 Total System 4,292,382 22,188 21,246 4,068,138 21,328 20,540 52,077 585,765 4,703 483 Costs of Service Net Operating Costs 4 Total - $ 17,946,400 5,488,461 6,055,775 0 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 5 Unit Cost - $/unit 1.28 272.93 0.00 0.33 76.71 45.62 20.55 2.17 25.82 77.28 Depreciation Expense 6 Total -$ 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 223,450 7 Unit Cost - $/unit 0.12 25.64 0.00 0.13 16.66 6.60 10.53 47.51 Net Plant Investment 8 Total -$ 107,521,256 19,176,835 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 7,867,602 9 Unit Cost - $/unit 4.47 950.71 0.00 5.21 624.42 278.48 367.89 1,672.89 Return on Investment 10 Inside City, Unit Return - $/unit 0.09 18.43 0.00 0.10 12.11 5.40 7.13 32.43 11 Outside City, Unit Return - $/Unit 0.31 66.55 0.00 0.36 43.71 19.49 25.75 117.10 Total Return 12 Inside City -$ 1,762,073 302,691 337,125 0 352,839 221,422 95,441 321,688 130,868 13 Outside City -$ 1,164,388 249,489 259,402 0 209,075 132,779 55,789 179,630 78,224 14 Total Return -$ 2,926,461 552,180 596,526 0 561,913 354,201 151,230 501,318 209,092 Total Unit Cost of Service 15 Inside City Unit Cost - $/unit 1.49 317.00 0.00 0.56 105.48 57.62 38.21 2.17 105.76 77.28 16 Outside City Unit Cost - $/unil 1.71 365.12 0.00 0.82 137.08 71.71 56.83 2.17 190.43 77.28 17 Inside City - Cost of Service -$ 19,153,831 5,192,113 5,797,984 0 1,956,356 1,929,210 1,018,497 1,723,535 1,072,927 426,744 36,465 18 Outside City -Cost of Service -$ 4,605,769 1,365,665 1,423,169 0 472,237 416,416 205,230 396,434 198,518 127,207 892 19 Total Cost of Service - $ 23,759,600 6,557,779 7,221,153 0 2,428,593 2,345,627 1,223,727 2,119,969 1,271,445 553,951 37,356 BLACK & VEATCH I Appendix 1: Water Tables 10-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 17 - Water 2023 Cost of Service by Customer Class Inside City 1 Residential 10,301,400 1,602,600 11,904,100 12,222,300 -2.6% 2 Non -Resident 3,436,200 534,600 3,970,800 3,370,900 17.8% 3 Industrial 1,108,700 172,500 1,281,200 980,000 30.7% 4 Irrigation 1,483,400 230,800 1,714,200 1,870,400 -8.4% Fire Protectio 5 Public 2,540,500 -2,540,500 6 Private 283,500 283,500 967,600 -70.7% 7 Subtotal 19,153,700 0 19,153,800 19,411,200 -1.3% Outside City 8 Residential 2,818,900 460,100 3,279,000 3,124,000 5.0% 9 Non-Resideni 336,200 54,900 391,100 318,800 22.7% 10 Industrial 0.0% 11 Irrigation 193,200 31,500 224,800 230,100 -2.3% Fire Protectio 12 Public 546,500 -546,500 13 Private 8,100 8,100 27,100 -70.1% 14 Subtotal 3,902,900 0 3,903,000 3,700,000 5.5% Wholesale 15 Elkins 284,300 284,300 262,300 8.4% 16 Mount Olive 211,700 211,700 195,300 8.4% 17 West Fork 206,700 206,700 190,800 8.3% 18 RDA/WWA 0 0 0 0.0% 19 Subtotal Whol 702,700 0 702,700 648,400 8.4% 20 Total Retail 23,056,600 0 23,056,800 23,111,200 -0.2% 21 Total Wholes; 702,700 0 702,700 648,400 8.4% 22 Total 23,759,300 0 23,759,500 23,759,600 0.0% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 18 - Water Proposed 2024 Rate Proposed Water Rates Effective January 1, 2024 Inches $/month $/month $/month $/month $/month 5/8 6.99 7.99 8.81 3/4 6.99 7.99 8.81 1 10.06 13.84 13.84 10.34 12.38 1.5 19.18 27.40 27.40 10.78 12.83 2 26.27 37.95 37.95 21.55 24.77 3 57.29 79.11 79.11 32.31 37.16 4 94.87 115.76 118.99 64.63 74.32 6 189.73 218.17 225.53 179.50 209.60 8 284.51 327.19 352.88 376.99 433.54 10 646.26 743.18 1,000 ga I. 1,000 gal. 1,000 ga I. 1,000 gal. Residential 0 - 2,000 Gallons 3.59 4.54 2,000 - 15,000 Gallons 4.75 6.01 Over 15,000 Gallons Non -Residential First 300,000 Gallons Over 300,000 Gallons Major Industrial All Usage Irrigation First 300,000 Gallons Over 300,000 Gallons Wholesale Reduced Peak Demand Peak Demand 6.74 8.52 4.20 5.11 4.20 5.11 3.14 3.49 4.75 5.89 4.75 5.89 3.30 3.30 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -19 - Water 2023 Cost of Service Under Proposed Rates 1 Inside City Residential 11,904,100 12,222,300 -2.6% 11,899,100 100•0 -3% -323,200 2 Non -Residential 3,970,800 3,370,900 17.8% 3,602,200 91% No 231,300 3 Industrial 1,281,200 980,000 30.7% 980,400 77% 0000 400 4 Irrigation 1,714,200 1,870,400 -8.4% 1,712,800 1001yo -8% -157,600 5 6 Subtotal Outside City Residential 18,870,300 3,279,000 18,443,600 3,124,000 2.3% 5.0% 18,194,500 3,279,200 96% 100% -1% 5% -249,100 155,200 7 Non -Residential 391,100 318,800 22.7% 356,100 91% 12% 37,300 8 Irrigation 224,800 230,100 -2.3% 224,700 100•D -2% -5,400 9 Subtotal 3,894,900 3,672,900 6.0% 3,860,000 99% 5% 187,100 Private Fire 10 Inside City 283,500 967,600 -70.7% 967,600 341% 09/0 0 11 Outside City 8,100 27,100 -70.1% 27,100 335% 0% 0 12 13 Subtotal Wholesale Elkins 291,600 284,300 994,700 262,300 -70.7% 8.4% 994,700 284,200 341% 100% 0•1/0 89'o 0 21,900 14 Mount Olive 211,700 195,300 8.49/o 211,600 1001/0 8910 16,300 15 West Fork 206,700 190,800 8.3% 206,600 100% 8% 15,800 16 RDA/WWA 0 0 0 0000 0% 17 18 Subtotal Total 702,700 23,759,500 648,400 23,759,600 8.4% 0.0% 702,400 23,751,600 100•0 100% 89,o 0% 54,000 -8,000 BLACK & VEATCH I Appendix 1: Water Tables 10-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2024 Bill Impact Line No. Residential 1 Meter Size Inches 3/4 Monthly Usage 1,000gal. 0.5 Existing Rates $ 9.91 Inside Proposenirrn-cr-ea-se-1- Rates ME $ 8.79 City Decrease $ -1.12 increase/ Decrease -11.3% Existing Rates $ 11.36 Outside Proposed Rates $ 10.26 City Increase Decrease $ -1.10 17 Decrease -9.7% 2 3/4 2 13.42 14.17 0.75 5.6% 15.40 17.07 1.67 10.8% 3 3/4 4 22.72 23.67 0.95 4.2% 26.10 29.09 2.99 11.5% 4 3/4 8 41.32 42.67 1.35 3.3% 47.50 53.13 5.63 11.9% 5 3/4 10 50.62 52.16 1.54 3.0% 58.20 65.15 6.95 11.9% 6 3/4 15 73.87 75.91 2.04 2.8% 84.95 95.20 10.25 12.1% Non -Residential 7 3/4 10 44.30 48.96 4.66 10.5% 51.12 59.08 7.96 15.6% 8 3/4 20 82.20 90.94 8.74 10.6% 94.92 110.18 15.26 16.1% 9 1 50 198.37 219.94 21.57 10.9% 229.21 269.30 40.09 17.5% 10 1 100 387.87 429.82 41.95 10.8% 448.21 524.76 76.55 17.1% 11 1 1/2 50 204.97 229.06 24.09 11.8% 236.78 282.86 46.08 19.5% 12 11/2 100 394.47 438.94 44.47 11.3% 455.78 538.32 82.54 18.1% 13 2 100 401.52 446.03 44.51 11.1% 463.88 548.87 84.99 18.3% 14 2 500 1,837.52 2,125.07 287.55 15.6% 2,119.88 2,592.55 472.67 22.3% Industrial 15 2 100 318.52 340.03 21.51 6.8% 362.52 386.69 24.17 6.7% 16 2 1,000 2,982.52 3,163.87 181.35 6.1% 3,422.52 3,525.35 102.83 3.0% 17 4 500 1,566.89 1,663.67 96.78 6.2% 1,786.89 1,859.46 72.57 4.1% 18 4 1,500 4,526.89 4,801.27 274.38 6.1%1 5,186.89 5,346.86 159.97 3.1% 19 6 2,500 7,573.78 8,033.73 459.95 6.1% 8,673.78 8,936.67 262.89 3.0% 20 6 5,000 14,973.78 15,877.73 903.95 6.0%1 17,173.78 17,655.17 481.39 2.8% 21 6 10,000 29,773.78 31,565.73 1,791.95 6.0%1 34,173.78 35,092.17 918.39 2.7% BLACK & VEATCH I Appendix 1: Water Tables 10-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 11.0 Appendix 2: Wastewater Tables Table S - 1 - Wastewater Projected Accounts Inside City 1 Residential 34,100 34,700 35,300 35,900 36,500 37,200 3,100 2 Non -Residential 2,500 2,500 2,500 2,500 2,500 2,500 0 0 3 Industrial 19 19 19 19 19 19 3,100 4 Subtotal 36,619 37,219 37,819 38,419 39,019 39,719 96.1% Outside City 5 Residential 2,800 2,900 2,900 3,000 3,000 3,000 200 0 6 Non -Residential 181 181 181 181 181 181 7 Industrial 0 0 0 0 0 0 0 8 Subtotal 2,981 3,081 3,081 3,181 3,181 3,181 200 114.8% Wholesale 9 Elkins 2 2 2 2 2 2 0 10 West Fork 1 1 1 1 1 1 0 0 11 Subtotal 3 3 3 3 3 3 11 Total 39,603 40,303 40,903 41,603 42,203 42,903 3,300 12 % Change 0.25% 1.77% 1.49% 1.71% 1.44% 1.66% 8.35% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table 5 - 2 - Wastewater Projected Billed Volume (1,000 Gallons) 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,949,400 1,983,600 2,018,300 2,053,600 2,126,100 2 Non -Residential 740,400 740,400 740,400 740,400 740,400 3 Industrial 323,500 323,500 323,500 323,500 323,500 4 Subtotal 3,013,300 3,047,500 3,082,200 3,117,500 3,190,000 Outside City 5 Residential 114,700 93,600 94,900 96,300 99,000 6 Non -Residential 18,600 15,200 15,200 15,200 15,200 7 Industrial 0 0 0 0 0 8 Subtotal 133,300 108,800 110,100 111,500 114,200 Wholesale 8 Elkins 90,900 90,900 90,900 90,900 90,900 9 West Fork 104,800 104,800 IK800 104,800 104,800 10 Subtotal 195,700 195,700 195,700 195,700 195,700 10 Total 3,342,300 3,352,000 3,388,000 3,424,700 3,499,900 11 % Change 4.78% 0.29% 1.07% 1.08% 1.09% 176,700 0 0 176,700 -15,700 -3,400 0 -19,100 0 0 0 157,600 4.94% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 3 - Wastewater Existing Charges Existing Wastewater Rates Effective January 1, 2022 Inches $/month $/month $/month 5/8 18.28 18.28 16.74 3/4 18.28 18.28 16.74 1 23.74 33.92 31.28 1 1/2 38.77 60.37 55.50 2 55.43 79.73 73.45 3 128.73 184.24 169.29 4 212.13 303.44 278.93 6 420.39 601.46 553.70 8 628.73 899.76 826.81 1,000 gal. 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.35 > 2,000 Gallons 5.80 All Usage 8.18 7.52 Non -Residential All Usage 4.40 8.18 7.52 Major Industrial All Usage 4.71 8.18 7.52 Wholesale 85% of metered water usage 5.19 Above 85% of metered water 2.71 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.4352 TSS - $/Ib for strength in excess of 300 ppm 0.3056 BLACK & VEATCH l Appendix 2: Wastewater Tables 11-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 4 - Wastewater Projected Revenues at Existing Rates S S S S S S Inside City 1 Residential 17,544,700 17,895,800 18,208,900 18,527,600 18,851,800 19,181,700 2 Non -Residential 3,989,200 3,999,000 3,999,000 3,999,000 3,999,000 3,999,000 3 Industrial 1,543,800 1,547,600 1,547,600 1,547,600 1,547,600 1,547,600 4 Subtotal 23,077,700 23,442,400 23,755,500 24,074,200 24,398,400 24,728,300 Outside City 5 Residential 1,459,000 1,305,500 1,323,500 1,341,900 1,360,500 1,379,500 6 Non -Residential 186,900 161,300 161,300 161,300 161,300 161,300 7 Industrial 0 0 0 0 0 0 8 Subtotal 1,645,900 1,466,800 1,484,800 1,503,200 1,521,800 1,540,800 Wholesale 9 Elkins 470,800 472,000 472,000 472,000 472,000 472,000 10 West Fork 542,400 543,700 543,700 543,700 543,700 543,700 11 Subtotal 1,013,200 1,015,700 1,015,700 1,015,700 1,015,700 1,015,700 12 Surcharge 834,600 834,600 834,600 834,600 834,600 834,600 13 Total 26,571,400 26,759,500 27,090,600 27,427,700 27,770,500 28,119,400 14 %Change 6.09% 0.71% 1.24% 1.24% 1.25% 1.26% Table S - 5 - Wastewater Projected Other Revenues 9,800 3,800 1,650,600 -79,500 -25,600 0 -105,100 1,200 1,300 2,500 24,300 1,572,300 6.28% n. 1 .. Sewer Impact Fee Revenue S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 0 2 Sewer Sales Not on Computer 11,800 11,800 11,800 11,800 11,800 11,800 0 3 Sewer Connection Fees 47,900 47,900 47,900 47,900 47,900 47,900 0 4 WWTPHay Sales 134,800 134,800 134,800 134,800 134,800 134,800 0 5 WWTPBiosolids/Fertilizer Sales 54,900 54,900 54,900 54,900 54,900 54,900 0 6 WWTP Water Treatment Residual Sales 180,800 180,800 180,800 180,800 180,800 180,800 0 7 Penalties 246,100 246,100 246,100 246,100 246,100 246,100 0 8 9 Total %Change 1,420,200 9.49% 1,420p200 0.00% 1,420,200 0.00% 1,420,200 0.00% 1,420,200 0.00% 1,420,200 0.00% 0 0.00% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 6 - Wastewater Capital Improvement Program 1 Sanitary Sewer Rehabilitation 3,044,800 3,136,100 3,635,600 3,752,700 3,426,900 3,529,700 2 Plant Pumps and Equipment - W.W.T.P. 530,500 546,400 1,125,500 1,159,300 1,194,100 1,229,900 3 W.W.T.P. Building Improvements 1,750,500 163,900 190,000 347,800 358,200 369,000 4 Upgrade/Replace Lift Stations-W.W.T.P. 318,300 327,800 380,100 403,200 358,200 369,000 5 Lake Sequoyah Sediment Removal/Dredging 530,500 546,400 0 0 0 0 6 Wastewater Treatment/Water Quality Improvements 106,100 109,300 126,700 134,400 119,400 123,000 7 Wastewater Impact Fee Improvements 318,300 327,800 380,100 347,800 358,200 369,000 8 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,100 3,000 9 Water/Sewer Relocations - Bond Projects 265,200 273,200 316,700 289,800 298,500 307,500 10 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 11 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 12 Water/Sewer Building -Office Improvements 26,500 27,300 31,600 33,600 59,700 61,500 13 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 14 Water & Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 15 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 16 Water & Sewer Technology Equipment Replacements 0 0 0 0 0 0 17 Water & Sewer Improvements Defined By Study 0 0 0 0 0 0 18 Biosolids Dryer Replacement 0 0 3,172,100 0 0 0 19 Filter Cell Upgrade/Replacement at Noland WWTP 0 0 0 0 0 0 20 Upgrade Automation at both WWTPs 0 0 0 0 0 0 21 CIPP of 36" Sewer Line from Armstrong Ave to Noland WWTP 0 0 0 0 0 0 22 23 Bypass Sewer Fulbright & North Gregg Hamestring Lift Station Bottle Neck Resolution 0 848,700 0 0 0 0 0 0 0 0 0 0 24 Total Capital Improvement Program 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 (a) Capital costs reflect 3% annual inflation starting in 2021. Table S - 7 - Wastewater Projected O&M Expenses 1 Personal Costs 3,198,200 3,334,400 3,476,600 3,624,900 3,779,500 3,940,900 2 Materials and Supplies 745,400 767,800 790,800 814,500 839,000 864,200 3 Services and Charges 6,261,000 6,448,800 6,642,300 6,841,600 7,046,800 7,258,200 4 WWTP Contract 4,115,500 4,238,900 4,366,100 4,497,100 4,632,000 4,771,000 5 Motorpool 1,062,900 1,094,800 1,127,600 1,161,400 1,196,300 1,232,200 6 Cost Allocation 701,100 722,100 743,800 766,100 789,100 812,700 7 Maintenance 87,300 89,900 92,600 95,400 98,300 101,200 8 Total 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 9 %Change 3.25% 3.25% 3.25% 3.26% 3.26% 3.26% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 8 - Wastewater Cash Financed Capital S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 501,900 506,700 506,700 506,700 506,700 506,700 2 Cash Financing of Capital Projects 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 3 Transfer from Impact Fee Fund 1,246,600 409,800 475,100 448,500 447,800 461,200 4 Subtotal 8,628,500 6,350,600 10,053,400 7,202,900 6,862,400 7,123,800 Application of Funds 5 Major Capital Improvements 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 6 Subtotal 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 7 End of Year Balance 506,700 506,700 506,700 506,700 506,700 506,700 8 Capital Reserve ECY Balance - Cumulative 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 9 - Wastewater Operating Cash Flow Revenues 1 Revenues Under Existing Rates 26,571,600 26,759,500 27,090,700 27,427,700 27,770,600 28,119,500 2 Revenue Increases 3.00 % Increase Effective January 1, 2024 0 0 745,000 822,800 833,100 843,600 3 3.00 % Increase Effective January 1, 2025 0 0 0 776,900 858,100 868,900 4 3.00 % Increase Effective January 1, 2026 0 0 0 0 810,200 895,000 5 3.00 % Increase Effective January 1, 2027 0 0 0 0 0 845,000 7 Total Revenue from Rates 26,571,600 26,759,500 27,835,700 29,027,400 30,272,000 31,572,000 8 Other Revenues (a) 726,000 724,300 726,700 729,600 732,700 735,900 9 Total Revenues 27,297,600 27,483,800 28,562,400 29,757,000 31,004,700 32,307,900 Expenses 10 Operating Expenses 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 11 Bad Debt 132,900 133,800 139,200 145,100 151,400 157,900 12 PILOT 1,129,300 1,137,300 1,183,000 1,233,700 1,286,600 1,341,800 13 Debt Service 0 0 0 0 0 0 14 Total Expenses 17,433,600 17,967,800 18,562,000 19,179,800 19,819,000 20,480,100 Transfers 15 Transfer to Shop Fund 0 0 0 0 0 0 16 Transfer to Operating Reserve 129,500 133,900 138,400 143,000 147,800 152,700 17 Cash Financing of Capital 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 18 Transfer to/from Capital Reserve 2,850,000 3,950,000 790,000 4,180,000 5,130,000 5,520,000 19 Total Transfers 9,859,500 9,518,000 10,000,000 10,570,700 11,185,700 11,828,600 Fund Balance 20 Beginning Balance 100,000 104,500 102,500 102,900 109,400 109,400 21 Annual Operating Balance 4,500 -2,000 400 6,500 0 -800 22 Ending Fund Balance 104,500 102,500 102,900 109,400 109,400 108,600 Performance Metrics 23 Debt Service Coverage NA NA NA NA NA NA 24 O&M Reserve Balance (Days) (b) O 90.00 O 90.00 O 90.00 O 90.00 O 90.00 O 90.00 (a) Includes interest income on operating fund balance. (b) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 10 - Wastewater Projected Fund Balances Operating Funds 1 O&M Reserve Balance (a) 4,117,000 4,250,900 4,389,300 4,532,300 4,680,100 4,832,800 2 Operating Fund Balance (b) 104,500 102,500 102,900 109,400 109,400 108,600 3 Total (e) 4,221,500 4,353,400 4,492,200 4,641,700 4,789,500 4,941,400 Capital Funds 4 Capital Fund Balance (c) 506,700 506,700 506,700 506,700 506,700 506,700 5 Capital Reserve Fund Balance (d) 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 6 Total (e) 23,945,700 27,895,700 28,685,700 32,865,700 37,995,700 43,515,700 7 Impact Fee Fund Balance (e) 3,935,100 4,269,200 4,538,000 4,833,400 5,129,500 5,412,200 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000 to account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022. (e) All balances are cumulative. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 11- Wastewater 2023 Cost of Service S $ $ Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 0&M Expenses 16,696,700 16,696,700 2 Bad Debt 133,800 133,800 3 PILOT 1,137,300 1,137,300 4 Debt Sevice 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 0 0 5 Transfer to Operating Reserve 133,900 133,900 6 7 Cash Funding of Capital Projects Transfer to Capital Reserve 5,434,100 3,950,000 5,434,100 3,950,000 8 Subtotal 18,101,700 9,384,100 27,485,800 Less Revenue Requirements Met from Other Sources 9 Other Revenues and Adjustments 676,300 676,300 10 Interest Earned 48,000 48,000 11 Net Balance Available 2,000 2,000 12 Full Year Rate Adjustment 13 Subtotal 724,300 2,000 726,300 14 Net Revenue Requirements to be Recovered by Rat 17,377,400 9,382,100 26,759,500 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 16 Depreciation 17 Return 18 Net Cost of Service 17,377,400 17,377,400 8,187,000 8,187,000 1,195,100 1,195,100 17,377,400 9,382,100 26,759,500 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment S S S S S S S S Net Plant Investment: 1 Sewer Collection 106,713,735 43,521,511 63,192,224 2 Sewer Connections 319,887 319,887 3 Water Meters 2,723,783 2,723,783 4 Owl Creek Lift Station and Force Main 14,103 14,103 5 Lift Stations 5,257,834 5,257,834 Sewer Treatment Plant- Noland 6 Sewage Pumping 229,919 229,919 7 Mechanical Bar Screens 172,282 51,685 120,597 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 1,684,829 1,684,829 11 Aeration Equipment 1,120,704 560,352 560,352 12 Sludge Handling 400,690 220,380 180,311 13 Other Plant and Misc Equipment 961,187 510,038 221,733 229,416 14 General Treatment 13,296,075 7,055,330 3,067,233 3,173,512 Sewer Treatment Plant- West 15 Sewage Pumping 921,333 921,333 16 Mechanical Bar Screens 169,727 50,918 118,809 17 Grit Removal 1,380,570 1,380,570 18 Primary Sedimentation 6,927,776 2,078,333 4,849,443 19 Disinfection 667,246 667,246 20 Aeration Equipment 1,490,202 745,101 745,101 21 Sludge Handling 34,604,278 19,032,353 15,571,925 22 Other Plant and Misc Equipment 3,425,729 1,799,980 1,625,749 23 General Treatment 6,163,399 3,238,433 2,924,966 24 Sewer Land and Land Rights 6,358,594 2,055,231 2,484,085 893,874 924,850 554 25 General Plant 1,768,105 608,158 592,278 286,604 252,406 25,529 3,130 26 Total Net Plant Investment 196,771,987 67,549,842 66,268,587 31,759,281 28,107,292 0 2,749,312 337,674 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 13 - Wastewater 2023 Allocation of Depreciation S s s s s S S S Net Depreciation Expense: 1 Sewer Collection 2,890,541 1,178,861 1,711,680 2 Sewer Connections 22,463 22,463 3 Water Meters 140,292 140,292 4 Owl Creek Lift Station and Force Main 6,509 6,509 5 Lift Stations 113,991 113,991 Sewer Treatment Plant- Noland 6 Sewage Pumping 42,418 42,418 7 Mechanical Bar Screens 33,421 10,026 23,395 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 282,757 282,757 11 Aeration Equipment 124,523 (1) 62,262 62,262 12 Sludge Handling 83,361 (1) 45,849 37,513 13 Other Plant and Misc Equipment 68,718 36,464 15,852 16,402 14 General Treatment 870,537 461,935 200,822 207,780 Sewer Treatment Plant- West 15 Sewage Pumping 117,218 117,218 16 Mechanical Bar Screens 55,071 16,521 38,550 17 Grit Removal 135,374 135,374 18 Primary Sedimentation 397,767 119,330 278,437 19 Disinfection 41,250 41,250 20 Aeration Equipment 140,345 (1) 70,173 70,173 21 Sludge Handling 2,080,224 1,144,123 936,101 22 Other Plant and Misc Equipment 320,819 168,568 152,251 23 General Treatment 47,759 25,094 22,665 24 Sewer Land and Land Rights 4,692 1,517 1,833 660 682 25 General Plant 166,936 57,419 55,920 27,060 23,831 2,410 296 26 Total Net Depreciation Expense 8,186,986 2,527,489 1,769,433 1,887,594 1,830,500 0 142,702 29,268 27 Percent of Total - Depreciation Expense 100.0% 30.9% 21.6% 23.1% 22.49/o 1.7% 0.4% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 14 - Wastewater 2023 Allocation of O&M Expenses S S S S S S S S 1 Sewer Mains Maintenance 2,527,372 1,030,749 1,496,623 2 Wastewater Treatment Plant 1,930,453 409,563 747,493 773,396 3 Wastewater Treatment Plant -Noland 5,578,707 1,183,574 2,160,139 2,234,994 4 Wastewater Treatment Plant -West 2,025,047 429,632 784,121 811,293 5 Lift Stations 990,432 990,432 6 Meter Operations (a) 1,705,258 1,705,258 7 Water& Sewer Connections 204,404 204,404 8 Operations and Administration 1,443,897 390,267 144,434 356,278 368,624 164,568 19,726 9 All Other O&M Cost 1,696,131 458,442 169,665 418,516 433,019 193,317 23,172 10 Subtotal 18,101,700 4,892,658 1,810,722 4,466,548 4,621,327 2,063,143 0 247,302 Less: Other Income Sources 11 Sewer Connection Fees 47,900 47,900 12 Other Income Sources 676,400 147,869 72,452 178,719 184,912 82,552 9,895 13 Subtotal 724,300 147,869 72,452 178,719 184,912 82,552 0 57,795 14 Net O&M Expenses 17,377,400 4,744,789 1,738,270 4,287,829 4,436,415 1,980,591 0 189,507 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 15 - Wastewater 2023 Units of Service 1,000ga1. 1,000gal. 1,000gaI. Pounds Pounds Bills Equiv. Meters (2) + (3) Inside City 1 Residential 1,983,604 1,725,364 3,708,968 6,398,027 5,434,305 416,068 34,346 2 Non -Residential 740,356 255,613 995,969 2,307,012 1,866,343 29,508 5,157 3 Industrial 323,545 72,596 396,141 1,000,041 799,307 228 249 4 Subtotal 3,047,505 2,053,572 5,101,077 9,705,080 8,099,955 445,804 39,752 Outside City Farmington 5 Residential 75,955 101,284 177,238 252,331 222,771 27,338 1,603 6 Non -Residential 13,136 8,143 21,278 41,684 34,618 1,692 157 7 Industrial 8 Subtotal 89,090 109,426 198,516 294,015 257,389 29,030 Greenland 9 Residential 10,113 18,030 28,144 34,545 31,557 5,112 435 10 Non -Residential 1,995 1,777 3,773 6,445 5,484 432 22 11 Industrial 12 Subtotal 12,109 19,808 31,916 40,990 37,041 5,544 Washington County/ Growth Area 13 Residential 1,158 1,035 2,193 3,740 3,184 252 74 14 Non -Residential 74 74 15 31 24 15 Industrial 16 Subtotal 1,158 1,109 2,267 3,755 3,215 276 Johnson 17 Residential 6,357 7,044 13,401 20,819 18,046 1,824 151 18 Non -Residential 43 84 126 146 136 24 18 19 Industrial 20 Subtotal 6,399 7,128 13,527 20,965 18,182 1,848 21 Total Retail 3,149,862 2,183,915 5,333,777 10,043,840 8,397,600 480,654 39,752 Wholesale 22 Elkins 90,935 20,280 111,215 281,043 224,600 24 23 23 West Fork 104,762 23,315 128,077 323,766 258,730 12 23 24 Subtotal 195,697 43,595 239,292 604,809 483,330 36 45 25 Subtotal (Inside City) 3,047,505 2,053,572 5,101,077 9,705,080 8,099,955 445,804 39,752 26 Subtotal (Outside City) 108,756 137,471 246,227 359,725 315,827 36,698 - 27 Subtotal (Wholesale) 195,697 43,595 239,292 604,809 483,330 36 45 28 Surcharge Customers 1,282,742 910,900 29 Total System 3,351,958 2,234,638 5,586,596 11,952,356 9,810,012 482,538 42,258 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 16 - Wastewater 2023 Unit Cost of Service $ 1,OOOgal. 1,OOOgal. Pounds Pounds Bills Equiv. Meters Bills Units of Service 1 Inside City 5,101,077 5,101,077 9,705,080 8,099,955 445,804 39,752 445,804 2 Outside City -w/o Farmington & Greenland 255,085 15,794 629,529 504,727 2,160 288 3 Outside City -Farmington 198,516 198,516 294,015 257,389 29,030 1,761 4 Outside City -Greenland 31,916 31,916 40,990 37,041 5,544 458 5 Surcharge 198,516 198,516 294,015 257,389 29,030 1,761 6 Total System 5,785,112 5,545,821 10,963,629 9,156,501 511,568 44,018 445,804 Costs of Service Net Operating Expense 7 Total - $ 17,377,400 4,744,789 1,738,270 $ 4,287,829 $ 4,436,415 1,980,591 189,507 8 Unit Cost - $/unit 0.85 0.33 $ 0.3587 $ 0.4522 4.10 0.43 Depreciation Expense: 9 Total -$ 8,186,987 2,527,489 1,769,433 $ 1,887,594 $ 1,830,500 $ 142,702 29,268 10 Unit Cost - $/unit 0.45 0.33 $ 0.1579 $ 0.1866 $ 3.3769 0.07 Net Plant Investment: 11 Total -$ 196,771,987 67,549,842 66,268,587 $ 31,759,281 $ 28,107,292 2,749,312 337,674 12 Unit Cost - $/unit 12.09 12.39 $2.6572 $2.8652 65.06 0.76 Return on Investment 13 Inside City, Unit Return - $/unit 0.04 0.04 $0.0085 $0.0092 0.21 0.00 14 Outside City (Exc Farmington & Greenland), Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 15 Farmington, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 16 Greenland, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 Total Return 17 Inside City 587,427 198,169 203,110 $ 93,805 $ 82,949 8,309 1,085 18 Outside City -w/o Farmington & Greenland 279,812 134,477 8,534 $ 72,932 $ 63,051 817 19 Outside City- Farmington 283,129 104,655 107,264 $ 34,062 $ 32,153 4,994 20 OutsideCity- Greenland 44,745 16,826 17,245 $ 4,749 $ 4,627 1,298 21 Total Return -$ 1,195,113 454,127 336,154 $ 205,548 $ 182,781 15,419 1,085 Total Unit Cost of Service 22 Inside City - $/unit 1.34 0.70 $ 0.5252 $ 0.6480 4.10 3.59 0.49 23 Outside City (w/o Farmington & Greenland)- $/unit 1.83 1.20 $ 0.6325 $ 0.7637 4.10 6.21 24 OutsideCity- Farmington - $/unit 1.83 1.20 $ 0.6325 $ 0.7637 4.10 6.21 25 OutsideCity- Greenland - $/unit 1.83 1.20 $ 0.6325 $ 0.7637 4.10 6.21 Total Cost of Service 26 InsideCity- Retail -$ 22,926,169 6,838,430 3,549,294 5,097,177 5,249,045 1,829,815 142,548 219,860 27 InsideCity-Surcharge -$ 1,263,999 673,705 590,294 28 Outside City- Except Farmington -$ 1,279,758 466,531 18,894 398,191 385,485 8,866 1,790 29 OutsideCity- Farmington -$ 1,113,204 363,071 237,487 185,971 196,581 119,155 10,939 30 OutsideCity- Greenland 176,370 58,373 38,182 25,927 28,290 22,756 2,843 31 Total Cost of Service - $ 26,759,500 7,726,405 3,843,957 6,380,971 6,449,695 1,980,591 158,121 219,860 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 17 - Wastewater 2023 Cost of Service by Customer Class (1) (2) (3) (4) Inside City 1 Residential 16,470,886 17,895,771 -8.0% 2 Non -Residential 4,603,442 3,999,013 15.1% 3 Industrial 1,851,842 1,547,635 19.7% 4 Subtotal 22,926,169 23,442,418 -2.2% Outside City 5 Residential 1,231,727 1,305,506 -5.7% 6 Non -Residential 147,832 161,315 -8.4% 7 Industrial 100.0% 8 Subtotal 1,379,559 1,466,821 -5.9% 9 Total Retail 24,305,728 24,909,239 -2.4% 10 Wholesale 1,189,772 1,015,665 17.1% 11 Surcharge 1,263,999 834,607 51.4% 12 Total 26,759,499 26,759,511 0.0% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study able S - 18 - Wastewater Proposed 2024 Charges Proposed Wastewater Rates Effective January 1, 2024 Inches $/month $/month 5/8 12.75 15.71 3/4 12.75 16.01 1 24.45 31.32 11/2 44.81 63.14 2 61.64 87.88 3 132.59 184.50 4 218.49 270.52 6 433.00 501.48 8 647.59 558.03 Volume Charge 1,000 gal. 1,000 gal. 1,000 gal. Residential First 2,000 Gallons 4.91 > 2,000 Gallons 6.56 All Usage 7.56 Non -Residential All Usage 5.51 7.56 Major Industrial All Usage 5.82 7.56 Wholesale 85% of metered water usage 6.26 Above 85% of metered water 6.26 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.5410 TSS - $/lb for strength in excess of 300 ppm 0.6674 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates S S S S Inside City 1 Residential 16,470,900 17,895,800 -8.0•0 16,472,800 100% -8%-1,423,000 2 Non -Residential 4,603,400 3,999,000 15.1% 4,601,500 100% 15% 602,500 3 Industrial 1,851,800 1,547,600 19.756 1,852,100 100% 20% 304,500 4 Subtotal 22,926,100 23,442,400 -2.2% 22,926,400 100% -2% -516,000 Outside City 5 Residential 1,231,700 1,305,500 -5.7•1 1,224,600 99% -6% -80,900 6 Non -Residential 147,800 161,300 -8.49/6 154,700 105% -4% -6,600 7 Industrial 0% 01Y0 8 Subtotal 1,379,500 1,466,800 -6.09/o 1,379,300 100•00 -6% -87,500 Wholesale 9 Elkins 552,900 472,000 17.1% 552,900 100•0 17% 80,900 10 West Fork 636,800 543,700 17.1% 637,000 100•0 17% 93,300 11 Subtotal 1,189,700 1,015,700 17.1% 1,189,900 100•0 17% 174,200 12 Surcharge 1,264,000 834,600 51.4% 1,264,000 100% 51% 429,400 13 Total 26,759,300 26,759,500 0.0% 26,759,600 100% 0% 100 Table S - 20 - Wastewater 2024 Bill Impact Line No. Residential 1 Meter Size Inches 3/4 Monthly Usage 1,000gaI. 0.5 Existing Rates $ 22.10 Inside City Propose Increase IdIlecrease $ 14.77 / $ -7.34 Increase / Decrease -33.2% Existing Rates $ 26.46 Outside Proposed Rates $ 19.21 City Increase / Decrease $ -7.25 increase Decrease -27.4% 2 3/4 2 26.45 21.92 -4.53 -17.1% 34.64 30.22 -4.42 -12.8% 3 3/4 4 38.05 31.46 -6.59 -17.3% 51.00 44.90 -6.10 -12.0% 4 3/4 8 61.25 50.54 -10.71 -17.5% 83.72 74.26 -9.46 -11.3% 5 3/4 10 72.85 60.08 -12.77 -17.5% 100.09 88.94 -11.14 -11.1% 6 3/4 15 101.85 83.93 -17.92 -17.6% 140.98 125.64 -15.34 -10.9% Non -Residential 7 3/4 10 61.75 65.88 4.13 6. No 100.08 88.94 -11.14 -11.1% 8 3/4 20 105.75 119.38 13.63 12.9% 181.88 162.34 -19.54 -10.7916 9 1 50 243.05 291.24 48.19 19.8% 442.92 397.41 -45.51 -10.3% 10 1 100 463.05 558.74 95.69 20.7% 851.92 764.41 -87.51 -10.3% 11 11/2 50 257.64 311.00 53.36 20.7% 469.37 428.30 -41.07 -8.89/o 12 1 1/2 100 477.64 578.50 100.86 21.1% 878.37 795.30 -83.07 -9.5% 13 2 100 493.82 594.84 101.02 20.5% 897.73 819.32 -78.41 -8.7% 14 2 500 2,253.82 2,734.84 481.02 21.3% 4,169.73 3,755.32 -414.41 -9.9% Industrial 15 2 100 493.52 624.84 131.32 26.6% 897.73 819.32 -78.41 -8.7% 16 2 1,000 4,732.52 5,709.84 977.32 20.7% 8,259.73 7,425.32 -834.41 -10.1% 17 4 500 2,441.89 3,037.13 595.24 24.4916 4,393.44 3,932.64 -460.80 -10.5% 18 4 1,500 7,151.89 8,687.13 1,535.24 21.5% 12,573.44 11,272.64 -1,300.80 -10.3% 19 6 2,500 11,948.78 14,545.39 2,596.61 21.7% 21,051.46 18,836.87 -2,214.59 -10.5% 20 6 5,000 23,723.78 28,670.39 4,946.61 20.9% 41,501.46 37,186.87 -4,314.59 -10.4% 21 6 10,000 47,273.78 56,920.39 9,646.61 20.4% 82,401.46 73,886.87 -8,514.59 -10.3% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-17 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 12.0 Appendix 3: Combined Tables Table C - 1 - Combined Projected Fund Balances S S $ S S S Operating Funds 1 O&M Reserve Balance (a) 8,314,600 8,657,100 9,015,200 9,389,600 9,781,000 10,190,300 2 Operating Fund Balance (b) 206,300 205,300 210,800 216,400 213,100 211,100 3 Subtotal Operating Funds Balance (d) 8,520,900 8,862,400 9,226,000 9,606,000 9,994,100 10,401,400 Capital Funds 4 Capital Fund Balance (c) 1,008,400 1,008,400 67,670,900 45,227,400 24,147,700 1,008,800 5 Capital Reserve Fund Balance 33,778,000 33,098,000 31,068,000 30,048,000 31,218,000 30,628,000 6 Subtotal Capital Funds Balance (d) 34,786,400 34,106,400 98,738,900 75,275,400 55,365,700 31,636,800 7 Impact Fee Fund Balance (d) 4,516,400 4,378,900 5,022,300 5,655,700 6,360,900 7,035,800 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target minimum combined balance is $200,000 to account for any adjustments that maybe needed to the O&M balance at the end of the yea r. (c) Target minimum combined balance is $1,000,000. Includes unspent revenue bond proceed amounts at the end of the fiscal years 2024 ($67M), 2025 ($44M) and 2026 ($23M). (d) All balances are cumulative. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 2 - Combined Operating Cash Flow 1 Revenues Revenues Under Existing Rates 49,952,000 50,519,100 51,181,800 51,857,600 52,546,600 53,249,200 2 Revenue Increases 4.4 % Increase Effective January 1, 2024 0 0 2,070,000 2,288,600 2,319,700 2,351,400 3 4.4 % Increase Effective January 1, 2025 0 0 0 2,201,200 2,433,900 2,467,200 4 4.5 % Increase Effective January 1, 2026 0 0 0 0 2,341,300 2,589,100 5 6 4.5 % Increase Effective January 1, 2027 4.5 % Increase Effective January 1, 2028 0 0 0 0 0 0 0 0 0 0 2,491,100 0 7 8 Total Revenue from Rates Other Revenues (a) 49,952,000 1,371,600 50,519,100 1,372,900 53,251,800 1,382,900 56,347,400 1,394,700 59,641,500 1,407,000 63,148,000 1,420,000 9 10 Subtotal Revenues Expenses Operating Expenses 51,323,600 32,655,400 51,892,000 33,720,200 54,634,700 35,109,500 57,742,100 36,561,700 61,048,500 38,079,900 64,568,000 39,667,300 11 Bad Debt 249,800 252,600 266,300 281,700 298,200 315,800 12 PILOT 2,123,000 2,147,100 2,263,200 2,394,800 2,534,800 2,683,800 13 SDWF- Reimbursement to ADPH 230,400 234,300 238,200 242,300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 16 Total Expenses Transfers Transfer to Shop Fund 35,258,600 0 36,354,200 0 41,077,200 0 45,780,500 0 47,459,300 0 49,217,500 0 17 Transfer to Operating Reserve 262,600 342,500 358,100 374,400 391,400 409,300 18 Cash Financing of Capital 15,930,000 15,876,300 15,223,900 12,601,600 12,031,100 15,533,200 19 Transferto/from Capital Reserve -129,000 -680,000 -2,030,000 -1,020,000 1,170,000 -590,000 20 21 22 Total Transfers Fund Balance Beginning Balance Annual Operating Balance 16,063,600 204,900 1,400 15,538,800 206,300 -1,000 13,552,000 205,300 5,500 11,956,000 210,800 5,600 13,592,500 216,400 -3,300 15,352,500 213,100 -2,000 23 Ending Fund Balance 206,300 205,300 210,800 216,400 213,100 211,100 Performance Metrics 24 Debt Service Coverage (b) NA NA 0 6.10 0 3.36 3.65 Q 3.95 25 O&M Reserve Balance (Days)(c) O 90.00 0 90.00 0 90.00 0 90.00 Q 90.00 Q 90.00 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.0 X the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOT and Safe Drinking Water Fee) (c) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 3 - Combined 2024 Bill Impact Line No. Meter Size Inches Residential 1 3/4 Monthly Usage 1,000gal. 1 Existing Rates $ 32.01 Inside Proposed Rates $ 24.00 City lncre=���k Decrease $ -8.01 .-""""""`l==i&EDecrease -25.0% $ 37.82 Outside Proposed $ 30.05 City IncreaseT $ -7.77 -20.5% 2 3/4 2 39.87 36.75 -3.12 -7.8% 50.04 48.20 -1.84 -3.7% 3 3/4 4 60.77 56.07 -4.70 -7.79/o 77.10 75.34 -1.76 -2.3% 4 3/4 8 102.57 94.73 -7.84 -7.6% 131.22 129.62 -1.60 -1.2% 5 3/4 10 123.47 114.04 -9.43 -7.6% 158.28 156.76 -1.52 -1.0% 6 3/4 15 175.72 162.36 -13.36 -7.6% 225.93 224.61 -1.32 -0.6% Non -Residential 7 3/4 10 106.05 116.82 10.77 10.2% 151.20 150.69 -0.51 -0.3% 8 3/4 20 187.95 213.90 25.95 13.8% 276.80 277.39 0.59 0.2% 9 1 50 441.42 519.92 78.50 17.8% 672.13 678.63 6.50 1.00/0 10 1 100 850.92 1,005.32 154.40 18.2% 1,300.13 1,312.10 11.97 0.9% 11 1.5 50 462.61 549.39 86.78 18.8% 706.15 724.01 17.86 2.5% 12 1.5 100 872.11 1,034.80 162.69 18.7% 1,334.15 1,357.48 23.33 1.8% 13 2 100 895.34 1,058.72 163.38 18.3% 1,361.61 1,392.77 31.16 2.3% 14 2 500 4,091.34 4,941.96 850.62 20.8% 6,289.61 6,460.53 170.92 2.7% Industrial 15 2 100 812.04 983.62 171.58 21.1% 1,260.25 1,230.59 -29.66 -2.4% 16 2 1,000 7,715.04 9,045.01 1,329.97 17.2% 11,682.25 11,173.43 -508.82 -4.49,o 17 4 500 4,008.78 4,791.91 783.13 19.5% 6,180.33 5,910.08 -270.25 -4.4% 18 4 1,500 11,678.78 13,749.01 2,070.23 17.7% 17,760.33 16,957.68 -802.65 -4.5% 19 6 2,500 19,522.56 23,015.48 3,492.92 17.9% 29,725.24 28,338.64 -1,386.60 -4.7% 20 6 5,000 38,697.56 45,408.23 6,710.67 17.3% 58,675.24 55,957.64 -2,717.60 -4.6% 21 6 10,000 1 77,047.56 90,193.73 13,146.17 17.1% 116,575.24 111,195.64 -5,379.60 -4.6% BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-3 EXH I BIT A 51.136 Monthly Water Rates Effective as of the first billing statements issued after December 31, 2023, the following monthly rates shall be fixed as rates to be charged for water furnished by the waterworks system of the city, which rates the City Council finds and declares to be reasonable and necessary minimum rates to be charged. All non -emergency water uses shall be billed to the user, to include but not limited to water used for: use within structures; business; manufacturing; irrigation; retail by another water utility; city uses; educational purposes; medical purposes; water system routine non -emergency uses; wastewater system routine non -emergency uses; non-profit uses; fire department non -emergency uses to include training and equipment calibration; construction of new water mains; street cleaning; and wet down of construction sites and materials. Emergency water use that does not pass through a water system meter shall not be billed, including firefighting, water leaks, water leak repair, and emergency water line flushing. The volumes used for these emergency purposes should be estimated and submitted monthly to the Business Office Manager and the Water/Sewer Operations Manager. (A) Monthly Water Rates. (1) The water usage of each customer shall be determined each month by meter measurement and the amount per 1,000 gallons to be paid for water usage by each customer shall be computed on the basis of the following schedule of rates. Table A-1 Monthly Water Rates Prior to January 1, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.51 $4.04 Next 13,000 $4.65 $5.35 Over 15,000 $6.59 $7.54 Non -Residential First 300,000 $3.79 $4.38 Over 300,000 $3.39 $3.90 Major Industrial All Usage $2.96 $3.40 Irrigation First 300,000 $5.04 $5.80 Over 300,000 $4.53 $5.22 Wholesale Reduced Peak Demand $2.87 $2.87 Peak Demand $3.20 $3.20 Table A-2 Monthly Water Rates After December 31, 2023 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.59 $4.54 Next 13,000 $4.75 $6.01 Over 15,000 $6.74 $8.52 Non -Residential First 300,000 $4.20 $5.11 Over 300,000 $4.20 $5.11 Major Industrial All Usage $3.14 $3.49 Irrigation First 300,000 $4.75 $5.89 Over 300,000 $4.75 $5.89 Wholesale Reduced Peak Demand $3.30 $3.30 Peak Demand $3.30 $3.30 Table A-3 Monthly Water Rates After December 31, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.81 $4.81 Next 13,000 $5.04 $6.37 Over 15,000 $7.14 $9.03 Non -Residential First 300,000 $4.45 $5.42 Over 300,000 $4.45 $5.42 Major Industrial All Usage $3.33 $3.70 Irrigation First 300,000 $5.04 $6.24 Over 300,000 $5.04 $6.24 Wholesale Reduced Peak Demand $3.50 $3.50 Peak Demand $3.50 $3.50 Table A-4 Monthly Water Rates After December 31, 2025 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $4.04 $5.10 Next 13,000 $5.34 $6.75 Over 15,000 $7.57 $9.57 Non -Residential First 300,000 $4.72 $5.75 Over 300,000 $4.72 $5.75 Major Industrial All Usage $3.53 $3.92 Irrigation First 300,000 $5.34 $6.61 Over 300,000 $5.34 $6.61 Wholesale Reduced Peak Demand $3.71 $3.71 Peak Demand $3.71 $3.71 Table A-5 Monthly Water Rates After December 31, 2026 Cost per 1,000 gallons Class Usage Rate Inside City Outside (In Gallons) I I City Residential First 2,000 $4.28 $5.41 Next 13,000 $5.66 $7.16 Over 15,000 $8.02 $10.14 Non -Residential First 300,000 $5.00 $6.10 Over 300,000 $5.00 $6.10 Major Industrial All Usage $3.74 $4.16 Irrigation First 300,000 $5.66 $7.01 Over 300,000 $5.66 $7.01 Wholesale Reduced Peak Demand $3.93 $3.93 Peak Demand $3.93 $3.93 (2) Beginning January 1, 2028, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, Fire Department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non-residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly Water Service Charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: Table B-1 Monthly Water Service Charge Prior to January 1, 2024 Inside Outside Meter Size City City Wholesale 5/8" $6.59 $7.54 $7.54 %x % inch $6.59 $7.54 $7.54 1 inch $9.14 $10.52 $10.52 1 % inch $15.93 $18.31 $18.31 2 inch $23.20 $26.66 $28.56 3 inch $54.05 $62.18 $64.38 4 inch $89.50 1 $102.93 1 $112.25 6 inch $178.99 $205.82 $213.02 8 inch $268.41 $308.67 $319.47 Table B-2 Monthly Water Service Charge After December 31, 2023 Meter Size Inside City Outside City Wholesale 5/8" $6.99 $7.99 $8.81 %x % inch $6.99 $7.99 $8.81 1 inch $10.06 $13.84 $13.84 1 % inch $19.18 $27.40 $27.40 2 inch $26.27 $37.95 $37.95 3 inch $57.29 $79.11 $79.11 4 inch $94.87 1 $115.76 1 $118.99 6 inch $189.73 $218.17 $225.53 8 inch $284.51 $327.19 $352.88 Table B-3 Monthly Water Service Charge After December 31, 2024 Meter Size Inside City Outside City Wholesale 5/8" $7.41 $8.47 $9.34 %x % inch $7.41 $8.47 $9.34 1 inch $10.66 $14.67 $14.67 1 % inch $20.33 $29.04 $29.04 2 inch $27.85 $40.23 $40.23 3 inch $60.73 $83.86 $83.86 4 inch $100.56 1 $122.71 1 $126.13 6 inch $201.11 $231.26 $239.06 8 inch $301.58 $346.82 $374.05 Table B-4 Monthly Water Service Charge After December 31, 2025 Inside Outside Meter Size City City Wholesale 5/8" $7.85 $8.98 $9.90 % x % inch $7.85 $8.98 $9.90 1 inch $11.30 $15.55 $15.55 1 % inch $21.55 $30.78 $30.78 2 inch $29.52 $42.64 $42.64 3 inch $64.37 $88.89 $88.89 4 inch $106.59 1 $130.07 1 $133.70 6 inch $213.18 $245.14 $253.40 8 inch $319.67 $367.63 $396.49 Table B-5 Monthly Water Service Charge After December 31, 2026 Meter Size Inside City Outside City Wholesale 5/8" $8.32 $9.52 $10.49 %x % inch $8.32 $9.52 $10.49 1 inch $11.98 $16.48 $16.48 1 % inch $22.84 $32.63 $32.63 2 inch $31.29 $45.20 $45.20 3 inch $68.23 $94.22 $94.22 4 inch $112.99 1 $137.87 1 $141.72 6 inch $225.97 $259.85 $268.60 8 inch $338.85 $389.69 $420.28 (2) Beginning January 1, 2028, all monthly water service charges shall be increased by 3% per year. (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section shall commence as of the first billing statements issued after December 31, 2023. (4) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly Standby Fire Protection Service Charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be based on the incoming line size or the backflow preventer size, whichever is smaller, as set forth in the following table: Monthly Standby Fire Protection Service Charge Line Size or Backflow Preventer Size Inside City Outside City 1 inch $10.34 $12.38 2 inch $10.78 $12.83 2.5 inch $21.55 $24.77 3 inch $32.31 $37.16 4 inch $64.63 $74.32 6 inch $179.50 $209.60 8 inch $376.99 $433.54 10 inch $646.26 $743.18 (2) The Utilities Department shall review the monthly standby fire protection service charges every two (2) years and shall make recommendations to the City Council following such review. Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7-17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11- 20-90; Ord. No. 4059, §1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02-03-04; Ord. No. 5123, 4-1-08; Ord. No. 6169, §1, 4-2-2019) EXHIBIT B 51.137 Monthly Sewer Rates (A) Monthly Sewer Rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before January 1, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.35 Greater than $5.80 2,000 gallons Non -Residential All Usage $4.40 Major Industrial All Usage $4.71 Farmington All Usage $7.52 Outside city All Usage $8.18 Wholesale 85% of metered $5.19 water usage Usage above 85% of $2.71 metered water usage Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2023 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.84 Greater than $5.13 2,000 gallons Non -Residential All Usage $5.36 Major Industrial All Usage $5.82 Farmington All Usage $7.56 Outside city All Usage $7.56 Wholesale 85% of metered $6.26 water usage Usage above 85% of $6.26 metered water usage Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2024 Class Usage Rate (In Gallons) Cost per 1,000 gallons Residential First 2,000 gallons $3.96 Greater than 2,000 gallons $5.28 Non -Residential All Usage $5.52 Major Industrial All Usage $5.99 Farmington All Usage $7.79 Outside city All Usage $7.79 Wholesale 85% of metered water usage $6.45 Usage above 85% of metered water usage $6.45 Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2025 Class Usage Rate (In Gallons) Cost per 1,000 gallons Residential First 2,000 gallons $4.08 Greater than 2,000 gallons $5.44 Non -Residential All Usage $5.68 Major Industrial All Usage $6.17 Farmington All Usage $8.02 Outside city All Usage $8.02 Wholesale 85% of metered water usage $6.64 Usage above 85% of metered water usage $6.64 Table D-5 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2026 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.20 Greater than $5.61 2,000 gallons Non -Residential All Usage $5.85 Major Industrial All Usage $6.36 Farmington All Usage $8.26 Outside city All Usage $8.26 Wholesale 85% of metered $6.84 water usage Usage above 85% of $6.84 metered water usage (2) Beginning January 1, 2028, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per -thousand volumetric usage or a per month basis. (B) Monthly Sewer Service Charge. (1) In addition to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $18.28 $18.28 $16.74 %x % inch $18.28 $18.28 $16.74 1 inch $23.74 $33.92 $31.28 1% inch $38.77 $60.37 $55.50 2 inch $55.43 $79.73 $73.45 3 inch $128.73 $184.24 $169.29 4 inch $212.13 $303.44 $278.93 6 inch 1 $420.39 1 $601.46 1 $553.70 8 inch 1 $628.73 1 $899.76 1 $826.81 Table E-2 Monthly Sewer Service Charge After December 31, 2023 Meter Size Inside City Outside Cityt Farmingtont 5/8" $18.83 $15.71 $15.71 %x % inch $18.83 $16.01 $16.01 1 inch $24.45 $31.32 $31.32 1% inch $44.81 $63.14 $63.14 2 inch $61.64 $87.88 $87.88 3 inch $132.59 $184.50 $184.50 4 inch $218.49 $270.52 $270.52 6 inch $433.00 $501.48 $501.48 8 inch $647.59 $558.03 $558.03 Table E-3 Monthly Sewer Service Charge After December 31, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $19.39 $16.18 $16.18 %x % inch $19.39 $16.49 $16.49 1 inch $25.19 $32.26 $32.26 1% inch 1 $46.15 1 $65.03 1 $65.03 2 inch 1 $63.48 1 $90.52 1 $90.52 3 inch $136.57 $190.04 $190.04 4 inch $225.05 $278.63 $278.63 6 inch $445.99 $516.52 $516.52 8 inch $667.02 $574.77 $574.77 Table E-4 Monthly Sewer Service Charge After December 31, 2025 Meter Size Inside City Outside Cityt Farmingtont 5/8" $19.98 $16.66 $16.66 %x % inch $19.98 $16.98 $16.98 1 inch $25.94 $33.23 $33.23 1% inch $47.53 $66.98 $66.98 2 inch $65.39 $93.23 $93.23 3 inch $140.67 $195.74 $195.74 4 inch $231.80 $286.99 $286.99 6 inch 1 $459.37 1 $532.02 1 $532.02 8 inch 1 $667.02 1 $592.02 1 $592.02 Table E-5 Monthly Sewer Service Charge After December 31, 2026 Meter Size Inside City Outside Cityt Farmingtont 5/8" $20.57 $17.16 $17.16 %x % inch $20.57 $17.49 $17.49 1 inch $26.72 $34.23 $34.23 1% inch $48.96 $68.99 $68.99 2 inch $67.35 $96.03 $96.03 3 inch $144.89 $201.61 $201.61 4 inch $238.75 $295.60 $295.60 6 inch $473.15 $548.00 $548.00 8 inch $707.64 $609.78 $609.78 tCost of Service Methodology required by contract. (2) Beginning January 1, 2028, all monthly sewer service charges shall be increased by 3% per year. (C) Determination of Sewer Quantity Charge for Residential Customers. (1) In the case of residential customers residing in a single family home, duplex, triplex, and/or fourplex, the average monthly water consumption for the preceding months of December, January, and February shall be computed separately for each customer, and a uniform monthly charge for each customer shall be determined by applying the schedule of rates set out in subsection (A) of this section to such average monthly water consumption. In the case of a residential user for whom a uniform monthly charge has been established and who moves to a new location the same uniform monthly charge shall apply at the new location. In the case of new residential customers, sewer averages shall be established based on the number of individuals residing within the dwelling unit, at a rate of 2,100 gallons per customer per month. This methodology of sewer averaging shall not apply to multi -family structures containing five (5) or more units in a contiguous building. (2) In the case of sewer customers who do not have a water meter provided by a public water utility, the sewer usage volume billed shall be the average volume of all users in the sewer system in like dwellings from the most recent system -wide sewer average calculation. (D) Determination of Charge for Non-residential and Major Industrial Customers. In the case of non-residential and/or major industrial customers, the monthly sewer charge shall be determined by applying the schedule of rates prescribed in subsection (A) of this section to the monthly water usage of such customers. In the event that a non-residential or major industrial customer discharging waste into the city's sanitary sewer system produces evidence to the Water and Wastewater Director demonstrating that a substantial portion of the total amount of water from all sources used for all purposes does not reach the sanitary sewer which is in excess of the factors used in establishing the rates in subsection (A) of this section, an estimated percentage of total water consumption to be used in computing charges may be established by the Water and Wastewater Director. The factors used in establishing said rates are on file in the office of the Water and Wastewater Director and are incorporated herein by reference thereto. Any rate so adjusted by the Water and Wastewater Director shall be effective for a twelve (12) month period beginning with the billing for the month when rates adjudged hereby go into effect. (E) Extra Strength Surcharge. (1) For all significant industrial users as defined in §51.074, whose wastewater discharge is greater than 300 mg/I of BOD Sand/or TSS, the city shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Table F1 Extra Strength Surcharges Prior to January 31, 2024 Prior to 01/01/2024 Extra Strength BOD 5 $0.3148 per pound Extra Strength TSS $0.4483 per pound Table F2 Extra Strength Surcharges After December 31, 2023 After 12/31/2023 Extra Strength BOD 5 $0.5410 per pound Extra Strength TSS $0.6674 per pound Table F3 Extra Strength Surcharges After December 31, 2024 After 12/31/2024 Extra Strength BOD 5 $0.5572 per pound Extra Strength TSS $0.6875 per pound Table F4 Extra Strength Surcharges After December 31, 2025 After 12/31/205 Extra Strength BOD 5 $0.5739 per pound Extra Strength TSS $0.7081 per pound Table FS Extra Strength Surcharges After December 31, 2026 After 12/31/2026 Extra Strength BOD 5 $0.5911 per pound Extra Strength TSS $0.7293 per pound (2) Starting after December 31, 2026, Extra Strength Surcharges shall be increased by 3% per year. (3) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (4) All sampling and analyses of the wastewater characteristics shall be performed in accordance with U.S. Environmental Protection Agency 40 Code of Federal Regulations Part 136 approved methods. (5) The volume of flow used in computing surcharge shall be based upon metered water consumption as shown in the records of meter readings maintained by the city's business office. In the event that a user discharging waste into the city sanitary sewer system produces evidence to the city demonstrating that a portion of the total amount of water used for all purposes is not discharged into the sanitary sewer, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (6) Any person discharging industrial waste into the sanitary sewers of the city who procures any part or all of the user's water supply from sources other than the city, all or part of which is discharged into the sanitary sewer, shall install and maintain at the user's expense water meters of the type approved by the city for the purpose of determining the proper volume of flow to be used in computing sewer service charges. Such meter will be read monthly and tested for accuracy when deemed necessary by the city. Where it can be shown that a portion of the water measured by the aforesaid meter or meters does not enter the sanitary sewer system of the city, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (7) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S I = V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (TSS - 300)] (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD Unit Charge = Unit charge for BOD in dollars per pound BOD = BOD strength in parts per million 300 = Allowed BOD strength in parts per million TSS Unit Charge = Unit charge for suspended solids in dollars per pound TSS = Suspended solids strength in parts per million 300 1 = Allowed TSS Strength in parts per million (F) Elkins Sewer Charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net difference to occur semiannually in June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins Impact Fee Charges. The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. (G) Hauled Wastewater Fees. (1) Application fee. An application to discharge hauled domestic waste must be accompanied by a fee of $100.00. (2) Discharge fee. A fee of $50.00 must be paid for each hauled domestic waste load discharged. (H) Industrial Wastewater Discharge Permit Fee. (1) Application Fee. An application for an industrial wastewater discharge permit must be accompanied by a fee of $500.00. (Code 1965, §21-26; Ord. No. 1165, 4-18-58; Ord. No. 3197, 7-1-86; Ord. No. 3285, 8-4-87; Ord. No. 3398, 1-3-89; Ord. No. 3491, 7-17-90; Ord. No. 3637, §§1, 2, 8-18-92; Ord. No. 4059, §2, 10-7-97; Code 1991, §51.137; Ord. No. 4530, 12-02-03; Ord. No. 4803, 12-20-05; Ord. No. 4998, 4-3-07; Ord. No. 5129, 4-15-08; Ord. No. 5438, 9-20-11; Ord. No. 5739, 2-17-15) EXHIBIT A 51.136 Monthly Water Rates Effective as of the first billing statements issued after December 31, 2022, the following monthly rates shall be fixed as rates to be charged for water furnished by the waterworks system of the city, which rates the City Council finds and declares to be reasonable and necessary minimum rates to be charged. All non -emergency water uses shall be billed to the user, to include but not limited to water used for: use within structures; business; manufacturing; irrigation; retail by another water utility; city uses; educational purposes; medical purposes; water system routine non -emergency uses; wastewater system routine non -emergency uses; non-profit uses; fire department non -emergency uses to include training and equipment calibration; construction of new water mains; street cleaning; and wet down of construction sites and materials. Emergency water use that does not pass through a water system meter shall not be billed, including firefighting, water leaks, water leak repair, and emergency water line flushing. The volumes used for these emergency purposes should be estimated and submitted monthly to the Business Office Manager and the Water/Sewer Operations Manager. (A) Monthly Water Rates. (1) The water usage of each customer shall be determined each month by meter measurement and the amount per 1,000 gallons to be paid for water usage by each customer shall be computed on the basis of the following schedule of rates. Table A-1 Monthly Water Rates Prior to January 1, 2023 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.51 $4.04 Next 13,000 $4.65 $5.35 Over 15,000 $6.59 $7.54 Non -Residential First 300,000 $3.79 $4.38 Over 300,000 $3.39 $3.90 Major Industrial All Usage $2.96 $3.40 Irrigation First 300,000 $5.04 $5.80 Over 300,000 $4.53 $5.22 Wholesale Reduced Peak Demand $2.87 $2.87 Peak Demand $3.20 $3.20 Table A-2 Monthly Water Rates After December 31, 2022 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.30 $4.47 Next 13,000 $4.37 $5.91 Over 15,000 $6.20 $8.38 Non -Residential First 300,000 $3.93 $5.05 Over 300,000 $3.93 $5.05 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 1 of 11 EXH I BIT A Major Industrial All Usage $3.14 $3.49 Irrigation First 300,000 $4.29 $5.43 Over 300,000 $4.29 $5.43 Wholesale Reduced Peak Demand $3.16 $3.16 Peak Demand $3.16 $3.16 Table A-3 Monthly Water Rates After December 31, 2023 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.40 $4.60 Next 13,000 $4.50 $6.09 Over 15,000 $6.39 $8.63 Non -Residential First 300,000 $4.05 $5.20 Over 300,000 $4.05 $5.20 Major Industrial All Usage $3.23 $3.59 Irrigation First 300,000 $4.42 $5.59 Over 300,000 $4.42 $5.59 Wholesale Reduced Peak Demand $3.25 $3.25 Peak Demand $3.25 $3.25 Table A-4 Monthly Water Rates After December 31, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.50 $4.74 Next 13,000 $4.64 $6.27 Over 15,000 $6.58 $8.89 Non -Residential First 300,000 $4.17 $5.36 Over 300,000 $4.17 $5.36 Major Industrial All Usage $3.33 $3.70 Irrigation First 300,000 $4.55 $5.76 Over 300,000 $4.55 $5.76 Wholesale Reduced Peak Demand $3.35 $3.35 Peak Demand $3.35 $3.35 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 2 of 11 EXHIBIT A (2) Beginning January 1, 2026, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, Fire Department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non-residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly Water Service Charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: Table B-1 Monthly Water Service Charge Prior to January 1, 2023 Meter Size Inside City Outside City Wholesale %x % inch $6.59 $7.54 $7.54 1 inch $9.14 $10.52 $10.52 1 % inch $15.93 $18.31 $18.31 2 inch $23.20 $26.66 $28.56 3 inch $54.05 $62.18 $64.38 4 inch $89.50 $102.93 $112.25 6 inch 1 $178.99 1 $205.82 1 $213.02 8 inch 1 $268.41 1 $308.67 1 $319.47 Table B-2 Monthly Water Service Charge After December 31, 2022 Inside Outside Meter Size City City Wholesale %x % inch $6.59 $7.54 $7.54 1 inch $9.14 $12.26 $12.26 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 3 of 11 EXHIBIT A 1 % inch $15.93 $24.22 $24.22 2 inch $23.20 $33.52 $33.52 3 inch $54.05 $69.84 $69.84 4 inch $89.50 $102.93 $102.93 6 inch $178.99 $205.82 $205.82 8 inch $268.41 $308.67 $308.67 Table B-3 Monthly Water Service Charge After December 31, 2023 Meter Size Inside City Outside City Wholesale %x % inch $6.79 $7.77 $7.77 1 inch $9.41 $12.63 $12.63 1 % inch $16.41 $24.95 $24.95 2 inch $23.90 $34.53 $34.53 3 inch $55.67 $71.94 $71.94 4 inch $92.19 $106.02 $106.02 6 inch $184.36 $211.99 $211.99 8 inch 1 $276.46 1 $317.93 1 $317.93 Table B-4 Monthly Water Service Charge After December 31, 2024 Meter Size Inside City Outside City Wholesale %x % inch $6.99 $8.00 $8.00 1 inch $9.70 $13.01 $13.01 1 % inch $16.90 $25.69 $25.69 2 inch $24.61 $35.56 $35.56 3 inch $57.34 $74.09 $74.09 4 inch $94.95 $109.20 $109.20 6 inch 1 $189.89 1 $218.35 1 $218.35 8 inch 1 $284.76 1 $327.47 1 $327.47 (2) Beginning January 1, 2026, all monthly water service charges shall be increased by 3% per year. (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section shall commence as of the first billing statements issued after December 31, 2022. (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 4 of 11 EXHIBIT A (4) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly Standby Fire Protection Service Charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be based on the incoming line size or the backflow preventer size, whichever is smaller, as set forth in the following table: Monthly Standby Fire Protection Service Charge Line Size or Backflow Preventer Size Inside City Outside City 1 inch $9.75 $11.68 2 inch 10.17 12.10 2.5 inch 20.33 23.37 3 inch 30.48 35.06 4 inch 60.97 70.11 6 inch 169.34 194.74 8 inch 355.65 409.00 10 inch 609.68 701.11 (2) The Utilities Department shall review the monthly standby fire protection service charges every two (2) years and shall make recommendations to the City Council following such review. Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7-17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11- 20-90; Ord. No. 4059, §1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02-03-04; Ord. No. 5123, 4-1-08; Ord. No. 6169, §1, 4-2-2019) (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 5 of 11 EXHIBIT B 51.137 Monthly Sewer Rates (A) Monthly Sewer Rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before January 1, 2023 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.35 Greater than $5.80 2,000 gallons Non -Residential All Usage $4.40 Major Industrial All Usage $4.71 Farmington All Usage $7.52 Outside city All Usage $8.18 Elkins 85% of metered $5.19 water usage Usage above 85% of $2.71 metered water usage Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2022 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.39 Greater than $4.52 2,000 gallons Non -Residential All Usage $5.10 Major Industrial All Usage $5.71 Farmington All Usage $8.27 Outside city All Usage $8.55 Elkins 85% of metered $7.20 water usage Usage above 85% of $7.20 metered water usage (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 6 of 11 EXHIBIT B Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2023 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.49 Greater than $4.66 2,000 gallons Non -Residential All Usage $5.25 Major Industrial All Usage $5.88 Farmington All Usage $8.52 Outside city All Usage $8.81 Elkins 85% of metered $7.42 water usage Usage above 85% of $7.42 metered water usage Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.60 Greater than $4.80 2,000 gallons Non -Residential All Usage $5.41 Major Industrial All Usage $6.06 Farmington All Usage $8.77 Outside city All Usage $9.07 Elkins 85% of metered $7.64 water usage Usage above 85% of $7.64 metered water usage (2) Beginning January 1, 2026, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per -thousand volumetric usage or a per month basis. (B) Monthly Sewer Service Charge. (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 7 of 11 EXHIBIT B (1) In addition to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2023 Meter Size Inside City Outside Cityt Farmingtont % x % inch $18.28 $18.28 $16.74 1 inch $23.74 $33.92 $31.28 1% inch $38.77 $60.37 $55.50 2 inch $55.43 $79.73 $73.45 3 inch $128.73 $184.24 $169.29 4 inch $212.13 $303.44 $278.93 6 inch $420.39 $601.46 $553.70 8 inch $628.73 $899.76 $826.81 Table E-2 Monthly Sewer Service Charge After December 31, 2022 Meter Size Inside City Outside Cityt Farmingtont %x % inch $18.28 $18.28 $25.10 1 inch $23.74 $33.92 $52.62 1% inch $38.77 $66.73 $109.78 2 inch $55.43 $93.11 $154.24 3 inch $128.73 $196.10 $327.83 4 inch $212.13 $303.44 $482.37 6 inch $420.39 $601.46 $897.30 8 inch $628.73 $899.76 $998.92 Table E-3 Monthly Sewer Service Charge After December 31, 2023 Meter Size Inside City Outside Cityt Farmingtont % x % inch $18.83 $18.83 $25.85 1 inch $24.45 $34.94 $54.20 1% inch $39.93 $68.73 $113.07 2 inch $57.09 $95.90 $158.87 3 inch $132.59 $201.98 $337.66 4 inch $218.49 $312.54 $496.84 6 inch $433.00 $619.50 $924.22 8 inch 1 $647.59 1 $926.75 1 $1,028.89 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 8 of 11 EXHIBIT B Table E-4 Monthly Sewer Service Charge After December 31, 2024 Meter Size Inside City Outside Cityt Farmingtont %x % inch $19.39 $19.39 $26.63 1 inch $25.19 $35.99 $55.82 1% inch $41.13 $70.79 $116.47 2 inch $58.81 $98.78 $163.63 3 inch $136.57 $208.04 $347.79 4 inch $225.05 $321.92 $511.75 6 inch 1 $445.99 1 $638.09 1 $951.95 8 inch 1 $667.02 1 $954.56 1 $1,059.75 tCost of Service Methodology required by contract. (2) Beginning January 1, 2026, all monthly sewer service charges shall be increased by 3% per year. (C) Determination of Sewer Quantity Charge for Residential Customers. (1) In the case of residential customers residing in a single family home, duplex, triplex, and/or fourplex, the average monthly water consumption for the preceding months of December, January, and February shall be computed separately for each customer, and a uniform monthly charge for each customer shall be determined by applying the schedule of rates set out in subsection (A) of this section to such average monthly water consumption. In the case of a residential user for whom a uniform monthly charge has been established and who moves to a new location the same uniform monthly charge shall apply at the new location. In the case of new residential customers, sewer averages shall be established based on the number of individuals residing within the dwelling unit, at a rate of 2,100 gallons per customer per month. This methodology of sewer averaging shall not apply to multi -family structures containing five (5) or more units in a contiguous building. (2) In the case of sewer customers who do not have a water meter provided by a public water utility, the sewer usage volume billed shall be the average volume of all users in the sewer system in like dwellings from the most recent system -wide sewer average calculation. (D) Determination of Charge for Non-residential and Major Industrial Customers. In the case of non-residential and/or major industrial customers, the monthly sewer charge shall be determined by applying the schedule of rates prescribed in subsection (A) of this section to the monthly water usage of such customers. In the event that a non-residential or major industrial customer discharging waste into the city's sanitary sewer system produces evidence to the Water and Wastewater Director demonstrating that a substantial portion of the total amount of water from all sources used for all purposes does not reach the sanitary sewer which is in excess of the factors used in establishing the rates in subsection (A) of this section, an estimated percentage of total water consumption to be used in computing charges may be established by the Water and Wastewater Director. The factors used in establishing said rates are on file in the office of the Water and Wastewater Director and are incorporated herein by reference thereto. Any rate so adjusted by the Water and Wastewater Director shall be effective for a twelve (12) month period beginning with the billing for the month when rates adjudged hereby go into effect. (E) Extra Strength Surcharge. Created: 2022-05-17 11:20:05 [EST] (Supp. No. 25) Page 9 of 11 EXHIBIT B (1) For all significant industrial users as defined in §51.074, whose wastewater discharge is greater than 300 mg/I of BOD Sand/or TSS, the city shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Table F3 Extra Strength Surcharges After 12/31/2022 Extra Strength BOD 5 $0.5426 per pound Extra Strength TSS $0.6921 per pound (2) Starting after December 31, 2023, Extra Strength Surcharges shall be increased by 3% per year. (3) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (4) All sampling and analyses of the wastewater characteristics shall be performed in accordance with U.S. Environmental Protection Agency 40 Code of Federal Regulations Part 136 approved methods. (5) The volume of flow used in computing surcharge shall be based upon metered water consumption as shown in the records of meter readings maintained by the city's business office. In the event that a user discharging waste into the city sanitary sewer system produces evidence to the city demonstrating that a portion of the total amount of water used for all purposes is not discharged into the sanitary sewer, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (6) Any person discharging industrial waste into the sanitary sewers of the city who procures any part or all of the user's water supply from sources other than the city, all or part of which is discharged into the sanitary sewer, shall install and maintain at the user's expense water meters of the type approved by the city for the purpose of determining the proper volume of flow to be used in computing sewer service charges. Such meter will be read monthly and tested for accuracy when deemed necessary by the city. Where it can be shown that a portion of the water measured by the aforesaid meter or meters does not enter the sanitary sewer system of the city, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (7) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S I = V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (TSS - 300)] (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD Unit Charge = Unit charge for BOD in dollars per pound (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 10 of 11 EXHIBIT B BOD = BOD strength in parts per million 300 = Allowed BOD strength in parts per million TSS Unit Charge = Unit charge for suspended solids in dollars per pound TSS = Suspended solids strength in parts per million 300 = Allowed TSS Strength in parts per million (F) Elkins Sewer Charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net difference to occur semiannually in June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins Impact Fee Charges. The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. (G) Hauled Wastewater Fees. (1) Application fee. An application to discharge hauled domestic waste must be accompanied by a fee of $100.00. (2) Discharge fee. A fee of $50.00 must be paid for each hauled domestic waste load discharged. (H) Industrial Wastewater Discharge Permit Fee. (1) Application Fee. An application for an industrial wastewater discharge permit must be accompanied by a fee of $500.00. (Code 1965, §21-26; Ord. No. 1165, 4-18-58; Ord. No. 3197, 7-1-86; Ord. No. 3285, 8-4-87; Ord. No. 3398, 1-3-89; Ord. No. 3491, 7-17-90; Ord. No. 3637, §§1, 2, 8-18-92; Ord. No. 4059, §2, 10-7-97; Code 1991, §51.137; Ord. No. 4530, 12-02-03; Ord. No. 4803, 12-20-05; Ord. No. 4998, 4-3-07; Ord. No. 5129, 4-15-08; Ord. No. 5438, 9-20-11; Ord. No. 5739, 2-17-15) (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 11 of 11 Received by Amanda Beilfuss 08/10/2023 11:32 AM Form 0.27 NVVA ftdddaim� A WEHCO MEDIA COMPANY Account #: NWC5182985 Company: CITY OF FAYETTEVILLE-PIA LEGAL Ad number #: 310604 PO #: Matter of. PH Proposed Water & Sewer Rate Change AFFIDAVIT • STATE OFARKANSAS • COUNTY OF WASHINGTON I, Carla Gardner, do solemnly swear that I am the Finance Director of the Northwest Arkansas Democrat Gazette, a daily newspaper printed and published in said county, State of Arkansas; that I was so related to this publication at and during the publication of the annexed legal advertisement in the matter of PH Proposed Water & Sewer Rate Change Pending in the court, in said County, and at the dates of the several publications of said advertisement stated below, and that during said periods and at said dates, said newspaper was printed and had a bona fide circulation in said County, that said newspaper had been regularly printed and published in said county, and had a bona fide circulation therein for the period of one month before the date of the first publication of said advertisement; and that said advertisement was published in the regular daily issues of said newspaper as stated below. And that there is due or has been paid the Northwest Arkansas Democrat Gazette for publication the sum of $1,365.00. (Includes $0.00 Affidavit Charge). NWA Democrat Gazette 08103123 Finance Director NOTARY PUBLIC CATHERINE STAGGS ,••;`�►�'.-,. _. rNOTARY .F MY COMMISSION # 1240Z772 .,, '�'•�:;��= EXPIRES; February 28, 2025 uun� Washington County 1lNORTH WEST ARKA N SAS' No— AR—S CLASSIFIED ailketplace m A-0—S A—S j— aDr nTe NOTrxx ..,17 page 1 pager page 1 page paga 1 Page PAge I Page Sell it in 10 4,06e; We'll Run it Again for Mi.. MJMIMNEED.E,D� J IZEW-MMM '— 1=.1=Nt MULTIMEDIA COORDINATOR 'I .. ...... . =E- ,= GREATDF4L 9. IMAUCTION L BLOC ESTATE AUCTION MAM�UWcuftx MTl-t]:W Received By: Paul Becker 08/07/2023 12:45 P.M City of Fayetteville Staff Review Form 2022-0517 Legistar File ID 6/21/2022 City Council Meeting Date - Agenda Item Only N/A for Non -Agenda Item Paul Becker 6/2/2022 WATER SEWER (720) Submitted By Submitted Date Division / Department Action Recommendation: Approval of the Water and Sewer Rate changes, rescinding and replacing sections 51.136 and 51.137 of the City Code of Ordinances and holding a Public Hearing based on a Rate Study conducted by Black and Veatch recommended by the Fayetteville Water and Sewer Committee. Budget Impact: N/A Water/Sewer Account Number Fund N/A N/A Project Number Project Title Budgeted Item? No Current Budget $ - Funds Obligated $ - Current Balance $ - Does item have a cost? No Item Cost $ - Budget Adjustment Attached? No Budget Adjustment $ - Remaining Budget Purchase Order Number: Change Order Number: Original Contract Number: Comments: V20210527 Previous Ordinance or Resolution # Approval Date: WW'A ggp CITY OF FAYETTEVILLE ARKANSAS MEETING OF AUGUST 15, 2023 TO: Mayor and City Council FROM: Paul Becker, Chief Financial Officer DATE: August 7,2022 CITY COUNCIL MEMO SUBJECT: Approval of the Water and Sewer Rate changes, rescinding and replacing sections 51.136 and 51.137 of the City Code of Ordinances. RECOMMENDATION: Administration recommends approval of an ordinance changing the water and sewer rates based on a Cost of Service Study conducted by Black and Veatch as presented to the Water and Sewer Committee in open meetings. These recommended rates are reflected in the attached replacement for sections 51.136 and 51.137 of the Fayetteville code of Ordinances. BACKGROUND: Black and Veatch was selected pursuant to RFQ 20-01 by the City Council on August 18,2020 with the approval of Resolution 212-20. The current water and sewer rates were adopted by the City of Fayetteville in 2008 based on a Cost of Service Study reformed by HDR Engineering. As a part of that study an annual 3% inflationary increase for each rate classification was authorized. This was sufficient to fund operations and capital need until now without a full rate study. Rate studies were delayed during the period between for 2008 to 2020 primarily because the City was working on the permitting process for our two plants and the possibility of significant discharge effluent reductions were being considered which would have required very expensive capital expenditures at both plants which would have required dramatic rate increases . Those issues have been resolved at this time and new permits have been issued, however, extensive new capital needs are required at this point in time and operating cost have increased above the revenue increases generated by an annual 3% proportional adjustment. DISCUSSION: State code dictates a schedule of events for any change in water and sewer rates. These require that the rate change ordinance be read, a public hearting be scheduled and announced, the ordinance be published, and the public hearing take place at least ten days after the initial reading and publication of the ordinance. The rate ordinance can then be approved any time after the public hearing .. Mailing Address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 The rate study prepared by Black and Veatch reflects some of the following guidelines: 1. The City has adopted a cost of service rate schedule based on customer class. 2. The City is using a volumetric block system within customer class to encourage conservation 3. New rates reflecting the true cost of service by customer class as determined by the rate study will be implemented as soon as this ordinance takes effect. 4. These rates will begin taking effect January 1 ,2024 and continue pursuant to the approved ordinance through 2027 unless amended prior to the end of 2027. BUDGET/STAFF IMPACT: Adoption of these new rates will provide necessary revenues to address current operating costs and capital needs Attachments: Staff Review form, Staff Memo, Black and Veatch Rate Study 51.136 Monthly Water Rates Effective as of the first billing statements issued after December 31, 2023, the following monthly rates shall be fixed as rates to be charged for water furnished by the waterworks system of the city, which rates the City Council finds and declares to be reasonable and necessary minimum rates to be charged. All non -emergency water uses shall be billed to the user, to include but not limited to water used for: use within structures; business; manufacturing; irrigation; retail by another water utility; city uses; educational purposes; medical purposes; water system routine non -emergency uses; wastewater system routine non -emergency uses; non-profit uses; fire department non -emergency uses to include training and equipment calibration; construction of new water mains; street cleaning; and wet down of construction sites and materials. Emergency water use that does not pass through a water system meter shall not be billed, including firefighting, water leaks, water leak repair, and emergency water line flushing. The volumes used for these emergency purposes should be estimated and submitted monthly to the Business Office Manager and the Water/Sewer Operations Manager. (A) Monthly Water Rates. (1) The water usage of each customer shall be determined each month by meter measurement and the amount per 1,000 gallons to be paid for water usage by each customer shall be computed on the basis of the following schedule of rates. Table A-1 Monthly Water Rates Prior to January 1, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.51 $4.04 Next 13,000 $4.65 $5.35 Over 15,000 $6.59 $7.54 Non -Residential First 300,000 $3.79 $4.38 Over 300,000 $3.39 $3.90 Major Industrial All Usage $2.96 $3.40 Irrigation First 300,000 $5.04 $5.80 Over 300,000 $4.53 $5.22 Wholesale Reduced Peak Demand $2.87 $2.87 Peak Demand $3.20 $3.20 Table A-2 Monthly Water Rates After December 31, 2023 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.59 $4.54 Next 13,000 $4.75 $6.01 Over 15,000 $6.74 $8.52 Non -Residential First 300,000 $4.20 $5.11 Over 300,000 $4.20 $5.11 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 1 of 13 Major Industrial All Usage $3.14 $3.49 Irrigation First 300,000 $4.75 $5.89 Over 300,000 $4.75 $5.89 Wholesale Reduced Peak Demand $3.30 $3.30 Peak Demand $3.30 $3.30 Table A-3 Monthly Water Rates After December 31, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.81 $4.81 Next 13,000 $5.04 $6.37 Over 15,000 $7.14 $9.03 Non -Residential First 300,000 $4.45 $5.42 Over 300,000 $4.45 $5.42 Major Industrial All Usage $3.33 $3.70 Irrigation First 300,000 $5.04 $6.24 Over 300,000 $5.04 $6.24 Wholesale Reduced Peak Demand $3.50 $3.50 Peak Demand $3.50 $3.50 Table A-4 Monthly Water Rates After December 31, 2025 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $4.04 $5.10 Next 13,000 $5.34 $6.75 Over 15,000 $7.57 $9.57 Non -Residential First 300,000 $4.72 $5.75 Over 300,000 $4.72 $5.75 Major Industrial All Usage $3.53 $3.92 Irrigation First 300,000 $5.34 $6.61 Over 300,000 $5.34 $6.61 Wholesale Reduced Peak Demand $3.71 $3.71 Peak Demand $3.71 $3.71 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 2 of 13 Table A-5 Monthly Water Rates After December 31, 2026 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $4.28 $5.41 Next 13,000 $5.66 $7.16 Over 15,000 $8.02 $10.14 Non -Residential First 300,000 $5.00 $6.10 Over 300,000 $5.00 $6.10 Major Industrial All Usage $3.74 $4.16 Irrigation First 300,000 $5.66 $7.01 Over 300,000 $5.66 $7.01 Wholesale Reduced Peak Demand $3.93 $3.93 Peak Demand $3.93 $3.93 (2) Beginning January 1, 2028, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, Fire Department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non-residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly Water Service Charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 3 of 13 Table B-1 Monthly Water Service Charge Prior to January 1, 2024 Meter Size Inside City Outside City Wholesale 5/8" $6.59 $7.54 $7.54 %x % inch $6.59 $7.54 $7.54 1 inch $9.14 $10.52 $10.52 1 % inch $15.93 $18.31 $18.31 2 inch $23.20 $26.66 $28.56 3 inch $54.05 $62.18 $64.38 4 inch $89.50 1 $102.93 1 $112.25 6 inch $178.99 $205.82 $213.02 8 inch $268.41 $308.67 $319.47 Table B-2 Monthly Water Service Charge After December 31, 2023 Meter Size Inside City Outside City Wholesale 5/8" $6.99 $7.99 $8.81 %x % inch $6.99 $7.99 $8.81 1 inch $10.06 $13.84 $13.84 1 % inch $19.18 $27.40 $27.40 2 inch $26.27 $37.95 $37.95 3 inch $57.29 $79.11 $79.11 4 inch $94.87 $115.76 $118.99 6 inch 1 $189.73 1 $218.17 1 $225.53 8 inch 1 $284.51 1 $327.19 1 $352.88 Table B-3 Monthly Water Service Charge After December 31, 2024 Meter Size Inside City Outside City Wholesale 5/8" $7.41 $8.47 $9.34 %x % inch $7.41 $8.47 $9.34 1 inch $10.66 $14.67 $14.67 1 % inch $20.33 $29.04 $29.04 2 inch $27.85 $40.23 $40.23 3 inch $60.73 $83.86 $83.86 4 inch $100.56 $122.71 $126.13 6 inch 1 $201.11 1 $231.26 1 $239.06 8 inch 1 $301.58 1 $346.82 1 $374.05 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 4 of 13 Table B-4 Monthly Water Service Charge After December 31, 2025 Meter Size Inside City Outside City Wholesale 5/8" $7.85 $8.98 $9.90 % x % inch $7.85 $8.98 $9.90 1 inch $11.30 $15.55 $15.55 1 % inch $21.55 $30.78 $30.78 2 inch $29.52 $42.64 $42.64 3 inch $64.37 $88.89 $88.89 4 inch $106.59 1 $130.07 1 $133.70 6 inch $213.18 $245.14 $253.40 8 inch $319.67 $367.63 $396.49 Table B-5 Monthly Water Service Charge After December 31, 2026 Meter Size Inside City Outside City Wholesale 5/8" $8.32 $9.52 $10.49 %x % inch $8.32 $9.52 $10.49 1 inch $11.98 $16.48 $16.48 1 % inch $22.84 $32.63 $32.63 2 inch $31.29 $45.20 $45.20 3 inch $68.23 $94.22 $94.22 4 inch $112.99 $137.87 $141.72 6 inch 1 $225.97 1 $259.85 1 $268.60 8 inch 1 $338.85 1 $389.69 1 $420.28 (2) Beginning January 1, 2028, all monthly water service charges shall be increased by 3% per year. (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section shall commence as of the first billing statements issued after December 31, 2023. (4) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly Standby Fire Protection Service Charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be based on the incoming line size or the backflow preventer size, whichever is smaller, as set forth in the following table: (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 5 of 13 Monthly Standby Fire Protection Service Charge Line Size or Backflow Preventer Size Inside City Outside City 1 inch $10.34 $12.38 2 inch $10.78 $12.83 2.5 inch $21.55 $24.77 3 inch $32.31 $37.16 4 inch $64.63 $74.32 6 inch $179.50 $209.60 8 inch $376.99 $433.54 10 inch $646.26 $743.18 (2) The Utilities Department shall review the monthly standby fire protection service charges every two (2) years and shall make recommendations to the City Council following such review. Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7-17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11- 20-90; Ord. No. 4059, §1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02-03-04; Ord. No. 5123, 4-1-08; Ord. No. 6169, §1, 4-2-2019) 51.137 Monthly Sewer Rates (A) Monthly Sewer Rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before January 1, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.35 Greater than $5.80 2,000 gallons Non -Residential All Usage $4.40 Major Industrial All Usage $4.71 Farmington All Usage $7.52 Outside city All Usage $8.18 Wholesale 85%of metered $5.19 water usage Usage above 85% of $2.71 metered water usage (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 6 of 13 Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2023 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.84 Greater than $5.13 2,000 gallons Non -Residential All Usage $5.36 Major Industrial All Usage $5.82 Farmington All Usage $7.56 Outside city All Usage $7.56 Wholesale 85% of metered $6.26 water usage Usage above 85% of $6.26 metered water usage Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $3.96 Greater than $5.28 2,000 gallons Non -Residential All Usage $5.52 Major Industrial All Usage $5.99 Farmington All Usage $7.79 Outside city All Usage $7.79 Wholesale 85% of metered $6.45 water usage Usage above 85% of $6.45 metered water usage Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2025 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.08 Greater than $5.44 2,000 gallons Non -Residential All Usage $5.68 Major Industrial All Usage $6.17 Farmington All Usage $8.02 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 7 of 13 Outside city All Usage $8.02 Wholesale 85% of metered $6.64 water usage Usage above 85% of $6.64 metered water usage Table D-5 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2026 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.20 Greater than $5.61 2,000 gallons Non -Residential All Usage $5.85 Major Industrial All Usage $6.36 Farmington All Usage $8.26 Outside city All Usage $8.26 Wholesale 85% of metered $6.84 water usage Usage above 85% of $6.84 metered water usage (2) Beginning January 1, 2028, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per -thousand volumetric usage or a per month basis. (B) Monthly Sewer Service Charge. (1) In addition to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $18.28 $18.28 $16.74 %x % inch $18.28 $18.28 $16.74 1 inch $23.74 $33.92 $31.28 1% inch $38.77 $60.37 $55.50 2 inch $55.43 $79.73 $73.45 3 inch $128.73 $184.24 $169.29 4 inch $212.13 $303.44 $278.93 6 inch 1 $420.39 1 $601.46 1 $553.70 8 inch 1 $628.73 1 $899.76 1 $826.81 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 8 of 13 Table E-2 Monthly Sewer Service Charge After December 31, 2023 Meter Size Inside City Outside Cityt Farmingtont 5/8" $18.83 $15.71 $15.71 % x % inch $18.83 $16.01 $16.01 1 inch $24.45 $31.32 $31.32 1% inch $44.81 $63.14 $63.14 2 inch $61.64 $87.88 $87.88 3 inch $132.59 $184.50 $184.50 4 inch $218.49 $270.52 $270.52 6 inch 1 $433.00 1 $501.48 1 $501.48 8 inch 1 $647.59 1 $558.03 1 $558.03 Table E-3 Monthly Sewer Service Charge After December 31, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $19.39 $16.18 $16.18 %x % inch $19.39 $16.49 $16.49 1 inch $25.19 $32.26 $32.26 1% inch $46.15 $65.03 $65.03 2 inch $63.48 $90.52 $90.52 3 inch $136.57 $190.04 $190.04 4 inch $225.05 $278.63 $278.63 6 inch $445.99 1 $516.52 1 $516.52 8 inch $667.02 $574.77 $574.77 Table E-4 Monthly Sewer Service Charge After December 31, 2025 Meter Size Inside City Outside Cityt Farmingtont 5/8" $19.98 $16.66 $16.66 %x % inch $19.98 $16.98 $16.98 1 inch $25.94 $33.23 $33.23 1% inch $47.53 $66.98 $66.98 2 inch $65.39 $93.23 $93.23 3 inch $140.67 $195.74 $195.74 4 inch $231.80 $286.99 $286.99 6 inch $459.37 $532.02 $532.02 8 inch $667.02 $592.02 $592.02 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 9 of 13 Table E-5 Monthly Sewer Service Charge After December 31, 2026 Meter Size Inside City Outside Cityt Farmingtont 5/8" $20.57 $17.16 $17.16 %x % inch $20.57 $17.49 $17.49 1 inch $26.72 $34.23 $34.23 1% inch $48.96 $68.99 $68.99 2 inch $67.35 $96.03 $96.03 3 inch $144.89 $201.61 $201.61 4 inch $238.75 $295.60 $295.60 6 inch $473.15 $548.00 $548.00 8 inch $707.64 $609.78 $609.78 tCost of Service Methodology required by contract. (2) Beginning January 1, 2028, all monthly sewer service charges shall be increased by 3% per year. (C) Determination of Sewer Quantity Charge for Residential Customers. (1) In the case of residential customers residing in a single family home, duplex, triplex, and/or fourplex, the average monthly water consumption for the preceding months of December, January, and February shall be computed separately for each customer, and a uniform monthly charge for each customer shall be determined by applying the schedule of rates set out in subsection (A) of this section to such average monthly water consumption. In the case of a residential user for whom a uniform monthly charge has been established and who moves to a new location the same uniform monthly charge shall apply at the new location. In the case of new residential customers, sewer averages shall be established based on the number of individuals residing within the dwelling unit, at a rate of 2,100 gallons per customer per month. This methodology of sewer averaging shall not apply to multi -family structures containing five (5) or more units in a contiguous building. (2) In the case of sewer customers who do not have a water meter provided by a public water utility, the sewer usage volume billed shall be the average volume of all users in the sewer system in like dwellings from the most recent system -wide sewer average calculation. (D) Determination of Charge for Non-residential and Major Industrial Customers. In the case of non-residential and/or major industrial customers, the monthly sewer charge shall be determined by applying the schedule of rates prescribed in subsection (A) of this section to the monthly water usage of such customers. In the event that a non-residential or major industrial customer discharging waste into the city's sanitary sewer system produces evidence to the Water and Wastewater Director demonstrating that a substantial portion of the total amount of water from all sources used for all purposes does not reach the sanitary sewer which is in excess of the factors used in establishing the rates in subsection (A) of this section, an estimated percentage of total water consumption to be used in computing charges may be established by the Water and Wastewater Director. The factors used in establishing said rates are on file in the office of the Water and Wastewater Director and are incorporated herein by reference thereto. Any rate so adjusted by the Water and Wastewater Director shall be effective for a twelve (12) month period beginning with the billing for the month when rates adjudged hereby go into effect. (E) Extra Strength Surcharge. (1) For all significant industrial users as defined in §51.074, whose wastewater discharge is greater than 300 mg/I of BOD Sand/or TSS, the city shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Created: 2022-05-17 11:20:05 [EST] (Supp. No. 25) Page 10 of 13 Table F1 Extra Strength Surcharges Prior to January 31, 2024 Prior to 01/01/2024 Extra Strength BOD 5 $0.3148 per pound Extra Strength TSS $0.4483 per pound Table F2 Extra Strength Surcharges After December 31, 2023 After 12/31/2023 Extra Strength BOD 5 $0.5410 per pound Extra Strength TSS $0.6674 per pound Table F3 Extra Strength Surcharges After December 31, 2024 After 12/31/2024 Extra Strength BOD 5 $0.5572 per pound Extra Strength TSS $0.6875 per pound Table F4 Extra Strength Surcharges After December 31, 2025 After 12/31/205 Extra Strength BOD 5 $0.5739 per pound Extra Strength TSS $0.7081 per pound Table F5 Extra Strength Surcharges After December 31, 2026 After 12/31/2026 Extra Strength BOD 5 $0.5911 per pound Extra Strength TSS $0.7293 per pound (2) Starting after December 31, 2026, Extra Strength Surcharges shall be increased by 3% per year. (3) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (4) All sampling and analyses of the wastewater characteristics shall be performed in accordance with U.S. Environmental Protection Agency 40 Code of Federal Regulations Part 136 approved methods. (5) The volume of flow used in computing surcharge shall be based upon metered water consumption as shown in the records of meter readings maintained by the city's business office. In the event that a user discharging waste into the city sanitary sewer system produces evidence to the city demonstrating that a portion of the total amount of water used for all purposes is not discharged into the sanitary sewer, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 11 of 13 the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (6) Any person discharging industrial waste into the sanitary sewers of the city who procures any part or all of the user's water supply from sources other than the city, all or part of which is discharged into the sanitary sewer, shall install and maintain at the user's expense water meters of the type approved by the city for the purpose of determining the proper volume of flow to be used in computing sewer service charges. Such meter will be read monthly and tested for accuracy when deemed necessary by the city. Where it can be shown that a portion of the water measured by the aforesaid meter or meters does not enter the sanitary sewer system of the city, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (7) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S I = V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (TSS - 300)] (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD Unit Charge = Unit charge for BOD in dollars per pound BOD = BOD strength in parts per million 300 = Allowed BOD strength in parts per million TSS Unit Charge = Unit charge for suspended solids in dollars per pound TSS = Suspended solids strength in parts per million 300 = Allowed TSS Strength in parts per million (F) Elkins Sewer Charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net difference to occur semiannually in June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins Impact Fee Charges. The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 12 of 13 (G) Hauled Wastewater Fees. (1) Application fee. An application to discharge hauled domestic waste must be accompanied by a fee of $100.00. (2) Discharge fee. A fee of $50.00 must be paid for each hauled domestic waste load discharged. (H) Industrial Wastewater Discharge Permit Fee. (1) Application Fee. An application for an industrial wastewater discharge permit must be accompanied by a fee of $500.00. (Code 1965, §21-26; Ord. No. 1165, 4-18-58; Ord. No. 3197, 7-1-86; Ord. No. 3285, 8-4-87; Ord. No. 3398, 1-3-89; Ord. No. 3491, 7-17-90; Ord. No. 3637, §§1, 2, 8-18-92; Ord. No. 4059, §2, 10-7-97; Code 1991, §51.137; Ord. No. 4530, 12-02-03; Ord. No. 4803, 12-20-05; Ord. No. 4998, 4-3-07; Ord. No. 5129, 4-15-08; Ord. No. 5438, 9-20-11; Ord. No. 5739, 2-17-15) (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 13 of 13 CITY OF FAYETTEVILLE. ARKANSAS Notice of Public Hearing on Proposed Water and Sewer Rate Changes City Council Agenda Session: Tuesday, June 14, 2022 at 4:30 PM City Council Meeting: Tuesday, June 21, 2022 at 5:30 PM City of Fayetteville Administration Building, City Hall 113 W. Mountain — Room 219 or via Zoom link at www.favetteville-ar.gov The City of Fayetteville AR, on the dates and times mentioned above, will hold a public hearing as part of the City Council Agenda Session and City Council Meeting with Fayetteville City Council prior to the adoption of the 2023 water and sewer rate increases. The public can attend in person or remotely via the link on the City's website, www.fayetteville- ar.gov. If adopted, the proposed new rates would take effect on or after January 01, 2023, with 3% increases annually thereafter. All property owners/tenants and other interested parties are invited to attend the public hearing and be heard on the matter. A water and sewer cost of service study was conducted by Black & Veatch pursuant to Fayetteville City Council Resolution 212-20 to perform a cost analysis to determine if costs allocations are fair and equitable among customer classes, to review the existing rate structure and design proposed rates that provide adequate revenues. The proposed water and sewer rate changes below are necessary for the City of Fayetteville to continue to provide safe and reliable water and sewer services to its citizens because extensive new capital needs are required at this point in time and operating costs have increased above the revenue increases generated by the current annual 3% proportional adjustment. 113 PROPOSED WATER RATE CHANGES - ON OR AFTER 11112023 FIXED BASE A•GE $/MONTH Meter SizeEXISTING 5/8" 3/4" WATER INSIDE CITY WATER OUTSIDE PROPOSED CHANGE EXISTING PROPOSED 6.59 6.59 0.0% 7.54 7.54 7.54 7.54 0.0% 0.0% 6.59 6.59 0.0% 1" 9.14 9.14 0.0% 10.52 12.26 16.5% 1.5" 15.93 15.93 0.0% 18.31 24.22 32.3% 2" 23.20 23.20 0.0% 26.66 33.52 25.7% 3" 54.05 54.05 0.0% 62.18 69.84 12.3% 4" 89.50 89.50 0.0% 102.93 102.93 0.0% 6" 178.99 178.99 0.0% 205.82 205.82 0.0% 8" • 000 GALLONS Residential First 2,000 gallons 268.41 268.41 0.0% 308.67 308.67 0.0% AVG 0.0% 3.51 3.30 -6.0% AVG 4.04 4.47 9.7% 10.6% Next 13,000 gallons 4.64 4.37 -5.8% 5.34 5.91 10.7% All over 15,000 gallons 6.59 6.20 -5.9% 7.54 8.38 11.1% on- esi entia First 300,000 gallons 3.79 AVG 3.93 -5.9% 3.7% 4.38 AVG 5.05 10.8% 15.3% All over 300,000 gallons 3.38 3.93 16.3% 3.90 5.05 29.5% All Usage First 300,000 gallons 2.96 5.04 AVG 3.14 4.29 10.0% 6.1% -14.9% 3.20 5.80 AVG 3.49 5.43 22.4% 9.1% -6.4% All over 300,000 gallons 4.53 4.29 -5.3% 5.22 5.43 4.0% Reduced Peak Demand AVG -10.1% 2.87 AVG 3.16 -1.2% 10.1% Peak Demand 3.20 3.16 -1.3% AVG 4.4% *Beginning January 1, 2024, all monthly water rates shall be increased by 3% per year Page213 PROPOSED SEWER RATE CHANGES - ON OR AFTER 11112023 FIXED BASE CHARGE $/MONTH Meter SizeEXISTING 5/8" 3/4" SEWER 18.28 INSIDESEWER PROPOSEDPROPOSED 18.28 0.0% 18.28 OUTSIDE 18.28 0.0% 16.74 PROPOSED 25.10 49.9% 18.28 18.28 0.0% 18.28 18.28 0.0% 16.74 25.10 49.9% V. 23.74 23.74 0.0% 33.92 33.92 0.0% 31.28 52.62 68.2% 1.5" 38.77 38.77 0.0% 60.37 66.73 10.5% 55.50 109.78 97.8% 2" 55.43 55.43 0.0% 79.73 93.11 16.8% 73.45 154.24 110.0% 3" 128.73 128.73 0.0% 184.24 196.10 6.4% 169.29 327.83 93.6% 4" 212.13 212.13 0.0% 303.44 303.44 0.0% 278.93 482.37 72.9% 6" 8" • 000 GALLONS ,37dent First 2,000 Gallons All over 2,000 Gallons 420.39 420.39 0.0% 601.46 601.46 0.0% 553.70 897.30 62.1% 628.73 628.73 0.0% 899.76 899.76 0.0% 826.81 998.92 20.8% AVG 0.0% 4.35 3.39 -22.1% AVG 3.8% 8.18 8.55 4.5% AVG 7.52 8.27 69.5% 10.0% 5.80 4.52 -22.1% 8.18 8.55 4.5% 7.52 8.27 10.0% AVG -22.1% AVG 4.5% AVG 10.0% on- esi en is All Usage Major Industrial All Usage 4.40 5.10 15.9% 8.18 8.55 4.5% 7.52 8.27 10.0% 4.71 5.71 21.2% 8.18 8.55 4.5% 7.52 8.27 10.0% Reduced Peak Demand 5.19 7.20 38.7% Peak Demand 2.71 7.20 165.7% AVG 102.2% *Beginning January 1, 2024, all monthly sewer rates shall be increased by 3% per year For more information or questions about the proposed water and sewer rate changes, contact the City of Fayetteville, Utilities Financial Services Division at (479) 575-8224 or visit the City's website for at www.fayetteville-ar.gov. Page313 Revised Draft 06/08/2022 Final Draft WATER AND WASTEWATER COMPREHENSIVE RATE STUDY B&V PROJECT NO. 406577 PREPARED FOR City of Fayetteville, Arkansas 8 JUNE 2022 13 BLACK&VEATCH Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table of Contents 1.0 Executive Summary..........................................................................................................ES 1-0 1.1 Summary of Findings.................................................................................................. ES 1-0 1.1.1 Revenue Under Existing Rates.................................................................... ES 1-0 1.1.2 Revenue Requirements............................................................................... ES 1-1 1.1.3 Summary of Cash Flow Results................................................................... ES 1-2 1.1.4 Cost of Service Analysis............................................................................... ES 1-2 1.2 Proposed Rate Adjustments....................................................................................... ES 1-3 1.3 Disclaimer................................................................................................................... ES 1-4 2.0 Introduction......................................................................................................................... 2-0 2.1 Purpose............................................................................................................................2-0 2.2 Scope................................................................................................................................2-0 2.3 Study Methodology......................................................................................................... 2-1 2.3.1 Financial Plan....................................................................................................2-1 2.3.2 Cost of Service.................................................................................................. 2-1 2.3.3 Rate Design....................................................................................................... 2-2 3.0 Rate Structure Overview....................................................................................................... 3-0 3.1 Fixed Charge.....................................................................................................................3-0 3.2 Volumetric (Usage) Charge..............................................................................................3-0 3.3 Existing Rate Structure.....................................................................................................3-0 3.3.1 Water Rate Structure....................................................................................... 3-0 3.3.2 Wastewater Rate Structure..............................................................................3-1 4.0 Water Utility......................................................................................................................... 4-1 4.1 Water Revenue Projections Under Existing Rates...........................................................4-1 4.1.1 Water Revenue Under Existing Rates..............................................................4-1 4.1.2 Projection of Service Revenue Under Existing Rates.......................................4-3 4.1.3 Other Water Revenue...................................................................................... 4-3 4.2 Water Capital Improvements Program............................................................................4-4 4.3 Water Revenue Requirements........................................................................................4-4 4.3.1 Water Operation and Maintenance Expenses.................................................4-4 4.3.2 Water Bad Debt................................................................................................4-5 4.3.3 Water Payment In Lieu of Taxes......................................................................4-5 4.3.4 Safe Drinking Water Fee Reimbursement........................................................4-5 4.3.5 Water Debt Service Requirements...................................................................4-6 4.3.6 Transfer to Shop Fund......................................................................................4-6 4.3.7 Transfer to Operating Reserve.........................................................................4-6 4.3.8 Water Cash Financed Capital...........................................................................4-6 4.3.9 Transfer to Capital Reserve..............................................................................4-6 4.4 Water Proposed Revenue Adjustments..........................................................................4-6 BLACK & VEATCH I Table of Contents Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5 Water Cost of Service...................................................................................................... 4-8 4.5.1 Determination of Cost of Service.....................................................................4-8 4.5.2 Determination of Functional Costs..................................................................4-9 4.5.3 Allocation of Costs to the Functional Cost Components...............................4-10 4.5.4 Distribution of Water Utility Costs to Customer Classes...............................4-11 5.0 Water Rate Design.............................................................................................................. 5-14 5.1 Existing Water Rates...................................................................................................... 5-14 5.2 Proposed Water Rates................................................................................................... 5-14 6.0 Wastewater Utility............................................................................................................... 6-1 6.1 Wastewater Revenue Projections Under Existing Rates.................................................6-1 6.1.1 Wastewater Revenue Under Existing Rates.....................................................6-1 6.1.2 Projection of Service Revenue Under Existing Rates ....................................... 6-3 6.1.3 Other Wastewater Revenue.............................................................................6-3 6.2 Wastewater Capital Improvements Program..................................................................6-4 6.3 Wastewater Utility Revenue Requirements.................................................................... 6-4 6.3.1 Wastewater Operation and Maintenance Expenses.......................................6-4 6.3.2 Wastewater Bad Debt......................................................................................6-5 6.3.3 Wastewater Payment In Lieu of Taxes............................................................. 6-5 6.3.4 Wastewater Debt Service Requirements.........................................................6-6 6.3.5 Transfer to Shop Fund......................................................................................6-6 6.3.6 Transfer to Operating Reserve.........................................................................6-6 6.3.7 Wastewater Cash Financed Capital..................................................................6-6 6.3.8 Transfer to Capital Reserve..............................................................................6-6 6.4 Wastewater Proposed Revenue Adjustments.................................................................6-6 6.5 Wastewater Cost of Service.............................................................................................6-8 6.5.1 Determination of Cost of Service..................................................................... 6-8 6.5.2 Determination of Functional Costs..................................................................6-9 6.5.3 Allocation of Costs to the Functional Cost Components.................................6-9 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes ......................6-11 6.5.5 Wastewater Utility Customer Class Costs of Service.....................................6-12 7.0 Wastewater Rate Design.................................................................................................... 7-14 7.1 Existing Wastewater Rates............................................................................................7-14 7.2 Proposed Wastewater Rates.........................................................................................7-14 8.0 Combined Water and Wastewater Utilities......................................................................... 8-15 9.0 Disclaimer.......................................................................................................................... 9-16 10.0 Appendix 1: Water Tables................................................................................................... 10-1 11.0 Appendix 2: Wastewater Tables......................................................................................... 11-1 BLACK & VEATCH I Table of Contents Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF EXECUTIVE SUMMARY TABLES Table ES - 1—Water 2023 Cost of Service..................................................................................................1-2 Table ES - 2 —Wastewater 2023 Cost of Service........................................................................................1-3 LIST OF FIGURES Figure 4-1 - Historical and Projected Water Accounts...............................................................................4-2 Figure 4-2 - Historical and Projected Water Billed Volume.......................................................................4-3 Figure 4-3 - Historical and Projected Water Service Revenue...................................................................4-3 Figure 4-4 - Projected Annual Water O&M Expenses................................................................................4-5 Figure 4-5 - Water Revenues and Revenue Requirements........................................................................4-7 Figure 6-1 - Historical and Projected Wastewater Accounts.....................................................................6-2 Figure 6-2 - Historical and Projected Wastewater Billed Volume.............................................................6-3 Figure 6-3 - Historical and Projected Wastewater Service Revenue.........................................................6-3 Figure 6-4 - Projected Annual Water O&M Expense................................................................................. 6-5 Figure 6-5 - Wastewater Revenues and Revenue Requirements..............................................................6-7 LIST OF WATER TABLES Table W - 1 - Water Projected Number of Accounts...............................................................................10-1 Table W - 2 - Water Projected Billed Volume (1,000 Gallons).................................................................10-2 Table W - 3 - Water Existing Rates...........................................................................................................10-3 Table W - 4 - Water Projected Revenues Under Existing Rates...............................................................10-4 Table W - 5 - Water Projected Other Revenues.......................................................................................10-4 Table W - 6 - Water Capital Improvement Program................................................................................10-5 Table W - 7 - Water Projected O&M Expenses........................................................................................10-5 Table W - 8 - Capital Program Financing..................................................................................................10-6 Table W - 9 - Water Operating Cash Flow................................................................................................10-7 Table W - 10 - Water Fund Balances........................................................................................................10-8 Table W - 11 - Water 2023 Cost of Service..............................................................................................10-9 Table W - 12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components ........10-10 Table W - 13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components.................................................................................................................10-10 Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components ..................10-10 Table W - 15 - Water 2023 Estimated Units of Service..........................................................................10-11 Table W - 16 - Water 2023 Unit Cost of Service....................................................................................10-12 Table W - 17 - Water 2023 Cost of Service by Customer Class..............................................................10-13 Table W - 18 - Water Proposed 2023 Rates...........................................................................................10-14 Table W - 19 - Water 2023 Cost of Service Under Proposed Rates.......................................................10-15 Table W - 20 - Water 2023 Bill Impact...................................................................................................10-16 BLACK & VEATCH I Table of Contents iii Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF WASTEWATER TABLES Table S - 1 - Wastewater Projected Accounts..........................................................................................11-1 Table S - 2 - Wastewater Projected Billed Volume (1,000 Gallons).........................................................11-1 Table S - 3 - Wastewater Existing Charges...............................................................................................11-2 Table S - 4 - Wastewater Projected Revenues at Existing Rates..............................................................11-3 Table S - 5 - Wastewater Projected Other Revenues...............................................................................11-3 Table S - 6 - Wastewater Capital Improvement Program........................................................................11-4 Table S - 7 - Wastewater Projected O&M Expenses................................................................................11-4 Table S - 8 - Wastewater Cash Financed Capital......................................................................................11-5 Table S - 9 - Wastewater Operating Cash Flow........................................................................................11-5 Table S - 10 - Wastewater Projected Fund Balances...............................................................................11-6 Table S - 11 - Wastewater 2023 Cost of Service......................................................................................11-6 Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment......................................................11-7 Table S - 13 - Wastewater 2023 Allocation of Depreciation....................................................................11-7 Table S - 14 - Wastewater 2023 Allocation of O&M Expenses................................................................11-8 Table S - 15 - Wastewater 2023 Units of Service.....................................................................................11-9 Table S - 16 - Wastewater 2023 Unit Cost of Service............................................................................11-10 Table S - 17 - Wastewater 2023 Cost of Service by Customer Class......................................................11-10 Table S - 18 - Wastewater Proposed 2023 Charges...............................................................................11-11 Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates...............................................11-12 Table S - 20 - Wastewater 2023 Bill Impact...........................................................................................11-12 LIST OF COMBINED TABLES Table C - 1- Combined Projected Fund Balances .. Table C - 2 - Combined Operating Cash Flow......... Table C - 3 - Combined 2022 Bill Impact ................ ..............................................................................12-1 ..............................................................................12-2 ..............................................................................12-3 BLACK & VEATCH I Table of Contents Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.0 Executive Summary The City of Fayetteville (City) provides water and wastewater services to retail and wholesale customers. The Water and Wastewater fund is an Enterprise Fund, which is funded by the operating and capital revenues from the users of the system. Due to multiple factors including increasing operating costs, significant capital investments to meet regulatory requirements, and the need for infrastructure rehabilitation and replacement, revenues under existing rates are not adequate to meet the annual revenue requirements. Therefore, to maintain financial sufficiency and to assure equitable cost recovery, the City engaged Black & Veatch Management Consulting, LLC (Black & Veatch) to perform a Water and Wastewater Comprehensive Rate Study (Study). The primary objectives of the Study are to develop a balanced financial plan, determine cost of service allocations for each customer class and design rates to recover costs from customer classes in reasonable accord with the allocated costs of service. The financial plan was developed for the six -year period of 2021 through 2026, also referred to as the study period or the forecast period. The city's fiscal year is a calendar year, starting on January 1 and ending on December 31. As a result of our evaluations and analyses, the following summary of findings and recommendations are offered for the City's consideration. 1.1 Summary of Findings 1.1.1 Revenue Under Existing Rates 1. The City provides retail water services to approximately 40,800 customers inside the City and about 7,000 customers outside the City. The number of retail water service customers inside the City is projected to increase to about 44,800 by 2026 and the number of outside City water customers is projected to increase to about 8,000. The City also provides treated water to four wholesale customers. Retail wastewater collection and treatment service is provided to approximately 36,900 customers inside the City and about 2,600 customers outside the City. The number of inside City wastewater service customers is projected to increase to about 40,600 by 2026 and the number of outside City wastewater service customers is projected to increase to about 2,700. 2. Treated water sales to inside City retail customers are projected to increase from approximately 3,146,800 1,000 gallons (kgals) in 2021 to approximately 3,388,000 kgals by 2026. Treated water sales to outside City retail customers are projected to increase from approximately 507,600 kgals in 2021 to approximately 519,400 kgals by 2026. Treated water sales to wholesale customers is projected to be approximately 219,100 kgals in 2021 and decrease to 202,300 kgals in 2022 and remain at that level through 2026. Billed wastewater volume from inside City retail customers is projected to increase from approximately 2,806,700 kgals in 2021 to approximately 2,961,800 kgals by 2026. Billed wastewater volume from outside City retail customers is projected to increase from 109,800 kgals in 2021 to about 117,400 kgals by 2026. Billed wastewater volume from wholesale customers is projected to increase from 81,000 kgals in 2021 to 126,600 kgals in 2026 due to the addition of West Fork as a wholesale wastewater customer starting December 2020. The annual wholesale wastewater volume is projected to remain at the 2021 level through 2026. BLACK & VEATCH I Executive Summary ES-1-0 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The City's current water rates became effective January 1, 2022. For both retail and wholesale customers, the water rates include a monthly base charge, which varies by meter size and a volume charge that varies by customer class. The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, the wastewater rates include a monthly base charge, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). The existing wastewater rate structure is described in Section 3.3.2. 4. Revenue is currently derived principally from charges for treated water and wastewater service, with some revenue also obtained fire protection charges and other miscellaneous sources. Revenue from treated water sales, under existing rates, is projected to increase from $21,186,400 in 2021 to about $22,986,800 in 2026, reflecting a 5-year cumulative increase of 8%. Miscellaneous water revenues are estimated to increase from $1,484,700 in 2021 to approximately $1,608,600 in 2026, reflecting a 5-year cumulative increase of 8%. Revenue for wastewater collection and treatment services is projected to increase from $24,461,900 in 2021 to about $26,697,600 in 2026, under existing rates, reflecting a 5-year cumulative increase of 9%. Miscellaneous wastewater revenue is estimated at $1,297,100 in 2021 and $1,420,200 per year through 2022 to 2026, reflecting a 5-year cumulative increase of 9%. 1.1.2 Revenue Requirements 1. Costs of service to be recovered from water and wastewater service charges include (1) operation and maintenance (O&M) expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) Safe Drinking Water Fee Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The water and wastewater utilities do not have any outstanding debt service. There are no future debt issuances are planned over the study period and no transfers to the shop fund over the study period. 2. The annual O&M expense includes the cost of labor, materials, power, chemicals, purchased water, contract services and other expenses associated with each utility's operation. In this study, FY 2021 is defined as the base budget year, based on which the O&M costs are projected for the forecast period. O&M expense for the water utility is projected to increase from $15,949,600 in 2021 to $18,739,400 by 2026 due to the combined effects of inflation and system growth. O&M expense for the wastewater utility is projected to increase from $15,674,800 in 2021 to $18,395,700 by 2026 due to the combined effects of inflation and system growth. Bad debt expenses refer to outstanding balances from customers that are deemed uncollectible. The water and wastewater bad debt in 2019 was 0.5% of revenue. Bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expenses for water utility is projected to increase from $105,900 in 2021 to $129,000 by 2026. Annual bad debt expenses for wastewater utility is projected to increase from $122,300 in 2021 to $149,900 by 2026. 4. The Payment In Lieu of Taxes (PILOT) are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires the water and wastewater funds to pay 4.25% of annual total gross sales revenues to the City. Annual PILOT amount for the water utility is anticipated to increase from $900,400 in 2021 to $1,096,900 in 2026. Annual BLACK & VEATCH I Executive Summary ES-1-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study PILOT amount for the wastewater utility is projected to increase from $1,039,600 in 2021 to $1,274,000 in 2026. The Safe Drinking Water Fee (SDWF) revenue collected for each metered customer is reimbursed to the state of Arkansas Department of Public Health. The SDWF reimbursement is projected to increase from $230,000 in 2021 to $250,200 in 2026. The SDWF is a pass -through fee and is treated as a "revenue reduction" by the City. 6. The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve for the water utility is projected to increase from $133,000 in 2022 to $151,800 in 2026. The transfer to operating reserve for wastewater is projected to increase from $129,600 in 2022 to $147,900 in 2026. 7. The City currently utilizes the following two sources of funding for the water and wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. A capital project meets the requirements of using impact fees if the existing water or wastewater capacity is expanded due to growth. The wastewater capital improvement program for the study period is $69 million, of which $67 million is projected to be funded from operating revenues and $2 million is from the impact fee fund. 1.1.3 Summary of Cash Flow Results 1. The cash flow analysis performed based on the projected annual revenues under existing rates and the projected annual revenue requirements indicates a funding gap for both utilities beginning in 2021. Therefore, a series of 3% annual revenue adjustment is needed in both the water and wastewater utilities to achieve the goal of the operating fund revenues being self-sufficient and adequate to cover all of the O&M expenses, cash financing of the capital program, required transfers, and to maintain the minimum reserve requirements. Table W - 9, in Appendix 1 presents the cash flow analysis and the proposed series of revenue increases for the water utility, and Table S - 9, in Appendix 2 presents the same for the wastewater utility. 1.1.4 Cost of Service Analysis 1. The revenue requirements less any revenues from other sources provides the "net" annual operating fund revenue requirements (also referred to as "cost of service") that needs to be recovered through user rates and charges. A summary of the projected annual cost of service for 2023 is shown for water and wastewater in tables ES-1 and ES-2, respectively. Table ES - 1—Water 2023 Cost of Service O&M Expenses Depreciation Return 4 Net Cost of Service 17,791,700 2,820,100 1,476,000 17,791,700 4,296,100 17,791,700 2,820,100 1,476,000 22, 087, 800 BLACK & VEATCH I Executive Summary ES-1-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table ES - 2 —Wastewater 2023 Cost of Service 1 O&M Expenses 171346,000 17,346,000 2 Depreciation 8,259,600 8,259,600 3 Return 132,600 132,600 4 Net Cost of Service 17,346,000 8,392,200 25,738,200 2. As a basis for design of a schedule of water and wastewater rates, the costs of service are allocated to the classes of customers in accordance with respective service requirements of each customer class. The resulting costs of service allocated to customer classes are summarized in Table W - 17 for water and Table S - 17 for wastewater. 1.2 Proposed Recommendations Based on the financial planning and cost of service analysis performed for the study period, the Black & Veatch team proffers the following series of recommendations: 1. Implement a series of 3% annual revenue increase from 2024 to 2026 for both water and wastewater utilities. 2. Implement cost of service -based rates for water and wastewater utilities in 2023. 3. Transition the existing monthly Base charge to the proposed Base Charge, derived based on cost of service, if cost of service based proposed Base Charge is greater than the existing Base charge. 4. Eliminate the minimum volume charge billing of 1,000 gallons from the volumetric portion of the rate structure. 5. Continue with the existing tier block structure for customer classes that have an inclining block (residential) or a uniform block (industrial) for the volumetric rate structure. 6. Change to uniform block for customers that currently have a declining block (non-residential and irrigation) volumetric rate structure. The aforementioned recommendations enable the water and wastewater utilities to meet all its financial obligations, so that the City can continue to provide reliable service to serve the needs of existing and future customers. BLACK & VEATCH I Executive Summary ES-1-3 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.3 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Executive Summary ES-1-4 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.0 Introduction The City of Fayetteville water utility provides treated water and water distribution services to approximately 40,800 customers within the corporate limits of Fayetteville, and to approximately 7,000 customers in areas contiguous to, but outside of the City's corporate limits. The wastewater utility provides retail wastewater collection and treatment service to approximately 37,000 customers within the corporate city limits and to approximately 2,600 customers outside of the City's corporate limits. The City also provides treated water to four wholesale customers and wastewater treatment to two wholesale customers. In providing water and wastewater service, the City incurs considerable expense related to the ongoing operating and capital needs of the utilities. These operating and capital expenditures tend to increase annually due to the combined effects of inflation and the need to repair, replace, or extend existing service facilities to meet customer service requirements, as well as to meet more stringent state and federal water quality requirements and EPA requirements. The City of Fayetteville, recognizing the importance of financial planning and cost of service analysis to equitably recover the increasing costs to replace, renew, expand, improve, and operate its water and wastewater service facilities, retained Black & Veatch to perform this comprehensive study of revenue requirements, cost of service, and rates for potable water service and wastewater service. 2.1 Purpose This report examines the respective projected revenue and rate requirements of the water and wastewater systems of the City. The purpose of this report is (1) to project the future revenues of the water and wastewater utilities under existing rates and charges, as well as the operating expenses and capital financing revenue requirements of the two utilities, and to examine the adequacy of projected revenues to meet these revenue requirements through calendar year 2026; (2) to allocate these revenue requirements, or costs of service, for a representative test year to the various customer classes in accordance with the respective service requirements that each class places on the systems; and (3) to develop a suitable schedule of water and wastewater rates that will produce revenues adequate to meet the financial needs of the utility on a basis that recognizes customer costs of service, existing wholesale service agreements and practical bill impact considerations. 2.2 Scope This report presents the results of a comprehensive study of the projected revenue and revenue requirements, costs of service allocations, and proposed rates for treated water and wastewater service. Revenue and revenue requirements are projected for the five calendar years from 2022 through 2026, recognizing anticipated growth in number of customers, water use, and wastewater flows throughout the service area. The study of revenue requirements recognizes projected operation and maintenance expense, capital improvement requirements met from revenues, principal and interest payments on outstanding and proposed bond issues, and reserve fund requirements. Requirements of existing revenue bond indentures are also recognized. Costs of treated water and wastewater service are developed for each group of customers and type of service based on consideration of utility revenue needs and projected customer service requirements. Rate adjustments are designed for retail and wholesale customers in accordance with allocated costs of service, wholesale service agreement terms, and customer bill impact considerations. BLACK & VEATCH I Introduction 2-0 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.3 Study Methodology The development of user rates and charges requires the integration of three critical components: (i) financial plan; (ii) cost of service allocations; and (iii) rate design. 2.3.1 Financial Plan The development and update of a financial plan is necessary to continue to focus on financial discipline, build financial stability, and maintain sustainable financial planning Financial Planning practices. The financial planning process helps to establish a financial roadmap to meet all of the water and wastewater utility's obligations. As illustrated in Figure 2 - 1, the key components of a financial plan are: (i) projection of revenues from user rates and other sources; (ii) development of a capital financing plan to decide the mix of debt and cash funding of capital program; (iii) projection of revenue requirements (O&M and capital costs, and target reserves); and (iv) determination of the level and timing of revenue adjustments needed to maintain financial viability. The annual revenue requirements are typically developed on a cash - needs basis for public utility rate setting. The revenue requirements, under the cash -needs basis approach, include the following: Project Revenues Review CPro-Forma Project Revenue Requirements Scenario Planning Develop Capital % Rev ancing Plan Adjustments Figure 2 - 1: Financial Plan O&M expenditures; Debt service expenses; Cash financing of capital program; Contributions to operating reserves; and Other obligations such as payments and transfers for specific purposes. To establish financial stability, a financial plan is typically prepared for a multi -year period. A six -year financial plan was developed for the water and wastewater utility to achieve the financial objectives and target metrics defined to build and sustain financial integrity. 2022 through 2026 is the forecast period for both revenues and revenue requirement projections. The revenue adjustments represent the level of annual revenue increases necessary to meet the annual net revenue requirements. 2.3.2 Cost of Service Cost of service can be described as the revenue that the water and wastewater utility need to generate, net of funding from other miscellaneous sources of revenues. Therefore, Cost of Service is essentially the "net revenue requirement" that is to be recovered through user rates and charges. As illustrated in Figure 2 - 2, Cost of Cost of Service Analysis Allocate Costs Develop Units Unit Costs of Service Distribute Allocated Costs Based on Service Requirements Figure 2 - 2: Cost of Service service analysis enables an equitable apportioning of the net annual revenue requirements (also referred to as cost of service) to the various cost components and customer BLACK & VEATCH I Introduction 2-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study classes. The level and types of allocation performed depend on the existing and anticipated rate structure. As municipal utilities are public utilities that cannot make a profit, the equitable allocation of costs is a critical step that is necessary to establish a reasonable nexus between costs incurred in providing service and the fees charged from customers, and to establish defensible user rates and charges. 2.3.3 Rate Design The third and final component is an evaluation of the existing rate structure components and the development of proposed user rates and charges. The user rates and charge schedules typically include fixed charge, volumetric charge, and other special charge rate components. As illustrated in Figure 2 - 3, the rates and charges are designed to recover the annual cost of service allocated to these different rate components and based on local policy and practical considerations. The study methodology described above and used in the financial planning, cost of service and rate design analysis reflect the application of industry accepted rate setting approaches that are provided in the following two guidance manuals: American Water Works Association (AWWA) Manual M-1: Principles of Water Rates, Fees, and Charges for water rate setting; and Rate Design Review Develop COS Rates Scenario 1 Planning Develop Practical Rates Proposed Rates ---------------------------------- Figure 2 - 3: Rate Design Water Environment Foundation (WEF) Financing and Charges for Wastewater Systems for wastewater. BLACK & VEATCH I Introduction 2-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 3.0 Rate Structure Overview The revenue requirements of a water and wastewater utility, net of any miscellaneous sources of revenues, are recovered from user rates and charges. A water rate structure usually consists of two primary components, namely, a fixed charge and a volumetric charge. Similarly, a wastewater rate structure more commonly consists of a fixed charge, a volumetric charge, and pollutant charge (for wastewater pollutants such as Bio-chemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). Occasionally, a utility's water and wastewater rate structures may include special surcharges and/or special assessments to recover costs associated with certain service situations such as purchased water, pumping to elevations, drought conditions, readiness -to -serve, environmental conditions, and extra - strength wastewater discharges. 3.1 Fixed Charge A utility's annual revenue requirements comprise mostly of fixed costs such as salaries and benefits, pension obligations, debt service, cash financing for infrastructure renewal, and costs related to the provision of adequate capacity for service. These types of fixed costs occur on a recurring basis regardless of the amount of water used by the customer. Therefore, rate structures need to afford the ability to recover at least some of the fixed costs based on billing parameters that are not related to water usage or wastewater flow. The fixed charge, which is assessed regardless of the volume of water used, provides a mechanism to reliably recover some of the fixed annual operating costs of the utility, and provide for some level of revenue stability. In the utility industry, fixed charges are designed to recover one or more of the following types of costs, namely, (i) metering; (ii) billing; (iii) readiness -to -serve cost; (iv) specific capital investment; and (v) other specific costs. The costs of providing these functions vary among types of customers and/or by factors such as size and capacity of the meters. Therefore, to provide for equitable cost recovery, water and wastewater fixed charges are usually assessed based on meter size and also by customer class. 3.2 Volumetric (Usage) Charge In the utility industry, usage charges are designed to recover all other costs (except those that are recovered through fixed charge) associated with the treatment and delivery of water service and the collection, treatment, and disposal of wastewater. The three common types of volumetric charge are: (i) inclining block rate, where the usage in the next higher usage block is priced at a higher rate per unit; (ii) uniform block rate, where all units of usage are priced at the same unit rate; and (iii) declining block rate, where the usage in the next higher usage block is priced at a lower rate per unit. As usage patterns vary among customer classes and consequently different classes place different levels of service demands, different volumetric rates can be established for the various customer classes. In designing the volumetric rate structure, practical considerations including conservation, equity, affordability, and ease of administration are addressed. 3.3 Existing Rate Structure 3.3.1 Water Rate Structure Consistent with industry rate structures, the City's water rate structure comprises of both Fixed Charge and Volumetric Charge components. The water rate structure includes the following two components: BLACK & VEATCH I Rate Structure Overview 3-0 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Base Charge (Fixed Charge); and Volume Charge (Volumetric Charge). Some of these components are applicable to only specific customer classes. The revenues derived from the above charges are collectively referred to as uvater Service Kevenues. ■ Base Charge The existing Base Charge for all customer classes is based on meter size. ■ Volume Charge: The existing Volume Charge is based on the quantity of water used by the customers. ■ Safe Drinkine Water Fee• This is a regulatory charge per bill that is collected by the City on behalf of the state of Arkansas Department of Public Health. The customer classes to which the specific charge components apply is illustrated in Figure 3 - 1. The existing water rate schedule for 2022, for these rate components, is presented in Table W - 3 in Appendix 1. All customers are billed monthly. Figure 3 - 1: Existing Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) Minimum Usage (1,000 Gallons) • Volume Rate (2-Tier Declining Block) a Minimum Usage (1,000 Gallons) • Volume Rate (Uniform) • Minimum Usage (1,000 Gallons) Volume Rate ( Uniform) 2 rates (Reduced Peak Demand and Peak Demand) Safe Drinking Water Fee (per month) 3.3.2 Wastewater Rate Structure Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential Retail Inside City Non -Residential, Irrigation; and Retail Outside City Non -Residential, Irrigation Retail Inside City Major Industrial Retail Outside City Major Industrial Wholesale • All customer classes The City's Operating Fund wastewater rate structure also comprises of both Fixed Charge and Volumetric Charge components. The wastewater rate structure includes the following three components: Base Charge (Fixed Charge); BLACK & VEATCH I Rate Structure Overview 3-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Volume Charge (Volumetric Charge); and BOD and TSS Charge (Surcharge). The revenues derived from all these three sources are collectively referred to as "Wastewater Service Revenues. Some of these user rate components are applicable to only specific customer classes. ■ Base Charge: The existing Base Charge for all retail customers is based on meter size. ■ Volume Charge. The existing volume wastewater charge is based on the quantity of water used by the customer classes. Surcharge: The existing wastewater surcharge is based on the excess strengths of BOD and TSS, of certain customers. The customer classes to which the specific rate components are applicable is illustrated in Figure 3 - 2. The existing wastewater rate schedule for 2022 is presented in Table S - 3 in Appendix 2. Figure 3 - 2: Existing Wastewater Rate Structure • Base Charge by Meter Size Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); Volume Rate (2-Tier Inclining Block) Retail Inside City Residential Based on winter water usage of December, January and February Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale 2 tiered rates (85% of metered water usage and Above 85% of metered water usage) BLACK & VEATCH I Rate Structure Overview 3-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.0 Water Utility The financial plan and rate design were developed to meet all the funding obligations of the water utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The water utility financial plan was developed for the six -year forecast period of 2021 through 2026, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 4.1 Water Revenue Projections Under Existing Rates The water utility revenues are derived from the following sources: Water Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Water Service Revenues under the 2022 existing rates are projected for the forecast period. 4.1.1 Water Revenue Under Existing Rates As described in Section 3.3.1, the Water Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual water usage by customer class and by applicable blocks of usage. 4.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and average usage trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and usage factor. The number of accounts is projected to grow in all customer classes except for Fire protection and wholesale where the number of accounts is anticipated to remain at the 2020 level. The total number of water accounts (not including private fire connections) is anticipated to increase from about 48,620 in 2021 to about 52,850 in 2026, at an overall annual system growth rate of 1.7%. The number of private fire connections is anticipated to remain at 727 throughout the study period. Table W - 1 in Appendix 1 presents the projected annual number of water accounts and private fire connections for the period of 2021 through 2026. BLACK & VEATCH I Water Utility 4-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 4-1 presents both the historical and projected number of accounts for the water utility. Water Utility Historical and Projected Accounts 60,000 50,000 40,000 30,000 20,000 10,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected Figure 4-1 - Historical and Projected Water Accounts 4.1.1.2 Projection of Water Usage Billed water volumes are projected based on estimates of the number of water accounts and the average billed usage per account. Average water use per account is determined based on historical usage. The historical usage per account for all customer classes varies each year between 2016 and 2020. In 2020, the COVID pandemic led to stay-at-home measures and shut down of non -essential businesses across the country. Consequently, the residential customers used more water in 2020, whereas the non-residential customers used less water as compared to previous years. The average use per account for 2021 was projected to remain at the 2020 levels assuming a lingering effect of the pandemic. The average usage per account for 2022 and beyond was projected to return to the 2019 level for all customer classes assuming a return to pre -pandemic levels. Total system water usage is projected to increase from 3,873,500 kgals in 2021 to 4,109,400 kgals in 2026. Table W - 2 in Appendix 1 presents the projected annual volume for the period of 2021 through 2026. Figure 4-2 presents both the historical and projected annual billed volume for the water utility. Water Utility Historical and Projected Billed Volume (1,000 Gallons) 4,200,000 4,100,000 4,000,000 3,900,000 3,800,000 3,700,000 3,600,000 3,500,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected BLACK & VEATCH I Water Utility 4-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 4-2 - Historical and Projected Water Billed Volume 4.1.2 Projection of Service Revenue Under Existing Rates Water service revenues for the period 2021 through 2026 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected water usage for each customer class, and the application of the 2021 rate schedule for 2021 revenues and 2022 rate schedule for 2022 through 2026 revenues. Water service revenue under existing rates is projected to increase slightly from $21.2 million in 2021 to $23.0 million in 2026. This growth is due to increase in water sales due to the growth in the number of accounts over the study period. Table W - 4 in Appendix 1 presents the projected annual service revenues for the period of 2021 through 2026. Figure 4-3 presents both the historical and projected annual service revenues under existing rates for the water utility. Water Utility Historical and Projected Service Revenues (Under Existing Rates) $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 So 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected Figure 4-3 - Historical and Projected Water Service Revenue 4.1.3 Other Water Revenues The other revenues include the following major components: Impact Fee Revenue; Water/Rural Water Connection Fees; Miscellaneous Fees (Water Sales Not on Computer, Trip Fees, Tampering -Billed Service) Penalties; and Safe Drinking Water Fee (pass -through) The annual revenues from water impact fees, water connection fees and miscellaneous fees for 2021 to 2026 are projected based on historical three-year (2018 to 2020) average revenues for each of the fees. The penalties revenue in 2020 reflects only the first two and half months of revenues, as the City stopped assessing penalties for non-payment due to the pandemic. The revenue for penalties in 2021 is projected to be half of the historical three -year (2017 to 2019) average revenues due to continued waiver of the penalties as a result of the COVID pandemic during the first half for 2021. The revenue BLACK & VEATCH I Water Utility 4-3 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study from penalties in 2022 and beyond is projected as the historical three-year average (2017 to 2019) average revenues. Table W - 5 in Appendix 1 presents the historical and projected annual service revenues for the period of 2021 through 2026. The Safe Drinking Water Fee (SDWF) is assessed for all water users in the state of Arkansas. The current rate is $0.40 per bill per month and is collected by all water utilities in the state. The SDWF revenue is projected by applying the current rate to the number of meters for the period 2021 to 2026. The revenue collected as part of this fee is reimbursed to the state. 4.2 Water Capital Improvements Program The capital project costs provided by the City were based on 2020 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects for 2021 and beyond. The water utility Capital Improvement Plan (CIP) provides for a total of $49.0 million of investments during the study period of 2021 through 2026. Table W - 6 in Appendix 1 presents the CIP list of projects and schedule for 2021 through 2026 The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. 4.3 Water Revenue Requirements Projection of reliable revenue requirements includes: (1) operation and maintenance expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) SDWF Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The projections of annual revenue requirements for the study period is discussed in this section. 4.3.1 Water Operation and Maintenance Expenses The 0&M expenses for the water utility include the annual expenses associated with the water purchases from Beaver Water District; storage and distribution; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of C&M expenses for the study period. In addition, costs associated with a water inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Purchased Water: 3.00% BLACK & VEATCH I Water Utility 4-4 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The annual O&M expenses for water utility are budgeted at $15.9 million in 2021 and are projected to grow to $18.7 million by 2026. Table W - 7 in Appendix 1 presents a summary of total projected operation and maintenance expense for the period 2021 through 2026. Figure 4-4 presents the historical and projected O&M expenses for the water utility. Water Utility Historical and Projected O&M Expenses $2s,000,000 $20,000,000 $15,000,000 ........ $10,000,000 $5,000,000 so 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected Figure 4-4 - Projected Annual Water O&M Expenses 4.3.2 Water Bad Debt Bad debt expenses refer to outstanding balances owed that are deemed uncollectible. The water bad debt in 2019 was 0.5% of revenue. Hence, bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expenses for water utility is projected to increase from $105,900 in 2021 to $125,300 by 2026 reflecting the increase in projected revenues. Line 12 in Table W - 9 in Appendix 1 presents the projected bad debt for the period 2021 through 2026. 4.3.3 Water Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the water utility is calculated by multiplying actual water revenues from prior year (Water sales on Computer and Water sales not on Computer/ Bulk Water Sales, and Fire Hydrant and Protection). Annual PILOT amount for the water utility is anticipated to increase from $900,400 in 2021 to $1,064,900 in 2026. Line 13 in Table W - 9 in Appendix 1 presents the projected PILOT expenses for the period 2021 through 2026. 4.3.4 Safe Drinking Water Fee Reimbursement The SDWF revenue collected for each metered customer is reimbursed to the state of Arkansas department of Public Health. The SDWF reimbursement is projected to increase from $230,000 in 2021 to $250,200 in 2026. Line 14 in Table W - 9 in Appendix 1 presents the projected SDWF reimbursement for the period 2021 through 2026. BLACK & VEATCH I Water Utility 4-5 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.3.5 Water Debt Service Requirements The water utility does not have any outstanding debt service obligations. The City does not anticipate any debt issuances during the study period, therefore there is no projected debt service for future debt as shown in Line 15 in Table W - 9 in Appendix 1. 4.3.6 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 17 in Table W - 9 in Appendix 1. 4.3.7 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $133,000 in 2022 to $151,800 in 2026 reflecting the growth in the O&M budget. Line 18 in Table W - 9 in Appendix 1 presents the projected transfers to the operating reserve for the period 2021 through 2026. 4.3.8 Water Cash Financed Capital The City currently utilizes the following two sources of funding for the water utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 4.2, the water capital improvement program for the study period is $52 million, of which $50 million is projected to be funded from operating revenues and $2 million is from the impact fee fund. A capital project meets the requirements of using impact fees if the existing water capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table W - 8 in Appendix 1 presents the sources of funding for the water capital improvement program. Line 19 in Table W - 9 in Appendix 1 presents the projected transfers for cash financed capital for the period 2021 through 2026. 4.3.9 Transfer to Capital Reserve The water utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 20 in Table W - 9 in Appendix 1 presents the projected transfers to and from the capital reserve for the period 2021 through 2026. 4.4 Water Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table W - 9 in Appendix 1, provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing rates (2022 rates) water utility revenues will increase from $21.8 million in 2022 to $23.0 million in 2026. Projected Other Revenues: Line 8 indicates that the other revenues are anticipated to increase from $641,500 in 2022 to $662,300 in 2026. This increase is due to the growth in SDWF, which is a pass - through. It is anticipated that all other categories of other revenues will remain flat throughout the study period. BLACK & VEATCH I Water Utility 4-6 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Projected Expenses: Line 15 indicates the total annual expenses for the water utility are anticipated to increase from $17.7 million in 2022 to $20.2 million in 2026. Projected Transfers: Line 20 indicates the total annual transfers for the water utility are anticipated to increase from $4.7 million in 2022 to $5.6 million in 2026. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the water utility, a series of revenue adjustments are proposed as follows: 2024: 3% effective (January 1, 2024) 2025: 3% effective (January 1, 2025) 2026: 3% effective (January 1, 2026) Lines 2 through 7 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 4-5 presents the projected revenue and revenue requirements through 2026 for the wastewater utility. Water Utility Revenues and Revenue Requirements $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2021 2022 2023 2024 2025 2026 O&M Expenses Cash Financing of Capital Other Transfers — — Revenues Under Existing Rates Revenues Under Proposed Rates Figure 4-5 - Water Revenues and Revenue Requirements Table W - 10 in Appendix 1 presents the water utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. BLACK & VEATCH I Water Utility 4-7 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table W -10, the proposed annual revenue adjustments will allow the water utility to meeting the minimum fund balance requirements for all funds through 2026. 4.5 Water Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 4.1 through 4.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The cost of service analysis provides a mechanism to defensibly allocate the total annual revenue requirements to the various customer classes. The cost of service is typically performed for a single year, referred to as the "Test Year" for which the rates are to be designed. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Water Utility Costs to Customer Classes 4.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table W - 11 in Appendix 1 presents the derivation of the cost of service to be recovered through water charges. As Line 18 in Table W - 11 indicates, the water cost of service for 2023 is projected to be $22.1 million. This cost of service consists of $17.8 million of net O&M expense and $4.3 million of net capital costs. Costs of service is apportioned among customer classes in this study on a "Utility Basis", that is, in terms of operating expense, depreciation expense, and return. For a municipal utility, the total of depreciation expense and return is equal to the capital cost related portion of the total cost of service. Depreciation is the loss in value of the original plant investment, not restored by current maintenance, due to wear, decay, inadequacy, and obsolescence. Annual depreciation is determined as a percentage of original investment based on expected service lives of the various facilities. Unless funds are provided for normal annual replacement of original plant items, operating reliability of the system, as well as the value, will decrease. Depreciation funds are used to finance principal payments on bond issues and provide normal annual capital expenditures. The depreciation expense associated with the water utility is estimated in this study recognizing depreciation rates presently in use by the water utility. This results in a projected test year depreciation expense of $2.8 million exclusive of depreciation on contributed plant, which is not recognized for cost BLACK & VEATCH I Water Utility 4-8 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return on the system investment provides funds for bond interest payments and any other costs that may be incurred. In developing the level of return on net plant serving the requirements of outside City customers, provisions for a reasonable margin should be made to meet interest on borrowed funds, and to recognize the business risk assumed by the City in providing reliable facilities to serve nonresident customers. Total return for the test year is projected to be $1,476,030 as shown on Line 17 of Table W - 11 in Appendix 1. 4.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a water system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes Functional Cost Centers Functional cost centers of a water utility represent the activities that contribute to the incurrence of O&M and capital costs. For a water utility, they often include source of water supply, pumping, treatment, storage, distribution, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 4.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD of the water system is $104, as presented in Line 9 in Table W - 12 in Appendix 1. This plant investment data is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 4.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on the specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.8 million, to the various functional cost centers, is presented in Table W - 14 in Appendix 1. The various cost elements of water service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. BLACK & VEATCH I Water Utility 4-9 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of Base Costs, Extra -Capacity Costs, and Customer Costs. Base costs are those which vary directly with the quantity of water used, as well as those costs associated with serving customers under average load conditions without the elements necessary to meet water use variations or peak demands. Base costs include purchased power and treatment chemicals, and other operating and capital costs of the water system associated with serving customers to the extent required for a constant, or average annual rate of use. Extra -Capacity costs represent those operating costs incurred due to demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demand. Customer Costs are defined as costs which tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collection and accounting costs, and maintenance and capital charges associated with meters and services. The delineation of costs of service into these principal categories provides the means of further allocating such costs to the various customer classes based on the respective base, extra capacity, and customer service requirements of each customer class. Wholesale customers generally do not use smaller water distribution mains as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 4.5.3.1 Water Utility Allocation to Cost Components The water utility is comprised of a variety of service facilities, each designed and operated to fulfill a given function. In order to provide adequate service to its customers at all times, the utility must be capable of not only providing the total amount of water used, but also supplying water at maximum rates of demand. Since all customers do not exert their maximum demand for water at the same time, capacities of water facilities are designed to meet the peak coincidental demands that all classes of customers, as a whole, place on the system. For every water service facility on the system, there is an underlying average demand, or uniform rate of usage exerted by the customers for which the base cost component applies. For those facilities designed solely to meet average day demand, costs are allocated 100% to the base cost component. Extra capacity requirements associated with coincidental demands in excess of average use are further related to maximum daily and maximum hourly demands. Analysis of historical system maximum day and maximum hour demands to average day demands results in appropriate ratios for the allocation of capital costs and operating expenses to base and extra capacity cost components. A maximum day to average day ratio of 2.10 is used based on experienced demands in the water system. This indicates that approximately 47.6% of the capacity of facilities designed and operated to meet maximum day demand is required for average or base use. According, the remaining 52.4% is required for maximum day extra capacity requirements. BLACK & VEATCH I Water Utility 4-10 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The costs associated with facilities required to meet maximum hour demand are allocable to base, maximum day extra capacity, and maximum hour extra capacity. A ratio of maximum hour to annual average day water use of 2.73 is used, based on demands experienced by the system. This ratio indicates that 36.6% of the capacity of facilities designed and operated for maximum hour demand is needed for average or base use, while 40.3% is utilized for maximum day extra capacity uses, and the remaining 23.1% is required to meet maximum hour extra capacity demand in excess of maximum day needs. 4.5.3.2 Allocation of Net Water Plant Investment The estimated test year net plant investment in water facilities consists of net plant in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. As the wholesale customers have their own storage tanks, the plant investment associated with tanks was allocated to the retail customers only. The total estimated OCLD of the water system is $104 million, as presented in Line 9 in Table W - 12 in Appendix 1. Plant investment is allocated to cost components on a design basis recognizing the principal function governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. 4.5.3.3 Allocation of Water Facilities Depreciation Expense Depreciation is a real part of the cost of operating a utility. In utility accounting, it is generally accepted practice to use depreciation funds to finance system replacements, improvements, and extensions. While such action does not restore the value lost in each property unit every year, the total value lost through depreciation is restored to the system as a whole. Depreciation funds can be reinvested in the system either by direct payment of routine capital additions and replacements or by principal payments on bonded debt. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the water system is $2.8 million, as presented on Line 9 in Table W - 13 in Appendix 1. As the wholesale customer have their own storage tanks, the depreciation costs associated with tanks was allocated to the retail customers only. 4.5.3.4 Allocation of Water Utility Operating Expenses Table W - 14 in Appendix 1 presents the allocation of O&M expense to functional cost components. Total test year O&M expense, as shown on Line 7 of this table, amounts to $18.2 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. 4.5.4 Distribution of Water Utility Costs to Customer Classes As a basis for determining the cost of water service to each customer class, the elements of cost of service previously allocated to functional cost components are distributed among the classes in proportion to their respective service requirements. Estimates of these requirements, or units of service, reflect the average number of accounts with recognition to relative meter sizes serving each account, annual water sales, and estimated peak water demands placed on the system by each customer class. Analysis of resulting costs of service to each class and comparison of allocated costs with revenues under existing rates provide a basis for future water rate adjustments. BLACK & VEATCH I Water Utility 4-11 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5.4.1 Water Customer Classification Customer classes consist of residential, non-residential, industrial, irrigation, wholesale, and public and private fire protection. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential, and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit classes. Industrial includes major and minor industrial. Outside City includes Farmington, Greenland, Washington/Growth Area, Johnson, and Goshen/ White River. Wholesale includes the communities of Elkins, West Fork, Mt. Olive, and RDA/WWA. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. 4.5.4.2 Water Units of Service The cost of service responsibility for base costs varies with the annual volume of water usage and is distributed to customer classes on that basis. Extra capacity costs are those costs associated with meeting peak rates of water use and are distributed to customer classes on the basis of their respective system capacity requirements in excess of average requirement rates. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of the number of equivalent meters and monthly bills. The estimated units of service for the various customer classifications are presented in Table W - 15 in Appendix 1. Estimates of test year annual water volumes, shown in Column 1, are based on the projections of total water sales for the test year 2023. Average daily water use is presented in Column 2. Columns 3 through 8 present the estimated maximum day and maximum hour capacity factors for each customer class, the resulting demands, and extra capacity requirements, respectively. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 10) is estimated by relating typical costs for meters and services larger than 5/8 inch in size to the typical cost of a 3/4 inch meter and its related service line. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class in Column 11. Extra capacity requirements for fire protection service recognize, in part, peak fire flow requirements, and system capabilities established by the Insurance Service Office. One fire is estimated with peak fire flow requirements of 9,000 gallons per minute for 10 hours (maximum day) and 24 hours (maximum hour). Direct fire protection costs have been allocated between inside City and outside City customers in proportion to the number of equivalent 6-inch fire hydrants, as shown in Columns 12 and 13. 4.5.4.3 Water Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. The water utility has been built with provision for service to customers outside the City, yet the inside City customers must bear the responsibility for providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a BLACK & VEATCH I Water Utility 4-12 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study reasonable return on their allocated portion of value. A 7.0% (4.0% for future debt service plus 3.0% risk component) annual rate of return on the value of water facilities serving outside City customers is recognized for purposes of this study. Table W - 16 in Appendix 1 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 3 summarize the units of service developed in Table W - 15. Total allocated costs or investment shown on Lines 4, 6, and 8 were previously developed in Table W - 12, Table W - 13 and Table W - 14 respectively. Unit costs of service for each component are determined by dividing the allocated cost or investment by the total units of service. Total allocated unit costs of service for inside and outside City customers (Lines 15 and 16) are determined by adding the unit costs for net operating expense (Line 5) and depreciation expense (Line 7) to the respective inside and outside City unit costs for return on investment (Lines 10 and 11). These unit costs applied to the respective units of service shown on Lines 1 and 2 determine the allocated total costs of service for inside and outside City customers shown on Lines 17 and 18. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table W - 17 in Appendix 1 shows the resulting allocated and adjusted cost of service by customer class, revenue under existing rates, and the additional revenue required from each class. Costs associated with public fire protection are not recovered through direct charges, therefore, the cost of service for this class is reallocated to all other retail customers in proportion to their allocated cost of service as shown in Column 3. The test year adjusted cost of service, reflecting the reallocation of these costs, is shown in Column 4. The indicated increase or decrease in revenue required to meet adjusted cost of service is shown in Column 6. BLACK & VEATCH I Water Utility 4-13 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5.0 Water Rate Design The principal consideration in establishing water rate schedules is to establish rates to customers to recover costs that reasonably commensurate with the cost of providing water service. Theoretically, the only method of assessing entirely equitable rates for water service would be the determination of each customer's bill based upon each customer's particular service requirements. Since this is impractical, schedules of rates are normally designed to meet average conditions for groups of customers having similar service requirements. Rates should provide for equitable cost recovery, ease of customer understanding and be simple to administer. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting water rates. The revenue requirements reflect the need for adjustment and the level of revenue required. The cost of service analysis provides the unit costs of service used in the rate design process and gives a basis for determining whether resultant rates will develop revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 5.1 Existing Water Rates The existing schedule of rates for water service became effective on January 1, 2022. For both retail and wholesale customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. The existing water rate structure is described in Section 3.3.1. The existing schedule of base and volumetric water rates is shown in Table W - 3. 5.2 Proposed Water Rates The cost of service analysis described in the preceding sections of this report provides a basis for the design of a schedule of water rates to meet those costs. Proposed water base charge and volume rates have been designed to meet the test year allocated costs of service and are presented in Table W - 18. The proposed rate structure eliminates the minimum volume charge associated with 1,000 gallons. Additionally, volumetric rate structure for non-residential and irrigation customers classes both inside and outside city were changed from declining block rates to uniform block rates Figure 5 - 1 below presents the proposed water rate structure. Figure 5 - 1 Proposed Water Rate Structure Base Charge by Meter Size • Volume Rate (3-Tier Inclining Block) Volume Rate (Uniform) • Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential • Retail Inside City Non -Residential, Major Industrial, Irrigation; and BLACK & VEATCH I Water Rate Design 5-14 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Retail Outside City Non -Residential, Irrigation Volume Rate ( Uniform) Wholesale Safe Drinking Water Fee (per month) All customer classes In developing proposed schedules of water rates, it must be recognized that the cost of service studies are the result of engineering estimates, based to some extent upon judgment and experience, and detailed results should not be used as literal and exact answers but as guides for potential rate adjustments. Practical considerations such as previous rate levels, bill impact on customers, and magnitude of cost of service shifts among customer classes, and past local practices are commonly recognized in making rate adjustments. A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is presented in Table W - 19 in Appendix 1. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical inside city and outside city customer water charges under existing rates and the rates proposed to become effective January 1, 2023, is presented in Table W - 20. BLACK & VEATCH I Water Rate Design 5-15 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.0 Wastewater Utility The financial plan and rate design were developed to meet all the funding obligations of the wastewater utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The wastewater utility financial plan was developed for the forecast period of 2021 through 2026, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program; Annual revenue requirement projections; and Annual proposed revenue increases 6.1 Wastewater Revenue Projections Under Existing Rates The wastewater utility revenues are derived from the following sources: Wastewater Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Wastewater Service Revenues under the 2021 existing rates are projected for the forecast period. 6.1.1 Wastewater Revenue Under Existing Rates As described in Section 3.3.2, the Wastewater Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual wastewater billed volumes by customer class and by applicable blocks of billable wastewater volume. 6.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and billed volume trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and volume factor. The number of accounts is projected to grow for residential customer classes Fayetteville (Inside City) and Farmington (Outside City), whereas all other customer classes are anticipated to remain at the 2020 level. The total number of wastewater accounts is anticipated to increase from about 40,100 in 2021 to about 43,300 in 2026, at an overall annual system growth rate of 1.6%. Table S - 1 in Appendix 2 presents the projected annual number of accounts for the period of 2021 through 2026. BLACK & VEATCH I Wastewater Utility 6-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 6-1 presents both the historical and projected number of accounts for the wastewater utility. Waterwater Utility Historical and Projected Accounts 46,000 44,000 42,000 40,000 38,000 36,000 34,000 32,000 NO101:�IljVi10444 1016ilry��Z�TI:iIry2 iZ�Jb�Z�tI7 Historical — — Projected Figure 6-1 - Historical and Projected Wastewater Accounts 6.1.1.2 Projection of Wastewater Volume Billed wastewater volumes are projected based on estimates of the number of wastewater accounts and the average billed volume per account. Average billed volume per account is determined based on historical billed volume. The historical billed volume per account for all customer classes varies each year between 2016 and 2020. In 2020, the COVID pandemic led to stay-at-home measures and shut down of non -essential businesses across the country. Consequently, the residential customers used more water in 2020, whereas the non-residential customers used less water as compared to previous years. The average billed volume per account for 2021 was projected to remain at the 2020 levels assuming a lingering effect of the pandemic. The average billed volume per account for 2022 and beyond was projected to return to the 2019 level for all customer classes assuming a return to pre - pandemic levels. Total system wastewater billed volume is projected to increase from 3,043,100 kgals in 2021 to 3,205,800 kgals in 2026. Table S - 2 in Appendix 2 presents the historical and projected annual volume for the period of 2020 through 2026. Figure 6-2 presents both the historical and projected annual billed volume for the wastewater utility. BLACK & VEATCH I Wastewater Utility 6-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Wastewater Utility Historical and Projected Billed Volume (1,000Gallons) 3,500,000 3,000,000 — — — — — — — — 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected Figure 6-2 - Historical and Projected Wastewater Billed Volume 6.1.2 Projection of Service Revenue Under Existing Rates Wastewater service revenues for the period 2021 through 2026 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected billed volume for each customer class, and the application of the 2021 rate schedule for 2021 revenues and 2022 rate schedule for 2022 through 2026. Wastewater service revenue under existing rates is projected to increase slightly from $24.5 million in 2021 to $26.7 million in 2026. This growth is due to increase in wastewater sales due to the growth in the number of accounts over the study period. Table S - 4 in Appendix 2 presents the historical and projected annual service revenues for the period of 2021 through 2026. Figure 6-3 presents both the historical and projected annual service requirements under existing rates for the wastewater utility. Wastewater Utility Historical and Projected Service Revenues (Under Existing Rates) $ 30,000,000 $25,000,000 — — — — — — — — $ 20,000,000 $15,000,000 510,000,000 $5,000,000 $0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Historical — —Projected Figure 6-3 - Historical and Projected Wastewater Service Revenue 6.1.3 Other Wastewater Revenue The other revenues include the following major components: BLACK & VEATCH I Wastewater Utility 6-3 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Impact Fee Revenue; Wastewater Connection Fees; Wastewater Sales Not on Computer Penalties; and WWTP Fees (Hay Sales, Biosolids/ Fertilizer Sales & Water Treatment Residual) The annual revenues from wastewater impact fees, wastewater connection fees. wastewater sales not on computer, and WWTP Fees for 2021 to 2026 are projected based on historical three-year (2018 to 2020) average revenues for each of the fees. The penalties revenue in 2020 reflects only the first two and half months of revenues, as the City stopped assessing penalties for non-payment due to the pandemic. The revenue for penalties in 2021 is projected to be half of the historical three -year (2017 to 2019) average revenues due to continued waiver of the penalties as a result of the COVID pandemic during the first half for 2021. The revenue from penalties in 2022 and beyond is projected as the historical three-year average (2017 to 2019) average revenues. Table S - 5 in Appendix 2 presents the historical and projected annual other revenues for the period of 2020 through 2026. 6.2 Wastewater Capital Improvements Program The capital project costs provided by the City were based on 2020 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects for 2021 and beyond. The City's wastewater utility Capital Improvement Plan (CIP) provides for a total of $69.3 million of investments during the study period of 2021 through 2026. Major wastewater projects include sanitary wastewater rehabilitation totaling $15.7 million and Biosolids Dryer Replacement totaling $31.1 million. Table S - 6 in Appendix 2 presents the CIP list of projects for 2021 through 2026. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. 6.3 Wastewater Utility Revenue Requirements Projection of reliable revenue requirements includes: (1) O&M expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) debt service (consisting of principal and interest payments); (5) transfer to shop fund; (6) transfer to operating reserve; (7) cash financed capital; and (8) transfer to capital reserve. The projections of annual revenue requirements for the study period is discussed in this section. 6.3.1 Wastewater Operation and Maintenance Expenses The O&M expenses for the wastewater utility include the annual expenses associated with the wastewater conveyance, pumping, treatment and disposal; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a wastewater inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various BLACK & VEATCH I Wastewater Utility 6-4 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Wastewater Treatment Plant Contract: 3.00% The annual O&M expenses for wastewater utility are budgeted at $15.7 million in 2021 and are projected to grow to $18.4 million by 2026. Table S - 7 in Appendix 2 presents a summary of projected operation and maintenance expense for the period 2021 through 2026. Figure 6-4 presents the historical and projected O&M expenses for the wastewater utility. $ 20,000,000 $15,000,000 $10,000,000 $5,000,000 Wastewater Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 Historical — — Projected Figure 6-4 - Projected Annual Wastewater O&M Expense 6.3.2 Wastewater Bad Debt Bad debt expenses refer to outstanding balances owed that are deemed uncollectible. The wastewater bad debt in 2019 was 0.5% of revenue. Hence, the bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expenses for wastewater utility is projected to increase from $122,300 in 2021 to $145,500 by 2026 reflecting the increase in projected revenues. Line 16 in Table S - 9 in Appendix 2 presents bad debt expense for the period 2021 through 2026. 6.3.3 Wastewater Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the wastewater utility is calculated by multiplying actual wastewater revenues from prior year (Wastewater sales on Computer and Wastewater sales not BLACK & VEATCH I Wastewater Utility 6-5 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study on Computer/ Dump Fees) and is projected to increase from $1,039,600 in 2021 to $1,236,900 in 2026. Line 17 in in Appendix 2 presents PILOT expense for the period 2021 through 2026. 6.3.4 Wastewater Debt Service Requirements The wastewater utility does not have any outstanding debt service obligations. The City does not anticipate any debt issuances during the study period, therefore no projected debt service for future debt as shown in Line 18 in Table S - 9 in Appendix 2. 6.3.5 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 20 in Table S - 9 in Appendix 2 6.3.6 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $12,7100 in 2022 to $145,500 in 2026 reflecting the growth in the O&M budget. Line 21 in Table S - 9 in Appendix 2 presents transfer to the operating reserve for the period 2021 through 2026. 6.3.7 Wastewater Cash Financed Capital The City currently utilizes the following two sources of funding for the wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 6.2, the wastewater capital improvement program for the study period is $69 million, of which $67 million is projected to be funded from operating revenues and $2 million is from the impact fee fund. A capital project meets the requirements of using impact fees if the existing wastewater capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table S - 8 in Appendix 2 presents the sources of funding for the wastewater capital improvement program. Line 22 in Table S - 9 in Appendix 2 presents transfer for cash financing of capital program for the period 2021 through 2026. 6.3.8 Transfer to Capital Reserve The wastewater utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 23 in Table S - 9 in Appendix 2 presents transfer to and from the capital reserve for the period 2021 through 2026. 6.4 Wastewater Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table S - 9 in Appendix 2 provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing rates (2022 rates) wastewater utility revenues will increase from $25.4 million in 2022 to $26.7 million in 2026. BLACK & VEATCH I Wastewater Utility 6-6 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Projected Other Revenues: Line 8 indicates that the other revenues and interest income are anticipated to increase from $720,500 in 2022 to $727,000 in 2026. It is anticipated that all categories of other revenues will remain flat throughout the study period. The slight growth is due to the increase in interest income on the operating reserve. Projected Expenses: Line 14 indicates the total annual expenses for the wastewater utility are anticipated to increase from $17.4 million in 2022 to $19.8 million in 2026. Projected Transfers: Line 19 indicates the total annual transfers for the wastewater utility are anticipated to increase from $8.8 million in 2022 to $10.1 million in 2026. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the wastewater utility, a series of revenue adjustments are proposed as follows: 2024: 3% effective (January 1, 2024) 2025: 3% effective (January 1, 2025) 2026: 3% effective (January 1, 2026) Lines 2 through 7 in Table S - 9 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 6-5 presents the projected revenue and revenue requirements through 2026 for the wastewater utility. Wastewater Utility Revenues and Revenue Requirements $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2021 2022 2023 2024 2025 2026 O&M Expenses Cash Financing of Capital Other Transfers — — Revenues Under Existing Rates Revenues Under Proposed Rates Figure 6-5 - Wastewater Revenues and Revenue Requirements BLACK & VEATCH I Wastewater Utility 6-7 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 10 in Appendix 2 presents the wastewater utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipate capital projects. As shown in Table S - 9, the proposed annual revenue adjustments will allow the water utility to meet the minimum fund balance requirements for all funds through 2026. 6.5 Wastewater Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 6.1 through 6.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Wastewater Utility Costs to Customer Classes 6.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table S -11 in Appendix 2 presents the derivation of the cost of service to be recovered through the wastewater charges. As Line 18 in Table S - 11 indicated, wastewater cost of service for 2023 is projected to be $25.7 million. This cost of service consists of $17.3 million of net operation and maintenance expense and $8.4 million of net capital costs. As performed for the water utility, costs of services are apportioned among customer classes in this study on a Utility Basis. The depreciation expense and return on system investments that were already explained in Section 4.5.1 are applicable to the wastewater utility cost of service analysis as well. The depreciation expense associated with the wastewater utility is estimated in this study recognizing depreciation rates presently in use by the wastewater utility. This results in a projected test year depreciation expense of $8.3 million BLACK & VEATCH I Wastewater Utility 6-8 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return for the test year is projected to be $132,600 as shown on Line 17 of Table S - 11. 6.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a wastewater system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes. Functional Cost Centers Functional cost centers of a wastewater utility represent the activities that contribute to the incurrence of O&M and capital costs. For a wastewater utility, they often include source of collection, pumping, conveyance, treatment, disposal, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 6.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD value of the wastewater system is $200.0 million, as presented in Line 26 in Table S - 12 in Appendix 2. This plant investment is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 6.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.3 million, to the various functional cost centers is presented in Table S - 14 in Appendix 2. The various cost elements of wastewater service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 6.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of volume related costs, strength related costs, and customer related costs. Volume costs are those which vary directly with the quantity of wastewater contributed. They consist of capital costs related to investment in system facilities which are sized on the basis of, or required BLACK & VEATCH I Wastewater Utility 6-9 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study because of, wastewater volume. This also includes operation and maintenance expense related to those facilities, and the expense of volume related treatment chemicals and purchased power. Wastewater strength costs consist of the operation and maintenance expense and capital costs related to system facilities which are designed principally to treat the wastewater pollutant loadings of pollutants such as BOD, TSS, and other pollutants. BOD costs reflect costs associated with the treatment of influent BOD and include costs related to activated sludge aeration and disposal of BOD related sludge. Suspended solids strength costs are those costs of wastewater treatment which tend to vary according to the quantity of suspended solids in the raw wastewater. Customer costs are those which tend to vary in proportion to the number of customer bills or customers served. These include the wastewater utility share of customer related meter reading, billing, collection, and account expense. The delineation of costs of service into functional components provides a means of distributing such costs to the various customer classes based on the respective total wastewater volume, strength, and customer cost requirements of each. Wholesale customers generally do not use lateral wastewater lines as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 6.5.3.1 Wastewater Utility Cost Allocation to Cost Components In establishing the costs associated with each functional cost component, the return portion of the test year cost of service is distributed to cost functions based on an allocation of the estimated test year value of wastewater system facilities. The test year depreciation expense associated with each major element of plant facilities is allocated to cost functions in the same manner as the plant value. Operating expense is similarly allocated to cost functions based on the projected test year expense estimated for each wastewater system component. 6.5.3.2 Allocation of Net Wastewater Plant Investment The estimated test year value of wastewater facilities consists of net plan in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. Table S - 12 in Appendix 2 presents the allocation of the wastewater utility's total estimated plant value less contributions on an original cost less depreciation value basis. Total plant investment is estimated to be $200.0 million as indicated by Line 26 of the Table S - 12. Plant investment is allocated to cost components on a design basis recognizing the principal purpose governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. The Owl Creek Lift Station and Force Main serve only the City of Fayetteville, hence the plant investment associated with Owl Creek is allocated directly to the City of Fayetteville customers. Additionally, the outside City customers maintain their own wastewater connections, hence, the plant investment associated with wastewater connections is allocated 100% to the City of Fayetteville customers. BLACK & VEATCH I Wastewater Utility 6-10 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The City has a contract with the City of Farmington stipulating that Farmington will be allocated 8.2% of the costs associated with the West Treatment Plant. Hence, 8.2% of the West Treatment Plant's investment is allocated directly to the City of Farmington customers. Wastewater collection net plant is allocated 41% to both retail and wholesale (common to all) and 59% to retail only based on the ratio of interceptors (large diameter mains) which is 41% of the collection system. 6.5.3.3 Allocation of Wastewater Facilities Depreciation Expense As explained in Section 4.5.3.3, depreciation expense is a real part of the cost of operating a utility. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the wastewater system is $8,259,600 as presented on Line 26 in Table S - 13 in Appendix 2. The items of expense are allocated to cost components on the same design or cost causative basis used to allocate plant investment. Hence, the depreciation expense associated with Owl Creek Lift Station and Force main and Wastewater connections is directly allocated to the City of Fayetteville customers and 8.2% of the West Treatment Plant's depreciation is allocated directly to the City of Farmington customers. 6.5.3.4 Allocation of Wastewater Utility Operating Expenses Table S -14 in Appendix 2 presents the allocation of operation and maintenance expense to functional cost components. Total test year operation and maintenance expense, as shown on Line 10 of this table, amounts to $18.1 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes The total cost responsibility of each customer class is determined by developing unit costs of service for each cost component and applying the unit costs to the respective service requirements of each class. In accomplishing this, each customer class is allocated the share of volume, strength, and customer costs for which it is responsible. 6.5.4.1 Wastewater Customer Classification Customer classes consist of residential, non-residential, industrial and wholesale. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit customers. Outside City includes Farmington, Greenland, Washington County/Growth Area and Johnson. Wholesale includes the community of Elkins and West Fork. 6.5.4.2 Wastewater Units of Service Derivation of the responsibility of customer classes for costs of service require that each class be allocated a portion of the volume, strength, and customer costs of service according to their respective service requirements. The cost of service responsibility for volume costs, which vary with the volume of wastewater contributed to the wastewater system, is distributed to customer classes on that basis. Strength costs are principally related to the function of reducing wastewater suspended solids, and BOD strength loading. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of equivalent meters and monthly bills. BLACK & VEATCH I Wastewater Utility 6-11 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The estimated test year service requirements or units of service for the various customer classes are shown in Table S - 15 in Appendix 2. Wastewater collected and treated consists of two elements: (1) sanitary wastewater flow and (2) infiltration/inflow (1/1) of ground water into the sewers. Contributed wastewater flow is that portion of the annual water use and/or other flows from each customer class that are discharged to the wastewater system. Estimates of the contributed volume of each class is generally based upon wastewater billing records. For residential customers, the billed wastewater volume is based on average water consumption for the preceding months of December, January and February. This methodology of using a winter quarter average for quantity of wastewater flows is used to exclude outdoor uses such as irrigation, which do not return water to the collection system. For all other customer classes, the billed wastewater volume is the same as the water volume. The difference between the measured plant influent and the customer contributed wastewater flow is attributed to Infiltration and Inflow (1/1) volume. Based on discussions with the City staff, 40% of the total treated volume is assumed to be 1/1 flows. Each customer class should bear its proportionate share of the costs associated with 1/I, as it is integral aspect of wastewater system costs. The number of customer connections to a wastewater collection system and the volume of customer flows conveyed both influence the extent of 1/1 in a system. Recognizing that the major cost responsibility for 1/1 is allocable on an individual connection basis, two-thirds of the total 1/1 volume projected is allocated to customer classes based on the number of customers with the remaining one-third allocated on the basis of contributed volume. Estimated total strength units shown for each customer class are based on an average BOD concentration of 365 milligrams per liter (mg/1) and an average suspended solids concentration of 285 mg/I. 1/1 strength allowances for BOD and suspended solids are assumed at 25 mg/I and 50 mg/I, respectively. Estimated BOD and suspended solids responsibilities of each customer class presented in Table S - 15 in Appendix 2 are based on the respective indicated average strength concentrations and contributed wastewater and 1/1 volumes for each class. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class (Column 7) in Table S - 15. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 8) is estimated by relating typical costs for meters and services larger than 3/4 inch in size to the typical cost of a 3/4 inch meter. 6.5.5 Wastewater Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. The wastewater utility has been built with the provision for service to customers outside the City, yet the inside City customers must bear the responsibility of providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 7.0% (4.0 % for future debt BLACK & VEATCH I Wastewater Utility 6-12 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study service plus 3.0% risk component) annual rate of return on the value of wastewater facilities serving outside City customers is recognized for purposes of this study. Table S -16 in Appendix 2 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 3 summarize the units of service developed in Table S - 15. Total allocated costs or investment shown on Lines 5, 7, and 9 were previously developed in Table S - 14, Table S - 13 and Table S - 12, respectively. Total allocated unit costs of service for inside City and outside City customers (Line 18, Line 19, Line 20 and Line 21) are determined by adding the unit costs for net operating expense (Line 6) and depreciation expense (Line 8) to the respective inside and outside City unit costs for return on investment (Lines 11 and 12). These unit costs applied to the respective units of service shown on Lines 1,2 and 3 determine the allocated total costs of service for inside and outside City customers shown on Lines 18 through 21. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table S -17 in Appendix 2 shows the resulting allocated cost of service by customer class, revenue under existing rates, and the indicated increase or decrease in revenue required to meet the allocated cost of service. BLACK & VEATCH I Wastewater Utility 6-13 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 7.0 Wastewater Rate Design The principal consideration in establishing wastewater rate schedules is to establish charges to recover costs that are reasonably commensurate with the cost of providing wastewater service. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting wastewater rates. The revenue requirements show the need for adjustment and the level of revenue required. This cost of service analysis provides the unit costs of service to be used in the rate design process and gives a basis for determining whether resultant rates will generate revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 7.1 Existing Wastewater Rates The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of BOD and TSS. The existing wastewater rate structure is described in Section 3.3.2. The existing schedule of base and volume rates for wastewater service is shown in Table S - 3 in Appendix 2. 7.2 Proposed Wastewater Rates The cost of service study described in preceding sections of this report provides a basis for the design of a schedule of wastewater rates to meet those costs. Proposed wastewater rates have been designed to meet the test year allocated costs of service and are presented in Table S - 18. The proposed rate structure presented in Figure 7 - 1 is similar to the existing structure. Figure 7 - 1 Proposed Wastewater Rate Structure • Base Charge by Meter Size Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); • Volume Rate (2-Tier Inclining Block) Retail Inside City Residential Based on winter water usage of December, January and February Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale As already explained in Section 5.2, practical rate design should consider multiple factors including previous rate levels, customer bill impact, and magnitude of cost shifts among customer classes. BLACK & VEATCH I Wastewater Rate Design 7-14 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is shown in Table S - 19 in Appendix 2. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical bills under existing rates and the rates proposed to become effective January 1, 2023, is shown in Table S - 20. 8.0 Combined Water and Wastewater Utilities Table C - 1 in Appendix 3 presents the combined operating reserve, capital reserve and impact fee fund balances. Table C - 2 in Appendix 3 provides a summary of the combined revenue and revenue requirements (financial plan) for the study period. The revenue under existing rates are not sufficient to meet the obligations of the two utilities. As discussed in Section 4 and Section 6, a series of annual 3% proposed revenue adjustments enable the utilities to meet their operating, capital and reserve obligations. Figure 8-1 presents the projected revenue and revenue requirements through 2026 for the wastewater utility. Water and Wastewater Revenues and Revenue Requirements $70,000,000 $60,000,000 550,000,000 — — 540,000,000 $30,000,000 $20,000,000 $10,000,000 So 2021 2022 2023 2024 2025 2026 O&M Expenses Cash Financing of Capital Other Transfers — — Revenues Under Existing Rates Revenues Under Proposed Rates Figure 8-1 - Water and Wastewater Revenues and Revenue Requirements Table C - 2 in Appendix 3 presents the combined water and wastewater operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. Operating Fund Balance: A minimum target of $200,000. BLACK & VEATCH I Combined Water and Wastewater Utilities 8-15 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Capital Fund Balance: A minimum target of $1,000,000. Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table C - 2, the proposed annual revenue adjustments will allow the utilities on a combined basis to meet the minimum fund balance requirements for all funds through 2026. A comparison of combined water and wastewater typical bills under existing rates and the rates proposed to become effective January 1, 2022, is shown in Table C - 3. 9.0 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Disclaimer 9-16 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 10.0 Appendix 1: Water Tables Table W - 1 - Water Projected Number of Accounts Line 1 2 Inside City Residential Non -Residential 35,200 3,500 35,800 3,500 Projected 36,400 3,500 37,100 3,500 37,700 3,500 38,400 3,500 3,200 0 3 Industrial 21 21 21 21 21 21 0 200 4 5 Irrigation Private Fire 2,000 713 2,100 713 2,100 713 2,100 713 2,200 713 2,200 713 0 6 7 Subtotal Outside City Residential 41,434 6,500 42,134 6,600 42,734 6,800 43,434 6,900 44,134 7,100 44,834 7,200 3,400 700 8 Non -Residential 400 400 400 500 500 500 100 9 Industrial 0 0 0 0 0 0 0 10 Irrigation 271 277 285 292 299 307 37 11 Private Fire 14 14 14 14 14 14 0 12 13 Subtotal Wholesale Elkins 7,185 1 7,291 1 7,499 1 7,706 1 7,913 1 8,021 1 837 0 14 Mount Olive 2 2 2 2 2 2 0 15 West Fork 1 1 1 1 1 1 0 16 RDA/WWA 4 4 4 4 4 4 0 17 18 19 Subtotal Total %Change 8 48,627 3.26% 8 49,433 1.66% 8 50,241 1.63% 8 51,148 1.81% 8 52,055 1.77% 8 52,863 1.55% 0 4,237 8.71% BLACK & VEATCH I Appendix 1: Water Tables 10-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 2 - Water Projected Billed Volume (1,000 Gallons) Line Projected 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,896,300 1,769,800 1,800,800 1,832,300 1,864,400 1,897,000 700 2 Non -Residential 678,600 827,100 827,100 827,100 827,100 827,100 148,500 3 Industrial 322,300 401,800 401,800 401,800 401,800 401,800 79,500 4 Irrigation 249,600 244,300 248,600 252,900 257,300 261,800 12,200 5 Subtotal 3,146,800 3,243,000 3,278,300 3,314,100 3,350,600 3,387,700 240,900 Outside City 6 Residential 427,900 385,700 394,600 403,800 413,300 423,100 -4,800 7 Non -Residential 51,300 65,600 66,400 67,300 68,300 69,200 17,900 8 Irrigation 28,400 24,400 25,000 25,700 26,400 27,100 -1,300 9 Subtotal 507,600 475,700 486,000 496,800 508,000 519,400 11,800 Wholesale 10 Elkins 81,000 75,000 75,000 75,000 75,000 75,000 -6,000 11 Mount Olive 68,900 62,100 62,100 62,100 62,100 62,100 -6,800 12 West Fork 69,200 65,200 65,200 65,200 65,200 65,200 -4,000 13 RDA/WWA 0 0 0 0 0 0 0 14 Subtotal 219,100 202,300 202,300 202,300 202,300 202,300 -16,800 15 Total 3,873,500 3,921,000 3,966,600 4,013,200 4,060,900 4,109,400 235,900 16 %Change 1.26% 1.23% 1.16% 1.17% 1.19% 1.19% 6.09% BLACK & VEATCH I Appendix 1: Water Tables 10-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 3 - Water Existing Rates Existing Water Rates Effective January 1, 2022 Inches $/month $/month $/month $/month $/month 5/8 6.59 7.54 8.31 3/4 6.59 7.54 8.31 1 9.14 10.52 11.49 9.75 11.68 1 1/2 15.93 18.31 20.00 10.17 12.10 2 23.20 26.66 29.07 20.33 23.37 3 54.05 62.18 64.38 30.48 35.06 4 89.50 102.93 112.25 60.97 70.11 6 178.99 205.82 212.76 169.34 197.74 8 268.41 308.67 332.91 355.65 409.00 10 609.68 701.11 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Residential 0 - 2,000 Gallons 3.51 4.04 2,000 - 15,000 Gallons 4.65 5.35 Over 15,000 Gallons 6.59 7.54 Non -Residential First 300,000 Gallons 3.79 4.38 Over 300,000 Gallons 3.39 3.90 Major Industrial All Usage 2.96 3.40 Irrigation First 300,000 Gallons 5.04 5.80 Over 300,000 Gallons 4.53 5.22 Wholesale Reduced Peak Demand 2.87 Peak Demand 3.20 BLACK & VEATCH I Appendix 1: Water Tables 10-3 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 4 - Water Projected Revenues Under Existing Rates Line Projected S S S S S S Inside City 1 Residential 11,196,100 11,001,700 11,194,200 11,390,100 11,589,500 11,792,300 996,200 2 Non -Residential 2,844,700 3,476,000 3,476,000 3,476,000 3,476,000 3,476,000 631,300 3 Industrial 933,000 1,196,700 1,196,700 1,196,700 1,196,700 1,196,700 263,700 4 Irrigation 1,410,700 1,431,200 1,456,300 1,481,800 1,507,700 1,534,100 123,400 5 Private Fire 967,600 967,600 967,600 967,600 967,600 967,600 0 6 Subtotal 17,352,100 18,073,200 18,290,800 18,512,200 18,737,500 18,966,700 1,614,600 Outside City 7 Residential 2,743,800 2,614,600 2,674,900 2,737,200 2,801,400 2,867,700 123,900 8 Non -Residential 258,700 328,200 333,000 338,000 343,300 348,800 90,100 9 Industrial 0 0 0 0 0 0 0 10 Irrigation 190,000 173,400 177,900 182,500 187,400 192,400 2,400 0 11 Private Fire 27,100 27,100 27,100 27,100 27,100 27,100 12 Subtotal 3,219,600 3,143,300 3,212,900 3,284,800 3,359,200 3,436,000 216,400 Wholesale 13 Elkins 226,800 216,200 216,200 216,200 216,200 216,200 -10,600 14 Mount Olive 193,900 179,800 179,800 179,800 179,800 179,800 -14,100 15 West Fork 194,000 188,100 188,100 188,100 188,100 188,100 -5,900 16 RDA/WWA 0 0 0 0 0 0 0 17 Subtotal 614,700 584,100 584,100 584,100 584,100 584,100 -30,600 18 Total 21,186,400 21,800,600 22,087,800 22,381,100 22,680,800 22,986,800 1,800,400 19 %Change 4.28% 2.90% 1.32% 1.33% 1.34% 1.35% 8.50% (a) Reflects 3.0% revenue increase effective January 1, 2022. Table W - 5 - Water Projected Other Revenues Line 1 2 Water Impact Fee Revenue Water Sales Not on Computer S 976,300 300 S 976,300 300 Projected S 976,300 300 S 976,300 300 S 976,300 300 S 976,300 300 0 0 3 Water Connection Fees 162,000 162,000 162,000 162,000 162,000 162,000 0 4 Rural Water Connection Fees 2,700 2,700 2,700 2,700 2,700 2,700 0 5 Service Charge/Trip Fee - Billed Service 9,500 9,500 9,500 9,500 9,500 9,500 0 6 Tampering Fee - Billed Service 200 200 200 200 200 200 0 7 Penalties 103,700 207,400 207,400 207,400 207,400 207,400 103,700 20,200 8 Safe Drinking Water Fee 230,000 233,800 237,800 241,800 245,900 250,200 9 10 Total %Change 1,484,700 -0.99% 1,592,200 7.24% 1,596,200 0.25% 1,600,200 0.25% 1,604,300 0.26% 1,608,600 0.27% 123,900 8.35% BLACK & VEATCH I Appendix 1: Water Tables 10-4 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 6 - Water Capital Improvement Program 1 2 3 Water System Rehabilitation/Replacement Water Tank Improvements Water Storage & Pump Station Maintenance 2,060,000 1,030,000 103,000 0 1,060,900 106,100 2,185,500 1,092,700 109,300 2,251,000 1,125,500 112,600 2,318,500 1,159,300 115,900 0 2,149,300 0 4 Water Meters 849,800 875,200 901,500 928,500 956,400 0 5 Backflow Prevention Assemblies 51,500 53,000 54,600 56,300 58,000 0 6 W/S Improvements defined by Study (West Water Transmission Line) 618,000 636,500 655,600 675,300 695,600 4,776,200 7 Water Impact Fee Improvements 412,000 424,400 437,100 450,200 463,700 0 8 Utilities Financial Services Improvements 0 11,100 3,300 1,700 8,700 0 9 Water/Sewer Relocations - Bond Projects 174,600 265,200 273,200 281,400 289,800 0 10 Water/Sewer Impact Fee Cost Sharing 0 79,600 82,000 84,400 86,900 0 11 Utilities Technology Improvements 0 228,100 234,900 130,000 10,400 0 12 Water/Sewer Building -Office Improvements 0 26,500 27,300 28,100 29,000 0 13 Water/Sewer Equipment Expansions 0 26,500 27,300 28,100 29,000 0 14 Water & Sewer Rate/Operational Studies 0 10,600 10,900 11,300 11,600 0 15 Phosphorus Standards Management 0 26,500 27,300 28,100 29,000 0 16 Water & Sewer Technology Equipment Replacements 0 0 0 0 0 0 17 Water & Sewer Improvements Defined By Study 0 0 0 0 0 0 18 Huntsville Water Line Replacement (6 -inch upto 8-inch) 776,300 0 0 0 0 0 19 Benson Water Tank 1,030,000 338,200 0 0 0 0 20 East Water Service Improvements - Township 3,290,600 0 0 0 0 0 21 South Garland Ave Waterline Replacement 253,800 0 0 0 0 0 22 East Water Service Improvements CS 3 (Gulley, PS, Goshen Lines) 0 5,304,500 0 0 0 0 23 Ila/Oaks Manor/Persimmon Waterline Replacements 927,000 0 0 0 0 0 24 Western Park Waterline Replacement 309,000 0 0 0 0 0 25 N. College Waterline Replacement- upgrade from 8" to 12" 0 0 2,185,400 0 0 0 26 Total Capital Improvement Program 11,885,600 9,472,900 8,307,900 6,192,500 6,261,800 6,925,500 (a) Capital costs reflect 3%annual inflation starting in 2021. Table W - 7 - Water Projected O&M Expenses 1 Personal Costs 3,433,900 3,580,100 3,732,600 3,891,600 4,057,400 4,230,400 2 Materials and Supplies 968,100 997,100 1,027,000 1,057,800 1,089,600 1,122,200 3 Services and Charges 9,994,600 10,294,400 10,603,300 10,921,400 11,249,000 11,586,500 4 Motorpool 837,100 862,200 888,000 914,700 942,100 970,400 5 Cost Allocation 631,100 650,000 669,500 689,600 710,300 731,600 6 Maintenance 85,800 88,400 91,100 93,800 96,600 99,500 7 8 Total %Change 15,950,600 1.91% 16,472,200 3.27% 17,011,500 3.27% 17,568,900 3.28% 18,145,000 3.28% 18,740,600 3.28% BLACK & VEATCH I Appendix 1: Water Tables 10-5 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 8 - Capital Program Financing S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 500,200 506,800 501,700 501,700 503,600 508,700 2 Cash Financing of Capital Projects 5,460,000 9,050,000 6,860,000 6,110,000 6,180,000 6,920,000 3 Transfer from Impact Fee Fund 6,432,200 417,800 1,447,900 84,400 86,900 0 4 Subtotal 12,392,400 9,974,600 8,809,600 6,696,100 6,770,500 7,428,700 Application of Funds 5 Major Capital Improvements 11,885,600 9,472,900 8,307,900 6,192,500 6,261,800 6,925,500 6 Subtotal 11,885,600 9,472,900 8,307,900 6,192,500 6,261,800 6,925,500 7 End of Year Balance 506,800 501,700 501,700 503,600 508,700 503,200 8 Capital Reserve EOY Balance - Cumulative 12,915,000 8,453,000 6,559,000 5,789,000 5,359,000 4,634,000 BLACK & VEATCH I Appendix 1: Water Tables 10-6 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 9 - Water Operating Cash Flow 1 Revenues Revenue Under Existing Rates 21,186,600 21,800,700 22,087,800 22,381,200 22,680,800 22,986,900 2 Indicated Revenue Increases 0% Increase Effective January 1, 2022 0 0 0 0 0 3 0% Increase Effective January 1, 2023 0 0 0 0 0 4 3 % Increase Effective January 1, 2024 0 0 615,500 680,400 689,600 5 6 3 % Increase Effective January 1, 2025 3% Increase Effective January 1, 2026 0 0 0 0 0 0 642,400 0 710,300 670,600 7 Total Revenue from Rates 21,186,600 21,800,700 22,087,800 22,996,700 24,003,600 25,057,400 8 Other Revenues (a) 533,100 641,500 644,200 649,800 655,800 662,300 9 Total Revenue 21,719,700 22,442,200 22,732,000 23,646,500 24,659,400 25,719,700 10 Expenses Operating Expenses 15,950,600 16,472,200 17,011,500 17,568,900 18,145,000 18,740,600 11 Bad Debt 105,900 109,000 110,400 115,000 120,000 125,300 12 PILOT 900,400 926,500 938,700 977,400 1,020,200 1,064,900 13 Safe Drinking Water Fee 230,000 233,800 237,800 241,800 245,900 250,200 14 Debt Service 0 0 0 0 0 0 15 Total Expenses 17,186,900 17,741,500 18,298,400 18,903,100 19,531,100 20,181,000 16 Transfers Transfer to Shop Fund 33,000 0 0 0 0 0 17 Transfer to Operating Reserve 128,600 133,000 137,500 142,000 146,900 151,800 18 Cash Financing of Capital 5,460,000 9,050,000 6,860,000 6,110,000 6,180,000 6,920,000 19 Transfer to/from Capital Reserve -1,093,000 -4,479,000 -2,567,500 -1,505,000 -1,210,000 -1,522,000 20 Total Transfers 4,528,600 4,704,000 4,430,000 4,747,000 5,116,900 5,549,800 Fund Balance 21 Beginning Balance 99,400 103,600 100,300 103,900 100,300 111,700 22 Annual Operating Balance 4,200 -3,300 3,600 -3,600 11,400 -11,100 23 Ending Fund Balance 103,600 100,300 103,900 100,300 111,700 100,600 Performance Metrics 24 Debt Service Coverage NA NA NA NA NA NA 25 0&M Reserve Balance (Days) (b) Q 900 900 900 900 900 90 (a) Includes interest income on operating fund balance. (b) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 1: Water Tables 10-7 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 10 - Water Fund Balances S $ $ $ S S Operating Funds 1 O&M Reserve Balance (a) 4,061,600 4,194,600 4,332,100 4,474,100 4,621,000 4,772,800 2 Operating Fund Balance (b) 103,600 100,300 103,900 100,300 111,700 100,600 3 Total (e) 4,165,200 4,294,900 4,436,000 4,574,400 4,732,700 4,873,400 Capital Funds 4 Capital Fund Balance (c) 506,800 501,700 501,700 503,600 508,700 503,200 5 Capital Reserve Fund Balance (d) 12,915,000 8,436,000 5,868,500 4,363,500 3,153,500 1,631,500 6 Total (e) 13,421,800 8,937,700 6,370,200 4,867,100 3,662,200 2,134,700 7 Impact Fee Fund Balance (e) 22,800 581,300 109,700 1,001,600 1,891,000 2,867,300 (a) Calculated as 90 days of followingyear's Operating Expenses. (b) Target mininum balance is $100,000 to account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022 (e) All balances are cumulative. BLACK & VEATCH I Appendix 1: Water Tables 10-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Revised Draft 06/08/2022 Table W - 11- Water 2023 Cost of Service S Statement of Net Revenue Requirements (Cash Basis) ►j Fj 1 2 Revenue Requirements O&M Expenses Bad Debt Expense 17,011,500 110,400 17,011,500 110,400 3 PILOT 938,700 938,700 4 Debt Service 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 5 Transfer to Operating Reserve 137,500 137,500 6 Cash Funding of Capital Projects 6,860,000 6,860,000 7 Transferto Capital Reserve -2,567,500-2,567,500 8 Subtotal 18,198,100 4,292,500 22,490,600 Less Revenue Requirements Met from Other Sources 9 Other Revenues 10 Interest Earned 11 Net Balance Available 12 Full Year Rate Adjustment 13 Subtotal 14 Net Revenue Requirements to be Recovered by Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 16 Depreciation 17 Return 18 Net Cost of Service 382,100 382,100 24,300 24,300 -3,600 -3,600 406,400 -3,600 402,800 17,791,700 4,296,100 22,087,800 17,791,700 17,791,700 2,820,100 2,820,100 17,791,700 4,296,100 22,087,800 BLACK & VEATCH I Appendix 1: Water Tables 10-9 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components s s s s s s s s s s Net Plant Investment: 1 Water Land and Land Rights 2,191,756 1,043,693 1,148,063 2 Water Supply 6,819,846 3,247,546 3,572,300 3 Water Storage and Pumping 6,090,361 2,900,172 3,190,189 4 Water Transmission 26,043,791 12,401,805 13,641,986 5 Water Distribution 47,479,642 17,391,810 9,565,496 5,478,420 15,043,916 6 Water Meters 3,289,003 3,289,003 7 Fire Hydrants 7,535,573 7,535,573 8 Water General System 4,537,529 761,641 837,805 925,847 581,994 249,960 836,462 343,820 9 Total Net Plant Investment 103,987,502 17,454,685 19,200,154 0 21,217,829 13,337,679 5,728,380 19,169,381 0 7,979,393 Table W - 13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components Net Depreciation Expense: 1 Water Land and Land Rights 2 Water Supply 277,295 132,045 145,250 3 Water Storage and Pumping 219,139 4 Water Transmission 706,125 336,250 369,875 5 Water Distribution 1,134,421 6 Water Meters 169,405 7 Fire Hydrants 215,879 8 Water General System 97,807 16,825 18,508 9 Total Net Depreciation Expense 2,820,070 485,120 533,632 104,352 114,787 415,539 228,546 130,895 359,441 169,405 215,879 18,679 12,336 4,703 19,001 7,756 0 538,570 355,669 135,598 547,847 0 223,635 Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components s s s s s s s s s s s 1 Water Purchased 9,611,754 4,577,026 5,034,728 2 Water Storage and Pumping 269,987 98,896 108,786 62,305 3 Water Distribution (a) 3,105,785 1,005,654 1,251,415 716,720 100,939 31,058 4 Meter Services(b) 1,007,563 1,007,563 5 Customer Billing(c) 1,051,559 1,051,559 6 All Other Cost 3,151,452 958,637 1,054,501 231,343 294,888 163,163 211,029 220,244 21,141 6,505 7 Subtotal 18,198,100 5,535,663 6,089,229 0 1,335,894 1,645,089 942,187 1,218,592 1,271,804 122,079 37,563 Less: 8 Water Connection Fees(d) 164,700 164,700 9 Other Income Sources 241,700 89,707 80,875 17,743 21,949 12,514 16,892 1,621 499 10 Subtotal 406,400 89,707 80,875 17,743 21,849 12,514 164,700 16,892 1,621 499 11 Net O&M Expenses 17,791,700 5,445,956 6,009,355 1,318,151 1,623,240 929,674 1,053,892 1,254,912 120,458 37,064 (a) 3.2511 of 2020 water repair costs was associated with hydrants. (b) Includes costs for Meter Reading and Meter Maintenance and Backflow prevention (c) Includes costs under Utilities Financial Services (d) Includes revenues from Water Connection Fees and Rural Water Connection Fees BLACK & VEATCH I Appendix 1: Water Tables 10-10 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 15 - Water 2023 Estimated Units of Service 1,000 gal. 1,000 ga 1. 1,000 gal. 1,000 ga 1. 1,000 ga 1. 1,000 ga 1. Eq-.Meters Bills =quiv. HydrantEqum Hydrants (1)/365 (2)z(3) (4)- (2) (2)X (6) (7)-(4) Inside City 1 Residential 1,800,801 4,934 250% 12,334 7,401 370% 18,255 5,920 34,939 437,192 2 Non -Residential 827,079 2,266 240% 5,438 3,172 355% 8,044 2,606 6,761 41,712 3 Industrial 401,767 1,101 200% 2,201 1,101 295% 3,247 1,046 261 252 4 Irrigation 248,556 681 240% 1,634 953 355% 2,417 783 3,141 25,333 5 Subtotal 3,278,204 8,981 21,608 12,627 31,964 10,355 45,102 504,489 Fire Protection 6 Public 4,201 4,201 10,083 5,882 4,035 7 Private 491 491 1,179 688 472 8 Subtotal 3,278,204 8,981 26,300 17,319 43,226 16,925 45,102 504,489 4,035 472 Outside City Farmington 9 Residential 85,288 234 250% 584 350 370% 865 280 1,762 23,614 30 Non -Residential 17,853 49 240% 117 68 355% 174 56 245 2,431 11 Industrial 200% 295% 12 Irrigation 1,359 4 240% 9 5 355% 13 4 46 480 13 Subtotal 104,500 286 710 424 1,051 341 2,053 26,525 Greenland 14 Residential 19,818 54 250% 136 81 370% 201 65 458 5,676 15 Non -Residential 4,298 12 240% 28 16 355% 42 14 59 588 16 Industrial 200% 295% 17 Imgation 1,230 3 240% 8 5 355% 12 4 20 96 18 Subtotal 25,345 69 172 103 251 83 537 6,360 Washington County/Growth 19 Residential 198,114 543 250% 1,357 814 370% 2,008 651 2,618 34,384 20 Non -Residential 24,123 66 240% 159 93 355% 235 76 109 1,368 21 Industrial 200% 295% 22 Irrigation 14,574 40 240% 96 56 355% 142 46 188 1,884 23 Subtotal 236,811 649 1,611 963 2,385 773 2,915 37,635 Johnson 24 Residential 6,718 18 250% 46 28 370% 68 22 158 2,064 26 Non -Residential 8,320 23 240% 55 32 355% 81 26 35 240 27 Industrial 200% 295% 28 Irrigation 77 0 240% 1 0 355% 1 0 3 24 29 Subtotal 15,115 41 101 60 150 49 196 2,328 Goshen/White River 30 Residential 84,663 232 250% 580 348 370% 858 278 1,054 15,447 31 Non -Residential 11,837 32 240% 78 45 355% 115 37 52 768 32 Industrial 200% 295% 33 Irrigation 7,781 21 240% 51 30 355% 76 25 86 931 34 Subtotal 104,281 286 709 423 1,049 340 1,192 17,146 Fire Protection 35 Public 696 696 1,669 973 668 36 Private 12 12 29 17 12 37 Subtotal 486,052 1,332 4,012 2,680 6,588 2,575 6,892 89,994 668 12 38 Total Retail 3,764,256 10,313 30,312 19,999 49,813 19,501 51,994 594,483 Wholesale 39 Elkins 75,031 206 240% 493 288 355% 730 236 23 12 40 Mount Olive 62,062 170 240% 408 238 355% 604 196 38 24 41 West Fork 65,226 179 240% 429 250 355% 634 206 23 12 42 RDA/WWA 240% 355% 48 43 Subtotal 202,319 554 1,330 776 2,968 637 83 96 44 Subtotal (Inside City) 3,278,204 8,981 26,300 17,319 43,226 16,925 45,102 504,489 4,035 472 45 Subtotal (Outside City) 486,052 1,332 4,012 2,680 6,588 2,575 6,892 89,994 668 12 46 Subtotal (Wholesale) 202,319 554 1,330 776 1,968 637 83 96 47 Total System 3,966,575 10,867 31,643 20,775 51,781 20,138 52,077 594,579 4,703 483 BLACK & VEATCH I Appendix 1: Water Tables 10-11 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 16 - Water 2023 Unit Cost of Service $ 1,000 gs 1. 1,000 glad. 1,000 gpd. 1,000 ga 1. 1,000 gpd. 1,000 gpd. Equiv. Meters Bills Hydrants Hydrants Units of Service 1 Inside City 3,278,204 17,319 16,925 3,278,204 17,319 16,925 45,102 504,489 4,035 472 2 Outside City 688,371 3,456 3,213 486,052 2,680 2,575 6,975 90,090 668 12 3 Total System 3,966,575 20,775 20,138 3,764,256 19,999 19,501 52,077 594,579 4,703 483 Costs of Service Net Operating Costs 4 Total -$ 17,791,700 5,445,956 6,008,355 0 1,318,151 1,623,240 929,674 1,053,892 1,254,912 120,458 37,064 5 Unit Cost - $/unit 1.37 289.20 0.00 0.35 81.16 47.67 20.24 2.11 25.61 76.68 Depreciation Expense 6 Total -$ 2,820,070 485,120 533,632 0 538,570 355,669 135,598 547,947 223,635 7 Unit Cost - $/unit 0.12 25.69 0.00 0.14 17.78 6.95 10.52 47.55 Net Plant Investment 8 Total -$ 103,987,502 17,454,685 19,200,154 0 21,217,829 13,337,679 5,728,380 19,169,381 7,879,393 9 Unit Cost - $/unit 4.40 924.18 0.00 5.64 666.90 293.75 368.09 1,675.40 Return on Investment 10 Inside City, Unit Return- $/unit 0.02 4.29 0.00 0.03 3.10 1.36 1.71 7.78 11 Outside City, Unit Return - $/Unit 0.31 64.69 0.00 0.39 46.68 20.56 25.77 117.28 Total Return 12 Inside City -$ 412,445 67,007 74,347 0 85,831 53,650 23,094 77,115 31,401 13 Outside City - $ 1,063,585 212,040 223,605 0 191,780 125,131 52,959 179,730 78,342 14 Total Return -$ 1,476,030 279,046 297,952 0 277,610 178,781 76,053 256,845 109,743 Total Unit Cost of Service 15 Inside City Unit Cost - $/unit 1.52 319.18 0.00 0.52 102.05 55.99 32.47 2.11 80.95 76.68 16 Outside City Unit Cost - $/unit 1.80 379.58 0.00 0.89 145.63 75.19 56.52 2.11 190.44 76.68 17 Inside City- Cost of Service - $ 17,806,421 4,968,786 5,527,935 0 1,702,806 1,767,336 947,674 1,464,315 1,064,768 326,620 36,179 18 Outside City- Cost of Service - $ 4,281,379 1,241,336 1,312,003 0 431,525 390,353 193,649 394,269 190,144 127,215 885 19 Total Cost of Service -$ 22,087,800 6,210,122 6,839,938 0 2,134,331 2,157,689 1,141,324 1,858,594 1,254,912 453,935 37,064 BLACK & VEATCH I Appendix 1: Water Tables 10-12 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 17 - Water 2023 Cost of Service by Customer Class Inside City 1 Residential 9,170,800 1,473,200 10,644,000 11,194,200 -4.9% 2 Non -Residential 3,473,000 557,900 4,030,800 3,476,000 16.0% 3 Industrial 1,348,900 216,700 1,565,600 1,196,700 30.8% 4 Irrigation 1,106,700 177,800 1,284,500 1,456,300 -11.8% Fire Protection 5 Public 2,425,500 -2,425,500 6 Private 281,500 281,500 967,600 -70.9% 7 Subtotal 17,806,400 100 17,806,400 18,290,800 -2.6% Outside City 8 Residential 2,524,400 469,500 2,994,000 2,674,900 11.9% 9 Non -Residential 368,000 68,400 436,500 333,000 31.1% 10 Industrial 0.0% 11 Irrigation 150,200 27,900 178,200 177,900 0.2% Fire Protection 12 Public 565,900-565,900 13 Private 8,500 8,500 27,100 -68.6% 14 Subtotal 3,617,000 -100 3,617,200 3,212,900 12.6% Wholesale 15 Elkins 245,800 245,800 216,200 13.7% 16 Mount Olive 204,500 204,500 179,800 13.7% 17 West Fork 213,900 213,900 188,100 13.7% 18 RDA/WWA 19 Subtotal Wholesale 0 0 0 0.0% 664,200 0 664,200 584,100 13.7% 20 Total Retail 21,423,400 0 21,423,600 21,503,700 -0.4% 21 Total Wholesale 664,200 0 664,200 584,100 13.7% 22 Total 22,087,600 0 22,087,800 22,087,800 0.0% BLACK & VEATCH I Appendix 1: Water Tables 10-13 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 18 - Water Proposed 2023 Rates Existing Water Rates Effective January 1, 2022 Monthly Base Charge Proposed Water Rates Effective January 1, 2023 Monthly Base Charge Inside Meter Size C ity Inches $/month Outside City $/month Wholesale $/month Inside City Private Fire $/month Outside City Private Fire $/month Inside Meter Size__��L_Q" Inches $/month Outside $/month Wholesale $/month Inside City Private Fire $/month Outside Private Firm $/month 5/8 6.59 7.54 8.31 5/8 6.59 7.54 8.31 3/4 6.59 7.54 8.31 3/4 6.59 7.54 8.31 1 9.14 10.52 11.49 9.75 11.68 1 9.14 12.26 12.26 9.75 11.68 1 1/2 15.93 18.31 20.00 10.17 12.10 1 1/2 15.93 24.22 24.22 10.17 12.10 2 23.20 26.66 29.07 20.33 23.37 2 23.20 33.52 33.52 20.33 23.37 3 54.05 62.18 64.38 30.48 35.06 3 54.05 69.84 69.84 30.48 35.06 4 89.50 102.93 112.25 60.97 70.11 4 89.50 102.93 112.25 60.97 70.11 6 178.99 205.82 212.76 169.34 197.74 6 178.99 205.82 212.76 169.34 197.74 8 268.41 308.67 332.91 355.65 409.00 8 268.41 308.67 332.91 355.65 409.00 10 Volume Charge 609.68 701.11 10 Volume Charge 609.68 701.11 Monthly Water Usage 1,000 ga I. Inside city 1,000 ga I. Outside city 1,000 gal. Wholesalel 1,000 ga I. 1,000 ga I. Inside city 1,000 gal. Outside city 1,000 gal. Wholesale 1,000 gal. Residential Residential 0 - 2,000 Gallons 3.51 4.04 0 - 2,000 Gallons 3.30 4.47 2,000 - 15,000 Gallons 4.65 5.35 2,000 - 15,000 Gallons 4.27 5.91 Over 15,000 Gallons 6.59 7.54 Over 15,000 Gallons 6.20 8.38 Non -Residential Non -Residential First 300,000 Gallons 3.79 4.38 First 300,000 Gallons 3.93 5.05 Over 300,000 Gallons 3.39 3.90 Over 300,000 Gallons 3.93 5.05 Major Industrial Major Industrial All Usage 2.96 3.40 All Usage 3.14 3.49 Irrigation Irrigation First 300,000 Gallons 5.04 5.80 First 300,000 Gallons 4.29 5.43 Over 300,000 Gallons 4.53 5.22 Over 300,000 Gallons 4.29 5.43 Wholesale Wholesale Reduced Peak Demand 2.87 Reduced Peak Demand 3.16 Peak Demand 3.20 Peak Demand 3.16 BLACK & VEATCH I Appendix 1: Water Tables 10-14 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 19 - Water 2023 Cost of Service Under Proposed Rates Inside City 1 Residential 10,644,000 11,194,200 -4.9% 10,652,800 100% -5%-541,400 2 Non -Residential 4,030,800 3,476,000 16.0% 3,687,200 91% 6% 211,200 3 Industrial 1,565,600 1,196,700 30.8% 1,272,200 81% 6% 75,500 4 Irrigation 1,284,500 1,456,300 -11.8% 1,294,800 101% -11%-161,500 5 Subtotal 17,524,900 17,323,200 1.2% 16,907,000 96% -2%-416,200 Outside City 6 Residential 2,994,000 2,674,900 11.9% 2,903,900 97% 9% 229,000 7 Non -Residential 436,500 333,000 31.1% 387,400 89% 16% 54,400 8 Irrigation 178,200 177,900 0.2% 172,900 97% -3% -5,000 9 Subtotal 3,608,700 3,185,800 13.3% 3,464,200 96% 9% 278,400 Private Fire 10 Inside City 281,500 967,600 -70.9% 967,600 344% 0% 0 11 Outside City 8,500 27,100 -68.6% 27,100 319% 0% 0 12 Subtotal 290,000 994,700 -70.8% 994,700 343% 0% 0 Wholesale 13 Elkins 245,800 216,200 13.7% 238,400 97% 10% 22,200 14 Mount Olive 204,500 179,800 13.7% 198,300 97% 10% 18,500 15 West Fork 213,900 188,100 13.7% 207,500 97% 10% 19,400 16 RDA/WWA 0 0 0 0% 0% 17 Subtotal 664,200 584,100 13.7% 644,200 97% 10% 60,100 18 Total 22,087,800 22,087,800 0.0% 22,010,100 100% 0%-77,700 BLACK & VEATCH I Appendix 1: Water Tables 10-15 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2023 Bill Impact Line No. Residential 1 Meter Size Inches 3/4 Monthly Usage 1,000ga1. 0.5 Existing Rates $ 9.91 Inside City Proposed Rates $ 8.24 increase / increase Decrease $ -1.67 / Decrease -16.9% Existing Rates $ 11.36 Outside City Proposed IncreaARIM Rates $ 9.78 Decrease $ -1.59 -14.0% 2 3/4 2 13.42 13.19 -0.23 -1.7% 15.40 16.48 1.08 7.0% 3 3/4 4 22.72 21.73 -0.99 -4.4% 26.10 28.30 2.20 8.4% 4 3/4 8 41.32 38.81 -2.51 -6.1% 47.50 51.94 4.44 9.3% 5 3/4 10 50.62 47.35 -3.27 -6.5% 58.20 63.76 5.56 9.6% 6 3/4 15 73.87 68.70 -5.17 -7.0% 84.95 93.31 8.36 9.8% Non -Residential 7 3/4 10 44.30 45.89 1.59 3.6% 51.12 58.04 6.92 13.5% 8 3/4 20 82.20 85.19 2.99 3.6% 94.92 108.54 13.62 14.3% 9 1 50 198.37 205.64 7.27 3.7% 229.21 264.76 35.55 15.5% 10 1 100 387.87 402.14 14.27 3.7% 448.21 517.26 69.05 15.4% 11 11/2 50 204.97 212.43 7.46 3.6% 236.78 276.72 39.94 16.9% 12 1 1/2 100 394.47 408.93 14.46 3.7% 455.78 529.22 73.44 16.1% 13 2 100 401.52 416.20 14.68 3.7% 463.88 538.52 74.64 16.1% 14 2 500 1,837.52 1,988.20 150.68 8.2% 2,119.88 2,558.52 438.64 20.7% Industrial 15 2 100 318.52 337.20 18.68 5.9% 362.52 382.52 20.00 5.5% 16 2 1,000 2,982.52 3,163.20 180.68 6.1% 3,422.52 3,523.52 101.00 3.0% 17 4 500 1,566.89 1,659.50 92.61 5.9% 1,786.89 1,847.93 61.04 3.4% 18 4 1,500 4,526.89 4,799.50 272.61 6.0% 5,186.89 5,337.93 151.04 2.9% 19 6 2,500 7,573.78 8,028.99 455.21 6.0% 8,673.78 8,930.82 257.04 3.0% 20 6 5,000 14,973.78 15,878.99 905.21 6.0% 17,173.78 17,655.82 482.04 2.8% 21 6 10,000 29,773.78 31,578.99 1,805.21 6.1% 34,173.78 35,105.82 932.04 2.7% BLACK & VEATCH I Appendix 1: Water Tables 10-16 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 11.0 Appendix 2: Wastewater Tables Table S - 1 - Wastewater Projected Accounts Inside City 1 Residential 34,600 35,200 35,800 36,400 37,000 37,700 2 Non -Residential 2,900 2,900 2,900 2,900 2,900 2,900 3 Industrial 21 21 21 21 21 21 4 Subtotal 37,521 38,121 38,721 39,321 39,921 40,621 Outside City 5 Residential 2,400 2,400 2,500 2,500 2,500 2,500 6 Non -Residential 184 184 184 184 184 184 7 Industrial 0 0 0 0 0 0 8 Subtotal 2,584 2,584 Wholesale 9 Elkins 2 2 10 West Fork 1 1 11 Subtotal 2 2 11 Total 40,107 40,707 12 % Change 1.52% 1.50% 2,684 2,684 2,684 2,684 2 2 2 2 1 1 1 1 2 2 2 2 41,407 42,007 42,607 43,307 1.72% 1.45% 1.43% 1.64% Table S - 2 - Wastewater Projected Billed Volume (1,000 Gallons) 1,000 ga I. 1,000 ga I. 1,000 ga I. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,861,300 1,741,200 1,771,800 1,802,800 1,834,400 1,866,500 2 Non -Residential 626,900 698,700 698,600 698,600 698,600 698,600 3 Industrial 318,500 396,700 396,700 396,700 396,700 396,700 4 Subtotal 2,806,700 2,836,600 2,867,100 2,898,100 2,929,700 2,961,800 Outside City 5 Residential 94,500 97,400 98,700 100,100 101,400 102,800 6 Non -Residential 15,300 15,000 15,000 15,000 15,000 15,000 7 Industrial 0 0 0 0 0 0 8 Subtotal Wholesale 8 Elkins 9 West Fork 10 Subtotal 10 Total 11 % Change 109,800 112,400 113,700 115,100 116,400 117,800 81,000 81,000 81,000 81,000 81,000 81,000 45,600 45,600 45,600 45,600 45,600 45,600 126,600 126,600 126,600 126,600 126,600 126,600 3,043,100 3,075,600 3,107,400 3,139,800 3,172,700 3,206,200 2.30% 1.07% 1.03% 1.04% 1.05% 1.06% 0 0 3,100 100 0 0 100 n 3,200 7.98 % 155,100 -300 0 8,000 0 0 0 163,100 5.36% BLACK & VEATCH I Appendix 2: Wastewater Tables Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 3 - Wastewater Existing Charges Existing Wastewater Rates Effective January 1, 2022 Inches $/month $/month $/month 5/8 18.28 18.28 16.74 3/4 18.28 18.28 16.74 1 23.74 33.92 31.28 1 1/2 38.77 60.37 55.50 2 55.43 79.73 73.45 3 128.73 184.24 169.29 4 212.13 303.44 278.93 6 420.39 601.46 553.70 8 628.73 899.76 826.81 1,000 gal. 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.35 > 2,000 Gallons 5.80 All Usage 8.18 7.52 Non -Residential All Usage 4.40 8.18 7.52 Major Industrial All Usage 4.71 8.18 7.52 Wholesale 85% of metered water usage 5.19 Above 85% of metered water 2.71 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.4352 TSS - $/Ib for strength in excess of 300 ppm 0.3056 BLACK & VEATCH l Appendix 2: Wastewater Tables 11-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 4 - Wastewater Projected Revenues at Existing Rates S S S S S S Inside City 1 Residential 16,696,700 16,719,800 17,013,000 17,310,700 17,613,700 17,921,900 2 Non -Residential 3,505,200 3,926,200 3,926,100 3,926,100 3,926,100 3,926,100 3 Industrial 1,477,500 1,890,100 1,890,100 1,890,100 1,890,100 1,890,100 4 Subtotal 21,679,400 22,536,100 22,829,200 23,126,900 23,429,900 23,738,100 Outside City 5 Residential 1,177,400 1,242,000 1,258,300 1,274,800 1,291,700 1,308,800 6 Non -Residential 158,100 160,400 160,400 160,400 160,400 160,400 7 Industrial 0 0 0 0 0 0 8 Subtotal 1,335,500 1,402,400 1,418,700 1,435,200 1,452,100 1,469,200 Wholesale 9 Elkins 407,300 419,500 419,500 419,500 419,500 419,500 10 West Fork 229,400 236,200 236,200 236,200 236,200 236,200 11 Subtotal 636,700 655,700 655,700 655,700 655,700 655,700 12 Surcharge 810,300 834,600 834,600 834,600 834,600 834,600 13 Total 24,461,900 25,428,800 25,738,200 26,052,400 26,372,300 26,697,600 14 % Change 4.90% 3.95% 1.22% 1.22% 1.23% 1.23% (a) Reflects 3.0% revenue increase effective January 1, 2022. Table S - 5 - Wastewater Projected Other Revenues 1 2 Sewer Impact Fee Rev Sewer Sales Not on Cc S 743,900 11,800 S 743,900 11,800 S 743,900 11,800 S 743,900 11,800 S 743,900 11,800 S 743,900 11,800 3 Sewer Connection Fee 47,900 47,900 47,900 47,900 47,900 47,900 4 WWTP Hay Sales 134,800 134,800 134,800 134,800 134,800 134,800 5 WWTP Biosolids/Fertil 54,900 54,900 54,900 54,900 54,900 54,900 6 WWTP WaterTreatme 180,800 180,800 180,800 180,800 180,800 180,800 7 Penalties 123,000 246,100 246,100 246,100 246,100 246,100 8 9 Total %Change 1,297,100 -1.52% 1,420,200 9.49% 1,420,200 0.00% 1,420,200 0.00% 1,420,200 0.00% 1,420,200 0.00% 2,058,700 13 0 133,700 19,000 24,300 2,235,700 9.14 % 0 0 0 0 0 0 123,100 123,100 9.49 % BLACK & VEATCH I Appendix 2: Wastewater Tables 11-3 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 6 - Wastewater Capital Improvement Program 1 Sanitary Sewer Rehabilitation 2,956,100 3,044,800 3,136,100 3,230,200 3,327,100 0 2 Plant Pumps and Equipment -W.W.T.P. 515,000 530,500 546,400 562,800 579,600 0 3 W.W.T. P. Building Improvements 1,699,500 1,750,500 163,900 168,800 173,900 0 4 Upgrade/Replace Lift Stations -W.W.T.P. 309,000 318,300 327,800 337,700 347,800 0 5 Lake Sequoyah Sediment Removal/Dredging 515,000 530,500 546,400 562,800 579,600 0 6 Wastewater Treatment/Water Quality Improvement! 103,000 106,100 109,300 112,600 115,900 0 7 Wastewater Impact Fee Improvements 309,000 318,300 327,800 337,700 347,800 0 8 Utilities Financial Services Improvements 0 11,100 3,300 1,700 8,700 0 9 Water/Sewer Relocations - Bond Projects 174,600 265,200 273,200 281,400 289,800 0 10 Water/Sewer Impact Fee Cost Sharing 0 79,600 82,000 84,400 86,900 0 11 Utilities Technology Improvements 0 228,100 234,900 130,000 10,400 0 12 Water/Sewer Building -Office Improvements 0 26,500 27,300 28,100 29,000 0 13 Water/Sewer Equipment Expansions 0 26,500 27,300 28,100 29,000 0 14 Water & Sewer Rate/Operational Studies 0 10,600 10,900 11,300 11,600 0 15 Phosphorus Standards Management 0 26,500 27,300 28,100 29,000 0 16 Water& Sewer Technology Equipment Replacements 0 0 0 0 0 0 17 Water & Sewer Improvements Defined By Study 0 0 0 0 0 0 18 Biosolids Dryer Replacement 0 0 3,278,200 9,004,100 9,274,200 9,552,400 19 Filter Cell Upgrade/Replacement at Noland WWTP 0 0 0 0 0 1,432,900 20 Upgrade Automation at both WWTPs 0 0 0 0 0 1,671,700 21 22 23 CIPP of 36" Sewer Line from Armstrong Ave to Nolan Bypass Sewer Fulbright & North Gregg Hamestring Lift Station Bottle Neck Resolution 0 1,442,000 0 0 0 848,700 0 0 0 0 0 0 0 0 0 1,194,100 0 0 24 Total Capital Improvement Program 8,023,200 8,121,800 9,122,100 14,909,800 15,240,300 13,851,100 (a) Capital costs reflect 3% annual inflation starting in 2021. Table S - 7 - Wastewater Projected O&M Expenses 1 Personal Costs 3,074,800 3,205,800 3,342,400 3,484,900 3,633,500 3,788,600 2 Materials and Supplies 724,700 746,400 768,800 791,800 815,600 840,100 3 Services and Charges 6,080,800 6,263,300 6,451,200 6,644,700 6,844,000 7,049,400 4 WWTP Contract 3,995,600 4,115,500 4,238,900 4,366,100 4,497,100 4,632,000 5 Motorpool 1,032,500 1,063,400 1,095,300 1,128,200 1,162,100 1,196,900 6 Cost Allocation 680,700 701,200 722,200 743,900 766,200 789,200 7 Maintenance 84,800 87,400 90,000 92,700 95,500 98,300 8 9 Total %Change 15,673,900 0.81% 16,183,000 3.25% 16,708,800 3.25% 17,252,300 3.25% 17,814,000 3.26% 18,394,500 3.26% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-4 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 8 - Wastewater Cash Financed Capital Sources of Funds 1 Funds Available at Beginning of Year 504,100 501,900 506,700 504,400 506,700 501,100 2 Cash Financing of Capital Projects 6,270,000 6,880,000 8,710,000 14,490,000 14,800,000 13,850,000 3 Transfer from Impact Fee Fund 1,751,000 1,246,600 409,800 422,100 434,700 0 4 Subtotal 8,525,100 8,628,500 9,626,500 15,416,500 15,741,400 14,351,100 Application of Funds 5 Major Capital Improvements 8,023,200 8,121,800 9,122,100 14,909,800 15,240,300 13,851,100 6 Subtotal 8,023,200 8,121,800 9,122,100 14,909,800 15,240,300 13,851,100 7 End of Year Balance 8 Capital Reserve EOY Balance- Cumulative Table S - 9 - Wastewater Onerating Cash Flow 501,900 506,700 504,400 506,700 501,100 500,000 19,995,000 21,737,000 22,105,000 17,205,000 12,555,000 9,445,000 Revenues Revenues Under Existing Rates Revenue Increases 0% Increase Effective January 1, 2022 24,461,900 25,428,800 0 25,738,200 0 26,052,500 0 26,372,200 0 26,697,600 0 0% Increase Effective January 1, 2023 0 0 0 0 0 3 % Increase Effective January 1, 2024 0 0 716,400 791,200 800,900 3 % Increase Effective January 1, 2025 0 0 0 747,000 825,000 3 % Increase Effective January 1, 2026 0 0 0 0 778,900 Total Revenue from Rates 24,461,900 25,428,800 25,738,200 26,768,900 27,910,400 29,102,400 Other Revenues (a) 594,700 720,500 719,400 721,600 724,200 727,000 Total Revenues 25,056,600 26,149,300 26,457,600 27,490,500 28,634,600 29,829,400 Expenses Operating Expenses 15,673,900 16,183,000 16,708,800 17,252,300 17,814,000 18,394,500 Bad Debt 122,300 127,100 128,700 133,800 139,600 145,500 PILOT 1,039,600 1,080,700 1,093,900 1,137,700 1,186,200 1,236,900 Debt Service 0 0 0 0 0 0 Total Expenses 16,835,800 17,390,800 17,931,400 18,523,800 19,139,800 19,776,900 Transfers Transfer to Shop Fund 33,000 0 0 0 0 0 Transfer to Operating Reserve 125,500 129,700 134,000 138,500 143,100 147,900 Cash Financing of Capital 6,270,000 6,880,000 8,710,000 14,490,000 14,800,000 13,850,000 Transfer to/from Capital Reserve 1,793,000 1,742,000 -312,000 -5,670,000 -5,450,000 -3,940,000 Total Transfers Fund Balance Beginning Balance 8,221,500 106,700 8,751,700 106,000 8,532,000 112,800 8,958,500 107,000 9,493,100 115,200 10,057,900 116,900 Annual Operating Balance -700 6,800 -5,800 8,200 1,700 -5,400 Ending Fund Balance 106,000 112,800 107,000 115,200 116,900 111,500 Performance Metrics Debt Service Coverage NA NA NA NA NA NA 0&M Reserve Balance (Days) O 90.00 lO 90.00 0 90.00 l0 90.00 0 90.00 lO 90.00 Includes interest income on operatingfund balance. Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-5 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 10 - Wastewater Projected Fund Balances Operating Funds 1 O&M Reserve Balance (a) 3,990,300 4,120,000 4,254,000 4,392,500 4,535,600 4,683,500 2 Operating Fund Balance (b) 106,000 112,800 107,000 115,200 116,900 111,500 3 Total (e) 4,096,300 4,232,800 4,361,000 4,507,700 4,652,500 4,795,000 Capital Funds 4 Capital Fund Balance (c) 501,900 506,700 504,400 506,700 501,100 500,000 5 Capital Reserve Fund Balance (d) 19,995,000 21,737,000 21,425,000 15,755,000 10,305,000 6,365,000 6 Total (e) 20,496,900 22,243,700 21,929,400 16,261,700 10,806,100 6,865,000 7 Impact Fee Fund Balance (e) 4,437,800 3,935,100 4,269,200 4,591,000 4,900,200 5,644,100 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000 to account for any adjustments that may be needed to the 0&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022 (e) All balances are cumulative. Table S - 11- Wastewater 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 0&M Expenses 16,708,800 16,708,800 2 Bad Debt 128,700 128,700 3 PILOT 1,093,900 1,093,900 4 Debt Sevice 0 0 Other Expenditures & Transfers: Transferto Shop Fund (Capital Outlay) 0 0 5 Transfer to Operating Reserve 134,000 134,000 6 Cash Funding of Capital Projects 8,710,000 8,710,000 7 Transfer to Capital Reserve (312,000) (312,000) 8 Subtotal 18,065,400 8,398,000 26,463,400 Less Revenue Requirements Met from Other Sources 9 Other Revenues and Adjustments 676,300 676,300 10 Interest Earned 43,100 43,100 11 Net Balance Available 12 Full Year Rate Adiustment 13 Subtotal 14 Net Revenue Requirements to be Recovered by Rates Restatement of Net Cost of Service (Utility Basis) 5,800 5,800 719,400 5,800 725,200 17,346,000 8,392,200 25,738,200 15 O&M Expenses 17,346,000 17,346,000 16 Depreciation 8,259,600 8,259,600 17 Return 132,600 132,600 18 Net Cost of Service 17,346,000 8,392,200 25,738,200 BLACK & VEATCH I Appendix 2: Wastewater Tables Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment s s s s s s s s s s s s s Net Plant Investment: 1 Sewer Collection 106,713,735 43,521,511 63,192,224 2 Sewer Connections 319,997 319,887 3 Water Meters 2,741,021 2,741,021 4 Owl Creek Lift Station and Force Main 14,103 14,103 5 Lift Stations 5,257,834 5,257,834 Sewer Treatment Plant- Noland 6 Sewage Pumping 229,919 229,919 7 Mechanical Bar Screens 172,282 51,685 120,597 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 1,694,829 1,694,829 11 Aeration Equipment 1,120,71A 560,352 560,352 12 Sludge Handling 400,690 220,380 180,311 13 Other Plant and Misc Equipment 961,187 510,038 221,733 229,416 14 General Treatment 14,870,670 7,890,861 3,430,472 3,549,337 Sewer Treatment Plant- West 15 Sewage Pumping 921,333 845,784 75,549 16Mechanical Bar Screens 169,727 13,918 46,743 109,066 17 Grit Removal 1,380,570 113,207 1,267,363 18 Primary Sedimentation 6,927,776 568,078 1,907,909 4,451,789 19 Disinfection 667,246 612,532 54,714 20 Aeration Equipment 1,490,202 122,197 684,003 684,003 21 Sludge Handling 34,604,278 2,837,551 17,471,700 14,295,027 22 Other Plant and Misc Equipment 3,425,729 108,225 280,910 Ip92,438 1,544,156 23 General Treatment 7,795,332 246,269 639,217 3,396,080 3,513,766 24 Sewer Land and Land Rights 6,358,594 1,917,514 132,595 2,484,085 148,797 823,260 851,789 554 25 General Plant 1,768,194 449,533 111,771 582,356 43,363 271,709 281,124 25,260 3,078 26 Total Net Plant Investment 199,995,842 51,146,392 12,372,823 66,258,665 0 4,897,501 0 30,578,464 0 31,638,096 0 2,766,281 337,622 Table S - 13 - Wastewater 2023 Allocation of Depreciation 5 5 5 5 5 S 5 Net Depreciation Ezpense: 1 Sewer Collection 2,890,542 1,178,862 1,711,680 2 Sewer Connections 22,463 22,463 3 Water Meters 141,180 141,180 4 Owl Creek Lift Station and Force Main 6,509 6,509 5 Lift Stations 113,991 113,991 Sewer Treatment Plant- Noland 6 Sewage Pumping 42,418 42,418 7 Mechanical Bar Screens 33,421 10,026 23,395 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 282,757 282,757 11 Aeration Equipment 124,523 (1) 62,262 62,262 12 Sludge Handling 83,361 (1) 45,849 37,513 13 Other Plant and Misc Equipment 68,718 36,464 15,852 16,402 14 General Treatment 935,042 496,164 215,702 223,176 Sewer Treatment Plant- West 15 Sewage Pumping 117,218 107,606 9,612 16 Mechanical Bar Screens 55,071 4,516 15,167 35,388 17 Grit Removal 135,374 11,101 124,273 18 Primary Sedimentation 397,767 32,617 109,545 255,605 19 Disinfection 41,250 37,868 3,382 20 Aeration Equipment 140,345 1 11,508 64,418 64,418 21 Sludge Handling 2,080,224 170,578 1,050,3" 859,341 22 Other Plantand Misc Equipment 320,819 10,135 26,307 139,]67 144,610 23 General Treatment 54,927 1 1,735 4,504 23,929 24,758 24 Sewer Land and Land Rights 4,692 1,415 98 1,833 110 607 629 25 General Plam 166,944 42,443 10,553 54,983 4,094 25,653 26,542 2,385 291 26 Total NO Depreciation Ezpense 8,259,556 1,336,711 1,025,798 1,768,496 0 278,329 0 1,719,082 0 1,898,312 0 143,565 29,20 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-7 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 14 - Wastewater 2023 Allocation of O&M Expenses 1 Sewer Mains Maintenance 2,527,372 1,030,749 1,496,623 2 Waste --Treatment Plats 1,930,453 367,405 42,IS8 747,493 773,396 3 Wastewater Treatment Plats -Noland 5,578,707 1,183,574 2,160,139 2,234,994 4 Wastewater Treatment Plant -West 2,025,047 263,578 166,054 794,121 811,293 5 Lift Stations 990,432 990,432 6 Meter Operations (a) 1,716,051 1,716,051 7 Water& Sewer Connections 205,698 205,698 8 Operations and Administration 1,443,89] 194,900 174,975 144,317 20,078 355,990 368,326 165,476 19,835 9 All Other 0&M Cost 1,647,745 222,415 199,678 164,692 22,912 406,249 420,326 188,838 22,635 10 Subtotal 18,065,400 2,438,495 2,189,210 1,805,632 0 251,202 0 4,453,993 0 4,608,336 2,070,365 0 248,168 Less: Other Income Sources 11 Sewer Connection Fees 47,900 47,900 12 Other Income Sources 671,500 49,206 87,179 71,904 10,003 177,367 183,513 82,446 9,883 13 Subtotal 719,400 49,206 87,179 71,904 0 10,003 0 177,367 0 183,513 82,446 0 57,783 14 Net O&M Expenses 17,346,000 2,389,289 2,102,032 1,733,728 0 241,199 0 4,276,626 0 4,424,823 2,987,90 0 190,386 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-8 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 15 - Wastewater 2023 Units of Service 1,000gal. 1,000ga1. 1,000gal. Pounds Pounds Bills Equiv. Meters (2) + (3) Inside City 1 Residential 1,771,796 1,590,308 3,362,104 5,725,103 4,874,540 429,266 34,346 2 Non -Residential 698,638 250,840 949,478 2,179,024 1,765,193 34,296 5,157 3 Industrial 396,716 88,853 485,569 1,226,169 980,006 252 249 4 Subtotal 2,867,150 1,930,001 4,797,151 9,130,296 7,619,739 463,814 39,752 Outside City Farmington 5 Residential 77,284 77,958 155,242 251,513 216,205 21,806 1,603 6 Non -Residential 12,743 7,448 20,191 40,344 33,395 1,656 157 7 Industrial 8 Subtotal 90,027 85,406 175,432 291,857 249,600 23,462 Greenland 9 Residential 10,633 17,382 28,016 35,993 32,523 5,388 435 10 Non -Residential 2,212 1,830 4,041 7,114 6,020 480 22 11 Industrial 12 Subtotal 12,845 19,212 32,057 43,107 38,543 5,868 Washington County/ Growth Area 13 Residential 4,304 1,893 6,197 13,496 11,019 336 74 14 Non -Residential 67 67 14 28 24 15 Industrial 16 Subtotal 4,304 1,960 6,264 13,510 11,047 360 Johnson 17 Residential 6,479 6,692 13,171 21,119 18,191 1,884 151 18 Non -Residential 28 140 168 114 125 48 18 19 Industrial 20 Subtotal 6,507 6,832 13,339 21,233 18,316 1,932 21 Total Retail 2,974,326 2,036,578 5,010,904 9,478,770 7,918,929 493,504 39,752 Wholesale 22 Elkins 81,017 18,069 99,086 250,391 200,104 24 23 23 West Fork 45,625 10,171 55,796 141,008 112,687 12 23 24 Subtotal 126,642 28,240 154,882 391,399 312,791 36 45 25 Subtotal (inside City) 2,867,150 1,930,001 4,797,151 9,130,296 7,619,739 463,814 39,752 26 Subtotal (Outside City) 113,683 113,409 227,092 369,707 317,506 31,622 - 27 Subtotal (Wholesale) 126,642 28,240 154,882 391,399 312,791 36 45 28 Surcharge Customers 1,282,742 910,900 29 Total System 3,107,475 2,071,650 5,179,125 11,174,144 9,160,936 495,472 42,258 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-9 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 16 - Wastewater 2023 Unit Cost of Service U.-f Servke 1 Inside City 4,797,151 4,797,151 4,797,151 4,]9J,151 9,130,296 9,130,296 7,619,739 7,619,J39 463,814 39,J52 463,814 2 Outside City -w/o Farmington 206,542 20fi,542 51,15fi0 51,660 46%249 469,249 380,697 380,697 8,196 766 3 Surcharge 175,432 175,432 1J5,432 291,857 249,600 23,462 1,J61 4 Total Sy-nn 5,1J9,125 5,003,693 5,024,243 4,848,811 1J5,432 9,891,402 9,599,545 8,250,036 8,000,436 495,472 42,258 ­,­ C.- If S-ke 5 Net Operating Expense Total-$ 17,346,000 2,389,289 2,102,031 1,733,728 24 J. 4,276,626 4,424,823 1,987,918 190,386 6 Unit CO -$/unit C.46 0.42 0.35 1.37 0.39 0.50 4.01 O 1 J Depreciation Expense: 1.1-$ 8,259,555 1,336,]31 1,025,798 1,768,4% 278,329 1,779,082 1,898,312 5 143,565 29,263 8 Unit Cost -$/unit 0.26 0.21 0.35 1.59 0.16 0.21 5 3.3974 0.06 9 NO plats Investment: Total -$ 199,995,842 51,146,392 12,372,823 66,258,665 4,897,501 30,578,4 4 31,638,096 2,766,281 337,622 10 Unit Cost -$/unit 9.88 2.47 13.19 27.92 2.81 3.55 65.46 0.73 Return on In-ment 11 Inside City, Unit Return - $/unit AN) (Uol) (am) (aol) (0.02) (0.28) (D.90) 12 Outside City -E-pt Farrnington-Unit Return - $/Unil 0.69 0.17 0.92 0.20 0.21 4.58 13 Outside City - Farmington - Unit Retum - $/Unit 0.54 0.73 $1,5354 3.60 14 Total Retum Inside City -$ (782,136) (200,302) (50,1 ) (267p84) (123,713) (128,U54) (1,427) 15 Outside City- Except Farmington-$ 41%, 142,M 35,J51 47,689 92,299 94,612 3p17 16 Outside Clty- WinIngon-$ 498,334 11,216 12J,246 269,363 6,339 1) Total Retum-$ 132,.5 3],]64 (1Q403) (92,549) 269,363 (31,114) (33p42) (1,247) Total Unit -of -it, 18 Inside City -$/unit (1 .68 0.61 0.64 0.54 0.69 4.01 3.12 0.47 19 Outside City(E., Farmington)-$/un l.I 0.. 1.62 0.75 0.96 4.01 ].98 20 Outside City -Farmington -$/unit 1.215 1.42 $ 4.49. 4.01 ].00 Total Cost of 51MCe 21 Inside City -Retail- $ 21,J43,fi60 3,250,89fi 2,948,565 3,0J6,442 4,9J2,298 5,292,288 1,8fi0,902 124,048 21$221 22 Inside City-Sureharge-$ 1,331,238 698,572 632,1565 23 Outside City- Except Farmington-$ 1,296,924. 291,3J0 164,861 83,J00 353,424 364,J39 32,884 5,950 24 Outside City -Farmington-$ 1,3fi6,3]4 221,49J 24%, )88,890 94,133 12,320 25 Total Cost ofS ke-$ 25,738,200 3,J63,763 3,113,426 3,409,6J6 0 J88,890 0 6,024,2% 0 6,289,693 1,98],918 1 ,318 218,221 Table S - 17 - Wastewater 2023 Cost of Service by Customer Class Inside City 1 Residential 15,035,955 17,013,006 -11.6% 2 Non -Residential 4,418,463 3,926,109 12.5% 3 Industrial 2,289,243 1,890,075 21.1 % 4 Subtotal 21,743,660 22,829,190 -4.8% Outside City 5 Residential 1,543,180 1,258,314 22.6% 6 Non -Residential 183,028 160,409 14.1% 7 Industrial 100.0% 8 Subtotal 1,726,208 1,418,723 21.7% 9 Total Retail 23,469,868 24,247,913 -3.2% 10 Wholesale 937,095 655,689 42.9% 11 Surcharge 1,331,238 834,607 59.5% 12 Total 25,738,201 25,738,209 0.0% BLACK & VEATCH I Appendix 2: Wastewater Tables Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study -able S - 18 - Wastewater Proposed 2023 Charges Existing Wastewater Rates Effective January 1, 2022 Inches 5/8 3/4 1 $/month 18.28 18.28 23.74 $/month 18.28 18.28 33.92 $/month 16.74 16.74 31.28 11/2 38.77 60.37 55.50 2 55.43 79.73 73.45 3 128.73 184.24 169.29 4 212.13 303.44 278.93 6 420.39 601.46 553.70 8 628.73 899.76 826.81 Proposed Wastewater Rates Effective January 1, 2023 Inches $/month $/month $/month 5/8 18.28 18.28 25.10 3/4 18.28 18.28 25.10 1 23.74 33.92 52.62 11/2 38.77 66.73 109.78 2 55.43 93.11 154.24 3 128.73 196.10 327.83 4 212.13 303.44 482.37 6 420.39 601.46 897.30 8 628.73 899.76 998.92 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Residential Residential First 2,000 Gallons 4.35 First 2,000 Gallons 3.39 > 2,000 Gallons 5.80 > 2,000 Gallons 4.52 All Usage 8.18 7.52 Non -Residential All Usage 4.40 8.18 7.52 Major Industrial All Usage 4.71 8.18 7.52 Wholesale 85% of metered water usage 5.19 Above 85% of metered water 2.71 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.4352 TSS - $/lb for strength in excess of 300 ppm 0.3056 BLACK & VEATCH I Appendix 2: Wastewater Tables All Usage 8.55 8.27 Non -Residential All Usage 5.10 8.55 8.27 Major Industrial All Usage 5.71 8.55 8.27 Wholesale 85% of metered water usage 7.20 Above 85% of metered water 7.20 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.5426 TSS - $/Ib for strength in excess of 300 ppm 0.6921 11-11 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates (1) Line (2) (3) Adjusted (4) Under (5) Indicated Revenue (6) (7) Revenues Proposed Under Revenue % (8) Indicated mnitclicated Revenue r (9) Revenue DescriptionRevenue as Inside City 1 Residential 15,036,000 17,013,000 -11.6% 15,049,500 100% -12% -1,963,500 2 Non -Residential 4,418,500 3,926,100 12.5% 4,424,800 100% 13% 498,700 3 Industrial 2,289,200 1,890,100 21.1% 2,291,500 100% 21% 401,400 4 Subtotal 21,743,700 22,829,200 -4.8% 21,765,800 100% -5% -1,063,400 Outside City 5 Residential 1,543,200 1,258,300 22.6% 1,510,400 98% 20% 252,100 6 Nan -Residential 183,000 160,400 14.1% 193,500 106% 21% 33,100 7 Industrial 0% 0% 8 Subtotal 1,726,200 1,418,700 21.7% 1,703,900 99% 20% 285,200 Wholesale 9 Elkins 599,500 419,500 42.9% 583,300 97% 39% 163,800 10 West Fork 337,600 236,200 42.9% 328,500 97% 39% 92,300 11 Subtotal 937,100 655,700 42.9% 911,800 97% 39% 256,100 12 Surcharge 1,331,200 834,600 59.5% 1,326,400 100% 59% 491,800 13 Total 25,738,200 25,738,200 0.0% 25,707,900 100% 0% -30,300 Table S - 20 - Wastewater 2023 Bill Impact Line No. Residential 1 MeterSize Inches 3/4 Monthly Usage 1,000 gal. 0.5 Existing Rates $ 22.10 Inside City Proposed Rates $ 19.98 increase increase Decrease $ -2.13 Decrease -9.6% EA,ting Rate, $ 26.46 Outside Proposed Rates $ 22.56 City increase increase Decrease $ -3.91 Decrease -14.8% 2 3/4 2 26.45 25.06 -1.39 -5.3% 34.64 35.38 0.74 2.1% 3 3/4 4 38.05 31.84 -6.21 -16.3% 51.00 52.48 1.48 2.9% 4 3/4 8 61.25 45.40 -15.85 -25.9% 83.72 86.68 2.96 3.5% 5 3/4 10 72.85 52.18 -20.67 -28.4% 100.08 103.78 3.70 3.7% 6 3/4 15 101.85 69.13 -32.72 -32.1% 140.98 146.53 5.55 3.9% Non -Residential 7 3/4 10 61.75 69.28 7.53 12.2% 100.08 103.78 3.70 3.7% 8 3/4 20 105.75 120.28 14.53 13.7% 181.88 189.28 7.40 4.1% 9 1 50 243.05 278.74 35.69 14.7% 442.92 461.42 18.50 4.2% 30 1 100 463.05 533.74 70.69 15.3% 851.92 888.92 37.00 4.3% 11 11/2 50 257.64 293.77 36.13 14.0% 469.37 494.23 24.86 5.3% 12 11/2 100 477.64 548.77 71.13 14.9% 878.37 921.73 43.36 4.9% 13 2 100 493.82 565.43 71.61 14.5% 897.73 948.11 50.38 5.6% 14 2 500 2,253.82 2,605.43 351.61 15.6% 4,169.73 4,368.11 198.38 4.8% Industrial 15 2 100 493.52 626.43 132.91 26.9% 897.73 948.11 50.38 5.6% 16 2 1,000 4,732.52 5,765.43 1,032.91 21.8% 8,259.73 8,643.11 383.38 4.6% 17 4 500 2,441.89 3,067.13 625.24 25.6%1 4,393.44 4,578.44 185.00 4.2% 38 4 1,500 7,151.89 8,777.13 1,625.24 22.7% 12,573.44 13,128.44 555.00 4.4% 19 6 2,500 11,948.78 14,695.39 2,746.61 23.0% 21,051.46 21,976.46 925.00 4.4% 20 6 5,000 23,723.78 28,970.39 5,246.61 22.1% 41,501.46 43,351.46 1,850.00 4.5% 21 6 10,000 1 47,273.78 57,520.39 10,246.61 21.7%1 82,401.46 86,101.46 3,700.00 4.5% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-12 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 12.0 Appendix 3: Combined Tables Table C - 1 - Combined Projected Fund Balances $ $ S S S S Operating Funds 1 O&M Reserve Balance (a) 8,051,900 8,314,600 8,586,100 8,866,600 9,156,600 9,456,300 2 Operating Fund Balance (b) 209,600 213,100 210,900 215,500 228,600 212,100 3 Subtotal Operating Funds Balance (e) 8,261,500 8,527,700 8,797,000 9,082,100 9,385,200 9,668,400 Capital Funds 4 Capital Fund Balance (c) 1,008,700 1,008,400 1,006,100 1,010,300 1,009,800 1,003,200 5 Capital Reserve Fund Balance (d) 32,910,000 30,173,000 27,293,500 20,118,500 13,458,500 7,996,500 6 Subtotal Capital Funds Balance (e) 33,918,700 31,181,400 28,299,600 21,128,800 14,468,300 8,999,700 7 Impact Fee Fund Balance (e) 4,460,597 4,516,397 4,378,897 5,592,597 6,791,197 8,511,397 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target minimum combined balance is $200,000 to account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target minimum combined balance is $1,000,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022 (e) All balances are cumulative. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-1 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 2 - Combined Operating Cash Flow 1 Revenues Revenues Under Existing Rates 45,648,500 47,229,500 47,826,000 48,433,700 49,053,000 49,684,500 2 Revenue Increases 0.0 % Increase Effective January 1, 2022 0 0 0 0 0 3 0.0 % Increase Effective January 1, 2023 0 0 0 0 0 4 3.0 % Increase Effective January 1, 2024 0 0 1,331,900 1,471,600 1,490,500 5 3.0 % Increase Effective January 1, 2025 0 0 0 1,389,400 1,535,300 6 3.0 % Increase Effective January 1, 2026 0 0 0 0 1,449,500 7 8 Total Revenue from Rates Other Revenues (a) 45,648,500 1,127,800 47,229,500 1,362,000 47,826,000 1,363,600 49,765,600 1,371,400 51,914,000 1,380,000 54,159,800 1,389,300 9 Subtotal Revenues 46,776,300 48,591,500 49,189,600 51,137,000 53,294,000 55,549,100 10 Expenses Operating Expenses 31,624,500 32,655,200 33,720,300 34,821,200 35,959,000 37,135,100 11 Bad Debt 228,200 236,100 239,100 248,800 259,600 270,800 12 PILOT 1,940,000 2,007,200 2,032,600 2,115,100 2,206,400 2,301,800 13 SDWF-Reimbursement to ADPH 230,000 233,800 237,800 241,800 245,900 250,200 14 Debt Service 0 0 0 0 0 0 15 Total Expenses 34,022,700 35,132,300 36,229,800 37,426,900 38,670,900 39,957,900 16 Transfers Transfer to Shop Fund 66,000 0 0 0 0 0 17 Transfer to Operating Reserve 254,100 262,700 271,500 280,500 290,000 299,700 18 Cash Financing of Capital 11,730,000 15,930,000 15,570,000 20,600,000 20,980,000 20,770,000 19 Transfer to/from Capital Reserve 700,000 -2,737,000 -2,879,500 -7,175,000 -6,660,000 -5,462,000 20 Total Transfers 12,750,100 13,455,700 12,962,000 13,705,500 14,610,000 15,607,700 Fund Balance 21 Beginning Balance 206,100 209,600 213,100 210,900 215,500 228,600 22 Annual Operating Balance 3,500 3,500 -2,200 4,600 13,100 -16,500 23 Ending Fund Balance 209,600 213,100 210,900 215,500 228,600 212,100 Performance Metrics 24 Debt Service Coverage NA NA NA NA NA NA 25 O&M Reserve Balance (Days)(b) Q 90.00 �j 90.00 u 90.00 Q 90.00 © 90.00 a 90.00 (a) Includes interest income on operating fund balance. (b) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-2 Revised Draft 06/08/2022 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 3 - Combined 2023 Bill Impact Line No. Meter Residential 1 Size Inches 3/4 Monthly Usage 1,030gal. 0.5 Existing Rates $ 32.01 Proposed Rates $ 28.22 DecreaseInside City Increase / Increase/ $ -3.80 Decrease -11.9% Existing Rates $ 37.82 Outside Proposed Rates $ 32.33 City Increase / Decrease $ -5.49 Increase Decrease -14.5% 2 3/4 2 39.87 38.25 -1.62 -4.1% 50.04 51.86 1.82 3.6% 3 3/4 4 60.77 53.57 -7.20 -11.8% 77.10 80.78 3.68 4.8% 4 3/4 8 102.57 84.21 -18.36 -17.9% 131.22 138.62 7.40 5.6% 5 3/4 10 123.47 99.53 -23.94 -19.4% 158.28 167.54 9.26 5.9% 6 3/4 15 175.72 137.83 -37.89 -21.6% 225.93 239.84 13.91 6.2% Non -Residential 7 3/4 10 106.05 115.17 9.12 8.6% 151.20 161.82 10.62 7.0% 8 3/4 20 187.95 205.47 17.52 9.3% 276.80 297.82 21.02 7.6% 9 1 50 441.42 484.38 42.96 9.7% 672.13 726.18 54.05 8.0% 10 1.5 100 872.11 957.70 85.59 9.8% 1,334.15 1,450.95 116.80 8.8% 11 2 500 4,091.34 4,593.63 502.29 12.3% 6,289.61 6,926.63 637.02 10.1% Industrial 12 2 100 812.04 963.63 151.59 18.7% 1,260.25 1,330.63 70.38 5.6% 13 2 1,000 7,715.04 8,928.63 1,213.59 15.7% 11,682.25 12,166.63 484.38 4.1% 14 4 1,500 11,678.78 13,576.63 1,897.85 16.3% 17,760.33 18,466.37 706.04 4.0% 15 6 5,000 38,697.56 44,849.38 6,151.82 15.9%1 58,675.24 61,007.28 2,332.04 4.0% 16 6 10,000 77,047.56 89,099.38 12,051.82 15.6%1 116,575.24 121,207.28 4,632.04 4.0% BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-3 CITY OF r• FAYETTEVILLE IF ARKANSAS CITY OF FAYETTEVILLE, ARKANSAS Notice of Public Hearine on Proposed Water and Sewer Rate Cha City Council Agenda Session: Tuesday, June 14, 2022 at 4:30 PM City Council Meeting: Tuesday, June 21, 2022 at 5:30 PM City of Fayetteville Administration Building, City Hall 113 W. Mountain — Room 219 or via Zoom link at www.fayetteville-ar.gov The City of Fayetteville AR, on the dates and times mentioned above, will hold a public hearing as part of the City Council Agenda Session and City Council Meeting with Fayetteville City Council prior to the adoption of the 2023 water and sewer rate increases. The public can attend in person or remotely via the link on the City's website, www.fayetteville-ar.gov. If adopted, the proposed new rates would take effect on or after January 01, 2023, with 3% increases annually thereafter. All property owners/tenants and other interested parties are invited to attend the public hearing and be heard on the matter. A water and sewer cost of service study was conducted by Black & Veatch pursuant to Fayetteville City Council Resolution 212-20 to perform a cost analysis to determine if costs allocations are fair and equitable among customer classes, to review the existing rate structure and design proposed rates that provide adequate revenues. The rate study was conducted following the industry standard methodology from the American Water Works Association (M1 Principles of Water Rates, Fees, and Charges). The proposed water and sewer rate changes below are necessary for the City of Fayetteville to continue to provide safe and reliable water and sewer services to its citizens because extensive new capital needs are required at this point in time and operating costs have increased above the revenue increases generated by the current annual 3% proportional adjustment. Page 113 PROPOSED WATER RATE CHANGES - ON OR AFTER 11112023 FIXED BASE AR . EXISTING PROPOSED OUTSIDE PROPOSED CITY Meter Size 5/8" 3/4" 1" 1.5" 6.59 6.59 0.0% 7.54 7.54 7.54 7.54 0.0% 0.0% 6.59 6.59 0.0% 9.14 9.14 0.0% 10.52 12.26 16.5% 15.93 15.93 0.0% 18.31 24.22 32.3% 2" 23.20 23.20 0.0% 26.66 33.52 25.7% 3" 54.05 54.05 0.0% 62.18 69.84 12.3% 4" 89.50 89.50 0.0% 102.93 102.93 0.0% 6" 178.99 178.99 0.0% 205.82 205.82 0.0% 8" • 00i GALLONS Residential First 2,000 gallons 268.41 268.41 0.0% 308.67 308.67 0.0% AVG 0.0% 3.51 3.30 -6.0% AVG 4.04 4.47 9.7% 10.6% Next 13,000 gallons 4.64 4.37 -5.8% 5.34 5.91 10.7% All over 15,000 gallons 6.59 6.20 -5.9% 7.54 8.38 11.1% esidentia First 300,000 gallons 3.79 AVG 3.93 -5.9% 3.7% 4.38 AVG 5.05 10.8% 15.3% All over 300,000 gallons 3.38 3.93 16.3% 3.90 5.05 29.5% All Usage First 300,000 gallons 2.96 5.04 AVG 3.14 4.29 10.0% 6.1% -14.9% 3.20 5.80 AVG 3.49 5.43 22.4% 9.1% -6.4% All over 300,000 gallons 4.53 4.29 -5.3% 5.22 5.43 4.0% Wholesa Reduced Peak Demand AVG -10.1% 2.87 AVG 3.16 -1.2% 10.1% Peak Demand 3.20 3.16 -1.3% AVG 4.4% *Beginning January 1, 2024, all monthly water rates shall be increased by 3% per year Page213 PROPOSED SEWER RATE CHANGES - ON OR AFTER 11112023 FIXED BASE CHARGE $/MONTH Meter sizeEXISTING 5/8" 3/4" SEWER 18.28 INSIDE CITY PROPOSED 18.28 CHANGE 0.0% SEWER EXISTING 18.28 OUTSIDE PROPOSED 18.28 CHANGE 0.0% EXISTING 16.74 PROPOSED 25.10 49.9% 18.28 18.28 0.0% 18.28 18.28 0.0% 16.74 25.10 49.9% 1" 23.74 23.74 0.0% 33.92 33.92 0.0% 31.28 52.62 68.2% 1.5" 38.77 38.77 0.0% 60.37 66.73 10.5% 55.50 109.78 97.8% 2" 55.43 55.43 0.0% 79.73 93.11 16.8% 73.45 154.24 110.0% 3" 128.73 128.73 0.0% 184.24 196.10 6.4% 169.29 327.83 93.6% 4" 212.13 212.13 0.0% 303.44 303.44 0.0% 278.93 482.37 72.9% 6" 420.39 420.39 0.0% 601.46 601.46 0.0% 553.70 897.30 62.1% 8" 628.73 628.73 0.0% 899.76 899.76 0.0% 826.81 998.92 20.8% • 00i GALLONS Residential First 2,000 Gallons All over 2,000 Gallons 4.35 AVG 3.39 0.0% -22.1% 8.18 AVG 8.55 3.8% 4.5% 7.52 AVG 8.27 69.5% 10.0% 5.80 4.52 -22.1% 8.18 8.55 4.5% 7.52 8.27 10.0% on -Resident All Usage Major Industrial All Usage Wholesale AVG -22.1% AVG 4.5% AVG 10.0% 4.40 5.10 15.9% 8.18 8.55 4.5% 7.52 8.27 10.0% 4.71 5.71 21.2% 8.18 8.55 4.5% 7.52 8.27 10.0% Reduced Peak Demand 5.19 7.20 38.7% Peak Demand 2.71 7.20 165.7% AVG 102.2% *Beginning January 1, 2024, all monthly sewer rates shall be increased by 3% per year For more information or questions about the proposed water and sewer rate changes, contact the City of Fayetteville, Utilities Financial Services Division at (479) 575-8224 or visit the City's website for at www.fayetteville-ar.gov. City of Fayetteville, Arkansas By: Tim Nyander Water & Sewer Utilities Director Date: 06/08/2022 Page313 DEPARTMENTAL CORRESPONDENCE OFFICE OF THE CITY ATTORNEY TO: Mayor Jordan City Council Kara Paxton, City Clerk/ Treasurer CC: Susan Norton, Chief of Staff Paul Becker, Chief Financial Officer Tim Nyander, Utilities Director FROM: Kit Williams, City Attorne' DATE: July 15, 2022 Kit Williams City Attorney Blake Pennington Assistant City Attorney Jodi Batker Paralegal RE: Statutory Procedure Required For Adopting New Sewer Rates There is a precise and unusual procedural schedule that is required by A.C.A. §14-235-223 Rates and charges for services - Lien for sewer rate changes. Prior to raising or changing sewer rates, the City must carefully follow every statutorily required step pursuant to A.C.A. §14-235-223 as shown below: "(d)(1)(A) No rates or charges shall be established until after a public hearing, at which all the users of the works and owners of property served or to be served by them and others interested shall have opportunity to be heard concerning the proposed rates or charges. (B) After introduction of the ordinance fixing the rates or charges, and before the ordinance is finally enacted, notice of the hearing, setting forth the proposed schedule of the rates or charges, shall be given by one (1) publication in a newspaper published ... at least ten (10) days before the date fixed in the notice for the hearing, which may be adjourned from time to time. (2) After the hearing the ordinance establishing rates or charges, either as originally introduced or as modified and amended, shall be passed and put into effect." Statutorily Required Schedule (1) Introduce (Read) the ordinance proposing to change the sewer rates at a City Council meeting; (2) Publish "notice of the hearing setting forth the proposed schedule of the rates and charges ... by one publication in a newspaper..." (3) This notice must be published "at least ten (10) days before the date fixed in the notice for the hearin " g... (4) After this public hearing, the ordinance may be passed. The sewer rate ordinance will be read for the first time (introduced) at the June 21st City Council Meeting. After such introduction (reading), the City needs to set the date of the public hearing no earlier than ten (10) days from date such notice can be published (which might be Sunday, June 26, or if that cannot be accomplished, then Sunday July 3rd). Ten days after either publication date would allow the public hearing to be held at the July 19th City Council Meeting and the ordinance acted upon at that meeting after the Public Hearing. As you see, the currently scheduled Public Hearing for next Tuesday does not fulfill the statutory requirement for such Public Hearing because the ordinance must be introduced (read) BEFORE the public hearing is even scheduled. Then the notice of such public hearing date must be published in the paper. Such notice must also set "forth the proposed schedule of the rates and charges" as well as the date of the public hearing. Since the City has scheduled a public hearing for the next City Council Meeting, we may still wish to conduct one, but it will not suffice for our statutory requirement. The very first requirement is the reading of the ordinance which statutorily begins the full process which we must accomplish before the ordinance can be passed. The Agenda for the June 21st City Council Meeting needs to have the sewer rate change ordinance as an item of New Business where it will be placed on its first reading. Since all such items of New Business allow public comment, persons wishing to speak to the proposed rate changes can publicly comment then so we do not need a separate public hearing on the June 21st Agenda. During the discussion of the sewer rate ordinance, the Council needs to agree that the Public Hearing will be scheduled for the July 19th City Council Meeting. 0) 34� - 19 MUNICIPAL SEWAGE SYSTEMS 14-235-223 I .ore than such ruin turned over to it in be paid from the revenues derived from ••:amtaining the system, the city having that service and nothing in this subchap- bondy x•en operating and maintaining this sys- tel' aLrthlOr'1Le.s any part of the revenues dcipa 'Lin out of general revenues with no ex- derived from the system to be devoted and listin- 7�enses to the district, and the desire for appropriated to pay the cost of construe - audit of the accounts was made after the tion or operation of waterworks system. r Vice etirement of the bonds issued for the Mathers v. Moss, 202 Ark. 554, 151 S.W.2d maintenance of the sewer. Lawrence v. 660 (1941). needs J Dnes, 228 Ark. 1136, 313 S.W.2d 228 iinin 1958). r the Scope. This section contemplates that revenue ty be *,onds authorized to construct sewers will g the f an14-235-223. Rates and charges for services — Lien. to be (a)(1) The council of the municipality shall have power, and it shall be its duty, by ordinance to establish and maintain just and equitable v the rates or charges for the use of and the service rendered by the works, to . be paid by each user of the sewerage system of the municipality. fonds (2) The council may change and readjust the rates or charges from and time to time to such extent as will not render insecure the rights of the holders of revenue bonds or violate any sinking fund agreement, or the other lawful agreement, with such bondholders. 'd to (b) The rates or charges shall be sufficient in each year for the payment of the proper and reasonable expense of operation, repair, ds of replacements, and maintenance of the works and for the payment of the .ture sums required in this subchapter to be paid into the sinking fund. ured (c) Revenues collected pursuant to this section shall be deemed the gate re nues of the works. (d f 1)(A) No rates or charges shall be established until after a public pro- hearing, at which all the users of the works and owners of property nen- served or to be served by them and others interested shall have any opportunity to be heard concerning the proposed rates or charges. rtic- (B) After introduction of the ordinance fixing the rates or charges, and before the ordinance is finally enacted, notice of the hearing, setting forth the proposed schedule of the rates or charges, shall be given by one (1) publication in a newspaper published in the munic- ipality if there is such a newspaper, but otherwise in a newspaper having general circulation in the municipality, at least ten (10) days ?' before the date fixed in the notice for the hearing, which may be adjourned from time to time. From (2) After the hearing the ordinance establishing rates or charges, sluff, either as originally introduced or as modified and amended, shall be passed and put into effect. (e) A copy of the schedule of the rates and charges established shall 'were be kept on file in the office of the sewer committee having charge of the unt, operation of the works, and also in the office of the municipal clerk or t of recorder, and shall be open to inspection by all parties interested. for (f)(1) The rates or charges so established for any class of users or : far property served shall be extended to cover any additional premises Paxton, Kara From: Paxton, Kara Sent: Tuesday, June 14, 2022 5:07 PM To: Bolinger, Bonnie; Pennington, Blake; Brown, Chris; Bunch, Sarah; CityClerk; Curth, Jonathan; Harvey, Sonia; Hertzberg, Holly; Batker, Jodi; Jones, D'Andre; Kelley, Courtney; Kinion, Mark; Johnson, Kimberly; Rogers, Kristin; Williams, Kit; Jordan, Lioneld; Mathis, Jeana; Paxton, Kara; Mulford, Patti; Rea, Christine; Scroggin, Sloan; Norton, Susan; Thurber, Lisa; Turk, Teresa; Wiederkehr, Mike Subject: FW: Pre -Agenda Meeting Good afternoon, The Public Hearing item CA Public Hearing Discussion on Recommendations for Water and Sewer Rates Effective January 1, 2023 on the 06/14/2022 Tentative Agenda was placed on the agenda per the request I received via email on Wednesday, June 8, 2022 2:23 PM. Based on the City Attorney requesting that this item now be moved the below email will be placed as additional documents in the agenda packet. Thank you, Kara Paxton, MSISM, CMC, CMO City Clerk Treasurer City of Fayetteville, Arkansas kapaxton °,fayetteville-ar.gov T 479.575.8323# _ CITY OP �IPAYSTTEVI LL! ARKA.M��w From: Norton, Susan <snorton@fayetteville-ar.gov> Sent: Thursday, June 9, 2022 3:12 PM To: Paxton, Kara <kapaxton@fayetteville-ar.gov> Subject: RE: Pre -Agenda Meeting Thankyou! From: Paxton, Kara <kapaxton@fayetteville-ar.gov> Sent: Thursday, June 9, 2022 3:02 PM To: Norton, Susan <snorton@fayetteville-ar.gov> Subject: RE: Pre -Agenda Meeting I processed the change and uploaded the document. The agenda can be viewed at the below link. https://accessfavetteville.granicus.com/GeneratedAgendaViewer.php?view id=14&event id=2591 Thank you, Kara Paxton, MSISM, CMC, CMO City Clerk Treasurer City of Fayetteville, Arkansas kapaxton a)fayetteville-ar.gov T 479.575.8323# CITY OP FAYITTIYILLI �Rlx�►N�w� From: Norton, Susan <snorton@fayetteville-ar.gov> Sent: Wednesday, June 8, 2022 4:07 PM To: Paxton, Kara <kapaxton@fayetteville-ar.gov>; Williams, Kit <kwilliams@fayetteville-ar.gov>; Thurber, Lisa <Ithurber@fayetteville-ar.gov>; Curth, Jonathan <jcurth@fayetteville-ar.gov>; Brown, Chris <cbrown@fayetteville- ar.gov>; Becker, Paul <pbecker@fayetteville-ar.gov> Cc: Rogers, Kristin <krogers@fayetteville-ar.gov>; Bolinger, Bonnie <bbolinger@fayetteville-ar.gov> Subject: RE: Pre -Agenda Meeting Kara - Please add the following descriptor to that Public Hearing title and include the attached as a link in the packet. Please let me know if you have any questions. Public Hearing: Discussion on Recommendations for Water and Sewer Rates Effective January 1, 2023 Thank you. Susan From: Paxton, Kara <kapaxton@fayetteville-ar.gov> Sent: Wednesday, June 8, 2022 3:37 PM To: Williams, Kit <kwilliams@fayetteville-ar.gov>; Thurber, Lisa <Ithurber@fayetteville-ar.gov>; Norton, Susan <snorton@fayetteville-ar.gov>; Curth, Jonathan <Icurth@favetteville-ar.gov>; Brown, Chris <cbrown@fayetteville- ar.gov>; Becker, Paul <pbecker@fayetteville-ar.gov> Cc: Rogers, Kristin <krogers@fayetteville-ar.gov>; Bolinger, Bonnie <bbolinger@fayetteville-ar.gov> Subject: RE: Pre -Agenda Meeting Kit, Thank you for your response. I have added the Public Hearing section and moved the item you mentioned. I have attached a copy of the agenda to this email for your records. This agenda will be published on the website tomorrow afternoon. Thank you, Kara Paxton, MSISM, CMC, CMO City Clerk Treasurer City of Fayetteville, Arkansas kapaxtonkfayetteville-ar. gov T 479.575.8323# CITY OF PAYSTTEVILL■ ARMAM�w• From: Williams, Kit <kwilliams@fayetteville-ar.gov> Sent: Wednesday, June 8, 2022 2:23 PM To: Paxton, Kara <kapaxton@fayetteville-ar.gov>; Thurber, Lisa <Ithurber@fayetteville-ar.gov>; Norton, Susan <snorton@fayetteville-ar.gov>; Curth, Jonathan <icurth@fayetteville-ar.gov>; Brown, Chris <cbrown@fayetteville- ar.gov>; Becker, Paul <pbecker@fayetteville-ar.gov> Subject: RE: Pre -Agenda Meeting Ka ra, Looks very good to me. We need to have a separate place for a public hearing on the new water/sewer rates (before item for the ordinance.). Kit From: Paxton, Kara Sent: Wednesday, June 08, 2022 12:31 PM To: Thurber, Lisa <Ithurber@fayetteville-ar.gov>; Norton, Susan <snorton@favetteville-ar.gov>; Curth, Jonathan <icurth@favetteville-ar.gov>; Brown, Chris <cbrown@fayetteville-ar.gov>; Becker, Paul <pbecker@fayetteville-ar.gov>; Williams, Kit <kwilliams@fayetteville-ar.gov> Cc: Bolinger, Bonnie <bbolinger@fayetteville-ar.gov>; Rogers, Kristin <krogers@fayetteville-ar.gov> Subject: Pre -Agenda Meeting Good afternoon, I have attached the draft version of the Tentative Agenda. Once you have had a chance to review this document please email me and let me know what your agenda item preferred order is for the Consent Agenda and New Business. Thank you, Kara Paxton, MSISM, CMC, CMO City Clerk Treasurer City of Fayetteville, Arkansas kap axtongfayetteville-ar. goy T 479.575.8323# CITY OI' FAVETT(EVILLE ANK&NIAN ICA OFFICE OF THE CITY ATTORNEY Received by City Attorney 7/13/22, 10:28 AM DEPARTMENTAL CORRESPONDENCE Kit Williams City Attorney TO: Ma Jordan Blake Pennington Mayor an y J Assistant City Attorney City Council Jodi Batker Kara Paxton, City Clerk/ Treasurer Paralegal CC: Paul Becker, Chief Financial Officer Tim Nyander, Utilities Director Corey Granderson, Utilities Engineer FROM: Kit Williams, City Attorney DATE: July 13, 2022 RE: Contracting with other political subdivisions The City of Fayetteville has constructed a very efficient and effective wastewater system for our residents, businesses, and factories which we have graciously allowed residents and businesses outside our city limits to access for decades. The City is authorized to contract with other cities or their residents (Elkins, Greenland, Farmington, Johnson, and West Fork) by A.C.A. §14-235-212 Contracting with other political subdivisions. These contracts are statutorily authorized, "but only to the extent of the capacity of the works without impairing the usefulness of them to the owners (Fayetteville), upon such terms and conditions as may be fixed by the sewer committee..." Id. at (a)(1)(B). (emphasis added) In a sewer rate challenge case, the Arkansas Supreme Court held: "Rate making being a legislative act, unless the city council has acted arbitrarily and unreasonably in fixing these rates, there is a prima facie presumption in favor of their correctness, and the burden is on complainant to show otherwise." Lazurence v. Jones, 228 Ark. 1136, 313 S.W. 2d. 228, 231 (1958). In a recent case, the City of Fayetteville was sued because it substantially increased its rates to a nonresident wholesale water customer. "Water may be supplied to nonresident consumers at such rates as the legislative body of the municipality may deem just and reasonable, and the rates need not be the same as the rates charged residents of the municipality." Mount Olive Water Association v. City of Fayetteville, 313 Ark, 606, 856 S.W. 2d 864, 866 (1993). The water association challenged a 9.8 % rate of return for computing revenue requirements. Id. The Arkansas Supreme Court rejected the water association's argument that the 9.8% rate of return establishing the water rates was not just or reasonable. The Court ruled: "We have stated no hard and fast rule regarding what constitutes a reasonable rate or the variables properly employed by which a municipality may charge in these situations. Reasonableness of rates must therefore be dictated by the facts of each situation and the definition of 'reasonable' established by the common meaning of the term. Webster's Third New International Dictionary (Unabridged) (1968) gives several definitions of 'reasonable' including 'not conflicting with reason: not absurd: not ridiculous ... b. being or remaining within the bounds of reason."' Mount Olive Water Association v. City of Fayetteville, Supra at 867. The Arkansas Supreme Court cited "the Report on Revenue Requirements, Cost of Service, and Rates for Water and Sewer Services for Fayetteville, Arkansas prepared by Black and Veatch/Engineers - Architects of Kansas City," Id. as 'evidence presented by the City (which) showed the rates were based upon 'reason' and were 'reasonable' in accordance with the dictionary definitions quoted." Id. Although the current Black and Veatch report may need to be slightly modified, once the City Council is satisfied that Black and Veatch has properly considered all relevant factors including realistic and relevant concerns of the City of Farmington and others, rates based upon the Report should satisfy the reasonableness standard here just as they did in the Mount Olive Water 2 Association case. The Court in that case found that the charge per 1000 gallon rate there which more than tripled in four years was reasonable and legal. "The burden of proving the city's rate schedule to be arbitrary and unreasonable rested upon the plaintiffs, for the ordinance is entitled to the presumption of validity that legislative enactments ordinarily receive." Lawrence v. Jones, Supra at 231. CONCLUSION The City of Fayetteville has always strived to fairly apportion the costs of building, maintaining, and operating its water and sewer systems among all of its customers. The law clearly gives the City Council the right to protect the interests of our citizens and businesses by crediting their recent 200 Million Dollar investment into the wastewater system project which was needed to service not only our intown customers, but our many out of town customers in Farmington, Greenland and Johnson as well as our wholesale customers of Elkins and West Fork. A reasonable rate of return from our out-of-town customers to compensate our citizens' 200 Million Dollar investment is not only legal, but fair and reasonable. 3 Received By Paul Becker During City Council Meeting (Physical Handout) City of Fayetteville Final Amended Rate Schedule September 19, 2023 51.136 Monthly Water Rates Effective as of the first billing statements issued after December 31, 2023, the following monthly rates shall be fixed as rates to be charged for water furnished by the waterworks system of the city, which rates the City Council finds and declares to be reasonable and necessary minimum rates to be charged. All non -emergency water uses shall be billed to the user, to include but not limited to water used for: use within structures; business; manufacturing; irrigation; retail by another water utility; city uses; educational purposes; medical purposes; water system routine non -emergency uses; wastewater system routine non -emergency uses; non-profit uses; fire department non -emergency uses to include training and equipment calibration; construction of new water mains; street cleaning; and wet down of construction sites and materials. Emergency water use that does not pass through a water system meter shall not be billed, including firefighting, water leaks, water leak repair, and emergency water line flushing. The volumes used for these emergency purposes should be estimated and submitted monthly to the Business Office Manager and the Water/Sewer Operations Manager. (A) Monthly Water Rates. (1) The water usage of each customer shall be determined each month by meter measurement and the amount per 1,000 gallons to be paid for water usage by each customer shall be computed on the basis of the following schedule of rates. Table A-1 Monthly Water Rates Prior to January 1, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.51 $4.04 Next 13,000 $4.65 $5.35 Over 15,000 $6.59 $7.54 Non -Residential First 300,000 $3.79 $4.38 Over 300,000 $3.39 $3.90 Major Industrial All Usage $2.96 $3.40 Irrigation First 300,000 $5.04 $5.80 Over 300,000 $4.53 $5.22 Wholesale Reduced Peak Demand $2.87 $2.87 Peak Demand $3.20 $3.20 Table A-2 Monthly Water Rates After December 31, 2023 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.59 $4.54 Next 13,000 $4.75 $6.01 Over 15,000 $6.74 $8.52 Non -Residential First 300,000 $4.20 $5.11 Over 300,000 $4.20 $5.11 Major Industrial All Usage $3.14 $3.49 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 1 of 13 Irrigation First 300,000 $4.75 $5.89 Over 300,000 $4.75 $5.89 Wholesale Reduced Peak Demand $3.30 $3.30 Peak Demand $3.30 $3.30 Table A-3 Monthly Water Rates After December 31, 2024 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $3.81 $4.81 Next 13,000 $5.04 $6.37 Over 15,000 $7.14 $9.03 Non -Residential First 300,000 $4.45 $5.42 Over 300,000 $4.45 $5.42 Major Industrial All Usage $3.33 $3.70 Irrigation First 300,000 $5.04 $6.24 Over 300,000 $5.04 $6.24 Wholesale Reduced Peak Demand $3.50 $3.50 Peak Demand $3.50 $3.50 Table A-4 Monthly Water Rates After December 31, 2025 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $4.04 $5.10 Next 13,000 $5.34 $6.75 Over 15,000 $7.57 $9.57 Non -Residential First 300,000 $4.72 $5.75 Over 300,000 $4.72 $5.75 Major Industrial All Usage $3.53 $3.92 Irrigation First 300,000 $5.34 $6.61 Over 300,000 $5.34 $6.61 Wholesale Reduced Peak Demand $3.71 $3.71 Peak Demand $3.71 $3.71 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 2 of 13 Table A-5 Monthly Water Rates After December 31, 2026 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $4.28 $5.41 Next 13,000 $5.66 $7.16 Over 15,000 $8.02 $10.14 Non -Residential First 300,000 $5.00 $6.10 Over 300,000 $5.00 $6.10 Major Industrial All Usage $3.74 $4.16 Irrigation First 300,000 $5.66 $7.01 Over 300,000 $5.66 $7.01 Wholesale Reduced Peak Demand $3.93 $3.93 Peak Demand $3.93 $3.93 (2) Beginning January 1, 2028, all monthly water rates shall be increased by 3% per year. (3) All bills under such schedules shall be computed by adding the applicable meter service charge prescribed by subsection (B) to the amount determined to be due for water usage under this schedule. Applicable sales tax and franchise fees shall be added to the bill so computed. (4) When a common facility/building is served by multiple water meters and the water usage is for the same purpose, customers may petition the Water & Wastewater Director and/or the Finance & Internal Services Director to have the water consumption aggregated and have the tiered rates apply to the aggregated quantity. (5) Water used for flushing and sampling of newly constructed water lines, Fire Department training and equipment calibration, and other similar uses requiring a large volume and/or high velocity of water movement shall employ a fire hydrant meter of the appropriate size for the use. If a fire hydrant meter cannot be used due to high flow or volume requirements, then the volume of water used shall be measured by using a pitot gauge to determine the gallons per minute and by timing the flow of water to be able to calculate total volume. In the cases of fire department training and equipment calibration, sewer line washing, street sweeping, and other uses where the equipment employed has a built-in water meter, these built in water meters may be used. All such meters other than those on fire trucks must be evaluated by the Meter Superintendent. These water uses shall be billed at the same rates as non-residential customers. (6) Monthly wholesale treated water rates outside city limits are based on Cost of Service Methodology. (B) Monthly Water Service Charge. (1) In addition to the above, each customer shall pay a monthly water service charge in accordance with the following schedule: (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 3 of 13 Table B-1 Monthly Water Service Charge Prior to January 1, 2024 Meter Size Inside City Outside City Wholesale 5/8" $6.59 $7.54 $7.54 %x % inch $6.59 $7.54 $7.54 1 inch $9.14 $10.52 $10.52 1 % inch $15.93 $18.31 $18.31 2 inch $23.20 $26.66 $28.56 3 inch $54.05 $62.18 $64.38 4 inch $89.50 1 $102.93 1 $112.25 6 inch $178.99 $205.82 $213.02 8 inch $268.41 $308.67 $319.47 Table B-2 Monthly Water Service Charge After December 31, 2023 Meter Size Inside City Outside City Wholesale 5/8" $6.99 $7.99 $8.81 %x % inch $6.99 $7.99 $8.81 1 inch $10.06 $13.84 $13.84 1 % inch $19.18 $27.40 $27.40 2 inch $26.27 $37.95 $37.95 3 inch $57.29 $79.11 $79.11 4 inch $94.87 $115.76 $118.99 6 inch 1 $189.73 1 $218.17 1 $225.53 8 inch 1 $284.51 1 $327.19 1 $352.88 Table B-3 Monthly Water Service Charge After December 31, 2024 Meter Size Inside City Outside City Wholesale 5/8" $7.41 $8.47 $9.34 %x % inch $7.41 $8.47 $9.34 1 inch $10.66 $14.67 $14.67 1 % inch $20.33 $29.04 $29.04 2 inch $27.85 $40.23 $40.23 3 inch $60.73 $83.86 $83.86 4 inch $100.56 $122.71 $126.13 6 inch 1 $201.11 1 $231.26 1 $239.06 8 inch 1 $301.58 1 $346.82 1 $374.05 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 4 of 13 Table B-4 Monthly Water Service Charge After December 31, 2025 Meter Size Inside City Outside City Wholesale 5/8" $7.85 $8.98 $9.90 % x % inch $7.85 $8.98 $9.90 1 inch $11.30 $15.55 $15.55 1 % inch $21.55 $30.78 $30.78 2 inch $29.52 $42.64 $42.64 3 inch $64.37 $88.89 $88.89 4 inch $106.59 1 $130.07 1 $133.70 6 inch $213.18 $245.14 $253.40 8 inch $319.67 $367.63 $396.49 Table B-5 Monthly Water Service Charge After December 31, 2026 Meter Size Inside City Outside City Wholesale 5/8" $8.32 $9.52 $10.49 %x % inch $8.32 $9.52 $10.49 1 inch $11.98 $16.48 $16.48 1 % inch $22.84 $32.63 $32.63 2 inch $31.29 $45.20 $45.20 3 inch $68.23 $94.22 $94.22 4 inch $112.99 $137.87 $141.72 6 inch 1 $225.97 1 $259.85 1 $268.60 8 inch 1 $338.85 1 $389.69 1 $420.28 (2) Beginning January 1, 2028, all monthly water service charges shall be increased by 3% per year. (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section shall commence as of the first billing statements issued after December 31, 2023. (4) The State of Arkansas mandated Safe Drinking Water Act fee shall be added to the monthly water utility bill. (C) Monthly Standby Fire Protection Service Charge. (1) Charges for unmetered service connections for standby fire protection and fire hydrants shall be based on the incoming line size or the backflow preventer size, whichever is smaller, as set forth in the following table: (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 5 of 13 Monthly Standby Fire Protection Service Charge Line Size or Backflow Preventer Size Inside City Outside City 1 inch $10.34 $12.38 2 inch $10.78 $12.83 2.5 inch $21.55 $24.77 3 inch $32.31 $37.16 4 inch $64.63 $74.32 6 inch $179.50 $209.60 8 inch $376.99 $433.54 10 inch $646.26 $743.18 (2) The Utilities Department shall review the monthly standby fire protection service charges every two (2) years and shall make recommendations to the City Council following such review. Fire protection lines shall not be connected to the water system downstream from a meter. (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord. No. 2144, 9-2-75; Ord. No. 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, 2-21-89; Ord. No. 3431, 6-6-89; Ord. No. 3491, 7-17-90; Ord. No. 3513, 9-18-90; Ord. No. 3519, 11- 20-90; Ord. No. 4059, §1, 10-7-97; Ord. No. 4223, 2-15-00; Code 1991, §51.136; Ord. No. 4530 12-02-02; Ord. No. 4540, 02-03-04; Ord. No. 5123, 4-1-08; Ord. No. 6169, §1, 4-2-2019) 51.137 Monthly Sewer Rates (A) Monthly Sewer Rates. (1) All monthly sewer charges shall be calculated from the customer's monthly water usage. The following monthly rates are hereby fixed as rates to be charged for sewer services: Table D-1 Monthly Sewer Rates Per 1,000 Gallons Before January 1, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.35 Greater than $5.80 2,000 gallons Non -Residential All Usage $4.40 Major Industrial All Usage $4.71 Farmington All Usage $7.52 Outside city All Usage $8.18 Wholesale 85%of metered $5.19 water usage Usage above 85% of $2.99 metered water usage (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 6 of 13 Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2023 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $4.94 Greater than $6.59 2,000 gallons Non -Residential All Usage $5.54 Major Industrial All Usage $5.85 Farmington All Usage $7.59 Outside city All Usage $7.59 Wholesale 85% of metered $5.74 water usage Usage above 85% of $5.74 metered water usage Table D-3 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2024 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $5.09 Greater than $6.79 2,000 gallons Non -Residential All Usage $5.71 Major Industrial All Usage $6.03 Farmington All Usage $7.82 Outside city All Usage $7.82 Wholesale 85% of metered $5.91 water usage Usage above 85% of $5.91 metered water usage Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2025 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $5.24 Greater than $6.99 2,000 gallons Non -Residential All Usage $5.88 Major Industrial All Usage $6.21 Farmington All Usage $8.05 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 7 of 13 Outside city All Usage $8.05 Wholesale 85% of metered $6.09 water usage Usage above 85% of $6.09 metered water usage Table D-5 Monthly Sewer Rates Per 1,000 Gallons After December 31, 2026 Class Usage Rate Cost per (In Gallons) 1,000 gallons Residential First 2,000 gallons $5.40 Greater than $7.20 2,000 gallons Non -Residential All Usage $6.06 Major Industrial All Usage $6.40 Farmington All Usage $8.29 Outside city All Usage $8.29 Wholesale 85% of metered $6.27 water usage Usage above 85% of $6.27 metered water usage (2) Beginning January 1, 2028, all monthly sewer quantity charge- usage rates per 1,000 gallons shall be increased by 3% per year. (3) Sewer related fees levied by the Cities of Farmington or Greenland shall be added to the wastewater utility bill at the request of Farmington or Greenland. These fees may be calculated on a per -thousand volumetric usage or a per month basis. (B) Monthly Sewer Service Charge. (1) In addition to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: Table E-1 Monthly Sewer Service Charge Prior to January 1, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $18.28 $18.28 $16.74 %x % inch $18.28 $18.28 $16.74 1 inch $23.74 $33.92 $31.28 1% inch $38.77 $60.37 $55.50 2 inch $55.43 $79.73 $73.45 3 inch $128.73 $184.24 $169.29 4 inch $212.13 $303.44 $278.93 6 inch 1 $420.39 1 $601.46 1 $553.70 8 inch 1 $628.73 1 $899.76 1 $826.81 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 8 of 13 Table E-2 Monthly Sewer Service Charge After December 31, 2023 Meter Size Inside City Outside Cityt Farmingtont 5/8" $12.75 $15.71 $15.71 % x % inch $12.75 $16.01 $16.01 1 inch $24.45 $31.32 $31.32 1% inch $44.81 $63.14 $63.14 2 inch $61.64 $87.88 $87.88 3 inch $132.59 $184.50 $184.50 4 inch $218.49 $270.52 $270.52 6 inch 1 $433.00 1 $501.48 1 $501.48 8 inch 1 $647.59 1 $558.03 1 $558.03 Table E-3 Monthly Sewer Service Charge After December 31, 2024 Meter Size Inside City Outside Cityt Farmingtont 5/8" $13.13 $16.18 $16.18 %x % inch $13.13 $16.49 $16.49 1 inch $25.19 $32.26 $32.26 1% inch $46.15 $65.03 $65.03 2 inch $63.48 $90.52 $90.52 3 inch $136.57 $190.04 $190.04 4 inch $225.09 $278.64 $278.64 6 inch $445.99 1 $516.52 1 $516.52 8 inch $667.02 $574.77 $574.77 Table E-4 Monthly Sewer Service Charge After December 31, 2025 Meter Size Inside City Outside Cityt Farmingtont 5/8" $13.52 $16.66 $16.66 %x % inch $13.52 $16.98 $16.98 1 inch $25.94 $33.23 $33.23 1% inch $47.53 $66.98 $66.98 2 inch $65.37 $93.23 $93.23 3 inch $140.67 $195.74 $195.74 4 inch $231.80 $286.99 $286.99 6 inch $459.37 $532.02 $532.02 8 inch $687.03 $592.02 $592.02 (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 9 of 13 Table E-5 Monthly Sewer Service Charge After December 31, 2026 Meter Size Inside City Outside Cityt Farmingtont 5/8" $13.93 $17.16 $17.16 %x % inch $13.93 $17.49 $17.49 1 inch $26.72 $34.23 $34.23 1% inch $48.96 $68.99 $68.99 2 inch $67.35 $96.03 $96.03 3 inch $144.89 $201.61 $201.61 4 inch $238.75 $295.60 $295.60 6 inch $473.15 $547.98 $547.98 8 inch $707.64 $609.78 $609.78 tCost of Service Methodology required by contract. (2) Beginning January 1, 2028, all monthly sewer service charges shall be increased by 3% per year. (C) Determination of Sewer Quantity Charge for Residential Customers. (1) In the case of residential customers residing in a single family home, duplex, triplex, and/or fourplex, the average monthly water consumption for the preceding months of December, January, and February shall be computed separately for each customer, and a uniform monthly charge for each customer shall be determined by applying the schedule of rates set out in subsection (A) of this section to such average monthly water consumption. In the case of a residential user for whom a uniform monthly charge has been established and who moves to a new location the same uniform monthly charge shall apply at the new location. In the case of new residential customers, sewer averages shall be established based on the number of individuals residing within the dwelling unit, at a rate of 2,100 gallons per customer per month. This methodology of sewer averaging shall not apply to multi -family structures containing five (5) or more units in a contiguous building. (2) In the case of sewer customers who do not have a water meter provided by a public water utility, the sewer usage volume billed shall be the average volume of all users in the sewer system in like dwellings from the most recent system -wide sewer average calculation. (D) Determination of Charge for Non-residential and Major Industrial Customers. In the case of non-residential and/or major industrial customers, the monthly sewer charge shall be determined by applying the schedule of rates prescribed in subsection (A) of this section to the monthly water usage of such customers. In the event that a non-residential or major industrial customer discharging waste into the city's sanitary sewer system produces evidence to the Water and Wastewater Director demonstrating that a substantial portion of the total amount of water from all sources used for all purposes does not reach the sanitary sewer which is in excess of the factors used in establishing the rates in subsection (A) of this section, an estimated percentage of total water consumption to be used in computing charges may be established by the Water and Wastewater Director. The factors used in establishing said rates are on file in the office of the Water and Wastewater Director and are incorporated herein by reference thereto. Any rate so adjusted by the Water and Wastewater Director shall be effective for a twelve (12) month period beginning with the billing for the month when rates adjudged hereby go into effect. (E) Extra Strength Surcharge. (1) For all significant industrial users as defined in §51.074, whose wastewater discharge is greater than 300 mg/I of BOD Sand/or TSS, the city shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Created: 2022-05-17 11:20:05 [EST] (Supp. No. 25) Page 10 of 13 Table F1 Extra Strength Surcharges Prior to January 31, 2024 Prior to 01/01/2024 Extra Strength BOD 5 $0.3148 per pound Extra Strength TSS $0.4483 per pound Table F2 Extra Strength Surcharges After December 31, 2023 After 12/31/2023 Extra Strength BOD 5 $0.5414 per pound Extra Strength TSS $0.6679 per pound Table F3 Extra Strength Surcharges After December 31, 2024 After 12/31/2024 Extra Strength BOD 5 $0.5576 per pound Extra Strength TSS $0.6880 per pound Table F4 Extra Strength Surcharges After December 31, 2025 After 12/31/205 Extra Strength BOD 5 $0.5743 per pound Extra Strength TSS $0.7086 per pound Table F5 Extra Strength Surcharges After December 31, 2026 After 12/31/2026 Extra Strength BOD 5 $0.5915 per pound Extra Strength TSS $0.7299 per pound (2) Starting after December 31, 2026, Extra Strength Surcharges shall be increased by 3% per year. (3) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (4) All sampling and analyses of the wastewater characteristics shall be performed in accordance with U.S. Environmental Protection Agency 40 Code of Federal Regulations Part 136 approved methods. (5) The volume of flow used in computing surcharge shall be based upon metered water consumption as shown in the records of meter readings maintained by the city's business office. In the event that a user discharging waste into the city sanitary sewer system produces evidence to the city demonstrating that a portion of the total amount of water used for all purposes is not discharged into the sanitary sewer, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 11 of 13 the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (6) Any person discharging industrial waste into the sanitary sewers of the city who procures any part or all of the user's water supply from sources other than the city, all or part of which is discharged into the sanitary sewer, shall install and maintain at the user's expense water meters of the type approved by the city for the purpose of determining the proper volume of flow to be used in computing sewer service charges. Such meter will be read monthly and tested for accuracy when deemed necessary by the city. Where it can be shown that a portion of the water measured by the aforesaid meter or meters does not enter the sanitary sewer system of the city, a separate meter or meters or other approved flow measuring device may be installed at the user's expense, upon its request, to measure only that portion of the total flow being discharged into the city sewer system. If a surcharge is assessed by the city, it shall be shown separately on the monthly billing. (7) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S I = V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (TSS - 300)] (b) Where: S = Surcharge in dollars V = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD Unit Charge = Unit charge for BOD in dollars per pound BOD = BOD strength in parts per million 300 = Allowed BOD strength in parts per million TSS Unit Charge = Unit charge for suspended solids in dollars per pound TSS = Suspended solids strength in parts per million 300 = Allowed TSS Strength in parts per million (F) Elkins Sewer Charges. (1) Elkins' payment for wastewater treatment shall be based on 85% of the metered water purchased. The volume of wastewater received by Fayetteville at the "Point of Connection" shall be measured by the installed wastewater meter. Volumes of wastewater below or above the agreed upon percentage (85%) of metered water, as measured by the wastewater meter, shall be recorded on a monthly basis, with a reconciliation of the net difference to occur semiannually in June and December. If the reconciliation volume is over the agreed upon percentage, this amount shall be billed to Elkins in June and December at the actual computed cost of wastewater collection to and treatment at the Noland Wastewater Treatment Plant, not including the calculated rate of return and not including depreciation charges, but including any capacity surcharge, based on the most recent rate as determined in paragraph B of this contract. If the reconciliation volume is below the agreed upon percentage, the actual amount billed for the difference shall be refunded to Elkins in June and December (2) Elkins Impact Fee Charges. The City of Elkins shall pay an additional $0.25 per 1,000 gallons of wastewater, for all wastewater volume charges including both the 85% of metered water volume and for wastewater in excess of the 85% of the metered water purchased billed volume. (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 12 of 13 (G) Hauled Wastewater Fees. (1) Application fee. An application to discharge hauled domestic waste must be accompanied by a fee of $100.00. (2) Discharge fee. A fee of $50.00 must be paid for each hauled domestic waste load discharged. (H) Industrial Wastewater Discharge Permit Fee. (1) Application Fee. An application for an industrial wastewater discharge permit must be accompanied by a fee of $500.00. (Code 1965, §21-26; Ord. No. 1165, 4-18-58; Ord. No. 3197, 7-1-86; Ord. No. 3285, 8-4-87; Ord. No. 3398, 1-3-89; Ord. No. 3491, 7-17-90; Ord. No. 3637, §§1, 2, 8-18-92; Ord. No. 4059, §2, 10-7-97; Code 1991, §51.137; Ord. No. 4530, 12-02-03; Ord. No. 4803, 12-20-05; Ord. No. 4998, 4-3-07; Ord. No. 5129, 4-15-08; Ord. No. 5438, 9-20-11; Ord. No. 5739, 2-17-15) (Supp. No. 25) Created: 2022-05-17 11:20:05 [EST] Page 13 of 13 Form v1.33 fii6 "U" A WEHCO MEDIA COMPANY Account #: NWCL5004205 RECEIVED Company: CITY OF FAYETTEVILLE-CLERKS OFFI SEP 2 5 2023 Ad number #: 328856 PO #: OF FAYTEVIL CITYCITYCLERKS OFFICE Matter of: ORD 6681 AFFIDAVIT • STATE OF ARKANSAS I, Carla Gardner, do solemnly swear that I am the Finance Director of the Democrat Gazette, a daily newspaper printed and published in WASHINGTON county, State of ARKANSAS; that I was so related to this publication at and during the publication of the annexed legal advertisement in the matter of: ORD 6681 Pending in the court, in said County, and at the dates of the several publications of said advertisement stated below, and that during said periods and at said dates, said newspaper was printed and had a bona fide circulation in said County, that said newspaper had been regularly printed and published in said county, and had a bona fide circulation therein for the period of one month before the date of the first publication of said advertisement; and that said advertisement was published in the regular daily issues of said newspaper as stated below. And that there is due or has been paid the Democrat Gazette for publication the sum of $122.20. (Includes $0.00 Affidavit Charge). NWA Democrat Gazette 09123123; NWA nwaonline.com 09123123 Finance Director State of ARKANSAS, County of WASHINGTON , Subscribed and sworn to before me on this 25th day of September, 2023 �a*p NOTARY PUBLIC CATHERINE STAGGS MY COMMISSION # 12402772 ' EXPIRES: February 28, 2025 Washington County Ordinance: 6681 File Number: 2022-319 AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES: AN ORDINANCE TO AMEND §51.136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES TO CHANGE WATER AND SEWER RATES AS RECOMMENDED BY THE COST OF SERVICE STUDY CONDUCTED BY BLACK & VEATCH WHEREAS, the City of Fayet- teville's current water and sewer rates were adopted in 2008 based on a Cost of Service Study conducted by HDR Engi- neering; and WHEREAS, on August 18, 2020, the City Council approved Resolution 212-20 authorizing a contract with Black & Veatch for an updated Cost of Service Study; and WHEREAS, the Black & Veatch Cost of Service Study recom- mends initial changes in both water and sewer rates that re- flect the true cost of service by customer class and a 3% an- nual increase in rates each year thereafter until a new study is conducted; and WHEREAS, the City Council has determined, after the public hearing required by Ark. Code Ann. § 14-235-223, that the proposed rate changes reflect- ng the true cost of service should be adopted and that the new rates shall take effect on January 1, 2024. NOW, THEREFORE, BE IT OR- DAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayet- teville, Arkansas hereby repeals §51.136 Monthly Water Rates and enacts a new §51.136 as shown in Exhibit A attached to this Ordinance. Section 2: That the City Council of the City of Fayet- teville, Arkansas hereby repeals §51.137 Monthly Sewer Rates and enacts a new §51.137 as shown in Exhibit B attached to this Ordinance. PASSED and APPROVED on September 19, 2023 Approved: Lioneld Jordan, Mayor Attest: Kara Paxton, City Clerk Treasurer This publication was paid for by the City Clerk -Treasurer of the City of Fayetteville, Arkansas. Amount paid: $122.20 Sept. 23,2023 328856 RECEIVED SEP 2 5 2023 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE Received By: Paul Becker 11/14/2023 12:40 P.M Final WATER AND WASTEWATER COMPREHENSIVE RATE STUDY B&V PROJECT NO. 406577 PREPARED FOR City of Fayetteville, Arkansas 18 OCTOBER 2023 0 BLACK&VEATCH City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table of Contents 1.0 Executive Summary.............................................................................................................1-0 1.1 Summary of Findings.......................................................................................................1-0 1.1.1 Revenue Under Existing Rates.........................................................................1-0 1.1.2 Revenue Requirements....................................................................................1-1 1.1.3 Summary of Cash Flow Results........................................................................1-2 1.1.4 Cost of Service Analysis....................................................................................1-2 1.2 Proposed Recommendations...........................................................................................1-3 1.3 Disclaimer........................................................................................................................1-4 2.0 Introduction.......................................................................................................................2-0 2.1 Purpose............................................................................................................................2-0 2.2 Scope................................................................................................................................2-0 2.3 Study Methodology.........................................................................................................2-1 2.3.1 Financial Plan....................................................................................................2-1 2.3.2 Cost of Service..................................................................................................2-1 2.3.3 Rate Design.......................................................................................................2-2 3.0 Rate Structure Overview.....................................................................................................3-0 3.1 Fixed Charge.....................................................................................................................3-0 3.2 Volumetric (Usage) Charge..............................................................................................3-0 3.3 Existing Rate Structure.....................................................................................................3-0 3.3.1 Water Rate Structure.......................................................................................3-0 3.3.2 Wastewater Rate Structure..............................................................................3-1 4.0 Water Utility.......................................................................................................................4-1 4.1 Water Revenue Projections Under Existing Rates...........................................................4-1 4.1.1 Water Revenue Under Existing Rates..............................................................4-1 4.1.2 Projection of Water Service Revenue Under Existing Rates ............................4-3 4.1.3 Other Water Revenues.....................................................................................4-3 4.2 Water Capital Improvements Program............................................................................4-4 4.3 Water Revenue Requirements........................................................................................4-4 4.3.1 Water Operation and Maintenance Expenses.................................................4-4 4.3.2 Water Bad Debt................................................................................................4-5 4.3.3 Water Payment In Lieu of Taxes......................................................................4-5 4.3.4 Safe Drinking Water Fee Reimbursement........................................................4-5 4.3.5 Water Debt Service Requirements...................................................................4-5 4.3.6 Transfer to Shop Fund......................................................................................4-6 4.3.7 Transfer to Operating Reserve.........................................................................4-6 4.3.8 Water Cash Financed Capital...........................................................................4-6 4.3.9 Transfer to Capital Reserve..............................................................................4-6 4.4 Water Proposed Revenue Adjustments...........................................................................4-6 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.5 Water Cost of Service......................................................................................................4-8 4.5.1 Determination of Cost of Service.....................................................................4-8 4.5.2 Determination of Functional Costs..................................................................4-9 4.5.3 Allocation of Costs to the Functional Cost Components...............................4-10 4.5.4 Distribution of Water Utility Costs to Customer Classes...............................4-11 5.0 Water Rate Design............................................................................................................5-14 5.1 Existing Water Rates......................................................................................................5-14 5.2 Proposed Water Rates...................................................................................................5-14 6.0 Wastewater Utility..............................................................................................................6-1 6.1 Wastewater Revenue Projections Under Existing Rates.................................................6-1 6.1.1 Wastewater Revenue Under Existing Rates.....................................................6-1 6.1.2 Projection of Wastewater Service Revenue Under Existing Rates...................6-3 6.1.3 Other Wastewater Revenue.............................................................................6-3 6.2 Wastewater Capital Improvements Program..................................................................6-3 6.3 Wastewater Utility Revenue Requirements....................................................................6-4 6.3.1 Wastewater Operation and Maintenance Expenses.......................................6-4 6.3.2 Wastewater Bad Debt......................................................................................6-5 6.3.3 Wastewater Payment In Lieu of Taxes.............................................................6-5 6.3.4 Wastewater Debt Service Requirements.........................................................6-5 6.3.5 Transfer to Shop Fund......................................................................................6-5 6.3.6 Transfer to Operating Reserve.........................................................................6-5 6.3.7 Wastewater Cash Financed Capital..................................................................6-6 6.3.8 Transfer to Capital Reserve..............................................................................6-6 6.4 Wastewater Proposed Revenue Adjustments.................................................................6-6 6.5 Wastewater Cost of Service.............................................................................................6-7 6.5.1 Determination of Cost of Service.....................................................................6-8 6.5.2 Determination of Functional Costs..................................................................6-8 6.5.3 Allocation of Costs to the Functional Cost Components.................................6-9 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes ......................6-11 6.5.5 Wastewater Utility Customer Class Costs of Service.....................................6-12 7.0 Wastewater Rate Design...................................................................................................7-13 7.1 Existing Wastewater Rates............................................................................................7-13 7.2 Proposed Wastewater Rates.........................................................................................7-13 8.0 Combined Water and Wastewater Utilities........................................................................8-15 9.0 Disclaimer.........................................................................................................................9-16 10.0 Appendix 1: Water Tables.................................................................................................10-1 11.0 Appendix 2: Wastewater Tables........................................................................................11-1 12.0 Appendix 3: Combined Tables...........................................................................................12-1 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study LIST OF EXECUTIVE SUMMARY TABLES Table ES - 1—Water 2023 Cost of Service..................................................................................................1-2 Table ES - 2 —Wastewater 2023 Cost of Service........................................................................................1-3 LIST OF FIGURES Figure 4-1 - Historical and Projected Water Accounts...............................................................................4-2 Figure 4-2 - Historical and Projected Water Billed Volume.......................................................................4-2 Figure 4-3 - Historical and Projected Water Service Revenue...................................................................4-3 Figure 4-4 - Projected Annual Water O&M Expenses................................................................................4-5 Figure 4-5 - Water Revenues and Revenue Requirements........................................................................4-7 Figure 6-1- Historical and Projected Wastewater Accounts.....................................................................6-2 Figure 6-2 - Historical and Projected Wastewater Billed Volume.............................................................6-2 Figure 6-3 - Historical and Projected Wastewater Service Revenue.........................................................6-3 Figure 6-4 - Projected Annual Wastewater O&M Expense........................................................................ 6-5 Figure 6-5 - Wastewater Revenues and Revenue Requirements..............................................................6-7 Figure 8-1 - Water and Wastewater Revenues and Revenue Requirements ..........................................8-15 LIST OF WATER TABLES Table W - 1 - Water Projected Number of Accounts...............................................................................10-1 Table W - 2 - Water Projected Billed Volume (1,000 Gallons).................................................................10-2 Table W - 3 - Water Existing Rates...........................................................................................................10-3 Table W - 4 - Water Projected Revenues Under Existing Rates...............................................................10-4 Table W - 5 - Water Projected Other Revenues.......................................................................................10-4 Table W - 6 - Water Capital Improvement Program................................................................................10-5 Table W - 7 - Water Projected O&M Expenses........................................................................................10-5 Table W - 8 - Capital Program Financing..................................................................................................10-6 Table W - 9 - Water Operating Cash Flow................................................................................................10-7 Table W - 10 - Water Fund Balances........................................................................................................10-8 Table W - 11- Water 2023 Cost of Service..............................................................................................10-9 Table W - 12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components ........10-10 Table W - 13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components.................................................................................................................10-10 Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components ..................10-10 Table W - 15 - Water 2023 Estimated Units of Service..........................................................................10-11 Table W - 16 - Water 2023 Unit Cost of Service....................................................................................10-12 Table W - 17 - Water 2023 Cost of Service by Customer Class..............................................................10-13 Table W - 18 - Water Proposed 2024 Rates...........................................................................................10-14 Table W - 19 - Water 2023 Cost of Service Under Proposed Rates.......................................................10-15 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2024 Bill Impact...................................................................................................10-16 LIST OF WASTEWATER TABLES Table S - 1 - Wastewater Projected Accounts..........................................................................................11-1 Table S - 2 - Wastewater Projected Billed Volume (1,000 Gallons).........................................................11-2 Table S - 3 - Wastewater Existing Charges...............................................................................................11-3 Table S - 4 - Wastewater Projected Revenues at Existing Rates..............................................................11-4 Table S - 5 - Wastewater Projected Other Revenues...............................................................................11-4 Table S - 6 - Wastewater Capital Improvement Program........................................................................11-5 Table S - 7 - Wastewater Projected O&M Expenses................................................................................11-5 Table S - 8 - Wastewater Capital Program Financing...............................................................................11-6 Table S - 9 - Wastewater Operating Cash Flow........................................................................................11-7 Table S - 10 - Wastewater Projected Fund Balances...............................................................................11-8 Table S - 11- Wastewater 2023 Cost of Service......................................................................................11-9 Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment....................................................11-10 Table S - 13 - Wastewater 2023 Allocation of Depreciation..................................................................11-11 Table S - 14 - Wastewater 2023 Allocation of O&M Expenses..............................................................11-12 Table S - 15 - Wastewater 2023 Units of Service...................................................................................11-13 Table S - 16 - Wastewater 2023 Unit Cost of Service............................................................................11-14 Table S - 17 - Wastewater 2023 Cost of Service by Customer Class........................................................11-1 Table S - 18 - Wastewater Proposed 2024 Charges.................................................................................11-2 Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates.................................................11-3 Table S - 20 - Wastewater 2024 Bill Impact.............................................................................................11-4 LIST OF COMBINED TABLES Table C - 1 - Combined Projected Fund Balances....................................................................................12-1 Table C - 2 - Combined Operating Cash Flow...........................................................................................12-2 Table C - 3 - Combined 2024 Bill Impact..................................................................................................12-3 BLACK & VEATCH I Table of Contents City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.0 Executive Summary The City of Fayetteville (City) provides water and wastewater services to retail and wholesale customers. The Water and Wastewater fund is an Enterprise Fund, which is funded by the operating and capital revenues from the users of the system. Due to multiple factors including increasing operating costs, significant capital investments to meet regulatory requirements, and the need for infrastructure rehabilitation and replacement, revenues under existing rates are not adequate to meet the annual revenue requirements. Therefore, to maintain financial sufficiency and to assure equitable cost recovery, the City engaged Black & Veatch Management Consulting, LLC (Black & Veatch) to perform a Water and Wastewater Comprehensive Rate Study (Study). The primary objectives of the Study are to develop a balanced financial plan, determine cost of service allocations for each customer class and design rates to recover costs from customer classes in reasonable accord with the allocated costs of service. The financial plan was developed for the six -year period of 2022 through 2027, also referred to as the study period or the forecast period. The city's fiscal year is a calendar year, starting on January 1 and ending on December 31. As a result of our evaluations and analyses, the following summary of findings and recommendations are offered for the City's consideration. 1.1 Summary of Findings 1.1.1 Revenue Under Existing Rates 1. The City provides retail water services to approximately 41,300 customers inside the City and about 7,400 customers outside the City. The number of retail water service customers inside the City is projected to increase to about 44,600 by 2027 and the number of outside City water customers is projected to increase to about 8,300. The City also provides treated water to four wholesale customers. Retail wastewater collection and treatment service is provided to approximately 36,600 customers inside the City and about 3,000 customers outside the City. The number of inside City wastewater service customers is projected to increase to about 39,700 by 2027 and the number of outside City wastewater service customers is projected to increase to about 3,200. 2. Treated water sales to inside City retail customers are projected to increase from approximately 3,454,000 kgals (1,000 gallons) in 2022 to approximately 3,664,400 kgals by 2027. Treated water sales to outside City retail customers are projected to increase from approximately 560,700 kgals in 2022 to approximately 629,300 kgals by 2027. Treated water sales to wholesale customers is projected to be approximately 224,200 kgals in 2022 and remain at that level through 2027. Billed wastewater volume from inside City retail customers is projected to increase from approximately 3,013,300 kgals in 2022 to approximately 3,190,000 kgals by 2027. Billed wastewater volume from outside City retail customers is projected to increase from 133,300 kgals in 2022 to about 114,200 kgals by 2027. Billed wastewater volume from wholesale customers is projected to remain at the 2022 level of 195,700 kgals through 2027. The City's current water rates became effective January 1, 2022. For both retail and wholesale customers, the water rates include a monthly base charge, which varies by meter size and a volume charge that varies by customer class. The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, the wastewater rates include BLACK & VEATCH I Executive Summary ES-1-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study a monthly base charge, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). The existing wastewater rate structure is described in Section 3.3.2. 4. Revenue is currently derived principally from charges for treated water and wastewater service, with some revenue also obtained fire protection charges and other miscellaneous sources. Revenue from treated water sales, under existing rates, is projected to increase from $23,380,300 in 2022 to about $25,129,700 in 2027, reflecting a 5-year cumulative increase of 7.3%. Miscellaneous water revenues are estimated to increase from $1,588,800 in 2022 to approximately $1,609,000 in 2027, reflecting a 5-year cumulative increase of 1.3%. Revenue for wastewater collection and treatment services is projected to increase from $26,571,400 in 2022 to about $28,119,400in 2027, under existing rates, reflecting a 5-year cumulative increase of 5.7%. Miscellaneous wastewater revenue is estimated at $1,420,200 per year from 2022 through 2027. 1.1.2 Revenue Requirements 1. Costs of service to be recovered from water and wastewater service charges include (1) operation and maintenance (O&M) expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) Safe Drinking Water Fee Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The water and wastewater utilities do not have any outstanding debt service; however, a future water debt issuance of $90,000,000 is projected in 2024. No transfers to the shop fund are planned over the study period. 2. The annual O&M expense includes the cost of labor, materials, power, chemicals, purchased water, contract services and other expenses associated with each utility's operation. In this study, FY 2021 is defined as the base budget year, based on which the O&M costs are projected for the forecast period. O&M expense for the water utility is projected to increase from $15,961,700 in 2021 to $20,686,900 by 2027 due to the combined effects of inflation and system growth. O&M expense for the wastewater utility is projected to increase from $15,662,800 in 2021 to $18,980,400 by 2027 due to the combined effects of inflation and system growth. Bad debt expense refers to outstanding balances from customers that are deemed uncollectible. The water and wastewater bad debt in 2019 was 0.5% of revenue. Bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for the water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027. Annual bad debt expense for the wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027. 4. The Payment In Lieu of Taxes (PILOT) are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires the water and wastewater funds to pay 4.25% of annual total gross sales revenues to the City. Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Annual PILOT amount for the wastewater utility is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. BLACK & VEATCH I Executive Summary ES-1-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5. The Safe Drinking Water Fee (SDWF) revenue collected for each metered customer is reimbursed to the state of Arkansas Department of Public Health. The SDWF reimbursement is projected to increase from $230,400 in 2022 to $250,600 in 2027. The SDWF is a pass -through fee and is treated as a "revenue reduction" by the City. 6. The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve for the water utility is projected to increase from $133,100 in 2022 to $256,600 in 2027. The transfer to operating reserve for wastewater is projected to increase from $129,500 in 2022 to $152,700 in 2027. 7. The City currently utilizes the following two sources of funding for the water and wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. A capital project meets the requirements of using impact fees if the existing water or wastewater capacity is expanded due to growth. The water capital improvement for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, and $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. The wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. 1.1.3 Summary of Cash Flow Results The cash flow analysis performed based on the projected annual revenues under existing rates and the projected annual revenue requirements indicates a funding gap for both utilities beginning in 2024. 2. A series of 6% annual revenue adjustment is needed in the water utility and a series of 3% annual revenue adjustment is needed in the wastewater utility, starting in 2024, to achieve the goal of the operating fund revenues being self-sufficient and adequate to cover all of the O&M expenses, cash financing of the capital program, required transfers, and to maintain the minimum reserve requirements. Table W - 9, in Appendix 1 presents the cash flow analysis and the proposed series of revenue increases for the water utility, and Table S - 9, in Appendix 2 presents the same for the wastewater utility. 1.1.4 Cost of Service Analysis 1. The revenue requirements less any revenues from other sources provides the "net" annual operating fund revenue requirements (also referred to as "cost of service") that needs to be recovered through user rates and charges. A summary of the projected annual cost of service for 2023 is shown for water and wastewater in tables ES-1 and ES-2, respectively. Table ES - 1—Water 2023 Cost of Service O&M Expenses 17,946,400 17,946,400 Depreciation 2,886,700 2,886,700 3 Return 2,926,500 2,926,500 4 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Executive Summary ES-1-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table ES - 2 —Wastewater 2023 Cost of Service O&M Expenses Depreciation 17,377,400 8,187,000 17,377,400 8,187,000 3 Return 1,195,100 1,195,100 4 Net Cost of Service 17,377,400 9,382,100 26,759,500 2. As a basis for design of a schedule of water and wastewater rates, the costs of service are allocated to the classes of customers in accordance with respective service requirements of each customer class. The resulting costs of service allocated to customer classes are summarized in Table W - 17 for water and Table S -17 for wastewater. 1.2 Proposed Recommendations Based on the financial planning and cost of service analysis performed for the study period, the Black & Veatch team proffers the following series of recommendations: 1. Implement new water and wastewater rate schedules in 2024 that are based on 2023 cost of service and reflect a 6% revenue increase in water and a 3% revenue increase in sewer. 2. Implement a series of 6% annual revenue increase from 2025 to 2027 for the water utility and a series of 3% annual revenue increases from 2025 to 2027 for the wastewater utility. 3. Transition the existing monthly Base charge to the proposed Base Charge, derived based on cost of service when the cost of service based proposed Base Charge is greater than the existing Base charge. 4. Eliminate the minimum volume charge billing of 1,000 gallons from the volumetric portion of the rate structure. 5. Continue with the existing tier block structure for customer classes that have an inclining block (residential) or a uniform block (industrial) for the volumetric rate structure. 6. Change to uniform block for customers that currently have a declining block (non-residential and irrigation) volumetric rate structure. These recommendations enable the water and wastewater utilities to meet all its financial obligations, so that the City can continue to provide reliable service to serve the needs of existing and future customers. The City Council adopted the schedule of proposed water and wastewater rates shown in Table W-18 and Table 5-18 of this report, to be effective January 1, 2024, as a means of meeting the projected water and wastewater system revenue requirements in the year 2024. BLACK & VEATCH I Executive Summary ES-1-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 1.3 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. Use of this report or any information contained therein by any party other than the Client, shall constitute a waiver and release by such third party of Black & Veatch from and against all claims and liability, including but not limited to liability for special, incidental, indirect or consequential damages in connection with such use. Such use of this report by a third party shall constitute agreement by the third party user that its rights, if any, arising from this report shall be subject to the terms of this Report Limitations, and in no event shall the third party's rights, if any, exceed those of the Client under its contract with B&V. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of B&V, and the shareholders, directors, officers, partners, employees, and agents of all released or indemnified parties. BLACK & VEATCH I Executive Summary ES-1-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.0 Introduction The City of Fayetteville water utility provides treated water and water distribution services to approximately 41,300 customers within the corporate limits of Fayetteville, and to approximately 7,400 customers in areas contiguous to, but outside of the City's corporate limits. The wastewater utility provides retail wastewater collection and treatment service to approximately 36,600 customers within the corporate city limits and to approximately 3,000 customers outside of the City's corporate limits. The City also provides treated water to four wholesale customers and wastewater treatment to two wholesale customers. In providing water and wastewater service, the City incurs considerable expense related to the ongoing operating and capital needs of the utilities. These operating and capital expenditures tend to increase annually due to the combined effects of inflation and the need to repair, replace, or extend existing service facilities to meet customer service requirements, as well as to meet more stringent state and federal water quality requirements and EPA requirements. The City of Fayetteville, recognizing the importance of financial planning and cost of service analysis to equitably recover the increasing costs to replace, renew, expand, improve, and operate its water and wastewater service facilities, retained Black & Veatch to perform this comprehensive study of revenue requirements, cost of service, and rates for potable water service and wastewater service. 2.1 Purpose This report examines the respective projected revenue and rate requirements of the water and wastewater systems of the City. The purpose of this report is (1) to project the future revenues of the water and wastewater utilities under existing rates and charges, as well as the operating expenses and capital financing revenue requirements of the two utilities, and to examine the adequacy of projected revenues to meet these revenue requirements through calendar year 2027; (2) to allocate these revenue requirements, or costs of service, for a representative test year to the various customer classes in accordance with the respective service requirements that each class places on the systems; and (3) to develop a suitable schedule of water and wastewater rates that will produce revenues adequate to meet the financial needs of the utility on a basis that recognizes customer costs of service, existing wholesale service agreements and practical bill impact considerations. 2.2 Scope This report presents the results of a comprehensive study of the projected revenue and revenue requirements, costs of service allocations, and proposed rates for treated water and wastewater service. Revenue and revenue requirements are projected for the six calendar years from 2022 through 2027, recognizing anticipated growth in number of customers, water use, and wastewater flows throughout the service area. The study of revenue requirements recognizes projected operation and maintenance expense, capital improvement requirements met from revenues, principal and interest payments on outstanding and proposed bond issues, and reserve fund requirements. Requirements of existing revenue bond indentures are also recognized. Costs of treated water and wastewater service are developed for each group of customers and type of service based on consideration of utility revenue needs and projected customer service requirements. Rate adjustments are designed for retail and wholesale customers in accordance with allocated costs of service, wholesale service agreement terms, and customer bill impact considerations. BLACK & VEATCH I Introduction 2-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2.3 Study Methodology The development of user rates and charges requires the integration of three critical components: (i) financial plan; (ii) cost of service allocations; and (iii) rate design. 2.3.1 Financial Plan The development and update of a financial plan is necessary to continue to focus on financial discipline, build financial stability, and maintain sustainable financial planning Financial Planning practices. The financial planning process helps to establish a financial roadmap to meet all of the water and wastewater utility's obligations. As illustrated in Figure 2 - 1, the key components of a financial plan are: (i) projection of revenues from user rates and other sources; (ii) development of a capital financing plan to decide the mix of debt and cash funding of capital program; (iii) projection of revenue requirements (O&M and capital costs, and target reserves); and (iv) determination of the level and timing of revenue adjustments needed to maintain financial viability. The annual revenue requirements are typically developed on a cash - needs basis for public utility rate setting. The revenue requirements, under the cash -needs basis approach, include the following: Project Revenues Review ro-Forma FP Project Revenue Requirements Scenario Planning Develop Capital % Rev ancing Plan Adjustments Figure 2 -1: Financial Plan O&M expenditures; Debt service expenses; Cash financing of capital program; Contributions to operating reserves; and Other obligations such as payments and transfers for specific purposes. To establish financial stability, a financial plan is typically prepared for a multi -year period. A six -year financial plan was developed for the water and wastewater utility to achieve the financial objectives and target metrics defined to build and sustain financial integrity. 2022 through 2027 is the forecast period for both revenues and revenue requirement projections. The revenue adjustments represent the level of annual revenue increases necessary to meet the annual net revenue requirements. 2.3.2 Cost of Service Cost of service can be described as the revenue that the water and wastewater utility need to generate, net of funding from other miscellaneous sources of revenues. Therefore, Cost of Service is essentially the "net revenue requirement" that is to be recovered through user rates and charges. As illustrated in Figure 2 - 2, Cost of Cost of Service Analysis Allocate Costs Develop Units Unit Costs of Service Distribute Allocated Costs Based on Service Requirements Figure 2 - 2: Cost of Service service analysis enables an equitable apportioning of the net annual revenue requirements (also referred to as cost of service) to the various cost components and customer BLACK & VEATCH I Introduction 2-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study classes. The level and types of allocation performed depend on the existing and anticipated rate structure. As municipal utilities are public utilities that cannot make a profit, the equitable allocation of costs is a critical step that is necessary to establish a reasonable nexus between costs incurred in providing service and the fees charged from customers, and to establish defensible user rates and charges. 2.3.3 Rate Design The third and final component is an evaluation of the existing rate structure components and the development of proposed user rates and charges. The user rates and charge schedules typically include fixed charge, volumetric charge, and other special charge rate components. As illustrated in Figure 2 - 3, the rates and charges are designed to recover the annual cost of service allocated to these different rate components and based on local policy and practical considerations. The study methodology described above and used in the financial planning, cost of service and rate design analysis reflect the application of industry accepted rate setting approaches that are provided in the following two guidance manuals: American Water Works Association (AWWA) Manual M-1: Principles of Water Rates, Fees, and Charges for water rate setting; and Rate Design Review Develop COS Rates Scenario 1 Planning Develop Practical Rates Proposed Rates ---------------------------------- Figure 2 - 3: Rate Design Water Environment Foundation (WEF) Financing and Charges for Wastewater Systems for wastewater. BLACK & VEATCH I Introduction 2-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 3.0 Rate Structure Overview The revenue requirements of a water and wastewater utility, net of any miscellaneous sources of revenues, are recovered from user rates and charges. A water rate structure usually consists of two primary components, namely, a fixed charge and a volumetric charge. Similarly, a wastewater rate structure more commonly consists of a fixed charge, a volumetric charge, and pollutant charge (for wastewater pollutants such as Bio-chemical Oxygen Demand (BOD) and Total Suspended Solids (TSS). Occasionally, a utility's water and wastewater rate structures may include special surcharges and/or special assessments to recover costs associated with certain service situations such as purchased water, pumping to elevations, drought conditions, readiness -to -serve, environmental conditions, and extra - strength wastewater discharges. 3.1 Fixed Charge A utility's annual revenue requirements comprise mostly of fixed costs such as salaries and benefits, pension obligations, debt service, cash financing for infrastructure renewal, and costs related to the provision of adequate capacity for service. These types of fixed costs occur on a recurring basis regardless of the amount of water used by the customer. Therefore, rate structures need to afford the ability to recover at least some of the fixed costs based on billing parameters that are not related to water usage or wastewater flow. The fixed charge, which is assessed regardless of the volume of water used, provides a mechanism to reliably recover some of the fixed annual operating costs of the utility, and provide for some level of revenue stability. In the utility industry, fixed charges are designed to recover one or more of the following types of costs, namely, (i) metering; (ii) billing; (iii) readiness -to -serve cost; (iv) specific capital investment; and (v) other specific costs. The costs of providing these functions vary among types of customers and/or by factors such as size and capacity of the meters. Therefore, to provide for equitable cost recovery, water and wastewater fixed charges are usually assessed based on meter size and also by customer class. 3.2 Volumetric (Usage) Charge In the utility industry, usage charges are designed to recover all other costs (except those that are recovered through fixed charge) associated with the treatment and delivery of water service and the collection, treatment, and disposal of wastewater. The three common types of volumetric charge are: (i) inclining block rate, where the usage in the next higher usage block is priced at a higher rate per unit; (ii) uniform block rate, where all units of usage are priced at the same unit rate; and (iii) declining block rate, where the usage in the next higher usage block is priced at a lower rate per unit. As usage patterns vary among customer classes and consequently different classes place different levels of service demands, different volumetric rates can be established for the various customer classes. In designing the volumetric rate structure, practical considerations including conservation, equity, affordability, and ease of administration are addressed. 3.3 Existing Rate Structure 3.3.1 Water Rate Structure Consistent with industry rate structures, the City's water rate structure comprises of both Fixed Charge and Volumetric Charge components. The water rate structure includes the following two components: BLACK & VEATCH I Rate Structure Overview 3-0 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Base Charge (Fixed Charge); and Volume Charge (Volumetric Charge). Some of these components are applicable to only specific customer classes. The revenues derived from the above charges are collectively referred to as water Service ttevenues. ■ Base Charge The existing Base Charge for all customer classes is based on meter size. ■ Volume Charge. The existing Volume Charge is based on the quantity of water used by the customers. ■ Safe Drinkine Water Fee: This is a regulatory charge per bill that is collected by the City on behalf of the state of Arkansas Department of Public Health. The customer classes to which the specific charge components apply is illustrated in Figure 3 -1. The existing water rate schedule for 2022, for these rate components, is presented in Table W - 3 in Appendix 1. All customers are billed monthly. Figure 3 - 1: Existing Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) Minimum Usage (1,000 Gallons) Volume Rate (2-Tier Declining Block) Minimum Usage (1,000 Gallons) Volume Rate (Uniform) Minimum Usage (1,000 Gallons) Volume Rate ( Uniform) 2 rates (Reduced Peak Demand and Peak Demand) Safe Drinking Water Fee (per month) 3.3.2 Wastewater Rate Structure Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential Retail Inside City Non -Residential, Irrigation; and Retail Outside City Non -Residential, Irrigation Retail Inside City Major Industrial Retail Outside City Major Industrial Wholesale • All customer classes The City's Operating Fund wastewater rate structure also comprises of both Fixed Charge and Volumetric Charge components. The wastewater rate structure includes the following three components: Base Charge (Fixed Charge); BLACK & VEATCH I Rate Structure Overview 3-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Volume Charge (Volumetric Charge); and BOD and TSS Charge (Surcharge). The revenues derived from all these three sources are collectively referred to as "Wastewater Service Kevenues. Some of these user rate components are applicable to only specific customer classes. ■ Base Charge: The existing Base Charge for all retail customers is based on meter size. ■ Volume Charge: The existing volume wastewater charge is based on the quantity of water used by the customer classes. Surcharge: The existing wastewater surcharge is based on the excess strengths of BOD and TSS, of certain customers. The customer classes to which the specific rate components are applicable is illustrated in Figure 3 - 2. The existing wastewater rate schedule for 2022 is presented in Table S - 3 in Appendix 2. Figure 3 - 2: Existing Wastewater Rate Structure • Base Charge by Meter Size • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); • Volume Rate (2-Tier Inclining Block) Retail Inside City Residential Based on winter water usage of December, January and February Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale 2 tiered rates (85% of metered water usage and Above 85% of metered water usage) BLACK & VEATCH I Rate Structure Overview 3-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.0 Water Utility The financial plan and rate design were developed to meet all the funding obligations of the water utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The water utility financial plan was developed for the six -year forecast period of 2022 through 2027, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 4.1 Water Revenue Projections Under Existing Rates The water utility revenues are derived from the following sources: Water Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Water Service Revenues under the 2022 existing rates are projected for the forecast period. 4.1.1 Water Revenue Under Existing Rates As described in Section 3.3.1, the Water Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual water usage by customer class and by applicable blocks of usage. 4.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and average usage trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and usage factor. The number of accounts is projected to grow in all customer classes except for Fire protection and wholesale where the number of accounts is anticipated to remain at the 2022 level. The total number of water accounts (not including private fire connections) is anticipated to increase from about 48,000 in 2022 to about 52,200 in 2027, at an overall annual system growth rate of 1.7%. The number of private fire connections is anticipated to remain at 727 throughout the study period. Table W - 1 in Appendix 1 presents the projected annual number of water accounts and private fire connections for the period of 2022 through 2027. BLACK & VEATCH I Water Utility 4-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 4-1 presents both the historical and projected number of accounts for the water utility. Water Utility Historical and Projected Accounts 60,000 50,000 40,000 30,000 20,000 10,000 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-1 - Historical and Projected Water Accounts 4.1.1.2 Projection of Water Usage Billed water volumes are projected based on estimates of the number of water accounts and the average billed usage per account. Average water use per account is determined based on historical usage. Customer water usage projections are based on 2022 actuals. Total system water usage is projected to increase from 4,238,900 kgals in 2022 to 4,517,900 kgals in 2027. Table W - 2 in Appendix 1 presents the projected annual volume for the period of 2022 through 2027. Figure 4-2 presents both the historical and projected annual billed volume for the water utility. Water Utility Historical and Projected Billed Volume (1,000 5,000,000 Gallons) 4,000,000 3,000,000 2,000,000 1,000,000 0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-2 - Historical and Projected Water Billed Volume BLACK & VEATCH I Water Utility 4-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 4.1.2 Projection of Water Service Revenue Under Existing Rates Water service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected water usage for each customer class, and the application of the 2022 rate schedule. Water service revenue under existing rates is projected to increase slightly from $23.4 million in 2022 to $25.1 million in 2027. This growth is due to increase in water sales due to the growth in the number of accounts over the study period. Table W - 4 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. Figure 4-3 presents both the historical and projected annual service revenues under existing rates for the water utility. Water Utility Historical and Projected Water Service Revenues (Under Existing Rates) $30,000,000 $25,000,000 — — — — — — $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-3 - Historical and Projected Water Service Revenue 4.1.3 Other Water Revenues The other revenues include the following major components: Impact Fee Revenue; Water/Rural Water Connection Fees; Miscellaneous Fees (Water Sales Not on Computer, Trip Fees, Tampering -Billed Service); Penalties; and Safe Drinking Water Fee (pass -through) The annual revenues from water impact fees, water connection fees, miscellaneous fees, and penalties for 2022 to 2027 are projected based on historical three-year average revenues for each of the fees. Table W - 5 in Appendix 1 presents the projected annual service revenues for the period of 2022 through 2027. The Safe Drinking Water Fee (SDWF) is assessed for all water users in the state of Arkansas. The current rate is $0.40 per bill per month and is collected by all water utilities in the state. The SDWF revenue is BLACK & VEATCH I Water Utility 4-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study projected by applying the current rate to the number of meters for the period 2022 to 2027. The revenue collected as part of this fee is reimbursed to the state. 4.2 Water Capital Improvements Program The capital project costs provided by the City were based on 2023 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects. The water utility Capital Improvement Plan (CIP) provides for a total of $134.6 million of investments during the study period of 2022 through 2027. Table W - 6 in Appendix 1 presents the CIP list of projects and schedule for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. Included in the 2022 — 2027 Water capital program is $93.5 million for the West Water Transmission Line. This project consists of approximately 11.3 miles of 48" diameter pipeline to convey treated water from Beaver Water District to the City. This project is to be funded from a mix of bond financing and revenue from water rates. 4.3 Water Revenue Requirements Projection of reliable revenue requirements includes: (1) operation and maintenance expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) SDWF Reimbursement; (5) debt service (consisting of principal and interest payments); (6) transfer to shop fund; (7) transfer to operating reserve; (8) cash financed capital; and (9) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 4.3.1 Water Operation and Maintenance Expenses The O&M expenses for the water utility include the annual expenses associated with the water purchases from Beaver Water District; storage and distribution; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a water inspector (not included in the budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Purchased Water: 3.00% BLACK & VEATCH I Water Utility 4-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The annual O&M expenses for water utility are budgeted at $16.5 million in 2022 and are projected to grow to $20.7 million by 2027. Table W - 7 in Appendix 1 presents a summary of total projected operation and maintenance expense for the period 2022 through 2027. Figure 4-4 presents the historical and projected O&M expenses for the water utility. $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Water Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 4-4 - Projected Annual Water O&M Expenses 4.3.2 Water Bad Debt Bad debt expense refers to outstanding balances owed that are deemed uncollectible. The water bad debt in 2019 was 0.5% of revenue. Hence, bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for water utility is projected to increase from $116,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table W - 9 in Appendix 1 presents the projected bad debt for the period 2022 through 2027. 4.3.3 Water Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the water utility is calculated by multiplying actual water revenues from prior year (Water sales on Computer and Water sales not on Computer/ Bulk Water Sales, and Fire Hydrant and Protection). Annual PILOT amount for the water utility is anticipated to increase from $993,700 in 2022 to $1,342,000 in 2027. Line 12 in Table W - 9 in Appendix 1 presents the projected PILOT expenses for the period 2022 through 2027. 4.3.4 Safe Drinking Water Fee Reimbursement The SDWF revenue collected for each metered customer is reimbursed to the state of Arkansas department of Public Health. The SDWF reimbursement is projected to increase from $230,400 in 2022 to $250,600 in 2027. Line 13 in Table W - 9 in Appendix 1 presents the projected SDWF reimbursement for the period 2022 through 2027. 4.3.5 Water Debt Service Requirements The water utility currently does not have any outstanding debt service obligations; however, it does anticipate a $90 million debt issuance in 2024 for the West Water Transmission Line. Projected debt BLACK & VEATCH I Water Utility 4-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study service is $3.2 million in 2024 and increasing to $ 6.3 million in 2025 as shown in Line 14 in Table W - 9 in Appendix 1. 4.3.6 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 16 in Table W - 9 in Appendix 1. 4.3.7 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $133,100 in 2022 to $256,600 in 2027 reflecting the growth in the O&M budget. Line 17 in Table W - 9 in Appendix 1 presents the projected transfers to the operating reserve for the period 2022 through 2027. 4.3.8 Water Cash Financed Capital The City currently utilizes the following two sources of funding for the water utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 4.2, the water capital improvement program for the study period is $134.6 million, of which $47.5 million is projected to be funded from operating revenues, $4.3 million is from the impact fee fund, and $90 million from a new revenue bond. A capital project meets the requirements of using impact fees if the existing water capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table W - 8 in Appendix 1 presents the sources of funding for the water capital improvement program. Line 18 in Table W - 9 in Appendix 1 presents the projected transfers for cash financed capital for the period 2022 through 2027. 4.3.9 Transfer to Capital Reserve The water utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 19 in Table W - 9 in Appendix 1 presents the projected transfers to and from the capital reserve for the period 2022 through 2027. 4.4 Water Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table W - 9 in Appendix 1, provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates water utility revenues will increase from $23.8 million in 2022 to $25.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues are anticipated to increase from $645,600 in 2022 to $684,100 in 2027. This increase is due to the growth in SDWF, which is pass - through. It is anticipated that all other categories of other revenues will remain flat throughout the study period. BLACK & VEATCH I Water Utility 4-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Projected Expenses: Line 15 indicates the total annual expenses for the water utility are anticipated to increase from $17.8 million in 2022 to $28.7 million in 2027. Projected Transfers: Line 20 indicates the total annual transfers for the water utility are anticipated to decrease from $6.2 million in 2022 to $3.5 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the water utility, a series of revenue adjustments are proposed as follows: 2024: 6% effective (January 1, 2024) 2025: 6% effective (January 1, 2025) 2026: 6% effective (January 1, 2026) 2027: 6% effective (January 1, 2027) Lines 2 through 7 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 4-5 presents the projected revenue and revenue requirements through 2027 for the water utility. Water Utility Revenues and Revenue Requirements $50,000,000 $40,000,000 $30,000,000 IIIIIIII� � $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Debt Service Cash Financing of Capital Other Transfers — Revenues Under Existing Rates Revenues Under Proposed Rates Figure 4-5 - Water Revenues and Revenue Requirements Table W - 10 in Appendix 1 presents the water utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: BLACK & VEATCH I Water Utility 4-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table W -10, the proposed annual revenue adjustments will allow the water utility to meeting the minimum fund balance requirements for the O&M Reserve, Operating and Capital funds through 2027. The water utility Capital Reserve fund balance is negative beginning 2025, however, the combined water and wastewater utility Capital Reserve fund is positive through 2027. 4.5 Water Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 4.1 through 4.4 provides an estimate of the total annual revenue requirements for a given fiscal year. The cost of service analysis provides a mechanism to defensibly allocate the total annual revenue requirements to the various customer classes. The cost of service is typically performed for a single year, referred to as the "Test Year" for which the rates are to be designed. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Water Utility Costs to Customer Classes 4.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table W -11 in Appendix 1 presents the derivation of the cost of service to be recovered through water charges. As Line 18 in Table W -11 indicates, the water cost of service for 2023 is projected to be $23.8 million. This cost of service consists of $17.9 million of net O&M expense and $5.8 million of net capital costs. Costs of service is apportioned among customer classes in this study on a "Utility Basis", that is, in terms of operating expense, depreciation expense, and return. For a municipal utility, the total of depreciation expense and return is equal to the capital cost related portion of the total cost of service. Depreciation is the loss in value of the original plant investment, not restored by current maintenance, due to wear, decay, inadequacy, and obsolescence. Annual depreciation is determined as a percentage of original investment based on expected service lives of the various facilities. Unless funds are provided for normal annual replacement of original plant items, operating reliability of the system, as well as the BLACK & VEATCH I Water Utility 4-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study value, will decrease. Depreciation funds are used to finance principal payments on bond issues and provide normal annual capital expenditures. The depreciation expense associated with the water utility is estimated in this study recognizing depreciation rates presently in use by the water utility. This results in a projected test year depreciation expense of $2.9 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return on the system investment provides funds for bond interest payments and any other costs that may be incurred. In developing the level of return on net plant serving the requirements of outside City customers, provisions for a reasonable margin should be made to meet interest on borrowed funds, and to recognize the business risk assumed by the City in providing reliable facilities to serve nonresident customers. Total return for the test year is projected to be $2,926,500 as shown on Line 17 of Table W - 11 in Appendix 1. 4.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a water system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes Functional Cost Centers Functional cost centers of a water utility represent the activities that contribute to the incurrence of O&M and capital costs. For a water utility, they often include source of water supply, pumping, treatment, storage, distribution, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 4.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W - 12 in Appendix 1. This plant investment data is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 4.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on the specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue BLACK & VEATCH I Water Utility 4-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study requirement) of $17.9 million, to the various functional cost centers, is presented in Table W -14 in Appendix 1. The various cost elements of water service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 4.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of Base Costs, Extra -Capacity Costs, and Customer Costs. Base costs are those which vary directly with the quantity of water used, as well as those costs associated with serving customers under average load conditions without the elements necessary to meet water use variations or peak demands. Base costs include purchased power and treatment chemicals, and other operating and capital costs of the water system associated with serving customers to the extent required for a constant, or average annual rate of use. Extra -Capacity costs represent those operating costs incurred due to demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. Total extra capacity costs are subdivided into costs associated with maximum day and maximum hour demand. Customer Costs are defined as costs which tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collection and accounting costs, and maintenance and capital charges associated with meters and services. The delineation of costs of service into these principal categories provides the means of further allocating such costs to the various customer classes based on the respective base, extra capacity, and customer service requirements of each customer class. Wholesale customers generally do not use smaller water distribution mains as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 4.5.3.1 Water Utility Allocation to Cost Components The water utility is comprised of a variety of service facilities, each designed and operated to fulfill a given function. In order to provide adequate service to its customers at all times, the utility must be capable of not only providing the total amount of water used, but also supplying water at maximum rates of demand. Since all customers do not exert their maximum demand for water at the same time, capacities of water facilities are designed to meet the peak coincidental demands that all classes of customers, as a whole, place on the system. For every water service facility on the system, there is an underlying average demand, or uniform rate of usage exerted by the customers for which the base cost component applies. For those facilities designed solely to meet average day demand, costs are allocated 100% to the base cost component. Extra capacity requirements associated with coincidental demands in excess of average use are further related to maximum daily and maximum hourly demands. Analysis of historical system maximum day and maximum hour demands to average day demands results in appropriate ratios for the allocation of capital costs and operating expenses to base and extra BLACK & VEATCH I Water Utility 4-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study capacity cost components. A maximum day to average day ratio of 2.10 is used based on experienced demands in the water system. This indicates that approximately 47.6% of the capacity of facilities designed and operated to meet maximum day demand is required for average or base use. According, the remaining 52.4% is required for maximum day extra capacity requirements. The costs associated with facilities required to meet maximum hour demand are allocable to base, maximum day extra capacity, and maximum hour extra capacity. A ratio of maximum hour to annual average day water use of 2.73 is used, based on demands experienced by the system. This ratio indicates that 36.6% of the capacity of facilities designed and operated for maximum hour demand is needed for average or base use, while 40.3% is utilized for maximum day extra capacity uses, and the remaining 23.1% is required to meet maximum hour extra capacity demand in excess of maximum day needs. 4.5.3.2 Allocation of Net Water Plant Investment The estimated test year net plant investment in water facilities consists of net plant in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. As the wholesale customers have their own storage tanks, the plant investment associated with tanks was allocated to the retail customers only. The total estimated OCLD of the water system is $107.5 million, as presented in Line 9 in Table W - 12 in Appendix 1. Plant investment is allocated to cost components on a design basis recognizing the principal function governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. 4.5.3.3 Allocation of Water Facilities Depreciation Expense Depreciation is a real part of the cost of operating a utility. In utility accounting, it is generally accepted practice to use depreciation funds to finance system replacements, improvements, and extensions. While such action does not restore the value lost in each property unit every year, the total value lost through depreciation is restored to the system as a whole. Depreciation funds can be reinvested in the system either by direct payment of routine capital additions and replacements or by principal payments on bonded debt. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the water system is $2.9 million, as presented on Line 9 in Table W - 13 in Appendix 1. As the wholesale customer have their own storage tanks, the depreciation costs associated with tanks was allocated to the retail customers only. 4.5.3.4 Allocation of Water Utility Operating Expenses Table W - 14 in Appendix 1 presents the allocation of O&M expense to functional cost components. Total test year O&M expense, as shown on Line 7 of this table, amounts to $17.9 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. 4.5.4 Distribution of Water Utility Costs to Customer Classes As a basis for determining the cost of water service to each customer class, the elements of cost of service previously allocated to functional cost components are distributed among the classes in proportion to their respective service requirements. Estimates of these requirements, or units of BLACK & VEATCH I Water Utility 4-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study service, reflect the average number of accounts with recognition to relative meter sizes serving each account, annual water sales, and estimated peak water demands placed on the system by each customer class. Analysis of resulting costs of service to each class and comparison of allocated costs with revenues under existing rates provide a basis for future water rate adjustments. 4.5.4.1 Water Customer Classification Customer classes consist of residential, non-residential, industrial, irrigation, wholesale, and public and private fire protection. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential, and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit classes. Industrial includes major and minor industrial. Outside City includes Farmington, Greenland, Washington/Growth Area, Johnson, and Goshen/ White River. Wholesale includes the communities of Elkins, West Fork, Mt. Olive, and RDA/WWA. These classes group together customers with similar service requirement characteristics and provide a means for allocating costs to customers. 4.5.4.2 Water Units of Service The cost of service responsibility for base costs varies with the annual volume of water usage and is distributed to customer classes on that basis. Extra capacity costs are those costs associated with meeting peak rates of water use and are distributed to customer classes on the basis of their respective system capacity requirements in excess of average requirement rates. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of the number of equivalent meters and monthly bills. The estimated units of service for the various customer classifications are presented in Table W -15 in Appendix 1. Estimates of test year annual water volumes, shown in Column 1, are based on the projections of total water sales for the test year 2023. Average daily water use is presented in Column 2. Columns 3 through 8 present the estimated maximum day and maximum hour capacity factors for each customer class, the resulting demands, and extra capacity requirements, respectively. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 10) is estimated by relating typical costs for meters and services larger than 5/8 inch in size to the typical cost of a 3/4 inch meter and its related service line. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class in Column 11. Extra capacity requirements for fire protection service recognize, in part, peak fire flow requirements, and system capabilities established by the Insurance Service Office. One fire is estimated with peak fire flow requirements of 9,000 gallons per minute for 10 hours (maximum day) and 24 hours (maximum hour). Direct fire protection costs have been allocated between inside City and outside City customers in proportion to the number of equivalent 6-inch fire hydrants, as shown in Columns 12 and 13. 4.5.4.3 Water Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. BLACK & VEATCH I Water Utility 4-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The water utility has been built with provision for service to customers outside the City, yet the inside City customers must bear the responsibility for providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 7.0% (4.0% for future debt service plus 3.0% risk component) annual rate of return on the value of water facilities serving outside City customers is recognized for purposes of this study. Table W - 16 in Appendix 1 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 3 summarize the units of service developed in Table W - 15. Total allocated costs or investment shown on Lines 4, 6, and 8 were previously developed in Table W - 14, Table W - 13, and Table W - 12, respectively. Unit costs of service for each component are determined by dividing the allocated cost or investment by the total units of service. Total allocated unit costs of service for inside and outside City customers (Lines 15 and 16) are determined by adding the unit costs for net operating expense (Line 5) and depreciation expense (Line 7) to the respective inside and outside City unit costs for return on investment (Lines 10 and 11). These unit costs applied to the respective units of service shown on Lines 1 and 2 determine the allocated total costs of service for inside and outside City customers shown on Lines 17 and 18. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table W - 17 in Appendix 1 shows the resulting allocated and adjusted cost of service by customer class, revenue under existing rates, and the additional revenue required from each class. Costs associated with public fire protection are not recovered through direct charges, therefore, the cost of service for this class is reallocated to all other retail customers in proportion to their allocated cost of service as shown in Column 3. The test year adjusted cost of service, reflecting the reallocation of these costs, is shown in Column 4. The indicated increase or decrease in revenue required to meet adjusted cost of service is shown in Column 6. BLACK & VEATCH I Water Utility 4-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 5.0 Water Rate Design The principal consideration in establishing water rate schedules is to establish rates to customers to recover costs that reasonably commensurate with the cost of providing water service. Theoretically, the only method of assessing entirely equitable rates for water service would be the determination of each customer's bill based upon each customer's particular service requirements. Since this is impractical, schedules of rates are normally designed to meet average conditions for groups of customers having similar service requirements. Rates should provide for equitable cost recovery, ease of customer understanding and be simple to administer. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting water rates. The revenue requirements reflect the need for adjustment and the level of revenue required. The cost of service analysis provides the unit costs of service used in the rate design process and gives a basis for determining whether resultant rates will develop revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 5.1 Existing Water Rates The existing schedule of rates for water service became effective on January 1, 2022. For both retail and wholesale customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. The existing water rate structure is described in Section 3.3.1. The existing schedule of base and volumetric water rates is shown in Table W - 3. 5.2 Proposed Water Rates The cost of service analysis described in the preceding sections of this report provides a basis for the design of a schedule of water rates to meet those costs. Proposed water base charge and volume rates have been designed to meet the 2024 allocated costs of service and are presented in Table W -18. The proposed rate structure eliminates the minimum volume charge associated with 1,000 gallons. Additionally, volumetric rate structure for non-residential and irrigation customers classes both inside and outside city were changed from declining block rates to uniform block rates Figure 5 - 1 below presents the proposed water rate structure. Figure 5 - 1 Proposed Water Rate Structure • Base Charge by Meter Size Volume Rate (3-Tier Inclining Block) • Volume Rate (Uniform) Retail Inside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Retail Outside City (Residential, Non -Residential, Major Industrial, Irrigation, Fire Protection); Wholesale Retail Inside City Residential; and Retail Outside City Residential • Retail Inside City Non -Residential, Major Industrial, Irrigation; and BLACK & VEATCH I Water Rate Design 5-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study • Retail Outside City Non -Residential, Irrigation Volume Rate ( Uniform) Wholesale Safe Drinking Water Fee (per month) All customer classes In developing proposed schedules of water rates, it must be recognized that the cost of service studies are the result of engineering estimates, based to some extent upon judgment and experience, and detailed results should not be used as literal and exact answers but as guides for potential rate adjustments. Practical considerations such as previous rate levels, bill impact on customers, and magnitude of cost of service shifts among customer classes, and past local practices are commonly recognized in making rate adjustments. A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is presented in Table W - 19 in Appendix 1. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical inside city and outside city customer water charges under existing rates and the rates proposed to become effective January 1, 2024, is presented in Table W - 20. The City Council adopted the schedule of proposed water rates shown in Table W-18 of this report, to be effective January 1, 2024, as a means of meeting the projected water system revenue requirements in the year 2024. BLACK & VEATCH I Water Rate Design 5-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.0 Wastewater Utility The financial plan and rate design were developed to meet all the funding obligations of the wastewater utility, and to achieve the financial adequacy and equitable cost recovery discussed in Section 2.3. The wastewater utility financial plan was developed for the forecast period of 2022 through 2027, and includes the following key components: Revenue projections (user rate revenues and non -rate revenues); Capital improvement program financing; Annual revenue requirement projections; and Annual proposed revenue increases 6.1 Wastewater Revenue Projections Under Existing Rates The wastewater utility revenues are derived from the following sources: Wastewater Service Revenues (Base and Volume Charge) Other Revenues As a first step in the development of the financial plan, Wastewater Service Revenues under the 2022 existing rates are projected for the forecast period. 6.1.1 Wastewater Revenue Under Existing Rates As described in Section 3.3.2, the Wastewater Service Revenue consists of two charge components. For each of the two components, revenues are projected based on billing units and applicable existing rate schedules. The billing units necessary to compute the Base Charge revenues are the number of accounts based on meter size and customer class. The billing units necessary to compute the Volume Charge are the annual wastewater billed volumes by customer class and by applicable blocks of billable wastewater volume. 6.1.1.1 Projection of Customer Accounts Typically, historical billing units are reviewed and used to project billing units for the forecast period. The project team reviewed historical accounts and billed volume trends for each customer class referenced in Section 3.3.1. Based on the review of historical trends, two annual adjustment factors were applied to project billing units for the forecast period. The two adjustment factors applied at the customer class level are accounts growth rate and volume factor. The number of accounts is projected to grow for residential customer classes Fayetteville (Inside City) and Farmington (Outside City), whereas all other customer classes are anticipated to remain at the 2022 level. The total number of wastewater accounts is anticipated to increase from about 39,603 in 2022 to about 42,900 in 2027, at an overall annual system growth rate of 1.6%. Table S - 1 in Appendix 2 presents the projected annual number of accounts for the period of 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Figure 6-1 presents both the historical and projected number of accounts for the wastewater utility. Wastewater Utility Historical and Projected Accounts 44,000 43,000 42,000 41,000 00 40,000 dop 39,000 38,000 37,000 36,000 35,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-1 - Historical and Projected Wastewater Accounts 6.1.1.2 Projection of Wastewater Volume Billed wastewater volumes are projected based on estimates of the number of wastewater accounts and the average billed volume per account. Average billed volume per account is determined based on historical billed volume. Wastewater customer usage projections are based on 2022 actuals. Total system wastewater billed volume is projected to increase from 3,342,300 kgals in 2022 to 3,499,900 kgals in 2027. Table S - 2 in Appendix 2 presents the projected annual volume for the period of 2022 through 2027. Figure 6-2 presents both the historical and projected annual billed volume for the wastewater utility. Wastewater Utility Historical and Projected Billed Volume (1,000Gallons) 3,600,000 3,500,000 3,400,000 3,300,000 3,200,000 3,100,000 3,000,000 2,900,000 2,800,000 2,700,000 2,600,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-2 - Historical and Projected Wastewater Billed Volume BLACK & VEATCH I Wastewater Utility 6-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.1.2 Projection of Wastewater Service Revenue Under Existing Rates Wastewater service revenues for the period 2022 through 2027 are projected for each charge component (base and volume) based on the projections of accounts by meter size, projected billed volume for each customer class, and the application of the 2022 rate schedule. Wastewater service revenue under existing rates is projected to increase slightly from $26.6 million in 2022 to $28.1 million in 2027. This growth is due to increase in wastewater sales due to the growth in the number of accounts over the study period. Table S - 4 in Appendix 2 presents the historical and projected annual service revenues for the period of 2022 through 2027. Figure 6-3 presents both the historical and projected annual service requirements under existing rates for the wastewater utility. Wastewater Utility Historical and Projected Wastewater Service Revenues (Under Existing Rates) $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-3 - Historical and Projected Wastewater Service Revenue 6.1.3 Other Wastewater Revenue The other revenues include the following major components: Impact Fee Revenue; Wastewater Connection Fees; Wastewater Sales Not on Computer; Penalties; and WWTP Fees (Hay Sales, Biosolids/ Fertilizer Sales & Water Treatment Residual) The annual miscellaneous revenues for 2022 to 2027 are projected based on historical three-year average revenues for each of the fees. Table S - 5 in Appendix 2 presents the projected annual other revenues for the period of 2022 through 2027. 6.2 Wastewater Capital Improvements Program The capital project costs provided by the City were based on 2023 dollars. Based on discussions with the City, the project costs are inflated at an annual rate of 3.0% to accurately reflect the costs of projects. BLACK & VEATCH I Wastewater Utility 6-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study The City's wastewater utility Capital Improvement Plan (CIP) provides for a total of $43.2 million of investments during the study period of 2022 through 2027. Major wastewater projects include sanitary wastewater rehabilitation totaling $20.5 million and Biosolids Dryer Replacement totaling $3.2 million. Table S - 6 in Appendix 2 presents the CIP list of projects for 2022 through 2027. The CIP is expected to be financed from a funding mix of cash financing from service revenue and impact fees. 6.3 Wastewater Utility Revenue Requirements Projection of reliable revenue requirements includes: (1) O&M expenses; (2) bad debt; (3) Payment In Lieu of Taxes; (4) debt service (consisting of principal and interest payments); (5) transfer to shop fund; (6) transfer to operating reserve; (7) cash financed capital; and (8) transfer to capital reserve. The projections of annual revenue requirements for the study period are discussed in this section. 6.3.1 Wastewater Operation and Maintenance Expenses The O&M expenses for the wastewater utility include the annual expenses associated with the wastewater conveyance, pumping, treatment and disposal; meters and services; billing and collection, and general administrative services. These expenses include personnel costs (salaries and benefits), costs for materials and supplies, costs of utilities, and contracted services. The 2021 O&M budget provided by the City was used as the baseline for projection of O&M expenses for the study period. In addition, costs associated with a wastewater inspector (not included in the 2021 budget) recurring salary and benefits costs, recurring vehicle maintenance costs and one-time cost of the vehicle purchase was added per City's direction. Based on historical O&M costs, industry experience, and discussions with the City management, appropriate escalation factors were applied to various categories of costs to project future annual O&M expenses. Annual escalation factors used for major cost categories include the following: Salaries: 4.00% Benefits: 5.00% Energy: 3.00% Chemicals: 3.00% Wastewater Treatment Plant Contract: 3.00% The annual O&M expenses for wastewater utility are budgeted at $16.2 million in 2022 and are projected to grow to $19.0 million by 2027. Table S - 7 in Appendix 2 presents a summary of projected operation and maintenance expense for the period 2022 through 2027. Figure 6-4 presents the historical and projected O&M expenses for the wastewater utility. BLACK & VEATCH I Wastewater Utility 6-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study $20,000,000 $15,000,000 $10,000,000 $5,000,000 so Wastewater Utility Historical and Projected O&M Expenses 2020 2021 2022 2023 2024 2025 2026 2027 Historical — — Projected Figure 6-4 - Projected Annual Wastewater O&M Expense 6.3.2 Wastewater Bad Debt Bad debt expense refers to outstanding balances owed that are deemed uncollectible. The wastewater bad debt in 2019 was 0.5% of revenue. Hence, the bad debt projections for the study period assume 0.5% of annual revenues. Annual bad debt expense for wastewater utility is projected to increase from $132,900 in 2022 to $157,900 by 2027 reflecting the increase in projected revenues. Line 11 in Table S - 9 in Appendix 2 presents bad debt expense for the period 2022 through 2027. 6.3.3 Wastewater Payment In Lieu of Taxes The PILOT costs are paid by public utilities to municipal entity as a compensation for utilization of streets, easements, right of ways or other public places. The PILOT amount is determined per City Ordinance 4449 that requires that the water and wastewater funds to pay 4.25% of annual total gross sale revenues to the City. Annual PILOT amount for the wastewater utility is calculated by multiplying actual wastewater revenues from prior year (Wastewater sales on Computer and Wastewater sales not on Computer/ Dump Fees) and is projected to increase from $1,129,300 in 2022 to $1,341,800 in 2027. Line 12 in in Appendix 2 presents PILOT expense for the period 2022 through 2027. 6.3.4 Wastewater Debt Service Requirements The wastewater utility does not have any outstanding debt service obligations. The City does not anticipate any debt issuances during the study period, therefore no projected debt service for future debt as shown in Line 18 in Table S - 9 in Appendix 2. 6.3.5 Transfer to Shop Fund The transfer to the shop fund is made by the utility whenever a new vehicle (associated with new personnel) is purchased, thereby expanding the existing fleet. There are no projected transfers to the shop fund over the study period as shown in Line 15 in Table S - 9 in Appendix 2 6.3.6 Transfer to Operating Reserve The City maintains an operating reserve balance equivalent of ninety (90) days of following years' O&M budget. The transfer to operating reserve is projected to increase from $129,500 in 2022 to $152,700 in 2027 reflecting the growth in the O&M budget. Line 16 in Table S - 9 in Appendix 2 presents transfer to the operating reserve for the period 2022 through 2027. BLACK & VEATCH I Wastewater Utility 6-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.3.7 Wastewater Cash Financed Capital The City currently utilizes the following two sources of funding for the wastewater utility capital projects (1): transfer from operating revenues and (2) transfer from the impact fee fund. As stated in Section 6.2, the wastewater capital improvement program for the study period is $43.2 million, of which $39.7 million is projected to be funded from operating revenues and $3.5 million is from the impact fee fund. A capital project meets the requirements of using impact fees if the existing wastewater capacity is expanded due to growth. The construction contract and the budget amendment to change the source of funding to impact fee must be approved by the City Council. Table S - 8 in Appendix 2 presents the sources of funding for the wastewater capital improvement program. Line 22 in Table S - 9 in Appendix 2 presents transfer for cash financing of capital program for the period 2022 through 2027. 6.3.8 Transfer to Capital Reserve The wastewater utility, after meeting all the obligations stated in sections above, transfers the excess funds to the capital reserve fund. The capital reserve fund is used as a source for funding the capital program in the years that the revenues are not sufficient to meet the capital funding requirements. Line 18 in Table S - 9 in Appendix 2 presents transfer to and from the capital reserve for the period 2022 through 2027. 6.4 Wastewater Proposed Revenue Adjustments The annual revenue adjustments that are needed to achieve the defined financial performance objectives are determined by evaluating the funding gap between the projected annual revenue requirements and the projected revenues under existing rates. Table S - 9 in Appendix 2 provides a summary of the revenue and revenue requirements (financial plan) for the study period. Projected Revenue Under Existing Rates: Line 1 indicates that under existing 2022 rates wastewater utility revenues will increase from $26.6 million in 2022 to $28.1 million in 2027. Projected Other Revenues: Line 8 indicates that the other revenues and interest income are anticipated to increase from $726,000 in 2022 to $735,900 in 2027. It is anticipated that all categories of other revenues will remain flat throughout the study period. The slight growth is due to the increase in interest income on the operating reserve. Projected Expenses: Line 14 indicates the total annual expenses for the wastewater utility are anticipated to increase from $17.4 million in 2022 to $20.5 million in 2027. Projected Transfers: Line 19 indicates the total annual transfers for the wastewater utility are anticipated to increase from $9.9 million in 2022 to $11.8 million in 2027. Funding Gap: The cash flow analysis indicates that the sum of revenues under existing rates and the other revenues is not adequate to fund the projected annual revenue requirements, thereby causing an operating deficit. Proposed Revenue Adjustments: To address the funding gap in the wastewater utility, a series of revenue adjustments are proposed as follows: 2024: 3% effective (January 1, 2024) 2025: 3% effective (January 1, 2025) BLACK & VEATCH I Wastewater Utility 6-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 2026: 3% effective (January 1, 2026) 2027: 3% effective (January 1, 2027) Lines 2 through 7 in Table S - 9 present the amount of additional revenues generated each year with the proposed magnitude and timing of revenue adjustments. Figure 6-5 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Wastewater Utility Revenues and Revenue Requirements $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Cash Financing of Capital Other Transfers Revenues Under Existing Rates Revenues Under Proposed Rates Figure 6-5 - Wastewater Revenues and Revenue Requirements Table S - 10 in Appendix 2 presents the wastewater utility's operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: ■ O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. ■ Operating Fund Balance: A minimum target of $100,000. ■ Capital Fund Balance: A minimum target of $500,000. ■ Capital Reserve Fund Balance: An amount necessary to fully fund anticipate capital projects. As shown in Table S - 9, the proposed annual revenue adjustments will allow the water utility to meet the minimum fund balance requirements for all funds through 2027. 6.5 Wastewater Cost of Service A key step to developing an equitable rate structure involves the cost of service analysis. The financial plan discussed in sub sections 6.1 through 6.4 provides an estimate of the total annual revenue BLACK & VEATCH I Wastewater Utility 6-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study requirements for a given fiscal year. The test year for which the cost of service study was performed is 2023. The key components of the cost of service analysis are: Determination of Cost of Service (net revenue requirements); Determination of Functional Costs; Allocation of Functional Costs to Cost Components; and Distribution of Wastewater Utility Costs to Customer Classes 6.5.1 Determination of Cost of Service The first step is to determine the cost of service that is to be recovered from user rates and charges. As briefly discussed in Section 2.3, cost of service is defined as, and synonymous with, the "net revenue requirement" that is to be recovered for the test year through user rates and charges. Table S - 11 in Appendix 2 presents the derivation of the cost of service to be recovered through the wastewater charges. As Line 18 in Table S - 11 indicated, wastewater cost of service for 2023 is projected to be $26.8 million. This cost of service consists of $17.4 million of net operation and maintenance expense and $9.4 million of net capital costs. As performed for the water utility, costs of services are apportioned among customer classes in this study on a Utility Basis. The depreciation expense and return on system investments that were already explained in Section 4.5.1 are applicable to the wastewater utility cost of service analysis as well. The depreciation expense associated with the wastewater utility is estimated in this study recognizing depreciation rates presently in use by the wastewater utility. This results in a projected test year depreciation expense of $8.2 million exclusive of depreciation on contributed plant, which is not recognized for cost allocation or rate design purposes. The contributed plant adjustment is consistent with generally accepted regulatory practices. Total return for the test year is projected to be $ 1,195,100 as shown on Line 17 of Table S - 11. 6.5.2 Determination of Functional Costs As a basis for developing an equitable rate structure, the test year cost of service should be allocated to the various customer classes according to respective service requirements. The basic underlying principle in developing cost of service rates is the determination of what elements in a wastewater system are responsible for causing the level of revenue requirements that is needed. To allocate the costs to customer classes, first the operating and capital costs of service are aggregated into "Functional Cost Centers." The functional costs are then further allocated to cost components. Each component cost is then apportioned to customer classes. Functional Cost Centers BLACK & VEATCH I Wastewater Utility 6-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Functional cost centers of a wastewater utility represent the activities that contribute to the incurrence of O&M and capital costs. For a wastewater utility, they often include source of collection, pumping, conveyance, treatment, disposal, meters, billing, and other administration costs. Both the O&M and capital costs defined for the Test Year, discussed in 6.5.1, need to be allocated to functional cost centers. Functional Costs The capital costs associated with the functional cost centers are determined using detailed fixed assets data, provided by the City, for each class of asset that is currently in service, construction work in progress and projected capital improvement program for the test year. The total value of the fixed assets (referred to as "Net Plant Investment") in the system is usually presented as Original Cost Less Depreciation ("OCLD"). The total estimated OCLD value of the wastewater system is $196.8 million, as presented in Line 26 in Table S - 12 in Appendix 2. This plant investment is subsequently used as a basis for the allocation to cost components, discussed in the following subsection 6.5.3.2. The O&M costs for the Test Year are allocated to the various functional cost centers based on specific nature of costs. The allocation of the projected O&M cost of service (net operating revenue requirement) of $17.4 million, to the various functional cost centers is presented in Table S -14 in Appendix 2. The various cost elements of wastewater service are assigned to functional cost components as the first step in the subsequent distribution of the costs of service to customer classes. 6.5.3 Allocation of Costs to the Functional Cost Components The principal functional cost components consist of volume related costs, strength related costs, and customer related costs. Volume costs are those which vary directly with the quantity of wastewater contributed. They consist of capital costs related to investment in system facilities which are sized on the basis of, or required because of, wastewater volume. This also includes operation and maintenance expense related to those facilities, and the expense of volume related treatment chemicals and purchased power. Wastewater strength costs consist of the operation and maintenance expense and capital costs related to system facilities which are designed principally to treat the wastewater pollutant loadings of pollutants such as BOD, TSS, and other pollutants. BOD costs reflect costs associated with the treatment of influent BOD and include costs related to activated sludge aeration and disposal of BOD related sludge. Suspended solids strength costs are those costs of wastewater treatment which tend to vary according to the quantity of suspended solids in the raw wastewater. Customer costs are those which tend to vary in proportion to the number of customer bills or customers served. These include the wastewater utility share of customer related meter reading, billing, collection, and account expense. The delineation of costs of service into functional components provides a means of distributing such costs to the various customer classes based on the respective total wastewater volume, strength, and customer cost requirements of each. BLACK & VEATCH I Wastewater Utility 6-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Wholesale customers generally do not use lateral wastewater lines as do retail users. Therefore, separate functional cost of service categories are designated for costs which are common to all customer classes and those which are common to retail service classes only. 6.5.3.1 Wastewater Utility Cost Allocation to Cost Components In establishing the costs associated with each functional cost component, the return portion of the test year cost of service is distributed to cost functions based on an allocation of the estimated test year value of wastewater system facilities. The test year depreciation expense associated with each major element of plant facilities is allocated to cost functions in the same manner as the plant value. Operating expense is similarly allocated to cost functions based on the projected test year expense estimated for each wastewater system component. 6.5.3.2 Allocation of Net Wastewater Plant Investment The estimated test year value of wastewater facilities consists of net plan in service as of December 31, 2019, the 2020 construction work in progress, and the estimated cost of proposed capital improvements expected to be in service by the end of calendar year 2022. Table S - 12 in Appendix 2 presents the allocation of the wastewater utility's total estimated plant value less contributions on an original cost less depreciation value basis. Total plant investment is estimated to be $196.8 million as indicated by Line 26 of the Table S - 12. Plant investment is allocated to cost components on a design basis recognizing the principal purpose governing the design of the facility. The allocation of net plant investment provides the basis for allocation of depreciation expense. The Owl Creek Lift Station and Force Main serve only the City of Fayetteville, hence the plant investment associated with Owl Creek is allocated directly to the City of Fayetteville customers. Additionally, the outside City customers maintain their own wastewater connections, hence, the plant investment associated with wastewater connections is allocated 100% to the City of Fayetteville customers. Wastewater collection net plant is allocated 41% to both retail and wholesale (common to all) and 59% to retail only based on the ratio of interceptors (large diameter mains) which is 41% of the collection system. 6.5.3.3 Allocation of Wastewater Facilities Depreciation Expense As explained in Section 4.5.3.3, depreciation expense is a real part of the cost of operating a utility. The total estimated depreciation cost (excluding depreciation on contributed facilities) for the wastewater system is $8.2 million as presented on Line 26 in Table S - 13 in Appendix 2. The items of expense are allocated to cost components on the same design or cost causative basis used to allocate plant investment. Hence, the depreciation expense associated with Owl Creek Lift Station and Force main and Wastewater connections is directly allocated to the City of Fayetteville customers. 6.5.3.4 Allocation of Wastewater Utility Operating Expenses Table S - 14 in Appendix 2 presents the allocation of operation and maintenance expense to functional cost components. Total test year operation and maintenance expense, as shown on Line 10 of this table, amounts to $17.4 million. Operating expenses are allocated to functional cost components in generally the same manner as plant investment. BLACK & VEATCH I Wastewater Utility 6-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 6.5.4 Distribution of Wastewater Utility Costs to Customer Classes The total cost responsibility of each customer class is determined by developing unit costs of service for each cost component and applying the unit costs to the respective service requirements of each class. In accomplishing this, each customer class is allocated the share of volume, strength, and customer costs for which it is responsible. 6.5.4.1 Wastewater Customer Classification Customer classes consist of residential, non-residential, industrial and wholesale. The residential class includes single family residential, duplex, fourplex, apartment, multi -unit residential and rooming house customers. The non-residential class includes commercial, combination, construction, government, and non-profit customers. Outside City includes Farmington, Greenland, Washington County/Growth Area and Johnson. Wholesale includes the community of Elkins and West Fork. 6.5.4.2 Wastewater Units of Service Derivation of the responsibility of customer classes for costs of service require that each class be allocated a portion of the volume, strength, and customer costs of service according to their respective service requirements. The cost of service responsibility for volume costs, which vary with the volume of wastewater contributed to the wastewater system, is distributed to customer classes on that basis. Strength costs are principally related to the function of reducing wastewater suspended solids, and BOD strength loading. Customer costs, which consist of meter related costs, billing, collection and accounting costs, are allocated on the basis of equivalent meters and monthly bills. The estimated test year service requirements or units of service for the various customer classes are shown in Table S -15 in Appendix 2. Wastewater collected and treated consists of two elements: (1) sanitary wastewater flow and (2) infiltration/inflow (1/1) of ground water into the sewers. Contributed wastewater flow is that portion of the annual water use and/or other flows from each customer class that are discharged to the wastewater system. Estimates of the contributed volume of each class is generally based upon wastewater billing records. For residential customers, the billed wastewater volume is based on average water consumption for the preceding months of December, January and February. This methodology of using a winter quarter average for quantity of wastewater flows is used to exclude outdoor uses such as irrigation, which do not return water to the collection system. For all other customer classes, the billed wastewater volume is the same as the water volume. The difference between the measured plant influent and the customer contributed wastewater flow is attributed to Infiltration and Inflow (1/1) volume. Based on discussions with the City staff, 40% of the total treated volume is assumed to be 1/1 flows. Each customer class should bear its proportionate share of the costs associated with 1/I, as it is integral aspect of wastewater system costs. The number of customer connections to a wastewater collection system and the volume of customer flows conveyed both influence the extent of 1/1 in a system. Recognizing that the major cost responsibility for 1/1 is allocable on an individual connection basis, two-thirds of the total 1/1 volume projected is allocated to customer classes based on the number of customers with the remaining one-third allocated on the basis of contributed volume. Estimated total strength units shown for each customer class are based on an average BOD concentration of 365 milligrams per liter (mg/1) and an average suspended solids concentration of 285 mg/l. 1/1 strength allowances for BOD and suspended solids are assumed at 25 mg/I and 50 mg/I, BLACK & VEATCH I Wastewater Utility 6-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study respectively. Estimated BOD and suspended solids responsibilities of each customer class presented in Table S - 15 in Appendix 2 are based on the respective indicated average strength concentrations and contributed wastewater and 1/1 volumes for each class. The contributed flow from the wholesale customers (Elkins and West Fork) includes 1/1 and is transported directly from the metered pump station to the Noland Wastewater Treatment Plant. Therefore, system 1/1 is not allocated to these two wholesale customers. Customer billing and accounting costs are distributed to classes on the basis of the number of bills for each customer class (Column 7) in Table S -15. Customer related meter and service costs are allocated on the basis of the number of equivalent 3/4 inch meters serving each customer class. The number of equivalent meters in each customer class (Column 8) is estimated by relating typical costs for meters and services larger than 3/4 inch in size to the typical cost of a 3/4 inch meter. 6.5.5 Wastewater Utility Customer Class Costs of Service Unit costs of service are developed by dividing the total cost allocated to each functional cost component by the total applicable units of service. The customer class responsibility for service is obtained by applying unit costs of service to the number of units for which the customer class is responsible. The wastewater utility has been built with the provision for service to customers outside the City, yet the inside City customers must bear the responsibility of providing system facilities by undertaking the necessary investment. Revenues derived from outside City service should provide a margin of return on capital adequate to induce the citizens of Fayetteville to bear the risks of providing outside City service. To recognize the proprietary interest and responsibility of inside City customers in the system, it is proper to charge outside City customers, in addition to their share of operating expense and depreciation, a reasonable return on their allocated portion of value. A 4.36% annual rate of return on the value of wastewater facilities serving outside City customers is recognized for purposes of this study. Table S - 16 in Appendix 2 shows the development of the unit costs of service applicable to each cost function. Lines 1 through 6 summarize the units of service developed in Table S -15. Total allocated costs or investment shown on Lines 5, 7, and 9 were previously developed in Table S - 14, Table S - 13 and Table S -12, respectively. Total allocated unit costs of service for inside City and outside City customers (Line 18, Line 19, Line 20 and Line 21) are determined by adding the unit costs for net operating expense (Line 6) and depreciation expense (Line 8) to the respective inside and outside City unit costs for return on investment (Lines 11 and 12). These unit costs applied to the respective units of service shown on Lines 1,2 and 3 determine the allocated total costs of service for inside and outside City customers shown on Lines 18 through 21. In order to determine the allocated costs for each customer class, the costs are allocated to the various customer classes by applying the appropriate unit cost of service to the respective service requirements of each customer class. Table S - 17 in Appendix 2 shows the resulting allocated cost of service by customer class, revenue under existing rates, and the indicated increase or decrease in revenue required to meet the allocated cost of service. BLACK & VEATCH I Wastewater Utility 6-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 7.0 Wastewater Rate Design The principal consideration in establishing wastewater rate schedules is to establish charges to recover costs that are reasonably commensurate with the cost of providing wastewater service. The revenue requirements and cost of service allocations described in the preceding sections provide the basis for adjusting wastewater rates. The revenue requirements show the need for adjustment and the level of revenue required. This cost of service analysis provides the unit costs of service to be used in the rate design process and gives a basis for determining whether resultant rates will generate revenues which recover costs of service from customer classes in proportion to service required and provide the total level of revenue required. 7.1 Existing Wastewater Rates The existing schedule of rates for wastewater service became effective on January 1, 2022. For retail customers, these rates include a monthly base charge bill, which varies by meter size. The volume charge varies by customer class. Surcharge rates are based on excess strength of BOD and TSS. The existing wastewater rate structure is described in Section 3.3.2. The existing schedule of base and volume rates for wastewater service is shown in Table S - 3 in Appendix 2. 7.2 Proposed Wastewater Rates The cost of service study described in preceding sections of this report provides a basis for the design of a schedule of wastewater rates to meet those costs. Proposed wastewater rates have been designed to meet the 2024 allocated costs of service and are presented in Table S - 18. The proposed rate structure presented in Figure 7 - 1 is similar to the existing structure. Figure 7 - 1 Proposed Wastewater Rate Structure • Base Charge by Meter Size Volume Rate (2-Tier Inclining Block) • Retail Inside City (Residential, Non -Residential and Major Industrial); Retail Outside City (Residential, Non -Residential and Major Industrial); Retail Inside City Residential Volume Rate (Uniform) Retail Inside City (Non -Residential and Major Industrial) Retail Outside City (Residential, Non -Residential and Major Industrial) Volume Rate ( Uniform) Wholesale As already explained in Section 5.2, practical rate design should consider multiple factors including previous rate levels, customer bill impact, and magnitude of cost shifts among customer classes. BLACK & VEATCH I Wastewater Rate Design 7-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of estimated test year revenue under the proposed rates with allocated costs of service for each of the customer classes is shown in Table S - 19 in Appendix 2. This comparison indicates the proposed rates will recover revenues from inside and outside City customer groups reasonably commensurate with the cost of service and practical considerations previously noted. To better reflect the total effect the proposed rates have on customer bills, a comparison of typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table S - 20. The City Council adopted the schedule of proposed wastewater rates shown in Table S-18 of this report, to be effective January 1, 2024, as a means of meeting the projected wastewater system revenue requirements in the year 2024. BLACK & VEATCH I Wastewater Rate Design 7-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 8.0 Combined Water and Wastewater Utilities Table C - 1 in Appendix 3 presents the combined operating reserve, capital reserve and impact fee fund balances. Table C - 2 in Appendix 3 provides a summary of the combined revenue and revenue requirements (financial plan) for the study period. The revenue under existing rates are not sufficient to meet the obligations of the two utilities. As discussed in Section 4 and Section 6, a series of annual 6% and 3% proposed revenue adjustments for water and wastewater respectively will enable the utilities to meet their operating, capital and reserve obligations. Figure 8-1 presents the projected revenue and revenue requirements through 2027 for the wastewater utility. Water and Wastewater Revenues and Revenue Requirements $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 2022 2023 2024 2025 2026 2027 O&M Expenses Debt Service Cash Financing of Capital Other Transfers • Revenues Under Existing Rates Revenues Under Proposed Rates Figure 8-1- Water and Wastewater Revenues and Revenue Requirements Table C - 2 in Appendix 3 presents the combined water and wastewater operating reserve, capital reserve and impact fee fund balances. The City has identified the minimum balance requirements for each of the following funds: O&M Reserve Balance: A cash balance of at least 90 days of the follow's year operating expenses. Operating Fund Balance: A minimum target of $200,000. Capital Fund Balance: A minimum target of $1,000,000. Capital Reserve Fund Balance: An amount necessary to fully fund anticipated capital projects. As shown in Table C - 2, the proposed annual revenue adjustments will allow the utilities on a combined basis to meet the minimum fund balance requirements for all funds through 2027. BLACK & VEATCH I Combined Water and Wastewater Utilities 8-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study A comparison of combined water and wastewater typical bills under existing rates and the rates proposed to become effective January 1, 2024, is shown in Table C - 3. 9.0 Disclaimer This report was prepared for the City of Fayetteville (Client) by Black & Veatch Management Consulting, LLC (Black & Veatch) and is based on information provided by the Client not within the control of Black & Veatch. While it is believed that the information, data and opinions contained herein will be reliable under the conditions and subject to the limitations set forth in this report, Black & Veatch does not guarantee the accuracy thereof. Black & Veatch has assumed that the information provided by others, both verbal and written, is complete and correct. The projections set forth in this report are intended as "forward -looking statements." In formulating these projections, Black & Veatch has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. While Black & Veatch believes the assumptions are reasonable actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that occur. As such, Black & Veatch does not take responsibility for the accuracy of data or projections provided by or prepared on behalf of the Client, nor does Black & Veatch have any responsibility for updating this report for events occurring after the date of this report. 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BLACK & VEATCH I Disclaimer 9-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 10.0 Appendix 1: Water Tables Table W - 1 - Water Projected Number of Accounts Inside City 1 Residential 35,800 36,400 37,000 37,700 38,300 39,000 2 Non -Residential 3,300 3,300 3,300 3,300 3,300 3,300 3 Industrial 21 21 21 21 21 21 4 Irrigation 1,500 1,500 1,600 1,600 1,600 1,600 5 Private Fire 713 713 713 713 713 713 6 Subtotal 41,334 41,934 42,634 43,334 43,934 44,634 Outside City 7 Residential 6,800 7,000 7,100 7,300 7,500 7,600 8 Non -Residential 400 400 400 500 500 500 9 Industrial 0 0 0 0 0 0 10 Irrigation 181 186 191 196 201 207 11 Private Fire 14 14 14 14 14 14 12 Subtotal 7,395 7,600 7,705 8,010 8,215 8,321 Wholesale 13 Elkins 1 1 1 1 1 1 14 Mount Olive 2 2 2 2 2 2 15 West Fork 1 1 1 1 1 1 16 RDA/WWA 4 4 4 4 4 4 17 Subtotal 8 8 8 8 8 8 18 Total 48,737 49,542 50,347 51,352 52,157 52,963 19 % Change 0.76% 1.65% 1.62% 2.00% 1.57% 1.54% 0 0 100 0 3,300 800 100 0 26 0 926 0 0 0 0 0 4,226 8.74% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 2 - Water Projected Billed Volume (1,000 Gallons) 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. 1,000 gal. Inside City 1 Residential 1,984,500 2,019,200 2,054,500 2,090,500 2,127,100 2,164,300 2 Non -Residential 804,000 803,900 803,900 803,900 803,900 803,900 3 Industrial 327,500 327,500 327,500 327,500 327,500 327,500 4 Irrigation 338,000 343,900 350,000 356,100 362,300 368,700 5 Subtotal 3,454,000 3,494,500 3,535,900 3,578,000 3,620,800 3,664,400 Outside City 6 Residential 463,300 474,300 485,500 497,200 509,200 521,700 7 Non -Residential 62,300 63,200 64,200 65,300 66,400 67,500 8 Irrigation 35,100 36,000 37,000 38,000 39,000 40,100 9 Subtotal 560,700 573,500 586,700 600,500 614,600 629,300 Wholesale 10 Elkins 90,900 90,900 90,900 90,900 90,900 90,900 11 Mount Olive 67,300 67,300 67,300 67,300 67,300 67,300 12 West Fork 66,000 66,000 66,000 66,000 66,000 66,000 13 RDA/WWA 0 0 0 0 0 0 14 Subtotal 224,200 224,200 224,200 224,200 224,200 224,200 15 Total 4,238,900 4,292,200 4,346,800 4,402,700 4,459,600 4,517,900 16 % Change 5.92% 1.26% 1.27% 1.29% 1.29% 1.31% BLACK & VEATCH I Appendix 1: Water Tables 10-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 3 - Water Existing Rates Existing Water Rates Effective January 1, 2022 Inches $/month $/month $/month $/month $/month 5/8 6.59 7.54 8.31 3/4 6.59 7.54 8.31 1 9.14 10.52 11.49 9.75 11.68 1 1/2 15.93 18.31 20.00 10.17 12.10 2 23.20 26.66 29.07 20.33 23.37 3 54.05 62.18 64.38 30.48 35.06 4 89.50 102.93 112.25 60.97 70.11 6 178.99 205.82 212.76 169.34 197.74 8 268.41 308.67 332.91 355.65 409.00 10 609.68 701.11 1,000 ga I. 1, 000 ga I . 1, 000 gal. 1, 000 gal. Residential 0 - 2,000 Gal Ions 2,000 - 15,000 Gallons Over 15,000 Gallons 3.51 4.65 6.59 4.04 5.35 7.54 Non -Residential First 300,000 Gallons 3.79 4.38 Over 300,000 Gallons 3.39 3.90 Major Industrial All Usage 2.96 3.40 Irrigation First 300,000 Gallons 5.04 5.80 Over 300,000 Gallons 4.53 5.22 Wholesale Reduced Peak Demand 2.87 Peak Demand 3.20 BLACK & VEATCH I Appendix 1: Water Tables 10-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 4 - Water Projected Revenues Under Existing Ratl 1 Inside City Residential 11,982,900 12,222,300 12,436,200 12,653,800 12,875,200 13,100,600 1,117,700 2 Non -Residential 3,362,700 3,370,900 3,370,900 3,370,900 3,370,900 3,370,900 8,200 3 Industrial 977,500 980,000 980,000 980,000 980,000 980,000 2,500 4 Irrigation 1,833,700 1,870,400 1,903,100 1,936,400 1,970,300 2,W4,800 171,100 5 Private Fire 967,600 967,600 967,600 967,600 967,600 967,600 0 6 7 Subtotal Outside City Residential 19,124,400 3,045,300 19,411,200 3,124,000 19,657,800 3,197,500 19,908,700 3,273,300 20,164,000 3,351,700 20,423,900 3,432,600 1,299,500 387,300 8 Non -Residential 312,900 318,800 324,100 329,800 335,700 341,900 29,000 9 Industrial 0 0 0 0 0 0 0 10 11 Irrigation Private Fire 223,700 27,100 230,100 27,100 236,200 27,100 242,500 27,100 249,000 27,100 255,800 27,100 32,100 0 12 13 14 Subtotal Wholesale Elkins Mount Olive 3,609,000 261,700 194,900 3,700, 000 262,300 195,300 31784,900 262,300 195,300 3,872, 700 262,300 195,300 3,963, 500 262,300 195,300 4,057,400 262,300 195,300 448,400 600 400 15 West Fork 190,300 190,800 190,800 190,800 190,800 190,800 500 16 RDA/WWA 0 0 0 0 0 0 0 17 18 19 Subtotal Total % Change 646,900 23,380,300 8.05% 648,400 23,759,600 1.62% 648,400 24,091,100 1.40% 648,400 24,429,800 1.41% 648,400 24,775,900 1.42% 648,400 25,129,700 1.43% 1,500 1,749,400 8.08% (a) Reflects 3.0% revenue increase effective January 1, 2022. Table W - 5 - Water Projected Other Revenues 1 2 Water Impact Fee Revenue Water Sales Not on Computer S 976,300 300 S 976,300 300 S 976,300 300 5 976,300 300 5 976,300 300 S 976,300 300 3 Water Connection Fees 162,000 162,000 162,000 162,000 162,000 162,000 4 Rural Water Connection Fees 2,700 2,700 2,700 2,700 2,700 2,700 5 Service Charge/Trip Fee - Billed Service 9,500 9,500 9,500 9,500 9,500 9,500 6 Tampering Fee - Billed Service 200 200 200 200 200 200 7 8 Penalties Safe Drinking Water Fee 207,400 230,400 207,400 234,300 207,400 238,200 207,400 242,300 207,400 246,400 207,400 250,600 9 Total 1158818W 1,592,700 1,596,600 1,600,700 1,604,800 1,609,000 10 % Change 7.14% 0.25% 0.24% 0.26% 0.26% 0.26% BLACK & VEATCH I Appendix 1: Water Tables 10-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 6 - Water Capital Improvement Program 1 2 Water System Rehabilitation/Replacement Water Tank Improvements 0 1,060,900 2,185,500 1,092,700 2,533,500 1,266,800 2,687,800 1,159,300 2,388,100 1,194,100 2,459,700 1,229,900 3 Water Storage& Pump Station Maintenance 106,100 109,300 126,700 134,400 119,400 123,000 4 Water Meters 875,200 901,500 1,045,000 1,159,300 1,194,100 1,229,900 5 Backflow Prevention Assemblies 53,000 54,600 63,400 67,200 59,700 61,500 6 W/SImprovements defined byStudy (West Water Transmission Line) -Cash 636,500 4,237,800 675,300 695,6D0 716,400 737,900 7 W/SImprovements defined byStudy (West Water Transmission Line) -Bond 0 0 16,137,500 22,443,500 21,079,700 26,138,900 8 Water Impact Fee Improvements 424,400 437,100 506,700 537,600 477,600 491,900 9 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,400 3,100 10 Water/Sewer Relocations - BondProjects 265,200 273,200 316,700 289,800 298,500 307,500 11 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 12 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 13 Water/Sewer Building -Office Improvements 26,5W 27,300 31,600 33,600 59,700 61,500 14 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 15 Water &Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 16 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 17 Water& Sewer Technology Equipment Replacements 0 0 0 0 0 0 18 Water& Sewer Improvements Defined By Study 0 0 0 0 0 0 19 Huntsville Water Une Replacement (6 -inch upto 8-inch) 0 0 0 0 0 0 20 Benson Water Tank 338,200 0 0 0 0 0 21 East Water Service Improvements - Township 0 0 0 0 0 0 22 South Garland Ave Waterline Replacement 0 0 0 0 0 0 23 East Water Service Improvements CS 3 (Gulley, PS, Goshen Lines) 5,304,500 0 0 0 0 0 24 25 26 Ila/Oaks Manor/Persimmon Waterline Replacements Western Park Waterline Replacement N. College Waterline Replacement- upgrade from 8" to 12" 0 0 0 0 0 2,185,400 0 0 0 0 0 0 0 0 0 0 0 0 27 Total Capital Improvement Program 9,472,900 11,890,100 22,891,500 29,435,700 27,770,100 33,100,300 (a) Capital costs reflect 3%annual inflation starting in 2024. Table W - 7 - Water Projected O&M Expenses 1 Personal Costs 3,587,800 3,740,500 3,899,900 4,066,100 4,239,500 4,420,300 2 Materials and Supplies 998,100 1,028,000 1,058,800 1,090,600 1,123,300 1,157,000 3 Services and Charges 10,296,700 10,605,600 11,212,100 11,854,100 12,533,800 13,253,200 4 Motorpool 862,800 888,600 915,300 942,800 971,000 1,000,200 5 Cost Allocation 650,100 669,600 689,700 710,400 731,700 753,600 6 Maintenance 88,500 91,200 93,900 96,700 99,600 102,600 7 Total 16,484,000 17,023,500 17,869,700 18,760,700 19,698,900 20,686,900 8 % Change 3.27% 3.27% 4.97% 4.99% 5.00% 5.02% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 8 - Capital Program Financing S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 506,800 501,700 501,700 67,164,200 44,720,700 23,641,000 2 Revenue Bond or Loan Proceeds 0 0 90,000,000 0 0 0 3 Cash Financing of Capital Projects 9,050,000 10,442,200 6,152,300 6,353,900 6,123,200 9,377,300 4 Transfer from Impact Fee Fund 417,800 1,447,900 601,700 638,300 567,200 584,100 5 Subtotal 9,974,600 12,391,800 97,255,700 74,156,400 51,411,100 33,602,400 Application of Funds 6 Major Capital Improvements 9,472,900 11,890,100 22,891,500 29,435,700 27,770,100 33,100,300 7 Issuance Costs 0 0 900,000 0 0 0 8 Bond Reserve Funds 0 0 6,300,000 0 0 0 9 Subtotal 9,472,900 11,890,100 30,091,500 29,435,700 27,770,100 33,100,300 10 End of Year Balance 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 11 Capital Reserve ECY Balance - Cumulative 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 BLACK & VEATCH I Appendix 1: Water Tables 10-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 9 - Water Operating Cash Flow 1 Revenues Revenue Under Existing Rates 23,380,400 23,759,600 24,091,100 24,429,900 24,776,000 25,129,700 2 Revenue Increases 6.00 % Increase Effective January 1, 2024 1,325,000 1,465,800 1,486,600 1,507,800 3 6.00 % Increase Effective January 1, 2025 1,424,300 1,575,800 1,598,300 4 6.00 % Increase Effective January 1, 2026 1,531,100 1,694,100 5 6.00 % Increase Effective January 1, 2027 1,646,100 7 Total Revenue from Rates 23,380,400 23,759,600 25,416,100 27,320,000 29,369,500 31,576,000 8 Other Revenues (a) 645,600 648,600 656,200 665,100 674,300 684,100 9 10 Total Revenue Expenses Operating Expenses 24,026,000 16,484,000 24,408,200 17,023,500 26,072,300 17,869,700 27,985,100 18,760,700 30,043,800 19,698,900 32,260,100 20,686,900 11 Bad Debt 116,900 118,800 127,100 136,600 146,800 157,900 12 PILOT 993,700 1,009,800 1,080,200 1,161,100 1,248,200 1,342,000 13 Safe Drinking Water Fee 230,400 234,300 238,200 242o300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 16 Total Expenses Transfers Transfer to Shop Fund 17,825,000 0 18,386,400 0 22,515,200 0 26,600,700 0 27,640,300 0 28,737,400 0 17 Transferto Operating Reserve 133,100 208,600 219,700 231,400 243,600 256,600 18 19 Cash Financing of Capital Transferto/from Capital Reserve 9,050,000 -2,979,000 10,442,200 -4,630,000 6,152,300 -2,820,000 6,353,900 -5,200,000 6,123,200 -3,960,000 9,377,300 -6,110,000 20 21 Total Transfers Fund Balance Beginning Balance 6,204,100 104,900 6,020,800 101,800 3,552,000 102,800 1,385,300 107,900 2,406,800 107,000 3,523,900 103,700 22 Annual Operating Balance -3,100 1,000 5,100 -900 -3,300 -1,200 23 Ending Fund Balance 101,800 102,800 107,900 107,000 103,700 102,500 Performance Metrics 24 Debt Service Coverage (b) NA NA 2.56 1.46 1.64 1.84 25 O&M Reserve Balance (Days) (c) 0 900 900 900 900 900 90 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.0X the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOT and Safe Drinking Water Fee) (c) Mininum requirement is 90 days of following year's Operating Expenses. BLACK & VEATCH I Appendix 1: Water Tables 10-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 10 - Water Fund Balances $ $ $ $ $ $ Operating Funds 1 O&M Reserve Balance (a) 4,197,600 4,406,200 4,625,900 4,857,300 5,100,900 5,357,500 2 Operating Fund Balance (b) 101,800 102,800 107,900 107,000 103,700 102,500 3 Total (d) 4,299,400 4,509,000 4,733,800 4,964,300 5,204,600 5,460,000 Capital Funds 4 Capital Fund Balance (c) 501,700 501,700 67,164,200 44,720,700 23,641,000 502,100 5 Capital Reserve Fund Balance 10,339,000 5,709,000 2,889,000 -2,311,000 -6,271,000 -12,381,000 6 Total (d) 10,840,700 6,210,700 70,053,200 42,409,700 17,370,000 -11,878,900 7 Impact Fee Fund Balance (d) 581,300 109,700 484,300 822,300 1,231,400 1,623,600 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000to account for any adjustments that may be needed to the 0&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) All balances are cumulative. BLACK & VEATCH I Appendix 1: Water Tables 10-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 11 - Water 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 O&M Expenses 2 Bad Debt Expense 3 PILOT 4 Debt Service R 17,023,500 R 17, 023, 500 118,800 118,800 1,009,800 1,009,800 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 5 Transferto Operating Reserve 208,600 208,600 6 Cash Funding of Capital Projects 10,442,200 10,442,200 7 Transfer to Capital Reserve -4,630,000-4,630,000 8 Subtotal 18,360,700 5,812,200 24,172,900 Less Revenue Requirements Met from Other Sources 9 Other Revenues 10 Interest Earned 11 Net Balance Available 12 Full Year Rate Adjustment 382,100 382,100 32,200 32,200 -1,000 -1,000 13 Subtotal 414,300 -1,000 413,300 14 Net Revenue Requirements to be Recovered by Rates 17,946,400 5,813,200 23,759,600 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 17,946,400 17,946,400 16 Depreciation 2,886,700 2,886,700 17 Return 2,926,500 2,926,500 18 Net Cost of Service 17,946,400 5,813,200 23,759,600 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -12 - Water 2023 Allocation of Net Plant Investment to Functional Cost Components s s s s s s s s s s Net Plant Investment: 1 Water Land and Land Rights 2,191,756 1,043,693 1,148,063 2 Water Supply 6,819,846 3,247,546 3,572,300 3 Water Storage and Pumping 6,090,361 2,900,172 3,190,189 4 Water Transmission 29,560,218 14,076,294 15,483,924 5 Water Distribution 47,479,642 17,391,810 9,565,496 5,478,420 15,043,916 6 Water Meters 3,306,241 3,306,241 7 Fire Hydrants 7,535,573 7,535,573 8 Water General System 4,537,618 809,302 890,232 894,096 562,035 241,388 808,536 332,029 9 Total Net Plant Investment 107,521,256 19,176,935 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 0 7,867,602 10 PercentofTotal 100.09/o 17.8% 19.6% 0.0% 19.7% 12.4% 5.3% 17.8% 0.0% 7.3% Table W -13 - Water 2023 Allocation of Net Annual Depreciation to Functional Cost Components s s s s s s s s s s Net Depreciation Expense: 1 Water Land and Land Rights 2 Water Supply 277,295 132,045 145,250 3 Water Storage and Pumping 219,139 104,352 114,787 4 Water Transmission 771,897 367,570 404,327 5 Water Distribution 1,134,421 415,539 228,546 130,895 359,441 6 Water Meters 170,293 170,293 7 Fire Hydrants 215,879 215,879 8 Water General System 97,816 17,523 19,275 18,234 12,042 4,591 18,579 7,571 9 Total Net Depreciation Expense 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 0 223,450 10 PercentofTotal 100% 18% 20% 0% 19% 12% 5% 19% 0% 8% Table W - 14 - Water 2023 Allocation of O&M Expenses to Functional Cost Components 5 s 5 5 5 5 S 5 5 5 1 Water Purchased 9,611,754 4,577,026 5,034,728 2 Water Storage and Pumping 269,987 98,896 108,786 62,305 3 Water Distribution (a) 3,105,785 1,005,654 1,251,415 716,720 100,938 31,058 4 Meter Services (b) 1,012,843 1,012,843 5 Customer Billing (c) 1,057,071 1,057,071 6 AlIOther Cost 3,303,260 1,004,095 1,104,505 242,313 298,397 170,900 222,195 231,897 22,144 6,813 7 Subtotal 18,360,700 5,581,121 6,139,233 1,346,864 1,658,598 949,925 1,235,038 1,288,968 123,082 37,871 Less: 8 Water Connection Fees (d) 164,700 164,700 9 Other Income Sources 249,600 92,661 83,458 18,310 22,547 12,914 17,523 1,673 515 10 Subtotal 414,300 92,661 83,458 18,310 22,547 12,914 164,700 17,523 1,673 515 it Net O&M Expenses 17,946,400 5,488,461 6,055,775 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 (a) 3.25%of 2020water repair costs was associated with hydrants. (b) Includes costs for Meter Reading and Meter Maintenance and Backflow prevention (c) Includes costs under Utilities Financial Services (d) Includes revenues from Water Connection Fees and Rural Water Connection Fees BLACK & VEATCH I Appendix 1: Water Tables 10-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -15 - Water 2023 Estimated Units of Service Equiv. Equiv. 1,000gal. 1,000gal. 1,000gal. 1,000gal. 1,000gal. Equiv. Meters Bills Hydrants Hydrants (1)/365 (2) x (3) (2) x (6) (7) - (4) Inside City 1 Residential 2,019,203 5,532 250% 13,830 370% 20,469 6,638 34,939 436,593 2 Non -Residential 803,940 2,203 240% 5,286 355% 7,819 2,533 6,761 39,012 3 Industrial 327,534 897 200% 1,795 295% 2,647 852 261 252 4 Irrigation 343,941 942 240% 2,262 355% 3,345 1,094 3,141 18,449 5 Subtotal 3,494,618 9,574 23,173 34,280 11,108 45,102 494,306 Fire Protection 6 Public 4,201 10,083 5,882 4,035 7 Private 491 1,179 688 472 8 Subtotal 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 Outside City Farmington 9 Residential 98,894 271 250% 677 370% 1,002 325 1,762 28,974 10 Non -Residential 19,943 55 240% 131 355% 194 63 245 2,142 11 Industrial 200% 295% 12 Irrigation 2,688 7 2400% 18 3559/ 26 8 46 256 13 Subtotal 121,525 333 826 1,223 396 2,053 31,373 Greenland 14 Residential 20,454 56 250% 140 370% 207 67 458 5,736 15 Non -Residential 2,847 8 240% 19 355% 28 9 59 552 16 Industrial 200% 295% 17 Irrigation 698 2 240% 5 355% 7 2 20 24 18 Subtotal 23,999 66 163 242 78 537 6,312 Washington County/Growth 19 Residential 242,049 663 250% 1,658 370% 2,454 796 2,618 33,223 20 Non -Residential 21,511 59 240% 141 3559/ 209 68 109 1,608 21 Industrial 200% 295% 22 Irrigation 22,197 61 240% 146 355% 216 70 188 1,270 23 Subtotal 285,757 783 1,945 2,879 933 2,915 36,101 Johnson 24 Residential 6,652 18 250% 46 370•� 67 22 158 2,064 26 Non -Residential 9,716 27 2409A 64 355% 94 31 35 240 27 Industrial 2001/6 295% 28 Irrigation 68 0 240% 0 355% 1 0 3 24 29 Subtotal 16,436 45 110 163 53 196 2,328 Goshen/White River 30 Residential 106,213 291 2509% 727 370% 1,077 349 1,054 13,898 31 Non -Residential 9,209 25 2401/6 61 35596 90 29 52 696 32 Industrial 200% 295% 33 Irrigation 10,382 28 240% 68 355% 101 33 86 655 34 Subtotal 125,804 345 856 1,267 411 1,192 15,249 Fire Protection 35 Public 696 1,669 973 668 36 Private 12 29 17 12 37 Subtotal 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 38 Total Retail 4,068,138 11,146 32,474 53,013 20,540 51,994 595,669 Wholesale 39 Elkins 90,935 249 240% 598 35591 884 287 23 12 40 Mount Olive 67,314 184 240•1/O 443 355% 655 212 38 24 41 West Fork 65,996 181 240% 434 355% 642 208 23 12 42 RDA/WWA 240% 355% 48 43 Subtotal 224,244 614 1,474 2,181 707 83 96 44 Subtotal (Inside Cit 3,494,618 9,574 27,865 45,542 17,678 45,102 494,306 4,035 472 45 Subtotal (Outside C 573,521 1,571 4,609 7,471 2,862 6,892 91,363 668 12 46 Subtotal (Wholesal 224,244 614 1,474 2,181 707 83 96 47 Total System 4,292,382 11,760 33,948 55,194 21,246 52,077 595,765 4,703 483 BLACK & VEATCH I Appendix 1: Water Tables 10-11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -16 - Water 2023 Unit Cost of Service $ 1,000gal. 1,000gpd. 1,000gpd. 1,000gal. 1,000gpd. 1,000glad. Equiv. Meters Bills Hydrants Hydrants Units of Service 1 Inside City 3,494,618 18,290 17,678 3,494,618 18,290 17,678 45,102 494,306 4,035 472 2 Outside City 797,765 3,898 3,568 573,521 3,038 2,862 6,975 91,459 668 12 3 Total System 4,292,382 22,188 21,246 4,068,138 21,328 20,540 52,077 585,765 4,703 483 Costs of Service Net Operating Costs 4 Total - $ 17,946,400 5,488,461 6,055,775 0 1,328,554 1,636,051 937,011 1,070,338 1,271,445 121,408 37,356 5 Unit Cost - $/unit 1.28 272.93 0.00 0.33 76.71 45.62 20.55 2.17 25.82 77.28 Depreciation Expense 6 Total -$ 2,886,739 517,138 568,852 0 538,125 355,375 135,486 548,313 223,450 7 Unit Cost - $/unit 0.12 25.64 0.00 0.13 16.66 6.60 10.53 47.51 Net Plant Investment 8 Total -$ 107,521,256 19,176,835 21,094,519 0 21,186,078 13,317,720 5,719,808 19,158,693 7,867,602 9 Unit Cost - $/unit 4.47 950.71 0.00 5.21 624.42 278.48 367.89 1,672.89 Return on Investment 10 Inside City, Unit Return - $/unit 0.09 18.43 0.00 0.10 12.11 5.40 7.13 32.43 11 Outside City, Unit Return - $/Unit 0.31 66.55 0.00 0.36 43.71 19.49 25.75 117.10 Total Return 12 Inside City -$ 1,762,073 302,691 337,125 0 352,839 221,422 95,441 321,688 130,868 13 Outside City -$ 1,164,388 249,489 259,402 0 209,075 132,779 55,789 179,630 78,224 14 Total Return -$ 2,926,461 552,180 596,526 0 561,913 354,201 151,230 501,318 209,092 Total Unit Cost of Service 15 Inside City Unit Cost - $/unit 1.49 317.00 0.00 0.56 105.48 57.62 38.21 2.17 105.76 77.28 16 Outside City Unit Cost - $/unil 1.71 365.12 0.00 0.82 137.08 71.71 56.83 2.17 190.43 77.28 17 Inside City - Cost of Service -$ 19,153,831 5,192,113 5,797,984 0 1,956,356 1,929,210 1,018,497 1,723,535 1,072,927 426,744 36,465 18 Outside City -Cost of Service -$ 4,605,769 1,365,665 1,423,169 0 472,237 416,416 205,230 396,434 198,518 127,207 892 19 Total Cost of Service - $ 23,759,600 6,557,779 7,221,153 0 2,428,593 2,345,627 1,223,727 2,119,969 1,271,445 553,951 37,356 BLACK & VEATCH I Appendix 1: Water Tables 10-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 17 - Water 2023 Cost of Service by Customer Class Inside City 1 Residential 10,301,400 1,602,600 11,904,100 12,222,300 -2.6% 2 Non -Resident 3,436,200 534,600 3,970,800 3,370,900 17.8% 3 Industrial 1,108,700 172,500 1,281,200 980,000 30.7% 4 Irrigation 1,483,400 230,800 1,714,200 1,870,400 -8.4% Fire Protectio 5 Public 2,540,500 -2,540,500 6 Private 283,500 283,500 967,600 -70.7% 7 Subtotal 19,153,700 0 19,153,800 19,411,200 -1.3% Outside City 8 Residential 2,818,900 460,100 3,279,000 3,124,000 5.0% 9 Non-Resideni 336,200 54,900 391,100 318,800 22.7% 10 Industrial 0.0% 11 Irrigation 193,200 31,500 224,800 230,100 -2.3% Fire Protectio 12 Public 546,500 -546,500 13 Private 8,100 8,100 27,100 -70.1% 14 Subtotal 3,902,900 0 3,903,000 3,700,000 5.5% Wholesale 15 Elkins 284,300 284,300 262,300 8.4% 16 Mount Olive 211,700 211,700 195,300 8.4% 17 West Fork 206,700 206,700 190,800 8.3% 18 RDA/WWA 0 0 0 0.0% 19 Subtotal Whol 702,700 0 702,700 648,400 8.4% 20 Total Retail 23,056,600 0 23,056,800 23,111,200 -0.2% 21 Total Wholes; 702,700 0 702,700 648,400 8.4% 22 Total 23,759,300 0 23,759,500 23,759,600 0.0% BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 18 - Water Proposed 2024 Rate Proposed Water Rates Effective January 1, 2024 Inches $/month $/month $/month $/month $/month 5/8 6.99 7.99 8.81 3/4 6.99 7.99 8.81 1 10.06 13.84 13.84 10.34 12.38 1.5 19.18 27.40 27.40 10.78 12.83 2 26.27 37.95 37.95 21.55 24.77 3 57.29 79.11 79.11 32.31 37.16 4 94.87 115.76 118.99 64.63 74.32 6 189.73 218.17 225.53 179.50 209.60 8 284.51 327.19 352.88 376.99 433.54 10 646.26 743.18 1,000 ga I. 1,000 gal. 1,000 ga I. 1,000 gal. Residential 0 - 2,000 Gallons 3.59 4.54 2,000 - 15,000 Gallons 4.75 6.01 Over 15,000 Gallons Non -Residential First 300,000 Gallons Over 300,000 Gallons Major Industrial All Usage Irrigation First 300,000 Gallons Over 300,000 Gallons Wholesale Reduced Peak Demand Peak Demand 6.74 8.52 4.20 5.11 4.20 5.11 3.14 3.49 4.75 5.89 4.75 5.89 3.30 3.30 BLACK & VEATCH I Appendix 1: Water Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W -19 - Water 2023 Cost of Service Under Proposed Rates 1 Inside City Residential 11,904,100 12,222,300 -2.6% 11,899,100 100•0 -3% -323,200 2 Non -Residential 3,970,800 3,370,900 17.8% 3,602,200 91% No 231,300 3 Industrial 1,281,200 980,000 30.7% 980,400 77% 00/u 400 4 Irrigation 1,714,200 1,870,400 -8.4% 1,712,800 1001yo -89/6 -157,600 5 6 Subtotal Outside City Residential 18,870,300 3,279,000 18,443,600 3,124,000 2.3% 5.0% 18,194,500 3,279,200 96% 100% -1% 5% -249,100 155,200 7 Non -Residential 391,100 318,800 22.7% 356,100 91% 12% 37,300 8 Irrigation 224,800 230,100 -2.3% 224,700 100•D -2% -5,400 9 Subtotal 3,894,900 3,672,900 6.0% 3,860,000 99% 5% 187,100 Private Fire 10 Inside City 283,500 967,600 -70.7% 967,600 341% 09/0 0 11 Outside City 8,100 27,100 -70.1% 27,100 335% 0% 0 12 Subtotal 291,600 994,700 -70.7% 994,700 341% 01/0 0 Wholesale 13 Elkins 284,300 262,300 8.4% 284,200 1000/0 89'o 21,900 14 Mount Olive 211,700 195,300 8.49/o 211,600 1001/0 8910 16,300 15 West Fork 206,700 190,800 8.3% 206,600 100% 8% 15,800 16 RDA/WWA 0 0 0 0000 0% 17 Subtotal 702,700 648,400 8.4% 702,400 100•0 89,o 54,000 18 Total 23,759,500 23,759,600 0.0% 23,751,600 100% 0% -8,000 BLACK & VEATCH I Appendix 1: Water Tables 10-15 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table W - 20 - Water 2024 Bill Impact Line No. Residential 1 Meter Size Inches 3/4 Monthly Usage 1,000gal. 0.5 Existing Rates $ 9.91 Inside Proposenirrn-cr-ea-se-1- Rates ME $ 8.79 City Decrease $ -1.12 increase/ Decrease -11.3% Existing Rates $ 11.36 Outside Proposed Rates $ 10.26 City increase Decrease $ -1.10 77 Decreasel -9.7% 2 3/4 2 13.42 14.17 0.75 5.6% 15.40 17.07 1.67 10.8% 3 3/4 4 22.72 23.67 0.95 4.2% 26.10 29.09 2.99 11.5% 4 3/4 8 41.32 42.67 1.35 3.3% 47.50 53.13 5.63 11.9% 5 3/4 10 50.62 52.16 1.54 3.0% 58.20 65.15 6.95 11.9% 6 3/4 15 73.87 75.91 2.04 2.8% 84.95 95.20 10.25 12.1% Non -Residential 7 3/4 10 44.30 48.96 4.66 10.5% 51.12 59.08 7.96 15.6% 8 3/4 20 82.20 90.94 8.74 10.6% 94.92 110.18 15.26 16.1% 9 1 50 198.37 219.94 21.57 10.9% 229.21 269.30 40.09 17.5% 10 1 100 387.87 429.82 41.95 10.8% 448.21 524.76 76.55 17.1% 11 1 1/2 50 204.97 229.06 24.09 11.8% 236.78 282.86 46.08 19.5% 12 11/2 100 394.47 438.94 44.47 11.3% 455.78 538.32 82.54 18.1% 13 2 100 401.52 446.03 44.51 11.1% 463.88 548.87 84.99 18.3% 14 2 500 1,837.52 2,125.07 287.55 15.6% 2,119.88 2,592.55 472.67 22.3% Industrial 15 2 100 318.52 340.03 21.51 6.8% 362.52 386.69 24.17 6.7% 16 2 1,000 2,982.52 3,163.87 181.35 6.1% 3,422.52 3,525.35 102.83 3.0% 17 4 500 1,566.89 1,663.67 96.78 6.2% 1,786.89 1,859.46 72.57 4.1% 18 4 1,500 4,526.89 4,801.27 274.38 6.1% 5,186.89 5,346.86 159.97 3.1% 19 6 2,500 7,573.78 8,033.73 459.95 6.1% 8,673.78 8,936.67 262.89 3.0% 20 6 5,000 14,973.78 15,877.73 903.95 6.0% 17,173.78 17,655.17 481.39 2.8% 21 6 10,000 29,773.78 31,565.73 1,791.95 6.0% 34,173.78 35,092.17 918.39 2.7% BLACK & VEATCH I Appendix 1: Water Tables 10-16 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 11.0 Appendix 2: Wastewater Tables Table S - 1 - Wastewater Projected Accounts Inside City 1 Residential 34,100 34,700 35,300 35,900 36,500 37,200 3,100 2 Non -Residential 2,500 2,500 2,500 2,500 2,500 2,500 0 0 3 Industrial 19 19 19 19 19 19 3,100 4 Subtotal 36,619 37,219 37,819 38,419 39,019 39,719 96.1% Outside City 5 Residential 2,800 2,900 2,900 3,000 3,000 3,000 200 6 Non -Residential 181 181 181 181 181 181 0 7 Industrial 0 0 0 0 0 0 0 8 Subtotal 2,981 3,081 3,081 3,181 3,181 3,181 200 114.8% Wholesale 9 Elkins 2 2 2 2 2 2 0 10 West Fork 1 1 1 1 1 1 0 0 11 Subtotal 3 3 3 3 3 3 11 Total 39,603 40,303 40,903 41,603 42,203 42,903 3,300 12 % Change 0.25% 1.77% 1.49% 1.71% 1.44% 1.66% 8.35% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table 5 - 2 - Wastewater Projected Billed Volume (1,000 Gallons) 1,000 ga 1. 1, 000 gal. 1,000 ga 1. 1, 000 gal. 1, 000 gal. Inside City 1 Residential 1,949,400 1,983,600 2,018,300 2,053,600 2,126,100 2 Non -Residential 740,400 740,400 740,400 740,400 740,400 3 Industrial 323,500 323,500 323,500 323,500 323,500 4 Subtotal 3,013,300 3,047,500 3,082,200 3,117,500 3,190,000 Outside City 5 Residential 114,700 93,600 94,900 96,300 99,000 6 Non -Residential 18,600 15,200 15,200 15,200 15,200 7 Industrial 0 0 0 0 0 8 Subtotal 133,300 108,800 110,100 111,500 114,200 Wholesale 8 Elkins 90,900 90,900 90,900 90,900 90,900 9 West Fork 104,800 104,800 IK800 104,800 104,800 10 Subtotal 195,700 195,700 195,700 195,700 195,700 10 Total 3,342,300 3,352,000 3,388,000 3,424,700 3,499,900 11 % Change 4.78% 0.29% 1.07% 1.08% 1.09% 176,700 0 0 176,700 -15,700 -3,400 0 -19,100 0 0 0 157,600 4.94% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 3 - Wastewater Existing Charges Existing Wastewater Rates Effective January 1, 2022 Inches $/month $/month $/month 5/8 18.28 18.28 16.74 3/4 18.28 18.28 16.74 1 23.74 33.92 31.28 1 1/2 38.77 60.37 55.50 2 55.43 79.73 73.45 3 128.73 184.24 169.29 4 212.13 303.44 278.93 6 420.39 601.46 553.70 8 628.73 899.76 826.81 1,000 gal. 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.35 > 2,000 Gallons 5.80 All Usage 8.18 7.52 Non -Residential All Usage 4.40 8.18 7.52 Major Industrial All Usage 4.71 8.18 7.52 Wholesale 85% of metered water usage 5.19 Above 85% of metered water 2.71 Surcharge BOD - $/Ib for strength in excess of 300 ppm 0.4352 TSS - $/Ib for strength in excess of 300 ppm 0.3056 BLACK & VEATCH l Appendix 2: Wastewater Tables 11-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 4 - Wastewater Projected Revenues at Existing Rates S S S S S S Inside City 1 Residential 17,544,700 17,895,800 18,208,900 18,527,600 18,851,800 19,181,700 2 Non -Residential 3,989,200 3,999,000 3,999,000 3,999,000 3,999,000 3,999,000 3 Industrial 1,543,800 1,547,600 1,547,600 1,547,600 1,547,600 1,547,600 4 Subtotal 23,077,700 23,442,400 23,755,500 24,074,200 24,398,400 24,728,300 Outside City 5 Residential 1,459,000 1,305,500 1,323,500 1,341,900 1,360,500 1,379,500 6 Non -Residential 186,900 161,300 161,300 161,300 161,300 161,300 7 Industrial 0 0 0 0 0 0 8 Subtotal 1,645,900 1,466,800 1,484,800 1,503,200 1,521,800 1,540,800 Wholesale 9 Elkins 470,800 472,000 472,000 472,000 472,000 472,000 10 West Fork 542,400 543,700 543,700 543,700 543,700 543,700 11 Subtotal 1,013,200 1,015,700 1,015,700 1,015,700 1,015,700 1,015,700 12 Surcharge 834,600 834,600 834,600 834,600 834,600 834,600 13 Total 26,571,400 26,759,500 27,090,600 27,427,700 27,770,500 28,119,400 14 % Change 6.09% 0.71% 1.24% 1.24% 1.25% 1.26% Table S - 5 - Wastewater Projected Other Revenues 1 Sewer Impact Fee Re S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 S 743,900 2 Sewer Sales Not on C 11,800 11,800 11,800 11,800 11,800 11,800 3 Sewer Connection Fe 47,900 47,900 47,900 47,900 47,900 47,900 4 WWTP Hay Sales 134,800 134,800 134,800 134,800 134,800 134,800 5 WWTP Biosolids/Feri 54,900 54,900 54,900 54,900 54,900 54,900 6 WWTP Water Treatm 180,800 180,800 180,800 180,800 180,800 180,800 7 Penalties 246,100 246,100 246,100 246,100 246,100 246,100 8 9 Total % Change 1,420,200 9.49% 1,420,200 0.00% 1,420,200 0.00•/0 1,420,200 0.0000 1,420,200 0.00% 1,420,200 0.00% 9,800 3,800 1, 650, 600 -25,600 0 -105,100 1 1,300 2,500 24,300 1,572,300 6.28% 0 0 0 0 0 0 0 0 0.00% BLACK & VEATCH I Appendix 2: Wastewater Tables City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 6 - Wastewater Capital Improvement Program 1 Sanitary Sewer Rehabilitation 3,044,800 3,136,100 3,635,600 3,752,700 3,426,900 3,529,700 2 Plant Pumps and Equipment- W.W.T.P. 530,500 546,400 1,125,500 1,159,300 1,194,100 1,229,900 3 W.W.T.P. Building Improvements 1,750,500 163,900 190,000 347,800 358,200 369,000 4 Upgrade/Replace Lift Stations-W.W.T.P. 318,300 327,800 380,100 403,200 358,200 369,000 5 Lake Sequoyah Sediment Removal/Dredging 530,500 546,400 0 0 0 0 6 Wastewater Treatment/Water Quality lmprovem 106,100 109,300 126,700 134,400 119,400 123,000 7 Wastewater Impact Fee Improvements 318,300 327,800 380,100 347,800 358,200 369,000 8 Utilities Financial Services Improvements 11,100 3,300 1,900 10,100 9,100 3,000 9 Water/Sewer Relocations - Bond Projects 265,200 273,200 316,700 289,800 298,500 307,500 10 Water/Sewer Impact Fee Cost Sharing 79,600 82,000 95,000 100,700 89,600 92,200 11 Utilities Technology Improvements 228,100 234,900 15,500 36,200 12,100 89,600 12 Water/Sewer Building -Office Improvements 26,500 27,300 31,600 33,600 59,700 61,500 13 Water/Sewer Equipment Expansions 26,500 27,300 31,600 33,600 29,900 30,700 14 Water&Sewer Rate/Operational Studies 10,600 10,900 12,700 13,400 11,900 12,300 15 Phosphorus Standards Management 26,500 27,300 31,600 33,600 29,900 30,700 16 Water& Sewer Technology EquipmentReplacem 0 0 0 0 0 0 17 Water& Sewer Improvements Defined By Study 0 0 0 0 0 0 18 Biosolids Dryer Replacement 0 0 3,172,100 0 0 0 19 Filter Cell Upgrade/Replacement at Noland WWT 0 0 0 0 0 0 20 Upgrade Automation at both WWTPs 0 0 0 0 0 0 21 CIPP of 36" Sewer Line from Armstrong Ave to Nc 0 0 0 0 0 0 22 Bypass Sewer Fulbright & North Gregg 0 0 0 0 0 0 23 Hamestring Lift Station Bottle Neck Resolution 848,700 0 0 0 0 0 24 Total Capital Improvement Program 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 (a) Capital costs reflect 3% annual inflation starting in 2024. Table S - 7 - Wastewater Projected O&M Expenses 1 Personal Costs 3,198,200 3,334,400 3,476,600 3,624,900 3,779,500 3,940,900 2 Materials and Supplies 745,400 767,800 790,800 814,500 839,000 864,200 3 Services and Charges 6,261,000 6,448,800 6,642,300 6,841,600 7,046,800 7,258,200 4 WWTP Contract 4,115,500 4,238,900 4,366,100 4,497,100 4,632,000 4,771,000 5 Motorpool 1,062,900 1,094,800 1,127,600 1,161,400 1,196,300 1,232,200 6 Cost Allocation 701,100 722,100 743,800 766,100 789,100 812,700 7 Maintenance 87,300 89,900 92,600 95,400 98,300 101,200 8 Total 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 9 %Change 3.25% 3.25% 3.25% 3.26% 3.26% 3.26% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-5 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 8 - Wastewater Capital Program Financing S S S S S S Sources of Funds 1 Funds Available at Beginning of Year 501,900 506,700 506,700 506,700 506,700 506,700 2 Cash Financing of Capital Projects 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 3 Transferfrom Impact Fee Fund 1,246,600 409,800 475,100 448,500 447,800 461,200 4 Subtotal 8,628,500 6,350,600 10,053,400 7,202,900 6,862,400 7,123,800 Application of Funds 5 Major Capital Improvements 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 6 Subtotal 8,121,800 5,843,900 9,546,700 6,696,200 6,355,700 6,617,100 7 End of Year Balance 506,700 506,700 506,700 506,700 506,700 506,700 8 Capital Reserve ECYBalance-Cumulative 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-6 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 9 - Wastewater Operating Cash Flow 1 Revenues Revenues Under Existing Rates 26,571,600 26,759,500 27,090,700 27,427,700 27,770,600 28,119,500 2 Revenue Increases 3.00 % Increase Effective January 1, 2024 0 0 745,000 822,800 833,100 843,600 3 3.00 % Increase Effective January 1, 2025 0 0 0 776,900 858,100 868,900 4 3.00 % Increase Effective January 1, 2026 0 0 0 0 810,200 895,000 5 3.00 % Increase Effective January 1, 2027 0 0 0 0 0 845,000 7 Total Revenue from Rates 26,571,600 26,759,500 27,835,700 29,027,400 30,272,000 31,572,000 8 Other Revenues (a) 726,000 724,300 726,700 729,600 732,700 735,900 9 Total Revenues 27,297,600 27,483,800 28,562,400 29,757,000 31,004,700 32,307,900 Expenses 10 Operating Expenses 16,171,400 16,696,700 17,239,800 17,801,000 18,381,000 18,980,400 11 Bad Debt 132,900 133,800 139,200 145,100 151,400 157,900 12 PILOT 1,129,300 1,137,300 1,183,000 1,233,700 1,286,600 1,341,800 13 Debt Service 0 0 0 0 0 0 14 Total Expenses 17,433,600 17,967,800 18,562,000 19,179,800 19,819,000 20,480,100 Transfers 15 Transfer to Shop Fund 0 0 0 0 0 0 16 Transferto Operating Reserve 129,500 133,900 138,400 143,000 147,800 152,700 17 Cash Financing of Capital 6,880,000 5,434,100 9,071,600 6,247,700 5,907,900 6,155,900 18 Transferto/from Capital Reserve 2,850,000 3,950,000 790,000 4,180,000 5,130,000 5,520,000 19 Total Transfers 9,859,500 9,518,000 10,000,000 10,570,700 11,185,700 11,828,600 Fund Balance 20 Beginning Balance 100,000 104,500 102,500 102,900 109,400 109,400 21 Annual Operating Balance 4,500 -2,000 400 6,500 0 -800 22 Ending Fund Balance 104,500 102,500 102,900 109,400 109,400 108,600 Performance Metrics 23 Debt Service Coverage NA NA NA NA NA NA 24 0&M Reserve Balance (Days) (b) a 90.00 0 90.00 0 90.00 0 90.00 ® 90.00 0 90.00 (a) Includes interest income on operating fund balance. (b) Mininum requirement is 90 days of folIowing year's Operating Expenses. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-7 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 10 - Wastewater Projected Fund Balances Operating Funds 1 O&M Reserve Balance (a) 4,117,000 4,250,900 4,389,300 4,532,300 4,680,100 4,832,800 2 Operating Fund Balance (b) 104,500 102,500 102,900 109,400 109,400 108,600 3 Total (e) 4,221,500 4,353,400 4,492p200 4,641,700 4,789,500 4,941,400 Capital Funds 4 Capital Fund Balance (c) 506,700 506,700 506,700 506,700 506,700 506,700 5 Capital Reserve Fund Balance (d) 23,439,000 27,389,000 28,179,000 32,359,000 37,489,000 43,009,000 6 Total (e) 23,945,700 27,895,700 28,685,700 32,865,700 37,995,700 43,515,700 7 Impact Fee Fund Balance (e) 3,935,100 4,269,200 4,538,000 4,833,400 5,129,500 5,412,200 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target mininum balance is $100,000to account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target mininum balance is $500,000. (d) Does not include expenses associated with facilities master plan to be completed in FY 2022. (e) All balances are cumulative. BLACK & VEATCH I Appendix 2: Wastewater Tables 11-8 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 11- Wastewater 2023 Cost of Service Statement of Net Revenue Requirements (Cash Basis) Revenue Requirements 1 O&M Expenses 2 Bad Debt 16,696,700 16,696,700 133,800 133,800 3 PILOT 1,137,300 1,137,300 4 Debt Sevice 0 0 Other Expenditures & Transfers: Transfer to Shop Fund (Capital Outlay) 0 0 5 Transfer to Operating Reserve 133,900 133,900 _ 6 Cash Funding of Capital Projects 5,434,100 5,434,100 7 Transfer to Capital Reserve 3,950,000 3,950,000 8 Subtotal 18,101,700 9,384,100 27,485,800 Less Revenue Requirements Met from Other Sources 11 Net Balance Available 12 Full Year Rate Adjustment 2,000 2,000 13 Subtotal 724,300 2,000 726,300 14 Net Revenue Requirements to be Recovered by Rate 17,377,400 9,382,100 26,759,500 Restatement of Net Cost of Service (Utility Basis) 15 O&M Expenses 17,377,400 17,377,400 16 Depreciation 8,187,000 8,187,000 17 Return 1,195,100 1,195,100 18 Net Cost of Service 17,377,400 9,382,100 26,759,SW BLACK & VEATCH I Appendix 2: Wastewater Tables 11-9 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 12 - Wastewater 2023 Allocation of Net Plant Investment S S S S S S S S Net Plant Investment: 1 Sewer Collection 106,713,735 43,521,511 63,192,224 2 Sewer Connections 319,887 319,887 3 Water Meters 2,723,783 2,723,783 4 Owl Creek Lift Station and Force Main 14,103 14,103 5 Lift Stations 5,257,834 5,257,834 Sewer Treatment Plant- Noland 6 Sewage Pumping 229,919 229,919 7 Mechanical Bar Screens 172,282 51,685 120,597 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 1,684,829 1,684,829 11 Aeration Equipment 1,120,704 560,352 560,352 12 Sludge Handling 400,690 220,380 180,311 13 Other Plant and Misc Equipment 961,187 510,038 221,733 229,416 14 General Treatment 13,296,075 7,055,330 3,067,233 3,173,512 Sewer Treatment Plant- West 15 Sewage Pumping 921,333 921,333 16 Mechanical Bar Screens 169,727 50,918 118,809 17 Grit Removal 1,380,570 1,380,570 18 Primary Sedimentation 6,927,776 2,078,333 4,849,443 19 Disinfection 667,246 667,246 20 Aeration Equipment 1,490,202 745,101 745,101 21 Sludge Handling 34,604,278 19,032,353 15,571,925 22 Other Plant and Misc Equipment 3,425,729 1,799,980 1,625,749 23 General Treatment 6,163,399 3,238,433 2,924,966 24 Sewer Land and Land Rights 6,358,594 2,055,231 2,484,085 893,874 924,850 554 25 General Plant 1,768,105 608,158 592,278 286,604 252,406 25,529 3,130 26 Total Net Plant Investment 196,771,987 67,549,842 66,268,587 31,759,281 28,107,292 0 2,749,312 337,674 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-10 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 13 - Wastewater 2023 Allocation of Depreciation S s s s s S S S Net Depreciation Expense: 1 Sewer Collection 2,890,541 1,178,861 1,711,680 2 Sewer Connections 22,463 22,463 3 Water Meters 140,292 140,292 4 Owl Creek Lift Station and Force Main 6,509 6,509 5 Lift Stations 113,991 113,991 Sewer Treatment Plant- Noland 6 Sewage Pumping 42,418 42,418 7 Mechanical Bar Screens 33,421 10,026 23,395 8 Grit Removal 9 Primary Sedimentation 10 Disinfection 282,757 282,757 11 Aeration Equipment 124,523 (1) 62,262 62,262 12 Sludge Handling 83,361 (1) 45,849 37,513 13 Other Plant and Misc Equipment 68,718 36,464 15,852 16,402 14 General Treatment 870,537 461,935 200,822 207,780 Sewer Treatment Plant- West 15 Sewage Pumping 117,218 117,218 16 Mechanical Bar Screens 55,071 16,521 38,550 17 Grit Removal 135,374 135,374 18 Primary Sedimentation 397,767 119,330 278,437 19 Disinfection 41,250 41,250 20 Aeration Equipment 140,345 (1) 70,173 70,173 21 Sludge Handling 2,080,224 1,144,123 936,101 22 Other Plant and Misc Equipment 320,819 168,568 152,251 23 General Treatment 47,759 25,094 22,665 24 Sewer Land and Land Rights 4,692 1,517 1,833 660 682 25 General Plant 166,936 57,419 55,920 27,060 23,831 2,410 296 26 Total Net Depreciation Expense 8,186,986 2,527,489 1,769,433 1,887,594 1,830,500 0 142,702 29,268 27 Percent of Total - Depreciation Expense 100.0% 30.9% 21.6% 23.1% 22.49/o 1.7% 0.4% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 11 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 14 - Wastewater 2023 Allocation of O&M Expenses S S S S S S S S 1 Sewer Mains Maintenance 2,527,372 1,030,749 1,496,623 2 Wastewater Treatment Plant 1,930,453 409,563 747,493 773,396 3 Wastewater Treatment Plant -Noland 5,578,707 1,183,574 2,160,139 2,234,994 4 Wastewater Treatment Plant -West 2,025,047 429,632 784,121 811,293 5 Lift Stations 990,432 990,432 6 Meter Operations (a) 1,705,258 1,705,258 7 Water& Sewer Connections 204,404 204,404 8 Operations and Administration 1,443,897 390,267 144,434 356,278 368,624 164,568 19,726 9 All Other O&M Cost 1,696,131 458,442 169,665 418,516 433,019 193,317 23,172 10 Subtotal 18,101,700 4,892,658 1,810,722 4,466,548 4,621,327 2,063,143 0 247,302 Less: Other Income Sources 11 Sewer Connection Fees 47,900 47,900 12 Other Income Sources 676,400 147,869 72,452 178,719 184,912 82,552 9,895 13 Subtotal 724,300 147,869 72,452 178,719 184,912 82,552 0 57,795 14 Net O&M Expenses 17,377,400 4,744,789 1,738,270 4,287,829 4,436,415 1,980,591 0 189,507 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-12 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 15 - Wastewater 2023 Units of Service 1,000gal. 1,000ga1. 1,000gal. Pounds Pounds Bills Equiv. Meters (2) + (3) Inside City 1 Residential 1,983,604 1,752,788 3,736,392 6,403,745 5,445,740 416,068 34,346 2 Non -Residential 740,356 265,819 1,006,175 2,309,140 1,870,599 29,508 5,157 3 Industrial 323,545 77,053 400,599 1,000,971 801,166 228 249 4 Subtotal 3,047,505 2,095,660 5,143,166 9,713,856 8,117,505 445,804 39,752 Outside City Farmington 5 Residential 75,955 102,336 178,291 252,550 223,210 27,338 1,603 6 Non -Residential 13,136 8,324 21,460 41,722 34,693 1,692 157 7 Industrial 8 Subtotal 89,090 110,660 199,751 294,272 257,903 29,030 Greenland 9 Residential 10,113 18,171 28,284 34,575 31,615 5,112 435 10 Non -Residential 1,995 1,805 3,800 6,450 5,496 432 22 11 Industrial 12 Subtotal 12,109 19,976 32,084 41,025 37,111 5,544 Washington County/ Growth Area 13 Residential 1,158 1,051 2,209 3,743 3,190 252 74 14 Non -Residential 74 74 15 31 24 15 Industrial 16 Subtotal 1,158 1,125 2,283 3,758 3,221 276 Johnson 17 Residential 6,357 7,132 13,489 20,837 18,083 1,824 151 18 Non -Residential 43 84 127 147 136 24 18 19 Industrial 20 Subtotal 6,399 7,216 13,615 20,984 18,219 1,848 21 Total Retail 3,149,862 2,227,422 5,377,284 10,052,911 8,415,740 480,654 39,752 Wholesale 22 Elkins 90,935 0 90,935 276,815 216,143 24 23 23 West Fork 104,762 0 104,762 318,905 249,008 12 23 24 Subtotal 195,697 0 195,697 595,720 465,151 36 45 25 Subtotal (Inside City) 3,047,505 2,095,660 5,143,166 9,713,856 8,117,505 445,804 39,752 26 Subtotal (Outside City) 108,756 138,978 247,733 360,039 316,454 36,698 0 27 Subtotal (Wholesale) 195,697 0 195,697 595,720 465,151 36 45 28 Surcharge Customers 1,282,742 910,900 29 Total System 3,351,958 2,234,638 5,586,596 11,952,357 9,810,010 482,538 42,258 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-13 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Fable S - 16 - Wastewater 2023 Unit Cost of Service $ 1,000gal. 1,000gal. Pounds Pounds Bills Equiv. Meters Bills Units of Service 1 Inside City 5,143,166 5,143,166 9,713,856 8,117,505 445,804 39,752 445,804 2 Outside City -w/o Farmington & Greenland 211,595 15,898 620,462 486,591 2,160 288 3 Outside City -Farmington 199,751 199,751 294,272 257,903 29,030 1,761 4 Outside City -Greenland 32,084 32,084 41,025 37,111 5,544 458 5 Surcharge 199,751 199,751 294,272 257,903 29,030 1,761 6 Total System 5,786,346 5,590,650 10,963,887 9,157,013 511,568 44,018 445,804 Costs of Service Net Operating Expense 7 Total -$ 17,377,400 4,744,789 1,738,270 $ 4,287,829 $ 4,436,415 1,980,591 189,507 8 Unit Cost - $/unit 0.85 0.32 $ 0.3587 $ 0.4522 4.10 0.43 Depreciation Expense: 9 Total -$ 10 Unit Cost - $/unit 8,186,987 2,527,489 1,769,433 $ 1,887,594 $ 1,830,500 0.45 0.33 $ 0.1579 $ 0.1866 $ 142,702 29,268 $ 3.3769 0.07 Net Plant Investment: 11 Total - $ 196,771,987 67,549,842 66,268,587 $ 31,759,281 $ 28,107,292 2,749,312 337,674 12 Unit Cost - $/unit 12.09 12.29 $2.6572 $2.8652 65.06 0.76 Return on Investment 13 Inside City, Unit Return - $/unit 0.04 0.04 $0.0089 $0.0096 0.22 0.00 14 Outside City (Exc Farmington & Greenland), Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 15 Farmington, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 16 Greenland, Unit Return - $/Unit 0.53 0.54 $0.1159 $0.1249 2.84 Total Return 17 Inside City 613,093 207,865 211,325 $ 97,667 $ 86,464 8,645 1,129 18 Outside City -w/o Farmington & Greenland 253,555 111,550 8,521 $ 71,882 $ 60,786 817 19 Outside City- Farmington 283,668 105,306 107,058 $ 34,092 $ 32,218 4,994 20 Outside City- Greenland 44,797 16,914 17,196 $ 4,753 $ 4,636 1,298 21 Total Return -$ 1,195,113 441,635 344,100 $ 208,394 $ 194,103 15,754 1,129 Total Unit Cost of Service 22 InsideCity- $/unit 1.34 0.69 $ 0.5256 $ 0.6484 4.10 3.59 0.49 23 Outside City (w/o Farmington & Greenland)- $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 24 OutsideCity- Farmington - $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 25 Outside City- Greenland - $/unit 1.83 1.19 $ 0.6325 $ 0.7637 4.10 6.21 Total Cost of Service 26 InsideCity- Retail -$ 23,021,915 6,902,913 3,557,834 5,105,131 5,263,434 1,829,815 142,883 219,904 27 InsideCity-Surcharge -$ 1,264,779 674,147 590,632 28 Outside City- Except Farmington - $ 1,180,603 386,991 18,866 392,456 371,634 8,866 1,790 29 Outside City- Farmington - $ 1,115,560 365,328 237,030 186,133 196,973 119,155 10,939 30 Outside City- Greenland 176,644 58,680 38,072 25,949 28,344 22,756 2,843 31 Total Cost of Service - $ 26,759,500 7,713,912 3,851,803 6,383,816 6,451,017 1,980,591 158,456 219,904 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-14 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 17 - Wastewater 2023 Cost of Service by Customer Class (1) (2) (3) (4) Inside City 1 Residential 16,532,489 17,895,771 -7.6% 2 Non -Residential 4,627,157 3,999,013 15.7% 3 Industrial 1,862,269 1,547,635 20.3% 4 Subtotal 23,021,915 23,442,418 -1.8% Outside City 5 Residential 1,234,084 1,305,506 -5.5% 6 Non -Residential 148,314 161,315 -8.1% 7 Industrial 8 Subtotal 1,382,398 1,466,821 -5.8% 9 Total Retail 24,404,313 24,909,239 -2.0% 10 Wholesale 1,090,407 1,015,665 7.4% 11 Surcharge 1,264,779 834,607 51.5% 12 Total 26,759,499 26,759,511 0.0% BLACK & VEATCH I Appendix 2: Wastewater Tables 11 1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 'able S - 18 - Wastewater Proposed 2024 Charges Proposed Wastewater Rates Effective January 1, 2024 Inches 5/8 $/month 12.75 $/month 15.71 3/4 12.75 16.01 1 24.45 31.32 1 1/2 44.81 63.14 2 61.64 87.88 3 132.59 184.50 4 218.49 270.52 6 433.00 501.48 8 647.59 558.03 1,000 gal. 1,000 gal. 1,000 ga I. Residential First 2,000 Gallons 4.94 > 2,000 Gallons 6.59 All Usage 7.59 Non -Residential All Usage 5.54 7.59 Major Industrial All Usage 5.85 7.59 Wholesale 85% of metered water usage 5.74 Above 85% of metered water 5.74 Surcharge BOD - $/lb for strength in excess of 300 ppm 0.5414 TSS - $/Ib for strength in excess of 300 ppm 0.6679 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 19 - Wastewater 2023 Cost of Service Under Proposed Rates Inside City 1 Residential 16,532,500 17,895,800 -7.6% 16,532,300 100% -8% -1,363,500 2 Non -Residential 4,627,200 3,999,000 15.7% 4,623,700 100% 16% 624,700 3 Industrial 1,862,300 1,547,600 20.3% 1,861,800 100% 20% 314,200 4 Subtotal 23,022,000 23,442,400 -1.8% 23,017,800 100% -2% -424,600 Outside City 5 Residential 1,234,100 1,305,500 -5.5% 1,227,400 99% -6% -78,100 6 Non -Residential 148,300 161,300 -8.1% 155,200 105% -4% -6,100 7 Industrial 0% 0% 8 Subtotal 1,382,400 1,466,800 -5.8% 1,382,600 100% -6% -84,200 Wholesale 9 Elkins 506,700 472,000 7.4% 506,500 100% 7% 34,500 10 West Fork 583,700 543,700 7.4% 583,500 100% 7% 39,800 11 Subtotal 1,090,400 1,015,700 7.4% 1,090,000 100% 7% 74,300 12 Surcharge 1,264,800 834,600 51.5% 1,264,800 100% 52% 430,200 13 Total 26,759,600 26,759,500 0.0% 26,755,200 100% 0% -4,300 BLACK & VEATCH I Appendix 2: Wastewater Tables 11-3 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table S - 20 - Wastewater 2024 Bill Impact Line No. Residential 1 Meter Size 3/4 Monthly Usage 1,000gaI. 0.5 Existing Rates $ 22.10 Inside Proposed Rates $ 15.22 City Increase / Decrease $ -6.88 increase Decrease -31.1% Existing Rates $ 26.46 Outside Proposed Rates $ 19.80 City Increase / Decrease $ -6.66 Increase Decrease -25.2% 2 3/4 2 26.45 22.64 -3.81 -14.4% 34.64 31.19 -3.45 -10.0% 3 3/4 4 38.05 32.53 -5.52 -14.5% 51.00 46.37 -4.63 -9.1% 4 3/4 8 61.25 52.30 -8.95 -14.6% 83.72 76.74 -6.98 -8.3% 5 3/4 10 72.85 62.19 -10.66 -14.6% 100.08 91.92 -8.16 -8.2% 6 3/4 15 101.85 86.91 -14.94 -14.7% 140.98 129.87 -11.11 -7.9% Non -Residential 7 3/4 10 61.75 68.17 6.42 10.4% 100.08 91.92 -8.16 -8.2% 8 3/4 20 105.75 123.58 17.83 16.9% 181.88 167.83 -14.05 -7.7% 9 1 50 243.05 301.52 58.47 24.1% 442.92 410.88 -32.04 -7.2% 10 1 100 463.05 578.59 115.54 25.0% 851.92 790.43 -61.49 -7.2% 11 1 1/2 50 257.64 321.88 64.24 24.9% 469.37 442.69 -26.68 -5.7% 12 1 1/2 100 477.64 598.95 121.31 25.4% 878.37 822.25 -56.12 -6.4% 13 2 100 493.82 615.78 121.96 24.7% 897.73 846.99 -50.74 -5.7% 14 2 500 2,253.82 2,832.34 578.52 25.7% 4,169.73 3,883.43 -286.30 -6.9% Industrial 15 2 100 493.52 646.68 153.16 31.0% 897.73 846.99 -50.74 -5.7% 16 2 1,000 4,732.52 5,912.04 1,179.52 24.9% 8,259.73 7,678.98 -580.75 -7.0% 17 4 500 2,441.89 3,143.69 701.80 28.7% 4,393.44 4,066.07 -327.37 -7.5% 18 4 1,500 7,151.89 8,994.09 1,842.20 25.8% 12,573.44 11,657.17 -916.27 -7.3% 19 6 2,500 11,948.78 15,059.00 3,110.22 26.0% 21,051.46 19,479.22 -1,572.24 -7.5% 20 6 5,000 23,723.78 29,685.00 5,961.22 25.1% 41,501.46 38,456.97 -3,044.49 -7.3% 21 6 10,000 47,273.78 58,937.00 11,663.22 24.7% 82,401.46 76,412.47 -5,988.99 -7.3% BLACK & VEATCH I Appendix 2: Wastewater Tables 11-4 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study 12.0 Appendix 3: Combined Tables Table C - 1 - Combined Projected Fund Balances S S S S S S Operating Funds 1 O&M Reserve Balance (a) 8,314,600 8,657,100 9,015,200 9,389,600 9,781,000 10,190,300 2 Operating Fund Balance (b) 206,300 205,300 210,800 216,400 213,100 211,100 3 Subtotal Operating Funds Balance (d) 8,520,900 8,862,400 9,226,000 9,606,000 9,994,100 10,401,400 Capital Funds 4 Capital Fund Balance (c) 1,008,400 1,008,400 67,670,900 45,227,400 24,147,700 1,008,800 5 Capital Reserve Fund Balance 33,778,000 33,098,000 31,068,000 30,048,000 31,218,000 30,628,000 6 Subtotal Capital Funds Balance (d) 34,786,400 34,106,400 98,738,900 75,275,400 55,365,700 31,636,800 7 Impact Fee Fund Balance (d) 4,516,400 4,378,900 5,022,300 5,655,700 6,360,900 7,035,800 (a) Calculated as 90 days of following year's Operating Expenses. (b) Target minimum combined balance is $200,OOOto account for any adjustments that may be needed to the O&M balance at the end of the year. (c) Target minimum combined balance is $1,000,000. Includes unspent revenue bond proceed amounts at the end of the fiscal years 2024 ($67M), 2025 ($44M) and 2026 ($23M). (d) All balances are cumulative. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-1 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 2 - Combined Operating Cash Flow 1 Revenues Revenues Under Existing Rates 49,952,000 50,519,100 51,181,800 51,857,600 52,546,600 53,249,200 2 Revenue Increases 4.4 % Increase Effective January 1, 2024 0 0 2,070,000 2,288,600 2,319,700 2,351,400 3 4.4% Increase Effective January 1, 2025 0 0 0 2,201,200 2,433,900 2,467,200 4 4.5 % Increase Effective January 1, 2026 0 0 0 0 2,341,300 2,589,100 5 4.5 % Increase Effective January 1, 2027 0 0 0 0 0 2,491,100 6 4.5 % Increase Effective January 1, 2028 0 0 0 0 0 0 7 8 Total Revenue from Rates Other Revenues (a) 49,952,000 1,371,600 50,519,100 1,372,900 53,251,800 1,382,900 56,347,400 1,394,700 59,641,500 1,407,000 63,148,000 1,420,000 9 Subtotal Revenues 51,323,600 51,892,000 54,634,700 57,742,100 61,048,500 64,568,000 Expenses 10 Operating Expenses 32,655,400 33,720,200 35,109,500 36,561,700 38,079,900 39,667,300 11 Bad Debt 249,800 252,600 266,300 281,700 298,200 315,800 12 PILOT 2,123,000 2,147,100 2,263,200 2,394,800 2,534,800 2,683,800 13 SDWF-ReimbursementtoADPH 230,400 234,300 238,200 242,300 246,400 250,600 14 Debt Service 0 0 3,200,000 6,300,000 6,300,000 6,300,000 15 Total Expenses 35,258,600 36,354,200 41,077,200 45,780,500 47,459,300 49,217,500 Transfers 16 Transfer to Shop Fund 0 0 0 0 0 0 17 Transfer to Operating Reserve 262,600 342,500 358,100 374,400 391,400 409,300 18 Cash Financing of Capital 15,930,000 15,876,300 15,223,900 12,601,600 12,031,100 15,533,200 19 Transferto/from Capital Reserve -129,000 -680,000 -2,030,000 -1,020,000 1,170,000 -590,000 20 Total Transfers 16,063,600 15,538,800 13,552,000 11,956,000 13,592,500 15,352,500 Fund Balance 21 Beginning Balance 204,900 206,300 205,300 210,800 216,400 213,100 22 Annual Operating Balance 1,400 -1,000 5,500 5,600 -3,300 -2,000 23 Ending Fund Balance 206,300 205,300 210,800 216,400 213,100 211,100 Performance Metrics 24 Debt Service Coverage (b) NA NA a 6.100 3.36 0 3.65 @ 3.95 25 0&M Reserve Balance (Days)(c) a 90.000 90.00 a 90.00 Q 90.00 0 90.00 a 90.00 (a) Includes interest income on operating fund balance. (b) Minimum requirement is 2.OX the net revenues. Net revenues is total revenues less operating expenses (excluding bad debt, PILOTand Safe Drinking Water Fee) (c) Mininum requirement is 90days of following year's Operating Expenses. BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-2 City of Fayetteville, Arkansas I Water and Wastewater Comprehensive Rate Study Table C - 3 - Combined 2024 Bill Impact Inside City Outside City Line Monthly Existing !T,!ZMM== No. Meter Residential 1 Size Inches 3/4 Usage 1,000gal. 1 Rates $ 32.01 Rates $ 24.01 Decrease $ -8.00 -25.0% $ 37.82 $ 30.06 $ -7.76 -20.5% 2 3/4 2 39.87 36.81 -3.06 -7.7% 50.04 48.26 -1.78 -3.6% 3 3/4 4 60.77 56.20 -4.57 -7.5% 77.10 75.46 -1.64 -2.1% 4 3/4 8 102.57 94.97 -7.60 -7.4% 131.22 129.87 -1.35 -1.0% 5 3/4 10 123.47 114.35 -9.12 -7.4% 158.28 157.07 -1.21 -0.8% 6 3/4 15 175.72 162.82 -12.90 -7.3% 225.93 225.07 -0.86 -0.4% Non -Residential 7 3/4 10 106.05 117.13 11.08 10.5% 151.20 151.00 -0.20 -0.1% 8 3/4 20 187.95 214.52 26.57 14.1% 276.80 278.01 1.21 0.4% 9 1 50 441.42 521.46 80.04 18.1% 672.13 680.18 8.05 1.2% 10 1 100 850.92 1,008.41 157.49 18.5% 1,300.13 1,315.19 15.06 1.2% 11 1.5 50 462.61 550.94 88.33 19.1% 706.15 725.55 19.40 2.8% 12 1.5 100 872.11 1,037.89 165.78 19.0% 1,334.15 1,360.57 26.42 2.0% 13 2 100 895.34 1,061.81 166.47 18.6% 1,361.61 1,395.86 34.25 2.5% 14 2 500 4,091.34 4,957.41 866.07 21.2% 6,289.61 6,475.98 186.37 3.0% Industrial 15 2 100 812.04 986.71 174.67 21.5% 1,260.25 1,233.68 -26.57 -2.1% 16 2 1,000 7,715.04 9,075.91 1,360.87 17.6% 11,682.25 11,204.33 -477.92 -4.1% 17 4 500 4,008.78 4,807.36 798.58 19.9% 6,180.33 5,925.53 -254.80 -4.1% 18 4 1,500 11,678.78 13,795.36 2,116.58 18.1% 17,760.33 17,004.03 -756.30 -4.3% 19 6 2,500 19,522.56 23,092.73 3,570.17 18.3% 29,725.24 28,415.89 -1,309.35 -4.4% 20 6 5,000 38,697.56 45,562.73 6,865.17 17.7% 58,675.24 56,112.14 -2,563.10 -4.4% 21 6 10,000 77,047.56 90,502.73 13,455.17 17.5% 116,575.24 111,504.64 -5,070.60 -4.4% BLACK & VEATCH I APPENDIX 3: COMBINED TABLES 12-3 Form vt 36 grata AWEHCO MEDIA COMPANY RECEIVES Account#: NWCL5004205 OCT 0 3 2023 Company: CITY OF FAYETTEVILLE-CLERKS OFFI CMOFIF,/AYE�I t� Ad number#: 332350 pq•PC¢'.RK'_ PO#: Matter of: ord 6681 AFFIDAVIT•STATE OFARKANSAS I,Carla Gardner,do solemnly swear that 1 am the Finance Director of the NWA Democrat Gazette,a daily newspaper printed and published in WASHINGTON county,State ofARKANSAS:that I was so related to this publication at and during the publication of the annexed legal advertisement in the matter of: ord 6681 Pending in the court,in said County,and at the dates of the several publications of said advertisement stated below,and that during said periods and at said dates,said newspaper was printed and had a bona fide circulation in said County, that said newspaper had been regularly printed and published in said county.and had a bona tide circulation therein for the period of one month before the date of the first publication of said advertisement:and that said advertisement was published in the regular daily issues of said newspaper as stated below. And that there is due or has been paid the NWA Democrat Gazette for publication the sum of$138.32. (Includes$0.00 Affidavit Charge). NWA Democrat Gazette 10/01/23;NWA nwaonline.com 10/01/23 debt ja,__ Finance Director State of ARKANSAS.County of WASHINGTON,Subscribed and sworn to before me on this 3rd day of October,2023 (rile � CATHERINE STGOS MY COMMISSION 012402 772 „ EXPIRES:February 2025 ,t` Washington County NOTARY PUBLIC Ordinance:6681 Ale Number: 2022-319 AMEND §51 136 MONTHLY WATER RATES AND §51.137 MONTHLY SEWER RATES: AN ORDINANCETTO AMEND RECEIVED §51 136 MONTHLY WATER RATES AND§51.137 MONTHLY SEWER RATES TO CHANGE OCT O 2U23 WATER AND SEWER RATES AS RECOMMENDED BY THE COST OF SERVICE STUDY CONDUCTED BY BLACK d VEATCH WHEREAS,the City of Fayet- CITY Of FAYf 1 EVIL.Lr teville's current water and f 1TY CLERK$OFFICE sewer rates were adopted in 2008 based on a Cost of Service Study conducted by HER Engi- neering;and WHEREAS, on August 18, 2020,the City Council approved Resolution 212-20 authorizing a contract with Black&Veatch for an updated Cost of Service Study;and WHEREAS,the Black&Veatch Cost of Service Study recom- mends initial changes in both water and sewer rates that re- flect the true cost of service by customer class and a 3%an- nual increase In rates each year thereafter until a new study is conducted;and WHEREAS, the City Council has determined,after the public hearing required by Ark.Code Ann. § 14-235-223,that the proposed rate changes reflect- ing the true cost of service should be adopted and that the new rates shall take effect on January 1,2024. NOW,THEREFORE,BE IT OR- DAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayet- teville,Arkansas hereby repeals §51.136 Water Monthly Rates and §51 137 Monthly Sewer Rates and enacts replacement §51 136 Monthly Water Rates and §51.137 Montnly Sewer Rates as shown on the attached "City of Fayetteville Final Amended Rale Schedules - September 19,2023." PASSED and APPROVED on September 19,2023 Approved: LUOneld Jordan,Mayor Attest: Kara Paxton,City Clerk Treas- urer This publication was paid for by the City Clerk-Treasurer of the City of Fayetteville, Arkansas. Amount paid:$138.32 October 1,2023 332350 Form v1 32 NWA A WEHCO MEDIA COMPANY Account#: NWCL5004205 RECEIVEDSEP2 Company: CITY OF FAYETTEVILLE-CLERKS OFFI 5 2023 Ad number#: 328856 CIT Y OF FAYETTEVILLE PO#: CITY CLERK'S OfFlCf Matter of: ORD 6681 AFFIDAVIT•STATE OF ARKANSAS I.Carla Gardner.do solemnly swear that I am the Finance Director of the Democrat Gazette.a daily newspaper printed and published in WASHINGTON county,State ofARKANSAS;that I was so related to this publication at and during the publication of the annexed legal advertisement in the matter of: ORD 6681 Pending in the court,in said County,and at the dates of the several publications of said advertisement stated below,and that during said periods and at said dates,said newspaper was printed and had a bona tide circulation in said County, that said newspaper had been regularly printed and published in said county,and had a bona tide circulation therein for the period of one month before the date of the first publication of said advertisement;and that said advertisement was published in the regular daily issues of said newspaper as stated below. And that there is due or has been paid the Democrat Gazette for publication the sum of$122.20. (Includes $0.00 Affidavit Charge). NWA Democrat Gazette 09/23/23;NWA nwaonline.com 09/23/23 da,a_ Finance Director State of ARKANSAS.County of WASHINGTON , Subscribed and sworn to before me on this 25th day of September.2023 ��„ CATHERINE SMOGS wrr, • MY COMMISSION f#12402772 C1-Q �Zxt.t►..e�� � ""` EXPIRES:WashiFebtungton ry County 2025 Washlnpton CouMyt NOTARY PUBLIC Ordinance:6681 File Number:2022-319 AMEND §51.136 MONTHLY WATER RATES AND §51,137 MONTHLY SEWER RATES: AN ORDINANCE TO AMEND §51 136 MONTHLY WATER RATES AND§51 137 MONTHLY SEWER RATES TO CHANGE WATER MD SEWER RATES AS RECOMMENDED BY THE COST OF SERVICE STUDY CONDUCTED BY BLACK&VEATCH RECEIVED WHEREAS,the City of Fayet- tewfle's current water and sewer rates were adopted in 2008 based on a Cost of Service SEP {� no�� Study conducted by HDR Engi- SEP(j U nearing;and WHEREAS, on August 18, 2020,the City Council approved CITY OF FAYET rEVILLf Resolution 212-20 authorizing a CITY CI FRKS OFFICF contract with Black&Veatch for an updated Cost of Service Study;and WHEREAS,the Black&Veatch Cost of Service Study recom- mends initial changes in both water and sewer rates that re- flect the Use cost of service by customer class and a 3%an- nual increase in rates each year thereafter until a new study is conducted;and WHEREAS,the City Council has determined,after the public hearing required by Ark.Code Ann. § 14-235-223,that the proposed rate changes reflect- ing the true cost of service should be adopted and that the new rates shall take effect on January 1,2024, NOW,THEREFORE,BE IT OR- DAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayet- teville,Arkansas hereby repeals §51.136 Monthly Water Rates and enacts a new§51 136 as shown in Exhibit A attached to this Ordinance. Section 2: That the City Council of the City of Fayet- teville,Arkansas hereby repeals §51.137 Monthly Sewer Rates and enacts a new§51-137 as shown in Exhibit 8 attached to this Ordinance. PASSED and APPROVED on September 19 2023 Approved: Lioneld Jordan,Mayor Attest: Kara Paxton, City Clerk Treasurer This publication was paid for by the City Clerk-Treasurer of the City of Fayetteville, Arkansas. Amount paid:5122.20 Sept.23,2023 328856