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HomeMy WebLinkAboutORDINANCES 5123ORDINANCE NO. 5123 AN ORDINANCE REPEALING AND REPLACING §51.136, MONTHLY WATER RATES, OF THE FAYETTEVILLE CODE OF ORDINANCES. 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, of the Fayetteville Code of Ordinances, and adopts an amended version of §51.136, Monthly Water Rates, as set forth in Exhibit A, attached hereto, and incorporate herein by reference as if set forth word-for-word in its entirety.o�°$sa�sa��,� PASSED and APPROVED this 1St day of April, 2008. ATTEST: FAYETTEVILLE: By: ��3z vla�> /�FQN Geeee� SONDRA E. SMITH, City Clerk/Treasurer EXHIBIT A 61.136 Monthly Water Rates Effective as of the first billing statements issued after April 30, 2008, 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 fire fighting, 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. The minimum billing shall be 1,000 gallons per month. Table A-1 Monthly Water Rates After April 30, 2008 Cost per 1,000 jaiIons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.11 $2.43 Next 13,000 2.81 3.23 Residential 3.16 Over 15,000 3.98 4.58 Non- Residential First 300,000 2.55 2.93 2.46 Over 300,000 1.95 2.24 Major Industrial All Usage 1.77 2.04 Irrigation First 300,000 2.81 3.23 Over 300,000 1.84 1 2.11 Reduced Peak 1.84 1.84 Wholesale Demand 2.01 2.01 Peak Demand 2.04 2.04 Table A-2 Monthly Water Rates After December 31, 2008 Cost per 1,000 gallons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.25 $2.59 Next 13,000 2.99 3.44 Residential 3.16 Over 15,000 4.24 4.88 Non- Residential First 300,000 2.61 3.00 2.46 Over 300,000 2.11 2.43 Major Industrial All Usage 1.89 2.17 Irrigation First 300,000 3.09 3.55 Over 300,000 2.16 2.48 Reduced Peak 1.95 1.95 Wholesale Demand 2.01 2.01 Peak Demand 2.16 2.16 Table A-3 Monthly Water Rates After December 31, 2009 Cost per 1,000 gallons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.39 $2.75 Next 13,000 3.17 3.64 Residential 3.16 Over 15,000 4.49 1 5.16 Non- Residential First 300,000 2.68 3.08 2.46 Over 300,000 2.28 2.62 Major Industrial All Usage 2.01 2.31 Irrigation First 300,000 3.37 3.88 Over 300,000 2.70 3.11 Reduced Peak Wholesale Demand 2.01 2.01 Peak Demand 2.23 2.23 Table A-4 Monthly Water Rates After December 31, 2010 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $2.53 $2.91 Next 13,000 3.36 3.86 Over 15,000 4.75 1 5.46 Non- Residential First 300,000 2.75 3.16 Over 300,000 2.45 2.82 Major Industrial All Usage 2.14 2.46 Irrigation First 300,000 3.64 4.19 Over 300,000 3.28 3.77 EXHIBIT A (2) Beginning January 1, 2012, 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 After April 30, 2008 Reduced Peak 2.07 2.07 Wholesale Demand $4.00 $4.60 Peak Demand 2.30 2.30 6.38 (2) Beginning January 1, 2012, 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 After April 30, 2008 Meter Size Inside City Outside City Wholesale 5/8 x 3%" $4.00 $4.60 $5.00 1 inch 5.55 6.38 7.00 1 % inch 9.70 11.16 12.15 2 inch 14.10 16.22 17.70 3 inch 32.90 37.84 41.30 4 inch 54.45 62.62 68.30 6 inch 108.85 125.18 136.70 FFi-nchI 163.30 1 187.80 205.00 Table B-2 Monthly Water Service Charge After December 31, 2008 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.25 $4.89 $5.30 1 inch 5.90 6.79 7.40 1 '/ inch 10.30 11.85 12.85 2 inch 15.00 17.25 18.75 3 inch 34.95 40.19 43.80 4 inch 57.85 66.53 72.25 6 inch 115.65 133.00 144.90 8 inch 173.50 199.53 216.90 Table B-3 Monthly Water Service Charge After December 31, 2009 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.50 $5.18 $5.60 1 inch 6.25 7.19 7.80 1 '/ inch 10.90 12.54 13.55 2 inch 15.90 18.29 19.75 3 inch 37.00 42.55 45.10 4 inch 61.25 70.44 76.10 6 inch 122.45 140.82 149.20 8 inch 183.70 211.26 228.40 Table B-4 Monthly Water Service Charge After December 31, 2010 Meter Size Inside Outside Wholesale City City EXHIBIT A 5/8" x 3/a" $4.75 $5.46 $6.00 1 inch 6.60 7.59 8.30 1 % inch 11.50 13.23 14.45 2 inch 16.75 19.26 21.00 3 inch 39.05 44.91 46.50 4 inch 64.65 74.35 81.10 6 inch 129.30 148.70 153.70 8 inch 193.90 222.99 240.50 (2) Beginning January 1, 2012, 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 April 30, 2008. (4) Customers served through the White River Rural Water System will pay the outside city rate plus an additional $5.94 per month for all bills issued prior to January 1, 2012. This additional amount will not be charged on any bills issued after December 31, 2011. (5) 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: Table C-1 Monthly Standby Fire Protection Service Charge After April 30, 2008 Line Size Inside City Outside City 2 inch $ 6.84 $ 7.86 3 inch 20.51 23.59 4 inch 41.03 47.18 6 inch 113.96 131.05 8 inch 239.32 275.21 10 inch 410.26 471.79 Table C-2 Monthly Standby Fire Protection Service Charge After December 31, 2008 Line Size Inside City Outside City 2 inch $ 7.23 $ 8.32 3 inch 21.70 24.96 4 inch 43.41 49.92 6 inch 120.57 138.66 8 inch 253.20 291.18 10 inch 434.05 499.16 Table C-3 Monthly Standby Fire Protection Service Charge After December 31, 2009 Line Size Inside City Outside City 2 inch $ 7.62 $ 8.76 3 inch 22.85 26.28 4 inch 45.71 52.56 6 inch 126.96 146.00 8 inch 266.62 306.61 10 inch 457.06 525.61 Table C-4 Monthly Standby Fire Protection Service Charge After December 31, 2010 Line Size Inside City Outside City 2 inch $ 8.02 $ 9.22 3 inch 24.06 27.67 4 inch 48.13 55.35 6 inch 133.69 153.74 8 inch 280.75 322.86 10 inch 481.28 553.47 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the monthly standby fire protection service charge shall be increased by 3% per year. (3) 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) David Jurgens Submitted By City of Fayetteville Staff Review Form City Council Agenda Items or Contracts 1 -Apr -08 City Council Meeting Date Water/Wastewater Division Action Required: r �1 W l /a8 503 Aww 'd 51, lj� �n / me4er Water/Wastewater Department Approval of an ordinance changing the water rates based on the Cost of Service Study developed by HDR Engineering with input provided by the public, staff, Water/Sewer Committee, and City Council. Specifically, rescinding and replacing Section 51.136 of the Fayetteville Code of Ordinances. $0.00 $0.00 Water and Wastewater Cost of this request Category / Project Budget Program Category / Project Name N/A Account Number N/A Project Number Budgeted Item rA City Attorney Funds Used to Date $0.00 Remaining Balance Budget Adjustment Attached 1�A Aqz N Date Dat Water and Wastewater Program / Project Category Name Water/Sewer Fund Name Previous Ordinance or Resolution # Original Resolution Date: Original Contract Number: 49-08 4 -Mar -08 N/A Received in City Clerk's Office A Q 3�,- Finance and Internal Service Director Date Mayor Comments: Received in Mayor's Office Date City Council Meeting of April 1, 2008 CITY COUNCIL AGENDA MEMO To: Fayetteville City Council Thru: Mayor Dan Coody From: David Jurgens, Water and Wastewater Direct Fayetteville Sewer Committee Date: 14 March 2008 Subject: Approval of an ordinance changing water rates RECOMMENDATION City Administration recommends approval of an ordinance changing the water rates based on the Cost of Service Study developed by HDR Engineering with input provided by the public, staff, Water/Sewer Committee, and City Council. Specifically, rescinding and replacing Section 51.136 of the Fayetteville Code of Ordinances. BACKGROUND HDR, with input from City staff, has finalized the water and sewer rate study. The fundamental information was first presented to the City Council Water and Sewer Committee by Tom Gould, HDR, on July 27, 2007, and to the City Council on March 4, 2008. DISCUSSION The rate study reflects the following policy guidelines, as adopted by the Council on March 4, 2008: 1. The City shall adopt a cost of service rate schedule based on customer class. 2. The City shall use volumetric blocks within selected rate classes as appropriate: - Residential shall have an increasing block to reduce the cost burden of life critical water uses, encourage conservation, and capture system costs of irrigation through residential meters; - Non-residential shall have a declining block to match the reduced volumetric cost of service for larger non-residential users; - Industrial shall use a declining block to match the reduced volumetric cost of service for major users. 3. Rates shall be phased to true cost of service over several years. 4. A 3% annual increase shall be used thereafter to offset inflation. 5. All legitimate non -emergency water consumption shall be metered and billed at an appropriate rate BUDGET IMPACT This rate change will increase the Water and Sewer Utility's revenues to match projected needs. WS Rate Change Section 136 CCMemoMaM [09�7i.-MM"J AN ORDINANCE REPEALING AND REPLACING §51.136, MONTHLY WATER RATES, OF THE FAYETTEVILLE CODE. OF ORDINANCES. 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, of the Fayetteville Code of Ordinances, and adopts an amended version of §51.136, Monthly Water Rates, as set forth in Exhibit A, attached hereto, and incorporate herein by reference as if set forth word-for-word in its entirety. PASSED and APPROVED this 1St day of April, 2008. APPROVED: By: DAN COODY, Mayor ATTEST: By: SONDRA E. SMITH, City Clerk/Treasurer 51,136 Monthly Water Rates Effective as of the first billing statements issued after April 30, 2008, 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 fire fighting, 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. The minimum billing shall be 1,000 gallons per month. Table A-1 Monthly Water Rates After April 30, 2008 Cost per 1,000 1 lallons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.11 $2.43 Next 13,000 2.81 3.23 Residential 3.16 Over 15,000 3.98 4.58 Non- Residential First 300,000 2.55 2.93 2.46 Over 300,000 1.95 2.24 Major Industrial All Usage 1.77 2.04 Irrigation First 300,000 2.81 3.23 Over 300,000 1.84 2.11 Reduced Peak 1.84 1.84 Wholesale Demand Peak Demand 2.04 2.04 2.16 Table A-2 Monthly Water Rates After December 31, 2008 Cost per 1,000 gallons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.25 $2.59 Next 13,000 2.99 3.44 Residential 3.16 Over 15,000 4.24 1 4.88 Non- Residential First 300,000 2.61 3.00 2.46 Over 300,000 2.11 2.43 Major Industrial All Usage 1.89 2.17 Irrigation First 300,000 3.09 3.55 Over 300,000 2.16 2.48 Reduced Peak 1.95 1.95 Wholesale Demand Peak Demand Peak Demand 2.16 2.16 Table A-3 Monthly Water Rates After December 31, 2009 Cost per 1,000 gallons Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.39 $2.75 Next 13,000 3.17 3.64 Residential 3.16 Over 15,000 4.49 5.16 Non- Residential First 300,000 2.68 3.08 2.46 Over 300,000 2.28 2.62 Major Industrial All Usage 2.01 2.31 Irrigation First 300,000 3.37 3.88 Over 300,000 2.70 3.11 Reduced Peak 2,01 2.01 Wholesale Demand Peak Demand 2.23 2.23 Table A-4 Monthly Water Rates After December 31, 2010 Cost per 1,000 gallons Class Usage Rate (In Gallons) Inside City Outside City Residential First 2,000 $2.53 $2.91 Next 13,000 3.36 3.86 Over 15,000 4.75 5.46 Non- Residential First 300,000 2.75 3.16 Over 300,000 2.45 2.82 Major Industrial All Usage 2.14 2.46 Irrigation First 300,000 3.64 4.19 Over 300,000 3.28 3.77 EXHIBIT A (2) Beginning January 1, 2012, 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 After April 30, 2008 Reduced Peak Inside City Wholesale Demand 2.0 2.07 $4.00 Peak Demand 2.30 2.30 (2) Beginning January 1, 2012, 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 After April 30, 2008 Meter Size Inside City Outside City Wholesale 5/8 x 3/4" $4.00 $4.60 $5.00 1 inch 5.55 6.38 7.00 1 %2 inch 9.70 11.16 12.15 2 inch 14.10 16.22 17.70 3 inch 32.90 37.84 41.30 4 inch 54.45 62.62 68.30 6 inch 108.85 125.18 136.70 8 inch 163.30 187.80 205.00 Table B-2 Monthly Water Service Charge After December 31, 2008 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.25 $4.89 $5.30 1 inch 5.90 6.79 7.40 1 %2 inch 10.30 11.85 12.85 2 inch 15.00 17.25 18.75 3 inch 34.95 40.19 43.80 4 inch 57.85 66.53 72.25 6 inch 115.65 133.00 144.90 8 inch j 173.50 j 199.53 j 216.90 Table B-3 Monthly Water Service Charge After December 31, 2009 Meter Size Inside City Outside City Wholesale 5/8" x 3/4" $4.50 $5.18 $5.60 1 inch 6.25 7.19 7.80 1 %2 inch 10.90 12.54 13.55 2 inch 15.90 18.29 19.75 3 inch 37.00 42.55 45.10 4 inch 61.25 70.44 76.10 6 inch 122.45 140.82 149.20 8 inch 183.70 1 211.26 228.40 Table B-4 Monthly Water Service Charge After December 31, 2010 Meter Size Inside Outside Wholesale City City EXHIBIT A 5/8" x 3/4" $4.75 $5.46 $6.00 1 inch 6.60 7.59 8.30 1 % inch 11.50 13.23 14.45 2 inch 16.75 19.26 21.00 3 inch 39.05 44.91 46.50 4 inch 64.65 74.35 81.10 6 inch 129.30 148.70 153.70 8 inch 193.90 222.99 240.50 (2) Beginning January 1, 2012, 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 April 30, 2008. (4) Customers served through the White River Rural Water System will pay the outside city rate plus an additional $5.94 per month for all bills issued prior to January 1, 2012. This additional amount will not be charged on any bills issued after December 31, 2011. (5) 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: Table C-1 Monthly Standby Fire Protection Service Charge After April 30, 2008 Line Size Inside City Outside City 2 inch $ 6.84 $ 7.86 3 inch 20.51 23.59 4 inch 41.03 47.18 6 inch 113.96 131.05 8 inch 239.32 275.21 10 inch 410.26 471.79 Table C-2 Monthly Standby Fire Protection Service Charge After December 31, 2008 Line Size Inside City Outside City 2 inch $ 7.23 $ 8.32 3 inch 21.70 24.96 4 inch 43.41 49.92 6 inch 120.57 138.66 8 inch 253.20 291.18 10 inch 434.05 499.16 Table C-3 Monthly Standby Fire Protection Service Charge After December 31, 2009 Line Size Inside City Outside City 2 inch $ 7.62 $ 8.76 3 inch 22.85 26.28 4 inch 45.71 52.56 6 inch 126.96 146.00 8 inch 266.62 306.61 10 inch 457.06 525.61 Table C-4 Monthly Standby Fire Protection Service Charge After December 31, 2010 Line Size Inside City Outside City 2 inch $ 8.02 $ 9.22 3 inch 24.06 27.67 4 inch 48.13 55.35 6 inch 133.69 153.74 8 inch 280.75 322.86 10 inch 481.28 553.47 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the monthly standby fire protection service charge shall be increased by 3% per year. (3) 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) City of Fayetteville Final Report Comprehensive Water and Sewer Rate Study March 2008 fal Prepared by HDR Engineering, Inc. March 31, 2008 Mr. Paul Becker Director of Finance City of Fayetteville 113 W. Mountain St. Fayetteville, Arkansas 72701 Subject: Final Report for the Comprehensive Water and Sewer Rate Study Project #42284 Dear Mr. Becker: HDR Engineering, Inc. (HDR) is pleased to present the final report on the Comprehensive Water and Sewer Rate Study conducted for the City of Fayetteville (City). The key objective of the rate study was to develop equitable rates that generate sufficient revenue to fiind the operating and capital needs of the water and sewer utilities. This report outlines the approach, methodology, fundings, and conclusions of tate rate study. The conclusions and recommendations contained within this report provide a financial plan that meets the operating and capital needs of each utility. Furthermore, this report provides rates that are cost -based, defensible, and equitable to the City's customers. This report was developed using "generally accepted" rate setting techniques and is based upon data and information provided by the City. We appreciate the assistance provided by the City's Management team and City staff in the development of this study. We hope to have the opportunity to work with the City again in the future. Sincerely yours, HDR Engineering, hic. Thomas Gould Vice President HDR Enginoering, Inc. 5f O 1)R:h Avenue NE Shone: (4251153-6200 sollo 12oo =az, 0251 453-7107 6etcoe, WAN004-5519 navwhdrinc.com ExecutiveSummary...................................................................................................................... I Introduction........................................................................ Overview of the Rate Study Process....................................................................................... 1 Comprehensive Sewer Rate Study........................................................................................... 6 Section1 Introduction............................................................................................................1-1 1.1 Introduction......................................................................................... .1-1 .................... 1.2 Overview of the Rate Study Process........................................................................1-1 1.3 Organization of the Study .............................................. .......................................... 1-2 1.4 Sunrtuary ...................................................... ...1-2 Section 2 Overview of Utility Rate Setting Principles.........................................................2-1 2.1 Introduction.............................................................................................................. 2-1 2.2 Global Principles Around Which Rates Should Be Set...........................................2-1 2.3 Types of Utilities......................................................................................................2-2 2.4 Methods of Accumulating Costs for Revenue Requirements .................................. 2-2 2.5 Overview of the Cost Allocation Procedures........................................................... 2-3 2.6 Economic Theory and Rate Design......................................................................... 2-4 2.7 Prudent Financial Planning ......... ............................................................................. 2-4 2.8 Sunimary.............................................................................. .2-5 ................................... Section 3 Comprehensive Water Rate Study.......................................................................3-1 3.1 Introduction.............................................................................................................. 3-1 3.2 Development of the Water Revenue Requirements ................................................. 3-1 3.2.1 Determination of Time Period and Method of Accumulating Costs ............ 3-1 3.2.2 Water Rate and Other Miscellaneous Revenue ............................................ 3-2 3.2.3 Allocation of Joint O&M Expenses.............................................................. 3-3 3.2.4 Water Operation and Maintenance Expenses...............................................3-4 3.2.5 Taxes and Transfers......................................................................................3-4 3.2.6 Water Capital Improvement Projects............................................................3-4 3.2.7 Debt Service Payments.................................................................................3-6 3.2.8 Water Utility Reserve Levels....................................................................... 3-7 3.2.9 Sunnnary of the Water Revenue Requirements............................................3-7 3.2.10 Debt Service Coverage.................................................................................3-8 3.2.11 Rate Transition Plan.....................................................................................3-9 3.2.12 Summary Recormnendations of the Revenue Requirements ........................3-9 3.3 Water Cost of Service Analysis............................................................................... 3-9 3.3.1 Overview of the Cost of Set -vice Methodology..........................................3-10 3.3.2 Customer Classes of Service......................................................................3-10 3.3.3 Functionalization of Costs..........................................................................3-11 3.3.4 Classification of Costs ...............................................• ---.............................3-11 fal?able of Contents City of Fayetteville - Comprehensive Water and Sewer Rate Study 3.3.5 Functionalization and Classification of Water Plant in Sei vice .................3-12 3.3.6 Functionalization and Classification of Water Expenses ........................... 3-13 3.3.7 Allocation of the Revenue Requirements...................................................3-13 3.3.8 Rate of Return for Outside City and Wholesale Customers .......................3-14 3.3.9 Stnrmry of the Water Cost of Service Results.........................................3-15 3.3.10 Sunnnary Recommendations of the Water Cost of Service .......................3-17 3.4 Rate Design............................................................................................................3-18 3.4.1 Overview of Water Rate Structures............................................................ 3-18 3.4.2 Rate Design Criteria and Considerations ........................ ............................ 3-19 3.4.3 Establishing Retail Customer Classes of Service.......................................3-20 3.4.4 Review of the Final Adjustments By Class of Service ............................... 3-21 3.4.5 Review of the Present Fayetteville Retail Water Rate...............................3-21 3.4.6 Proposed Residential Water Rate............................................................... 3-22 3.4.7 Proposed Non -Residential Water Rate ....................................................... 3-24 3.4.8 Proposed Major Industrial Water Rate ....................................................... 3-25 3.4.9 Proposed Irrigation Rate.............................................................................3-25 3.4.10 Proposed Wholesale Water Rates...............................................................3-26 3.4.11 Fire Protection Rates..................................................................................3-27 3.5 Summary of the Water Rate Study........................................................................ 3-27 Section 4 Comprehensive Sewer Rate Study.......................................................................4-Z 4.1 Introduction.............................................................................................................. 4-1 4.1.1 Detern"ation of Time Period and Method of Accumulating Sewer Costs. 4-1 4.1.2 Sewer- Rate Revenue and Miscellaneous Revenue.......................................4-2 4.1.3 Sewer Operation and Maintenance Expenses...............................................4-3 4.1.4 Sewer Taxes and Transfers...........................................................................4-3 4.1.5 Sewer Capital Improvement Projects...........................................................4-3 4.1.6 Debt Service Payments................................................................................. 4-4 4.1.7 Sewer Utility Reserve Levels .................. ..................................................... 4-5 4.1.8 Summary of the Sewer Revenue Requirements ........... ............................ ....4-5 4.1.9 Debt Service Coverage ............................................ ............................ 4-6 4.1.10 Rate Transition Plan..................................................................................... 4-7 4.1.11 Consultant's Recommendation Regarding Sewer Revenue Requirements ... 4-7 4.2 Sewer Cost of Service Analysis...............................................................................4-7 4.2.1 Overview of the Cost of Service Methodology............................................4-8 4.2.2 Functionalization of Sewer Costs.................................................................4-8 4.2.3 Development of Cost Classifiers.................................................................. 4-9 4.2.4 Functionalization and Classification of Sewer Plant in Service.................4-10 4.2.5 Functionalization and Classification of Sewer Operating Expenses ..........4-11 4.2.6 Customer Classes of Service......................................................................4-11 4.2.7 Development of Allocation Factors............................................................ 4-12 4.2.8 Rate of Return for Outside City and Wholesale Customers .......................4-13 4.2.9 Summary of the Sewer Cost of Service Results ......................................... 4-13 4.2.10 Summary Recommendations of the Sewer Cost of Service .......................4-15 MI Tab[* of Contents ll City of Fayetteville - Comprehensive Water and Sewer Rate Study 4.3 Rate Design............................................................................................................4-16 4.3.1 Overview of Sewer Rate Structures............................................................4-16 4.3.2 Establishing Retail Customer Classes of Service.......................................4-16 4.3.3 Review of the Final Adjustments By Class of Service...............................4-17 4.3.4 Review of the Present Fayetteville Retail Sewer Rate...............................4-17 4.3.5 Proposed Residential Sewer Rate...............................................................4-18 4.3.6 Proposed Non -Residential Sewer Rate.......................................................4-19 4.3.7 Proposed Major Industrial Sewer Rate ........ ............................................... 4-20 4.3.8 Proposed City of Farmington Sewer Rate..................................................4-20 4.3.9 Proposed City of Ellcins Sewer Rate...........................................................4-21 4.4 Summary of the Sewer Rate Study........................................................................4-21 Table of Contents „ City of Fayetteville - Comprehensive Water and Sewer Rate Study Appendix A — Water Technical Analyses Appendix B — Sewer Technical Analyses Appendix C — Draft Water and Sewer Rate Ordinances fa�Table of Contents ` City of Fayetteville - Comprehensive Water and Sewer Rata Study Introduction HDR Engineering (HDR) was retained by the City of Fayetteville (City) to conduct a comprehensive water and sewer rate study. The inain objectives of the water and sewer rate study were to establish water and sewer rates that fiilly recover the cost of providing service to customers, adequately provide for maintaining and expanding the City's infi•astiucture, and provide adequate reserves for furare needs. The development of this study determines the adequacy of the existing water and sewer rates and provides the basis for any adjustments needed to move to cost -based rates. At the same tune, the study will also review the fairness and equity of the City's current water and sewer rates. Overview of the Rate Study Process "The wain objectives of the water and sewer rate study were to establish water and sewer rates that fully recover the cost of providing service to customers, adequately provide for maintaining and expanding the City's infrastructure, and provide adequate reserves for future needs." A comprehensive rate study consists of three interrelated analyses. Table ES -1 provides air overview of these analyses. Revenue Requirement Analysis Cost of Service Analysis Rate Design Analysis Compares the revenue of tire utility to the expenses to deterinine rite overall rate adjustment required Allocates the revenue requirements to rite various customer classes of service in air equitable manner Considers both the level and structure of the rate design to collect the appropriate and targeted level of revenues For this particular study, all aspects of a comprehensive rate analysis were conducted. Each utility was financially evaluated on a "stand-alone" basis. That is, no subsidies between the utilities should occur. falExecutive Summary ES -1 City of Fayetteville - Comprehensive Water and Sewer Rate Study Comprehensive Water Rate Study In conducting the water comprehensive rate study, the revenue requirement, cost of service and rate design analyses noted above in Table ES -1 were utilized. Provided below is a summary of each analysis. Water Revenue Requirement Analysis -- The development of the water revenue requirements was the first analysis undertaken in the water utility rate study. This analysis was used to determine the overall adequacy of the water utility rates. For this particular study, the revenue requirements were developed for a five-year projected time period (calendar year 2006-2010). This time period captured a good representation of current conditions the City will have to deal with for the next several years. In projecting the revenues and operating expenses for the utility, the primary inputs to the analysis were the City's accounting and billing records, capital plan and debt service obligations. A "cash basis" revenue requirement was developed that considered the prudent funding of both operating and capital infrastructure requirements of the City. The calendar year 2006 budget was used as a starting point. Escalation factors were developed for various types of expenses that the City incurs. The escalation factors used ranged from 3% to 10% per year. One key item in the water revenue requirements is the purchased water costs fiom the Beaver Water District. For 2008, Beaver Water District increased their wholesale rate by $0.02/1,000 gallons. The present wholesale rate from Beaver is $1.1611,000 gallons. This study has assumed continued increases from Beaver as a result of their 15 -year Financial Plan. Wholesale water costs for the City are approximately $6.3 million per year. Operation and maintenance costs for the projected time period ranged from $11.2 million in 2007 to $12.4 million in 2010. An important aspect of the water revenue requirements was the fiindiug of capital improvements. In the case of the City, there is a fairly significant list of water -related capital projects to be undertaken. In fact, the list of capital projects is so large that there are two lists — fiunded and unfunded. A major objective of this study is to determine the true financial condition of the water utility and develop a workable f°An important aspect capital pian. To achieve this objective, the list of capital projects of the water revenue was reviewed by City Staff and prioritized. Those projects that requirements was the could be deferred into the future were set aside as "deferred capital funding of capital projects." Unfortunately, the amount of projects being deferred is improvements." approximately $12..5 million. With the deferred projects being excluded, the City still anticipates approximately $58.4 million in capital projects which must be completed in the five year period of 2007-2010. The water financial plan developed as a part of this study assumes the need for the City to borrow a significant amount of funds to begin paying for the "unfanded" projects. It has been assumed that the City will need to borrow approximately $14.9 million in the 2007/2008 period. This financing will likely be slid out in time, but should occur at some point to be able to fired the needed projects. Failure to do so will only firrther push the water utility into deeper capital project deferrals. It should be noted that the financial plan developed as a part of this study has provided the financial/rate ability for the City to borrow these needed fiords. �] Lxeautive summary Es -2 -` City of Fayetteville - Comprehensive Water and sewer Rate study A sullllnary of the water revenue requirement analysis is provided below in Table ES -2. The technical appendix at the end of the report will provide the detailed technical analysis for the full five-year period. Sources of Funds Rate Revelries at Present Rates Wholesale Revenue Miscellaneous Revenue Less: Safe Water Act Fee/Sales Tax Total Sources of Funds Expenditures Water Portion of Joint Expenses Direct Water Expenditures Taxes and Transfers. Debt Service CIP Funded Through Rates Change in working Capital Total Revenue Requirements Balance (Deficiency) of Funds 2006 2007 2008 2009 2010 $11,872 $12,190 $12,517 $12,855 $13,202 315 322 331 341 352 1,395 1,436 1,454 1,498 1,543 812 855 881 903 928 $14,394 $14,803 $15,183 $15,597 $16,025 $2,819 $2,923 $3,035 $3,151 $3,273 8,060 8,312 8,573 8,844 9,124 1,320 1,379 1,421 1,459 1,500 1,030 1,337 1.948 1,949 3,484 1,269 1,900 2,000 2,100 2,200 0 0 0 0 0 $14,498 $15,851 $16,977 $17,503 $19,581 ($104) ($1,048) ($1,794) ($1,906) (53,556) Bal. (Def.) of Funds as a % of Rates (0.9%) (8.4%) (14.0%) (14.4%) (26.2%) The results of the water revenue requirements show a deficiency of funds in each year of the projected five-year time period of 2006-2010. Tile deficiency ranges frons approxilllately $104,000 or 0.9% of water rate revenue in 2006, to $3.6 million or 26.2% in 2010. The results of the study were presented to the City's management team, along with the City Water and Sewer Corlunittee. In discussions with both of these groups, a water rate transition plan was developed. The transition plats was developed to recognize the potential impact to certain customers from the overall adjustments. To help transition the needed water adjustments and cost of service results (discussed below), the City and Committee chose to extend the transition period to 2011 for purposes of this study. The adjustments shown in Table ES -3 reflect the sullunaly discussions with the Colnnlittee. 2008 2009 2010 2011 Proposed Water Rate Adjustments 3.6% 5.8% 5.3% 5.3010 The next step in the comprehensive water rate study is the cost of service analysis. This portion of the study is discussed in detail below. falExecutive Summary ES -3 City of Fayetteville - Comprehensive Water and Sewer Rate Study Water Cost of Service Analysis — The next step in a comprehensive rate study is to perforin a cost of service study. For this portion of the study, the revenue requirements were converted from a "cash basis" to the "utility/accrual basis". The "utility/accrual basis" is used to allow the City to earn a "fair" rate of return for serving outside Fayetteville and wholesale customers. The objectives of the water cost of service analysis are different from determining revenue requirements. A revenue requirement analysis determines the utility's overall financial needs, while the cost of service study determines the "fair and equitable" manner to collect those revenue requirements. A summary of the water utility cost of service analysis is shown within Table E5-4. Present Rate Atlocated $ % Class of Service Revenues Costs [1] Difference Difference Inside Fayetteville - Residential Conuuercial Industria Government Inigation Outside Fayetteville $6,271 $6,537 1,432 1,365 1,271 1,615 620 756 819 1,296 2,104 1,970 ($267) 4.3% 67 -4.7% (344) 27.1% (136) 21.9% (477) 58.2% 134 -6.4% wholesale 331 338 (6) 1.9% Total $12,849 $13,877 ($1,793) 8.0% As can be seen from the above table, there are cost differences associated with serving the various customer groups. In developing the outside Fayetteville and wholesale cost allocations, the City has assessed each of these customer groups a "fair" rate of return on the City's investment to serve these customers. Therefore, in the opinion of HDR, the City can not charge an amount greater than that shown in the cost of service for these specific customers. Water Rate Design — TI1e revenue requirements indicate the priority of the City should be to generate an adequate level of funding for the water utility with cost -based rates. At the present time, all retail customers within the City of Fayetteville are billed under the same rate schedule. The City's present retail water rate is a "declining" block rate structure. This study has recommended that the City move towards individual rate schedules for each customer class of service. There are a number of advantages to this change, but most importantly, the City can establish rates for each customer group that reflect the cost characteristics of that particular group of customers. Based upon discussions with the City, it was concluded that the new retail customer classes of service should be proposed: ■ Residential ■ Non -Residential ■ Major Industrial Executive Summary ES,4 City of Fayetteville - Comprehensive Water and Sewer Rate Study ■ hTigation ■ Outside Fayetteville ■ Wholesale Provided below in Table ES -5 is a sunnmary of the final proposed rate adjustments for 2008 - 2011 for the various customer classes of service. Class of Service 2008 2009 2010 2011 Inside Fayetteville - 2009 2010 2011 Meter Charge - ($/Month) Residential 5.5% 5.5% 5.5% 5.5% ATon-Residential [1] 4.1% 4.1% 4.1% 4.1% Major Industrial 6.6% 6.6% 6.6% 6.6% Irrigation 10.0% 10.0% 10.0% 10.00/0 Outside Fayetteville -6.4% 6.0% 3.0% 3.0% Wholesale 1.9% 6.010 3.0% 3.0% Total 3.610 5.8% 5.3% 5.3% [1] - Combined adjustment for previously defined Commercial and Government class of service For each class of service, a proposed rate for the 2008 - 2011 time period has been developed. The proposed residential water rate has been significantly restructured to better reflect the characteristics of this class of service and the overall policy objectives of the City Council. In particular, conservation and efficient use of water resources are an important objective. However, at the same tinge, affordability and ability to pay Must also be addressed. The proposed residential rate attempts to address these objectives and is shown below in Table ES -6. Inside Fayetteville I Outside Fayetteville Rate Components 2008 2009 2010 2011 1 2008 2009 2010 2011 Meter Charge - ($/Month) i 5/8" x 3/4" $4.00 $4.25 $4.50 $4.75 1 $4.60 $4.89 $5.18 $5.46 1" 5.55 5.90 6.25 6.60 6.38 6.79 7.19 7.59 1-1/2" 9.70 10.30 10.90 11.50 11.16 11.85 12.54 13.23 2" 14.10 15.00 15.90 16.75 16.22 17.25 18.29 19.26 Consumption Charge - ($/1,000 gallons) First 2,000 gallons $2.11 $2.25 $2.39 $2.53 $2.43 $2.59 $2.75 $2.91 Next 13,000 gallons 2.81 2.99 3.17 3.36 3.23 3.44 3.64 3.86 Over 15, 000 gallons 3.98 4.24 4.49 4.75 4.58 4.88 5.16 5.46 falExecutive Summary ES -5 City of Fayetteville - Comprehensive Water and Sewer Rate Study The residential rate structure has re -designed with three consumption blocks. The first block is designated for "essential" use and may be considered a "lifeline" block. The price of this block is set at a 25% discount of the average cost. This block is intended to address the issue of affordability and ability to pay. The second block is intended to address the remainder of typical indoor use and a portion of "efficient" outdoor use. Within the City, the average residential water customer uses approximately Comparison of Present and Proposed Presidential 5,000 gallons per month. Hence, Inside City Bilis at Varying Consumption Levels setting the second block at a limit (S/Month) of 15,000 gallons should provide r sufficient water for outdoor needs $100.00 { $50.00 $0.00 1,000 OW. Wage 0 5 10 15 20 25 30 a Present Fde5 56.69 $17.93 $31.88 $44.08 566.18 $88.28 580.38 a Propoml FeteS $6.11 $16.65 $30.70 $44.75 $64.64 $84.51 $104.44 for a typical lot size. The final block is designed to capture outdoor use, and this is likely "inefficient" outdoor use. The under -collection within the fust block is collected within this portion of the rate structure. It should be noted from a water resource perspective outdoor use is typically considered "discretionary" consumption. As can be seen in the bill comparison, the lowest users will actually see a slight rate decrease under these proposed rates. The largest users will have their bills adjusted under this proposed approach, and these revenues should be derived during the sununer months. Water rates were developed for the various other retail and wholesale customers. The main text of this report provides a detailed discussion of the proposed rates for each customer class of service. The water rates, as proposed herein, are cost -based and were developed using generally accepted rate -making methods and principles. The implementation of rate adjustments, as shown in the rate transition plan through 2011, should move the City closer to cost -based rates for all customers. Comprehensive Sewer Rate Study The comprehensive sewer rate study was developed using the same analytical framework as the water rate study. As with the water utility, three separate analyses were developed; a revenue requirement analysis, a cost of service analysis and the design sewer rates. Provided below is a stununnary discussion of each analysis. Sewer Revenue Requirement Analysis — The revenue requirement for the sewer utility was developed using the same general assumptions as the water utility. The sewer revenue requirements reviewed the same five-year projected time period of 2006 to 2010. This same rime period was reviewed in order to maintain consistency between the rate studies being conducted for the City. The City's 2006 sewer utility budget document was used as the base to project future year costs. The future O&M expenses were escalated by the most appropriate escalation factor. Generally, �] Executive Summary ES -6 City of Fayettevift - Comprehensive Water and Sewer Rate Study the escalation factors ranged from 3% to 10%. The highest escalation factor was due to increasing medical costs. A major change in the City's O&M levels are a result of the City's expanded wastewater treatment plant coning on line in 2008. In 2008, it has been assumed that the plant will be in a "start-up" mode and have $1.5 million of additional expenses over and above current levels. As the plant becomes more fully operational, the City estimated that the additional costs would be $3.0 million per year. In addition, it has been assumed that additional personnel will be needed. The City has assumed an additional labor cost of $50,000 in 2008 and a. total of $100,000 in 2009. These expenses are not unexpected and have been known and anticipated for the last two years or more. The City's total O&M expenses in 2007 are projected to be $9.4 million. With the additional costs noted above, the City's sewer O&M is projected to increase to $11.2 million in 2008 and $13.1 million in 2009. At that point, the plant is firliy operational and the City will be incurring the full costs of the plant. By 2010, it has been assumed that general inflation will increase the total O&M costs to approximately $13.6 million. Much like the water utility, capital infrastructure is an important fivading component of the City's sewer rates. The City anticipates approximately $8.9 million in capital expenditures for the sewer utility over the five-year period of 2006-2010. This equates to approximately $1.8 mullion per year in capital improvement projects. The major projects are collection system projects related to the renewal and replacement of existing facilities, along with the development of additional interceptor capacity. The finding for most of these projects is from a combination of reserve finds, grant finding, impact fees and rates. Even with this assumed finding, the City still has approximately $10.5 million in deferred capital improvements. At some point, the City will need to address this long -terra funding issue. In 2010, the study has assumed that a large portion of past deferrals are included within the capital finding. As a result, it has been assumed that the City will need to borrow approximately $7.0 million. This will help the City understand the potential long-term impacts of their past deferrals. Given a projection of revenues and expenses, the City's sewer revenue requirements were developed. A summary of the sewer revenue requirements can be seen in Table ES -7. Executive Summary ES -7 ,,, City of Fayetteville - Comprehensive Water and Sewer Rate Study Sources of Funds Rate Revenues at Present Rates Wholesale Revenue Miscellaneous Revenue Total Sources of Funds Expenditures Sewer Portion of Joint Expenses Direct Sewer Expenditures Service Level Plan Taxes and Transfers Debt Service (Rate Funded) CIP Funded Through Rates Change in Working Capital Total Revenue Requirements Balance (Deficiency) of Funds 2006 2007 2008 2009 2010 $12,641 $12,946 $13,260 $13,584 $13,918 137 141 145 149 154 492 542 551 474 476 $13,270 $13,629 $13,956 $14,207 $14,548 $2,288 $2,368 $2,451 $2,538 $2,627 6,821 7,040 8,768 10,504 10,838 0 0 0 50 100 478 493 507 523 538 603 606 608 608 1,100 3,183 2,700 2,700 2,730 2,900 0 0 0 0 0 $13,373 $13,207 $15,034 $6,9533 $18,103 ($103) $422 ($1,078) ($2,746) ($3,555) Bal. (Def.) of Funds as a % of Rates (0.8%) 3.2% (8.0%) (20.0%) (25.3%) As can be seen, the City's sewer rates will be deficient in 2008 due to the initial start-up costs associated with the West Side Wastewater Treatment Plant. Tile fill] impact of the operational costs associated with the treatment plant occurs in 2009. It should be pointed out that the level of adjustment shown in 2009 was projected in July of 2006, and connnunicated to the City's sewer customers at that time. In July 2006, HDR analyzed the potential impacts from the passage or failure of the sales tax initiative. As a result of that analysis, the City told the citizens of Fayetteville that no adjustments to sewer rates would occur in 2008, but that an adjustment of approximately 20% would be expected in 2009. The reason for the size of the sewer adjustment is the need for adequate fielding of the O&M costs associated with the West Side Wastewater Treatment Plant and/or the Heed for funding for renewal and replacement capital projects. Depending upon one's viewpoint, the deficiency ill 2009 is roughly equal to the incremental operational costs for the wastewater treatment plant ($3.0 million) and/or the amount of filnding for capital improvements fi-onl rates ($2.7 million). If the City's prior rate adjustment was intended to fiord the incremental operational costs of the new plant, then at that time, there was leo consideration of the adequate funding of CIP fi-om rates. This study has acknowledged the need to fiend both of these uses of fiends and has provided adequate filnding for both of those components. The results of the study were presented to the City's management team, along with the City's Water and Sewer Committee. In discussions with both of these groups, a sewer rate transition plan was developed. The transition plan recognized the need for an adjustment to the sewer utility in 2009. The adjustments shown in ES -8 reflect the sill unary discussions with the Cotilmittee. falExecutive Summary ES -8 City of Fayettevllle - Comprehensive Water and Sewer Rate Study zoos 2009 2010 2011 Proposed Sewer Rate Adjustments 0.0% 20.0% 3.0% 3.0% Tile next step in the comprehensive water rate study is the cost of service analysis. This portion of the study is discussed in detail below. Sewer Cost of Service Analysis — Like the water cost of service study, the sewer cost of service study seeks to equitably allocate the revenue requirements to the various customer classes of service. The sewer cost of set -vice analysis requires that the City allocate costs in conformance with the various wholesale contracts the City has with various parties. In particular, contracts with the Cities of Farmington and Elkins require a specific cost allocation methodology and rate of return. Table ES -9 provides a suumu nary of the sewer cost of service. Present Rate Allocated $ % Class of Service Revenues Costs Difference Difference Inside Fayetteville — Residential 1;7,209 $7,837 ($627) 8.7% Conymercial 2,076 2,618 (542) 26.1% Industrial 21467 3,749 (1.281) 51.9% Government 878 1,018 (140) 15.9% Outside Fayetteville—City of Farmington 695 765 (69) 10.00/1) Outside Fayetteville — All Others 257 309 (52) 20.0% Wholesale — City of Elkins 149 173 24 15.7% Total $13,734 $16,468 (52,735) 19.9% As can be seers from the above table, there are cost differences associated with serving the various customer groups. In developing the outside Fayetteville and wholesale rates, the City has assessed each of these customer groups a "fair" rate of return on the City's investment to serve these customers. Therefore, in the opinion of HDR, the City can not charge an amount greater than that shown in the cost of service for these customers. Sewer Rate Design — The revenue requirements indicate the priority of the City should be to generate an adequate level of fiurding for the sewer utility with cost -based rates. At the present time, all retail customers within the City of Fayetteville are essentially billed under the same rate schedule. There is a rate differential between residential and commercial, but it is contained within the same rate schedule. Similar to the water utility, it is recommended that the sewer utility move towards individual rate schedules for each customer class of service. Based upon discussions with the City, it was concluded that the new sewer customer classes of service should be proposed: FalExecutive Summary ES -9 City of Fayetteviite - Comprehensive Water and Sewer Rate Study ■ Residential ■ Non -Residential ■ Major Industrial ■ Outside Fayetteville - City of Farmington • Outside Fayetteville ■ Wholesale - City of Elkins Provided below in Table ES -10 is a. suniulaly of the final proposed sewer rate adjustments for 2008 — 2011 for the various customer classes of service. Class of Service 2008 2009 2010 2011 Inside Fayetteville — Residential 0.0% 18.0% 2.6% 2.6% Non -Residential [1] 0.0% 24.0% 2.6% 2.6% Major industrial 0.0% 25.0% 6.0% 6.0% Outside Fayetteville -Farmington 0.0% 10.0% 3.0% 3.0% Outside Fayetteville 0.0% 19.6% 3.0% 3.0% wholesale — City of Elkins 0.0% 15.5% 3.0% 3.0% Total 0.0% 20.0% 3.0% 3.0% [11— Combined adjustment for previously defined Commercial and Govenuneut class of service It should be noted that while the water utility is adjusting rates in 2008, the sewer utility will not adjust rates until January 1, 2009. The proposed residential sewer rate generally follows the approach used for water utility. The proposed residential sewer rate is shown below in Table ES -11. falExecutive Summary ES -10 City of Fayetteville — Comprehensive Water and Sewer Rata Study Inside Rate Components 2009 2010 2011 Outside Fayetteville 2009 2010 2011 Service Charge - ($/Month) 5/8"x3/4" $12.45 $12.80 $13.20 $12.40 $12.80 $13.20 1" 16.20 16.65 17.15 23.10 23.80 24.50 1-112" 26.45 27.15 28.00 41.10 42.30 43.60 2" 37,80 38.85 40.05 54.30 55.90 57.60 Quantity Charge - ($/1,000 gallons) First 2,000 gallons $3.00 $3.07 $3.14 $5.57 $5.74 $5.91 All Over 2,000 gallons 4.00 4.10 4.18 5.57 5.74 5.91 The proposed residential sewer rate uses a two -block approach. This is similar to the residential water rate structure in that it has a first block or "lifeline" block that is priced at 25% below cost. The balance or difference is trade up in the second block. In this case, there is no third block. A sewer utility does not have all "outdoor" component or inefficient use. Given that, an inverted block rate structure with three blocks was not needed. Comparison of Present and Proposed Residential Inside City Bills at Varying Consumption Levels ($/Month) $150.00 $100.00 $50.00 i $o 1,000 CW. Usage 0 5 10 15 20 25 30 Usage ■ Resent Rates $13.46 $25.86 $41.36 $56.89 $72.36 537.36 5103.36 ■ RopaSed Rdto$ $15.45 330.45 $50.45 $70.45 $90A5 $110.45 $1$0.45 Rates were developed for the various other retail, outside Fayetteville and wholesale customers. These are discussed in detail within the plain text. of this report. The results of the sewer rate study indicated that sewer rates are deficient for the projected time period reviewed. The sewer rates, as proposed herein, are cost -based and were developed using generally accepted rate -making methods and principles. The implementation of rate adjustments, as shown in the rate transition plan through 2011, should move the City closer to cost -based sewer rates for all customers. Summary This report has provided a comprehensive water and sewer rate study for the City. This study has established rates which are cost -based and contemporary and reflect the City Council's current policy objectives and goals. iaiExecutive Summary ES -11 City of Fayetteville - Comprehensive Water and Sewer Rate Study 1.1 Introduction HDR Engineering, Inc. (HDR) was retained by the City of Fayetteville (City) to perform a comprehensive water and sewer rate study. The main objectives of the water and sewer rate study were to establish water and sewer rates that fiilly recover the cost of providing service to customers, adequately provide for maintaining and expanding the City's infrastructure, and provide adequate reserves for fixture needs. The development of this study determines the adequacy of the existing water and sewer rates and provides the basis for any adjustments needed to move to cost -based rates. At the same time, the study will also review the fairness and equity of the City's current water and sewer rates. 1.2 Overview of the Rate Study Process User rates must be set at a Level where a utility's operating and capital expenses are met with the revenues received from customers. This is an important point, as failure to achieve this objective may lead to insufficient finds to maintain system integrity. To evaluate the adequacy of the existing rates, a comprehensive water and sewer rate study is often performed. A comprehensive water and sewer rate study consists of three interrelated analyses. Figure 1-1 provides au overview of these analyses. Revenue Requirement Analysis Cost of Service Analysis Rate Design Analysis Compares the sources of funds (revenues) to the expenses of the utility to determine the overall rate adjusnnent required Allocates the revenue requirements to [lie various customer classes of service in a 'fair and equitable" manner Considers both the level and structure of the rate design to collect the target level of revenues The water and sewer rate study prepared for the City reviewed each of these analytical elements. A detailed discussion of each of these elements of the study is presented within this report.. FalIntroduction 1.1 City of Fayetteville - Comprehensive Water and Sewer Rata Study 1.3 Organization of the Study This report is organized in a sequential maturer that fust provides an overview of utility rate setting principles, followed by sections that discuss in detail the specific steps used to review the City's water and sewer rates. The following sections comprise the City's comprehensive water and sewer rate study report: ® Section 2 — Overview of Utility Rate Setting Principles n Section 3 — Water Rate Study III Section 4 — Sewer Rate Study A Technical Appendices are attached at the end of this report, which details the various analyses that were used in the preparation of this report. 1.4 Summary This report will review the comprehensive water and sewer rate analyses prepared for the City of Fayetteville. This report has been prepared utilizing "generally accepted" sewer rate setting techniques. The nest section of the report will provide a brief overview of the general rate setting process that was used to analyze and establish the proposed water and sewer rates for the City. Introduction 1-2 City of Fayetteville - Comprehensive Water and Sewer Rate Study 2.1 Introduction In developing and establishing utility rates, there are "generally accepted" principles or guidelines around which these types of rates should be set.' The purpose of this section of the report is to provide a general overview of the methodology and guidelines used for setting cost - based water and sewer rates. This should provide the reader with a better understanding of the general process that is detailed later in this report. 2.2 Global Principles Around Which Rates Should Be Set As a practical matter, there should be a general set of principles around which water and sewer rates should be set. These guiding principles may be items such as setting rates that are cost - based, easy to understand, etc. These types of principles may be referred to as "global principles" since they should be utilized by all utilities (e.g. water, sewer, solid waste, etc.) in the development of their rates. Provided below is a brief listing of the global principles around which the City should consider in setting its utility rates: ■ Rates should be cost -fused and equitable, and set at a level such that they meet the fill] revenue requirements of the utility. ■ Rates should be easy to understand and administer. ■ Rates and the process of allocating costs should confonn to 11 All "In developing and establishing utility rates, there are "generally accepted" principles or guidelines around which rates should be set." genera y accepte rate setting techniques. ■ From the utility's perspective, rates should be stable, in their ability to provide adequate revenues to meet the utility's financial, operation, and regulatory requirements. ■ From the customer's perspective, rate levels (bills) should be stable from year to year (i.e. small rate adjustments are preferred over Iarge rate adjustments). These guiding principles will be utilized within this study to help develop water and sewer rates that are cost -based and equitable. It should be noted that the City has used these basic principles in the past to establish their water and sewer rates. 1 The American Water Works Association M1 Manual, Principles of Water Rates, Fees and Charges, is the most widely recognized source for "generally accepted" rate setting principles. For the wastewater industry, the Water Environment Federation, Manual of Practice No. 27, Financing and Charges for Wastewater 5j,sterm, is the most widely recognized source for "generally accepted" wastewater rate setting principles. ] Overview of Utility Roto Setting Principles 2.1 City of Fayetteville - Comprehensive Water and Sewer Rets Study 2.3 Types of Utilities Utilities are generally divided into two types - public and private utilities. Public utilities are usually owned by a City, county or special district, and theoretically operated at zero profit. A public utility is in essence locally owned since its customers are also its owners. In contrast to this, a private utility is a "for profit" enterprise and is owned by a "... the "owners" of aprivate company and/or stockholders. A private utility is private utility may not be capitalized by issuing stock to the general public. As such, the customers or local shareholders are, in essence, the owners of the private utility. citizens, but rather Therefore, the "owners" of a private utility may not be customers numerous individuals or or local citizens, but rather numerous individuals or shareholders shareholders spread spread across the United States. As a point of reference, the City across the United States." of Fayetteville water and sewer utilities are "public" utilities. Given these two vastly different fogs of utility ownership, their financial operations and considerations also vary significantly. Public utilities are capitalized or financed by issuing debt and soliciting fiords fiom customers tiuough direct capital contributions or user rates. These public or municipal utilities are exempt from state and federal income taxes. In addition, a publicly elected City Council or Board of Directors usually regulates public utilities. In contrast, private utilities are taxable entities. Given their "for profit" status, their rates and operational affairs are generally regulated by a state public utility commission or other regulatory body. 2.4 Methods of Accumulating Costs for Revenue Requirements By virtue of these two entity's vastly different administrative and financial characteristics, their revenue requirements are based upon different elements. Most private utilities utilize what is known as a "utility or accrual" basis of setting rates. This convention calculates a utility's annual revenue requirement by aggregating a time period's operation and maintenance (O&M) expenses, taxes, depreciation expense and a "fair" return on investment. Operation and maintenance expenses include the materials, electricity, chemicals, labor, supplies, etc., which are needed to keep the utility fiinctioning. Depreciation expense is a means of recouping the cost of capital facilities over their usefirl lives and generating internal cash. Private utilities must pay state and federal income taxes, along with any applicable property, franchise, sales and other forms of revenue taxes. The return portion of this type of revenue requirement pays for the private utility's interest expense our indebtedness, provides funds for a return to the utilities' shareholders in the form of dividends, and leaves a balance for retained earnings and cash flow purposes. Since public utilities do not have equity owners, per se, and are usually exempt from income taxes, a different method of determining their annual revenue requirement is commonly used. The convention used by most public utilities is called the "cash basis" approach of setting rates. As the name implies, a public utility aggregates its cash expenditures for a period of time to determine its required revenues fi-om user rates and other forms of income. This methodology conforms nicely to most public utility budgetary requirements, and is a very straightforward and easily understood calculation. Operation and maintenance expenses are added to any applicable falOverview of Utility Rate Setting Principles 2-2 City of Fayetteville -- Comprehensive Water And Sewer Rate Study taxes or transfer payments to determine total operating expenses. Capital costs are calculated by adding debt service payments (principal and interest) to capital improvements financed with operating rate revenues. Annual depreciation expense is sometimes included in. lieu of this latter item to stabilize annual revenue requirements. Under the "cash basis" approach, the stun of the capital and operating expense equals the utility's revenue requirement during any period of time. It should be noted that the two portions of the capital expense component (debt service and capital improvements financed from rates) are necessary tinder the cash basis approach because utilities generally cannot finance all of their capital facilities with long-term debt. Table 2-1 may be helpful in summarizing and comparing the cash and utility basis methodologies. Cash Basis Utility (Accrual) Basis + O&M Expenses + Taxes + Capital Additions Financed with Rate Revenues ('� Annual Deprec. Exp) + Debt Service (P+I) = Revenue Requirement + O&M Expenses + Taxes + Annual Depreciation Expense + Return on Investment Revenue Requirement Given a summary of the revenue requirements, the utility can determine from the analysis the overall level of rate adjustment needed in order for the utility to meet its overall expenditure needs. 2.5 Overview of the Cost Allocation Procedures After the total revenue requirement has been quantified and determined, it is allocated to the users of the service in a manner that reflects the cost relationships incurred for the production and delivery of the services. This analytical exercise usually takes the forin of a "cost of service" study. A cost of service study is a three-step approach. First, costs must be fimetionalized or grouped into the various cost categories related to the providing of service (e.g. for a water utility; source of supply, treatment, transmission, distribution, etc.). This step is largely accomplished by the utility's accounting system. The next step is the classification of the fiwctionalized costs. Classification refers to the arrangement of the filuctionalized data into cost components. For a water utility, these are typically, capacity -related, commodity (flaw) -related, public fire protection -related and customer -related component costs. For a sewer utility, these are typically volume -related, strength -related and customer -related cost components. Once the costs are classified to the various cost components, the last step in the cost of service process is the allocation of the classed costs to each of the customer classes of service (e.g. residential, commercial, industrial etc.). Each of the cost components are allocated to the various customer classes of service based upon each customer class' relative contribution to the specific cost FalOverview of Utility Rate Setting Principles p -g City of Fayetteville - Comprehensive Water And Sewer Rate Study component. For example, customer related costs are allocated proportionally to each class of service based upon the number of customers in that class of service in relation to the overall number of total customers. Once the costs are allocated to each class of service, a. measure of the required level of rate revenues from each class of service to achieve cost -based rates can be determined. 2.6 Economic Theory and Rate Design The design of the proposed water and sewer rates for adoption by the City concludes the rate study process. The rate design process utilizes the results of both the revenue requirement and cost of service analysis to develop rates that achieve the overall goals and objectives of the City. These goals and objectives may include consideration of cost -based rates, but may also consider items such as ability to pay, continuity of past rate philosophy, conservation, encouragement of economic development, ease of administration, legal requirements, etc. It is important to understand that cost of service is only one goal or objective in designing final water and sewer rates, however, it is an important one. While the general description of the utility rate setting process discussed in this section of the report is greatly simplified and abbreviated, it does however address the basic elements of contemporary regulatory thinking. One of the major justifications for a comprehensive rate study is founded in economic theory. Economic theory suggests that the price of a commodity must roughly equal its cost, if equity among customers is to be "Economic theory maintained. The implications of this statement on utility rate suggests that the price of design are significant. For example, capacity -related costs are a commodity must usually incurred by a water utility to ineet peak use roughly equal its cost, if requirements. Thus, the customers causing peak demands equity among customers should properly pay for the demand -related facilities in is to be maintained " proportion to their contribution to maximum demands. Recent emphasis on seasonal and marginal cost -based utility rates are movements in a direction that embrace this economic concept. Through refinement of costing and pricing techniques, consumers of a product are given a more accurate price signal of what the commodity costs to produce and deliver. The above basic thoughts have considerable foundation in economic literature. They also serve as primary guidelines for rate design by most utility regulators and administrative agencies. This "price - equals -cost" concept will provide the basis for much of the subsequent analysis and continent. 2.7 Prudent Financial Planning There are three key financial indicators that should be considered in the development of any utility financial plan, or revenue requirement. These three indicators are: capital projects funded from rates, debt service coverage ratio, and reserve levels. The following discussion provides a brief overview of each of these financial planning indicators. Capital Projects Funded From Rates — Prudent fniaucial planning dictates that a utility should fund a certain portion of capital improvement projects from rates on an on-going basis. The general financial guideline used is that at a minimum, a utility should fund an amount equal to or greater than annual depreciation expense. However, there are three reasons for increasing the �] Overview of Utility Rate setting Principles 2-4 City of Fayetteville - Comprehensive Water and sewer Rate Study level of capital finding through rates. The fust is that, funding levels over and above depreciation expense better reflect actual replacement cost. Second, increasing the level of capital finding will help provide cash flow to fiord the capital plan in future years, and minimize any long-term borrowing needs. Third, an increased level of capital finding will strengthen the utilities debt service coverage ratio. Debt Service Coverage Ratio — The debt service coverage ratio is all important financial measure that is reviewed by bond rating agencies and banks to evaluate a utility's ability to make debt payments. This ratio is calculated by subtracting total O&M and taxes from total revenues. Tile resulting figure is then divided by the amount of annual revenue bond debt service payments to deternnine the utilities debt service coverage ratio. Typically, most bond covenants require at least a nnhihmmn debt service coverage ratio of 1.25. A strong debt service coverage ratio may provide the benefit of a higher bond rating and potentially lower interest costs (i.e. lower risk equates to lower interest rates). Currently, the City strives to maintain a debt service coverage ratio above 1.25. Reserve Levels — Reserve levels are a crucial part of a utility's financial picture. Typically utilities maintain several different types of reserve fiords. These may include: an operating reserve, a capital reserve, an emergency or contingency reserve, a rate stabilization reserve, and a bond reserve. Each of these reserves has its own financial, operating or legal requirements which may set all established minimum reserve level (e.g. a bond reserve). A key aspect of reviewing reserve levels was determining target minimum levels for the City's current reserves. It is important to remember that when reserves fall below the targeted minimum level, management should review the cause of the declining reserves and detennine what action, if any, should be taken. Maintenance of minimum reserve levels should not, on its own, trigger the need for a rate adjustment. However, after two consecutive years of diminishing reserves as a result of not fully covering costs, rates should be reviewed. 2.8 Summary This section of the report has provided a brief introduction to the general principles, techniques, and economic theory used to set contemporary and cost -based water and sewer utility rates. These principles, techniques, and economic theory will become the basis for the City's rate analyses. The next section of the report will review the water rate analysis undertaken for the City. Overview of Utility Rate Setting Principles 2.5 City of Fayetteville - Comprehensive Water and Sewer Rate Study 3.1 Introduction This section of the report discusses the financial plan and rate analysis developed for the City's water utility. One of the main objectives of a water rate study is to develop equitable water rates while attempting to minimize impacts to the utility's customers. At the same time, the water utility should be viewed as a stand-alone entity capable of financially supporting its operating and capital needs. For that reason, the water utility is independently reviewed from the sewer utility. "One of the main objectives of a water rate study is to develop equitable water rates while attempting to minimize impacts to tine utility's customers." In developing the water rate analyses, a three-step process was utilized. First, revenue requirements were developed to determine the overall level of rate adjustment required. Next, a. cost of service study was developed to equitably allocate the revenue requirements. This analysis provides the basis for deternwiing "cast -based" rates. Finally, given an overall level of adjustment and a method to equitably allocate costs, the final step is to design the final proposed rates. The final proposed rates consider the cost -based rates, but also take into account any other policy considerations (e.g. conservation, ability to pay, etc.). This section of the report will discuss in detail the analyses undertaken, along with the key assumptions of the water rate analysis. The section concludes with the final proposed water rates. 3.2 Development of the Water Revenue Requirements The development of revenue requirements is the first step in the rate study process. A revenue requirement analysis determines the adequacy of the overall level of water rates. From this analysis, a determination can be made as to the level of water rate adjustment needed to provide adequate and prudent flurding for both operating and capital needs. The City's budget documents, consumption data, and capital improvement plan were used to complete the revenue requirements. A number of items were calculated independently of the budget document — the revenues at present rate levels, and the reserve levels. Provided below is a detailed discussion of the development of the water utility revenue requirements. 3.2.1 Determination of Time Period and Method of Accumulating Costs The initial step in calculating the revenue requirement for the water utility was to establish a "test period", or time frame of reference for the revenue requirement analysis. For this particular study, the revenue requirements were developed for a five-year projected time period (2006- 2010). This time period captured the City's major capital projects. Reviewing a multi-year time FalComprehensive Water Rata Study 3.1 City of Fayetteville - Comprehensive Water and Sewer Rate Study period is generally recommended in an attempt to identify any major expenses that may be on the horizon. By anticipating firtu a financial requirements, the City can begin planning for these changes sooner, thereby, minimizing short-term rate impacts and rates over the long term. The revenue requirement developed for the City utilized the "cash basis" methodology and was customized to follow the City's system of accounts (budget documents). Table 3-1 provides a summary of the approach that was used to develop the City's water revenue requirements. t Operation and Maintenance Expenses ✓ Water Director ✓ Billing and Collections ✓ Meter Operations Program ✓ Meter Maintenance & Backflow Prevention ✓ Operations and Administration Program ✓ Water Purchased Program ✓ Water Distribution Maintenance Program ✓ Water Storage and Pumping Maintenance Program + Taxes/Transfer Payments + Net Capital Improvements Funded From Rates (calculated below) + Debt Service (P+I) Existing and Future CUM to Working C ital se of Reserves), Total Water Revenue Requirements [1 ] Net Capital Improvements Funded From Rates + Total Water Capital Improvement Projects — Funding Sources Other Than Rates ✓ Plant investment charges ✓ Grants ✓ Low -Interest State Loans ✓ Lona Term Debt Issues Net Capital improvements Funded From Rates [1] Given a time period around which to develop the revenue requirements, and a method to accumulate the costs, the focus shifts to the projection of revenues and expenses for the City's water utility. The primary financial inputs in this process were the City's historical billing records, the City's capital improvement plan and the City's 2006 budgeted expenses. 3.2,2 Water Rate and Other Miscellaneous Revenue The revenue requirement calculation begins with a projection of rate revenue at present rate levels. This process involved developing projected billing units for each customer class of service (e.g. residential, commercial, etc.) based on historical usage records and an assumed annual growth rate. The billing units are then applied (multiplied) against the current rates to calculate the projected revenue. This method of independently calculating revenue ensures consistency in the revenue and consumption figures that are used throughout the rate study process. IER Comprehensive Water Rate Study 3-2 City of Fayetteville — Comprehensive Water and Sower Rate Study It should be noted that the City maintains consumption records by customer class of service, but the City uses a single retail rate structure, which has a declining block consumption charge. The revenue at present rates was calculated using 2005 historical consumption data and the specific rate schedule for that year. Rate revenues were projected forward to 2010 based on calculated 2005 rate revenues, plus an assumed 3% growth rate for all customers except industrial. Industrial was asstuned to remain at current levels during the test period. It should be noted that the City and the region has seen significant growth over the last few years. However, in projecting fiiture revenues it is best to not be overly optimistic. The projection developed herein has fairly balanced the issue of growth and the need to be conservative in financial/rate projections. The water utility also receives a variety of miscellaneous revenue. Miscellaneous revenue varies by year, but is relatively level during the planning period. Miscellaneous revenue for the water utility consists primarily of interest _ on various find balances, fire 2007 Water Rate Revenues protection fees and billed services, By Class of Service ($000) among others. Miscellaneous r revenue for the City was escalated I6.°88 ❑ Residential at 3.0% per year with two'1,993 ❑ Comm./Gov. exceptions. First, interest was ❑ Industrial calculated based on projected=1$l 271 c3irrigationinvestment find balance. Second, 2 $2,0A4-3;$795 ■ outside city hydrant income was not escalated, ■ wholesale z as it was presumed to be eliminated for outside Fayetteville customers. Miscellaneous revenue averages $1.3 million through 2010. In total, the City is projected to receive approximately $12.1 million in total rate and miscellaneous revenue in 2006, which increases to nearly $13.6 million by 2010. This increase over time is not a function of any assumed rate adjustments. Rather, it is primarily a function of customer growth on the system. The City also receives impact fee revenue.. The impact fee revenue data for the test period was provided by the City and is projected to average $3 million through the test period. These impact fees are deposited directly into the Impact Fee Reserve for use on capital projects and debt service. Legally, impact fees can not be used for operation and maintenance expenses. Given that, they have not been included in miscellaneous revenues. 3.2.3 Allocation of Joint O&M Expenses The City incurs a certain level of expenses that are of a joint or common nature. The City tracks these expenses and they relate specifically to the City's water and sewer activities. As a part of this study, the joint expenses were allocated between the two utilities. A number of different methods were used to allocate these costs, depending upon the specific cost. In total, there were approximately $6.6 million in joint O&M expenses. Of this amount, $3.6 million was deemed to be related to water services and $3.0 million were allocated to sewer. This split is the fust step in projecting the water O&M expenses beyond the first (budget) year. falComprehensive Water Rote Study 3-3 City of Fayetteville - Comprehensive Water and Sewer Rate Study 3.2.4 Water Operation and Maintenance Expenses The next step of the rate study involves projecting operation and maintenance (O&M) expenses. The City's 2006 budgeted expenses were used as a starting point to project future O&M expenses. Future year projections were calculated by applying an applicable escalation factor. Escalation factors developed for the various types of expenses that the City incus include: labor, benefits, materials and supplies, equipment, purchased water, and miscellaneous expenses. The escalation factors applied range fiom 3% to 10% per year. The higher escalation factors reflect the significantly higher escalation and cost increases associated with medical benefits. One of the major expenses for the water utility is purchased water from the Beaver Water District. During this test period, the Beaver Water District announced that wholesale water rates would be increasing. The Beaver Water District held a meeting on April 19, 2007 whereby the Beaver Water District approved a 15 -year Financial Plan. To adequately and properly fiord the District's 15 -year plan, the Board approved wholesale water rate adjustments. In sunnnary form, the Board approved a $0.02/1,000 gallon increase to be effective in 2008. The present rate is $1.16/1,000 gallons. The City and HDR assumed a $0.02/1,000 gallon increase in 2008 and each year thereafter. In summary form, the projected purchased water costs for the City in 2007 were approximately $6.5 million. With assumed customer growth and increased wholesale purchased water rates from Beaver Water District, the City's wholesale purchased water costs is expected to be approximately $7.1 million by 2010. Over the projected time period, no extraordinary O&M expenses are anticipated. In addition, no additional personnel are projected to be added during the projected time period. In total, O&M expenses range from $11.2 million in 2007 to $12.4 million in 2010. This increase in O&M expense over time is primarily a finction of increased purchased water costs and inflation. 3.2.5 Taxes and Transfers The water utility currently has a limited number of taxes. The major tax is a franchise fee of approximately $525,000 in 2007. These franchise fees are anticipated to increase slightly over time as a fiunction of inflation. At the same time, the City has certain "pass-through" taxes in which the City acts as the collect agent. These pass-through taxes are a Safe Water Act tax and a sales tax. Combined, these pass-through taxes range from $800,000 to $900,000 during the test period. The analysis acknowledges these pass -though payments by including them under miscellaneous revenue as well as under expenses creating a net rate impact of zero. 3.2.6 Water Capital Improvement Projects A utility typically has two basic types of capital improvement projects to consider: renewals and replacements and growth -related projects. A utility may also need to make "regulatory' or "mandated' improvements. These may be required by Federal or State legislation (e.g. Safe Drinking Water Act). The majority of capital projects on the City's capital improvement plan are renewals and replacement. A general financial guideline that can be used to determine proper funding levels for capital improvements from rates is that, at a minnimnmi, a utility should fluid am amount equal to or greater than annual depreciation expenses. Annual depreciation expense reflects the current investment in plant that is being depreciated or "losing" its useful life. Therefore, this portion of plant investment needs to be replaced to maintain the existing level of infrastructure. It must be Comprehensive Water Rate Study 3-4 City of Fayetteville - Comprehensive Water and Sewer Rate Study kept in mind that, in theory, annual depreciation expense reflects an investment in infrastructure an average of fifteen (15) years ago, assurning a 30 -year useful (depreciable) life. Simply finding an amount equal to annual depreciation expense will not be sufficient to replace the existing or depreciated facility. Therefore, consideration should be given to funding within rates some amount greater than annual depreciation expense for renewals and replacements. Whenever possible, the City should be funding capital projects from rates in an amount that is greater than annual depreciation expense. At the same time, the City has a number of deferred capital projects which only accentuates the capital infirastructure fiundung issue. For many utilities, it is difficult to set rates at an adequate level to meet current needs, let alone make «p for past deferrals. In the case of the City, there is a fairly significant list of water -related capital projects to be undertaken. In fact the list of capital projects is so large that there are two lists — funded and unfunded A major objective of this study is to determine "A general, financial guideline that can be used to determine proper funding levels for capital improvements from rates is that, at a minimum, a utility should fund an amount equal to or greater than annual depreciation expenses. the true financial condition of the water utility and develop a workable capital plan. To achieve this objective, the list of capital projects was reviewed by City Staff and prioritized. Those projects that could be deferred into the fixture were set aside as "deferred capital projects." Unfortunately, the amount of projects being deferred is approximately $12.5 million. With the deferred projects being excluded, the City anticipates approximately $58.4 million in capital projects which must be completed in the five year period of 2007-2010. As discussed previously, as a general rule, a utility should fiend a. portion of capital improvement projects from rates on an on-going basis. This finding will help to meet the City's renewal and replacement capital projects. The typical financial guideline is that, at a nninirnum, a utility should find an amount equal to or greater than annual depreciation expense. The city's current depreciation expense is $1.8 million. In 2006 the capital funded through rates is $1.2 million and increases to $2.2 million by 2010. A summary of the water capital improvement projects is provided in Table 3-2. falComprehensive Water Rate Study 3-5 City of Fayetteville - Comprehensive Water and Sewer Rate Study Funded Capital Projects - Water Improvements Water Service Improvements Budgeted Capital Projects Total Funded Capital Projects Unfunded Capital Projects Total Capital Improvement Projects Less: Outside Funding Sources Water Impact Fees Use of Working Capital Fund Misc. Grants/Cost Sharing New Long -Terni Borrowing Total Outside Ftuiding Sources Total Capital Funded From hates 2006 2007 2008 2009 2010 Deferred $224 $224 $224 $258 $0 $0 183 149 216 160 1681 0 10,636 274 282 290 299 0 $11,043 $647 $722 $674 $725 $0 $1,053 $5,530 $9,945 $4,765 $23,346 $12,455 $12,096 $6,177 $10,677 $5,439 $24,071 $12,455 $0 $o $o $1,000 $0 7,811 1 16 2.339 0 1,366 0 0 0 0 0 4,275 8,650 0 21,870 $9,177 $4,276 $8,666 $3,339 $21,870 $2,419 $1,900 $2,000 $2,100 $2,200 As can be seen in Table 3-2, even with the significant amount of deferrals, there is a large amount of projects assumed in 2010. If these projects are not fielded, then the City could invariably have deferred capital improvement projects approaching $20 million. This financial plan also assumes the need for the City to borrow significant amount of fiords to begin paying for the "imfimded" projects. It has been assumed that the City will need to borrow approximately $14.9 million in the 2007/2008 period. This financing will likely be slid out in time, but should occur to be able to fund the needed projects. Failure to do so will only fin-ther push the water utility into deeper deferrals. It should be noted that the financial plan developed as a part of this study has provided the financial/rate ability for the City to borrow these needed funds. 3.2.7 Debt Service Payments Debt service relates to the principal and interest obligations of the water utility when financing capital projects with long-term debt issues. The City currently has two bond issues outstanding with combined annual debt service of approximately $1.0 million (2002A and 2004). In addition to the principal and interest payments the City pays other fees associated with their bond issues that average $26,000 annually. As noted above in the capital improvement plan, it has been assumed that the City will need to utilize long-term debt to fiord the capital projects. The impact of this borrowing in the initial years is very manageable. The assumed borrowing in 2007 and 2008 will add approximately $909,000 in annual long-term debt service payments. The borrowing in 2010 is a significant debt issue and would have a large impact upon the utility. The assumed borrowing in 2010 would add an additional $1.5 million in annual debt service payments for the City. HDR has included this within the study, recognizing that the City will likely spread these costs out over time, but it is important for the City to recognize the potential long-term impact of these deferrals. falComprehensive Water Rate Study 3-6 City of Fayetteville - Comprehensive Water and Sewer Rate Study 3.2.8 Water Utility Reserve Levels As Mentioned in Section 2.7, reserve levels are an important component to the overall financial Health of a utility. The City inaintains two reserve fiends for the water- and sewer utility. To best show the financial position of the water utility on a stand alone basis the reserves were split equally into water and a sewer fiind. The City also accuniulates fluids into an impact fee fund for water and sewer. Due to the legal restrictions placed on the use of impact fees, the reserve for water and sewer impact fees was also split between water and sewer. Proper reserve levels provide liquidity needed for daily operations and ensure fielding for capital projects. The City currently has no stated mininiunt reserve policies. Industry standards for minimum operating reserves is either 45 to 60 days of operations and Maintenance expense, where 45 days is for a utility with a one mouth billing cycle and 60 days is for a utility with a bimonthly billing cycle. Due to the City's monthly billing cycle, HDR reconunends that the City maintain a ininiinum operating reserve of 45 days. Under the 45 day standard the City meets this mininiuru industry standard. However, it is iinportant to understand that the miniuitun standard is not necessarily the desirable level of reserves or HDR's reconmiended level. HDR recognizes that utilities are capital and cash-flow intensive entities. For that reason, HDR generally reconunends reserve levels closer to 90 to 120 days of O&M. 3,2.9 Summary of the Water Revenue Requirements In developing the final revenue requireinents, consideration was given to the financial planning criteria of the City. In particular, emphasis was placed on attempting to niiiiiinize rates, yet still providing adequate fluids to support the City's O&M activities along with the planned capital projects throughout the projected tine period. A stnuniary of the water revenue requirements is provided in Table 3-3. Sources of Fonds Rate Revenues at Present Rates Wholesale Revenue Miscellaneous Revenue Less: Safe Water Act Fee/Sales Tax Total Sources of Funds Expenditures Water Portion of Joint Expenses Direct Water Expenditures Taxes and Transfers Debt Semite CIP Funded Through Rates Change in Working Capital Total Revenue Requirements Balance (Deficiency) of Funds Bal. (Def.) of Funds as a % of Rates 2006 2007 2008 2009 2010 $11,872 $12,190 $12,517 $12,855 $13,202 315 322 331 341 352 1,395 1,436 1,454 1,498 1,543 812 855 881 903 928 $14,394 $14,803 $15,183 $15;597 $16,025 $2,819 $2,923 $3,035 $3,151 $3,273 8,060 8,312 8,573 8,844 9,124 1,320 1,379 1,421 1,459 1,500 1,030 1,337 1,948 1,949 3,484 1,269 1,900 2,000 2,100 2,200 0 0 0 0 0 $14,498 $15,851 $16,977 $17,503 $19,581 ($104) ($1,048) ($1,794) ($1,906) ($3,556) (0.9%) (8.4%) (14.0%) (14.4%) (26.20/.) FalComprehensive Water Rata Study 3-7 City of Fayetteville - Comprehensive Water and Sewer Rate Study The results of the water revenue requirements show a deficiency of Rinds in each year of the projected five-year time period of 2006--2010. The deficiency ranges fi•oni approximately $104,000 or 0.9% of water rate revenue in 2006, to $3.6 million or 26.2% in 2010. It should be noted that the final year of the projections contain a Iarge portion of deferred capital projects. Table 3-2 highlighted this issue and Composition of the 2007 included a large amount of long-term Water Revenue Requirements borrowing to fiend those projects. 41% ■ Purchased water HDR recognized that the City would ■ Other O&M likely be unwilling to adjust rates to o Taxes that level by 2010, but wanted to —popjo O Net Debt Seruce 1lo ■ CIP From Rates 8% 9% coniniuriicate the importance of understanding the size and magnitude of these past capital project deferrals. In reviewing Table 3-3, it should be noted that the annual deficiencies are cumulative. That is, any adjustments in the initial years will reduce the deficiency in the following years. For example, an 8.4% adjustment in 2007 would reduce the adjustment needed in 2008 to approximately 5.6%. As a part of this study, a rate transition plan was developed for the water utility. This aspect of the study is discussed in more detail later in this section of the report. Detailed exhibits of the water revenue requirement analysis prepared for the water utility are provided ill Appendix A, Water Technical Appendix at the end of this report. 3.2.10 Debt Service Coverage The debt service coverage (DSC) ratio is a financial measure of the utility's ability to repay outstanding debt. Typically, a utility must maintain a minimum of a 1.25 DSC ratio on outstanding revenue bonded debt. Failure to meet the minimum DSC for all outstanding debt obligation is considered to be technical default, making the revenue bonds callable or payable upon demand. Therefore, it is critical that the utility meet this legal requirement. On this basis, the net revenue of the combined utilities (gross revenue of the utilities less operating and maintenance expenses) must currently equal at least 1.25 times the City's annual revenue bond debt service payments. Table 3-4 provides a summary of the calculation of debt service coverage ratios. 2006 2007 2008 2009 2010 Water Revenue Bond DSC Ratios - Before Rate Adjustment 3.41 2.67 1.84 1.85 1.04 After RR Rate Adjustment 3.51 3.45 2.76 2.83 2.06 After Proposed Rate Adjustment Ell 3.41 2.67 2.07 2.50 1.64 111- See proposed water rate adjustments on Table 3-5 IDRCornprehensive Water Rata Study 3,8 City of Fayetteville - Comprehensive Water and Sewer Rate Study For the water utility, on a stand-alone basis, the utility ineets the coverage requirement during the test period after the rate adjustments. This even includes 2010 during which a large bond issue is assumed to pay for deferred capital projects. 3.2.11 Rate Transition Plan The results of the study were presented to the City's management team, along with the City Water and Sewer Committee. In discussions with both of these groups, a water rate transition plats was developed. The transition plan was developed to recognize the potential impact to certain customers from the overall adjustments. To help transition the needed water adjustments and cost of service results (discussed below), the City and Conunittee chose to extend the transition period to 2011 for purposes of this study. The adjustments shown in 3-5 reflect the surmnary discussions with the Committee. 2008 2009 2010 2011 Proposed water Rate Adjustments 3.6% 5.8% 5.3% 5.3% The adjustments shown in Table 3-5 are assumed to be effective on January 1 of each year. It should be noted that the adjustments shown in Table 3-5 do not fillly ineet the revenue requirements in 2010, but have made significant progress in moving towards firlly f hid ng the revenue requirements of the water utility. The portion that does not fillly meet the revenue requirements is related to the unfimded and deferred capital projects. It must be kept in mind that this study continues to show a significant backlog of deferred capital projects beyond 2010 (Table 3-2), which the City mist address at some point. This will likely require additional long-term borrowing and rate increases beyond what has been shown in this study. 3.2.12 Summary Recommendations of the Revenue Requirements Based upon the water revenue requirement analysis developed herein, it is projected that the City's water utility will operate at a deficit during the projected period of 2007--2010. The total level of deficiency is projected to be approximately $1,805,000 or 16.9% by 2010. The rate adjustments proposed herein will help prove the City toward cost -based rates. In this case, cost - based rates are defined as fully meeting both the operating and capital improvement requirements of the City's water utility. This concludes the discussion and review of the water revenue requirement analysis. Given the findings and reconwrendations fioln this analysis, the focus now shifts to the water cost of service analysis. 3.3 Water Cost of Service Analysis The objectives of the water cost of service analysis are different from determining revenue requirements. A revenue requirement analysis determines the utility's overall financial needs, while the cost of service study determines the equitable manner to collect those revenue falComprehensive Water Rate Study 3-9 City of Fayetteville - Comprehensive Water and Sewer Rate Study requirements. This analysis used the base/extra-capacity cost of service allocation method. The base/extra-capacity method is a "generally accepted" methodology that may be used to equitably allocate costs between the various types of customers served by the water utility. Provided below is a more detailed discussion of the overall approach used, along with the findings and conclusions of the water cost of service analysis. 3.3.1 Overview of the Cost of Service Methodology The water cost of service developed for the City uses the "base/extra-capacity" methodology. This methodology is a "generally -accepted" cost of service methodology as defined by the American Water Works Association (AWWA). At the same time, the methodology also utilizes a "utility basis" methodology which provides a "fait" return to the City for the investments made to serve customers. It should be noted that the City is required to use these two elements within then water cost of service methodology. The City has a number of water service contracts which contain language similar to or identical to the following: "Water rates for all customer classes will be based upon a cost -of -service rate study performed by independent utility rate consultants. All cost of service studies shall be conducted utilizing the utility basis of detennining revenue requirements and the base— extra capacity method of cost allocation in accordance with the methodology presented in the manual entitled Water Rates, published by the American Water Works Association." z HDR is of the opinion that the water cost of service study, as developed herein, complies with the contractual requirements of the City's contract customers and equitably allocates costs to Outside City and wholesale customers. 3.3.2 Customer Classes of Service A key objective of a cost of service analysis is to determine, what cost differences, if any, exist between serving the various types of customers on the water system. Given that, one of the fust tasks that must be accomplished in the cost of service analysis is to determine the customer classes of service to be reviewed. In making this determination, customers should be grouped together into similar or homogeneous groups based upon facility requirements and/or usage characteristics. For this study, the following customer classes of service were utilized: ■ Residential ■ Commercial ® Industrial ® Govermnental ® Irrigation • Outside Fayetteville (Outside City) ® Wholesale (Contract) 2 City of Elkins Water Purchase Contract dated May 21, 1991. Comprehensive Water Rate Study 3-10 e City of Fayettevnle - Comprehensive Water and Sewer Rate Study The water cost of service conducted for the City utilized a three-step approach to review costs. These three steps are: ftinctionallzation, classification, and allocation. 3.3.3 Functionalization of Costs The fust analytical step in the cost of service process is called functionalization. Functionalization is the arrangement of expenses and asset (plant) data by major operating functions within the utility (e.g. wholesale purchases, pumping, transmission, distribution, etc). Within this study, the fiunctionalization of the cost data was largely accomplished through the City's system of accotwts. 3.3.4 Classification of Costs The second analytical step in the water cost of service study is the classification of costs. Classification determines why the expenses were incrured or what type of need is being met. The City's plant accounts and revenue requirements were reviewed and classified according to the following cost classifiers as part of the water utility cost of service study. ■ Base Costs. Base -related costs are those costs that tend to vary with the total quantity of water cousrmned by a customer under average conditions. The costs of pumping water or electricity wider average flow conditions are examples of a base -related cost. ■ Extra -Capacity (Demand) Related Costs. Capacity costs are those costs incurred to meet peak demand conditions. These costs are a firnction of meeting maximtum demand requirements of the customers. Capacity may be defined by the peak period event, but is typically defined as peak day andlor peak hour requirements. Extra -capacity related costs are important since they are related to the sizing of facilities that meet these peak use requirements. For example, portions of distribution reservoirs and mains (pipes) Inst be adequately sized to meet peak use demands. ■ Customer Related Costs. Customer costs are those costs that vary with the number of customers on the water system. They do not vary with system output or consumption levels. These costs are also sometimes referred to as "readiness to serve" or "availability" costs. Customer costs may also sometimes be firrther classified as either actual or weighted. Actual customer costs vary Terminology of a Water Cast of Service Analysis FUNCTIONALIZATION - The arrangement of the cost data by functional category (e.g. supply, treatment, etc.). CLASSIFICATION - The assignment of functionalized casts to cost components (e.g. commodity, capacity, customer, and fire protection related). ALLOCATION — Allocating the classified costs to classes of service based upon each class's proportional contribution to that specific cost component. BASE COSTS - Costs that are classified as base related are associated with providing the average flow of water. EXTRA CAPACITY COSTS - Cost$ classified as capacity related vary with above average or peak usage. Facilities are often designed and sized around meeting peak demands. FIRE PROTECTION COSTS - Costs that are related to fire protection systems (e.g. hydrants). CUSTOMER COSTS — Costs classified as customer related vary with the number of customers on the system (e.g. metering costs). DIRECT ASSIGNMENT — Costs that can be clearly identified as belonging to a specific customer or group of customers. CUSTOMER CLASSES OF SERVICE —The grouping of customers into similar groups based upon usage characteristics and/or facility requirements. Comprehensive Water Rate Study 3-11 ,, City of Fayettevift - Comprehensive Water and Sewer Rate Study proportionally, from customer to customer, with the addition or deletion of a customer regardless of the size of customer. In contrast to this, a weighted customer cost reflects a disproportionate cost, from customer to customer, with the addition or deletion of a customer. ® Public Fire Protection Related Costs. Public fire protection costs are those costs that are related to the public fire protection function. Usually, such costs are those related to public fire hydrants and the over -sizing of mains and reservoirs for fire protection purposes. ® Revenue Related Costs. Certain costs associated with the water utility may vary with the amount of revenue received by the City. An example of a revenue related cost is a tax based upon the gross revenues of the utility. ® Direct Assignments. Some costs associated with operating the system may be directly traced to a specific customer or class of service (e.g. bad debt expense). In this case, these costs are then "directly assigned" to that specific class of service. This assures that other classes of set -vice will not be allocated costs for those "significant" facilities that they do not benefit from, or costs that they did not incur. For each of the classified costs noted above, an allocation factor must be developed to allocate each specific type of cost in an equitable manner to the customer classes of service (e.g. residential, commercial, etc.). A more detailed discussion of the specific cost of service methodology used for the City is provided below. 3.3.5 Functionalization and Classification of Water Plant in Service The City's historical plant records were used in performing the fu nctionalization of water plant in service. The classification process included reviewing each group of assets and determining which cost classifiers the assets were related to, or what fiunction the asset (facility) provided. Provided below is a brief discussion of the classification process used for the water utility. Under the base/extra-capacity method of allocating costs, a cost may be reviewed to determine the portion related to "base" or average demand conditions and the balance or remainder of the cost is considered "extra -capacity" or that level of demand over and above average demand conditions. To make this determination, the City's average day demand and peak day demands were reviewed and determined. From that analysis, it was determined that the relationship between average day demand and peak day demand was 63%/37%, with 63% being "base" related and 37% "extra -capacity" related. In developing the classification of costs, care had to be taken to assure that certain costs were not allocated to a customer group, if that particular customer group did not benefit from those facilities. As an example, the City's water distribution mains were not allocated to wholesale customers. This approach is consistent with past cost of service studies developed for the City. Table 3-6 provides a simple summary of the basic firnctionalization and classification of the City's major water plant items. falComprehensive Water Rate Study 3-12 City of Fayetteville - Comprehensive Water and Sewer Rate Study Base Costs Extra-CaRa.FJI-y Retail Retail Actual Weighted Fire Plant Component All Only[l] All Only[l] Customer Customer Protection Source of Supple - Lines 63% - 37% - - - - Storage - 63% - 37% - - - Transmission Mauls 31% - 64% - 5% - - Distribution Mains - 31% - 64% 5% - - Meters/Connections - - - - - 100% - Hydrants - - - - - - 100% [1] Excludes allocation to Miolesale customers The above table represents a sunu11ary of the classification of major water plant accotuits. A more detailed review of the classification of the water plant in service can be found in the Water Technical Appendix. 3.3.6 Functionalization and Classification of Water Expenses Certain O&M expenses could be clearly identified to a specific activity (e.g. ureter operations program). In that case, the classification of the expense should follow the service provided. In other instances, the O&M expense was related to a corresponding plain account water (e.g. water storage and pumping maintenance). In that case, operating expenses are generally classified in a maturer similar to the corresponding plant account. This approach to classification of operating expenses has been used for this analysis. For the City's study, the 2008 water revenue requirements were filnctionalized and classified utilizing the previously discussed methodology. The revenue requirements for 2008 were selected since it represents the time period over which rates would be proposed. A more detailed review of the filnctionalization and classification of revenue requirements can be found in the Water Technical Appendix. 3.3.7 Allocation of the Revenue Requirements Once the classes of service have been defined, and the classification process is complete, the various costs are then allocated to eacIr of the classes of set -vice based on equitable allocation factors. The water utility's classified costs were allocated to the various classes of service using the following allocation factors. ■ Base -Related Allocation Factor. Base -related costs are associated with average demand conditions. Total annual water consumption is used for the base allocation factor. Historical 2005 water sales, by class of service were used to develop the base allocation factor. ■ Extra -Capacity Related Allocation Factor. Extra capacity -related costs vary with peak use or maximum demands on the system. Accordingly, the extra capacity allocation factor was developed based upon each class' asstuned contribution to the system peak day demand. III developing this allocation factor, the City did not have City -specific measured information flComprehensive Water Rata Study 3-13 City of Fayetteville - Comprehensive Water and Sewer Rate Study on individual customer class contributions to the City's peak day event. Given that, peaking factors, by class of service, were used to estimate the contribution of the each class of service to the peak event. The peaking factors were initially calculated (estimated) by taking the ratio of the average mouth to peak month consmnption. This ratio was assumed to be a reasonable surrogate of peaking factors for each customer class of service. The calculated total system peak demand was compared to the actual (historical) system peak demand to assure reasonableness of the peaking factors for each class of service. ® Customer Allocation Factors. Customer costs vary with the murrber of customers on the system. Two basic types of customer allocation factors were identified - actual and weighted. The allocation factors for actual customers were based upon the projection of the number of customers developed within the revenue requirements. The weighted customer allocation factor is also broken down further into two factors that attempt to reflect the disproportionate costs associated with serving larger water users. The fust weighted customer factor is for customer service and accounting. This weighted customer allocation factor takes into account the fact that it may take more time to read a meter and process a bill for larger or more complex customers. The second weighted customer allocation factor is for meters and services. This factor attempts to reflect that different capital costs associated with providing larger sized meters. ® Public Fire Protection Allocation Factor. The allocation of public fire protection expenses in the water cost of service analysis involved an analysis of each class of service and their fire flow requirements. The analysis took into account the gallon per minute flow requirements in the event of a fire, along with the required duration of the flow. The fire flow rates used within the allocation factor were based upon the guidelines in the City's Water Master Plan. For this study, it has been assumed that the minimum fire flow requirement for a residential customer is 1,500 gallons per minute (gpm) and up to 3,000 gpm for the non-residential customer. The minimum fire flow requirements are then multiplied by the number of customers in each class of service, and the assumed duration, in minutes, of the required flow, to determine the class's prorated fire flow requirements. ■ Revenue Related Allocation Factor. The revenue related allocation factor was developed from each customer class' projected amoral rate revenues for 2006. This same amount of revenue was used in the revenue requirement analysis. The water utility allocation factors noted above can be found in the Water Technical Appendix. 3.3.8 Rate of Return for Outside City and Wholesale Customers Under the "utility" basis methodology, the City is entitled to a "fair" rate of rerun on their investment to serve outside City customers and wholesale (contract) customers. The City earns a "fair" rerun on these outside City and wholesale customers, and it is the responsibility of the inside City retail customers to provide a sufficient rate of rerun to meet the overall revenue requirements of the utility. Under the utility basis methodology, there are a number of different approaches that may be used to determine a "fahr" rate of return to serve the outside City and wholesale customers. The most technically correct method is to use a weighted cost of capital analysis. Under this methodology, the City determines its capital structure (debt/equity) and then determines the cost of each Comprehensive Water Rate Study 3.14 City of Fayetteville - Comprehensive Water and Sewer Rate Study component (e.g. debt = 4.5% and equity = 10.0%). The challenge for a municipal utility is determining a fair return on the equity component. Given that, an alternative approach was used for this study to determine the overall rate of return. Under the approach used for this study, HDR used the cost of debt plus a 3.0% risk premium to determine the overall rate of return. The risk premium is intended to reflect the weighted cost of equity component. This approach is generally recognized, and as an example, Seattle Public Utilities utilizes this exact approach to establish their rates for their wholesale customers. The rate of return used within this study for the outside City and wholesale customers was 7.5%. This was composed of a market cost of debt of 4.5% plus a 3.0% risk premium. 3.3.9 Summary of the Water Cost of Service Results The summary of the allocated costs determine each class's cost responsibility. The allocated costs are then compared to the present revenue received by each customer class to identify if each class is paying its "cost of service." A sununary of the water cost of service analysis developed for each class of service is shown within Table 3-7. Present Rate Allocated $ % Class of Service Revenues Costs 11] Difference Difference Inside Fayetteville - Residential $6,271 $6,537 ($267) 4.3% Conunercial 1,432 1,365 67 -4.710 Industrial 1,271 1,615 (344) 27.1% Government 620 756 (136) 21.9% Irrigation 819 1,296 (477) 58.2% Outside Fayetteville 21104 1,970 134 -6.4% Wholesale 331 338 (61 1.9% Total $12,849 $13,877 ($1,793) 8.0% [1] Allocated costs adjusted to reflect an 8.0% adjustment for 2008 As can be seen from the above table, there are cost differences associated with serving the various customer groups. In developing the outside Fayetteville and Wholesale rate, the City has assessed each of these customer groups a "fair" return on the City's investment to serve these customers. Therefore, in the opinion of HDR, the City can not charge an amount greater than that shown in the cost of service for these customers. It should also be noted that the City has a single water rate structure for the inside City (Fayetteville) customers. Given that, an exhibit was developed to show the impact of combining all inside Fayetteville customers into a single class of service. That is shown below in Table 3-8. falComprehensive Water Rate Study 3-15 City of Fayetteville - Comprehensive Water and Sewer Rate Study Present Rate Allocated $ % Class of Service Revenues Costs [1) Difference Difference Inside Fayetteville- $10,413 $11,569 ($1,156) Outside Fayetteville 2,104 1,970 134 -6.4% wholesale 331 338 (6i 1.9% Total $12,849 $13.877 ($1,793) 8.0% 1 j Allocated costs assumes an 8.0% adjustment for 2008 On a combined basis, the cost of service results for the Inside Fayetteville customers do not appear to be far from the overall cost of service adjustment of 8.0%. However, as the prior table has clearly shown, within the Inside Fayetteville customer groups, significant cost differences exist and the City's declining block rate structure is not properly priced for the large users. Viewing Table 3-7 does not provide the fill] picture of the cost relationships between the various customer groups. For example, the industrial customers are showing the need for one of the larger rate adjustments. However, on a per unit cost basis, these customers currently pay the lowest per unit cost. Figure 3-1 provides a graphical view of the current average rate revenue received from each class of service and the average allocated costs of each customer group. $5.00 $4.00 53.00 52.00 $1.00 50.00 a Existing Re%enaa $+t,000 gal. ■ Average Total Cost W. gal. As can be seen, there is a declining cost fiulction associated with serving the City's larger commercial and industrial customers. However, as discussed previously, the City's declining block rate stnrcture appears to have set the ending tail blocks at too low a Figure 3-1 -Comparison of the Average Unit Revenue to the Allocated level. The results of Average Cost ($11,000 gallons) this study are similar to the prior cost of service study conducted for the City. At that time, the City made a policy decision to subsidize the industrial customers. The allocation of costs attempted to reflect that the facilities and costs allocated to each customer class match the respective benefit received. A general rule that may be used to view the results of a cost of service is that if the cost of service results for a particular class of service are within FalComprehensive Water Rate Study 3.78 City of Fayetteville - Comprehensive Water and Sewer Rate Study ±5% of the overall adjustment, then the class of service is within a "reasonable range" of cost of service. It must be kept in mind that a cost of service analysis reflects costs and usage characteristics of a specific point in time, and as time goes on, customer's consumption patterns and usage requirements may change. For that reason, HDR would reconnnend that the City update this cost of service on a routine basis (e.g. every five years). Contractually, the City is required to use cost of service to establish rates for their wholesale customers. 3.3.10 Summary Recommendations of the Water Cost of Service The cost of service results for the water utility clearly showed cost differences between the various customer classes of service. Given that result, the City was faced with the policy decision of whether movement towards cost of service for all customers was appropriate, and if so, how best to transition to cost of service. As a part of this study, HDR reviewed with the City's Management and Water and Sewer Conmlittee a number of alternatives to "phase in" the cost of set -vice results. The Committee concluded that movement towards cost of set -vice was a decision they had made at the time of the last rate study and deferred that phase-in until this study. The obvious challenge of developing the "phase-in" of the cost of service study was the decision of how fast and how much. Provided below in Table 3-9 is a sunnnary of tine proposed phase-in for 2008 - 2011. Inside Fayetteville - Residential 5.5% 5.5% 5.5% 5.5% Conunercial 2.0% 2.0% 2.0% 2.0% Industrial 6.6% 6.6% 6.6% 6.6% Govenmlent 9.0% 9.0% 9.0% 9.0% Irrigation 10.0% 10.0% 10.0% 10.0% Outside Fayetteville -6.4% 6.0% 3.0% 3.0% W1lolesale 1.9% 6.0% 3.0% 3.0% Total 3.6% 5.8% 5.30/. 5.3% For the retail customers, this phase-in has assumed equal adjustments across a four year period. Even with these adjustments, the City still has certain subsidies within their system that will need to be resolved beyond 2011. For the Outside Fayetteville and Wholesale customers, the 2008 adjustment follows the cost of service results. These adjustments will set these customers at their "cost of service." The adjustments beyond 2008 follow the overall adjustments shown within the water revenue requirements. The final year, 2011, assumes an overall inflationary adjustment, thus the 3.0% adjustments for Outside Fayetteville and Wholesale customers. The overall adjustment in 2008 is below the proposed adjustment of 8.0% shown in the revenue requirements. The City was willing forego the overall adjustment to help phase-in the retail customer's cost of service. However, in 2010 and 2011, the overall adjustments are greater than IMComprehensive Water Rate Study 3.17 City of Fayetteville- Comprehensive Water and Sewer Rate Study those shown in the revenue requirement analysis. In essence, the City is willing to forego a larger adjustment in the initial year, with a trade-off of larger adjustments in the following years. HDR reviewed the impact of this phase-in and determined that the City would still meet their debt service coverage ratios, but financially would need to use some reserve fluids in the initial year to mitigate the reduced overall adjustment. 3.4 Rate Design The final step of the comprehensive water rate study process is the design of water rates to collect the desired level of revenue, based upon the findings and reconuuendations of the water revenue requirement analysis and cost of service analysis. In reviewing water rate designs, consideration is given to the level of the rates and the structure of the rates. This subsection of the report will review the proposed water rate designs for the City. 3.4.1 Overview of Water Rate Structures There are various "generally accepted" rate structures that can be used to establish water rates. The initial starting point in considering a rate structure is the relationship between fixed costs and variable costs. Fixed costs are generally collected as a fixed charge on a monthly basis (e.g. $3.88 per month for a 5/8" x 3/4" meter). This charge may be called by various names (e.g. customer charge, meter charge, readiness to serve charge, etc.), but in all cases, it is intended to collect those fixed costs that the utility incurs, regardless of the customer's level of consumption. While the charge is a fixed cost, it typically increases by meter size. The rate at which the meter charge increases is usually a function of the meter capacity. While it was noted that there are different approaches that can be used to collect fixed charges, the same can be said for variable or volmnet'ic charges. Variable charges, sometimes refereed to as commodity or consumption charges, are generally based upon metered consumption and charged on a $hunt cost. The unit of measurement may vary (e.g. gallons, thousands of gallons, cubic feet, hundreds of cubic feet, etc.), but it is not a critical element in the development of the rates. This is because the charge per unit is supply adjusted to reflect the units of measurement being used. In other words, if you are charging $2.00 per 1,000 gallons, and wanted to charge on a per gallon basis, the rate would be 0.002¢/gallon. It is the structure of the variable charges where numerous options exist. There are three basic rate structures for variable charges; a uniform charge, a declining block charge and an inverted block charge. Table 3-10 provides an overview of each of these variable charge rate structures. lqComprehensive Water Rate Study 3-18 City of Fayettevine - Comprehensive Water and Sewer Rate Study Per Unit Cost usage Per Unit Cost usage Per Unit Cost usage UNIFORM RATE STRUCTURE The cost per unit of consumption under a uniform rate structure does not increase or decrease with additional Units of consumrption. DECLINING BLOCK RATE STRUCTURE The cost per unit of consumption under a declining block rate structure decreases frith additional units of consumption INVERTED BLOCK RATE STRUCTURE The cost per unit of consumption under an inverted block rate struetnre increases with additional units of consumption As can be seen froin Table 3-10, the basic philosophy of each of these variable charge rate structures varies significantly. Under a uniform rate structure, the cost per unit does not change with consumption. From the perspective of customer understanding and rate administration/billing, this is a simple and straightforward approach. In contrast, the declining block rate structure is a bit more complex. The number of blocks (e.g. 3 stepped blocks) and size of the blocks (e.g. 0 — 10,000 gal) may vary. However, the number of blocks should be reasonable (i.e. 2 — 4 blocks) for reasons of simplicity and administration. Declining block rates may imply that there are certain economies of scale with additional consumption, and not necessarily a "vohiine discount." Depending upon the utility, this may or may not be a true statement. Finally, an inverted block Tate structure attempts to send a price signal to consumers that their consumption costs more, as more water is consumed. This may or may not be the proper price signal regarding the utility's water resource costs. As with the declining block rate structure, the number and size of each block may vary, but should be reasonable for purposes of customer understanding and rate administration. The rate structure concepts noted above may be combined and used to form various rate design options that meet the City's needs. However, at the same time, the rates must meet the City's overall goals and objectives in designing rates. 3.4.2 Rate Design Criteria and Considerations Prudent rate administration dictates that several criteria must be considered when setting utility rates. Some of these rate design criteria are listed below: Comprehensive Water Rate Study 3-19 M, City of Fayetteville- Comprehensive Water and Sewer Rate Study ■ Rates which are easy to understand, fi-om the customer's perspective ■ Rates which are easy for the utility to administer ■ Consideration of the customer's ability to pay ■ Continuity, over time, of the rate making philosophy ■ Policy considerations (encourage conservation, economic development, etc.) ■ Provide revenue stability from month to month and year to year ■ Promote efficient allocation of the resource ■ Equitable and non -discriminating (cost -based) Many contemporary rate economists and regulatory agencies feel that the last consideration, cost -based rates, should be of paramount importance and provide the primary guidance to utilities on rate stricture and policy. It is important that the City provide its customers with a proper price signal as to what their consumption or usage is costing. This goal may be approached through rate level and structure, When developing the proposed rate designs, all of the above listed criteria were taken into consideration. However, it should be noted that it is difficult, if not impossible, to design a rate that meets all of the goals and objectives listed above. For example, it may be difficult to design a rate that takes into consideration the customer's ability to pay, and one which is cost -based. In designing rates, there are always trade-offs between the various goals and objectives. 3.4.3 Establishing Retail Customer Classes of Service As a part of the discussion with the City management and Water and Sewer Committee, HDR noted that the single rate schedule for retail customers was ineffective for purposes of attempting to establish cost -based rates. If the City established individual rate schedules for each class of service, the City would have far more flexibility in its ability to adjust rates for a single group of customers. More importantly, by moving to individual rate schedules by class of service, the City would have the ability to use different rate strictures for different classes of service. For example, an inverted block rate is often used for conservation purposes for residential customers. However, that particular rate design is not particularly effective with large commercial or industrial customers. Once again, having rate schedules by customer class of service provides greater flexibility for the City to achieve the rate design objectives they have for each class of service (e.g. conservation, ability to pay, efficient use, etc.). From that discussion, the City concluded that movement to customer classes of service (individual rates by class of service) was appropriate. The following customer classes of service were proposed: ■ Residential ■ Non -Residential ■ Major Industrial ■ Irrigation ■ Outside Fayetteville ■ Wholesale As can be seen, the classes of service are slightly different than the classes of set -vice used for the cost of service study. Two changes were made to the classes of service. First, the commercial and governmental class of service was combined into a single class of service (non-residential). The other major change was to develop a "Major Industrial User" class of service. The City has fillComprehensive Water Rate Study 3.20 City of Fayetteville - Comprehensive Water and Sewer Rate Study three significant users which are very different from a typical tion -residential customer. The Major Industrial user is a non-residential customer, and excludes any wholesale or irrigation use customers.3 To qualify for this rate the customer's individual meter roust use an average of 5,000,000 gallons per month (12 mouth average prior calendar year) at a connmll facility/building. This does not apply to combined or consolidated sets of bills for non -irrigation use at separate facilities/buildings. At the present time, it appears that three customers would qualify as a Major Industrial customer under this defiuition. 3.4.4 Review of the Final Adjustments By Class of Service As this study progressed, a number of different decisions were made regarding the overall levels of rate adjustments, the phase-in of the cost of service and the re-definitiolr of customer classes of service. Provided below in Table 3-11 is a stullinaly of the final proposed rate adjustments for 2008 — 2011 for the various customer classes of service. Class of Service 2008 2009 2010 2011 Inside Fayetteville - Residential 5.5% 5.5% 5.5% 5.5% Non -Residential [1] 4.1% 4.1% 4.1% 4.1% Major Industrial 6.6% 6.6% 6.6% 6.6% Irrigation 10.0% 10.0% 10.0% 10.0% Outside Fayetteville -6.41/16 6.0% 3.0% 3.0% wholesale 1.9% 6.0% 3.0% 3.0% Total 3.6% 5.8% 5.3% 5.3% [1] - Combined adjustment for previously defined Counnercial and Government class of service For each class of service, a proposed rate for the 2008 — 2011 time period has been developed. 3.4.5 Review of the Present Fayetteville Retail Water Rate The City currently has a single rate for their retail customers. The City's present inside and outside Fayetteville retail rate is shown below in Table 3-12. 3 wholesale customers have their own specific rate and are an outside Fayetteville customer. Irrigation use customers have a distinct usage profile which does not fit the usage/cost profile of a Major industrial use customer T� Comprehensive Water Rate Study 3-21 City of Fayetteville - Comprehensive Water and Sewer Rate Study Consumption Charge - ($11,000 gallons) 0 - 10,000 gallons $2.81/1,000 gal. $3.5211,000 gal. 10,001 - 300,000 gallons 2.42 3.03 300,001 - 5,000,000 gallons 1.76 2.20 Over 5,000,000 gallons 1.60 1.98 As can be seed, the City has a rate structure that is composed of two components; a Meter charge and a consumption charge. The fixed meter charge is based upon ureter size. In contrast to this, the consumption charge is based upon the customer's metered usage and is a declining block rate structure. Given that this rate stnictuure applies to all retail customers, the declining block rate structure appears appropriate, but the pricing for the two lowest blocks are set too low, hence the results of the cost of service which indicated that the largest customers needed their rates adjusted greater than the overall average increase. The movement towards rates developed for each individual class of service will help rectify this disparity. The City's outside Fayetteville rates are very similar to the inside Fayetteville rate structure, but the pricing reflects the risk differential (rate of return) between these two customer groups. The current differential between inside and outside City customers is approximately 25%. The cost of service has shown that the Outside Fayetteville rates are too high, and tile differential must be adjusted downward. 3.4.6 Proposed Residential Water Rate The proposed residential rate has been greatly restructured to better reflect the characteristics of this class of service and the overall policy objectives of the City Council, In particular, conservation and efficient use of water resources are an important objective. However, at the same time, affordability and ability to pay must also be addressed. The proposed residential rate attempts to address these objectives and is shown below in Table 3-13. fa�Comprehensive Water Rate Study 3.22 ` City of Fayetteville - Comprehensive Water And Sewer Rata Study Present inside Present Outside Rate Components Fayetteville Rate Fayetteville Rate Meter Charge — 518" x 314" $3.88/montli $4.92/uaouth P, 5.39 6.54 1-1/2" 9.40 11.94 2" 13.69 17.39 3" 31.90 40.51 4" 52.80 67.05 6" 105.60 134.11 8" 158.40 201.16 Consumption Charge - ($11,000 gallons) 0 - 10,000 gallons $2.81/1,000 gal. $3.5211,000 gal. 10,001 - 300,000 gallons 2.42 3.03 300,001 - 5,000,000 gallons 1.76 2.20 Over 5,000,000 gallons 1.60 1.98 As can be seed, the City has a rate structure that is composed of two components; a Meter charge and a consumption charge. The fixed meter charge is based upon ureter size. In contrast to this, the consumption charge is based upon the customer's metered usage and is a declining block rate structure. Given that this rate stnictuure applies to all retail customers, the declining block rate structure appears appropriate, but the pricing for the two lowest blocks are set too low, hence the results of the cost of service which indicated that the largest customers needed their rates adjusted greater than the overall average increase. The movement towards rates developed for each individual class of service will help rectify this disparity. The City's outside Fayetteville rates are very similar to the inside Fayetteville rate structure, but the pricing reflects the risk differential (rate of return) between these two customer groups. The current differential between inside and outside City customers is approximately 25%. The cost of service has shown that the Outside Fayetteville rates are too high, and tile differential must be adjusted downward. 3.4.6 Proposed Residential Water Rate The proposed residential rate has been greatly restructured to better reflect the characteristics of this class of service and the overall policy objectives of the City Council, In particular, conservation and efficient use of water resources are an important objective. However, at the same time, affordability and ability to pay must also be addressed. The proposed residential rate attempts to address these objectives and is shown below in Table 3-13. fa�Comprehensive Water Rate Study 3.22 ` City of Fayetteville - Comprehensive Water And Sewer Rata Study Rate Components Meter Charge - ($/Month) 5/8" x 3/4" P 2" Consumption Charge - ($/1,000 gallons) Fust 2,000 gallons Next 13,000 gallons Over 15, 000 gallons Inside 2008 2009 2010 2011 Outside Fayetteville 2008 2009 2010 2011 $4.00 $4.25 $4.50 $4.75 $4.60 $4.89 $5.18 $5.46 5.55 5.90 6.25 6.60 6.38 6.79 7.19 7.59 9.70 10.30 10.90 11.50 11.16 11.85 12.54 13.23 14.10 15.00 15.90 16.75 16.22 17.25 18.29 19.26 52.11 $2.25 $2.39 $2.53 ' $2.43 $2.59 $2.75 $2.91 2.81 2.99 3.17 3.36 I 3.23 3.44 3.64 3.86 3.98 4.24 4.49 4.75 I 4.58 4.88 5.16 5.46 As can be seen, this rate stiticture has three consumption blocks. The first block is designated for "essential" use and may be considered a "lifeline" block. The price of this block is set at a 25% discount of the average cost. This block is intended to address the issue of affordability and ability to pay. The second block is intended to address the remainder of typical indoor use and a portion of "efficient" outdoor use. The average water customer uses approximately 5.000 gallons per month. Hence, setting Comparison of Present and Proposed Residential tile second block at a limit of Inside City Bills at Varying Consumption Levels 15,000 gallons should provide (S/Month) sufficient water for outdoor needs $iso"oo a for a typical lot size. Tile fu1aI 1 $100.00 i block is designed to capture outdoor use, and this is likely $,50-00! I "inefficient" outdoor use. The $0.000 tinder -collection within the first 1.000 C? Lisag2 5 10 t5 zo 25 3o •Resent Foes $6.69 617.98 $31.98 sa4.0e ss6.18 W6.28 590"38 block is priluarily collected within ■ RWe(1 RaleS 56.11 $16"65 $30.70 644.75 668.64 $84.54 $104A4 this portion of the rate structure. It. should be noted frons a water resource perspective outdoor use is typically considered "discretionary" consu nlption. As can be seen in the bill comparison, the lowest users will actually see a slight rate decrease under these proposed rates. The largest users will have their bills adjusted under this proposed approach. All tiered rates have revenue stability concerns in that a bulk of the revenue is collected in the tail block of the rate structure, which is weather sensitive. For that reason, the City should be aware that this rate structure may over or under -collect from year to year, depending upon the weather and outdoor water use. However, this rate structure is intended to encourage conservation and efficient use. With each gallon of water saved, that is one less gallon of water purchased at the wholesale level frons Beaver Water District. Tile outside Fayetteville rate applies to all outside City residential customers, with the exception of the White River Rural Water System. For White River, there is all additional fixed charge of falComprehensly* Water Rats Study 3-23 City of fayettoville - Comprehensive Water and S*war Rate Study $5.94/month, regardless of the meter size. This additional fixed charge is a pall of the current rates charged to White River. This surcharge will be eliminated after December 31, 2011. The revised differential between inside and outside Fayetteville customers is approximately 15%. This rate differential was developed based upon the results of the cost of set -vice analysis. 3.4.7 Proposed Non -Residential Water Rate The proposed non-residential rate has also been greatly simplified to better reflect the characteristics of this class of set -vice. This class of service has a wide variety of customers and a number of customers within this class of service consume significant quantities of water (i.e. over 300,000 gallons per month). The existing four -block rate structure had a price break at 300,000 gallons. While the objective for this class was to move to a uniform vohumetric rate, it was difficult to do so because of the number of customer using the larger volumes of water and the potential impact of moving to a uniform consumption charge. The proposed non-residential rate has a two -block declining structure. It is shown below in Table 3-14. Rate Components Meter Charge - ($/Mouth) 518" x 3/4" 1" 1-112" 2" 3" 4" 6" 8" Consumption Charge - ($/1,000 gallons) 0 - 300,000 gallons Over 300,000 gallons Inside Outside Fayetteville 2009 2009 2010 2011 1 2008 2009 2010 2011 $4.00 $4.25 $4.50 $4.75 $4.60 $4.89 $5.18 $5.46 5.55 5.90 6.25 6.60 6.38 6.79 7.19 7.59 9.70 10.30 10.90 11.50 11.16 11.85 12.54 13.23 14.10 15.00 15.90 16.75 16.22 17.25 18.29 19.26 32.90 34.95 37.00 39.05 37.84 40.19 42.55 44.91 54.45 57.85 61.25 64.65 62.62 66.53 70.44 74.35 108.85 115.65 122.45 129.30 125.18 133.00 140.82 148.70 163.30 173.50 183.70 193.90 187.80 199.53 211.26 222.99 $2.55 $2.61 $2.68 $2.75 1 $2.93 $3.00 $3.08 $3.16 $1.95 $2.11 $2.28 $2.45 $2.24 $2.43 $2.62 $2.82 The fust item to note with this rate structure is the fixed charges for this class of service are the same as those used for residential customers. It was determined that the use of a single set of fixed charges would simplify the administration of the City's rates. It is the volumletric charge that has been adjusted by each class of service to produce the overall required adjustments fi-om each class of service. Comparison of Present and Proposed Non- Residential Inside City Bills at Varying Consumption Levels ($/Month) $1,500.00 ---------- $1,000.00 $500.00 -1fl"' 11 1,000 GW. L"0 $o.00 50 100 200 300 400 500 ■ Resent Fades $6.69 $128.78 $249.78 $491.78 $733.78 $937.80 $1,113.80 ■Roposedpoles $6.58 $131.50 5259.00 $514.00 $769.00 599290 $1,187.90, falComprehensive Water Rate Study 3-24 City of Fayetteville - Comprehensive Water and Sewer Rate Study As can also be seen, this rate structure has eliminated the four block structure and moved to a two -block declining rate structure. For these two blocks, the pricing relationship has been established to help minimize impacts to the largest users within this class of service. However, as the rate adjusts through time, larger adjustments have been placed on the second block of consumption to attempt to move the price of the two blocks closer together. This logic follows the results of the cost of service which indicated that the last two blocks (largest users) were priced well below their cost. Similar to the residential rate structure, the outside City non-residential rate applies to all of Fayetteville's outside City non-residential customers, with the exception of White River. For White River, there is an additional fixed charge of $5.94/month, regardless of the meter size. An inverted block rate structure is not recommended for this class of service. Unlike a residential customer, greater use does not necessarily imply inefficient use. Given that situation, an inverted block rate structure is probably not appropriate for non-residential customers. In some cases, the largest users on the City's system may actually be the most efficient. 3.4.8 Proposed Major industrial Water Rate The Major Industrial class of service was created to recognize that the largest users on the City's system have different usage and cost characteristics than other non-residential customers. As noted previously, this class of service is for an individual meter that utilizes an average of 5,000,000 gallons per month. At the present time, three customers appear to qualify for this rate. Presented below in Table 3-15 is a summary of the proposed Major Industrial water rate. Rate Components 2008 Inside Fayetteville 2009 2010 2011 Outside Fayetteville 2008 2009 2010 2011 Meter Charge - ($/Month) 4" $54.45 $57.85 $61.25 $64.65 $62.62 $66.53 $70.44 $74.35 6" 108.85 115.65 122.45 129.30 125.18 133.00 140.82 148.70 8" 163.30 173.50 183.70 193.90 187.80 199.53 211.26 222.99 Consumption Charge - ($/1,000 gallons) All Consumption $1.77 $1.89 $2.01 $2.14 $2.04 $2.17 $2.31 $2.46 The rate structure for this particular class of service is a uniform rate structure. The cost of service indicated that this particular class of service had the Iowest per unit retail cost of any of the retail customer groups. A detailed bill comparison for this proposed rate schedule is included within the Technical Appendices. 3.4.8 Proposed Irrigation Rate Conservation and efficient use of water are important concepts in the water utility industry. Irrigation use is typically the component of usage which has the greatest amount of discretionary use, while at the same time, some of the most inefficient use. Given that, contemporary water Comprehensive Water Rate Study 3-23 ,,,, City of Fayetteville - Comprehensive Water and Sewer Rate Study rate design designs for irrigation customers have changed significantly from past practices. First, irrigation use is now considered a distinct end-use. At the saute time, the pricing should reflect the seasonal use of this group and the large demands that they place upon the system dining a peak -use period. The proposed 'irrigation rate for Fayetteville is a transitional rate, in that some of these customers are moving from a steeply declining block rate to a rate structure that better reflects the costs they place upon the system. Provided below in Table 3-16 is the proposed irrigation rate fi-oin inside and outside Fayetteville retail customers. Rate Components Meter Charge - ($/Month) 5/8" x 3/4" 1" 1-112" 2" 3" 4" 6" 8" Consumption Charge - ($/1,000 gallons) 0 - 300,000 gallons Over 300,000 gallons Inside FayettevWe Outside 2008 2009 2010 2011 I 2008 2004 2010 2011 $4.00 $4.25 $4.50 $4.75 1 $4.60 $4.89 $5.18 $5.46 5.55 5.90 6.25 6.60 6.38 6.79 7.19 7.59 9.70 10.30 10.90 11.50 11.16 11.85 12.54 13.23 14.10 15.00 15.90 16.75 16.2.2 17.25 18.29 19.26 32.90 34.95 37.00 39.05 37.84 40.19 42.55 44.91 54.45 57.85 61.25 64.65 62.62 66.53 70.44 74.35 10 8.8 5 115.65 122.45 129.30 125.18 133.00 140.82 148.70 163.30 173.50 183.70 193.90 187.80 199.53 211.26 222.99 $2.81 $3.09 $3.37 $3.64 1 $3.23 $3.55 $3.88 $4.19 $1.84 $2.16 $2.70 $3.28 $2.11 $2.48 $3.11 $3.77 Over the four-year period of rate adjustments, the adjustments have been applied to increase the second block of consumption at a greater level than the first block. Ultimately, the two -block declining structure should be eliminated, but this may take a number of years to achieve. Detailed bill comparisons for the proposed irrigation rates are included within the Technical Appendices. 3.4.10 Proposed Wholesale Water Rates Fayetteville currently has five wholesale water customers. They are as follows: a Washington County Rural Development Authority ■ Mount Olive Water Association ■ City of Elkins ■ City of West Fork It should be noted that in accordance with the 1970 contract between Greenland and Fayetteville, Greenland agreed to pay the Outside Fayetteville retail rates. Therefore, the proposed wholesale rates apply to the above customers, with the exception of Greenland. Provided below in Table 3- 17 is the summary of the proposed wholesale water rates. falComprehensive Water Rate Study 3-26 City of Fayetteville - Comprehensive Water and Sewer Rate Study Rate Components Meter Charge - ($/Month) 5/8" x 3/4" 1" 1-1/2" 2" 31, 4" 6" 8" Present Wholesale Rate Proposed Wholesale Rate 2008 2009 2010 2011 $55.55 $5.00 $5.30 $5.60 $6.00 55.55 7.00 7.40 7.80 8.30 55.55 12.15 12.85 13.55 14.45 55.55 17.70 18.75 19.75 21.00 55.55 41.30 43.80 45.10 46.50 55.55 68.30 72.25 76.10 81.10 5 5.5 5 136.70 144.90 149.20 153.70 55.55 205.00 216.90 228.40 240.50 Consumption Charge - ($/1,000 gallons) All Consumption $1.81 $1.84 $1.95 .$2.01 $2.07 As can be seed, at the present time, wholesale customers pay a fined charge of $55.55, regardless of meter size. The proposed rates [lave incorporated meter charges that follow the approach used for the other classes of service. The rate adjustments have been passed -through in accordance with the results of the cost of service analysis. 3.4.11 Fire Protection Rates The City has private fire protection rates (monthly stand-by fire protection set -vice charges). These rates are based upon service litre size. For this study, the private fire protection charges were adjusted by the overall annual adjustments for 3.6% in 2008, 5.8% in 2009, 5.3% 2010 and 5.3% in 2011. The City has also historically had public fire protection (hydrant) rates for outside Fayetteville customers. Based upon discussions with the City, for administrative and cost reasons, it was reconunended that these public fire protection (hydrant) rates be eliminated. 3.5 Summary of the Water Rate Study This section of the report presents the development and results of the water utility rate study. The results of the water rate study indicated that water rates are deficient for the projected time period reviewed. The water rates, as proposed herein, are cost -based and were developed using generally accepted rate -making methods and principles. The implementation of rate adjustments, as shown in the rate transition plan through 2011, should move the City closer to cast -based rates for all customers. The next section of the report will discuss the development and results of the sewer rate study. Comprahansive Water Rata Study 3-27 fa City of Fayetteville - Comprehensive Water and Sewer Rate Study 4.1 Introduction This section of the report presents the comprehensive sewer rate study undertaken for the City. As with the water utility, the objective of the sewer rate study was to determine the sufficiency of current sewer rate revenues to coverprojected operating and capital needs, while reviewing the overall equity of rates charged to the various customer classes of service. The revenue requirement analysis assumes that the City's sewer utility must financially "stand on its own" and not be subsidized by any other utility or City fiord. In developing the revenue requirements for this utility, all the costs that are necessary to rurr the sewer utility in a prudent and financially stable manner were included. "The revenue requirement analysis assumes that the City's sewer utility must financially "stand on its own" and not be subsidized by any other utility or City fund." 4.1.1 Determination of Time Period and Method of Accumulating Sewer Costs The revenue requirement for the sewer utility was developed using the same general framework and similar assumptions as for the water utility. The sewer revenue requirements reviewed a time period of 2006-2010, with emphasis on 2007 — 2010. This time period was reviewed in order to maintain consistency between the rate studies and to determine the impact of recent major sewer treatment plan improvements. The sewer revenue requirement developed for the City utilized the "cash basis" methodology and was customized to follow the City's system of accounts (budget documents). Table 4-1 provides a summary of the approach that was used to develop the City's sewer revenue requirements. laqComprehensive Sewer Rata Study 4.1 City of Fayetteville - Comprehensive Water and Sewer Rata Study + Operation and Maintenance Expenses ✓ Wastewater Director ✓ Billing and Collections ✓ Meter Operations Program ✓ Meter Maintenance & Backflow Prevention ✓ Operations and Administration Program ✓ Sewer Mains Maintenance Program ✓ Wastewater Treatment Plaut Program + Taxes/Transfer Payments + Net Capital Improvements Funded From Rates (calculated below) + Net Debt Service (P+I) Existing and Future Change in WoliWig Cavital )Use of Reserves) Total Seurer Revenue Requirements [1 ] Net Capital Iniprovements Funded Froin Rates + Total Sewer Capital Improvement Projects - Funding Sources Other Than Rates ✓ Sewer Impact Fees ✓ Grants ✓ Low -Interest State Loans ✓ Long Term Debt Issues Net Capital Improvements Funded From Rates [l] Given a time period around which to develop the revenue requirements, and a method to accumulate the costs, the focus shifts to the projection of revenues and expenses for the City's sewer utility. The primary financial inputs in this process were the City's historical billing records, the City's sewer capital improvement plan and the City's 2006 budgeted expenses. A more detailed discussion of the key assumptions contained within the sewer revenue requirement is provided below. 4.1.2 Sewer Rate Revenue and Miscellaneous Revenue The revenue requirement calculation begins with a projection of rate revenue at present rates. This process involved developing projected billing units for each customer class of service (e.g. single family, multi -family, commercial, etc.) based on historical usage records and an assumed annual growth rate. The billing units are then applied (multiplied) against the current rates to calculate the projected revenue. This method of independently calculating revenue ensures consistency in the revenue and consumption figures through rate design. The revenue at present rates was calculated using 2004-2005 historical consumption data and the specific rate schedule for that year. Rate revenues were projected forward to 2006 based on calculated 2004-2005 rate revenues, plus 3.0% growth rate for 2007-2010. In 2007 the rate revenue is projected to be $13.1 million, increasing to $14.1 million by 2010 as a result of the assumed customer growth on the system. T ��./■ � Comprehensive Sewer Rate Study 4.2 .i�City of Fayetteville - Comprehensive Water and Sewer Rate Study 2007 Sewer Rate Revenues By Class of Service ($000) $6,796 $2,785 ■ Residential ■ Comm./Gov. o Industrial $2,468 [1 Outside City $r44 $898 4 Wholesale The sewer utility also receives miscellaneous revenue. Miscellaneous revenue varies by year, but is fairly level during the planning period. Miscellaneous revenue for the sewer utility consists of a. variety of sources, but the largest single nkiscellaneous revenue source is interest earnings from reserve fiends. Interest revenue for the City was calculated at 3.0% of the balance of the reserve fiwds. Miscellaneous revenue as calculated to be approximately $542,000 in 2007, declining slightly over time to approximately $476,000 in 2010. This slight decline in overall miscellaneous revenues is primarily a flrnction of declining reserve balances and interest earnings. 4.1.3 Sewer Operation and Maintenance Expenses The City's 2006 sewer utility budget document was used as a base to project firt re year costs. The fixture O&M expenses were escalated by the most appropriate escalation factor. Escalation factors ranged from 3% to 10%. The vast majority of costs were escalated at 3% to 4% per year. A major change in the City's O&M levels are a result of the City's expanded wastewater treatment plant coming on line ill 2008. In 2008, it has been assumed that the plant will be in a "start-up" mode and have $1.5 million of additional expenses over and above current levels. As the plant becomes more fiilly operational, the City estimated that the additional costs would be $3.0 million per year. In addition, it has been assumed that additional personnel will be needed. The City has assumed aur additional labor cost of $50,000 in 2008 and a total of $100,000 in 2009. These expenses are not unexpected and have been known for the last two years or more. The City's total O&M expenses in 2007 are projected to be $9.4 million. With the additional costs noted above, the City's sewer O&M is projected to increase to $11.2 million in 2008 and $13.1 million in 2009. At that point, the plant is fully operational and the City will be incin-ring the MR costs of the plant. In 2010, it has been asstuned that general inflation will increase the total O&M costs to approximately $13.6 million. 4.1.4 Sewer Taxes and Transfers The sewer utility currently has a franchise fee of approximately $493,000 in 2007. These franchise fees are anticipated to increase slightly over time as a fiurction of inflation. In 2010, the franchise fees are projected to be approximately $538,000. 4.1.5 Sewer Capital Improvement Projects The City anticipates approximately $8.9 million in capital expenditures for the sewer utility over the five-year period of 2006-2010. This equates to approximately $1.8 million per year in capital improvement projects. The major projects are collection system projects related to the renewal and replacement of existing facilities, along with the development of additional interceptor capacity. The fiurding for most of these projects is from a combination of reserve fluids, grant fiurding, impact fees and rates. falComprehensive Sower Rate Study 4.3 City of Fayetteville - Comprehensive Water and Sewer Rete Study As noted for the water utility, a general lisle of fiuiding capital projects is that a utility sIlould find a portion from rates on an on-going basis. A guideline for finding that is used by HDR is to attempt to fiend at a niurimurn, ail amount equal to or greater than annual depreciation expense. As noted within the water utility discussion, annual depreciation expense is not the same as replacement cost. Therefore, the City will steed to find additional funding sources to meet their long -teen replacement needs. This study has established finding from rates that is roughly equal to the current annual depreciation expense of the utility. As the City's new wastewater treatment plant conies on line, the annual depreciation expense will increase, but the fiulding level established within this study best reflects the City's current system and fiulding needs. A slrninary of the sewer capital improvement projects is provided in Table 4-2. Funded Capital Projects - Wastewater Treatment Ianprovewents Sewer Improvements Sewer Service Luprovements Budgeted Capital Projects Total Funded Capital Projects Unfunded Capital Projects Wastewater Treatment Improvements Sewer Improvements Total Unfiuided Capital Projects Plus: Additions to Capital Reserves Total Capital Improvement Projects Less: Outside Funding Sources Sewer Impact Fees Use of Working Capital Fend Misc. Grants/Cost Sharing New Long -Tenn Borrowing Total Outside Fundiug Sources Total Capital Funded From Rates 2006 2007 2008 2009 2010 Deterred $180 $185 $190 $200 $210 $0 1,569 1,569 1,569 1.659 1,719 0 171 137 204 148 156 0 8,807 131 159 96 89 0 $10,727 $2,022 $2,122 $2,103 $2,174 $0 $355 $385 $363 $182 $197 $0 1,065 129 1,570 3,315 7,769 10,540 $1,420 $514 $1,933 $3,497 $7,966 $10,540 $212 $164 $0 $0 $o $0 $12„360 $2,700 $4,055 $4,600 $10,140 $10,540 $0 $0 $1,355 $0 $0 7,811 0 0 2,880 240 1,366 0 0 0 0 0 0 0 0 7,000 $9,177 $0 $1,355 $2,880 $7,240 $3,183 $2,700 $2,700 $2,720 $3,900 Table 4-2 indicates that there is a significant amount of deferred capital projects to be Mnded. The projects that will be fiinded include a significant portion in 2010. It. has been assiraed that the City will issue a $7.0 million bond in 2010 to find these projects. In all likelihood, these projects will be slid out into future years, but with $10.5 million in deferred projects already, the City will need to make some difficult decisions concerning the finding and timing of these projects. 4.1.6 Debt Service Payments Debt service is related to the sewer utility's long -teen borrowing for capital. Within this study, only rate -related debt service is included. The sewer utility currently has a significant amount of outstanding debt. Currently, there is a 2002 revenue bond issue, which has an annual principal falComprehensive Sewer Rate Study 4-4 City of Fayetteville - Comprehensive Water and Sewer Rate Study and interest payment of approximately $565,000 per year. There is a $7.0 million debt issues assumed in 2010 to filed capital improvements has an annual debt service of approximately $492,000. When taken together, the annual debt service payments, to be filnded from rates, range from approximately $606,000 in 2007 to $1.1 million in 2010. 4.1.7 Sewer Utility Reserve Levels The final component of the sewer revenue requirement is the review of reserve levels, as discussed in Section 2.7 of this report. As with the water utility reserves, the sewer utility operating reserve minimum target is 45 days of operating expense. This level ranges from approximately $1.1 million in 2006 to $1.6 million by 2010. The projected reserve levels are anticipated to meets this nlinirnum level. Overall, the sewer utility is projected to maintain an adequate level of reserves which will provide financial stability over the time period reviewed. 4.7.8 Summary of the Sewer Revenue Requirements Given the above asstumptions and the projections of revenues and expenses for the sewer utility, the revenue requirements were developed. A summary of the sewer revenue requirements is presented in Table 4-3. Sources of Funds Rate Revenues at Present Rates Wholesale Revenue Miscellaneous Revenue Total Sources of Funds Expenditures Sewer Portion of Joint Expenses Direct Sewer Expenditures Service Level Plan Taxes and Transfers Debt Service (Rate Funded) CIP Funded Through Rates Change in Working Capital Total Revenue Requirements Balance (Deficiency) of Funds Bal. (Def.) of Funds as a % of Rates 2006 2007 2008 2009 2010 $12,641 137 492 $12,946 141 542 $13,260 145 551 $13,584 149 474 $13,918 154 476 $13,270 $13,629 $13,956 $14,207 $14,548 $2,288 $2,368 $2,451 $2,538 $2,627 6,821 7,040 8,768 10,504 10,838 0 0 0 50 100 478 493 507 523 538 603 606 608 608 1,100 3,183 2,700 2,700 2,730 2,900 0 0 0 0 0 $13,373 $13,207 $15,034 $6,9533 $18,103 ($103) $422 ($1,078) ($2,746) ($3,555) (0.80/0) 3.2% (8.0%) (20.0%) (25.3%) In reviewing Table 4-3, it should be understood that the annual deficiencies are cumulative. That is, any adjustments in the initial years will reduce the deficiency in the following years. Therefore, an adjustment of 20% in 2009 will leave a deficiency of approximately 5.3% ill 20 10. As can be seen, the City's sewer rates will be deficient in 2008 due to the initial start-up costs associated with the West Side Wastewater Treatment Plant. The full impact of the operational costs associated with the treatment plant occurs in 2009. It should also be pointed out that the Comprehensive Sewer Rata Study 4.3 f aR City of Fayetteville - Comprehensive Water and Sewer Rate Study level of adjustment shown in 2009 was projected in the July of 2006, and couununicated to the City's sewer customers at that time. In July 2006, HDR analyzed the potential impacts from the passage or failure of the sales tax initiative. As a result of that analysis, the City told the citizens of Fayetteville that no adjustments to sewer rates would occur ill 2008, but that an adjustment of approximately 20% would be expected in 2009. The reason for the size of the adjustment is the need for adequate associated with the West Side Wastewater Treatment Plant and/or renewal and replacement capital projects. Depending upon one's viewpoint, the deficiency in 2009 is roughly equal to the incremental operational costs for the wastewater treatment plant ($3.0 million) and/or the amount of fiuiding for capital improvements fiom rates ($2.7 million). If the City's prior rate adjustment was intended to fluid the funding of the O&M costs the need for firid ng for Composition of the 2007 Sewer Revenue Requirements 40% a Treatment ■ Other O&M p Franchise Fees a Net lit SeNci 2011 31% ■ CIP From Rates 5% 4% incremental operational costs of the new plant, then at that time, there was no consideration of the adequate funding of CIP from rates. This study has acknowledged rile need to find both of these uses of funds and has provided adequate funding for both of those components. Detailed exhibits of the sewer revenue requirement analysis can be found in Appendix B, Sewer Technical Appendix. 4.1.9 Debt Service Coverage The debt service coverage (DSC) ratio is another financial indicator that is used to judge the financial status of a utility. The sewer fired should have a minimum debt service coverage ratio of 1.25 on any outstanding revenue bonds. Failure to meet the minimum DSC for all outstanding debt obligation is considered to be technical default, making the revenue bonds callable or payable upon demand. Therefore, it is critical that the utility meet this legal requirement. On this basis, the net revenue of the combined utilities (gross revenue of the utilities less operating and maintenance expenses) must currently equal at least 1.25 times the City's annual revenue bond debt service payments. 2Qt16 2007 zoos 2009 2010 Sewer Revenue Bond DSC Ratios - Before Rate Adjustment 6.90 3.36 2.18 0.89 0.59 Atter RR Rate Adjustment 7.08 3.02 3.03 3.07 4. t2 After proposed Rate Adjustment [F] 6.90 3.36 2.18 3.07 3.45 [I] - See proposed sewer rate adjustments on Table 4-5 As Table 4-4 indicates, on a "stand-alone" basis, without a rate adjustment in 2009, the sewer utility's debt service coverage ratio will be 0.89. A debt service coverage ratio of less than 1.00 indicates that the utility would not have sufficient revenue to meet the Rill debt service payment ID�] Comprehensive Sewer Rate Study 46 City of Fayetteville - Comprehensive Water and Sewer Rate Study (i.e. the utility has 89% of the heeded fiends for debt service). This lack of all adequate DSC clearly indicates the need for a rate adjustment. With the proposed rate adjustment of 20% in 2009, the utility returns to an adequate DSC. The adjustment in 2009 will also provide adequate coverage to allow for a bond issue in 2010 to help pay for the sewer utility's deferred capital. 4.1.10 Rate Transition Plan The results of the study were presented to the City's management team, along with the City Water and Sewer Committee. In discussions with both of these groups, a sewer rate transition plan was developed. The transition plan recognized the need for an adjustment to the sewer utility in 2009. The adjustments shown in 4-5 reflect the sununary discussions with the Committee. 2008 2005 2010 2011 Proposed Sewer Rate Adjustments 0.0% 20.0% 3.0% 3.0% The adjustments shown in Table 4-5 are assumed to be effective on January 1 of each year. The adjustments shown in 2010 and 2011 are assumed to be inflationary adjustments. This study has extended the adjustments into 2011 to match the timing shown in the rate transition plan for the water utility. Similar to rile water utility, it is important to keep in mind that even with these adjustments, the sewer utility continues to show a significant backlog of deferred capital projects beyond 2010 (Table 4-2), which the City must address at some point. This will likely require additional long- term borrowing and rate increases beyond what has been shown in this study. 4.1.11 Consultant's Recommendation Regarding Sewer Revenue Requirements The above concludes our discussion of the sewer revenue requirements. The results fiom the revenue requirement for the sewer utility indicate the utility needs to increase rates to properly fiord the incremental operating costs associated with the West Side Wastewater Treatment Plaut and to adequately fired capital improvements from rates. The proposed rate adjustments are also necessary to ensure that the utility is meeting its debt service coverage ratio required by its bond covenants. The next step in the rate study was the sewer cost of service analysis. 4.2 Sewer Cost of Service Analysis Similar to the water cost of service analysis, a sewer cost of service analysis is concerned with the equitable allocation of the total sewer revenue requirements to the various customer classes of service of the utility. falComprehensive sewer Rata Study 4.7 City of Fayetteville - Comprehensive Water and Sower Rata Study "Similar to the water cost of service analysis, a sewer cost of service analysis is concerned with the equitable allocation of the total sewer revenue requirements to the various custotuer classes of service of the utility." In order to determine the cost to serve each customer class of service on the sewer system, an analysis is conducted using the same basic analytical framework as the water cost of service study. That is, the sewer cost of service developed for the City functionalizes, classifies and allocates the revenue requirements to each of the classes of service in a. "fair and equitable" manner. Provided below is a detailed discussion of the sewer cost of service study conducted for the City. 4.2.1 Overview of the Cost of Service Methodology The City has certain requirements in setting their sewer rates. The City has certain sewer agreements and contracts that have elements that pertain to the rate setting methodology or approach to be used. As an example, the City of Greenland entered into a sewer contract on December 21, 1993 which contains a subsection that pertains to the rate setting process. The pertinent subsection appears as follows: "4. SEWER RATES: The rates for sewer service shall be on a cost -of -service basis as computed by a Registered Professional Engineer selected and employed by the City of Fayetteville. Greenland shall have the right to review such rates and provide the City with their comments prior to the time that the rates are adopted by Fayetteville. The rates as of the date of this contract shall be as shown on Exhibit "A" attaclied. The sewer rates include maintenance and treatment costs, tapping fees, and surcharge rates for excess BOD and Suspended Solids. Fayetteville reserves the right to review the sewer rates at the end of each three year period or at the same time Fayetteville rates are reviewed, and make an adjustineut in said rates if indicated, based upon a demonstrable increase or decrease in cost of performance hereunder. " The City has other sewer contracts and agreements with other customers. For the most pant, they do not provide for a specific methodology, but they do provide for a specific method to determine an appropriate rate of return. This would imply the use of the "utility/accrual" basis methodology. Given that, the sewer cost of service conducted for the City utilized a ` utility/accnral" basis methodology and provided for a "fair" return on investment to serve the outside City and wholesale customers. This aspect of the rate setting process is discussed it more detail later in this section of the report. In the opinion of HDR, the sewer cost of service analysis as developed herein conforms to the contractual requirements and fainly allocates costs to the outside City and wholesale customers, while providing for a "fair" rate of return to City to serve outside City and wholesale customers. 4.2.2 Functionalization of Sewer Costs The first analytical step in the cost of service is called firnctionalization. Functionalization is the arrangement of sewer expenses and asset (plant) data by major operating functions. This task was accomplished through the utility's system of accounts. falComprehensive Sewer Rate Study 46 City of Fayetteville - Comprehensive Water and Sewer Rate Study 4.2.3 Development of Cost Classifiers The second analytical task performed within the cost of service is the classification of the fiinctionalized expenses to cost components. This task reviews each cost and attempts to determine why the cost was incurred and what type of need was being met (e.g. volume, strength, customer etc.). The cost classifiers used for the City's sewer utility cost of service study are as follows: ■ Volume Related Costs. Volume related costs are those that tend to vary according to the quantity of wastewater collected and treated. A nia'jority of collection system costs and treatment costs are included in this component. An example of a volume related cost is chemicals for the wastewater treatment process. The total cost incurred for chemicals is generally related to the total flow or volume of wastewater. ■ Strength Related Costs. Strength related costs are those costs associated with the additional handling and treatment of high "strength" wastewater. Strength of sewerage is typically measured in biochemical oxygen demand (BOD) and suspended solids (SS). The higher the level of BOD or SS, the higher the cost of treatment. Pre-treatment is generally required if the discharge is known to regularly exceed the typical waste strength. ■ Customer Related Costs. Customer related costs include the costs of billing, collecting, and accounting. Customer costs typically vary with the addition or deletion of a customer. These costs may also be further categorized as actual or weighted. The differences in these costs are similar to those noted for the water utility. ■ Revenue Related Costs. Some costs associated with the wastewater utility may vary with the amount of revenue received by the utility. An example of a revenue related cost would be a tax that is assessed on the amount of revenues received. ■ Direct Assignment. Certain costs associated with operating the utility may be directly traced to a specific customer or class of service. These costs Terminology of a Sewer Cost of Service Analysis FUNCTIONALIZATiON — The arrangement of the cost data by functional category (e.g. treatment, collection, etc.). CLASSIFICATION — The assignment of functionalized costs to cost components (e.g. volume, strength and customer and related). ALLOCATION — Allocating the classified costs to each class of service based upon each class's proportional contribution to that specific cost component. VOLUME COSTS — Costs that are classified as volume related vary with the total flow of wastewater water (e.g. chemical use at the treatment plant). STRENGTH COSTS — Costs classified as strength related refer to the wastewater treatment function. Strength may be defined as biochemical oxygen demand and suspended solids. High strength wastewater costs more to treat. CUSTOMER COSTS — Costs classified as customer related vary with the number of customers on the system, e.g. billing costs. DIRECT ASSIGNMENT — Costs that can be clearly identified as belonging to a specific customer or group of customers. CUSTOMER CLASSES OF SERVICE — The grouping of customers into similar groups based upon usage and strength characteristics and/or facility requirements. �] Comprahansiva Sewer Rata Study 49 City of Fayetteville - Comprehensive Water and Sewer Rate Study are then "directly assigned" to that specific class of service. The fmal analytical task performed with the data in the sewer cost of service analysis is the allocation of the classified costs. For each of the classified costs noted above, an allocation factor is developed which equitably allocates each specific type of cost in a "fair and equitable" manner to the customer classes of service (e.g. residential, conunercial, etc.) for the utility. For example, in developing the volume allocation factor for the sewer consideration is given to the total wastewater flow of each class of service in order to equitably allocate these costs. The allocation of costs is performed after the classification of the test period's data is complete. The various classification totals are allocated among rate groups or customer classes of service based upon the nature of the classification. A more detailed discussion of the specific cost of set -vice methodology used for the sewer utility is provided below. 4.2.4 Functionalization and Classification of Sewer Plant in Service The finrctionalization and classification of sewer plant in service is an important element of the City's study. One of the complexities of the City's study is that certain facilities are allocated to certain customers, but not to others. To properly address this issue, HDR had to develop a classification scheme that would classify and allocate costs to all customers, another scheme which allocated certain facilities to all customers with the exception of the City of Farmington, and finally, a scheme to allocate certain facilities to only the retail customers. The reason for this complexity is related to both tine treatment and collection system, along with contractual requirements. On the collection system, all customers benefit from interceptors and are assigned a proportional share of those interceptors. However, the collection system is related only to the City's retail service and given that, wholesale is not assigned any costs associated with the City's collection assets. On the treatment side, the City of Farmington is contractually assigned 8.2% of the West Side Wastewater Treatment Plant (WSIP), but none of the Noland plant. At the same time, the Owl Creek lift station was directly assigned to the City of Fayetteville and the City of Farrington paid directly for their share of this facility. Obviously, the classification and eventual allocation of costs is complex and must be properly established to provide a result that is fair and equitable to all parties and reflects the current contractual agreements between the City and their contractual customers. As a part of this study process, HDR provided a draft analysis to the City of Elkins' and Farmington's financial/rate consultant. The purpose of providing the draft analysis was to allow for a review prior to finalization of the study to assure that EMns' and Fanuington's fmaucial/rate consultant concurred that the classification and allocation of costs was appropriate and fair. A conference call was held between HDR, the City and Elkin/Farmington's rate consultant to review, line -by- line, the classification of these costs. Based upon that conference call, the parties concurred that the classification was appropriate and reflected the current contactual agreements between the parties and reflected a fair classification of the plant assets. Table 4-6 provides a simple summary of the basic fiinctionalization and classification of the City's major sewer plant items. fillComprehensive Sewer Rate Study 410 City of Fayetteville - Comprehensive Water and Sewer Rate Study (1) Excludes allocation to wholesale custoiners Given the filllctionalization of plant in service (assets), the next step of the cost of service analysis is the filllctionalization and classification of operating expenses. 4.2.5 Functionalization and Classification of Sewer Operating Expenses Operating expenses are generally filnctionalized and classified in a manner similar to the corresponding plant accotmt. For example, treatment related expenses are classified in the same manner (percentages) as treatment plant, etc. This approach to classification of operating expenses has been used for the City's analysis. Ara important element of the operation and maintenance expenses are the costs associated with the Noland and West Side Wastewater Treatment Plants. Similar to the handling of the plant in service, the O&M costs associated with the Noland plant were not allocated to the City of Farmington, but 8.2% of the West Side Wastewater Treatment Plant O&M is assigned to the City of Farmington. The sewer utility revenue requirements for 2009 were fiurctionalized, classified, and allocated. The reason that 2009 was utilized is that is the first year of the proposed 20.0% adjustment. In that way, the timing of the proposed sewer adjustment is matched up with the cost of service analysis. A more detailed review of the classification of revenue requirements can be found in the Sewer Utility Tecluiical Appendices. 4.2.6 Customer Classes of Service Seven different classes of service were reviewed within the City's sewer cost of service analysis. These classes of service were as follows: �] Comprehensive Sewer Rate Study 4-11 �` City of Fayetteville — Comprehensive Water and Sewer Rete Study Volume- Related Strength -Related Direct Direct w/o Retail Assign. To Assign. To Plant Component Ali Farmington Only BOD SS Farmington Fayetteville Colleclforr systernr - - Interceptors 100.0% Collectors — — 100.0% Lift Stations 100.0% — — Treahuent Plant — — _ Noland Plaut — 40.0% — 30.0% 30.0% — — Noland Renovation — 40.0% — 30.0% 30,0% — — West Plaut (WSIP) — 36.8% — 27.5% 27.5% 8.2% — West Trunk Lure — 40.0% — 30.0% 30.0% — — Owl Creek Lift Station — — — — -- — 100.0% East Trunk Litre — 40.0% — 30.0% 30.0% — — (1) Excludes allocation to wholesale custoiners Given the filllctionalization of plant in service (assets), the next step of the cost of service analysis is the filllctionalization and classification of operating expenses. 4.2.5 Functionalization and Classification of Sewer Operating Expenses Operating expenses are generally filnctionalized and classified in a manner similar to the corresponding plant accotmt. For example, treatment related expenses are classified in the same manner (percentages) as treatment plant, etc. This approach to classification of operating expenses has been used for the City's analysis. Ara important element of the operation and maintenance expenses are the costs associated with the Noland and West Side Wastewater Treatment Plants. Similar to the handling of the plant in service, the O&M costs associated with the Noland plant were not allocated to the City of Farmington, but 8.2% of the West Side Wastewater Treatment Plant O&M is assigned to the City of Farmington. The sewer utility revenue requirements for 2009 were fiurctionalized, classified, and allocated. The reason that 2009 was utilized is that is the first year of the proposed 20.0% adjustment. In that way, the timing of the proposed sewer adjustment is matched up with the cost of service analysis. A more detailed review of the classification of revenue requirements can be found in the Sewer Utility Tecluiical Appendices. 4.2.6 Customer Classes of Service Seven different classes of service were reviewed within the City's sewer cost of service analysis. These classes of service were as follows: �] Comprehensive Sewer Rate Study 4-11 �` City of Fayetteville — Comprehensive Water and Sewer Rete Study ■ Residential ■ Commercial ■ Industrial ■ Governmental ■ Outside Fayetteville — City of Fannington ■ Outside Fayetteville (All other Outside City customers) ■ Wholesale (Contract) — City of Elkins The classes of service used for the sewer cost of service are similar, but different than those used for the water cost of service study. In this case, due to the different contracts the City has, the study needed to segregate out the City of Farmington and Elkins as separate customer classes of service. The main difference between the two contracts is the rate of return allowed under each contract. 4.2.7 Development of Allocation Factors Once the classification process is complete, and the classes of service to be reviewed have been defrted, the various classified sewer costs are then allocated to each of the classes of service. The sewer utility's classified costs were allocated to the various classes of service using the following methods. Volume Allocation Factors. Volume -related costs are generally allocated on the basis of contribution to flows of the treatment plant. In order to develop this allocation factor, some knowledge of the contribution to flows roust be determined_ Given that wastewater flows are typically not metered, water consumption is generally utilized as the surrogate for wastewater flows. In the case of residential "The use of winter water customers, winter time water usage is used to create an average usage for residential that is then charged every month as a "base" wastewater flow. customers is necessary to The use of winter water usage for residential customers is avoid including summer necessary to avoid including summer lawn watering lawn watering consumption in the volume allocation factor. Summer lawn eonsumpnon in the volume irrigation obviously does not contribute to wastewater allocation factor." treatment flows, and needs to be excluded. For commercial and generaI/industrial customers, their billed sewer (metered water consumption) consumption is utilized since they have the ability to segregate irrigation use via an irrigation meter. The volumes for Farrrui3ugton were handled in a manner similar to the inside Fayetteville residential and non-residential customers. Elkins volumes are metered and have been utilized within this study. To the estimated or metered volumes, inflow and infiltration (I&I) is added. The flow contributions from each customer, plus I&I should equate to the total volumes received at the treatment plant. All customers, with the exception of Elkins, was allocated a portion of the I&I volumes. Strength -Related Allocation Factors. Strength -related costs were classified between biochemical oxygen demand (BOD) and suspended solids (SS). Both of these types of costs were allocated to the various classes of service based upon the relative estimated strengths that each class of service contributed to the overall flow at the plant. Individual allocation factors were developed for BOD and SS. Strengths were measured in milligrams per liter, and multiplied times the annual estimated flows to develop an overall relationship of total pounds. It Comprehensive Sewer Rate Study 472 ,� City of Fayetteville- Comprehensive Water and Sower Rate Study is assumed that the average or typical residential and cornunercial customers have domestic type strengths for BOD and SS in the range of 180-260 mg/1. Elkins was the exception where its BOD is 120 mg/l and suspended solids is 115 mg/l. This is in part due to the high levels of I&I within Elkins system. Customer -Related Allocation Factors. Customer -related costs within the cost of service study are allocated to the various customer classes of service based upon their respective customer counts. The number of customers for the study was developed within the revenue requirement study. Two types of customer allocation factors were developed, actual and weighted. Actual customer costs do not vary by the volume or strength characteristics of the class of service. A weighting factor was used to develop the weighted customer allocation factor. The weighted customer allocation factor attempts to reflect the disproportionate costs associated with serving larger commercial customers. These customers are assigned a higher per customer cost because they require additional administrative costs and possible monitoring. Revenue -Related Allocation Factor. Revenue -related costs were allocated based upon the revenues at present rates for each class of service. Revenue -related costs are those costs that vary with the annouunt of revenue received. Revenues at present rates for 2009 were developed within the revenue requirement study previously discussed. The allocation factors used within the sewer rate study, and discussed above, are located in the Sewer Utility Technical Appendices. 4.2.8 Rate of Return for Outside City and Wholesale Customers Under the "utility" basis methodology, the City is entitled to a "fair" rate of return on their investment to serve outside City customers and wholesale (contract) customers. The City earns a "fair" return on these outside City and wholesale customers, and it is the responsibility of the inside City retail customers to provide a sufficient rate of return to meet the overall revenue requirements of the utility. As noted within the water cost of service discussion, there are a number of different methods that may be used to establish the final rate of rerun for a class of service. In this case, the rate of rerun for Farmington and Elkins is established using a specific formula. In general, the formula uses the cost of debt, plus a risk premium. In the case of Farrington and Elkins, the formula for each is slightly different and with different risk premiums. Given that, it results in different rates of retrrr. For Farmington, the overall rate of return was 6.03% and for Elkins the overall rate of return was 7.05%. The rate of rerun for the outside City customers was set equal to the rate of return used for Farmington. 4.2.9 Summary of the Sewer Cost of Service Results The test period revenue requirements were classified into their various cost components. The individual classification totals were then allocated to the various classes of service based upon the appropriate allocation factors. The allocated expenses for each class of service were then aggregated to deterunine each class's revenue responsibility. A summary of the results of this process can be seen in Table 4-7. fal Comprehensive Sewer Rate Study 4-93 City of Fayetteville- Comprehensive Water and Sewer Rate Study Present Rate Allocated $ % Class of Service Revenues Costs Difference Difference Inside Fayetteville - $12,632 $15,222 ($2,590) 20.5% Residential $7,209 $7,837 ($627) 8.7% commercial 2,076 2,618 (542) 26.1% Industrial 2,467 3,749 (1,281) 51.9% Government 878 1,018 (140) 15.9% Outside Fayetteville -City of Farmington 695 765 (69) 10.0% Outside Fayetteville - All Others 257 309 (52) 20.0% Wholesale - City of Elkins 149 173 24 1 5.74/o Total $13,734 $16,468 ($2,735) 19.9% As can be seen from the above table, there are cost differences associated with serving the various customer groups. In developing the Far7uiugton, outside Fayetteville and City of Elkins wholesale rate, the City has assessed each of these customer groups a "fair" return on the City's investment to serve these customers. Therefore, in the opinion of HDR, the City can not charge an amount greater than that shown in the cost of service for these customers. An exhibit was developed to show the impact of combining all inside Fayetteville customers into a single class of service. That is shown below in Table 4-8. . Present Rate Allocated $ % Class of Service Revenues Costs Difference Difference Inside Fayetteville - $12,632 $15,222 ($2,590) 20.5% Outside Fayetteville -City of Farmington 695 763 (69) 10.010 Outside Fayetteville - All Others 257 309 (52) 20.0% Wholesale - City of Elkins 149 173 24 15.7% Total $13,734 $16,468 ($2,735) 19.9% On a combined basis, the cost of service results for the Inside Fayetteville customers does not appear to be far from the overall cost of service adjustment of 19.9%. However, as the prior table has clearly shown, within the inside Fayetteville customer groups, significant cost differences exist, particularly with the larger customers. Viewing Table 4-7 does not provide the full picture of the cost relationships between the various customer groups. For example, the industrial customers are showing the need for one of the larger rate adjustments. However, on a per unit cost basis, they currently pay the lowest per unit cost. Figure 4-1 provides a graphical view of the current average rate revenue received from each class of service and the average allocated costs of each customer group. Comprehensive Sewer Rate Study 414 fl City of Fayetteville - Comprehensive Water and Sewer Rate Study $10.00 $9.00 $8.00 $Toa $8.00 $5.00 $4,00 $3.00 $200 $1.00 $0.00 ■ Existing Revenue $11.000 gal. ■ Average Total Cost $11,000 gal. Figure 41 - Comparison of the Average Unit Revenue to the Allocated Average Cost (S11,000 gallons) As can be seen, there is a slightly declining cost f inctiolt associated with serving the City's larger commercial and industrial customers. However, It is Ilot as steep as the Current rate structure provides. Interestingly, the results of this study are similar to the prior cost of service study conducted for the City. At that time, the City made a policy decision to subsidize the iIldustrial Customers. The allocation of costs attempted to reflect that the facilities and costs allocated to each customer class match the respective benefit received. A general rule that may be used to view the results of a cost of service is that if the cost of service results for a particular class of service is within t5% of the overall adjustment, then the class of service is within a "reasonable range" of cost of set -vice. It must be kept in mind that a cost of service analysis reflects costs and usage characteristics of a specific point in time, and as time goes on, customer's constunptiou patterns and usage requirements may change. For that reason. HDR would recommend that the City update this cost of service on a routine basis (e.g. every five years). Contractually, the City is required to use cost of service to establish rates for their wholesale customers. 4.2.10 Summary Recommendations of the Sewer Cost of Service The cost of service results for the sewer utility clearly showed cost differences between the various customer classes of service. Given that result, the City was faced with the policy decision of whether movement towards cost of service for all customers was appropriate, and if so, how best to transition to cost of service. As a part of this study, HDR reviewed with the City's management team, along with the Water and Sewer Comiltittee a number of alternatives to "phase in" the cost of service results. The Committee concluded that movement towards cost of service was a decision they had made at the time of the last rate study and deferred that phase- in until this study. The obvious challenge of developing the "phase-in" of the cost of service study was the decision of how fast and how much. Provided below in Table 4-9 is a summary of the proposed phase-in for 2008 — 2011. FalComprehensive Sewer Rata Study 4-15 City of Fayetteville - Comprehensive Water and Sewer Rate Study Class of Service 2008 2009 2010 2011 Inside Fayetteville - Residential 0.09/0 18.0% 2.6% 2.6% Commercial 0.0% 26.0% 1.5% 1.5% Industrial 0.09/0 25.0% 6.0% 6.0% Government 0.0% 21.0% 3.0% 3.0% Outside Fayetteville - Fanuington 0,09/0 10.0% 3.0% 3.0% Outside Fayetteville - All Other 0.0% 19.6% 3.0% 3.0% Wholesale - Elkins 0.0% 15.5% 3.0% 3.0% Total 0.0% 19.9% 3.0% 3.0% First, no adjustment will be made to sewer rates until 2009. This decision was made within the revenue requirement analysis. Given that, for the retail customers, this phase-in has assumed a gradual phase-in for the industrial class of service. The outside Fayetteville, Farmington and Elkins customers have been set at thein cost of service in 2009. The adjustments after 2009 reflect the overall assumed inflationary adjustments. 4.3 Rate Design The final step of the comprehensive sewer rate study process is the design of sewer rates to collect the desired level of revenue, based upon the findings and recommendations of the sewer revenue requirement analysis and cost of service analysis. In reviewing sewer rate designs, consideration is given to the level of the rates and the stricture of the rates. This subsection of the report will review the proposed sewer rate designs for the City. 4.3.1 Overview of Sewer Rate Structures There are various "generally accepted" rate structures that can be used to establish sewer rates. Much like the discussion included within the water rate design portion of the report, sewer rates are generally composed of a fixed and variable charge. Many of the same rate structure concepts discussed for water apply for the sewer utility. A major difference is the basis for the billing of wastewater volumes. Wastewater volumes are typically not metered. Given that, water consumption is typically used as a surrogate for wastewater volume billing purposes. 4.3.2 Establishing Retail Customer Classes of Service As a part of the discussion with the City management and the Water and Sewer Committee, HDR noted that the single rate schedule for retail sewer customers was ineffective for purposes of attempting to establish cost -based rates. The City determined that moving to customer classes of service the sewer utility was logical, given the same decision for the water utility. The following customer classes of service for the sewer utility were proposed: ■ Residential ■ Non -Residential falComprehensive Sewer Rate Study 4-16 City of Fayetteville - Comptehensive Water and Sewer Rate Study ■ Major Industrial User ■ Outside Fayetteville -- Farmington ■ Outside Fayetteville ■ )Yholesale - Elkins As can be seen, the classes of service are slightly different than the classes of service used for the cost of service study, but similar to those final classes of service used for the proposed water rates. In this case, Farmington is segregated as a separate outside Fayetteville customer due to the specifics of their wholesale contract with the City and the results of the cost of set -vice analysis. The Major Industrial User is defined in the same manner as that used for the water utility. To qualify for this rate the customer's individual meter must use an average of 5,000,000 gallons per month (12 month average prior calendar year) at a common facility/building. This does not apply to combined or consolidated sets of bills for non -irrigation use at separate facilities/buildings. At the present time, it appears that tinee customers would qualify as a Major Industrial customer wider this definition. 4.3.3 Review of the Final Adjustments By Class of Service As this study progressed, a number of different decisions were made regarding the overall levels of rate adjustments, the phase-in of the cost of service and the re -definition of customer classes of service. Provided below in Table 440 is a summary of the final proposed sewer rate adjustments for 2008 — 2011 for the various customer classes of service. Class of Service 2008 2009 2010 2011 Inside Fayetteville - Residential Non -Residential [ll Major Industrial Outside Fayetteville -Farmington 0.0% 18.0% 0.0% 24.0% 0.0% 2.5.0% 0.0% 10,0% 2.6% 2.6% 2.6% 2.6% 6.0% 6.0% 3.0% 3.0% Outside Fayetteville 0.0% 19.6% 3.0% 3.0% Wholesale - City of Elkins 0.0% 15.5% 3.0% 3.0% Total 0.0% 20.0% 3.0% 3.0% [ll -- Combined adjustment for previously defined Commercial and Goveimment class of service For each class of service, a proposed rate for the 2009 — 2011 time period has been developed. 4.3.4 Review of the Present Fayetteville Retail Sewer Rate The City currently has a single rate for their retail customers. The rate does have a residential and commercial usage (quantity) components. The City's present inside and outside Fayetteville retail sewer rate is shown below in Table 4-11. falComprehensive Sewer Rate Study 4-17 City of Fayetteville - Comprehensive Water and Sewer Rate Study Quantity [Volume] Charge - ($/1,000 gallons) Residential $3.10/1,000 gal. $4.6611,000 gal. Conuuercial 2.42 4.66 As can be seen, the City has a sewer rate structure that is composed to two components; a tllonthly set -vice charge and a quantity (volmne) charge. The monthly service charge is based upon ureter size, while the quantity charge is a uniform rate structure. The City's outside Fayetteville rates are similar to the inside Fayetteville rate structure, but the pricing reflects the risk differential (rate of return) between these two customer groups. The current differential between inside and outside City customers within the rate varies by component. The cost of service has shown that the Outside Fayetteville rates are near cost - based. 4.3.5 Proposed Residential Sewer Rate The proposed residential rate generally follows the approach used for water utility. The proposed residential sewer rate is shown below in Table 4-12. Rate Components Service Charge - ($/Mouth) 5/8" x 314" P, 1-112" 2» Quantity Charge - ($n,000 gallons) Fust 2,000 gallons All Over 2,000 gallons Inside Fayetteville Outside Fayetteville 2009 2010 2011 2009 2010 2011 $12.45 Present Inside Present Outside Rate Components Fayetteville Rete Fayetteville Rate Monthly Service Charge - 16.65 17.15 5/8" $10.36/month $10.35/mouth 314" 11.98 14.10 1 13.47 19.35 1-112" 21.99 34.33 2" 31.44 49.32 3" 73.01 115.27 4" 120.26 190.21 6" 238.37 377.56 $" 356.48 564.90 Quantity [Volume] Charge - ($/1,000 gallons) Residential $3.10/1,000 gal. $4.6611,000 gal. Conuuercial 2.42 4.66 As can be seen, the City has a sewer rate structure that is composed to two components; a tllonthly set -vice charge and a quantity (volmne) charge. The monthly service charge is based upon ureter size, while the quantity charge is a uniform rate structure. The City's outside Fayetteville rates are similar to the inside Fayetteville rate structure, but the pricing reflects the risk differential (rate of return) between these two customer groups. The current differential between inside and outside City customers within the rate varies by component. The cost of service has shown that the Outside Fayetteville rates are near cost - based. 4.3.5 Proposed Residential Sewer Rate The proposed residential rate generally follows the approach used for water utility. The proposed residential sewer rate is shown below in Table 4-12. Rate Components Service Charge - ($/Mouth) 5/8" x 314" P, 1-112" 2» Quantity Charge - ($n,000 gallons) Fust 2,000 gallons All Over 2,000 gallons Inside Fayetteville Outside Fayetteville 2009 2010 2011 2009 2010 2011 $12.45 $12.80 $13.20 $12.40 $12.80 $13.20 16.20 16.65 17.15 23.10 23.80 24.50 26.45 27.15 28.00 41.10 42.30 43.60 37.80 38.85 40.05 54.30 55.90 57.60 $3.00 $3.07 $3.14 $5.57 $5.74 $5.91 4.00 4.10 4.18 5.57 5.74 5.91 Comprehensive Sewer Rate Study 4-18 4 City of Fayetteville - Cornprehensive Water and Sewer Rate Study The proposed residential sewer rate uses a two -block approach. This is similar to the residential water rate stricture in that it has a first block or "lifeline" block which is priced at 25% below cost. The balance or difference is made tip in the second block. In this case, there is no third block. A sewer utility does not have all "outdoor" component or inefficient use. Given that, an inverted block rate stricture with three blocks was not needed. The outside Fayetteville rate applies to all outside City residential customers, with the exception of Farmington and Elkius. This rate has been simplified to include all residential and non- residential customers (no distinction is Made for billing purposes). 4.3.6 Proposed Non -Residential Sewer Rate The proposed non-residential rate is very similar to the existing rate. The major difference is that the customer group has now been clearly segregated as a customer class of service. The proposed non-residential sewer rate is shown below in Table 4-13. Rate Components Service Charge -. ($/Month) 5/8" x 3/4" If1 r-1/2" 2" 3" 4" 6" 8" Quantity Charge - ($/1,000 gallons) All Usage Inside FayettevWe Outside Fayetteville 2009 2010 2011 2009 2010 2011 $12.45 Comparison of Present and Proposed $13.20 Residential Inside City Bills at Varying $12.80 Consumption Levels ($/Month) $150.00 16.65 17.15 j 23.10 $100.00 i � 27.15 $50.00 I , $0.00 43.60 1,000 cat. utaae 5 0 10 1s 20 25 30 ■ Present Pates $13.46 $25.86 $41.36 $56.86 $72.36 $87.86 $103.36 ■ Proposed Rates $15.45 ' $30 45 $50.45 $70.45 $90.45 $110.45 $130.45 The outside Fayetteville rate applies to all outside City residential customers, with the exception of Farmington and Elkius. This rate has been simplified to include all residential and non- residential customers (no distinction is Made for billing purposes). 4.3.6 Proposed Non -Residential Sewer Rate The proposed non-residential rate is very similar to the existing rate. The major difference is that the customer group has now been clearly segregated as a customer class of service. The proposed non-residential sewer rate is shown below in Table 4-13. Rate Components Service Charge -. ($/Month) 5/8" x 3/4" If1 r-1/2" 2" 3" 4" 6" 8" Quantity Charge - ($/1,000 gallons) All Usage Inside FayettevWe Outside Fayetteville 2009 2010 2011 2009 2010 2011 $12.45 512.80 $13.20 I $12.40 $12.80 $13.20 16.20 16.65 17.15 j 23.10 23.80 24.50 26.45 27.15 28.00 41.10 42.30 43.60 37.80 38.85 40.05 54.30 55.90 57.60 87.75 90.20 93.00 125.50 129.25 133.10 144.50 148.60 153.25 206.60 212.80 219.20 286.45 294.50 303.70 409.60 421.88 434.50 428.40 440.45 454.20 612.60 631.00 650.00 53.02 $3.10 $3.18 1 $5.57 $5.74 $5.91 The Outside Fayetteville rate does not include the City of Farmington or Elkins. These two customers have their own unique contract and resulting sewer rate. FalComprehensive Sewer Rate Study 4.19 City of Fayetteville - Comprehensive Water and Sewer Rate Study 4.3.7 Proposed Major Industrial Sewer Rate The Major Industrial class is similar to that developed for the water utility. The definition of this customer group is the salve as the water utility. In this particular case, there are no outside Fayetteville customers, so rates have only been developed for the Inside Fayetteville customers. Presented below in Table 4-14 is a summary of the proposed Major hidustrial User rate. Inside Fayetteville Rate Components 2009 2010 2011 Service Charge - ($/Mouth) 518"x314" $10.35 $11.40 518" x 314" $12.45 $12.80 $13.20 1" 16.20 16.65 17.15 1-112" 26.45 27.15 28.00 2" 37.80 38.85 40.05 3" 87.75 90.20 93.00 4" 144.50 148.60 153.25 6" 286.45 294.50 303.70 8" 428.40 440.45 454.20 Quantity Charge - ($/1,000 gallons) All Usage $3.03 $3.21 $3.40 A detailed bill comparison for this proposed rate schedule is included within the Technical Appendices. 4.3.8 Proposed City of Farmington Sewer Rate The City of Farmington has a separate contractual rate with the City. The contract is unique and thus requires the development of a specific rate for Farmington. Provided below in Table 4-15 is the proposed City of Farmington sewer rate. Present Rate Components Rate 2009 2010 2011 Service Charge - ($/Month) 518"x314" $10.35 $11.40 $11.70 $12.10 1" 19.35 21.30 21.90 22.60 1-112" 34.33 37.80 38.90 40.10 2" 49.32 50.00 51.90 53.05 Quantity Charge - ($/1,000 gallons) All Usage $4.66 $5.13 $5.28 $5.44 Comprehensive Sewer Rate Study 4-20 City of Fayetteville - Comprehensive Water and Sewer Rate Study The adjustment shown in 2009 is a 10.0% adjustment over and above the existing Farmington sewer rate. This level of adjustment is based upon the previously reviewed sewer cost of service results. In that study, Faimington was treated as a separate customer class of set -vice. The adjustments in 2010 and 2011 are escalation adjustments of 3.0%. which follow the overall sewer utility adjustments. 4.3.9 Proposed City of Elkins Sewer Rate The City of Elkins also has a separate contractual rate with the City. The contract with the City of Elkins is slightly different than the City of Farmington's contract and therefore requires a. separate and distinct rate. Provided below in Table 4-16 is the proposed City of Farmington sewer rate. X11- Sewer rate for Elkins was analyzed as a part of this study. (21- Impact fee is a separate fee (See 51.13 (F)(2) and was not analyzed as apart of this study. The level of the Elkins adjustment is based upon the results of the cost of service study. The adjustments in 2010 and 2011 are escalation adjustments of 3.0%, which follow the overall sewer utility adjustments. 4.4 Summary of the Sewer Rate Study This section of the report presents the development and results of the sewer utility rate study. The results of the sewer rate study indicated that sewer rates are deficient for the projected time period reviewed. The sewer rates, as proposed herein, are cost -based and were developed using generally accepted rate -making inethods and principles. The implementation of rate adjustments, as shown in the rate transition plan through 2011, should move the City closer to cost -based rates for all customers. flComprehensive Sewer Rate Study 4.21 City of Fayetteville - Comprehensive Water and Sewer Rate Study Present Rate Components Rate 2009 2010 1011 Quantity Charge - ($I1,000 gallons) Sewer Rate [1] $2.51 $3.28 $3.39 $3.50 Impact Fee Charges[21 0.25 0.25 0.25 0.25 Total Rate $3.06 $3.53 $3.64 $3.75 X11- Sewer rate for Elkins was analyzed as a part of this study. (21- Impact fee is a separate fee (See 51.13 (F)(2) and was not analyzed as apart of this study. The level of the Elkins adjustment is based upon the results of the cost of service study. The adjustments in 2010 and 2011 are escalation adjustments of 3.0%, which follow the overall sewer utility adjustments. 4.4 Summary of the Sewer Rate Study This section of the report presents the development and results of the sewer utility rate study. 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Q t � WN �O�o �tcdo �4) c7OW cc CL mwoinm�ma, ommc�r; �E 3� > � o a rnL a; FL c c Q2_ �, m am 0@ 3 m m a� Q Tc m ' m o o `.. `o Mr- v Z JFK Ew �(Afr0_C°}—O_ Ul-, City of Fayetteville Water Utility EXhIbIt 3 Page i of 6 Development of the Revenue Requirement Total Outside Fayetteville Wholesale Elkins Mount Olive West ForkNJ RDAWA (Washington Water Authority) Total Wholesale Total Rate Revenues 1 102,569 105,646 As Other Revenues $1,983,458 $2,042,962 $2,104,250 $2,167,378 $2,232,399 $92,480 $95,255 $98,112 $101,056 5704,087 As Omer Revenues 72,114 74,278 76,506 78,801 81,165 AS Other Revenues 147,771 152,204 156,770 161,473 166,317 As Other Revenues 2,666 0 0 0 0 No longer a revenue source $315,032 $321,736 $331,388 $341,330 $351,570 $12,186,687 $12,511,416 $12,848,634 573,195,968 $13,553,721 Miscellaneous Revenues BudgetProlecred 2008 2007 2000 2000 2010 Notes Revenues Wheeler System Fees 8,800 9,064 9,336 9,616 Rate Revenues Water Tap Fees 94,460 97,294 100,213 103,219 Inside Fayetteville Rural Water Taps 12,600 12,978 13,367 13,768 Residential $5,910,639 $6,087,958 $6,270,597 $6,458,714 56,652,476 As Residential Rate Revenues Commercial 1,350,143 1,390,648 1,432,367 1,475,338 1,519,598 As Commercial Rate Revenues Industrial 1,270,840 1,270,840 1,270,840 1,270,840 1,270,840 AS Industrial Rate Revenues Government 584,622 602,161 620,226 638,833 657,998 As Government Rate Revenues Irrigation 771,953 795,112 818,965 843,534 868,840 As Irrigation Rate Revenues Total Fayetteville $9,888,198 $10,146,719 $10,412,995 $10,687,259 810,969,752 Outside Fayetteville Rent 36,000 37,080 38,192 39,338 White River $343,055 $353,346 $363,947 5374,865 5386,111 As Other Revenues Farmington 465,158 479,113 493,486 508,291 523,540 As Omer Revenues Greenland 123,013 126,704 130,505 134,420 138.452 As Other Revenues Growth Area 844,307 869,636 895,725 922,597 950,275 As Other Revenues Johnson 114,060 117,482 121,007 124,637 128,376 As Other Revenues Wheeler 93865 96681 9958 $880,700 $903400 Total Outside Fayetteville Wholesale Elkins Mount Olive West ForkNJ RDAWA (Washington Water Authority) Total Wholesale Total Rate Revenues 1 102,569 105,646 As Other Revenues $1,983,458 $2,042,962 $2,104,250 $2,167,378 $2,232,399 $92,480 $95,255 $98,112 $101,056 5704,087 As Omer Revenues 72,114 74,278 76,506 78,801 81,165 AS Other Revenues 147,771 152,204 156,770 161,473 166,317 As Other Revenues 2,666 0 0 0 0 No longer a revenue source $315,032 $321,736 $331,388 $341,330 $351,570 $12,186,687 $12,511,416 $12,848,634 573,195,968 $13,553,721 Miscellaneous Revenues Wheeler System Fees 8,800 9,064 9,336 9,616 9,904 As Other Revenues Water Tap Fees 94,460 97,294 100,213 103,219 106,316 As Other Revenues Rural Water Taps 12,600 12,978 13,367 13,768 14,181 As Other Revenues Fire Protection 470,458 484,571 499,108 514,082 529,504 As Other Revenues Fire Hydrant K542 24,542 0 0 0 Discontinued in 2008 Billed Service 115,000 118,450 122,004 125,664 129,434 As Omer Revenues Convenience Fees 700 721 743 765 786 AS Omer Revenues Convenience Fees Telework 3,200 3,296 3,395 3,497 3,602 As Other Revenues Interest on Working Capital Fund 622,700 641,381 660,622 680,441 700,854 As Interest Earnings (Rate) Rent 36,000 37,080 38,192 39,338 40,518 As Other Revenues Contract Services 6,100 6,283 6,471 6,666 6,866 As Omer Revenues Miscellaneous 800 824 849 874 900 As Omer Revenues Total Miscellaneous Revenues $1,395,360 51,436,485 57,454,300 $1,497,929 $1,542,867 Safe Water Act Fee $88,497 $92,500 596,900 597,900 $98,800 Sales Tax 723,088 762,400 783,800 805,500 828,800 Safe Water Act Fee/Sales Tax 5811,585 5854,900 $880,700 $903400 5927,600 Total Sources of Funtla 514393,832 $74,802807 578183,834 516,697,287 578,024,180 City of Fayetteville Water Utility Exhibit 3 Development of the Revenue Requirement Page 2 of 6 Budget Projected 2006 2007 2008 2009 2010 Notes Application of Funde Water Director Personnel Salary/Overtime $57,096 $59,382 S61.757 564,227 $66,797 As Labor Health insurance 3,326 3,592 3,951 4,346 4,780 AS Benefits - Medical Payroll taxes and insurance 11,369 11,710 12,061 12,423 12,796 AS Benefits - Other Total Personnel $71,793 $74,684 577,769 580,996 __-_-_-___- 584,373 MateriauSupplies Materials/Supplies 52,250 52,318 $2,387 $2,459 $2,532 As Miscellaneous Total Material/Supplies 52,250 82,318 $2,387 $2,459 52,532 Services & Charges Public]tions/DuesfTfmning/Exoenses $2,375 $2,446 $2,520 $2,595 $2,673 As Miscellaneous Telephone Expenses 485 504 525 546 567 As Utilities Engineering Services 536 552 569 586 603 As Miscellaneous Cost Allocation 11,268 11,606 11,954 12,313 12,682 As Miscellaneous Total Services & Charges $14,664 $15,109 $15,567 $16,039 $16,526 Total Water Director $08,707 592,110 $95,723 599,494 5703.431 Billing & Collections Personnel Salary/Overhme $299,072 5311,035 $323,477 $336,416 $349,872 As Labor Health Insurance 31,281 33,783 37,161 40,878 44,965 As Benefits - Medical Payroll Taxes and Insurance 52,901 54,488 56,123 57,807 59,541 As Benefits - Other Total Personnel 5383,254 $399,307 $416,761 _____ $435,100 _____________ 5454,379 MateriauSupplies Materials/Supplies $28,750 $29,613 530,501 531,416 $32,358 As Miscellaneous Total MateriallSupplies $28,750 $29,613 $30,501 $31,416 $32,356 Services & Charges Public Notification/Publications & Dues $1,250 $1,288 $1,326 31,366 S1,407 As Miscellaneous Postage 93,000 95,790 98,664 101,624 104,672 As Miscellaneous Telephone Expenses 2,000 2,080 2,163 2,250 2,340 As Utilities Professional Services 23,000 23,690 24,401 25,133 25,887 As Miscellaneous Bad Debt Expenses 63,700 65,611 67,579 69,607 71,695 As Miscellaneous Disputed Pmts/Coll. Related Expense 9,600 9,888 10,185 10,490 10,805 As Miscellaneous Cost Allocation (38,760) (39,923) (41,120) (42,354) (43,625) AS Miscellaneous Total Services & Charges $153,790 $158,424 $163,197 $168,115 5173,181 Maintenance Maintenance 54,523 $4,658 $4,798 $4,942 55,090 AS Repair & Maintenance Total Maintenance 54,523 ------------- $4,658 ------------- $4,798 ------------- 54,942 __-_.._ 95,090 Total Billing & Collections $570317 5592001 $615257 5530572 5995008 Meter Operations Program Personnel Salary/Overtime 5394,133 $409,898 $426,294 5443,345 S461,079 AS Labor Health insurance 49,883 53,873 59,260 65,186 71,705 AS Benefits - Medical Payroll Tax and Insurance 83,744 86,256 88,843 91,509 94,254 AS Benefits - Other Total Personnel 5527,759 $550,027 --- _ ---- __ $574,398 5600,041 5627,038 MateriallSupplies Material/Supplies $39,422 $40,605 541,823 $43,078 $44,370 As Miscellaneous Total MateriauSupplies $39,422 $40,605 $41,823 543,078 $44,370 City of Fayetteville Water utility Exhibit 3 Development of the Revenue Requirement Budget Pro)ected 2006 2007 2008 2000 2010 Notes Services & Charges $123,244 $126,941 $130,749 $134,672 $138,712 As Miscellaneous Miscellaneous Services and Charges $30,320 $31,230 $32,167 $33,132 $34,126 As Miscellaneous Postage 225 232 239 246 253 AS Miscellaneous Telephone Expenses 3,599 3,743 3,893 4,049 4,211 As U1111ies Property Insurance 5,580 5,747 5,920 6,097 6,280 As Miscellaneous Replacement Charges 34,583 35,621 36,689 37,790 38,924 As Miscellaneous Cost Allocation 50,895 52,422 53,995 55,614 57,283 AS Miscellaneous Total Services & Charges 5125,203 $128,995 $132,902 $136,928 5141,076 Maintenance Maintenance and Supplies $5,026 $5,177 $5,332 $5,492 $5,657 AS Repair & Maintenance Total Maintenance 55,026 55,177 $5,332 $5,492 $5,657 Total Meter Operations Program 5897,400 S724,803 $754,455 5785 538 S818,141 Meter Maintenance & Backflow Prevention Personnel Salary/Overhme $192,354 $200,048 $208,050 $216,372 5225,027 As Labor Health Insurance 17,692 19,107 21,018 23,120 25,432 As Benefits - Medical Payroll Tax and Insurance 43,271 44,569 45,906 47,284 48,702 AS Benefits - Other Total Personnel 5253,317 5263,725 $274,974 $286,775 5299,161 Material/Supplles MateriallSupplles 59,416 59,699 $9,990 $10,289 $10,598 As Miscellaneous Construction Materials 36,080 37,163 38,278 39,426 40,609 As Miscellaneous Total MateaallSupplies $45,497 $46,861 $48,267 $49,715 $51,207 Services & Charges Unaorms/Personal Equipment $37,168 538,283 $39,431 $40,614 $41,833 As Miscellaneous Postage 1,050 1,082 1,114 1,147 1,182 AS Miscellaneous Telephone Expenses 675 702 730 759 790 As U8151es Property Insurance 1,875 1,931 1,989 2,049 2,110 As Miscellaneous Total Services & Charges $40,768 541,998 543,264 $44,570 $45,914 Maintenance Maintenance $1,808 $1,862 $1,918 $1,975 $2,034 As Repair & Maintenance Total Maintenance 51,808 $1,862 ------ _____ $1,918 $1,975 $2,034 Total Meter Milan. & Back0ow Prevention $341,389 5354,445 5388,424 S383,035 S398;316= Operations and Administration Program Personnel Saiary/Overhme 5294,221 9305,990 $318,229 $330,959 8344,197 As Labor Health Insurance 28,407 30,680 33,748 37,122 40,834 As Benefits - Medical Payroll Tax and insurance 84,236 86,763 89,366 92,047 94,808 AS Benefits - Other Total Personnel 5406,864 $423,432 $441,343 5460,128 $479,840 MaterialtSupplles MatetiallSupplies $28,192 $29,037 529,908 $30,806 531,730 As Miscellaneous Minor Equipment 48,091 49,533 51,019 52,550 54,128 As Miscellaneous Total Material/Supplies $76,282 $78,570 580,928 $83,355 585,856 Services & Charges Public Notthcation $123,244 $126,941 $130,749 $134,672 $138,712 As Miscellaneous Postage 600 618 637 656 675 As Miscellaneous Utilities 86,094 89,538 93,119 96,844 100,718 As Utiiates Telephone Expenses 12,172 12,659 13,165 13,692 14,240 As Utilities Insurance- VellUes/Balidings 9,923 10,221 10,527 10,843 11,168 As Miscellaneous Cost Allocation 367,446 378,469 389,823 401,518 413,564 AS Miscellaneous Total Services & Charges $599,479 $618,446 $638,021 $658,224 $679,077 Maintenance Maintanence $38,507 $39,662 340,852 $42,078 $43,340 As Repair & Maintenance Total Maintenance $38,507 $39,662 UU52 $42,078 $43,340 Total Operations and Admin. Program 57,121,132 57,15D 111 51 201,144 $1,243785 S1.288.112 Total Water Portion of Joint Expenditures $2,818,963 52.923,470 S3,035,002 53151 428S3 273009 Page 3 of 6 City of Fayetteville Water Utility Exhibit 3 Page 4 of 6 Development of the Revenue Requirement Budget Projected 2008 2007 2008 2009 2010 Notes Water Purchased Program Services & Charges Purchased Water 56,300,000 56,489,000 $6,683,670 $6,864,180 $7,090,706 As Purchase of Water Total Services & Charges ............. $6,300,000 -------- $6,489,000 ..._.___._ $6,683,670 -__-------- $6,884,180 ---------- _- $7,090,706 Tom] Water Purchased Program 59,300000 $8489,000 $6,683,670 58884180 57090708 Water Distribution Maintenance Program Personnel Salary & Wages 5490,721 5510,350 $530,764 $551,994 5574,074 As Labor Overtime 25,260 26,270 27,321 28,414 29,551 As Labor FICA Taxes 39,471 40,655 41,875 43,131 44,425 As Benefits - Other Life Insurance 1,991 2,051 2,112 2,176 2,241 As Benefits - Other Health Insurance 69,003 74,523 81,976 90,173 99,190 As Benefits - Medical LTD Insurance 1,531 1,577 1,624 1,673 1,723 As Benefits- Other ADD insurance 258 266 274 282 290 As Benefits - Other Retirement Savings Plan 50,605 52,123 53,687 55,297 56,956 As Benems - Other Total Personnel 5678,840 5707,815 $739,632 $773,141 $808,451 Material/Supplies Fuel $46,800 $48,204 549,650 551,140 $52,674 As Miscellaneous Construction Materials 469,000 483,070 497,562 512,489 527,864 As Miscellaneous Total Material/Supplies $515,800 5531,274 $547,212 $563,629 $580,537 Services & Charges Equipment Rental $20,000 $20,600 $21,218 521,855 $22,510 As Miscellaneous Ins. - Seg- Non Vehicular Damage 4,000 4,120 4,244 4,371 4,502 As Miscellaneous Contract Services 1,000 1,030 1,061 1,093 1,126 As Miscellaneous Contract Services - St Cuts 77,000 79,310 81,689 84,140 86,664 As Miscellaneous Motor Pool Charges 54,690 56,331 58,021 59,761 61,554 As Miscellaneous Replacement Charges 110,169 113,474 116,878 120,385 123,996 As Miscellaneous Shop Overhead Charges 13,602 14,010 14,430 14,863 15,309 As Miscellaneous Cosi Allocation 64,548 66,484 66,479 70,533 72,649 As Miscellaneous Total Services & Charges ...__._- 5345,009 ....___.. 5355,359 ..._._... $366,020 ___.._..._ $377,001 -_------ __ $388,311 Maintenance Vehicles & Machine Maintenance $3,325 $3,425 $3,527 $3,633 $3,742 As Repair & Maintenance Total Maintenance $3,325 53,425 $3,527 $3,633 $3,742 TOW Water Dlstdbutlon Malnt. Program $1,642,974 51,697,873 S1,668,392 S1,717,403 $1,781,041 City of Fayetteville Water utility Exhibit 3 Development of the Revenue Requirement Budget Projected 2006 2007 2008 2008 2010 Notes Water Storage & Pumping Malm. Program SO $0 $0 SO $0 Personnel 570,878,479 511,235037 $11608487 51799550D 572398784 Salary & Wages $102,500 5106,600 $110,864 $115,299 5119,911 As Labor Overtime 7,619 7,924 8,241 8,570 8,913 As Labor FICA Taxes 8,425 8,678 8,938 9,206 9,482 AS Benefits - Other Lila lnsutance 395 407 419 432 445 As Benefits - Other Health Insurance 10,878 11,748 12,923 14,215 15,637 As Benefits - Medical LTD insurance 304 313 323 332 342 AS Benefits -Omer ADD insurance 36 37 38 39 41 AS Benefits - Other Retirement Savings Plan 13,214 13,610 14,019 14,439 14,872 As Benefits - Other Total Personnel 5143,371 $149,317 $155,764 $162,533 $169,643 MaterlavSupplies Minor Equipment $885 $912 $939 $967 $996 As Miscellaneous Fuel 4,300 4,429 4,562 4,699 4,840 As Miscellaneous Construction Materials 28,915 29,782 30,676 31,596 32,544 As Miscellaneous Total Material/Supplies $34,100 $35,123 $36,177 537,262 $38,380 Services & Charges Contract Services $16,000 $16,480 $16,974 $17,484 $18,008 As Miscellaneous Motor Pool Charges 3,696 3,807 3,921 4,039 4,160 As Miscellaneous Replacement Charges 9,230 9,507 9,792 10,086 10,388 As Miscellaneous Shop Overhead Charges 815 839 865 891 917 As Miscellaneous Cost Allocation 9,240 9,517 9,803 10,097 10,400 As Miscellaneous Total Services & Charges $38,981 $40,150 541,355 $42,596 $43,873 Maintenance Vehicles & Machine Maintenance $100 $103 $106 S109 $113 As Repair & Maintenance Total Maintenance $100 $103 5106 $109 $113 Total Water Storage & Pumping Molar. 5252009 5215552 5224994 $233402 5242,600 Total Dlreet Water Expenditures $8,059,529 58311597 58573494 58844083 $9123755 Service Level Plan AddNonal Employees so $0 so $0 so AddNonal Operational Expenses 0 0 0 0 0 Total Service Level Plan SO $0 $0 SO $0 Total Water OPemBons&Maintenance 570,878,479 511,235037 $11608487 51799550D 572398784 Page 5 of 6 City of Fayetteville Water Utility Exhibit 3 Development of the Revenue Requirement Page 6 of 6 Additional Revenue from Adjustment s0 SO 51,027,891 $1,910,776 $1,982,679 Total 9alanceADeflclency) of Funds Budget - Projected $3,959 ($1,894,634) 2008 2007 2008 2009 2010 Notes Taxes and Transfers Residential Monthly Average Rate $19.55 0 0 0 Water Franchise Fees $508,900 $524,167 $539,892 $556,089 $572,771 As Miscellaneous Safe Water Act Fee 88,497 92,500 96,900 97,900 98,800 Sales Tax 723,088 762,400 783,800 805,500 828,800 Total Taxes and Transfers 51,320,485 51,379,087 51,420,892 $1,459,489 $1,500,371 Debt Service Debt Service Coverage Ratio Revenue Bond Series 2002 A $139,811 $145,698 $151,585 $157,472 $163,358 Debt Schedule Interest 2002 A 95,556 90,523 84,840 78,701 72,166 Debt Schedule Revenue Bond Series 2004 595,000 615,000 635,000 655,000 670,000 Debt Schedule Interest 2004 174,520 159,645 141,195 122,145 103,805 Debt Schedule Trustee & Pay Agent Fees 6,000 6,000 6,000 6,000 6,000 As Flat Other Fees - Bonds 10,000 10,000 10,000 10,000 10,000 As Flat Bank Service Charges 9,500 9,785 10,079 10,381 10,692 As Miscellaneous Assumed New Debt 0 300,794 909,417 909,417 2,448,243 Total Debt Service $1,030,387 S1,337,444 51,948,116 $1,949,118 53,484,265 Less: Impact Fees s0 So So So SO Nei Debt Service $1,030,387 $1,337,444 $1,448,116 $1,949,116 $3,484,265 CIP Funded Through Rates 51,269,200 $1,900,000 52,000,000 52,100,000 $2,200,000 Target Dept. 1.8 mil Change In Working Capital (+,-) Water working Capital Fund $0 $0 SO so so Water Impact Fee Fund 0 0 0 0 0 Total Change In Working Capital - so 50 50 So So Total Revenue Requirements $14,498,1151 518,861,548 516,477,176 517,504,114 S19,881,401 Balance Dellclency of Funds ($104,918) ($1,046,747) ($1,743,541) ($1,906,617) (53,557,213) BaIJ(Deffclency) ss a %of Rate Revenues OA% 8.4% 14.(r 14.4% 26.2"/ Excludes state and Federal taxes proposed Rate Adjustment 0.0% 0.0"/ 8.0% 6.0% 0.0% Additional Revenue from Adjustment s0 SO 51,027,891 $1,910,776 $1,982,679 Total 9alanceADeflclency) of Funds (S1O4,91$) ($1,048,747) ($768,880) $3,959 ($1,894,634) Additional Rate Increase Needed 0.9% 8.4% 6.0"/ 0.0"/. 11.8°/. Residential Monthly Average Rate $19.55 0 0 0 0 After Required Rate Adjustment 19.72 21.19 22.28 22.38 24.68 After Proposed Rate Adjustment 19.55 19.55 21.12 22.38 22.38 Annual $ Change 0.00 0.00 1.56 1.27 0.00 Cumulative Change In Rate 0.00 0.00 1.56 2.83 2.83 Debt Service Coverage Ratio Before Rate Adjustment 3.41 2.67 1.84 1.85 1.04 Attel RR Rate Adjustment 3.51 3.45 2.76 2.83 2.06 Attei Proposed Rate Adjustment 3.41 2.67 2.36 2.83 1.60 Water Worklna Caoltal Fund B nnlng Balance $12,364,922 $4,553,689 $4,552,639 $4,536,383 $2,197,174 Joint fund allocated 50% to water Plus: To Operating Reserves 0 0 0 0 0 Plus: Additions to Capital Reserves 0 0 0 0 0 Less: Capital Expenditures 7,811,233 1,050 16,256 2,339,209 0 Less: Uses of Funds 0 0 0 0 0 Ending Balance $4,553,689 54,552,639 $4,536,383 $2,197,174 $2,197,174 45 days O&M Expense 1,341,182 1,385,142 1,431,181 1,478,898 1,528,368 Water Impact Fee Fund Beginning Balance $1,716,973 $1,295,050 $2,185,846 $1,645,692 Plus: Water Impact Fees 386,232 397,320 _$_1,730,733 409,640 421,960 434,280 Plus: Rural Tap Fees 12,600 $12,976 513,367 $13,768 $14,181 As Residential Rate Revenues Plus: Interest 23,091 25,386 32,106 24,117 31,200 Escalated as interest Less: Uses of Funds 0 0 0 1,000,000 0 Input From CIP Ending ffialance $1,295,050 $1,730,733 $2,185,848 $1,645,692 $2,125,353 Pagel of 2 City of Fayetteville Water Utility Currently Scheduled Capital improvements EXhlbit 4 2006 2001 2006 2009 2010 2011 OeterrM Water. b Sewer Improvements Water and Sewer Cost shanng 561,000 SBt,003 581,03 SBt,00 591,000 561,000 W 24' Water Line Replacement 143,000 0 0 0 0 0 0 Waren line Projcds as Nea0ea 0 143,000 143,030 143.000 34,000 34,030 0 Water Replace-N. Cdiege, Rolling Hills Towndtip 0 0 0 0 143,000 143,030 0 Total Water&Sewerlmpovements $224,000 5224,030 5224,000 3224,000 5258,000 5258,000 50 Water 4 Sewer ServiceImprovements Bscko3w Prevention Assemblies 512,000 $12,00 512,000 512,00 512,000 $12,001 Sa Water Monts 121,500 131,030 140,503 148,000 155,500 155,503 0 Meter and Equipment Parts Leaning Machine 12,000 0 0 0 0 0 0 Why Rate Review Analysis 37,530 0 0 0 0 0 0 Water antl Sewer 0,nornns Sru6y 0 0 6$000 0 0 0 0 Tool Water & Sewer Senxe Improvemenl5 5183,000 $149,00 5215,530 $1%0x) 5161,500 $161,501 50 Bo4peteG Cental Projects Meter Capital Experroilures $529,630 50 So $0 $0 9J $p Canal urrendt ne Program 80,150 0 0 0 0 0 0 Central water Mama No,. 9,660278 0 0 0 0 0 0 Wer. Corrections Program 265,583 213,553 281,158 20,209 238,915 301,883 0 Total Sudgeletl Cashel Projams 510,630,240 5213,550 5261,156 5290,20 $238,915 $301,863 50 Total Fun0e4 Capital Projects 511.043,240 $646,550 $721,256 5614,209 5124,415 5738,304 50 UntunOea Capital Projects Wath lon orn brobbis W/S Retool- Crossover, lAboy. to Cny Units X) 50 5994,50 $3,315,003 50 50 50 W5 Reloralc R.ma, 6aMo Maple 0 0 0 0 0 0 1,080,00 M, Sequoyah Area WS System Uppraee 2Y m 0 0 0 0 0 0 WS Rdoelle- Weeingaon, RuMla West 315,00 0 0 0 0 0 1,20,03 WS Rebrate-61'ssbn, North St,. City Umhs 0 0 0 0 0 0 31481,00 WS Relorato-O Woe, Township to Mission 0 0 0 0 0 0 2.323.00 WS Relocate- Township from Gregg to Onnege 0 128,50 5/5,500 0 0 0 0 W5 Relooste, 8ock, Oial. m Square 0 0 0 0 0 0 294,00 WS Rebcale-6th, SMxI to Waatl 0 0 0 0 0 0 TS5,00 WS InarOXarmn on Shkh, North of Dorothy Jeanne 0 0 0 0 0 0 114,5(X 361rltlr Water LoeRroka«ment 0 1,672,000 6,067,00 0 0 0 0 FA Sequoyeh Pressure Plane Improvemen6 0 0 1.936,033 0 0 0 0 Benson Mm. Pressure Plein Upgra0s 140,00 0 0 0 0 0 0 Water Repine- Highway 16E While River Bridge 0 45$00 0 0 0 0 0 Wath Restate. Huntsville Roe, M0t to Crosmver 0 0 312,00 1,450,00 0 0 0 Water Replace+ksaorvllle, crossover-VanHoose 0 2,454,030 0 0 0 0 0 Wal. RepWce-$prod, Skehon-Sunrise hhn 0 0 0 0 252,000 0 0 RePleca Meter Vaul, V of A Farms East on GarlaM 40,000 0 0 0 0 0 0 Wath Reamon Rohi g Kris, co" Cpl maraouri 0 0 0 0 1,299,00 0 0 Water Replace - 6th St pro Mile RD to Barbara 0 0 0 0 2,05500 0 0 Pant Banner Water, tanks 0 0 0 0 560,00 0 0 Water Replete Lafayette, Wen College 0 0 0 0 439,000 0 0 War. Loop, Hoeand Or (Fannkaamr) 0 0 0 0 441,000 0 0 Weyer Repla N College, Sycamore- Township 0 0 0 0 2,816,00 0 0 Wm. RepHce- Gregg, TO."-Sycamore 0 0 0 0 1,002,00 0 0 Wm. Replace-Dinsmore Trail 0 0 0 0 963,000 0 0 Were, Repbx- Folly arra Sara Area 0 0 0 0 1,243,0X) 0 0 Water Retrace- Ovet.en anal Modun6Nm Area 0 0 0 0 1,026,000 0 0 Water Relocate- Maple, Razorback-Ganland 0 0 0 0 0 0 314,00 South MOlanan Water Pump Station Repair, & Replace 0 0 0 0 183,00 0 0 Water Replace, Jackson, King, Columbus 165,00 822,09 0 0 0 0 0 Water Replace, N. College, Rdhlg HIOSTownsb, 0 0 0 0 2,842,00 0 0 Water Replace-CWlege, Krone, to Rolrng Hills 0 0 0 0 2,548,00 0 0 Water and Saxer )mprovertlents Defined by Sandy 0 0 0 0 5,600,00 0 0 Water lira Projects as Naafi 143,00 0 0 0 0 0 0 e St Water SynemOh 0 0 0 0 0 0 2,118,00 Water Une Lo Water Line Loop 65x0 from Shibh to Fair PaIX to F 0 0 0 0 0 0 135,00 Total Unfun0.W Capital Projects 51,059,00 55,529,500 59,945,000 54,765,000 $23,346,000 SO $12,454,50 Total Capital fmprovement Proiacis 512,096,240 $6,176,050 510,666,256 55,439,209 524,070,415 5133,384 512,454,500 Page 2 of 2 City o1 Fayetteville water thlllty Currently Scheduled Capital Improvements Exhibit 4 Nel Cepiblimprovemenk 2006 2007 2006 2009 2010 2011 Deterred Tafal Capital lmproarnent Propels 512,096,240 56,176,050 510,666,256 55,49912D9 $24,070,415 5733,384 512,454,500 Additions to Gephal Reserves 50 50 50 SO SO SO 50 Nel Cepiblimprovemenk _ 512096240 56,176050 $10666256 55499209 _ 524,070,415 A33,384 512,454,SDO Lees OMer sources of Funds Water Impact Fees SD SD 30 51,000,000 $0 $1 50 Use W Waking Capita Fund 7,611233 1,050 16,256 2,339,203 0 1 0 Fedelai GlarnsCapnal 77D,850 0 0 0 0 0 0 Slate Cost shale 595D80 0 0 0 0 0 0 Capital Fund 0 0 0 0 0 0 0 Cualmet Conribminn 0 0 0 0 0 0 Low Intel. Loan (ALF) 0 0 0 0 0 0 New Debl Issues 0 4,275,000 6,6socM 0 21,670,415 (156fi618) 0 Total Cnei Bounces of Fund: $9,17,163 $4,276,050 3@666,256 33.339,209 $21,870,415 (1,566,618) SO Total Cup From net. 52,919,076 51,900,000 5210001006 SMOG 52,200,000 52,300,002 311454,500 # g \ cc ca \ z � (�`� co cc) C6 Ln, CU --- 2 =rr=m % m 4£ ) Z5] IL _ ®�C� LO �) \ £ƒ373/7} \ \\\�� \� \ / ; 8/ co ®`- 2R/%/).@ @ §E 7 r�a ) e - _ + §{§ \\(\\\\.( 0 ca -"r . )§\ t §'} \ cc ca \ z co cc) C6 Ln, C15 )i \j LL/ =rr=m % /R$ 4£ ) E IL LO �) \ £ƒ373/7} \\\�� \� \ / 8/ ƒ 7 ) e - + §{§ \\(\\\\.( ca -"r )§\ t §'} \® . / 7 E / \ cc ca \ z -)e/=« LL/ Z, 0) « ) E # \ £ƒ373/7} / 8/ 7 \ cc ca \ z M �a 0\/\�\ � =mr�aao > - , co ƒ j , < g 2ca r ®j .� (\\\\46 $ (�E��/§()'/ , , / e�m f j > [f= /(0 -- co . ; § \O ` �a � =mr�aao co m m j ) \//)C/ co 2ca / (�E��/§()'/ e�m j > . § f / ) ` e] m k(\\ /cm \/) fƒo/%ta§ 5 ) I \ wVOMNMMIO oqw q�mnom;\cli ]f/f//j;\ ( 0002» ) 7 - f§ / � &a )/) /) oƒ� �,,,, ` k} /{ i$ 75 \ � )` /}\6cj"t6 /\ $ ' §) ®) t5 ! � cq ~ °`� c �� , , k \) 0002» ) 7 - f§ / ) \w�C)"Ij:\ LL ¥; - \) \\ i)9 §\a°°§°.a *{ r 7 *§ r /\\ \ 4// / ' {) 00 a) )/ j\-�� \\ \) a` )\\\°\° \\ \§{ ®wmm �« FL 2 3 cc /- \! 2) - _ ((/ \ a» E a )' ' // \ z ®/2@§« �\!)E=o- f ©'E¥®Jf) ° a) a) ] e m / Eq gegg /co / ]gle §/)JƒD cm 2, , § /\\\\§.( /ƒ 0M(`:/ \{/°°&°.} } / Eq 09 8 $ $ 'ZedoOOi8 8 8000 I -go $ 18 8i $ QiOOoQo i R $ iii c�6ao �+f n� Al � N in L9 N i i/I N i f� CC 41 � { pi p� N cZp tii i i Q� Q � N Cp I O L u! 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N o N o N N N 0000000 aimmomi m 00000000 vori ci civci ri o ui N 6 Nv r rn ?nom YJSFJFJSFJFJ 0 0 0 0 0 YJ F7YJOOOOO O o NO O o NN N N N NM r 6666666 4 m M M M V M M N M M m' M (V .r N N N N N m YN N 01 N N N N N O NO in Ori N m m m m m m $' ' $' $' �' a $' v' M` m U 0 VC) 9 C LL OI C_ > Q a m d W ¢ N d R C N N U R 9 m m ¢ W N ¢¢ c v C7 « m W q c a m c T c m E d v E c LL m w E F ; > € m �S'ffi5'oog� L-2$ m$�'HL d� ¢ aro OC m¢USc7O G LU mm a: o z i E EW F .-NM V N(OrM 0 O N City of Fayetteville Wastewater utility Page t of 6 Exhibit 3 Development of the Revenue Requirement Budget_ Projected 200E 2007 200E _ 2009 2010 Notes Sources of Funds �e Revenues Inside Fayetteville Residential $6,597,638 56,795,567 $6,999,434 $7,209,417 $7,425,699 As Residential Rate Revenues Commercial 1,90.229 1,957,236 2,015,953 2,076,432 2,136,725 As Commercial Rate Revenues Induslftal 2,467,607 2,467,607 2,467,607 2,467,607 2,467,607 As Industrial Rate Revenues Government 803,588 827,695 852,526 878,102 904,445 As Government Rate Revenues Total Fayetteville $11,769,062 $12,048,105 $12,335,520 $12,631,558 $12,936,476 Outside Fayetteville Faiminglon $636,156 $655,240 $674,897 $695,144 $715,999 As Other Revenues Greenland 174,582 179,819 185,214 190,770 196,493 As Other Revenues Johnson 52,405 53,977 55,596 57,264 58,982 As Other Revenues Growth Area 8,730 ~$871,872 6,992 9,262 9,540 9,826 As Other Revenues Total Outside City $898,029 $924,969 Y$952,718 $981,300 Wholesale Elkins $136,622 $140,720 $144,942 $149,290 $153,769 As Other Revenues Total Wholesale $136,622 $140,720 $144,942 $149,290 $153,769 Total Rate Revenues $12,777,556 $13,086,854 $13,405,432 $13,733,566 $14,071,545 Miscellaneous Iq,yenues Sewer Sales not on Computer $16,500 $16,995 $17,505 $18,030 $18,571 As System/Growth Sewer Tap Fees 68,521 105,000 105,000 105,000 105,000 Billed Service 115,000 118,450 122,004 125,664 129,434 As SystemfGiowth Convenience Fees 700 721 743 765 788 As SystemlGrowth Convenience Fees Telewark 3,200 3,296 3,395 3,497 3,602 As System/Giowth Interest on Working Capital Fund 143,010 147,939 147,939 61,535 54,358 As Interest Earnings (Rate) Rent 36,000 37,080 38,192 39,338 40,518 As SystemlGiowUt Contract Services 6,100 6,283 6,471 6,666 6,866 As System/Growth Hay Sales 102,600 105,678 108,848 112,114 115,477 As SystenVGiowth Miscellaneous 800 W$492,431 824 849 874 900 As SystemlGrowlh Total Miscellaneous Revenues $542,266 ~$550,946 $473,482 $475,513 Total Sources o1 Funds $13,269,987 S13,029,121 $13.M,378 511207 041 $14,547,058 City of Fayetteville Wastewater Utility Exhibit 3 Development of the Revenue Requirement Page 2 of 6 Material/Supplies Materials/Supplies Total Matetial/Supplles Services & Charges Publications/Dues/Raining/Expenses Telephone Expenses Engineering Services Cast Allocation Total Services & Charges Total Water & Wastewater Director Billing & Collections Personnel Salary/Overtime Health Insurance Payroll Taxes and Insurance Total Personnel MatenallSupplies Materials/Supplies Total Matetial/Supplies Services & Charges Public Notincation/Publications & Dues Postage Telephone Expenses Professional Services Bad Debt Expenses Disputed Payments/Collection Related Exp. Cost Allocation Total Services & Charges Maintenance Maintenance Total Maintenance Total Billing & Coilectlons Meter Operations Program Personnel Salary/OveNme Health Insurance Payroll Tax and Insurance Total Personnel Material/Supplies Material/Supplies Total Material/Supplles Services & Charges Miscellaneous Services and Charges Postage Telephone Expenses Property Insurance Replacement Charges Cost Allocation Total Services & Charges $2,250 $2,318 $2,387 $2,459 32,532 As Miscellaneous $2,250 $2,318 $2,387 $2,459 52,532 $2,375 Budget 2008 2007 Projected 2008 2008 2010 Notes Application of Funds 504 525 546 567 As Utilities Wastewater Dlrectot 552 569 586 603 As Miscellaneous Personnel 11,606 11,954 12,313 12,682 As Miscellaneous Salary/Overtime $57,098 $59,382 561,757 $64,227 566,797 As Labor Health insurance 3,326 3,592 3,951 4,346 4,780 As Benefits - Medical Payroll taxes and Insurance 11,369 11,710 12,061 12,423 12,796 As eenefns - Other Total Personnel S71,793 $74,664 .__.._-_.___. $77,769 $80,996 --__.---._..__ $84,373 Material/Supplies Materials/Supplies Total Matetial/Supplles Services & Charges Publications/Dues/Raining/Expenses Telephone Expenses Engineering Services Cast Allocation Total Services & Charges Total Water & Wastewater Director Billing & Collections Personnel Salary/Overtime Health Insurance Payroll Taxes and Insurance Total Personnel MatenallSupplies Materials/Supplies Total Matetial/Supplies Services & Charges Public Notincation/Publications & Dues Postage Telephone Expenses Professional Services Bad Debt Expenses Disputed Payments/Collection Related Exp. Cost Allocation Total Services & Charges Maintenance Maintenance Total Maintenance Total Billing & Coilectlons Meter Operations Program Personnel Salary/OveNme Health Insurance Payroll Tax and Insurance Total Personnel Material/Supplies Material/Supplies Total Material/Supplles Services & Charges Miscellaneous Services and Charges Postage Telephone Expenses Property Insurance Replacement Charges Cost Allocation Total Services & Charges $2,250 $2,318 $2,387 $2,459 32,532 As Miscellaneous $2,250 $2,318 $2,387 $2,459 52,532 $2,375 $2,446 $2,520 $2,595 S2673 As Miscellaneous 485 504 525 546 567 As Utilities 536 552 569 586 603 As Miscellaneous 11,268 11,606 11,954 12,313 12,682 As Miscellaneous $14,664 $15,109 $15,567 $16,039 $16,526 As Miscellaneous 988,707 992,110 995,723 999p94 9103,431 75 $244,696 $254,483 $264,663 5275,249 $285,259 As Labor 25,593 27,641 30,405 33,445 36,790 As Benefits - Medical 43,283 44,581 45,919 47,296 48,715 As Benefits - Other $313,572 S326,705 $340,986 $355,991 $371,764 $14,359 $28,750 $29,613 830,501 $31,416 $32,358 As Miscellaneous $28,750 $29,613 $30,501 $31,416 532,358 75 51,250 $1,286 $1,326 $1,366 $1407 As Miscellaneous 93,000 95,790 98,664 101,624 104,672 As Miscellaneous 2,000 2,060 2,122 2,185 2,251 As Miscellaneous 23,000 23,690 24,401 25,133 25,887 As Miscellaneous 66,300 68,289 70,338 72,448 74,621 As Miscellaneous 9,600 9,888 10,185 10,490 10,805 As Miscellaneous (36760) (39,923) (41,120) (42,354) (43,625) As Miscellaneous $156,390 $161,082 $165,914 $170,892 $176,018 $4,523 $4,658 $4,798 $4,942 $5,090 As Repair & Maintenance 54,523 $4,658 54,798 $4,942 85,090 $503,234 8522,058 5542,199 5563,240 $585,231 $131,376 S136,633 $142,098 $147,782 $153,693 AS Labor 16,628 17,293 17,984 18,704 19,452 As Labor 27,915 29,031 30,192 31,400 32,656 As Labor -------- $175,920 ----- $182,956 ._._-__.__ $190,275 $197,886 $205,801 $13,141 $13,535 $13,941 $14,359 514,790 As Miscellaneous 513,141 $13,535 S13,941 $14,359 514,790 510,107 $10,410 $10,722 $11,044 $11,375 As Miscellaneous 75 77 80 82 84 As Miscellaneous 1,200 1,236 1,273 1,311 1,350 As Miscellaneous 1,860 1,916 1,973 2,032 2,093 As Miscellaneous 11,528 11,874 12,230 12,597 12,975 As Miscellaneous 16,965 17,474 17,998 18,538 19,094 As Miscellaneous $41,734 $42,986 ._.._________ 344,276 ._----- __. $45,604 _-_____ $46,972 City of Fayetteville Wastewater Utility Page 3 of 6 Exhlblt 3 Development of the Revenue Requirement Budget Projected 2006 2007 2008 2009 2010 Notes Maintenance Maintenance and Supplies $1,675 $1,726 51,777 $1,831 $1,886 As Repair & Maintenance Total Maintenance $1,675 $1,726 $1,777 $1,831 $1,886 Total Meter Operations Program $232,470 $241,203 $260,269 S269,679 $269,449 Meter Maintenance & Backflow Prev. Personnel Salary/OverHme 564,118 $66,663 569,350 $72,124 575,009 As Labor Health Insurance 5,897 6,133 6,378 6,634 6,899 As Labor Payroll Tax and Insurance 14,424 14,856 15,302 15,761 16,234 As Benefits - Other Total Personnel $84,439 587,672 $91,031 $94,519 598,142 MatevallSupplies Materiall3upplles 53,139 $3,233 $3,330 $3,430 $3,533 As Miscellaneous Construction Materials 12,027 12,388 12,759 13,142 13,536 AS Miscellaneous Total Materlal/Supplies $15,166 $15,620 $16,089 $16,572 517,069 Services & Charges Unitorms/Personal Equipment $12,389 $12,761 $13,144 $13,538 S13,944 As Miscellaneous Postage 350 361 371 382 394 As Miscellaneous Telephone Expenses 225 232 239 246 253 As Miscellaneous Property Insurance 625 644 663 683 703 AS Miscellaneous Total Services & Charges $13,569 $13,997 514,417 $14,849 $15,295 Maintenance Maintenance $603 ------ -__ $621 --------- $639 $656 5678 AS Repair & Maintenance Total Maintenance $603 $621 __- $639 _.___..._. $658 __._..._._.- $678 Total Meter Mount. & Backflow Prev. $131,184 $113,798 5117,910 $122,176 5128,69(1 Operations and Administration Program Personnel Salary/Overtime $294,221 $305,990 $318,229 $330,959 $344,197 As Labor Health Insurance 28,407 29,543 30,725 31,954 33,232 As Labor Payroll Tax and Insurance 84,236 87,605 91,110 94,754 98,544 As Labor Total Personnel $406,664 $423,139 $440,064 $457,667 $475,973 Material/Supplies Material/Supplies $28,192 $29,037 $29,908 $30,806 531,730 As Miscellaneous Minor Equipment 48,091 49,533 51,019 52,550 54,126 As Miscellaneous Total Material/Supplles $76,282 $78,570 580,928 $83,355 585,856 Services & Charges Public NotAlcatlon $123,244 $126,941 $130,749 5134,672 $138,712 As Miscellaneous Postage 600 618 637 656 675 As Miscellaneous Utilities 305,243 314,400 323,832 333,547 343,554 AS Miscellaneous Telephone Expenses 12,172 12,537 12,913 13,301 13,700 As Miscellaneous Insurance- VehichesBUNdings 9,923 10,221 10,527 10,843 11,168 As Miscellaneous Cost Allocation 367,446 378,469 389,823 401,518 413,564 As Miscellaneous Total Services & Charges $818,627 5843,186 $868,482 $894,536 $921,372 Maintenance Maintanence 548,507 $49,962 551461 $53,005 $54,595 As Repair & Maintenance Total Maintenance 548,507 $49,962 S51,461 $53,005 $54,595 Total OPS and Admin. Program $1637797 $1360280 $1394857 $1440935 $7488683 Total Sewer Joint Expenditures 52,288,487 $2388136 52451302 $2537576 52627092 City of Fayetteville Wastewater Utility Exhibit 3 Development of the Revenue Requirement Budget Projected 2006 2007 2008 2009 2010 Notes Sewer Mains Maintenance Program Personnel Salary &Wages $703,150 S731,276 $760,527 5790948 $822,586 As Labor Extra Services 0 0 0 0 0 As Labor Overtime 34,777 36,168 37,615 39,119 40,684 As Labor FICA Taxes 56,450 58,144 59,888 61,684 63,535 As Benefits - Other Life Insurance 2,879 2,965 3,054 3,146 3,240 As Benefits - Other Health Insurance 98,622 106,512 117,163 128,879 141,767 As Benefits - Medical LTD Insurance 2,211 2,277 2,346 2,416 2,488 As Benefits - Other ADD Insurance 366 377 3BB 400 412 As Benefits - Other Retirement Savings Plan 85,671 88,241 90,868 93,615 96,423 As Benefits -Other Personnel Service -Contract 0 0 0 0 0 As Benefits - Other Total Personnel $984,126 $1,025,960 $1,071,869 $1,120,208 $1,171,137 Material/Supplies Chemicals $4,000 $4,120 $4,244 $4,371 54,502 As Chemical Supplies Fuel 32,443 33,416 34,419 35,451 36,515 As Miscellaneous Construction Materials 161,000 165,830 170,805 175,929 181,207 As Miscellaneous Total Material/Supplies $197,443 $203,366 $209467 5215,751 $222,224 Services & Charges Travel & Training $0 $0 $0 $0 $0 As Miscellaneous TraveliTraming Advances 0 0 0 0 0 As Miscellaneous Equipment Rental 22,000 22,660 23,340 24,040 24,761 As Miscellaneous Insurance - Self - City Vehicles 0 0 0 0 0 As Miscellaneous Insurance - Set- Non Vehicular Damage 18,000 18,540 19,096 19,669 20,259 AS Miscellaneous Contract Services 6,000 6,180 6,365 6,556 6,753 As Miscellaneous Contract Services - St Cuts 54,000 55,620 57,289 59,007 60,777 As Miscellaneous Recording Fees 0 0 0 0 0 As Miscellaneous Motor Pool Charges 58,594 60,352 62,162 64,027 65,948 As Miscellaneous Replacement Charges 199,270 205,248 211,406 217,748 224,280 As Miscellaneous Shop Overhead Charges 21,421 22,064 22,726 23,407 24,110 AS Miscellaneous Motor Pool - Contract 0 0 0 0 0 As Miscellaneous Cost Allocation 74,148 76,372 78,664 81,024 83,454 As Miscellaneous Total Services & Charges $453,433 $467,036 $481,047 $495,478 $510,343 Page 4 of 6 City of Fayetteville Wastewater Utility Exhibit 3 Development of the Revenue Requirement Page 5 of 6 Total Maintenance Total Sewer Memo Mulnt, Program Wastewater Treatment Plant Program Services & Charges Public Notification utiimes Insurance - Vehicles/Buildings Insurance - Sett - Gay Vehicles PCP Operations Contract Direct Purchases Motor Pool Charges Replacement Charges Shop Overhead Charges Motor Pool - Contract Special Assessments Cast Allocation Total Services & Charges Maintenance Building & Grounds Maintenance Radio Maintenance Vehicles & Machine Maintenance Plant Equipment Maintenance Lendscape Maintenance Total Maintenance Total WWTP Program Future W WTP S662 $702 $724 $745 $768 51,838,684 51,807,065 $1,763,107 $1,832,183 51904471 $0 Budget 2008 2007 Protected 2000 2000 2010 Notes Maintenance 179,978 59,536 61,322 63,162 65,057 Vehicles& Machine Maintenance 5682 $702 $724 $745 $768 AS Repair & Maintenance Small Equipment Maintenance 0 0 0 0 0 AS Repair & Maintenance Software Maintenance 0 0 0 0 0 As Repair & Maintenance Total Maintenance Total Sewer Memo Mulnt, Program Wastewater Treatment Plant Program Services & Charges Public Notification utiimes Insurance - Vehicles/Buildings Insurance - Sett - Gay Vehicles PCP Operations Contract Direct Purchases Motor Pool Charges Replacement Charges Shop Overhead Charges Motor Pool - Contract Special Assessments Cast Allocation Total Services & Charges Maintenance Building & Grounds Maintenance Radio Maintenance Vehicles & Machine Maintenance Plant Equipment Maintenance Lendscape Maintenance Total Maintenance Total WWTP Program Future W WTP S662 $702 $724 $745 $768 51,838,684 51,807,065 $1,763,107 $1,832,183 51904471 $0 SO $0 $0 160,000 166,400 173,056 179,978 59,536 61,322 63,162 65,057 0 0 0 0 4,661,854 4,801,710 4,945,761 5,094,134 124,329 128,059 131,901 135,858 0 0 0 0 0 0 0 0 140,226 144,433 146,766 153,229 0 0 0 0 3,735 3,847 3,962 4,081 33,468 34,472 35.506 36.571 $5,183,148 55,340,242 $5,502,114 $5,668,908 $0 As Miscellaneous 187,177 As Luddites 67,008 As Miscellaneous 0 As Miscellaneous 5,246,958 As Operators Management Inc. (OMI) 139,933 As Miscellaneous 0 As Miscellaneous 0 AS Miscellaneous 157,826 As Miscellaneous 0 As Miscellaneous 4,204 As Miscellaneous 37,669 As Miscellaneous $5,840,775 $0 SO $0 SO $0 As Repatr & Maintenance 1,621 1,670 1,720 1,771 1,824 As Repair & Malntenance 671 691 712 733 755 AS Repair &Maintenance 0 0 0 0 0 AS Repair&Maintenance 0 0 0 0 0 As Repair & Maintenance 52,292 $2,361 52,432 $2,505 52,580 56,186,490 55,342,603 56,604646 $6671412 56843354 West Waste Water Treatment Plant $0 ---------------- ._._-__-_._-_- $0 $1,500,000 S3,000,000 $3,090,000 As Operations Management Inc. (OMI) Total Future WWTP $0 s0 ------- .--- --- . $1,500,000 ------- ._------ 53,000,000 --- __--------- -- $3,090,000 Total Sewer Program $8821124 $7,039668 58767852 510603696 510837826 Service Level Plan 6,000 6,180 6,365 6,556 6,753 As Miscellaneous Additional Employees $0 SO $0 $50,000 $100,000 Additional Operational Expenses 0 0 0 0 0 Total Service Level Plan _-_ $0 SO -__ $0 $50,000 $t00,00D Total Sewer Operations &Maintenance 59109611 59407806 511218064 513091171 513664917 Fmnchlse Fees SWZ082 51,266,880 51,257,667 $1,268,174 $1,100,407 Sewer Franchise Fees $478,300 5492,649 $507,420 $522,651 $538,331 As Miscellaneous Total Fmnehise Fees $478,300 5492,649 $507,428 5522,661 $538,331 Debt Service Revenue Bond Series 2002 B S335,189 S349,302 $363,415 $377,528 $391,642 Debt Schedule Interest 2002 B 229,089 217,022 203,400 188,681 173,014 Debt Schedule Bond Aniiclpation Note Payment (BAN) 0 650,000 650,000 650,000 0 S13 million ® 5% Interest Only Trustee & Pay Agent Fees 6,000 6,180 6,365 6,556 6,753 As Miscellaneous Other Fees - Bonds 10,000 10,300 10,609 10,927 11,255 As Miscellaneous Interest Expenses 12,904 -,3,291 13,690 14,101 14,524 As Miscellaneous Bank Service Charges 9,500 9,785 10,079 10,381 10,692 As Miscellaneous Assumed New Debt 0 0 0 0 492,528 Total Rate Funded Debt Service SWZ082 51,266,880 51,257,667 $1,268,174 $1,100,407 Leae BAN Repayment from WSIP 60 5&50,000 $650,000 5650,000 50 Leas Impact Fees 60 50 $0 50 50 Net Debt Service $802,882 6806,880 5807667 6008774 57,100,407 CIP Funded Through Rates $3,183,211 32,700,000 $2,700,000 $2,720,000 $2,900,000 Target Dept. 2.7 mli City of Fayetteville Wastewater Utility EXhlblt 3 Devetopment of the Revenue Requirement BudgetProjected 2006 _ 2007 2008 2000 2010 Notes Change In Working Capital Water and Sewer Working Capital Fund $0 $0 $0 $0 $0 Wastewater System Improv. Project Fund 0 0 0 0 0 Total Change In Working Capital m s0 s0 ^� so _ �so µ so Total Revenue Requirements $13,373,804 $13,200,338 $15,023,040 16,9 1,906 1$,193,656 Balance Deficiency of Funds ($103,817) $422,766 (51,077,663) ($2,734,948) ($3,566,596) Bal, /(Deficiency) as a % of Rate Revenues 016% -321/, 8.V/. 1019°1. 26,3% Proposed Rote Adjustment 0.0% QAM 0.0°.6 20.0°.6 0.0% Additional Revenue from Adjustment so s0 50 $2,746,713 $2,814,309 Total BalanceADeflelency) of Funds (5103,817) 5422,785 (51,077,663) $11,765 (5742,267) Additional Rate Increase Needed 0.8'/ -3.2%5 8.0% -0.11. 6,3% Residential Mon" Average Rate 521.25 After Required Rate Adjustment 21.42 2056 22.% 25A8 26.62 After Proposed Rate Adjustment 21.25 21.25 21.25 25.50 25.50 Annual $ Change 0.00 0,00 0.00 4.25 0.00 Cumulative Change In Rate 0.00 0.00 0.00 4.25 4.25 Debt Service Coverage Ratio (Rate Funded only) Before Rate Adjustment 6.90 3.36 2.18 0.89 0.89 After RR Rate Adjustment 7.08 3.02 3.03 3.06 4.12 Atter Proposed Hate Adjustment 6.90 3.36 2.18 3.07 345 Page 6 of 6 Water and Hewer Working Capital fund Beginning Balance $12,364,922 $4,767,015 $4,931,310 $4,931,310 $2,051,159 Joint fund allocated 50% to sewer Plus: To Operating Reserves 0 0 0 0 0 Plus: Additions to Capital Reserves 213,326 164,295 0 0 0 Less: Capital Expenditures 7,811,233 0 0 2,880,151 239,235 Less: Uses of Funds 0 0 0 0 0 ROMEBalance ,767,015 $4,931,310 $4,931.310 $2,051,159 $1.811,924 45 days of O&M Expense 1,123,103 1,159,867 1,363,159 1,613,980 1,672,387 WIWW Impact Fee Fund Beginning Balance 1,260,223 $639,658 $1,433,213 $889,645 $1,737.002 Plus: Wastewater Impact Fees 748,995 772,375 797,425 822,475 847,525 Calculated based on Projected ERUs Plus: Interest 12,371 21,180 13,147 25,682 38,780 Less: Uses of Funds 0 0 1 354 141 0 0 Input From CIP Ending a $498,857 $1,433,213 89,645 1,737,002 2,624,107 Wastewater S stem r rov. Project Fund Beglan6ngBalance $63,651 1,051A51 $1,051.451 1,051,451 1,051,451 100%AilocatedtoSewer Plus: investment Earnings o _ 0 4 0 0 Escalated as System Growth Plus: Changes in Working Capital 0 0 0 0 0 Input Less: Improvement Projects 0 0 0 0 0 Escalated as System Growth Less: Use of Funds 0 0 0 0 0 Input Ending Balance $63,651 $1,051,451 $1,051,451 51,05f,451 $1.051,451 Page 1 2 City of Fayetteville Sewer Utility Currently Scheduled Capital Improvements Exhlblt 4 2006 200) 2008 _ 2003 RO10 ROtt DN<nM 1Yeefewata Treatment Improvements Up;ooda Replace Mi Sm0ons sits' 0 Mi." $62,003 S3p00 wools, 650,001 $0 Plan Pumps anal Equipment 0,000 90,000 94,000 117,00 82,000 82,000 0 Tearing Equipment 5,30 6,00 6,000 6,30 51,000 54,000 0 WWTP Bolan Improvements 21,000 21,02 21,00 21,000 16,00 16,00 0 Computer System UN,.d. 6,00 7,000 7,3D 6,000 8,000 8,0D 0 Total WanewaterTrealmem lmptaiemems tilsa3 $185,00 6190,00 $20,00 5210,0110 $210,01 3 Welty & Server improvement. Sanhow Sewer Rehab3tahan $1,53,30 $1,53,00 51,50,000 51,53,0D 51,650,00 $1,650,01 SD Watetaad SewerC irsnaring 69,00 69,00 69,003 from 69,03 69030 24 Water Line Replacement 0 0 0 0 0 0 Water Wte Praia= as Needed 0 0 0 D 0 0 Water Regale -N.0 ege, RaNg Kra Tavnohy 0 0 0 0 0 0 0 0 0 Tota?Watar&Smwlnptovammts SI,569,00 51,569,00 $1,569,03 51,65908 $1]19,30 61,719,01 SO Water & Sewer serif. Improvement BackBaw Preverl6on Assemblies $0 3 $0 $0 3 SO Water Meters 121,500 137,00 140,50D 148,30 155,500 155,53 3 0 ?Aver and Equipment Pans Cteanrag Machine 12,000 0 0 0 0 0 Maty Rateneview Artetyss 37,500 0 0 0 0 0 0 Winer and Sewer Operations stony0 0 63,003 0 0 0 a 0 Taal Water a Sewer Service improvmenta 5171,000 St37,00 $203,530 5148,00 $155.50 6155,500 $0 Rudgeted CapHei Proiecl. tAeter Capital ExpmGnuree 5209,677 SO S0 SO SO SO 50 Capital E Paadlure Rogarn 81 a 0 0 0 0 0 Sewer Metro Coaoalebon Program 8,147,702 0 0 0 0 0 Wastewater Treatment Plant CapOal Program 289,8]9 0 0 0 0 0 Sewer Conlleatems Progratn 78,840 81,2)5 83,641 fri all 0 88,735 0 0 Sanitary Sewer ReltabilTetpn 0 5.,33 75,= 10,30 0 0 D TBUdgeted Capital Ro,ana allSD $6,37,046 5131,205 $156,641 596,151$88,735$88,735 666735 ------ Total Funded Centel Projects $10,727,040 52,022,205 S2.121,14/ 52,103,151 92,173,235 52,173,237 SO Unfunded Capital Prolecis Wastewater Treatment armaments Upgrade /Replace Lilt/Slaaor5-WIMP 55,00 $11,033 $20,00 613,00 517,30 SO 3 Plant PUMM fins Eavipmem-wwm 6,00 12,00 13,00 22,000 0 28,0 0 0 StarWby Generators for LIB Stations 224,000 233,00 192,00 0 0 0 0 Innig.non Reern- WWTP 120,000 127,30 135,03 143,00 152,000 0 0 VJ4VTP Builang lmprovemema 0 2,3D 3,30 4,30 0 0 0 Taal Wastewater Treatment lmprovemems 6355,30 5385,000 $363,30 5182,00 $197,30 Sewer lmprovmenta Sewn Colleaffon sm. Motlel 653,30 SO $0 SO SO Sewn Replace- Crossover, ON15 to 36" Tnoornission 0 0 0 0 1,497,000 SO $0 sewerReplaro, Nappy tbibw, 4U to 36" Transmission 0 0 0 0 1,263,00 0 0 0 Sewer Replacement- Elkins O nfail line 0 0 0 0 1,515,03 0 Sewer lnntal- RO-Sarg9, GreenlerlC-15th 0 0 0 0 0 Sewer Replaoa fftlararam 18, cfaaaan-15th 0 0 a 0 0 0 1,252,D3 WS Rebar.- Crossover, Motion to Cry Liarhe 0 0 994,53 3,315,30 3,494,30 0 0 0 WS RNocate-Resaback, M4. Meek 0 0 0 0 a 0 Mt Sequoyeh Area WrS Synem Upgreae 250,000 0 0 0 0 0 0 1,00,000 WIS Relocate- Wadrgton, Ruppk West 31g00D 0 0 0 0 0 0 W/S RelocateiAssbn, NOM st, to City Limns 0 0 0 0 0 1,23,003 WS Rebcate-018 wire, Township to Milson 0 0 0 0 0 0 a 3,481,03 WS Relocma Towrmhb Lan Greggto Coaege 0 128,53 575,9w0 0 0 a 2,323,0D W/S Rekrcale-Bock, Dkkson to SRuare 0 0 0 0 0 0 WIS Relopme- 6th, School to WoM 0 0 0 0 0 294,000 WIS lnsmllation an sheen, North of Donna, Jeanne 0 0 0 0 735,000 0 0 0 0 114,53 TOW Sewer Improvearema 51,05.00 $128,53 61,570,03 $3,315,00 67,769,000 ----- M 510,539000 Total UnfundeC Projects 51,420,03 5513,500 $1,983,03 58,497,000 57,966,00 50 $10,539,500 TOMI Cepiiai Rolec}s 512,147,048 $2,595.705 54,054,141 55,600,151 510,199,235 54,173,237 SID,S39,W0 Page 2 of 2 City of Fayetteville sewer utility Currently Scheduled Capital Improvements Exhibit 4 2006 2007 2008 2009 20102011 Deferred Total Capital Projects $12,147,048 52,535,705 54,054,141 55,600,151 510,139,235 52,173237 510,539,500 Deterred Cannot W W SO W $0 W SO Additions to CapAal Reserves 5213,326 3166295 $0 SO W 60 SO Net Capital Projects 512.360574 52.700.000 $4,054,141 55.600.151 510.139.235 52,173.237 $10.539.500 Less Other Sources of Funds Sewer impart Fees SO 30 $1,356,141 SO W 30 Use of WorkOp Cannot Fund 7,811,233 0 0 2,880.151 239,235 0 Wastewater Ststem lmpmvemen: FUM 0 0 0 0 0 0 Federal Gloms-Capnal 710,850 0 0 0 0 0 0 31st, Cost Share 595,080 0 0 0 0 0 0 Capdal Fund 0 0 0 0 0 0 0 Cuzomer Comdbueon 0 0 0 0 0 0 Inv lnlerem Loan(ALF) 0 0 0 0 0 0 New Debt Ines 0 0 0 0 7.030,000 (626,763) 0 Total Other Somces01 Funds $9,17/,163 W $1,354,141 52,860,151 57239,235 (826,763) W TOW CIP From Pates 53189211 S2700000 $2700oDO 52720000 52900000 53000000 510539500 :44/§f1$ 7 ) 0 \;) ® \ } _ - - \\�\ t ! }:r! \US !) _ !} , ƒ{(! a ®+)) , mm&,, IWO / }0 ;7{ !3§:$sf()/ -! . ;{{/ \kk\ ¥-�� tfff e®30 Gi § :-\ )))) C6 Cf /#6 C6 =,�a ; ` �^ \\\j \\00 \ ( 76 \g\/ \\0?(0 / : - 7:}/) ! 7= 5a 7 W 3 W W W O Y mzaL' Y x O {LLU c CLA kgs c�i 3 D 0 0 0 0 0 0 0 ; o Q E�NOMC9,ou) 1 O O n W N V 10002 M 0000000 O In to U� IA OO r N N N N M M 0 0 0 0 0 0 0 i o (J N r V O r to r 1 CO NN O N 0 2 2 ' O 00 N r l�� f N O M O N N 6i W v_ 0 d( O R Z Ec y m 0 u- `° a E aEiLL �aNio'o0-0 3 0 c0 €'SY O Tto� Ncc0 O SOW a O M O N 61 1 R-ci;o � � \ /C%J 1 $§A%°pq'k C6 )\G§$L-?$ i8 $ »cv ci § \ 2 H�[\/k18 k _ fUlu o) , -� - )$$RC! / @ 2 k _ o) , @ ] 8ek 7 \ � a oia s k � e 7R§#feR,R k 2) /f N C%L \ k LO n-� ' co \$} /§§2\/) \$ 2� U. / f �7$ k�t 51 fkfk\k�\ })}- ))Kk277'/ 110 f 7 04`dff a D } § 2 7 )2_� i§ 2 m2 � $a L� t \)3)\/§a \ 4 $ ±2± - 2 )\ \ _� eLO )) {}k}\/\./ »% \ =m _ 5 a /g __a /:) ) > co \2J� _ 3 = ° 7 , ID co >_,; e7Ea>0 LL )CO U,L ���®�0 LL ®\E§>7)� (a§$ (D (D ) )3E ) ok0o : — /o ywc' .M., uMW o w w mid � w ee �$ w w eeeooeeeo4e m $oeee000e0000. 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Eli wd Q rel "! kn t {f} 51,136 Monthly Water Rates Effective as of the first billing statements issued after April 30, 2008, 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 fire fighting, 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. The minimum billing shall be 1,000 gallons per month. Table A-1 Monthly Water Rates After April 30, 2008 Cost per 1,000 1 lallons Class Usage Rate Inside Outside $2.25 (In Gallons) City City 3.44 First 2,000 $2.11 $2.43 Next 13,000 2.81 3.23 Residential Over 300,000 Over 15,000 3.98 4.58 Non- Residential First 300,000 2.55 2.93 Over 300,000 1.95 2.24 Over 300,000 Major Industrial All Usage 1.77 2.04 Irrigation First 300,000 2.81 3.23 Over 300,000 1.84 2.11 Reduced Peak 1.84 1,84 Wholesale Demand Peak Demand 2.04 2.04 Table A-2 Monthly Water Rates After December 31, 2008 Cost per 1,000 g Iallons Class Usage Rate (In Gallons) inside City Outside City Residential First 2,000 $2.25 $2.59 Next 13,000 2.99 3.44 Over 15,000 4.24 4.88 Non- Residential First 300,000 2.61 3.00 Over 300,000 2.11 2.43 Major Industria! All Usage 1.89 2.17 Irrigation First 300,000 3.09 3.55 Over 300,000 2.16 2.48 Wholesale Reduced Peak Demand 1.95 1.95 Peak Demand 2.16 2.16 Table A-3 Monthly Water Rates After December 31, 2009 Cost per 1,000 galigns Class Usage Rate Inside Outside $2.53 (In Gallons) City City 3.86 First 2,000 $2.39 $2.75 Next 13,000 3.17 3.64 Residential Over 300,000 Over 15,000 4.49 5.16 Non- Residential First 300,000 2.68 3.08 Over 300,000 2.28 2.62 Over 300,000 Major Industrial All Usage 2.01 2.31 Irrigation First 300,000 3.37 3.88 Over 300,000 2.70 3.11 Reduced Peak 2.01 2.01 Wholesale Demand Peak Demand 2.23 2.23 Table A-4 Monthly Water Rates After December 31, 2010 Cost per 1,000 gallons Class Usage Rate (in Gallons) Inside City Outside City Residential First 2,000 $2.53 $2.91 Next 13,000 3.36 3.86 Over 15,000 4.75 5.46 Non- Residential First 300,000 2.75 3.16 Over 300,000 2.45 2.82 Major Industrial All Usage 2.14 2.46 Irrigation First 300,000 3.64 4.19 Over 300,000 3.28 3.77 C-1 Reduced Peak 2.07 2.07 Wholesale Demand Peak Demand 2.30 2.30 (2) Beginning January 1, 2012, 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 facillty/bullding 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 phot 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 rales 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 Atter April 30 2008 Meter Size Meter Size Inside Outside Wholesale City city 5/8 x 3/a" $4.00 $4.60 $5.00 1 inch 5.55 6.38 7.00 1 1/2 Inch 9.70 11.16 12.15 2 inch 14.10 16.22 17.70 3inch 32.90 37.84 41.30 4 inch 54.45 62.62 68.30 6 inch 108.85 125.18 136.70 81nch 163.30 187.80 205.00 Table B-2 Monthly Water Service Charge After December 31 2008 Meter Size Meter Size Inside Outside Wholesale city City 5/8" x 3/" $4.25 $4.89 $5.30 1Inch 5.90 6.79 7.40 1 1/2 inch 10.30 11.85 12.85 2 inch 15.00 17.25 18.75 31nch 34.95 40.19 43.80 4Inch 57.85 66.53 72.25 61nch 115.65 133.00 144.90 8 inch 173,50 199.53 216.90 Table B-3 Monthly Water Service Charge After December 31, 20()9 Meter Size inside std Outside City ity Wholesale 5/8" x 3/4" $4.50 $5.18 $5.60 1 inch 8.25 7.19 7.80 1 '/2 Inch 10.90 12.54 13.55 2 inch 15.90 18.29 19.75 3 inch 37.00 42.55 45.10 4 inch 61.25 70.44 76.10 6 inch 122.45 140.82 1 149.20 Binch 183.70 211.26 1 228.40 C-2 Table B-4 Monthly Water Service Charge After December 31, 2010 Meter Size inside City Outside Clty Wholesale 5/8" x 3/a" $4.75 $5.46 $6.00 1Inch 6.60 7.59 8.30 1 '/2 Inch 11.50 13.23 14.45 2Inch 16.75 19.26 21.00 3 inch 39.05 44.91 46.50 4Inch 64.65 74.35 81.10 6Inch 129.30 148.70 153.70 8Inch 193.90 222.99 240.50 (2) Beginning January 1, 2012, 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 April 30, 2008. (4) Customers served through the White River Rural Water System will pay- the outside city rate plus an additional $5.94 per month for all bills Issued prior to January 1, 2012. This additional amount will not be charged on any bills Issued after December 31, 2011. (5) 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: Table C-1 Monthly Standby Fire Protection Service Char a After April 30, 2008 Line Size inside City Outside City 2Inch $ 6.84 $ 7.86 3 inch 20.51 23.59 4 inch 41.03 47.18 6 inch 113.96 131.05 8 inch 239.32 275.21 10 inch 410.26 471.79 Table C-2 Monthly Standby Fire Protection Service Charge After December 31, 2008 Line Size inside On Outside City 2 inch $ 7.23 $ 8.32 3 inch 21.70 24.96 4 inch 43.41 49.92 6 inch 120.57 138.66 8 inch 253.20 291.18 10 inch 434.05 499.16 Table C-3 Monthly Standby Fire Protection Service Charge After December 31, 2009 Line Size Inside City outside City 2 inch $ 7.62 $ 8.76 3 inch 22.85 26.28 4 inch 45.71 52.56 6 inch 126.96 146.00 8 inch 266,621 306.61 10 inch 457.06 1 525.61 Table C-4 Monthly Standby Fire Protection Service Charge After December 31, 2010 Line Size Inside City Outside City 2 inch $ 8.02 $ 9.22 3inch 24.06 27.67 4 inch 48.13 55.35 6 inch 133.69 153.74 flinch 280.75 322.86 10 Inch 481.28 553.47 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the monthly standby fire protection service charge shall be Increased by 3% per year. (3) 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, 11, 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) C-3 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 2009 Glass Usage Rate Cost per In Gallons gallons Residential First 2,000 ._..1,000 Residential gallons $3.10 Greater than 4.00 Non -Residential 2,000 allons 3.10 Non -Residential All Usage 2.42 Major Industrial All Usage 2.42 Farmington All Usage 4.66 Outside city All Usage 4.66 Elkins 85% of 3.53 Elkins metered 2.81 water usage water usa a 3' Usage above Usage above 85% of 1.85 1.91 metered 1.98 water usage Table D-2 Monthly Sewer Rates Per 1,000 Gallons After December 31 2008 Class usage Rate Cost per !n Gallons 1 000 allons Residential First 2,000 allons $3.00 1 000 allons Greater than First 2,000 2,000 allons 4.00 Non -Residential All Usage 3.02 Major Industrial All Usage 3.03 Farmington All Usage 5.13 Outside city All Usage 5.57 3.21 85% of All Usage Elkins metered 3.53 5.74 water usage 85% of metered Usage above water usa a 3' 85% of Usage above metered 1.85 1.91 water usage water usage Table D-4 Table D-3 December 31 2010 Monthly Sewer Rates Per 1,000 Gallons After December 31 2009 Class Usage Rate Cost per First 2,000 In Galions 1 000 allons gallons First 2,000 Residential gallons $3.07 2,000 gallons Greater than Non -Residential All Usage 2,000 qallons 4.10 Non -Residential All Usage 3.10 Ma or Industrial All Usage 3.21 Farmington All Usage 5.28 Outside city All Usage 5.74 water usage 85% of metered Elkins water usa a 3' 85% of metered Usage above water usage 85% of metered 1.91 water usage Table D-4 Monthly Sewer Rates Per 1,000 Gallons After December 31 2010 Class Usage Rate Cost per an Gallons 1,000 ciallons Residential First 2,000 $3.14 gallons Greater than 2,000 gallons 4.18 Non -Residential All Usage 3.18 Major Industrial All Usage 3.40 Farmington All Usage 5.44 Outside city All Usage 5.9i Elkins 85% of metered 3.75 water usage Usage above 85% of metered 1.96 water usage (2) Beginning January 1, 2012, 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 additlon to the above, each customer shall pay a monthly sewer service charge in accordance with the following schedule: C-4 Table E-1 Monthly Sewer Service Charge Prior to January 1, 2009 Meter Size inside City Outside Cllyt Farmingtont 518" x 3/a" $ 10.36 $ 10.35 $ 10.35 1Inch 13.47 19.35 19.35 1'/z inch 21.99 34.33 34.33 2Inch 31.44 49.32 49.32 3Inch 73.01 104.40 104.40 4Inch 120.26 171.97 171.97 6 inch 238.37 340.87 340.87 8 inch 356.48 509.76 509.76 Table E-2 Monthly Sewer Service Charge After December 31, 2008 Meter Size Inside City Outside Farmingtont 518" x 3/4" $ 12.45 $ 12.40 $ 11.40 1Inch 16.20 23.10 21.30 1'/z inch 26.45 41.10 37.80 2 inch 37.80 54.30 50.00 3 inch 87.75 125.50 115.30 4 inch 144.50 206.60 189.85 6 inch 286.45 409.60 376.40 8Inch 1 428.40 612.60 563.00 Table E-3 Monthly Sewer Service Charge After December 31, 2009 Meter Size Inside City Outside Cltyt Farmingtont 518" x 3/" $ 12.80 $ 12.80 $ 11.70 1Inch 16.65 23.80 21.90 1'/2 inch 27.15 42.30 38.90 2Inch 38.85 55.90 51.50 3 inch 90.20 129.25 118.75 4Inch 148.60 212.80 195.55 6Inch 294.50 421.88 387.70 8lnch 440.45 631.00 579.90 Table E-4 Monthly Sewer Service Charge After December 31, 2010 Meter Size Inside City Outside Cityt Farmingtont 518" x %" $ 13.20 $ 13.20 $ 12.10 1 inch 17.15 24.50 22.60 11/2 Inch 28.00 43.60 40.10 2 inch 40.05 57.60 53.05 3 inch 93.00 133.10 122.30 4 inch 153.25 219.20 201.50 6 inch 303.70 434.50 400.00 8 inch 454.20 650.00 597.30 tCost of Service Methodology required by contract. (2) Beginning January 1, 2012, 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 C-3 subsection (A) of this section to the monthly water usage of such customers. In the event that a non-residentlal 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 ail sources used for ail 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 12 -month period beginning with the billing for the month when rates adjudged hereby go Into effect. (E) Extra Strength Surcharge. (1) For all commercial and Industrial customers whose wastewater discharge Is greater than 300 mgA of BOD$ and/or TSS, the City shall levy an Extra Strength Surcharge for each parameter in accordance with the following unit charges: Fable F3 Extra Stren th Surchar es Sewer volume in million gallons Before After After After charge 1/1108 12/31/08 12/31/09 12131/10 Extra $0.2669 $0.3336 $0.4170 $0.4421 Strength per per per per BODS pound pound pound pound Extra $0.1334 $0.1668 $0.2084 $0.2209 Strength per per per per TSS pound I pound pound pound (2) Extra Strength Surcharges shall be billed monthly and shall be computed on the basis of water meter reading (wastewater discharge volume). (3) Starting after December 31, 2011, Extra Strength Surcharges shall be increased by 30% per year. (4) Computation of extra strength surcharges shall be based on the following formula: (a) Extra strength surcharge: S = V x 8.34 x [BOD Unit Charge (BOD - 300) + SS Unit Charge (SS - 300)] (b) Where: = Surcharge in dollars v = Sewer volume in million gallons 8.34 = Pounds per gallon of water BOD unit = Unit charge for SOD in charge dollars per pound BOD = BOD atrength index in parts per million 300 = Allowed BOD strength in parts per million SS unit = Unit charge for suspended charge solids in dollars per pound SS = Suspended solids strength index in parts per million by weight 300 = Allowed SS Strength in parts per million by weight (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. C-6 51.138 Definitions Pertaining to Water and Sewer Rates For the purpose of the sections pertaining to water and sewer rates, the following definitions shall apply unless the context clearly indicates or requires a different meaning: (A) City or Farmington customer_ Customer whose structure being served for water and/or wastewater Is physically located within the incorporated limits of the City of Farmington, Arkansas, who is served by the City of Fayetteville for water and/or sewer service. (B) inside City customer. Customer whose structure being served for water and/or wastewater is physically located Inside the incorporated limits of the City of Fayetteville, AR. (C) InNtration/inBow. The total quantity of water other than wastewater from both infiltration and inflow without distinguishing the source from defective pipes, pipe joints, connections, manholes, roof down spouts, cellar drains, yard drains, area drains, foundation drains, drains from springs and swampy areas, storm sewer cross connections, catch basins, cooling towers, storm waters, surface runoffs, street wash water, or drainage. Infiltration and Inflow are specifically prohibited from being intentionally allowed into the sanitary sewer system. (D) Irrigation users. Irrigation users include meters installed which serve primarily landscape Irrigation systems and Include city -owned meters which directly connect to the city water system (water only) or privately owned meters located downstream of a city -owned meter (exempt meters). Meters which serve park properties, golf courses, commercial nurseries and/or land agricultural uses shall be classified as Irrigation except for meters at these locations which serve exclusively non -irrigation uses. Exempt meters which serve uses other than landscape Irrigation systems shall also be considered Irrigation and shall not be considered commercial. (E) Major industrial user. An Industrial customer who uses an average of 5,000,000 gallons or more of metered water per month in the previous calendar year for non -irrigation use at a common faclllty/buliding. This does not apply to combined or consolidated sets of bills for non -Irrigation use at separate facilities/bulldings. (F) Afunicipaliry. A city, town, county, parish, district, association, or other public body (Including an inter -municipal agency of two or more of the foregoing entities) created under state law having jurisdiction over disposal of sewage, Industrial waste or other waste. The definition includes special districts such as water, sewer, sanitary, utility, drainage, transport, or disposal of liquid waste of the general public in a particular geographic area. (G) Non-residential customer or user. All customers that do not meet the specific definitions of residential customers, Irrigation users, or major indusirlai users. Non-residential customers include but are not limited to retall establishments, restaurants, office buildings, laundries, governmental, educational, social, charitable, religious, medical, penal Institutions, poultry houses, other private business and service establishments. It also Includes industrial users using less than an average of 5,000,000 gallons per month In the previous calendar year. (H) Operation and maintenance. Those functions that result In expenditures during the useful life of the treatment works for materials, labor, utilities, and other Items which are necessary for managing and for which such works were designed and constructed. The term "operation and maintenance" includes replacement. (1) Replacement. Expenditures for obtaining and installing components, equipment and appurtenances which are necessary during the useful lite of the treatment works to maintain the capacity and performance for which such works were designed and constructed. (J) Residentiat customer or user. Any contributor of wastewater to the city's treatment works whose dwelling in a single family home, duplex, triplex, fourplex and/or any individually metered dwelling unit that is used for domestic dwelling purposes only. (K) Treatment works. Any devices and systems for the storage, treatment, recycling, and reclamation of municipal sewage, domestic sewage, or liquid industrial wastes. These include intercepting sewers, outfall sewers, sewage collection systems, pumping, power, and other equipment and their appurtenances; extensions Improvement; remodeling, additions, and alterations thereof; elements essential to provide a reliable recycled supply such as standby treatment units and clear well facilities; and any works, including site acquisition of the land that will be an Integral part of the treatment process or Is used for ultimate disposal of residues resulting from such treatment (including land for composting sludge, temporary storage of such compost, and land used for the storage of treated wastewater In land treatment systems before land application); or any other method or system for preventing, abating, reducing, storing, treating, separating, or disposing of municipal waste or C-1 Industrial waste, Including waste in combined storm water and sanitary sewer systems. (L) Useful life. The estimated period during which a treatment works will be operated. (M) User charge. That portion of the total wastewater service charge which Is levied In a proportional and adequate manner for the cost of operation, maintenance and replacement of the wastewater treatment works. (N) Water meter. A water volume measuring and recording device, furnished and Installed by the water department of the city. in some bulk water cases, primarily for construction uses where a standard water meter cannot be used due to large volume or water velocity requirements, the water shall be measured using a pilot gauge and a timer, 51.139 Reviews of Water and Sewer Rates, Notification to User (A) Periodic review by city, revision of rates. The city shall review the charges periodically and revise the rates as necessary to ensure that adequate revenues are generated to pay the cost of operation, maintenance, and replacement, and that the system continues to provide for the proportional distribution of operation, maintenance, and replacement costs among users and user classes. (B) Notification of user. The city shall notify each user a1 least annually, In conjunction with a regular bill, of the rates being charged for operation, maintenance and replacement of the wastewater treatment works. (Code 1965, 121-26; 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 1 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. 4998, 4-3-07) 51.144 Filling Water Tanks On Commercial Trucks; Rates (A) Water rates for consumers that purchase water for the purpose of filling water tanks on commercial trucks shall be as follows: Table I Water Rates for Commercial Water Trucks Volume Rate A minimum of $9.00 First 1,000 gallons ($5.00 labor plus $4.00 water/tax). Greater than 1,000 gallons $4•00 per 1,000 gallons (B) Rates are charged on a per -trip basis. The initial labor charge shall be paid upon each arrival at the fill site. (Ord. No. 3478, 4.3-90; Ord. No. 3491, 7-17-90; Ord. No. 4059, � 4, 10.7.97; Code 1991, §51.144) 4.3.08) Clarice Pearman - Ords. 5124 thru r" _t Page 1 From: Clarice Pearman To: Jurgens, David Date: 4.3.08 10:41 AM Subject: Ords. 5124 thru 5127 Attachments: 5123 Amend 51.136 Mo Water Rates.pdf, 5125 Amend 51.139 Reviews & Notificat ion.pdf; 5124 Amend 51.138 Definitions.pdf; 5126 Amend 51.144 Water Tank Ra tes.pdf; 5127 Amend 157.05 and 171.05.pdf CC: Audit David: Attached are copies of the above ordinances amending Chapter 51. Please let me know if there is anything else needed for these items. Have a good day. Thanks. Clarice (4.3.08 Clarice Pearman - Ords. 5121 and E--- Page 1 From: Clarice Pearman To: Pate, Jeremy Date: 4.3.08 10:35 AM Subject: Ords. 5121 and 5122 Attachments: 5121 Amend RZN 07-2889 Cooper.pdf; 5122 VAC 08-2930 Wilmoth.pdf CC: Audit; GIS Jeremy: Attached is a copy of the above ordinances passed by City Council. Please let me know if there is anything else needed for these items. Have a good day. Thanks. Clarice RECEIVED APR 112008 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE ay WS EDITION Northwest Arkansas Times Benton County. Daily Record P. 0. BOX 1607 FAYETTEVILLE, AR 72702 PHONE: 479-571-6421 AFFIDAVIT OF PUBLICATION 1, Cathy Wiles, do solemnly swear that I am Legal Clerk of the Arkansas Democrat Gazette newspaper. Printed and published in Benton County Arkansas, (Lowell) and that from my own personal knowledge and reference to the files of said publication, the advertisement of: City of Fayetteville- Ordinance 5123 * April 7, 2008 Publication Charge: $400.90 Subscribed and sworn to before me This g day of CZ , 2008. Notary Public My Commission Expires: 2ial-r-' 09, 0—W 1I Do not pay from Affidavit, an invoice will be sent SA NDRA B SH Notary PjthjjcArkansas Co"n"y of Washington My r-nniksion Exp,01/0M/2011 ORDINANCE NO. 5123 Table A-3 lonthly Water Rates After December 31, 2008 Table 8"3 Monthly Water Servlos Charge Cost per 1,000 gallons After December 31, 2008 AN ORDINANCE j T Usage Rate Inside Outside Me Inside City REPEALING AND \/ (In Gallons) City City i Outside City Wholesale 5/8" x'A" $4.50 $5.18 $5.60 REPLACING r First 2,000 $2.39 $2.75 1 inch 6.25 7.19 7.80 951.136, MONTH- A R K A N S A 5ayle Residential Next 13,000 3.17 3.64 1 'h inch 10.90 12.54 13.55 LY WATER RATES, Over 15,000 4.49 5.16 2 inch 15.90 18.29 19.75 OF THE FAYET- 3 inch 37.00 4255 45.10 TEVILLE CODE OF ORDINANCES. Non- First 300,000 2.68 3.08 4 Inch 61.25 70.44 76.10 Residential Over 300,000 2.28 2.62 6 Inch 122.45 140.82 149.20 BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY 8 Inch 183.70 211.26 228.40 OF FAYETTEVILLE, ARKANSAsr Major Industrial All Usage 2.01 2.31 Table 04 Section i- That the City Council of the City of Fayetteville, Monthly Water Service Charge Arkansas hereby repeals §51.136, Monthly Water Rates, of the Irrigation First 300,000 3.37 3.88 After December 31; 2010 Fayetteville Code of Ordinances, and adopts an amended version Over 300,000 2.70 3.11 Meter Size Inside City Outside City Wholesale of §51.136, Monthly Water Rates, as set forth in Exhibit A, attached Sill` x %. $4.75 $5.46 $6.00 hereto, and Incorporate herein by reference as If set forth word -for- Wholesale Reduced Peak Demand 2.01 2.01 1 Inch 6.60 7.59 8.30 word in its entirety. Peak Demand 2.23 2.23 1 Vii Inch 11.50 13.23 14.45 2inch 16.75 19.26 21.00 PASSED and APPROVED this 1st day of April, 2008. Table A-4 3 inch 39.05 44.91 46.50 Monthly Water Rates After December 31, 2010 4 inch 64.65 74.35 81.10 APPROVED: Cost per 1,000 gallons 6 inch 129.30 148.70 153.70 By: Class Usage Rate Inside Outside 8 inch 193.90 222.99 240.50 DAN GOODY, Mayor (In Gallons) City City ATTEST: First 2,000 $2.53 $2.91 (2) Beginning January 1, 2012, all monthly water service charges By: Residential Next 13,000 3.36 3.86 shall be Increased by 3% per year. SONDRA E. SMITH, Chy ClerkRhasursr Over 15,000 4.75 5.46 (3) The monthly treated water rates and the monthly meter service charge rates prescribed by subsections (A) and (B) of this section EXHIBIT A Non- First 300,000 2.75 3.16 shall commence as of the first billing statements Issued after April 51.136 Monthly Water Rates Residential Over 300,000 2.45 2.82 30, 2008. Effective as of the first billing statements Issued after April 30, (4) Customers served through the White River Rural Water System 2008, the following monthly rates shall be fixed as rates to be Major will pay the outside city rate plus an additional $5.94 per month for charged for water furnished by the waterworks system of the city, Industrial All Usage 2.14 2.46 all bills Issued prior to January 1, 2012. This additional amount which rates the City Council finds and declares to be reasonable - will not be charged on any bills Issued after December 31, 2011, and necessary minimum rates to be charged. All non -emergency Irrigation First 300,000 3.64 4.19 (5) The State of Arkansas mandated Safe Drinking Water Act fee water uses shall be billed to the user, to Include but not limited to Over 300,000 3.28 3.77 shall be added to the monthly water utility bill, water used for: use within structures; business; manufacturing; irri- (C) Monthly standby fire protection service charge. gallon; retail by another water utility; City uses; educational pur- Wholesale Reduced Peak Demand 2.07 2.07 (1) Charges for unmetered service connections for standby fire poses; medical purposes; water system routine non -emergency Peak Demand 2.30 2.30 protection and fire hydrants shall be: uses; wastewater system routine non -emergency uses; non-profit uses; fire department non -emergency uses to Include training and (2) Beginning January 1, 2012, all monthly water rates shall be Table C"1 equipment .calibration; construction of new water mains; street increased by 3% per year. Monthly Standby Fire Protection Service Charss cleaning; and v(et down of construction sites and materials. (3) All bills under such schedules shall be computed by adding After April 30, 2008 Emergency water use that does not pass through a water system the applicable meter service charge prescribed by subsection (B) Line Size Inside City Outside City meter shall not be billed, including fire fighting, water leaks, water to the amount determined to be due for water usage under this 2Inch $ 6.84 $ 7.86 leak repair, and emergency water line flushing. The volumes used schedule. Applicable sales tax and.franchise fees shall be added 3 inch 20.51 23.59 for these emergency purposes should be estimated and submit- to the bill so computed. 4 inch 41.03 47.18 ted monthly to the Business Office Manager and the Water/Sewer (4) When a common facility/bullding is served by multiple water 6 inch 113.96 131,05 Operations Manager. meters and the water usage is for the same purpose, customers flinch 239.32 275.21 (A) Monthly water rates, may petition the Water 8 Wastewater Director and/or the Finance 10 inch 410.26 471.79 (1) The water usage of each customer shall be determined each 8 Internal Services Director to have the water consumption aggre- month by meter measurement and the amount per 1,000 gallons•to gated and have the tiered rates apply to the aggregated quantity. Table C"2 be paid for water usage by each customer shall be computed on (5) Water used for flushing and sampling of newly constructed Monthly Standby Flre Protection Service Charge the basis of the following schedule of rates. The minimum billing water lines, fire department training and equipment calibration, Atter December 31, 2008 shall be 1,000 gallons per month. and other similar uses requiring a large volume and/or high veloc- Line Size Inside City Outside City Sty of water movement shall employ a fire hydrant meter of the. 21nch $ 7.23 $ 8.32 le A-11 TabMonthly appropriate size for the use. If a fire hydrant meter cannot be used 3 inch 21.70 24.96 Water RateAfter a April 30, 2008 due to high flow or volume requirements, then the volume of water 4 inch 43.41 49.92 Cost per 1,000 gallons used shall be measured by using a pilot gauge to determine the 6 inch 120.57 138.66 Usage Rate Inside Outside gallons per minute and by timing the flow of water to be able to cal- 8 Inch 253.20 291.18 Class (In Gallons) City City culate total volume. In the cases of fire department training and 10 inch 434.05 499.16 First 2,000 $2.11 $2.43 equipment calibration, sewer line washing, street sweeping, and Residential Next 13,000 2.81 3.23 other uses where the equipment employed has a built-in water Table C-3 Over 15,000 3.98 4.58 mater, these built in water meters may be used. All such meters Monthly standby Fine Protection Service Charge other than those on fire trucks must be evaluated by the Meter After December 31, 2008 Non- First 300,000 2.55 2.93 Superintendent. These water uses shall be billed at the same rates Line Size Inside City Outside City Residential Over 300,000 1.95 2.24 as non-residential customers. 2 inch $ 7.62 $ 8.76 (6) Monthly wholesale treated water rates outside city limits are 3 inch 22.85 26.28 Major I based on Cost of Service Methodology. 41nch 45.71 52.56 Industrial All Usage 1.77 2.04 (B) Monthly water service charge. 6 inch 126.96 146.00 (1) 1n addition to the above, each customer shalt pay a monthly 8 inch 266.62 306.61 Irrigation First 300,000 2.81 3.23 water service charge in accordance with the following schedule: 10 inch 457.06 525.61 Over 300,000 1.84 2.11 Table 8"1 Table C-4 Wholesale Reduced Peak Demand 1.84 1.84 Monthly Water Service Charge Monthly Standby Fire Protection Service Charge Peak Demand 2.04 2.04 After Aprll 30, 2008 After December 31, 2010 Meter Size Inside City Outside City Wholesale Line Size Inside City Outside City Table A"2 5/8 x 3A" $4.00 $4.60 $5.00 21nch $ 8.02 $ 9.22 Monthly Water Rates After December 31, 2008 finch 5.55 6.38 7.00 3 inch 24.06 27.67 Cost per 1,000 gallons I h inch 9.70 11.16 12.15 4 inch 48.13 55.35 Class Usage Rate Inside Outside 21nch 14.10 16.22 17.70 6 inch 133,69 153.74 (in Gallons) City City 3 inch 32.90 37.84 41.30 8 inch 280.75 322.86 First 2,000 $2.25 $2.59 4 inch 54.45 62.62 66.30 10 Inch 481.28 553.47 Residential Next 13,000 2.99 3.44 61nch 108.85 125.18 136.70 Over 15,000 4.24 4.88 8 inch 163.30 187.80 205.00 (2) Monthly Standby Fire Protection Service Charge After December 31, 2011. Starting the day after December 31, 2011, the Non- First 300,000 2.61 3.00 Table 0.2 monthly standby fire protection service charge shall be increased Residential Over 300,000 2.11 2.43 Monthly Water service Charge by 3% per year. After December 31, 2008 (3) Fire protection lines shall not be connected to the water system Major Meter Size Inside City Outside City Wholesale downstream from a meter. Industrial All Usage 1.89 2.17 5/8" x 3A" $4.25 $4.89 $5.30 1 inch 5.90 6.79 7.40 (Code 1965, §21-25; Ord. No. 1165, 4-18-58; Ord, No. 2144, 9-2- Irrigation First 300,000 3.09 3.55 1 jh inch 10.30 11.85 12.85 75; Ord. No, 2594, 2-5-80; Ord. No. 3197, 7-1-86; Ord. No. 3409, Over 300,000 2.16 2.48 2 inch 15.00 17.25 18.75 2-21-89; Ord. No. 3431, 6.6.89; Ord. No. 3491, 7-17-90; Ord. No. 3 inch 34.95 40.19 43.80 3513, 9-18.90; Ord. No. 3519, 11-20-90; Ord. No. 4059, §1, 10 -7 - Wholesale Reduced Peak Demand 1.95 1.95 4 inch 57.85 66.53 72.25 97; Ord. No. 4223, 2-15.00; Code 1991, §51.136; Ord. No. 4530 Peak Demand 2.16 2.16 flinch 115.65 133.00 144.90 12-02-02; Ord. No. 4540, 02-03-04) 8 inch 173.50 199.53 216.90}, + *J RECEIVED APR 1 1 2008 CITY OF FAYETTEVILLE CITY CLERK'S OFFICE