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City of Laredo

City of Laredo. 2018 Water/Wastewater Rate Study and Financial Forecast City Council Presentation April 2019. Average utility has been increasing rates 5-6% per year; trend expected to continue AWWA expects water and wastewater rates across USA to triple in the next 15 years

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City of Laredo

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  1. City ofLaredo 2018 Water/Wastewater Rate Study and FinancialForecast City CouncilPresentation April2019

  2. Average utility has been increasing rates 5-6% peryear; trend expected tocontinue • AWWA expects water and wastewater rates across USAto triple in the next 15years • Rate adjustments are primarily due to reasons beyond a utility’s control – inflation, system replacement,regulatory mandates,etc. • 30-40% of utilities currently charge rates that do notcover theircosts Facts about Water and WWRates in the 21stCentury

  3. City’s policy of annual nominal rate adjustments has been beneficial – resulted in a financially healthy utility until currentyear • However, increasing costs and need to finance $150 -- $180 million in new debt for capital improvements will require future rate adjustments that will be higher than2.0% • Costs and rateplanpresented today are from 2018study • Recommendations are being updated to account for revisionsin budget, CIP anddebt • Final recommendations unlikely to be materially different from2018 estimates City of Laredo InitialObservations

  4. City of Laredo Current Water RateStructure NOTE: Effective October2018

  5. City ofLaredo Current Wastewater RateStructure NOTE: Effective October2018

  6. Monthly Residential Charge Comparison 10,000 GalWater/Wastewater

  7. Monthly Residential Charge Comparison 10,000 GalWater/Wastewater Oct2018

  8. Monthly Commercial Charge Comparison 20,000 GalWater/Wastewater

  9. 100,000 2% AnnualGrowth 90,000 86,039 79,487 80,000 71,994 68,769 70,000 Actual and Forecast Total WaterAccounts 60,000 50,000 40,000 30,000 20,000 10,000 - FY2015 FY2016 FY 2017 TY 2018 TY = TestYear FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027

  10. Total --$179,164,540 2018 Rate Study Capital ImprovementPlan

  11. FORECASTEDwater CAPITAL IMPROVEMENT PlAN FY2019-2023 11

  12. FORECASTEDwastewater CAPITAL IMPROVEMENT PlAN FY2019-2023 12

  13. WaterWastewaterTotal 2018 Rate Study Forecast W/WW BondIssues Term = 25Years Interest = 3.5% P&I =Fixed $179,000,000 --Total Note: Debt Service for 2018 issue included as Current Debt not FutureDebt

  14. 2018 RateStudy Forecast Water/Wastewater Cost of Service

  15. City’s policy of 2.0% annual rate adjustments have been effective in prior years in funding water and WWcosts • However, combination of increasing operating costs and need to fund capital projects will require a nominal adjustment in City’s rate plan beginning October2019 • Combination of robust expected growth and higher adjustments to commercial W/WW rate is forecast to minimizeimpact on residentialcustomers Notes on RateProposal

  16. 2018 Rate Study Residential Water RatePlan Residential &Irrigation Base Charge (Includes 2,000Gallons) 5/8" or3/4" 1" 11/2" 2" Volume Rates Per 1,000Gallons Annual 3.0% rate adjustments beginning October2023

  17. 2018 Rate Study Commercial Water RatePlan Annual 3.0% rate adjustments beginning October2023

  18. ResidentialWater; • 2019-2022 Base rate from 2% to5% • 2019-2022 Volume rate from 2% to5% What’s theChange • 2023 forward 2% to3% • CommercialWater; • 2019-2022 Base rate 2% to5% • 2019 Volume rate 2% to20% • 2020-2022 Volume rate 2% to5% • 2023 forward 2% to3%

  19. Residential BaseCharge (Includes 2,000Gallons) Volume Rates Per1,000 Gallons 2018 Residential and Commercial Wastewater RatePlan Commercial BaseCharge (Includes 2,000Gallons) Volume Rates Per1,000 Gallons Annual 3.0% rate adjustments beginning October2023

  20. ResidentialSewer; • 2019-2022 Base rate from 2% to6% • 2019-2022 Volume rate from 2% to6% What’s theChange • 2023 forward 2% to3% • CommercialSewer; • 2019-2022 Base rate 2% to6% • 2019 Volume rate 2% to15% • 2020-2022 Volume rate 2% to6% • 2023 forward 2% to3%

  21. 2018 RatePlan Impact on Ratepayers – Water andWastewater WATER & WASTEWATER RATE PLAN - MONTHLY BILLIMPACT

  22. Monthly Residential Charge Comparison 10,000 GalWater/Wastewater

  23. Monthly Commercial Charge Comparison 20,000 GalWater/Wastewater

  24. Residential: • 35% of customers will have a maximum increase of $2.00/month for use of 5,000 gallons or less wateruse. • 40% of customers will have an increase of between $2.00-$3.55/month based on their water use between 5,000 to 10,000gallons. • 25% of customers will see a higher increase of more than $3.55 for use of 10,000 gallons or more. Effects on theCustomers • Commercial: • 73% of customer will have a maximum increase of $21.31/month for use of 20,000gallons. • 17% of customer will have an increase of between $21.31-$55.67/month for use of 20,000 to 50,000gallons. • 10% customer will see higher than $55.67/month increase based on their water consumption more than 50,000gallons.

  25. PresentationSummary How Does Rate Plan Benefit City? • Will enable utility to operate on a stand-alone basisand independent of general fundassistance • Will result in financially-healthy utility that has ability to fund operations and capitalneeds • Will ensure that ratepayers are paying only what it coststo provide water and wastewaterservice • Will allow capital investment of $150-$180 million into system to improve quality of service and provide a well-functioning system for futuregenerations

  26. Questions?

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