The URL can be used to link to this page

Home My WebLink About08.a. Introduction to Cost of Service Study and Staffing Needs Assessment• Goals of Study • Rates 101 — Financial Planning — Cost of Service Analysis • Types of Reserves • Alternative Wastewater Rate Structures • Preliminary Pricing Objectives • Staffing Assessment Overview • Wrap -up 7/25/2014 ff. a. 1 • Develop financial plan and rates for wastewater enterprise • Review recycled water rates • Review capacity fees and environmental and development - related charges • Assess organizational and staffing needs • Benchmarking overview Fes. FRAMEWORK 1 DEVELOPMENT Project Initiation Quality Assurance Fee and Reserve Review Pricing Objectives PHASE MODEL 2 DEVELOPMENT Financial Plan Cost of Service Analysis Rate Calculations Staffing Assessment WAS, 1 3 1 IMPLEMENTATION Comprehensive Report Easy -to- Understand Presentations Stakeholder Meetings STAKEHOLDER AND BOARD MEETINGS 3 a 7/25/2014 %) • Operating Reserve • Capital /R &R Reserve • Rate Stabilization Reserve • Emergency Reserve • Dedicated Reserves • We will survey other agencies and bring recommendations for different reserves s 6 7/25/2014 91 <by of Service Reenue ust Requirements omer Class • The method to recover costs from users in proportion to their use of the system, recognizing the impact of each class on system facilities and operations — A cost -based process of converting revenue requirements into unit costs — Allocation of cost of service to customer classes is based on customer usage characteristics ® Cost of Service is the fundamental benchmark used for establishing utility rates in the United States • Rationale: - Different types of customers incur different costs because their discharge characteristics vary amongst each other - Cost of service allows the matching of rates charged to each group with the costs of serving them — Each group will "pay its own way "; no subsidies -------- 7/25/2014 4 •Examine inflow of the treatment plant and other factors (plant balancing) •Compile flow and strength (BOD and SS) of non - residential customers ' • -Estimate residential loadings to check if they are reasonable _„__. • Allocate O &M and capital costs by function • Allocate functional costs to strength or flow • Allocate revenue requirements based on above allocations • Determine allocations to flow and strength (BOD and SS) • Determine unit costs of flow, BOD and SS • Distribution of flow and strength (BOD and SS) costs to customer classes 9 7/25/2014 5 7/25/2014 n 7/25/2014 Commercial customers 7/25/2014 Per dwelling unit; Fixed Only Per account; Per fixture unit /building area Actual water usage (with /without cap); Variable Only Winter water usage (with /without cap); /o of historical water usage; Indoor water usage Fixed and Variable Combination of the above bases for fixed and variable Fixed Only (Current Structure) Variable Only Fixed and Variable Revenue stability; Predictability; Simplicity; Minimizes impacts Charges proportional to use; Affordability; Greater incentive for conservation More equitable than fixed only; Some incentive for conservation; Some revenue stability 17 Charges not proportional to use; Less incentive for conservation; No affordability Revenue instability; Significant administrative effort; Additional costs of staffing and data acquisition; Customer impacts Significant administrative effort; Additional costs of staffing and data acquisition; Customer impacts 18 7/25/2014 E Revenue stability; Fixed Only Predictability; Simplicity Variable Only Charges proportional to costs of subject to providing service; minimum (Current Simple to explain; Structure) Minimizes impacts Fixed and More equitable than fixed only; Variable Some revenue stability Incentive for conservation Charges not proportional to costs of providing service; Customer impacts Revenue instability Some administrative effort; Customer impacts 19 • Equitability (cost of service based) • Minimization of customer impacts • Rate stability • Affordability • Simple to understand and explain • Administrative ease • Revenue stability • Conservation ___. --- - - ---- 20 7/25/2014 10 Customer -:. -U Qr. 7/25/2014 11 PRELIMINARY PRICING OBJECTIVES Pricing Objectives Descriptions Equitability (Cost of The rate structure should ensure that each customer class is contributing Service Based equitably towards revenue requirements based upon the costs of providing Allocations) service to each customer class. Minimization of The rate structure should be developed such that adverse rate impacts on each Customer Impacts customer class are minimized. Rate Stability The rate structure should minimize dramatic rate increases or decreases over the planning period. Affordability The rate structure should not overly burden low volume customers. Simple to The rate structure should be easy for District customers to understand, utilizing a Understand and moderate level of educational tools. In addition, the rate structure should be Explain able to be effectively maintained by District staff in future years. The rate structure should be compatible with District's billing system. In addition, Ease of Implementation the rate structure should allow for the continuation of existing management and system reports. y p ue Stability The rate structure should rovide for a stead and redictable stream of pry Le, V revenues to the utilit under va in conditions. g vation The rate structure should encourage water conservation. 21 Customer -:. -U Qr. 7/25/2014 11 • "Minimization of customer impacts ", 1� "Simple to understand and explain ", and _I HATE change! "Administrative ease" Mete objectives favor1 retaining the current rate structure ® "Conservation ", "Affordability" and "Equitability" objectives favor a variable rate structure 23 24 7/25/2014 12 ® "Revenue stability" and "Rate stability" objectives favor a fixed rate structure Z" .mac 0-0-*-* ....__- CONTINUOUS IMPRDVE MEN T... ENGAGE the staff to understand the organizational structure, culture, and employee and stakeholder perceptions of the Utility. ASSESS operating procedures, roles and responsibilities, coordination and collaboration, policies, technology, and processes used to meet the expanding requirements of the District's business. COMPARE the District with those of others to identify staffing considerations and practices. • ENHANCE the District's staffing and resource utilization to effectively and efficiently provide services to its service area. 2s 26 7/25/2014 13 Understand the staffing vision and EXTERNAL COMPARISON challenges from management's perspective Metric benchmarking to industry and selected peers Collaborative process E- Survey provides everyone in the Process benchmarkingto best organization with opportunity to provide practices input Individual and Group interviews !8* Observe work areas, major assets and technologies, logistics, and other "Forward looking" operational and maintenance Validation of findings by OPT is requirements important 27 STAFFING AND ORGANIZATION ASSESSMENT PROCESS Multiple strategies are used to gather both qualitative and quantitative information Interviews Employee Benchmarking L • Board Survey • Key metrics • Management compared to peer • Staff •Distributed to all agencies employees • Metrics determined -Administered by Board & anonymously Management input 28 7/25/2014 14 r - r , ¢ -Aa a�= :, i What do you see? What did the Pilot think? You look Funny!! 29 30 7/25/2014 15 UtllityA Utility Utility • Project Kick -off • SNA Interviews • Recycled Water • Benchmarking • Project Introduction • Employee Survey Policy Discussion Workshop to Board • COS Study — Pricing • SNA Interviews • Validation of Objectives Workshop Interview Findings • Present • Present • Discuss SNA Findings • Submit Final Study Benchmarking Plan Benchmarking • Finalize COS Study Reports • Offsite Financial Results • Prepare Draft • Rate Model Training Planning Workshop • COS Study Workshop Reports and Manual • Present COS Study Results 31 32 7/25/2014 16 'r Service Charge $69,447,000 $3,784,000 $73,231,000 64% of Concord $13,500,000 $3,305,000 $16,805,000 15% ,cled Water $0 $260,000 $260,000 0% ierty Tax $0 $8,160,000 $5,535,647 $13,695,647 12% Pacity Fees Other REVENUE $0 $6,418,000 $6,418,000 6% $3,284,600 $354,000 $735,670 $4,374,270 4% $86,231,600 $22,281,000 $6,271,317 $114,783,917 100% 34 7/25/2014 17 • O &M Fund -- Estimated beginning balance for FY 2015 - $13.2M — Prudent balance is assumed to be 10% of expenses Debt Service Fund — Debt service funded by property taxes, no fund balance Self- Insurance Fund -- Estimated beginning balance for FY 2015 - $4.5M Sewer Construction Fund — Act as the "checking account" for the utility — Recommended minimum balance is $30M 35 7/25/2014