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Home My WebLink About01. Conduct the second Financial Planning WorkshopLICENTRAL SAN January 16, 2025 Page 1 of 28 Item 1. FROM: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER REVIEWED BY: GREG NORBY, DEPUTY GM - ENGINEERING & OPERATIONS PHILIP LEIBER, DEPUTYGM -ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER SUBJECT: CONDUCT THE SECOND FINANCIAL PLANNING WORKSHOP IN WHICH THE FOLLOWING WILL BE PRESENTED AND DISCUSSED: • REVIEW OF FIRST FINANCIAL WORKSHOP RESULTS; AND • OVERVIEW OF INTERNAL CAPITAL IMPROVEMENT PROGRAM UPDATE PROCESS AND RESULTS; AND • FINANCIAL CONDITION REVIEW; AND • UPDATED FINANCIAL PLANNING ASSUMPTIONS AND OUTLOOK FOR PERIODS BEYOND THE TWO-YEAR RATE PROPOSAL; AND • COST OF SERVICE RESULTS INCLUDING PROPOSED TWO-YEAR SEWER SERVICE CHARGE (SSC) RATES BY CUSTOMER CLASS; AND • RECYCLED WATER RATE PROPOSAL; AND • SUMMARY OF SSC RATE PROPOSAL AND COMPETITIVE RATE COMPARISON TO PEERS Central San's sewer service rates were approved through Fiscal Year (FY) 2024-25. New proposed rates for FY 2025-26 and beyond require completion of a Cost of Service Study and initiation of a Proposition 218 rate setting process. This Cost of Service Study has been completed, resulting in some proposed changes in cost allocations between customer classes, and resulting proposed rate changes. On December 18, 2024 the first of two Financial Workshops was held with the Board of Directors (Board) to review the Proposition 218 process, discuss the preliminary Cost of Service Study results, review potential rate proposal scenarios, and to generally commence the rate setting process. The Board provided initial guidance to staff indicating a preference for a two-year rate proposal, with overall rate adjustments for single family residences not to exceed 4%. Staff were to return at the next workshop with additional rate proposal implications resulting from this direction. At the second workshop, Staff will review the attached presentation, which provides additional detail about the process used to revise the Ten Year Capital Improvement Program to accommodate the Nutrients project in compliance with the San Francisco Regional Water Quality Control Board Order of July 2024; January 16, 2025 Regular Board Meeting Agenda Packet - Page 5 of 34 Page 2 of 28 the District's Financial Condition; the rate outlook beyond the current two year proposal; additional detail regarding the Cost of Service study results including rates for all of the customer rate categories; proposed recycled water rates; and Central San's competitive rates position compared to peer agencies. The Board's direction to staff resulting from this second workshop will allow staff to commence the Proposition 218 process in early February through notification to customers of the proposed two-year rate adjustments, in anticipation of a public hearing on April 17, 2025 to approve the proposed rate adjustment that would be effective July 1, 2025. With this direction on rates, staff can also commence in January the preparation of the FY 2025-26 budget, which will result in the distribution for review of the proposed budget in May, and scheduled adoption of the budget on June 5, 2025. Staff look forward to the Board's further deliberations and guidance on this important matter on January 16, 2025. Strategic Plan re -In GOAL ONE: Customer and Community Strategy 1— Deliver high-quality customer service, Strategy 2 - Promote initiatives to advance affordable and equitable access to services GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 2 - Encourage and facilitate public participation, Strategy 3 - Maintain financial stability and sustainability GOAL SIX: Infrastructure Reliability Strategy 1 - Manage assets optimally, Strategy 2 - Execute long-term capital renewal and replacement program ATTACHMENTS: 1. Presentation January 16, 2025 Regular Board Meeting Agenda Packet - Page 6 of 34 Page 3 of 28 Attachment 1 January 16, 2025 Regular Board Meeting Agenda Packet - Page 7 of 34 Page 4 of 28 Overview of Today's Presentation 1. Financial Workshop #1 RecapWOC7a _ 11 Review of Internal Capital Planning Workshops and Results 5. III. Current Financial Condition Review IV. Two -Year Proposal: Two 4% SSC increases* and Two Scenarios for Subsequent Rate Outlooks \ Cost of Service and Proposed Rate StructureF - VI. Recycled Water VII. Proposed SSC Rates Recap VIII. General Manager Concluding Remarks , FY 2025-26 increase is 4% for Single -Family Residences but 4 Provides an overall revenue increase of 2.5% due to Cost of - Service -related changes 3 January 16, 2025 Regular Board Meeting Agenda Packet - Page 8 of 34 Page 5 of 28 Current 10 -Year CIP FY 2024-25: $1.003 Billion $46,600,000 $65,250,000 $66,399,000 $66,750,000 $63,495,000 $58,400,000 $51,900,000 $46,950,000 $43,750,000 $45,250,000 $554,744,000 $300,000 $500,000 $112001000 $4,000,000 $4,000,000 $7,500,000 $9,500,000 $18,000,000 $19,000,000 $15,000,000 $79,000,000 $23,327,000 $34,002,000 $31,333,000 $31,625,000 $32,675,000 $29,875,000 $29,875,000 $30,030,000 $30,530,000 $30,530,000 $303,802,000 $5,235,000 $5,075,000 $4,525,000 $2,725,000 $2,725,000 $2,475,000 $2,475,000 $2,475,000 $2,475,000 $2,475,000 $32,660,000 RN.- AOOAW M seoaoa= sa.'n' oo wjngo a� s2o'Mm w .M5 nZ026 nM, n202B nXr_9 FY i0P ez.3 r,.,; —13 fY hl30 5 ■ Treatment Plant ■Nutrients ■ CaRection System ■ General Improvements ■Recycled Water Proposed 10 -Year CIP FY 2025-26: $1.265 Billion Total Uninflated CIP $71,250,000 $81,849,000 $66,150,000 $58,995,000 $57,050,000 $42,250,000 $16,750,000 $8,250,000 $8,750,000 $22,350,000 $433,644,000 $4,000,000 $5,000,000 $20,000,000 $30,000,000 $35,000,000 $55,000,000 $100,000,000 $100,000,000 $100,000,000 $50,000,000 $499,000,000 $35,502,000 $32,233,000 $27,275,000 $28,525,000 $24,375,000 $24,375,000 $24,530,000 $24,530,000 $25,030,000 $30,650,000 $277,025,000 $6,325,000 $5,975,000 $3,575,000 $3,575,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $39,400,000 sreo.000.000 si4a_000.000 Slto,opp,y pp 1 ' ' Sioa.000,000 - SW.000.OW 55x,000,000 — Sox.xxx nxx 520.000.x00 SD Fr mx6 n2x21 f•'mxa rx mza rx m3x nrua F1'zo31 fl2a33 ry m3a nm35 ■Treatment Plant ■ Nutrients ■ Collection System ■General Improvements ■ Recycled Water January 16, 2025 Regular Board Meeting Agenda Packet - Page 9 of 34 Financial Workshop #1 Recap and Results 1 Presented overview of Capital Improvement Program (CIP) for next 10 years Presented baseline and 3 rate scenarios (based on Single Ar - Family Rate Case) Previous baseline: 2 -year rate of 4.0% with $170 M debt Scenario A: 2 -year rate of 4.5% with $370 M debt Scenario B: 2 -year rate of 5.25% with $225 M debt • Scenario C: 2 -year rate of 6.5% with NO added debt vi • Board tentatively selected a variant of Scenario A: 4.0% increase for two years, with staff to present rate and debt outlook beyond two years Page 6 of 28 II. Review of Capital Planning Workshops and Results Greg Norby, Deputy General Manager — Engineering & Operations January 16, 2025 Regular Board Meeting Agenda Packet - Page 10 of 34 I Page 7 of 28 Purpose and Scope of Five Workshops Review of FY 2023-24 capital program activity, lessons learned, and SWOT analysis; summary presented to E&O Committee on October 2, 2024 Process for CIP prioritization and sequencing and initial assessments on how nutrients projects, as currently identified, may impact the CIP Capital Projects, Planning, and Optimization Divisions' current roles and II responsibilities for CIP; review of program delivery challenges and solutions;,,, Revising of FY 2024-25 10 -Year CIP to free up delivery capacity for approximately $500 M in new nutrients project activity Recap of key findings and action items with senior staff and Executive Leadership Team Workshop #4 Purpose and Limitations Objective of the exercise was to confirm initial feasibility of incorporating approximately $500 M in nutrients -related projects to meet 2034 compliance target ($79 M was already in 10 -year CIP; net increase is $420 M) Feasibility determined by balance of priorities, risks, and constraints Results are intended as a transitional work product to guide near-term rate setting and financial planning for FY 2026-27 Senior staff from Plant Operations, CSO, Maintenance, Capital Delivery, Planning, Optimization, and Regulatory achieved consensus on the specific changes 158 M in relatively lower -priority projects reprogrammed to beyond the 2034 horizon to provide delivery and funding capacity needed for nutrients projects The Nutrients Management and Energy Management District Projects will be developed over the next 18 to 24 months. Results will confirm specific major projects' relative prioritization, sequencing, and estimated cost. January 16, 2025 Regular Board Meeting Agenda Packet - Page 11 of 34 a Page 8 of 28 $158 M Adjusted in 10 -Year CIP Collection System Renovation Program — Phase 3 $196 M ($38.5 M) $157.5 M Prior planning level mileage targets being updated through condition assessment and Sanitary Sewer Infrastructure Plan Solids Handling Improvements — Phase 1C $62 M ($22 M) $40 M Split project scope and moved the work associated with additional air pollution control in future Steam Renovations — Phase 2 $24 M ($24 M) $0 Awaiting feedback from the Energy and Nutrients management I planning efforts Wet Weather Flow Management - Phase 2 $15.5 M ($15.5 M) $0 Awaiting feedback from Nutrients Management and updated site planning Standby Generator Expansion $6.5 M ($6.5 M) $0 Awaiting feedback from the Energy and Nutrients Management planning efforts Primary Expansion (Tank 5) $5 M ($5 M) $0 Current focus is on the plant secondary process, no urgency to the primary tankage expansion Cogen Replacement $5 M ($5 M) $0 Awaiting feedback from the Energy and Nutrients Management planning efforts Filter Plant Improvements — Phase 1 C $17 M ($17 M) $0 $60 M in upgrades already done or in progress, no immediate driver for additional filters capacity Surcharge Soil Pile Relocation & DAFT Tank $24.4 M (24.4 M) $0 Consolidated into Nutrients Management Improvements (moved to Nutrients Program) Subtotal ($157.9 M) How the 10 -Year CIP Changed Nutrient All Other Projects Projects TOTAL (millions) (millions) (millions) 1 • • J Changes from Capital Planning +$420 -$158 +$262 Workshops Updated CIP $499 $766 $1,265 January 16, 2025 Regular Board Meeting Agenda Packet - Page 12 of 34 4 Page 9 of 28 Major Factors Influencing 10 -Year Picture This is data that will be available in next 2 years: II Energy and Nutrients Management and impacts to CIP; various existing projects and new projects will be identified that require significant coordination and scheduling Condition Assessments needed for several of the projects to determine a more accurate timeline or overall potential cost impact; may have significant impact on reduced Collection System funding �I r Delivery capabilities of the Capital Program and the limit for y construction activities within the treatment plant Design, Construction, and Supply Chain market capacity and cost trends +� :'PEy III. Current Financial Condition Review Philip Leiber, Deputy General Manager - Administration January 16, 2025 Regular Board Meeting Agenda Packet - Page 13 of 34 Page 10 of 28 V. Recent Financial Accomplishmentstlb- =`; Overall Budgetary Control and Cost Reductions Eight years of nearly flat Operations and Maintenance (O&M) budgets (through FY 2021-22); some minor increases in O&M subsequently California Public Employees' Retirement System (CaIPERS) Healthcare Plan switch; $5.5 M savings annually started in FY 2019-20 2018 Bond Refinancing: $8 M interest savings through 2030 �- 2021 UAAL Payoff: Current estimate of —$3 M projected interest savings through 2029 (actual being monitored annually) State Revolving Fund (SRF) Financing for Solids Handling Facility Improvements (Solids Project): $20+ M interest savings over 30 years based on likely use of $100 M of the $173 M loan Spending Control after Budget Adoption Past three years average of $3.6 M O&M savings FY 2024-25 anticipated — $3+ M O&M spending savings Recent Financial Accomplishments Building Reserves to Weather Turbulent Times Fully funded O&M and Sewer Construction Reserves Rate stabilization account: $12.7 M Increased Catastrophic Self -Insurance Reserve from $5 M to $7.5 M Greatly improved funded ratios for employee -related liabilities 97.4% for Pension UAAL at 12/31/2023 and 98.6% for Other Post -Employment Benefits (OPEB) at 7/1/2023 Recovery of —$1 M of COVID response costs from State, $800 K from FEMA (with an additional $38 K still pending from FEMA) Optimization and Benchmarking Creation of Operations & Organization -Wide Optimization Division and Division Manager appointed Continuation of national/state benchmarking study participation Annual Optimization report documents continual improvement efforts Process optimization improvements a key focus in next two years January 16, 2025 Regular Board Meeting Agenda Packet - Page 14 of 34 FY 2024-25 Central San Funding Sources $231.1 M Total SSC is the main "controllable" (through setting rates) revenue source, used to cover projected expenses not funded from other revenue sources Borrowing can also be used to cover capital funding needs City of Concord, $29,560,000 All Other Revenue Capacity Fees, Sources, $11,532,123 $5,000,000 Tax Revenw $24,711,87 Debt Prod $39,000. 17 Revenue provides $192.1 M of the revenue requirement; balance from SRF Loan SSC Annual Review Requirement While not binding for FY 2025-26, the Ordinance that set rates for FY 2024-25 indicated "Prior to imposing the rate set forth under this Ordinance for Fiscal Year 2024-25, the Board of Directors shall consider, at a noticed public hearing:" A. District's proposed budget; and B. Projected capital and operations and maintenance costs; and C. Its financial condition; and D. Other factors which bear on the revenue requirements of the District. Ak/-1, January 16, 2025 Regular Board Meeting Agenda Packet - Page 15 of 34 Page 11 of 28 Sewer Service Charges, $121,310,000 19 A. Proposed FY 2025-26 Budget Budget Process Not Yet Started (Budget to be presented in early May) O&M for FY 2025-26 Per Financial Plan: $101.2 M as of January 2025 Capital Budget for FY 2025-26 (placeholder pending start of budgeting) Per Prior 10 -Year Cl P: $75.7 M Per Current 10 -Year CIP: $119.4 M B. Historical and Projected O&M Costs Slao,000,000 5120,000,00D 5100.00D.000 S80.00D.0 560.00D.000 5411, SZo,000,000 _ _ i 0 0 0 aK T a-1 uY � a-1 H N N N H N rV N N h N H� T ,e rzQd.d?:Za,a�.bKohda��, aa.6��bd.a ��r rQ+2RlZRR�r}Z��&�Q�RQ�i2 Budget ❑ 2021 Debc Service ■ Projection O 2021 Debt Service Summary: Eight years of O&M budget stability at an average of about $89 M Inflationary pressures in FY 2022-23 forward result in modest O&M budget growth Cost growth mitigated through optimizations and other efforts (bars represent Financial Plan 20 placeholders for now) January 16, 2025 Regular Board Meeting Agenda Packet - Page 16 of 34 Page 12 of 28 Page 13 of 28 7B. Historical and Projected Capital Costs s1Bo Sustained Higher Investment Level $190 Ram P Catch- j P 5170 — UP_ 5100 se0 a M0 Maintain sw � I -I 1 Ob �° ti� 1y �'' �P Ly �b b1 A ti9 .y0 1 y~ y^, y0 .1% .yb .ti1 b cl n ,�•Y ..�R. '� ..p ,y9 v .r ■Grryiorwards ■UP Budl. j"Est—d&p-di[ures"pre FY17/18•OPJProje dj Summary: Transition from "Maintain" to higher levels of investment, with recent "Catch -Up" period to draw down a growing carry -forward C. Summary Outlook and Current Year Results Financial Condition is Good Required Fiscal Reserves are fully funded $12.7 M in Rate Stabilization Account Pension: 97.4.% funded; OPEB: 98.6% funded Favorable variances are anticipated from FY 2024-25 YTD Results through November 2024 O&M Variances Total revenue variance: $31 K through November Total spending variance: $4.6 M Net Variance —$3 to 4 M favorable b ear end YY Capital Variances Total revenue variance: $145 K unfavorable Total capital project spending of $131 M with carryforward Detailed capital forecast conducted (discussed subsequently) January 16, 2025 Regular Board Meeting Agenda Packet - Page 17 of 34 C. Debt Overview Outstanding Debt: Original Issuance Protected Balance at 6/30/2025 Bonds 2018 Revenue Bonds: $19,450,000 $9,910,000 2021 Certifications of Participation: $50,570,000 $27,925,000 SRF Loan $173.1 M for Solids Projects Drawn to date: $ 0 $55,169,297 (FY 2024-25 draws est. at $39 M) Total $70,020,000 $93,004,297 I � I � $10,006,000 � I 58,006,000 1 it Debt Service Chart sa.666,006 (Principal and Interest per Year) sa,666,u66 ��I1111111 IIII�� I $2 600,006 rnq,m oqo �o oqo 'I n .+.. .. .+.. ry ry n n ry ry ry n ry ry n n n ry n n n ry ry n n ry n rv��lry ry n n ry ry ry n n • 2021 5RF Lw ■ 2018 Bonds 09 ■ 2000PS . 2021 COPS ■ 1999 Recycled Water La . 19941199,912002 Refunding Revenge 13-& Page 14 of 28 January 16, 2025 Regular Board Meeting Agenda Packet - Page 18 of 34 C. Debt Overview Debt used to fund CIP (last 10 years; projected 10 years) Debt Funded CIP $ In millions 1,400 1,266 100 1,200 MA - 1,000 800 668 60% 600 355 40% 400 200 106 — 209/ - - ' 10Years through FY 2024-25 Next 10yearsfrom FY 2025-26 Debt Capital Spending —Percentage January 16, 2025 Regular Board Meeting Agenda Packet - Page 18 of 34 C. Reserves BOARD POLICY (BP) 017 FISCAL RESERVES Defines and governs use of: O&M Reserve Sewer Construction Reserve` Self -Insurance Reserve Rate Stabilization Account OPEB Trust and Pension == Prefunding Trusts C. Reserves On Track / Healthy Page 15 of 28 Reserves per 6/30/24* $42.5 $134.5 $9.2 $10.7 $90.1 $1.1 $504.2 Policy Required Level at 6-30-24 40 41.7 9.0 Difference 2.5 92.8(3) 0.2 Reallocations (2.5) 1.5 1.0 Balances After Reallocations $40 $134 5 $9.2 1199 $921 $2.1 $504 2 * Reserve balances per pre -audit financial statements and external sources as applicable (1) OPEB trust reported a balance of $92.1 million as of August 31, 2024, most current balance known immediately prior to the presentation of this position paper to the Board (2) Actuarial value of assets per 12/31/23 CCCERA valuation (3) Balance is higher than the policy required level due to unspent CIB carryforwards (total authorized spending less actual spending) January 16, 2025 Regular Board Meeting Agenda Packet - Page 19 of 34 Page 16 of 28 W. D. Other Factors that Bear on the Revenue Requirements of the District Economic outlook: Economy has generally remained resilient Inflation higher than 2% target but down substantially from post- COVID peak The public continues to feel the impact of cost pressure and inflation in many expenses Project Uncertainty: Nutrients Management — compliance will be costly, though likely less than first thought with use of innovative technology; project cost estimate to be significantly refined by January 2026 and further refined by January 2027 .. Mt. View Sanitary District — Central San Consolidation Study Study underway; results targeted for 2026 Summary Assessment 111,61, A. District's proposed budget; and Process not yet commenced. Budgets Budgets expected to be consistent anticipated to be consistent with financial plan. with financial plan. B. Projected capital and operations and maintenance costs; and C. Its financial condition; and Capital needs in the next 10 years remain heightened, though slower pace expected versus last year's financial plan. Significant uncertainty as to timing of major projects. Water exchange/nutrients Issue Pending. Good. D. Other factors which bear on the External economy continues to be resilient. revenue requirements of the District. January 16, 2025 Regular Board Meeting Agenda Packet - Page 20 of 34 Rate adjustments needed to fund nutrients program. Maintain fiscal and rate adjustment discipline. Rate adjustments needed for nutrients compliance effort; more clarity on costs anticipated in 2026. Page 17 of 28 IV. Two -Year Rate Proposal at 4.0% Scenarios and Outlook Danea Gemmell, Planning & Development Services Division Manager t '.0,1 January 16, 2025 Regular Board Meeting Agenda Packet - Page 21 of 34 Rate !Scenario Summary 7 .. Scenario E Debt)(Emphasizing (Emphasizing Year 1 Overall Revenue 2.5% 2.5% (4.0% SFR) (4.0% SFR) Year 2 Overall Revenue 4.0% all classes 4.0% all classes Rate Stabilization Account Draw Down (Year 1) $6 M $6 M Total New Debt Needed $270 M $370 M Year $150 M $215 M Year $120 M $155 M Year 3-10 Rates 5.5% to 6% 4% to 5% December 18 Workshop Alternatives Debt $225 M $370 M (Scenario B) (Scenario A) Year 3-10 Rates 5.5% 4 to 5% January 16, 2025 Regular Board Meeting Agenda Packet - Page 21 of 34 Page 18 of 28 Proposal Outlook m -No-Year Rate Annual Single -Family SSC Outlook Previous Baseline Scenario (FY 2023-24) - $170 M Future Bonds 31.400Hls`1 toricV AV dopted V Years 3.12Rate Plan $1,158 $1.200 $1.098 $1.041 $935 51.000 $896 54815 4,0% $690 $697 $725 $754 4 704�6 $800 $660 4,0% n!a - 5600 — — .6: $490 $0 off -ft" atl FY 2022 112023 Fr 2024 FY 2025 FY 2026 1/2027 Fr 2028 FY2029 FY2030 FY2031 FY 2033 Fl2031 Fl 203d FY2035 9 �iFr at 31' Annual Single -Family SSC Outlook Scenario D - $270 M Future Bonds (Higher Reliance on Rates) Staab S1.aoc HistoriclAdopted Proposed Years3-10Rate Plan $1.214 $1,151 5.5% $1,200 $1.091 5.5% $1.034 5.5% 3980 5.5% $1.000 $ $881 5.5%.5% $831 6.0% 54 E784 8.0% $Ko $680 $997 $725 q0%% ao% $ 4.5% 1.0% 4.0% Na $200 $4 FY 20222 FY 2023 FY 2024 FY 2025 FY 2026 FY 2021 FY 2025 FY 2029 FY 2030 F1' 2031 FY 2032 FY 203.1 FY 2034 fY 2035 Note: FY 2025-26 4.0% rate adjustment for SFR customers; 2.5% overall rate revenue adjustment 32 January 16, 2025 Regular Board Meeting Agenda Packet - Page 22 of 34 Page 19 of 28 Annual Single -Family SSC Outlook 44 Scenario E - $370 M Future Bonds (Higher Reliance on Debt) 51.600 � $1.400 HisFortclHdopted Proposed Years 3-10 Rate Plan 51,200 $1,000 5600 $fico 5400 $200 $1,093 $1,051 4.0% $972 $1.011 10% 4.0% $699 $935 4 4.0% .0% 4.0 __. $699 $725 $754 $7&1 $ 3 5,0% ■ ■ 4�m FY 2022 FY 2023 FY2024 FY2025 FV2026 F12027 FY 2026 I.. 12030 12011 FY 2032 FY 2033 1Y2034 12035 Note: FY 2025-26 4.0% rate adjustment for SFR customers; 2.5% overall rate revenue adjustment Use of Debt Helps to Mitigate Future SSC Increases Scenario D - $270 M Future Bonds (Higher Reliance on Rates) Debt Financing Plan FY 2025-26 5160,000.000 $140,m0.Om 28.0% of proposed 10 -year CIP g12om6.om is funded with debt sloa,mo.am $eo,noo.mo �m000.m6 saonoo.mo sx ow.mo so "2026 FY202J FY202S FY2029 FY2030 FY1031 FY2032 FY2033 FY2094 FY2035 •CehFYNed •SUF.M •% Fu d January 16, 2025 Regular Board Meeting Agenda Packet - Page 23 of 34 Page 20 of 28 Use of Debt Helps to Mitigate Future SSC Increases Scenario E - $370 M Future Bonds (Higher Reliance on Debt) $78,395,000 $89,375,000 $87,318,000 $119,163,000 $122,068,000 $53,601,333 $73,256,333 $64,763,333 $85,763,333 $55,583,333 1 $829,286,667 $41,000,000 $39,000,000 $33,000,000 $5,000,000 $0 $0 $0 $0 $0 $0 1 $118,000,000 Total Uninflated CIP V. Cost of Service and Proposed Rate Structure Danea Gemmell, Planning & Development Services Division Manager Thomas Brightbill, Senior Engineer - Financial Planning January 16, 2025 Regular Board Meeting Agenda Packet - Page 24 of 34 Debt rinancingPlan FY 2025-26 S1ao,BBa,°oo 34.5% of proposed 10 -year CIP is funded with debt $Fi0000.BB0 sw om,°ao So FV 1026 fY2°9 FY 2026 F1'2°9 erz°a] FY 20.11 F1'2°31 fY2°S1 FY 2036 F1'2°3i ■Cess Farded ■SWFundetl ■Band Funded V. Cost of Service and Proposed Rate Structure Danea Gemmell, Planning & Development Services Division Manager Thomas Brightbill, Senior Engineer - Financial Planning January 16, 2025 Regular Board Meeting Agenda Packet - Page 24 of 34 37 Proposed 2 -Year Rate Schedule Customer Class Residential Units CU111111111111!IIIIIIII1111111 Select Non -Residential Rate Impacts a Single Family Dwellings Dwelling Unit $725.00 $754.00 4.0% $784.00 4.0% Multi Family Dwellings Dwelling Unit $647.00 $625.00 -3.49,. $650.00 4.0% Accessory Dwelling Units Dwelling Unit $353.00 $335.00 -5.1% $348.00 3.9% Non-residential 7.6% $572 Medium -High 358 $5,647 8.1% Commercial - Low per HCF $7.94 $8.12 2.3% $8.44 3.9% Commercial - Medium Low per HCF $9.69 $10.38 7.1% $10.80 4.0% Commercial - Medium per HCF $11.43 $12.30 7.6% $12.79 4.0% Commercial - Medium High per HCF $12.52 $13.54 8.1% $14.08 4.0% Commercial - High per HCF $15.06 $16.70 10.9•o $17.37 4.0% Schools 38 Elementary per student $9.30 $9.94 6.9% $10.34 4.0% Intermediate per student $18.61 $19.63 5.5% $20.42 4.01/. High School per student $18.61 $19.57 5.2% $20.35 4.0% Overall Rate Revenue Adjustment 2.5% 4.0% FY 2025-26 4.0% rate adjustment for SFR customers; 2.5% overall rate revenue adjustment FY 2025-26 percentage increases vary due to Cost of Service calculations and rounding FY 2026-27 percentage increases vary due to rounding Page 21 of 28 V. COS and Proposed Select Non -Residential Rate Impacts NumberCommercial 4P ..ProposedProposed $ change Rate Class Water Low Meters 691 sewer bill change $3,343 to median 2.3% bill $76 Medium -Low 195 $3,081 7.1% $219 Medium 147 $7,521 7.6% $572 Medium -High 358 $5,647 8.1% $460 High 21 $964 10.9% $105 Low Medium Low Medium Medium High High i Meed Use o% Food* rDelis �rt Shops ® ,I .. Fo-eam SnoPs � 1".... JLa.: 38 " January 16, 2025 Regular Board Meeting Agenda Packet - Page 25 of 34 VI. Recycled Water Danea Gemmell, Planning & Development Services Division Manager Recycled Water Consumption Categories Utility Water -Treatment Plant Residential Fill Station Class I Truck Fill Class I Meters (Former Treated Customers) Class II Meters (Former Untreated Customers) FY 2023-24 Recycled Water Revenue is $549,390 Page 22 of 28 565 M Gallons in FY 2023-24 Residential Class II Fill Station 25.5% 0.5% tclass `Truck Fill _911111 0.1% Utility 61.9% -Utility - Class I - Class II Residential Fill Station Truck Fill January 16, 2025 Regular Board Meeting Agenda Packet - Page 26 of 34 Page 23 of 28 Proposed Recycled Water 3% Rate Increase' Zone 1 ReW customers are billed based on measured use $5.00 $4.50 $4.53 $4.67 $4.03 $4.15 $4.00 $4.27 $4.40 $3.50 $3.80 $3.91 $3.00 $2.50$2.16 $2.22 $2.00 i $1.81 $1.86 $1.92 $1.98 $2.04 $.10 ..- A— $1.50 $1.00 4, $0.50 $0.00 �ryo\gryotio �ryo�0�oti� �-10Y titi 0.ryoti �ry01`tioti� �ryo��tioyn �ryory5 ��ory1 ry1 Fkryorybtioti� 41 —11 --Class I (Former Treated) —*--Class 11 (Former Untreated) January 16, 2025 Regular Board Meeting Agenda Packet - Page 27 of 34 Page 24 of 28 VI. Staff Recommendation: Recommend Adoption of Sewer Service Charge Rates Philip Leiber, Deputy General Manager - Administration Recommendation Proceed with 4% single-family* SSC rate increases for FY 2025-26 and FY 2026-27 Alternatives for FY 2027-28 and beyond include scenarios for reliance on more debt or relatively higher rate adjustments; can be revisited after clarity on Nutrients Management cost Our rates continue to remain competitive; below or near median (without and with property tax revenue) * 2.5% overall increase for FY 2025-26 (due to cost of service changes) January 16, 2025 Regular Board Meeting Agenda Packet - Page 28 of 34 45 6 Central San Rates Continue to be Below Average San Francisco (SFPUC) - Santa Rosa Benicia Petaluma Rodeo Sanitary District Richmond Berkeley (EBMUD fortreatment) Pleasanton (DSRSD for treatment) Vallejo Sal and Flood Cont' Mt View Sanitary District Crockett Sanitary Depamnent Average Average of Agencies Surveyed Livermore Oakland(EBMUD for tmatrnent) Stege SD (EBMUD for treatment) Sunnyvale Concord (CCCSD fortreatneIt) Median Median of Agencies Surveyed west county waatawater District Brentwood_ Central San PROPOSED FY 25-28 Central San FY 2025-26(Proposed) Napa Sanitation Dishict central San Central San FY 2024-25 Nouato Sanitary District - Antioch (Delta Diablo fortreatment)' Pittsburg (Delta Diablo fortmatment) Bay Point(Celta Diablo fortreatment) San Leandro Union Sanitary District Fairfield -Suisun Sewer Distdct San Jose Castor Valley Sanitary District Hayward Rates in effect as of January 1, 2025 Dublin San Ramon Services District Orn Loma Sanitary Distdct $0 $200 $400 $600 511 $9,000 $1,200 $1,400 $1,600 $1,800 $2,000 FY 2024-25 Annual Sewer Service Charge per Single -Family Home Central San Rates are Below Average Even When Property Tax is Included San Francisco(SFPUC) r Sanla Rosa L Ben a trrrr�t� Petaluma Rodeo Sanitary Diatrkt i o Richmond Berkeley (EBMUDf ,treatrnenll Crockett Sanitary Depamment Ple.—ik,n (DSRSD Aorheatrnent) �1 Vallejo 5anitation and Flood Contml MI View Sanitary Diatmct Average Average ofA,gencies Surveyed L Stege 59 (EBMUD fir 12atrnenQ Oakland (EBMUD for TLty-- ntj Livermore Oential San PROPOSED FY 25-26 Central San FY 2025.26 (proposed) Median Median of Agencies Surveyed Central son west County wastewater Demes Central San FY 2024-25 sennyvale Concord (CCCSD for Treatment( Brentwood Novato Sanilary District Napa Sanitation "I" let Antioch (Delta Diabbforlreatmen0 PitSbuy (Dein Diablo for t2aMen1) Bay Point (Delb Dia Wo for treatment) rr FY 24-25 Sewer Service Charge San Leandro OF�g°Yn°�PfO1� Union Sanitery Oietic0 Falrfiel Suisun Sewerl) under San Jos Castor Valley Sanitary District Ray- Dublin San Ramon Services Distdct t ff Rates in effect as of 1, 2025 f J January Ore roma Sanita,y Ill $0 $200 $400 $600 0 $1,200 $1,0 $1,600 $1,500 $2,000 $600 $7,00 40 FY 2024-25 Annual Sewer Service Charge per Single -Family Home January 16, 2025 Regular Board Meeting Agenda Packet - Page 29 of 34 Page 25 of 28 Page 26 of 28 VIII. Summary of Recommendations and Closing Roger S. Bailey, General Manager ��_. _ X� _ P, Summary of Key Points Central San's financial position is favorable, reflecting strong financial policies and discipline to date Cost of Service study updates allocation between residential and non-residential classes 3. A moderate rate adjustment is needed 4. Established framework of multi-year rate proposal with annual check -ins has worked well in the past and is proposed for this two-year adjustment period Two-year rate proposal balances several factors including project outlook, overall spending trajectory, and cost mitigation of Prop 218 requirement (mailing, etc.) January 16, 2025 Regular Board Meeting Agenda Packet - Page 30 of 34 Rate Setting Schedule Financial Workshop #1 December 18, 2024 Financial Workshop #2 Receive draft Prop 218 Notice language January 16, 2025 DEADLINE to send Final Prop 218 Notice to printer February 7, 2025 DEADLINE to mail Final Prop 218 Notice (minimum 45 days before public hearing); February 28, 2025 Cost of Service study posted on CentralSan.org PUBLIC HEARING to review SSC rates for FY 2025-26 through 2026-27 or 2026-29 April 17, 2025 Draft Budget Book distributed May 16, 2025 O&M and Capital Budget hearings and adoption June 5, 2025 New SSC rates effective July 1, 2025 Page 27 of 28 January 16, 2025 Regular Board Meeting Agenda Packet - Page 31 of 34 a - - Additional Key Activities Affecting Rates for Years 3-10 Retain consultant for Nutrients Management February 2025.e New SSC rates effective July 1, 2025 Nutrients Management alternatives and cost estimate a Early Calendar Yr 2026 (10% design) available Rate check-in for Year 2 March 2026 —-- Year 2 rates become effective July 1, 2026 -.; Nutrients Management preferred approach refined cost available Early Calendar Yr 2027 Financial Workshop for FY 2027-28 rate development Early Calendar Yr 2027 Proposition 218 process Spring 2027 �0 New rates for FY 2027-28 effective July 1, 2027 January 16, 2025 Regular Board Meeting Agenda Packet - Page 31 of 34 Page 28 of 28 January 16, 2025 Regular Board Meeting Agenda Packet - Page 32 of 34