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Home My WebLink AboutRexburg Water Sewer and Sanitation Rate and Capitalization Fee Study Presentation_v21_with Notes Council Workshop Water, Sewer, and Sanitation Rate Study and Capitalization Fee Analysis Angie Sanchez Virnoche, Principal Angie Hammrich, Project Manager CITY OF REXBURG 1 Overview FCS retained to complete a Water, Sewer, and Sanitation Rate Study and a Capitalization Fee Analysis. Multi-year financial plan providing a forward look at each system’s needs Cost-of-Service Analysis and Rate Design for each system Capitalization Fee Analysis for water and sewer. Focus for today: Overview of the Rate Study Capitalization Fee Analysis results Present key data inputs and assumptions Summary of findings for each system Questions 2 Why A Rate Study? Enables each utility to remain self-sufficient Enables long-term fiscal sustainability Informs financial decisions and their impact Develops capital funding plan and evaluates future needs Living Plan sets rate path to achieve long-term planning objectives 3 Key Rate and Fee Study Components Revenue Requirement Financial Plan “Define Overall system Needs” Cost of Service Analysis “Equitable Cost Allocation” Rate Design “Collect Needed Revenue” Capitalization Fee “Determine Value of system capacity” Meetings, Presentations, Documentation 4 Governing Statutes/Guidance Idaho Code Title 50, Chapter 10 Finances Section 1030(f) allows cities “to prescribe and collect rates, fees, tolls or charges” Section 1032 “shall be and always remain self-supporting” Provide for all expenses of operation and maintenance of such works*, bonds, and interest, including reserves Capitalization Fees 2015 Idaho Supreme Court Ruling NIBCA** v. City of Hayden Identifies methodology to calculate connection/capitalization fees - Loomis v. Hailey Does not allow for including future facility costs *The term “works” shall include water systems, drainage systems, sewerage systems **NIBCA = North Idaho Building Contractors Association Start with statutes as they provide the authority and guidance for what is being requested. 5 Capitalization Fee Analysis 6 Overview of Capitalization Fees One-time charge, not ongoing rates Recovers value of system capacity new user will utilize Based on the replacement cost of system infrastructure investment Includes only existing infrastructure in use Calculated fee represents maximum allowable For capital use only 7 Overview of Capitalization Fees (cont.) Fee based on specific asset investment for each system Focus is value of system capacity rather than revenue producing 8 Capitalization Fee – Water Current Fee $2,403 MAX Capitalization Fee Supply & Pumping: $.30 per GPD Storage: $1.15 per GPD Transmission & Distribution: $1.14 per GPD Residential: 1,825 GPD $4,727 No Outside Cap Fee 9 Capitalization Fee – Sewer MAX Capitalization Fee Current Fee: $1,869 Residential – 198 GPD: $2,151 Rexburg Capitalization Fee: Treatment: $5.45 per GPD + Collection Rexburg: $4.47 per GPD +Shared Collection – Rexburg: $.94 GPD = $10.86 per GPD Shared Collection – Sugar City/Teton: $.94 per GPD each + Treatment $5.45 per GPD for each No Outside Cap Fee 10 Water Utility – Monthly Rates 11 Revenue Requirement Overview Determine the amount of annual revenue necessary to fund all financial obligations on a standalone basis Operating expenses | debt service (principal & interest) | capital Meet financial parameters and targets (coverage | reserves) Evaluate revenue sufficiency over a multi-year period Develop a rate plan to balance financial needs and minimize customer impacts 12 Forecast Basis Study Period: 2025-2030 Budget FY 2025/2026 Used as a baseline Financial Forecast Key Assumptions Customer Growth Water: 2.15% per year Operating Reserve Target Water: 120 days $1.09 – 1.17M Existing Debt Service Water: $6.9M Capital Plan 2025-2030 Water: $33.7M Expense Inflation 3.50% to 4.00% annual cost inflation Annual Rate Revenue Water: $4.6 – 5.0M 13 Capital and Funding 2025-2030 $33.7M capital costs Funding Sources S. WATER TANK AND WELL - 42 S Hidden Valley Road Pipeline WELL #10 -BURTON-WELL AND WELLHOUSE CONSTRUCTION, PUMPS, BOOSTERS Burton and North Well Fence and Landscaping 1.1 Zone 3 Well Increase Supply Capacity to Zone 3 $6,020,000 (Well 11) 1.4 New Burton Booster Increase Delivery Capacity to Zone 1 $270,000 1.9 Zone 1 1.5 MG Tank Increase Storage Capacity in Zone 1 $7,410,000 (Tank 5) 2.1 Zone 1 Well #1 Increase Supply Capacity to Zone 1 $3,920,000 (Well 12) Chlorinating water system Cathodic Protection 14 Water Rate Strategy– Rate and Debt Funded This rate strategy will support: Operating costs Full capital improvement program of $33.7M Annual New Debt Service $310k in FY2027 – FY2029 for $3.5M in new debt proceeds. $1.33M in FY2030 for $11.5M in new debt proceeds. Adopted Right of Way Charge & Asset Security, removed in 2026 15 Water Rate Strategy – Rate and Debt Funded Revenues meet annual operating needs Funds $33.7M in capital projects System Reinvestment Funding Phased – In, fully funded by FY2030 Adopted 16 Distribution of costs to customer classes based on their proportional demands on and use of the system(s). Use of industry standard methodologies*/practices Cost distribution considers usage characteristics and facility requirements City specific usage and demand Planning, engineering, and design criteria Determines unit costs as foundation for rate design Total cost by class (equity) Unit costs ($/usage; $/meter/account/ERU) * Industry Standard Methodologies; AWWA Principles of Water Rates, Fees and Charges, M1 Manual Cost of Service Analysis 17 Customer Meters & Services Base Capacity Peak Capacity Fire Protection Allocate Costs to Customer Classes Water Cost of Service - Methodology Accounts Meter Size Average Use Peak Use Fire Flow Req. * Industry Standard Methodologies; AWWA Principles of Water Rates, Fees and Charges, M1 Manual 4.44% 3.62% 24.85% 42.59% 24.50% 18 ±10% is considered within cost of service Residential is under-collecting Commercial is aligned with their cost-of service. Multi-Family collecting approximately 1.3x cost to serve Result of one rate schedule for all customers. Rate design proposals will work to align cost of service between classes Water Cost of Service Results (Revenue ÷ COS Findings) 19 Proposed Water Rate Schedule (Inside City) The largest change is the removal of the 6,000 gallons included in the monthly fixed fee. Every gallon is billed going forward. 20 Proposed Water Bill Impacts (Inside City) 21 ±10% is considered within cost of service By 2030, all classes are aligned with their cost-of-service using the proposed rate design. 2030 Cost of Service Results with Rate Design Review and revisit in three years to confirm it is acting as intended. 22 Sewer Utility – Monthly Rates 23 Forecast Basis Study Period: 2025-2030 Budget FY 2025/2026 Used as a baseline Financial Forecast Key Assumptions Customer Growth Sewer: 2.15% per year Operating Reserve Target Sewer: 120 days $1.2 - $1.4M Existing Debt Service Sewer: $799k Capital Plan 2025-2030 Sewer: $63M Expense Inflation 3.50% to 4.00% annual cost inflation Annual Rate Revenue Sewer: $6.07M – $6.61M 24 Capital and Funding 2025-2030 $63M capital costs Funding Sources SEWER PLANT CONSTRUCTION 52 Projects from 2022 Wastewater Treatment Plant Facility Planning Study 2023 Design of 80' Clarifier 2024 Construction of additional 80’ Clarifier 2023 Design of Bio-Tower and Aerated Oxidation Ditch 2024 Construction of Bio-Tower Aerated Oxidation Ditch 2026 Design of Additional 80' Clarifier 2027 Construction of Additional 80' Clarifier or when ADF exceeds 4.2 MGD 25 Sewer Rate Strategy– Rate and Debt Funded This rate strategy will support: Operating costs Full capital improvement program of $63M Annual New Debt Service $310k in FY2027– FY2028 for $3.5M in new debt proceeds. $2.08M in FY2029 – FY2030 for adding $20M in new debt proceeds. Adopted 26 Sewer Rate Strategy – Rate and Debt Funded Revenues meet annual operating needs Funds $63M in capital projects System Reinvestment Funding Phased – In, fully funded by FY2030 Adopted 27 Customer Flow BOD* Treatment TSS** Treatment Allocate Costs to Customer Classes Sewer Cost of Service - Methodology Accounts Gallons lb. of BOD lb. of TSS * Industry Standard Methodologies. *BOD = biochemical oxygen demand **TSS = total suspended solids 7.59% 44.67% 22.64% 25.09% 28 ±10% is considered within cost of service Residential over-collecting Commercial is aligned with their cost-of service. Multi-Family is slightly under collecting Result of one rate schedule for all customers. Rate design proposals will work to align cost of service between classes 2027 Sewer Cost of Service Results (Revenue ÷ COS Findings) 29 Proposed Sewer Rate Schedule (Inside City) Inside/Outside charges – not reviewing outside city factor 30 Proposed Sewer Bill Impacts (Inside City) 31 ±10% is considered within cost of service By changing the meter rate schedule to the MCE ratio, all classes are aligned to their cost of service. 2027 Sewer Cost of Service Results With Updated Rate Design 32 Sanitation Utility – Monthly Rates 33 Forecast Basis Study Period: 2025-2030 Budget FY 2025/2026 Used as a baseline Financial Forecast Key Assumptions Customer Growth Sanitation: 2.15% per year Operating Reserve Target Sanitation: 120 days $583 – 609k Existing Debt Service Sanitation: No Debt Capital Plan 2025-2030 Sanitation: $2.5M Expense Inflation 3.50% to 4.00% annual cost inflation Annual Rate Revenue Sanitation: $3.4 – $3.7M 34 Capital and Funding 2025-2030 $2.5M capital costs Funding Sources New Shop/Trucks 35 Sanitation Rate Strategy– Rate Funded This rate strategy will support: Operating costs Capital improvement program of $2.5M 36 Sanitation Rate Strategy – Rate Funded Revenues meet annual operating needs Funds $2.5M in capital projects System Reinvestment Funding – Fully Funded 37 ±10% is considered within cost of service Residential under-collecting but is aligned with their cost-of service. Commercial is over-collecting but is aligned with their cost-of service. Rate design proposals will work to align cost of service between classes 2027 Sanitation Cost of Service Results (Revenue ÷ COS Findings) 38 Proposed Sanitation Rates 39 Bill Examples 40 Summary & Next Steps Discussion Implementation Capitalization fees effective July 2, 2026 Monthly water, sewer and sanitation rates effective October 1, 2026 41 Thank you! Questions? Angie Hammrich (605) 601-5544 Angie.Hammrich@bowman.com Angie Sanchez Virnoche (425) 336 - 4157 Angie.Virnoche@bowman.com www.fcsgroup.com 42 Appendix 43 Overuse Charge Calculation - Example 44