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Home My WebLink AboutHandouts_Regular_Tab 13_4/8/2021 April 8, 2021 Village Council Meeting Water Enterprise Fund Rate Presentation 2 Beach and portions of Background miles of pipe Enterprise Fund20 employeesServes Village of Tequesta, Jupiter Inlet Colony, and unincorporated Palm Martin CountiesPopulation served: ~15,000One water treatment plant75 Interconnects with Town of Jupiter and South Martin Regional Utilities 3 Tequesta (48%)Jupiter Inlet Colony (7%)Unincorporated Palm Beach County (17%)Unincorporated Martin County (28%) Revenues Village of Tequesta 4 Residential (68%)Commercial (10%)Multifamily (17%)Irrigation (3%)Other (2%) Revenues Village of Tequesta 5 Service - PersonnelPowerChemicalsSupplies OperatingCapitalDebtFixed vs Variable Expenses Village of Tequesta 6 based ratemaking - Rate Analysis Water Enterprise Fund~Every five yearsLast formal study performed during Fiscal Year 2015Engaged Raftelis Financial Consultants, Inc. in January 2020Based on AWWA Manual M1Cost 7 service, - year) outlook - Goals term (10 - Sustainable financing plan to operate water system (operating, debtcapital)LongFair, predictable, and competitive ratesPromote efficient use of resource (conservation)Legal and defensible 8 2029) - term capital funding plan - phasing plan to meet Village objectives - year financial plan (2020 - Fully fund the cost to provide serviceDevelop longCompliance with bond covenantsMaintain strong fiscal positionIdentify rate implementation plan Primary objective: develop sustainable rate and cost recovery planDevelop tenEvaluate the sufficiency of revenues to fund expendituresIdentify a rate Study Purpose Village of Tequesta 9 2019) - phasing schedule (2017 - price index inflation adjustment year rate - currently provide service to over: will require ongoing renewals and replacements evaluate financial / rate plan of utility - 5,060 water accounts / 7,932 ERCsAverage monthly water use per residential customer = 8,000 gallonsOver $35.7 million in depreciable assets (2019)Assets aging Adopted a threeFiscal Year 2020 Total estimated FY 2020 rate revenues = $6.07 million Customer base Significant utility investment made by VillageLast formal study performed during Fiscal Year 2015Need to re Utility Overview and Facts to Remember Village of Tequesta 10 2030 2029 2028 2027 2026 2025 Existing Rate Revenues 2024 2023 System Revenue Requirements 2022 2021 0 8,000,0007,000,0006,000,0005,000,0004,000,0003,000,0002,000,0001,000,000 Provided by rate resolutionRecommended to be continuedDeferred in FY 2021 Rate revenues accounts for 95% of total utility revenuesProjections include annual price index of approximately 1.8% Revenues Village of Tequesta 11 2030 2029 2028 Operating Margin 2027 Existing Rate Revenues 2026 2025 2024 2023 2022 Total Operating Expenses System Revenue Requirements 2021 $0 $8,000,000$7,000,000$6,000,000$5,000,000$4,000,000$3,000,000$2,000,000$1,000,000 3.1% 73% of funding needs Generally higher than inflation (CPI)Typical trend being experienced by other utilities Operating expenses Annual change in expense Major Drivers Affecting Rates Operating Expenses Village of Tequesta April 8, 2021 Village Council Meeting Water Enterprise Fund Rate Presentation 2 Beach and portions of Background miles of pipe Enterprise Fund20 employeesServes Village of Tequesta, Jupiter Inlet Colony, and unincorporated Palm Martin CountiesPopulation served: ~15,000One water treatment plant75 Interconnects with Town of Jupiter and South Martin Regional Utilities 3 Tequesta (48%)Jupiter Inlet Colony (7%)Unincorporated Palm Beach County (17%)Unincorporated Martin County (28%) Revenues Village of Tequesta 4 Residential (68%)Commercial (10%)Multifamily (17%)Irrigation (3%)Other (2%) Revenues Village of Tequesta 5 Service - PersonnelPowerChemicalsSupplies OperatingCapitalDebtFixed vs Variable Expenses Village of Tequesta 6 based ratemaking - Rate Analysis Water Enterprise Fund~Every five yearsLast formal study performed during Fiscal Year 2015Engaged Raftelis Financial Consultants, Inc. in January 2020Based on AWWA Manual M1Cost 8 2029) - term capital funding plan - phasing plan to meet Village objectives - year financial plan (2020 - Fully fund the cost to provide serviceDevelop longCompliance with bond covenantsMaintain strong fiscal positionIdentify rate implementation plan Primary objective: develop sustainable rate and cost recovery planDevelop tenEvaluate the sufficiency of revenues to fund expendituresIdentify a rate Study Purpose Village of Tequesta 9 2019) - phasing schedule (2017 - price index inflation adjustment year rate - currently provide service to over: will require ongoing renewals and replacements evaluate financial / rate plan of utility - 5,060 water accounts / 7,932 ERCsAverage monthly water use per residential customer = 8,000 gallonsOver $35.7 million in depreciable assets (2019)Assets aging Adopted a threeFiscal Year 2020 Total estimated FY 2020 rate revenues = $6.07 million Customer base Significant utility investment made by VillageLast formal study performed during Fiscal Year 2015Need to re Utility Overview and Facts to Remember Village of Tequesta 10 2030 2029 2028 2027 2026 2025 Existing Rate Revenues 2024 2023 System Revenue Requirements 2022 2021 0 8,000,0007,000,0006,000,0005,000,0004,000,0003,000,0002,000,0001,000,000 Provided by rate resolutionRecommended to be continuedDeferred in FY 2021 Rate revenues accounts for 95% of total utility revenuesProjections include annual price index of approximately 1.8% Revenues Village of Tequesta 11 2030 2029 2028 Operating Margin 2027 Existing Rate Revenues 2026 2025 2024 2023 2022 Total Operating Expenses System Revenue Requirements 2021 $0 $8,000,000$7,000,000$6,000,000$5,000,000$4,000,000$3,000,000$2,000,000$1,000,000 3.1% 73% of funding needs Generally higher than inflation (CPI)Typical trend being experienced by other utilities Operating expenses Annual change in expense Major Drivers Affecting Rates Operating Expenses Village of Tequesta 12 4.2% 24.9%11.0%59.9% 100.0% Percent 3,046,3831,154,615 Amount $6,871,41216,526,168 $27,598,579 Capital Needs (Inflation Adjusted) needs original cost 2030) Project Type (2021 Water Production Well ImprovementsWater Treatment Plant ImprovementsWater Main Replacement ProgramOther Capital Projects and General PlantTotal Capital Improvement Expenditure Plan (CIP) capital improvement expenditure Preliminary estimate replacement cost = over $72.6 million Major issue facing utilities across the country$ 35.7 million in depreciable water assets Due to age in service / asset type Identified capital expenditure plan for forecast period Increasing need for asset replacementIncreased Major Drivers Affecting Rates Village of Tequesta 12 4.2% 24.9%11.0%59.9% 100.0% Percent 3,046,3831,154,615 Amount $6,871,41216,526,168 $27,598,579 Capital Needs (Inflation Adjusted) needs original cost 2030) Project Type (2021 Water Production Well ImprovementsWater Treatment Plant ImprovementsWater Main Replacement ProgramOther Capital Projects and General PlantTotal Capital Improvement Expenditure Plan (CIP) capital improvement expenditure Preliminary estimate replacement cost = over $72.6 million Major issue facing utilities across the country$ 35.7 million in depreciable water assets Due to age in service / asset type Identified capital expenditure plan for forecast period Increasing need for asset replacementIncreased Major Drivers Affecting Rates Village of Tequesta 13 21.2%46.3%32.5% 100.0% Percent 8,963,407 Amount $5,849,06412,786,108 $27,598,579 Capital Needs investment) - investment) - 2030) Project Type (2021 Available and Projected Operating Reserves / Continuing Operations (Rates)Additional Debt (2 Separate Issues)Renewal and Replacement (Capital Fund) Account (Capital ReTotal Capital Improvement Funding Plan Phased during forecast period to levelize financial impactsAnnually funded from ratesTarget at 15% of annual revenues (end of forecast period)Limits future debt borrows / promotes rate sustainability Funding identified capital plan for forecast periodAdditional debt required to support CIP funding planIncreasing deposits to R&R account (capital re Major Drivers Affecting Rates Village of Tequesta 14 Capital Funding Debt Debt based on capital draws (line of credit)Payment begins when construction completedLevel debt assumed New debt tied to CIP needsLow interest SRF loansSizing, timing and structure will be advisor Major Drivers Affecting Rates Village of Tequesta 15 2030 2029 2028 Existing Rate Revenues 2027 2026 2025 2024 Total Operating Expenses 2023 System Revenue Requirements 2022 2021 $0 Total Debt Service $8,000,000$7,000,000$6,000,000$5,000,000$4,000,000$3,000,000$2,000,000$1,000,000 net plant 10% of funding needs Debt based on capital drawsPayment begins when construction completedLevel debt assumed Debt repayment Debt burden manageable ratio at 38% Sizing, timing and structure will be advisor Major Drivers Affecting Rates Debt Repayment Village of Tequesta 16 2030 2029 2028 2027 Transfer to R&R Fund - OtherTotal Operating Expenses 2026 2025 2024 2023 2022 System Revenue Requirements 2021 Capital Funded From RatesTotal Debt ServiceExisting Rate Revenues $0 $9,000,000$8,000,000$7,000,000$6,000,000$5,000,000$4,000,000$3,000,000$2,000,000$1,000,000 - You - As provides - 13.0% of Deposits to R&R Account funding needscapital accountProvides funds for future ongoing capital replacement Reduces future debt issues flexibility Major Drivers Affecting Rates Village of Tequesta 17 2030 2029 2028 2027 Capital Funded From RatesTotal Debt ServiceTotal Revenues with Proposed Rates 2026 2025 2024 2023 System Revenue Requirements 2022 2021 $0 Transfer to Operating ReservesTransfer to R&R Fund - OtherTotal Operating ExpensesExisting Rate Revenues $9,000,000$8,000,000$7,000,000$6,000,000$5,000,000$4,000,000$3,000,000$2,000,000$1,000,000 ($1,000,000) 4.0% phasing and - Transfers to operating reserves of funding needsTransfers to reserves to maintain fiscal positionProvides funds for rateestablishing R&R account plan Major Drivers Affecting Rates Other Transfers Village of Tequesta 18 $1.81 3.50% 1.82% 1.68% $53.37 $51.56 Oct. 1, 2025 $1.73 3.50% 1.90%1.60% $51.56 $49.83 Oct. 1, 2024 $1.68 3.50% 1.52% 1.98% $48.15 $49.83 Oct. 1, 2023 $1.65 1.91% 3.50% 1.59% $48.15 $46.50 Oct. 1, 2022 $1.87 3.50% 1.86%1.64% $44.63$46.50 Oct. 1, 2021 Percentage Adjustment:Price Index (Inflation) AdjustmentAdditional Rate Adjustment Recommended Rate Adjustment Monthly Bill Increase at 8,000 Gallons of Service:Current Bill (w/ Prior Increases)Proposed Rate AdjustmentsBill with Proposed Adjustment Recommended rate revenue adjustments for the five fiscal years ending 2025:Rate increases include inflation (index) adjustmentsProposed rates should remain competitive with "neighboring" utilities Proposed User Rate Revenue Adjustments Village of Tequesta 19 driven) - 4.9% annually - averaging 3.4% Nationally rates have increased greater than CPI (primarily capitalNationally rates will continue to increase Composite index of 174 utilities serving 104 million people Observation of NACWA Comparison National Association of Clean Water Agencies (NACWA) Rate Adjustments Consistent with National Trends Village of Tequesta 20 Proposed Revenue Adjustments Supports Strong Fiscal Position Village of Tequesta 21 Proposed Revenue AdjustmentsSupports Strong Fiscal Position Village of Tequesta 22 promotes revenue stability Increase in fixed revenue recovery Tiers more reflective of other communitiesTiers link to essential and discretionary (e.g., irrigation) demands / use Village plans minor changes the current water tiers and both fixed and variable chargesChanges follow AWWA standardsRaftelis has tested and agrees with the proposed rate structure Rate Structure Changes Village of Tequesta 23 2022 $2.75 $4.25 $6.00$8.00 $21.50 Proposed per Unit 30,000 Gallons 15,000 Gallons - Rate Structure Proposed Water 6,000 Gallons Base Charge Usage Charge per Unit (1,000 Gallons)0 6,001 15,001 Above 30,000 Gallons $7.13 $3.12 $5.25 $9.14 $19.67 Existing 2021 per Unit 25,000 Gallons 40,000 Gallons - Current Water Rate Structure 12,000 Gallons Current and Proposed Rate Structure Residential (Inside)Base Charge Usage Charge per Unit (1,000 Gallons)0 12,001 25,001 Above 40,000 Gallons Village of Tequesta 24 $24.67 $61.60 $197.37 $123.36 $370.08 $616.79 Effective $1,233.59 October 1, 2026 $59.51 $23.84 $357.56 $119.19 $190.70 $595.94 Effective $1,191.87 October 1, 2025 $23.03 $57.50 $575.78 $115.16 $345.47 $184.25 Effective $1,151.57 October 1, 2024 $22.25 $55.56 $333.79 $556.31 $111.26 $178.02 Effective $1,112.63 October 1, 2023 Monthly Service Fee (Fixed) $21.50 $53.68 $537.50 $107.50 $172.00 $322.50 Effective $1,075.00 October 1, 2022 $19.67 $49.11 $98.46 $157.21 $294.77 $491.23 $982.50 Current 1"3" 2"4"6" 1.5" Excluding Utility Tax or Surcharge 5/8" or 3/4" Meter Size Proposed Rates Village of Tequesta 25 Step 4 Above 30,000Above 50,000Above 120,000Above 150,000Above 400,000Above 750,000Above 1,500,000 $3.16 2026 $9.18 $4.88$6.89 Effective October 1, 150,000 400,000 1,500,000 750,000 30,000 - 120,000- 50,000 - - $4.71 $3.05 $8.87 - $6.65-- 2025 Effective Step 3 October 1, 15,001 37,001 75,001 120,001 225,001 375,001 750,001 2024 $8.57 $4.55 $2.95$6.43 Effective October 1, 750,000 375,000 225,000 120,000 75,000- 37,000 - 15,000 -- - - - 2023 $2.85$6.21 $4.40$8.28 Step 2 Effective October 1, 6,001 15,001 30,001 48,001 90,001 150,001 300,001 $2.75 2022 $4.25 $6.00$8.00 Quantity Rate Charge (Variable) Effective October 1, Gallonage Allowance per Quantity Step Rate Table 6,00015,00030,00048,00090,000150,000300,000 ------- Step 1 1 1 1 1 1 1 1 $7.13 $3.12 $5.25 $9.14 Current Step Step 1Step 3 Step 2Step 4 Per 1,000 gallons of water usedExcluding utility tax or surcharge 1"3" 2"4"6" 1.5" Proposed Rates Meter Size 5/8" or 3/4" Village of Tequesta 26 Comparison: 6,000 Gallons Village of Tequesta 27 Comparison: 15,000 Gallons Village of Tequesta 28 Comparison: 30,000 Gallons Village of Tequesta - investment for plant replacement (R&R) - you - as - Operation and maintenance expenses, including transfersDebt repayment for new capital financing / sewer extension programCapital rePromote a strong utility credit (rating agency guidelines)Consider best management practices / compliance with rate covenants / limit financial riskFocus on liquidity / debt coverage / balanced capital funding plan (relates to debt financing vs. Rates should fully recover costs of providing serviceMaintain financially sustainable utilityMaintain competitive and justifiable monthly user rates Rate Guiding Principles Recognized Village of Tequesta 30 depreciation equivalent) investment - including initiation of the water line replacement reduces financial risk provides ability to issue debt - Operating (working capital) and capital reserves Promotes favorable credit Maintains revenue margins ($ available for debt / capital)Provides recurring funds for R&R capital funding (capital reMaintains strong cash liquidity Allows Village to fully fund capital plan programPromotes a strong fiscal position Results of Rate Adjustment Implementation Village of Tequesta 31 suspend the automatic price index phasing plan is completed - rate resolution which provides the following: institute the index after rate - For fiscal years with approved rate increase Is a component of the proposed rate adjustmentRe ApproveMaintain automatic price index adjustmentContinue to monitor financial and rate position and adjust plan accordingly Recommendations Village of Tequesta 32 year) outlook - Goals term (10 service, capital) - - Sustainable financing plan to operate water system (operating, debtLongFair, predictable, and competitive ratesPromote efficient use of resource (conservation)Legal and defensible 33 Questions?