CITY OF Water and Sewer Rate Study August

CITY OF Water and Sewer Rate Study August 24, 2020 1

1. 2. 3. 4. 5. 6. Background on City Utilities Summary of Findings and Recommendations Next Steps Water Fund Rate Recommendations Sewer Fund Rate Recommendations Combined Bill Impacts 2

• City operates and maintains two water systems: › West Side – Well Customers › East Side – Great Lakes Water Authority (GLWA) customers • During 1980 s growth on East Side occurred too quickly to allow for expansion of well and treatment capacity. Solution was Detroit (now GLWA) water. • Currently cost prohibitive/technically infeasible to expand well water service to east side. • Two system approach remains the most cost-effective option for water service delivery 3

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Per Ccf Usage Charge Recovers O&M Costs Per Qtr Fixed Charge Recovers O&M Costs Operations and Maintenance Infrastructure Repair and Replacement Per Ccf Usage Charge Recovers Capital Costs Per Qtr. Fixed Charge Recovers Capital Costs 9

Raftelis team worked closely with City Staff and Infrastructure Committee 10

Q. – Are current revenue levels adequate to fund the provision of safe and reliable water and sewer service? A. – Current revenue levels are adequate at least through next year. Modest adjustments may be needed after that. Q – Is the City’s rate structure fair? In other words, does it recover revenue from customers in proportion to the costs they cause the City to incur? A. – The City’s current rate structure is sound, but modest changes could be made to improve the equity of the water and sewer rates. 11

• No rate adjustment this year (September 2020 to August 2021) • Modest adjustments in future years as needed • Continue efforts to evaluate cost control/reduction • City has long history of evaluating ways to reduce utility costs › Drilling additional wells › Treating sewage vs. purchasing sewage treatment › Reducing purchased water costs – Direct Connection with GLWA – Storage to reduce peak demand – Demand management strategies 12

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• Public Engagement Efforts to Communicate Study Results › › Study Materials Posted to City Website Town Hall Meeting Social Media Postings Bill Stuffers • Evaluate Need for Rate Adjustment Next Year › Visibility into capital improvement needs should be better due to condition assessments › Longer term impacts of COVID-19 better understood › City staff provided with rate model to use for future financial planning/rate development needs 14

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• Fund 592 (Operating) › No rate increase in FY 2021 › Inflationary increases to revenues over the next 4 years › 4 -Year Phase-In to Cost of Service Rates • Fund 488 (Infrastructure) › No rate increase in FY 2021 › Inflationary increase to revenues over the next 4 years › Cash Fund East Side Booster Station 17

• Revenues – › FY 2019 usage used for projections › Lower usage year relative to recent history • Expenditures › Largest is purchased water from GLWA via Shelby Township – 4% increase per year – 10% water loss assumed › Inflationary increases to all other expenditures 18

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• Revenues – › FY 2019 usage used for projections › Lower usage year relative to recent history • Expenditures › Includes funding for: – Phase 1 DWRF – Ongoing cash funded repair and replacement – Cash Funding of East Side Booster Station ($1 M) – Galvanized service line replacement ($250 k) 25

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• Fund 592 (Operating) › No rate increase in FY 2021 › Amortize New Share of OMID Debt › Across the board increase to fixed and variable charges • Fund 488 (Infrastructure) › No rate increase in FY 2021 › Annual increases begin funding a second round of sewer SRF, mitigate larger increases outside of the planning period. › Across the board increase to fixed and variable charges 31

• Revenues – › FY 2019 usage used for projections › Lower usage year relative to recent history • Expenditures › Largest expense is treatment cost from OMID › City share of OMID Debt will increase by $1. 6 M › Inflationary Increases to All Other Expenses 32

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• Revenues – › FY 2019 usage used for projections › Lower usage year relative to recent history • Expenditures › Includes funding for: – Phase 2 SRF – Ongoing cash funded repair and replacement 36

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