Town of Prescott Valley
2023 Water Wastewater and Drainage
Rate Study and Long-Term Financial Plan
Presentation Update
September 2023
Updated: September 13 2023
WATER AND WASTEWATER RATE STUDY
INTRODUCTION AND BACKGROUND
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Facts about Water and Wastewater Rates in
the 21st Century
▪ Average utility has been increasing rates 5-6% per year, a trend that is expected to continue and may accelerate
▪ American Water Works Association (AWWA) forecasts that water and wastewater rates across the U.S. will triple in the next 15 years
▪ Rate adjustments are primarily due to reasons beyond a utility’s direct control –inflation, necessary Capital Improvement Plans, wholesale costs, and other indirect expenses
▪ 30-40% of utilities charge rates that do not cover their costs
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▪ Town has not adjusted rates since 2017
▪ High Inflation is driving up utility operating and capital costs
▪ Utility fund plans to fund $54.6 million in capital improvements over next five years
▪ Combination of above factors results in need to implement a new long-term rate plan
▪ Two alternative rate scenarios will be presented; Council can choose one it considers most appropriate
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Prescott Valley Water and Wastewater Rate Background
Current Water and Wastewater Rate Structure
* Residential Monthly billed based on 90% of average monthly water consumption for the months of November - March.
* Non-Residential Monthly billed based on 100% of monthly water consumption
5 Minimum Charge by Meter Size 5/8" 9.00 $ 3/4" 11.25 1" 13.50 1 1/2" 18.00 2" 22.50 3" 27.00 4" 31.50 6" 36.00 8" 40.50 Volume Rate (per 1,000 Gallons) Block 1 - Based on Meter Size 3.21 $ Block 2 - Based on Meter Size 3.85 Block 3 - Based on Meter Size 5.01 Water Rates Residential and Non-Residential Rates Minimum Charge by Meter Size 5/8" 5.07 $ 3/4" 5.07 1" 8.06 1 1/2" 11.06 2" 14.05 3" 17.04 4" 20.03 6" 23.03 8" 26.02 Volume Rate (per 1,000 Gallons) 4.54 $
Wastewater Rates Residential and Non-Residential Rates
Current Monthly Residential Charges | 5,000 Gallons Water and Wastewater 5/8” Meter Size 6
Water and Wastewater Accounts | Test Year 2023
Account growth over period 2023-2032 forecast to be on average 507 new accounts per year.
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5/8" 21,981 3/4" 31 1" 814 1 1/2" 208 2" 307 3" 19 4" 11 6" 8 8" 1 Hydrant 74 Total Accounts 23,454 WATER Customer Accounts 5/8" 18,950 3/4" 25 1" 661 1 1/2" 157 2" 225 3" 14 4" 7 6" 7 Total Accounts 20,046 WASTEWATER Customer Accounts
Historical and Forecast Water Consumption (gallons)
Billed consumption average annual growth rate of 2.0%.
Water usage varies considerably with weather patterns, the model is based on the overall trend. Annual results may vary significantly.
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Cost of Service Forecast
Principal Assumptions
▪ Most expenses increase 3.0% -- 5.0% per year
▪ Certain expenses (chemicals, electricity, insurance, etc.) increase at higher rate
▪ City continues to use operating company to manage system
▪ Some existing debt will be retired in next five years, creating available cash to finance increasing costs
▪ Maintain fund balance and limit any reserve drawdown
▪ Biggest factor impacting rate plan: total debt required to fund $51.6M CIP
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Forecast Water and Wastewater CIP
FY 2023 – FY 2027
Total FY 2023 – FY 2027 CIP = $54,642,979
NOTE: CIP includes only nominal funding for Big Chino project
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Wastewater Treatment Plant 8,000,000 $ WWTP - Headworks Design 500,000 WWTP - Aeration System Control 250,000 WWTP - Backup Chlorine/De-Chlor System 175,000 WWTP - Exterior LED Lighting 100,000 WWTP - UV Room Lighting / Insulation 25,000 WWTP - Parking Lot Seal and Striping 20,000 Lift Station - Southside and Village Way 4,000,000 Florentine Road Improvements 484,208 Sewer Upsizing - Section 2 5,950,000 Manhole Improvements 300,000 Civic Center Space Study and Remodel 5,000 Ranger Road (East) Gravity Trunk Sewer 2,000,000 Antelope Meadows Lift Station 1,200,000 Total Wastewater Projects 23,009,208 $ WASTEWATER PROJECTS Recharge Injection Well 2,000,000 $ Monks Well Improvements - Building 800,000 Jasper Well Improvements 2,500,000 North Well Field Well Improvements 350,000 Well Improvements 1,500,000 PFAS Project 8,250,000 Summit Tank Waterline 2,000,000 Florentine Road Improvements 633,771 StoneRidge Waterline at Highway 69 300,000 Windsong Waterline 250,000 Duplex Booster Station Upsizing 4,700,000 Big Chino Project 1,075,000 Viewpoint Area Water Tank 5,200,000 Huggins Well Improvements - Building 150,000 Superstition/Bitterwell Waterline 100,000 Viewpoint Drive Improvements 20,000 Civic Center Space Study and Remodel 5,000 Mingus West Waterlines 150,000 North Well Field Waterline 1,150,000 Pressure Reducing Station Improvement Tools 150,000 Viewpoint Drive Waterline 350,000 Total Water Projects 31,633,771 $
WATER PROJECTS
Forecast CIP Funding
20 Years
Rate: 4%
FY
11 Term:
Interest
Issued
Total Water and Wastewater CIP 54,642,979 $ Funded from Non-Rate Sources: Water Resources Fund 3,175,000 Water Capacity Fund 12,425,000 Wastewater Capacity Fund 17,525,000 Grants 2,061,979 Sub-Total 35,186,979 Funded from Rates: Bonds 20,000,000 Total CIP Funding 55,186,979 Balance for Future Projects 544,000 $
FY 2023 –
2027
in 2024 and 2025
Forecast Revenue Requirement | Water and Wastewater
NOTE: FY 2023 contains one time operating expenses of $2,514,000
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Introduction to Rate Scenarios
▪ Based on feedback from staff and Council, the following rate scenarios will be presented:
▪ Scenario I – Status Quo – maintains existing rate structure, percentage adjustments
▪ Scenario II – Conservation – Scenario I plus more aggressive rate blocks and increase in base charges to meter equivalencies
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Scenario I – Maintain Status Quo
▪ Benefits
▪ Consistent, easy to understand, path of least resistance
▪ Fairness – all pay the same percentage increase
▪ Has been successful in past in generating sufficient revenue to maintain financial health
▪ Challenges
▪ Not as aggressive in encouraging conservation
▪ No gallon allowance or low-income benefit
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Scenario I – Maintain Status Quo – Proposed Rates
15 Current Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 Water Rates Monthly Minimum Charge 5/8" 9.00 $ 9.54 $ 10.11 $ 10.72 $ 11.36 $ 11.70 $ 3/4" 11.25 11.93 12.64 13.40 14.20 14.63 1" 13.50 14.31 15.17 16.08 17.04 17.55 1 1/2" 18.00 19.08 20.22 21.44 22.72 23.41 2" 22.50 23.85 25.28 26.80 28.41 29.26 3" 27.00 28.62 30.34 32.16 34.09 35.11 4" 31.50 33.39 35.39 37.52 39.77 40.96 6" 36.00 38.16 40.45 42.88 45.45 46.81 8" 40.50 42.93 45.51 48.24 51.13 52.66 Hydrant 24.00 25.44 26.97 28.58 30.30 31.21 Volume Rate Per 1,000 Gal Block 1 - Based on Meter Size 3.21 3.40 3.61 3.82 4.05 4.17 Block 2 - Based on Meter Size 3.85 4.08 4.33 4.59 4.86 5.01 Block 3 - Based on Meter Size 5.01 5.31 5.63 5.97 6.33 6.51 Wastewater Rates Monthly Minimum Charge 5/8" 5.07 $ 5.32 $ 5.59 $ 5.70 $ 5.82 $ 5.93 $ 3/4" 5.07 5.32 5.59 5.70 5.82 5.93 1" 8.06 8.46 8.89 9.06 9.25 9.43 1 1/2" 11.06 11.61 12.19 12.44 12.69 12.94 2" 14.05 14.75 15.49 15.80 16.12 16.44 3" 17.04 17.89 18.79 19.16 19.55 19.94 4" 20.03 21.03 22.08 22.52 22.98 23.43 6" 23.03 24.18 25.39 25.90 26.42 26.94 Volume Rate/1,000 Gal 4.54 4.77 5.01 5.11 5.21 5.31 WATER WASTEWATER Effective
Scenario I – Maintain Status Quo – Impact on Monthly Charges
16 Current Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 Residential Monthly Charges -- 5/8" 5,000 Water 5,000 WW 52.82 $ 55.71 $ 58.76 $ 61.06 $ 63.48 $ 65.06 $ Increase -- $ 2.89 3.05 2.30 2.41 1.59 Increase -- % 5.5% 5.5% 3.9% 4.0% 2.5% 15,000 Water 5,000 WW 88.76 93.81 99.14 103.87 108.85 111.80 Increase -- $ 5.05 5.34 4.72 4.98 2.95 Increase -- % 5.7% 5.7% 4.8% 4.8% 2.7% Commercial Monthly Charges -- 2" 50,000 Water 50,000 WW 428.53 $ 451.83 $ 476.41 $ 494.36 $ 513.18 $ 525.81 $ Increase -- $ 23.30 24.58 17.95 18.82 12.63 Increase -- % 5.4% 5.4% 3.8% 3.8% 2.5% Effective
Scenario II -- Conservation
▪ Goal – to encourage more prudent use of a diminishing resource
▪ Sets more aggressive 2nd and 3rd tier block rates
▪ Phases in “meter equivalencies” over 10 years
▪ Will ensure equitable treatment of larger users
▪ Establishes higher hydrant monthly charge equivalent to cost of service
▪ Establishes new volume tiers for 5/8” residential meters:
▪ 0 – 5,000 Gallons
▪ 5,001 – 15,000 Gallons
▪ 15,001 -- Above
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Scenario II -- Conservation Rate – Proposed Rates
18 Current Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 Water Rates Monthly Minimum Charge 5/8" 9.00 $ 9.54 $ 9.73 $ 9.93 $ 10.12 $ 10.33 $ 3/4" 11.25 12.16 12.65 13.15 13.67 14.20 1" 13.50 15.26 16.54 17.87 19.24 20.65 1 1/2" 18.00 21.94 25.30 28.78 32.40 36.14 2" 22.50 29.10 35.03 41.19 47.58 54.21 3" 27.00 59.15 91.47 125.06 159.96 196.20 4" 31.50 92.06 153.75 217.86 284.48 353.68 6" 36.00 167.90 303.60 444.66 591.24 743.50 8" 40.50 267.60 502.11 745.90 999.23 1,262.40 Hydrant 24.00 59.15 91.47 125.06 159.96 196.20 Volume Rate Per 1,000 Gal Block 1 - Based on Meter Size 3.21 3.40 3.47 3.54 3.61 3.68 Block 2 - Based on Meter Size 3.85 4.59 5.50 6.00 6.50 7.00 Block 3 - Based on Meter Size 5.01 6.20 7.20 8.20 9.20 10.20 Wastewater Rates Monthly Minimum Charge 5/8" 5.07 $ 5.27 $ 5.43 $ 5.54 $ 5.65 $ 5.76 $ 3/4" 5.07 5.80 6.52 7.20 7.91 8.65 1" 8.06 8.06 6.85 8.69 10.53 12.43 1 1/2" 11.06 11.98 16.04 20.14 24.40 28.82 2" 14.05 17.64 24.49 31.42 38.63 46.11 3" 17.04 48.60 85.06 122.47 161.34 201.72 4" 20.03 82.72 152.16 223.49 297.62 374.62 6" 23.03 164.30 317.01 474.08 637.31 806.88 Volume Rate/1,000 Gal 4.54 4.72 4.86 4.96 5.06 5.16 WATER WASTEWATER Effective
Scenario II – Conservation Rate Rate – Impact on Monthly Charges
19 Current Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 Residential Monthly Charges -- 5/8" 5,000 Water 5,000 WW 52.82 $ 55.43 $ 56.83 $ 57.97 $ 59.13 $ 60.31 $ Increase -- $ 2.61 1.40 1.14 1.16 1.18 Increase -- % 4.9% 2.5% 2.0% 2.0% 2.0% 15,000 Water 5,000 WW 88.76 101.37 111.83 117.97 124.13 130.31 Increase -- $ 12.61 10.46 6.14 6.16 6.18 Increase -- % 14.2% 10.3% 5.5% 5.2% 5.0% Commercial Monthly Charges -- 2" 50,000 Water 50,000 WW 428.53 $ 461.28 $ 490.42 $ 514.86 $ 539.96 $ 565.74 $ Increase -- $ 32.75 29.14 24.44 25.10 25.78 Increase -- % 7.6% 6.3% 5.0% 4.9% 4.8% Effective
Summary – Next Steps
▪ Review account/expense assumptions and rate alternatives; refine as appropriate
▪ Schedule next Council briefing to choose preferred rate plan and implement ARS-951 guidelines:
▪ Adopt “Notice of Intent”
▪ 60 days later -- hold public hearing
▪ Adopt rate plan by Council vote
▪ 30 days later – rate plan in effect
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DRAINAGE FEE STUDY
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How are Drainage Fees Assessed?
NOTE: some utilities use a combination of methods to assess fees
SOURCE: 2021 BV Stormwater Survey
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Impervious Surface Area – Non-Residential Accounts
SOURCE: Town Staff, North Point Geographic Solutions
Total Parcels = 1,018
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Forecast Accounts and Cost of Service
▪ Account growth – similar to water – 500 accounts/2.0% per year
▪ Most expenses increase 3-5%; new personnel added
▪ Initial capital expenditure estimate:
▪ Total: $4.0 million per year
▪ $3.0 million per year funded from fees, remaining from HURF/DIF/CDBG
▪ Funded by $6.0 million bond issues every two years for next decade
▪ NOTE: capital assumptions may be revised after completion of Master Plan
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Drainage Utility -- Forecast Cost of Service
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Notes on Drainage Fee Proposal
▪ Recommend implementing a multi-year stormwater fee plan, effective January 2024
▪ Uniform Residential fee
▪ Non-residential fee to increase based on ISA square footage
▪ Phased in over 3 years
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Proposed Monthly Drainage Fees
27 Jan-24 Jan-25 Jan-26 Jan-27 Jan-28 DRAINAGE Utility Monthly Charge Residential 3.00 $ 3.50 $ 4.00 $ 5.00 $ 5.00 $ Non-Residential - 10,000 3.00 3.50 4.00 5.00 5.00 10,001 50,000 5.40 12.60 24.00 30.00 30.00 50,001 100,000 13.50 31.50 60.00 75.00 75.00 100,001 250,000 31.50 73.50 140.00 175.00 175.00 250,001 500,000 63.00 147.00 280.00 350.00 350.00 500,001 Above 135.00 315.00 600.00 750.00 750.00 Square Feet Effective Date
Monthly Residential Drainage Fees
NOTE: these represent only cities in Arizona identified by project team as assessing drainage fees
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Presentation Summary
How are Water/ww/Drainage Rate Plans Beneficial?
▪ Will enable utility to remain financially-healthy
▪ Will ensure that utilities operate on a stand-alone basis independent of general fund assistance
▪ Will ensure that customers pay only what it costs to provide service
▪ Will result in $52 million in capital investment in water/ww system and $40 million in drainage system
▪ Town will continue to have rates that are comparable to or below neighbors
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QUESTIONS & DISCUSSION
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