Christian Valley Park Water Rate Study Recommendations

CHRISTIAN VALLEY PARK COMMUNITY SERVICES DISTRICT Water Rate Study Preliminary Recommendations Board Meeting February 13, 2024 Alison Lechowicz Project Manager

Background Background Water service is self-supported by water rates Other revenues include hookup fees, standby fees, and interest Gayle Loop property taxes pay off the Gayle Loop debt Rate study will cover a 5-year period First rate increase effective July 1, 2024 Subsequent increases will go into effect on July 1 of 2025, 2026, 2027, 2028 Provides water service to 632 customers District purchases raw water from the Placer County Water Agency (PCWA) and receives water from the Bowman canal system 2

Proposition 218 Proposition 218 Governs how property-related charges are adopted Rates must be based on the reasonable cost of service Rates must proportionally recover costs based on how customers take service Revenues from rates can only be used for intended purpose Covers rates over a 5-year period Procedural requirements: Conduct a rate study Mail a notice to property owners Hold a public hearing a minimum of 45 days after notice is mailed Rates cannot be adopted if more than 50% of ratepayers submit written protests 3

Current Quarterly Water Rates Current Quarterly Water Rates Monthly Service Charge $59.79 Quarterly Service Charge $179.37 Meter Size 3/4" 1" $99.66 $298.98 1-1/2" $199.32 $597.96 2" $318.91 $956.73 3" $597.95 $1,793.85 4" $996.58 $2,989.74 Usage Charge ($/ccf) $1.28 $1.28 1 ccf = 1 hundred cubic feet = 748 gallons 4

Tiered Water Rates Tiered Water Rates Not recommended Not recommended In 2015, Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano ruled that tiered water rates must be based on actual costs of providing water service to ratepayers To comply with Prop 218,each water rate tier breakpoint (i.e. the consumption used in each tier) and the price of each tier must be individually cost-justified. Higher use must be directly tied to specific costs such as imported water, higher electricity costs associated with peak pumping, increased maintenance, and/or conservation programs. Tiers can no longer be assigned to customers solely based on conservation objectives. For example, public agencies may not arbitrarily raise the price of higher use tiers in order to offer a discount to lower water users. 5

Example Bills Example Bills Single Family Single Family Average Water Use (ccf) Quarterly Bill Quarter 1 Jan through Mar 25 $211.37 2 Apr through Jun 64 $261.29 3 4 Jul through Sep Oct through Dec 109 39 $318.89 $229.29 Average 59 $254.89 6

Water Fund Financial Overview Water Fund Financial Overview Projected 2023/24 Financials Strong estimated reserves at end of FY2024 2023/24 Upcoming Cost of Service Increases $795,000 BEGINNING FUND BALANCE Inflationary cost increases for most operating expenses REVENUES Water Sales Other Revenues Total Revenues $650,600 $67,000 $717,600 +$14,000/year set aside for the USDA reserve requirement EXPENSES Operating Expenses Debt Service CIP Total Expenses $594,000 $179,000 $25,000 $798,000 +$45,000/year in high priority capital projects (media replacements and valve replacements) ($80,400) Target a debt coverage ratio of 1.25x on existing Gayle Loop and USDA obligations to maintain a strong credit rating NET INCOME $714,600 ENDING FUND BALANCE Potential additional needed funding of $1M of pipe replacements Approximately equal to the cost of the water line repair Steel portion of the 8 Allen replacement 6 Witt Road 7

Rate Options Rate Options Each +15% rate increase = about $100,000 in additional revenues Proposed rates will be revised based on growth projections & Board discussion items Options Description % Rate Increase Option 1 Base rate change O&M and high priority capital +15% rate increase Cash fund $50,000 per year of pipe improvements Option 2 Gradual CIP funding +23% rate increase Cash fund $100,000 per year of pipe improvements Option 3 Fund $0.5M over 5 years +30% rate increase Cash fund $200,000 per year of pipe improvements Option 4 Fund $1M over 5 years +46% rate increase 8

DRAFT Quarterly Water Rates DRAFT Quarterly Water Rates PROJECTED - RATE STUDY PERIOD FY2024/25 FY2025/26 FY2026/27 FY2027/28 FY2028/29 Meter Size Current FIXED CHARGE 3/4" 1" 1-1/2" 2" 3" 4" $179.37 $298.98 $597.96 $956.73 $1,793.85 $2,989.74 $202.68 $330.86 $651.31 $1,035.85 $2,061.29 $3,214.91 $208.11 $339.72 $668.73 $1,063.55 $2,116.41 $3,300.86 $213.78 $348.96 $686.93 $1,092.49 $2,173.98 $3,390.65 $219.70 $358.61 $705.90 $1,122.66 $2,233.99 $3,484.24 $225.85 $368.65 $725.64 $1,154.04 $2,296.42 $3,581.60 CAPITAL IMPROVEMENT FEE (fixed charge) Option 2 - Gradually accumulate capital funds 3/4" 1" 2" $19.56 $32.60 $104.33 $19.56 $32.60 $104.33 $19.56 $32.60 $104.33 $19.56 $32.60 $104.33 $19.56 $32.60 $104.33 Option 3 - Cash fund $0.5M of projects 3/4" 1" 2" $39.12 $65.21 $208.66 $39.12 $65.21 $208.66 $39.12 $65.21 $208.66 $39.12 $65.21 $208.66 $39.12 $65.21 $208.66 Option 4 - Cash fund $1M of projects 3/4" 1" 2" $78.25 $130.41 $417.32 $78.25 $130.41 $417.32 $78.25 $130.41 $417.32 $78.25 $130.41 $417.32 $78.25 $130.41 $417.32 USAGE CHARGE $ per ccf $1.28 $1.53 $1.57 $1.62 $1.67 $1.71 9

Water Rate Survey Water Rate Survey 10

Board Discussion Items Board Discussion Items Growth Assumptions One new 1 meter added each year pays hookups fees and rates 260 unit apartment complex? Treatment Plant Maintenance Budgeted expense is $19,000 CVPCSD expects to go over-budget due to increased costs What level of maintenance should be included in the rate study? Cost of water line breaks does the District expect to fund $70,000 to $80,000 per year in expenses? Capital improvement funding High priority only, some portion of pipeline replacements, or fully funded? All pay-go from rate revenues or would CVPCSD consider new debt? 11

Rate Study Schedule Rate Study Schedule February 13: Present initial recommendations to Board March 12: Present revised recommendations to Board April 9: Present final report; Board votes to initiate Prop 218 process April 26: Mail notice of public hearing June 12: Proposition 218 Public Hearing (at least 45 days later) July 1, 2024: New rates go into effect 12

Questions? Questions? 13