Reso25 16368 - Laserfiche WebLink

Browse Search

Water Rate Cost-of-Service Study Section 3. Revenue Requirements HF&H Consultants, LLC | July 8, 2025 | Page 14 of 53 Section 3. Revenue Requirements The revenue requirements analysis starts by determining the FY 2024-25 revenue requirements based on the budgeted O&M and capital expenditures. Revenue requirements for each fiscal year are then projected over the Study Period. Revenue increases needed to cover the projected revenue requirements are then determined. Since the City provides water through one integrated system of potable and recycled water, the rates reflect the realities of the system. As a result, all water, whether potable or recycled, will be considered as part of the same system portfolio. DEMAND PROJECTIONS The revenue requirements projected during the Study Period are based on the City’s unique circumstances. Projected customer demand is particularly significant because it affects certain variable expenses such as the cost of purchased water as well as the revenue from water sales. Customer demand depends on the types of customers, the nature of their demands, the trends in their water use, growth, and climate, among others. The City consists of single-family residences, multi-family residences, commercial (including schools), industrial, municipal, and irrigation water customers. The service area is largely developed, but the City’s General Housing Element identifies plans for more housing to meet future population growth. For purposes of this rate study, no growth in water demand nor in growth of accounts was assumed. Connection fee revenue from growth is assumed, but the City did not estimate increased operational costs or supply costs explicitly due to growth because the volume is expected to be insignificant on the annual time scale. Water demand projections used in this study are shown in Figure 3-1. Projections are based on the two-year average of billing data from FY 2022-23 to FY 2023-24. Figure 3-1. Five-Year Modeled Demand Projections REVENUE REQUIREMENT ASSUMPTIONS AND PROJECTIONS Expense projections combined with contributions to reserves become the revenue requirements. The City’s operating and capital budgets were relied on for FY 2024-25 expenses in the first-year revenue requirement. The assumptions shown in Figure 3-2 were used to project revenue requirements through FY 2027-28. Customer Class FY 2025-26 FY 2026-27 FY 2027-28 Multi Family Residential 824,419 824,419 824,419 Commercial 631,112 631,112 631,112 Commercial Irrigation 311,165 311,165 311,165 Residential Irrigation 174,878 174,878 174,878 Single Family Residential 1,660,000 1,660,000 1,660,000 Commercial Recycled 10,301 10,301 10,301 Annual Water Use (HCF) 3,611,875 3,611,875 3,611,875 ATTY/RESO.0109/CC RESO WATER RATES - EXHIBIT A REV: 11-05-25 MI