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Water Rate Study 1971 '. . ,. , , CITY OF SALINA KANSAS WATER RATE REPORT FOR THE SALINA WATER DEPARTMENT AUGUST 1971 ENGINEERING DEPARTMENT CITY 0 F SALI NA . . , , WATER RATE STUDY A. PURPOSE The purpose of this report is to analyze the water rate structure of the Salina Water Department in" order to determine the rate revisions required to furnish adequate revenue for the operation of the water works system. . This amount would include operating expenditures, retirement of outstanding revenue bonds, and capital improvement costs. B. SCOPE This report includes an analysis of the income and expenditures and water consumption data for the years 1966 through 1970. A detailed study of the expenditures, income, rate balance, aver- age flow per meter and total water sales per meter size for the year 1970 was used as a basis for the determination of the proposed water . rate schedule. C. BACKGROUND The last study of the water rates for the City of Salina was made in 1959. Water rates established in 1953 were increased in 1959 by approximately 15 percent. This increase averaged 2.5 percent per year. The 1959 rate schedule is still in effect at the present date. Due to the increase in costs of salaries, materials, chemicals, etc. occurring mainly as a result of inflation, the Water Department has shown a deficit during eight of the ten years during the period, 1961 through 1970. Additional revenue must also be obtained to allow for the planned ~onstruction of larger supply mains throughout the City. -1- " . " . '. , D. RECOMMENDATIONS It is recommended that the 1959 water rate schedule now in effect be amended to increase the total annual revenue by approximately 30 percent. This rate increase would average 2.5 percent per year. We are proposing to raise the monthly minimum charge, lower the monthly minimum allowable, and raise the existing base rates. All of these revisions are necessary to furnish the revenue required for the operation of the Water Department. The proposed water rate schedule will produce sufficient revenue to allow a planned capital improvement program to commence. A minimum expenditure of $100,000 will be needed per year for this program. Eo WATER CONSUMPTION, 1966 THROUGH 1970 Water consumption data, based on the Water Department records, is shown in Table I. An average of 21 percent of all water pumped into the mains has been lost in the distribution system or use.d by other City departments without charge. The percent of 1I1ost waterll should decrease in the future due to the planned installation of meters in the City park system, etc. thus lowering the cost of water production. Both the trend toward increased consumption per capita and a steady growth in population should continue in future years. Therefore a steady increase in total water revenue can be expected. -2- , . " " TABLE I YEAR TOTAL WATER PUMPED (looo GAL.) POPULATION CONSUMPTION PER CAPITA PER DAY, GAL. TOTAL WATER SOLD (1000 GAL.) PERCENT SOLD 1966 1,746,201 39,278 133 1,422,365 81.5 1967 1,790,320 38,024 98 1,364,056 76.2 1968 1,958,386 38,110 116 1,552,216 79.3 1969 2,039,185 39,013 115 1,640,546 80.5 . 1970 2,231,662 37,714 125 1,747,967 78.3 AVERAGE 1,953,151 38,428 1i7 1,545,430 79.1 -3- " . " ' , , F. REVENUE AND EXPENSES Table II shows the Water Department's revenue and expenditures for the years 1961 through 1970. The revenue figures include only income derived directly from the sale of water and do not include variable income from tapping charges, penalties, interest, etc. The expenditures include all Water Department figures shown in the annual reports, which include bond and interest payments. Data summarized in Table II shows that the present water rate sche- dule, placed in effect in 1959, was adequate for only one year during the _.period of study from year 1966 through 1970. During the other four years, there was not sufficient revenue to meet the actual expenses occurring during those years. G. A.W.W.A. RECOMMENDATIONS The American Water Works Association is the leading authority in the field of water rate studies. Water rate schedules developed by using the A.W.W.A. pattern, results in the most logical and through analysis 'of the entire water rate study. ,This report will use the A.W.W.A. recommendations, with minor adjustments, as a basis for deter- mining the proposed Salina water rate schedule. Charges to be included in the water rate schedule includes a mini- mum charge which includes the cost of meters. reading meters, billing and collection services, general office expense, and a minimum amount of water for domestic sanitary needs. Other costs are applied in three steps: Rates. (a) Wholesale Rates, (b) Intermediate Rates and (c) Domestic The A.W.W.A. formula requires that all expenditures of the Water . Department be broken down into principal division as follows: -4- . ,', . , , , . (A) PRODUCTION AND TRANSMISSION COSTS which includes all costs of supplying water to the distribution system. This item includes all costs pertaining to wells, pumping stations, water softening plant, storage, and transmission facilities, etc. The transmission mains are the large diameter lines from the raw water source to the central point of distribution. These lines are substantially without service taps. (B) METER AND SERVICE COSTS which include the cost of new meters, expense of installing, repairing, and maintaining the existing meters, etc. (C) COMMERCIAL AND GENERAL COSTS includes the cost of reading meters, billing, collecting, administration, office expense, and general overhead cos ts . (D) INTERMEDIATE DISTRIBUTION COSTS includes all costs for new pipeline construction and the expense of repairing, maintaining, and extending the existing lines which are 611 or larger in diameter, except- ing about 30% of the 6" lines which is allocated to Domestic Distribution Costs. (E) DOMESTIC DISTRIBUTION COSTS include all expenses relative to the pipelines which are less than 6" in diameter, and about 30% of the 6" 1 i nes . A rather definite rate schedule for ~11ocating the required char~es to the different classes of uses has been recommended by the A. W. W'.A. The schedule consists of a minimum meter and service charge, plus a commodity charge applied in three steps as follows: Minimum Meter and Service Charge includes: 1. / All commercial expense and a suitable portion of administration and overhead costs, the total of which is to be divided equally to all accounts. -5- ,", . 2. All expense arising out of meters and services, with a share of administrative expense and overhead, the total of which may be dis- tributed between accounts on the basis of the meter cost. , 3. There should also be added for all minimum users, the cost, based on the domestic commodity rate, of the minimum desirable use from the standpoint of sanitary conditions. Commodity Unit Rates are to be determined as follows: 1. The Wholesale Unit Rate is obtained by dividing the total of all production and transmission expense (capital costs and operation and maintenance), plus a portion of administrative expense ànd overhead, by the total annual pumpage. ," 2. The Intermediate Unit Rate is obtained by adding the intermediate increment to the wholesale rate. The intermediate increment is obtained by dividing the total expense arising out of distribution mains serving intermed~ate customerss by the water sold through all meters, except sales at the wholesale rate. 3. . The Domestic Unit Rate is obtained by adding the domestic increment to the intermediate rate. The domestic increment is obtained by dividing the total expense arising out of distribution mains serving domestic customers, plus the cost of all lost water, by the water sold through all meters 3/4 in. and smf11er. Rate Steps are to be determined as follows: Step quantity limitations must be adopted which, when applied to the unit rates, will produce the necessary revenue; and the quantity limitations and unit rates must be checked as a whole against the system1s cus tomers. The AWWA suggests that as an initial determination of step quantities, the following amounts of consumption be applied to the three rate classes: -6- ," lhe Domestic Rate should apply up to a quantity equal to twice the average consumption through all domestic 5/811 and 3/411 meters; which, in the case of Salina will be 2 x 1,000 = 2,000 cu.ft./month. The Intermediate Rate should apply up to a quantity equal to twice the average consumption through 1" to 211 meters, which in the case of Salina will be about 2 x 10,000 = 20,000 cu.ft./month. The Wholesale Rate will apply to all usage in excess of the inter- mediate rate or 20,000 cu.ft./mo. H. WATER RATE ANALYSIS By using the A.W.W.A. formula, as modified for Salina conditions, a schedule of proposed water rates was established. The results of the calculations involved in the application of the above formula are shown in Table IV through Table X. The A.W.W.A. formula takes into consideration the number of meters of each size, the average annual consumption of "water through each meter, the service and accounting charge for each meter, and the actual cost of producing, t~eating, and distributing costs of marketing the water. Rates and allowable minimum usage have been balanced as fairly as possible so that each consumer will pay his proportionate share of the cost of his water consumption. Table III shows the rate balance for all meters in Salina, based on the year 1970. -]- ..' TABLE II YEAR REVENUES EXPENSES SURPLUS (or DEFICIT) 1961 $536,143.77 $373,357.62 $162,786.15 1962 555s359.12 561,514.66 (6,155.54) 1963 564,695.50 606,840.34 (42s144.84) 1964 576,895.25 630s226.18 (53,330',93) 1965 506,849. 19 554s804.20 (47,955.01) 1966 546,233.65 541,497.36 4s736.29 1967, 546s850.71 573,743.71 (26s893.00) 1968 587s536.32 632s860.31 (45,323.99) 1969 611,469.61 678,151.27 (66,681.66) 1970 653,657,56 729,434. 11 (75,776.55) -8- I ' . ", . , . .' TABLE II I 1970 RATE BALANCE METER SIZE NO. OF METERS % OF TOTAL METERS % OF WATER USED % OF TOTAL REVENUE 5/8" 12,295 91.24 56.40 , 64.90 3/411 536 3.98 5.56 5.49 1" 256 1.89 3.95 3.84 1-1/2" 126 0.94 2.96 2.80 211 , 252 1.87 18.11 13.98 311 1 0.01 . 0.01 0.03 411 5 0.04 1.85 1. 11 611 0 0.00 0.00 0 8" 4 0.03 11.16 7.85 TOTALS: 13,475 100.00 100.00 100.00 -9- , , . .., . " \ .' . TABLE IV AVERAGE FLOW/METER 5/811 131,370,300 10,685 cubic feet/year or 890 cubic feet/month = = 12,295 3/4" = 12,933,600 = 24,130 cubic feet/year or 2,011 cubic feet/month 536 111 = 9,187,800 = 35.890 cubic feet/year or 2,991 cubic feet/month 256 1-1/211 = 6,913,600 54,870 cubic feet/year or 4.573 cubic feet/month = 126 211 = .42,193,600 = 167.435 cubic feet/year or 13,953 cubic feet/month 252 311 = 19,500 = 19,500 cubic feet/year or 1,625 cubic feet/month 1 411 4,320,700 864,140 cubi c feet/year 72,012 cubic feet/month = = or 5 611 = N/A 811 = 25,992,600 = 6,498.1S0 cubic feet/year or 541,513 cubic feet/month 4 NOTE: Above data based on 1970 consumption figures. -10- ._- ~._~--_..__._--, ""_~_"~'---"_.""~--_'- ~...--- ...... -..-- -,....,.-...... ._.. <. :' . . . , \ .' TABLE V EXPENSES A.' PRODUCTION & TRANSMISSION 1. Water Supply = $ 12,815.70 2. Treatment & Softening = 222,995.41 3. Pumping = 48,017.29 Sub Total = $283,828.40 Bonds & Interest = 147,513.19 $431,341. 59 .'. Use $431,300 8. METERS & SERVICE LINES 1. Meter Maintenance Salaries = $ 11,318.40 2. Meter Maintenance Supplies = 5,711.23 Total = $ 17,029.63 .'. Use $ 17,000 c. COMMERCIAL & GENERAL 1. Accounting & Collection = $108,434.54 2. Administration & General = 97,294.04 Total = $205,728.58 .'. Use $205,700 D. INTERMEDIATE DISTRIBUTION 1. Distribution Expenses - $ 37,667.16 ... Use $ 37,700 E. DOMESTIC DISTRIBUTION 1. Distribution Expenses = $ 37,667.15 ... Use $ 37,700 NOTE: Above figures obtained from 1970 Profit and Loss Statement of Water Department. -11- -""-. ...._.._-'_._"._-,-,_.._.>.~,-,......~......,. """"'--.-.".""'" ....... '. . , , TABLE VI METER VOLUMES WHOLESALE SALES: 311 = 19,500 cubic feet 411 = 4,320,700 cubic feet 6" = 0 cubic feet 811 = 25,992,600 cubic feet I TOTAL: = 30,332,800 cubic feet INTERMEDIATE SALES: 1" = 9,187,800 cubic feet 6,913,600 cubic feet 1-1/~1I = t' 42,193,600 cubic feet = TOTAL: = 58,295,000 cubic feet DOMESTIC SALES: 5/811 = 131,370,300 cubic feet 3/411 = 12,933,600 cubic feet TOTAL: = 144,~03,900 cubic feet NOTE: Above data based on 1970 consumption figures. -12- - .--.>--->- ...--.-." .. _..---- . , , TABLE VII COMPUTATION OF METER & SERVICE CHARGES COMMERCIAL COSTS = $205,700 13,475 = $15.27/year/account . METER & SERVICE COSTS *NO. OF METER UNITS = $ 17 ,000 16,131 = $ 1.0S/year/unit * SEE TABLE VIII -13- " . , . .' , , TABLE VIII SUMMARY OF METER & SERVICE CHARGES NO. *METER NO. ANNUAL ANNUAL TOTAL METER OF COST OF CHARGE CHARGE SERVICE CHARGE SIZE METERS RA TI 0 UNITS PER SIZE, PER METER PER YEAR PER MONTH 5/8" 12,295 1 12,295 $ 1. 05 $15.27 $ 16.32 $1.36 3/4" 536. 1.5 804 1.58 15.27 16.85 1.40 111 256 2.25 576 2.36, 15.27 17.63 1.47 1-1/211 126 4 504 4.20 15.27 19.47 1.62 211 252 6 1,512 6.30 15.27 21.57 1.80 311 1 12 12 12.60 15.27 27.87 2.32 4" 5' 20 100 21.00 15.27 36.27 3.02 611 0 55 0 57.75 15.27 73.02 6.09 811 4 82 328 86. 10 15.27 101.37 8.45 TOTALS: 13,475 16,131' NOTE: Above information based on 1970 data. *METER COST RATIO EQUALS THE COST OF ANY SIZE METER DIVIDED BY THE COST OF A 5/8" METER. -14- . ' WHOLESALE RATE WHOLESALE RATE INTERMEDIATE RATE DOMESTIC RATE lOST WATER COST DOMESTIC RATE . '- ~" ._- .-.. . < .. TABLE IX RATE DETERMINATION = PRODUCTION + TRANSMISSION TOTAL PUMPAGE = K $ 531,300 = 2,983,510 = $0. 178/C cubic feet = K INTERMEDIATE DISTRIBUTION COST + SECOND STEP INCREMENT BASE $37,700 TOTAL SALES - WHOLESALE SALES $37,700 232,931.700 - 30,332,800 = K' K' = $0.178 + K' = 0.178 + K' = $0.019 O. 178 $O.197/C cublc feet + = 0 . . Use $O,.20/C cubic feet = K' + DOMESTIC DISTRIBUTION + LOST COST Dor~ESTIC SALES = WHOLESALE RATE X LOSS = $0.178 X 646,651 C cubic feet = . $115,104 or $115,100 = K' + $37,700 + $115,100 144,303,900 cubic feet = K' + $0.106/C cubic feet = $0.197 + $0.106 = $0.303/C cubic feet .0. Use $0.30/C -15- ' cubic feet . .-..-- .-... -. ----..... ----'" ... "'-", ... -- .. , . " ; TABLE X AVERAGE WATER CONSUMPTION 1. DOMESTI C USE: 5/8" & 3/411 meters Total of 5/8" & 3/4" meters = 1,443,039 = 120,253 = ... Use 2 (10) = 20 C cubic feet/month/meter 2. INTERMEDIATE USE: 111,1-1/2", & 2" meters Total of 1",1-1/2" & 2" meters = 582,950 48,579 = ..-.--..-.'-."" -..-.... --.-.... C cubic feet/year C cubic feet/month 9.37 C cubic feet per month/meter (A.W.W.A. Formula) C cubic feet/year C cubic feet/month = 76.62 C cubic feet per month/meter ... Use 2 (100) = 200 C cubic feet/month/meter 3. WHOLESALE USE = 200 NOTE: Above data based on 1970 consumption figures. -16- (A.W.W.A. Formula) C cubic feet/month/meter or greater '. . .. . . . , . I. COMPARISON OF PRESENT RATES AND PROPOSED RATES (a) PRESENT RATES Firs t 2000 Cu. Ft. or 15,000 Gals. @ 25i per C Cu. Ft. Next 3000 Cu. Ft. or 22,500 Gals. @ 22i per C Cu. Ft. Next 5000 Cu. Ft. or 37,500 Gals. @ 19i per C Cu. Ft. Allover 10000 Cu. Ft. or 75,000 Gals. @ 15i per C Cu. Ft. Monthly minimum charges are as follows, based on size of meter ins ta 11 ed; Size of Minimum Cu. Ft. meter charge al10\ved 5/8" $ 1. 75 500 3/411 2.45 700 1" 4~20 1,200 1-1~211 7.70 2,200 211 11.20 3,200 311 16.30 5,000 4" 27.20 9,000 6" 46.50 17,000 811 78.08 32,000 -17- .. . .' . , . . (b) PROPOSED RATES First 2000 Cu. Ft. or 15,000 Gals. @ 30t per C Cu. Ft. Next 3000 Cu. Ft~ or 22,500 Gals. @ 26t per C Cu. Ft. Next 5000 Cu. Ft. or 37,500 Gals. @ 22t per C Cu. Ft. Allover 10000 Cu. Ft. or 75,000 Gals, @ 18t per C Cu. Ft. Monthly minimum charges are as follows, based on size of meter ins ta 11 ed: Size of Minimum Cu. Ft. meter charge all m..¡ed 5/811 $ 2.25 300 3/411 3.20 600 1" 5.05 1,200 1-1/2" 8.15 2,200 2" 10.90 3,200 .3" 16.10 5,000 .4" 25.60 9,000 6" 43.50 17 ,000 8". 72.85 32,000 J. RËCOMMENDËD RATE SCHEDULE .' We are proposing ~ new water rate schedule which will increase the' annual revenue required for the operation of the Salina Water Department. The new schedule differs from the existing schedule as follows: a. The minimum charge per month was increased for the smaller sized meters and decreased for the larger sizes. -18- . . " . , . b. The monthly minimum allowable amount was decreased for the 5/811 and 3/4" meters. c. The rates per hundred cubic feet of water were raised an average of $0.04. The new schedule has been applied to the average consumption of each size of meter based on the year 1970, and is shown in Table XI on the following page. -19- , . .' ,~ '\ ,TABLE XI WATER RATE SCHEDULE METER CU. FT. RATE REVENUE TOTAL REVENUE NO. OF TOTAL REVENUE SIZE PER MO. CU. FT. 100 CU. FT. PER MO. PER MO. METERS PER MO. 5/8". 890 300 $0.75 $ 2.25 590 0.30 1.77 $ 4.02 12,295 $49,425.90 '3/4" 2,011 600 0.53 3.20 1,400 0.30 4.20 11 0.26 0.03 7.43 536 3,982.48 1 " 2,991 1,200 0.42 5.05 800 0.30 2.40 991 0.26 2.58 10.03 256 2,567.68 1-1/2" 4,573 2,200 0.37 8.15 2,373 0.26 6.17 14.32 126 1,804.32 2 II 13,953 3,200 0.34 10.90 1,800 0.26 4.68, 5,000 0.22 11.00 3,953 0.18 7.12 ' 33.70 252 8,492.40 3 II 1 ,625' 5,000 0.32 16.10 16.10 1 16.10 4 " 72,012 9,000 0.28 25.60 1,000 0.22 2.20 62,012 O. 18 111. 62 139.42 5 697. 10 8 II 541,513 32,000 509,513 0.23 0.18 72.85 917.12 989.97 4 3,959.88 Based on 1970 consumption, using reduced minimum allowable rates: c' Firs t 2,000 Cu. Ft. @ $0.30/C Cu. Ft. 3,000 Cu. Ft. @ 0.26/C Cu. Ft. J Next Next 5,000 Cu. Ft. @ 0.22/C Cu. Ft. Allover 10,000 Cu. Ft. @ 0.18/C Cu. Ft. Total Revenue per Month = $ 70,945.86 Total Revenue per Year = $851,350.32 -20- . .