Water Rate Study 1959
CITY OF SALINA
KANSAS
WATER RATE STUDY
Mr. Don McCune, Mayor
Commissioners
Mr. R. F. Exline
Mr. Carl Ramsey
Mr. Harold Jaeger
Mr. R. W. Bull
Mr. Leland M. Srack, City Manager
Mr. Harold F. Harper, City. Engineer
Mr. Harold E. Peterson, City Clerk
Mr. Rudolph Barta, City Attorney
(59-54)
L
SALINA, KANSAS
WATER RATE STUDY
A.
PURPOSE
The purpose of this study and report is to analyze the rate
structure of the Salina Water Department and to determine what
revisions to the structure are necessary to derive adequate revenue
for the operation of the system of water works, for capital improve-
ments and for the retirement of outstanding revenue bonds.
B.
SCOPE
The study includes an analysis of the water consumption,
receipts and expenditures of the Department for the years 1954
through 1958, during which time the present rate structure has
been in effect.
The bond and interest payments which will be
due until the present bonds are amortized, together with the pro-
jected estimates of expenditures for operation and capital improve-
ments, have also been taken into consideration.
Water consumption, revenues and expenditures for the year 1958
have been scrutinized most carefully, since total water sales for
the year, based on per capita consumption, were far below average.
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c.
RECOMMENDATIONS
It is recommended that the water rate schedules now in effect be
altered to increase the total annual revenue by approximately 15 per-
cent, and that the increase be effected by reducing the amounts of
water allowable for the minimum, with no change to the minimum charge
itself.
It is also recommended that the 12-cent rate now in effect
be eliminated entirely.
D.
BACKGROUND INFORMATION
The last complete study of the Salina water rate study was made
in 1953.
This study was pJ:"imarily for the purpose of determining the
rate schedule increase required for financing the construction, opera-
tion and maintenance of the new water softening plant (in addit~on to
other regular water works expenses) and to show that the plant would
be self-liquidating.
The rate schedule placed in effect at that time was based on a
continuation of the rate of population increase which prevailed at
that time and on the prevailing rates of increase of water consumption.
The estimates of water consumption were based conservatively on normal
rates of. usage but were believed to be adequate for all but extreme
conditions of low consumption.
When the Water Softening Plant Bonds were issued, the initial
bond principal payments were deferred for 4 years in order to allow
for the annual retirement of the existing bonds, scheduled for
completion in 1957.
In other words, the interest payment on the
Water Softening Plant bonds overlapped that of the existing bonds
for 4 years.
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The "Summary of Receipts and Expenditures" contained in the 1953
report, indicated that there would be an annual deficit from 1956
through 1961, but that the department should be "in the black" through-
out that period because of previously accumulated reserves.
The actual
revenues obtained were considerably above the predicted amounts from
1954 through 1957 and almost exactly the predicted amount for 1958.
However, the reserves did not accumulate, as anticipated, for three
specific reasons, as follows:
1.
Water Shortage
The drought, which had started before the softening plant was
constructed, continued through 1954,1955 and 1956, resulting in
serious depletion of the well supply and causing the imposition of
temporary water restrictions which reduced revenue.
2.
Emergency Construction
The shortage of water caused the city to spend a considerable
amount of money. for facilities to augment its water supply by the
utilization of water from the Smoky Hill River, the construction
of additional underground storage, exploration for additional ground
water and the development of additional wells.
This construction was
financed by an additional revenue bond issue of $600,000 in October,
1955.
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3.
Unexpected Population Growth
The 1953 report predicted a 1958 population of about 31,500.
The
actual 1958 population was 36,209.
This increase in population brought
in additional revenue of course, but at the same time required a consid-
erable extension of the distribution system and the construction of a new
elevated tank and appurtenant facilities.
A part of the cost of the
distribution mains is being met by the tapping charge of $1.50 per
front foot, which charge has been in effect about 2 years.
E.
WATER CONSUMPTION, 1954 THROUGH 1958
Water consumption figures, based on the amounts of water delivered
to the mains from the pumping station, are shown in Table 1 below.
TABLE 1
Total Water Consumption Total Water
Pumped per capita sold (1000 Percent
Year (1000 cu.ft.) Population per da:y, g~l. cu.ft.) Sold
1954 297,060 31,032 197 188,439 63.4
1955 256,170 32,420 162 186,473 72.8
1956 253,540 33,537 155 198,435 78.2
1957 216,260 35,3,27 126 167,024 77.2
1958 185,700 36,209 105 164.253 88.5
The table shows the d~cline in water consumption, both as to total
water pumped and as to per capita daily consumption.
The decline in
1955 and 1956 was undoubtedly caused by the shortage of water and the
imposition of restrictions.
The decline in 1957 and 1958 was caused
by the extremely abundant rainfall, cool summers, and the lack of
irrigation and air conditioning use.
4
Plate I, on the following page, compares the actual with the
predicted (1953 report) values of total water consumption, per capita
consumption, and water revenues and expenses for the years 1954 through
1958.
F.
INCOME AND EXPENSES
Water Department income and expenses for the years 1954 through
1958 are shown in Table
2, below.
The income figures contain only
such revenue as was derived directly from the sale of water, and do
not include such variable income as was derived from penalties,
interest, tapping charges, etc.
The expense figures include all
water department expenditures shown in the annual reports, including
bond and interest payments, but no funds set up for depreciation.
TABLE 2
Surplus
Year Revenues Expenses (or Deficit)
1954 $424,092.87 $275,150.14 $148,942.73
1955 465,306.50 311,675.70 153,630.80
1956 483,939.65 436,216.24 47,090.26
1957 438,179.18 410,882.25 28,057.40
1958 411, 381. 69 418,001.42 (6,619.73)
Table 2 shows that the water rate schedule was adequate in 1954
and 1955 to meet all operating expenses and allow a reasonable sum for
capital improvements and expansion of the distribution system.
In 1956
and 1957, there was very little money left for the distribution sy-stem
expansion that was required, and in 1958, the Department was actually
"in the red" for the year.
5
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G.
RATE STRUCTURE ANALYSIS
Since the year 1958 was extremely unusual in the matter of water
consumption and revenue, the water department records were studied in
detail to determine exactly what happened during the year.
Rainfall
at Salina for the year was 32.2 inches, which was only about 5 inches
above the normal.
However, the rainfall amounts were adequately spaced
through the growing season.and very little irrigation was required.
The mean temperature was somewhat below normal and the use of water
for air conditioning was below average for the year.
It is apparent that a very large proportion of the domestic
meters (5/8") failed to use the minimum allowable amounts of water
during many months of the year.
The rate schedul~ plaçed in effect in 1953 modified previous
rates to provide a more equitable distribution of the water bills
as paid by users of the various size meters.
It does not appear
necessary to make any significant change in the structure as far
as the ratio between sizes of meters is concerned.
Any change in
the rates should apply to all users alike, with the exception that
the 12 cents per 100 cubic feet step should be eliminated so that
the City will not be selling water below the actual cost of delivery.
Table 3, on the following page, shows the rate balance for all
meters in use in the City at the present time.
It is based on the
actual average consumption through each size of meter for the year
1958.
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TABLE 3
RATE BALANCE
Meter
Size Quantity
5/8" 10396
3/4" 307
1" 210
l!" 83
2" 124
3" 4
4" 4
6" 1
Total 11129
Percent of Percent of
Total Water Used
93.4 72.8
2.76 5.517
1.89 50159
. 75 3.622
1.0 11.529
.036 0236
.036 .815
.009 .309
Percent of
Total Revenue
74.67
5.706
5.153
3.465
10.016
.219
.564
.020
H.
REVENUE REQUIRED
The revenues derived from the sale of water in Salina must be
sufficient to pay all expenses of the Water Department, maintain an
adequate bond reserve, and build extensions and other current improve-
ments as required.
The financial condition of the Water Department i$
shown by the Annual Financial Report for 1958 and by the monthly
reports and will not be repeated here.
It is evident that an increase in revenue of about 15 percent
will be required to keep abreast of expected Water Department
expenses.
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I.
RECOMMENDED RATE SCHEDULE
There are several methods by which the water rates can be increased
to bring about the desired result.
We are proposing, for your consideration, three separate alterations
to the rate structure which will increase the annual revenue.
These plans
are described briefly as follows:
Plan No.1
No change in existing base rates, except that the 12-cent rate
be eliminated, the monthly minimum remain the same, but reduce the
amount of water allowed for the minimum charge.
Plan No.2
No change in the monthly minimum allowable amount but increase
the base rate by 15 percent throughout.
Plan No.3
Similar to Plan No.1 in that no change is made in the existing
base rate or the monthly minimum charge, but reduc,e the monthly allow-
able suèh that the 5/8-inch through l!-inch meters would each pay
35 cents per 100 cubic feet for the minimum; and reduce the allowable
for the 3", 4" and 6" meters such that they would pay 32.6 cents, 30.2
cents and 27.4 cents per 100 cubic feet, respectively, for the minimum.
The rates included in each of the three proposed plans have been
applied to the average consumption of each size of meter for the year
1958, and appear on the following three pages.
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Plan No.1
T orAL. REVENUE
Based on 1958 consumption and existing base rates
No change in minimum charge
Reduced allowance for the minimum
Delete the 12~ rate entirely
Motor Cu.Ft. Rate Revenue Ave. Cost No. of Total
Size per month Cu.Ft. Rate Sum Per Mo. Per 100 cu.ft. Meter I) Reven1¡e
500 .35 $1. 75
5/8" 959 459 .25 1.15 $2.90 .3025 10396 $30,148.40
700 .35 2.45
3/4" 1300 .25 3.25
2460 460 .22 1001 6.71 .2728 307 2,059.97
1400 .30 4.20
-
1" 3363 600 .25 1050
1363 .22 3.00 8.70 .2587 210 1,827.00
2500 .308 7.70
Ii" 5974 2500 .22 5.50
974 .19 1.85 15.15 .2536 83 1,257.45
3300 .34 11. 20
2" 12726 1700 .22 3.74
5000 .19 9.50
2626 .15 4.09 28.53 .2242 124 3,537.72
6000 .272 16.30
3" 8044 2044 .19 3.83 20.13 .2503 4 80.52
12000 .227 27.20
-
4" 27884 17884 .15 26.83 54.03 .1938 4 216.12
23000 .202 46.50
6" 42320 19320 .15 28.98 75.48 .1784 1 75.84
Ave. .2864
Total 11129
Total Revenue Per Month $39,206.66
Total Revenue Per Year $470,479.92
File No. 59-54
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Plan No.2
TOTAL REVENUE
Based on 1958 consumption
Existing Minimum Allowable First 2,000 Cu.Ft. @ .2875 per C cu.ft.
15% base rate increase Next 3,000 Cu.Ft. @ .2530 per C cu.ft.
Next 5,000 Cu.Ft. @ .2185 per C.cu.ft.
AllOver 10,000 Cu.Ft.@ .1725 per C cu.ft.
Meter Cu.Ft. Rate Revenue Ave. Cost Per No. of Total
Size per Mo. Cu.Ft. Rate Sum Per Mo. 100 cu.ft. Meters Revenue
700 .2874 2.01
5/811 959 259 .2874 .74 $ 2.75 .2875 10,396 $28,589.00
900 .2875 2.59
3/411 2460 1100 .2875 3.09
460 .253 1.16 6.84 .2780 307 2,099.88
1" 3363 1600 .2875 4.60
400 .2875 1.15
1363 .253 3.45 9.20 .2736 210 1,932.00
3000 8.28
-
lilt 5974 2000 .253 5.06
974 .2185 2.13 15.47 .2590 83 1,284.01
4000 10.81
1000 .253 2.53
2" 12726 5000 .2185 10.93
2776 .1725 4.79 29006 .2284 124 3,603.44
7000 17071
3" 8044 1084 .2185 2.37 20.08 .2496 4 80.32
13000 29.42
4" 27884 14884 .1725 25.67 55. 09 .1976 4 220.36
26000 51. 86
-
6" 42320 16320 .1725 28.15 90.01 .2127 1 90.01
Ave. .2769
Total 11,129
Total Revenue per Month $37,889.02
Total Revenue per Year $454,608.24
File No. 59-54
10
Plan No.3
TOTAL REVENUE
Based on 1958 consumption and existing base rates
No change in minimum charge
Reduced allowance for minimum
Delete 12~ rate entirely
Motor Cu.Ft. Rate Revenue Ave. Cost per No. of Total
Size per Mo. Cu.Ft. Rate Sum per Mo. 100 cu.ft. Meters Revenue
-
500 .35 1. 75
459 .25 1.15
5/8" 959 $2.90 .3024 10396 $30,148.40
700 .35 2.45
1300 .25 3.25
3/4" 2460 460 .22 1.01 6.71 .2727 307 2,059.97
1200 .35 4.20
800 .25 2.00
1" 3363 1363 .22 3.00 9.20 .2736 210 1,932.00
2200 .35 7.70
-
2800 .22 6.16
I! II 5974 974 .19 1.85 15.71 .2630 83 1,303.93
3200 .35 ll. 20
1800 .22 3.96
2" 12726 5000 019 9.50 28.75 .2259 124 3,565.00
2726 .15 4.09
5000 32.6 16.30
3044 .19 5.78
3" 8044 22.08 .2745 4 88.32
9000 30.2 27.20
1000 .19 1.90
4" 27884 17884 .15 26.82 55.92 .20 4 223.68
17000 27.4 46.50
6" 42320 25320 .15 37.98 84.48 020 1 84.48
Ave. .2879
Total Revenue per Month $ 39,406.14
Total Revenue per Year $472,873.68
File No. 59-54
11
Plan No.3 appears to be the most equitable and easier to set up
on the billing charts.
It does not change the equitability of the rates
among the meters of various sizes appreciably and it will increase the
total annual revenue by approximately 15 percent.
We therefore recommend Plan No.3 for adoption by the Commission.
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