Water & Sewer Rate Review 2001
L..-ð ð (
ENGINEERING REPORT
WATER AND SEWER UTILITY
RA TE REVI EW
Prepared for
The City of Salina, Kansas
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& COM PANY
5 December 200 I
Albuquerque
Colorado Springs
Caftan
Commerce
Denver
Fort Worth
Houston
Kansas City
Lenexa
Monterrey, Mex.
Oklahoma City
Panama City, Pma.
Phoenix
Rio Rancho
Salina
Wichda
3059 W. 13th Street
Wichita, Kansas 67203
P.O. Box 850 67201-0850
316-946-9800
Mayor and Commissioners
City of Salina
300 West Ash Street
Salina, KS 67402-0736
Re:
Water and Sewer Utility Rate Review
WCEA File: XI-410-004
Dear Mayor and Commissioners:
The Water and Sewer Rate Review presented in this document has been prepared in accordance
with your authorization. The document sets forth our approach to the development of adjustments
to the existing Water and Sewer Rate structures that will be required to meet the anticipated
revenue requirements of the utility for the period 2002 through 2006.
The approach presented is based on the general goals for the review which were established at the
beginning ofthe project. Those goals include:
.
Generate adequate revenues to operate and maintain the utilities
Maintain equitability among the user classes
Minimize the percent increase in rates
Minimize the percent increase in rates to small volume and fixed income users
Strategic use of available reserve funds in excess of target fund balances
Maintain reserve funds within the Water and Sewer Utility at target fund balances
established by the City
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.
.
The proposed rate schedules for the respective utilities shown on Tables 2-3 and 3-5 embrace these
goals.
Wilson & Company appreciates the assistance of Water and Sewer and Finance personnel with
assembling existing information, timely review of interim drafts and technical input in to the
preparation of this review. We are available to discuss the document with you upon request.
Thank you very much for this opportunity to be of continued service to the City of Salina.
/jlm
X 1-41O-004/ReportslFinallCover Letter
*
Engineers & Architects
A PARTNERSHIP OF CORPORATIONS
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ENGINEERING REPORT
WATER AND SEWER UTILITY
RATE REVIEW
Prepared for
The City of Salina, Kansas
Kristin Seaton, Mayor
Deborah Divine, City Commissioner
Alan Jilka, City Commissioner
Larry Mathews, City Commissioner
Monte Shadwick, City Commissioner
Dennis Kissinger, City Manager
Don Hoff, P.E., Director of Engineering & Utilities
Rod Franz, Director of Finance and Administration
Hank Corcoran Boyer, Water Office Supervisor
Address all communication
regarding this work to:
Wilson & Company
P. O. Box 850
Wichita, Kansas 67201-0850
(316) 946-9800
INIISOIV
& COM PANY
December 2001
X 1-410-004
*
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112/4101
Section One
General
Purpose
This Water and Sewer Rate Review has been prepared for the City of Salina's
Water and Sewage Utility to evaluate the revenue requirements of both the Sewer
Division and the Water Division. It will make recommendations for rate
adjustments that will be required to finance anticipated administration, customer
services, operational, maintenance and capital improvement costs during the next
five years.
Scope
Sewer User Charge Evaluation
The Sewer User Charge Evaluation included a review of current Sewer Division
revenues and expenditures and the development of anticipated revenue
requirements for the 5-year period from 2002 through 2006. A schedule of sewer
user charges consisting of a customer charge for administrative costs and customer
services and a commodity charge for wastewater use was developed which will
provide the revenue to meet the projected requirements throughout the study
period.
Water Rate Evaluation
The Water Rate Evaluation included a review of current revenues and expenditures
of the Water Division and development of anticipated revenue requirements for the
5-year period from 2002 through 2006. The current stepped rate structure, which
provides for a decreasing unit cost of water with increasing usage, was developed in
the 1987 water rate study prepared by Wilson & Company ("Salina, Kansas, Water
Rate Study", August 1987, WCEA File: 86-332A). The unit cost allocations for
Wilson & Company
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Section One
General
base costs, customer costs, and extra-capacity costs and usage blocks established in
the 1987 water rate review and as modified in the 1997 study are still valid for this
study. The equitability of the current stepped rate schedule was reviewed by
comparing the percent of consumption to the percent of revenue generated for each
user class for the year 2000, Reasonable equitability exists among user classes
under the existing rate structure.
Annual revenue requirements were compared with the requirements of the previous
year to determine a percent increase in the amount of revenue required from
charges for sewer in each year of the review period. A schedule of proposed
minimum montWy charges (MMC) was developed by determining the amount of
revenue required from each user or meter size to generate the required revenue
amounts for administrative, customer services, customer billing and other non-use
related revenue requirements. Likewise the commodity charge was adjusted to
generate the revenue requirements by applying appropriate percentage adjustments
for meter sizes and existing usage blocks for water and sewer use related revenue
requirements.
Project Approach
Six separate trial allocations utilizing reserve funds to establish the proposed Sewer
Rate were reviewed. The trial allocations tested various levels of reserve funds to
establish the range of rates for both the minimum monthly charge (MMC) and the
commodity charge. All of the trial allocations utilizing reserves were discussed
with City Staff in workshop sessions. The development of the Water and Sewer
Utility Sewer Rates discussed in this review is based on the trial allocations of
reserves which best matches the general goals of Water and Sewer Utility Sewer
Rate review. In general, these goals include:
.
Generate adequate revenues for the utility
Maintain equitability among user classes
.
Wilson & Company
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112/4/01
Section One
General
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Minimize percent increase in rates
Minimize percent increase in rates to smaller volume, fixed income
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customers
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Strategic use of available reserves in excess of target fund balance
Maintain reserves within the Water and Sewer Utility at target fund
.
balances established by the City
Historic and Projected Water and Sewer Revenue and Expenses
Table I-I is a summary of historic revenue and expenditures in the Water and
Sewer Division for the years 1996 through 2000. The 5-year historic review
provides a glance at the trends that have occurred in the utilities to assist in making
projections of expenditures and revenue needs for future years.
Wi/son & Company
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Table 1-1
Historic Water and Sewer Revenues and Expenditures 1997-2000
Revenues
1996 1997 1998 1999 2000
Actual Actual Actual Actual Actual
$ 5,593,029.00 $ 5,529,751.00 $ 5,671,960.00 $ 5,558,623.00 $ 6,402,809.00
$ 4,598,103.00 $ 4,624,432.00 $ 4,833,950.00 $ 4,744,976.00 $ 4,754,719.00
$ - $ - $ 4,853.00 $ 32,066.00 $ -
$ 283,723.00 $ 315,612.00 $ 338,326.00 $ 327,139.00 $ 386,059.00
$ - $ 987,748.00 $ 12,458.00 $ -
$ 259,213.00 $ 246,535.00 $ 176,252.00 $ 163,181.00 $ 181,848.00
$10,734,068.00 $11,704,078.00 $ 11,037,799.00 $ 10,825,985.00 $11,725,435.00
Charges for Services
Water
Sewer
Reimbursements
Interest
Internal Charges
Miscellaneous
ToalRevenue
Expenditures
General Government
Administration
Water
Sewer
Customer Accounting
Water
Sewer
Operations and Maintenance
Distribution
Cross Connection
Softening and Treatment
Groundwater Remediation
Capital Outlay
Water
Sewer
South Water
Collection and Treatment
Transfers Out
Total Expenditures and Transfers
Balance
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Beginning Balance
Ending Balance
$ 638,404.00 $ 524,418.00 $ 647,067.00 $ 643,216.00 $ 895,385.00
$ 343,756.00 $ 282,379.00 $ 348,421.00 $ 346,647.00 $ 482,130.00
$ 1,011,194.00 $ 885,050.00 $ 958,574.00 $ 1,050,385.00 $ 1,128,659.00
$ 178,446.00 $ 156,185.00 $ 169,160.00 $ 185,748.00 $ 199,175.00
$ 987,661.00 $ 958,751.00 $ 1,138,168.00 $ 1,121,050.00 $ 1,294,004.00
$ 54,145.00 $ 66,988.00 $ 68,218.00 $ 72,762.00 $ 52,304.00
$ 1,661,001.00 $ 1,807,441.00 $ 1,801,628.00 $ 1,824,221.00 $ 1,913,343.00
$ 7,935.00 $ 431.00 $ - $ - $
$ 2,562,276.00
$ -
$ 371,885.00
$ 2,006,802.00
$ 2,269,367.00
$12,092,872.00
$ 959,907.00
$ 70,269.00
$ 6,419.00
$ 2,300,735.00
$ 2,271,381.00
$10,290,354.00
$ 648,253.00
$ 419,004.00
$ -
$ 1,835,181.00
$ 2,344,900.00
$10,378,574.00
$ 1,673,356.00
$ 715,043.00
$ -
$ 2,073,972.00
$ 1,957,519.00
$ 11,663,919.00
$ 925,864.00
$ 517,456.00
$ -
$ 2,181,723.00
$ 2,145,205.00
$11,735,248.00
$ (1,358,804.00) $ 1,413,724.00 $
659,225.00 $ (837,934.00) $
(9,813.00)
$ 5,114,800.00 $ 3,755,996.00 $ 5,169,720.00 $ 5,828,945.00 $ 4,991,011.00
$ 3,755,996.00 $ 5,169,720.00 $ 5,828,945.00 $ 4,991,011.00 $ 4,981,198.00
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112/4101
Section One
General
Annual revenues are derived primarily from the charges for water and sewer
services. Total revenues generated from all sources have increased by
approximately 9.2 percent over the S-year historic period. Revenues generated
from the charge for services increased approximately 14.S percent over the same
period.
Expenditures for the water and sewer divisions are for administration and customer
services and for operations and maintenance, including debt service for the facilities
required to serve the utilities customers.
Total expenditures for administrative and customer services increased by
approximately 24.6 percent during the S-year historic period. In addition to the
percent increase in administration and customer services expenditures, the
allocation of expenditures between the Water and Sewer Divisions has changed.
Prior to 2000 the administration and customer accounting expenditures were
allocated approximately 67 percent to Water and 33 percent to Sewer. Beginning
with the 2001 budget year the allocation was approximately SO percent Water and
SO percent Sewer. For this review, the split of administrative and customer
accounting expenditures was projected to transition from the 67%/33% allocation
in 2002 to an equal split in 2006.
Total expenditures for operations and maintenance, including debt service
decreased by approximately 2.3 percent during the same period.
Annual fluctuations of both revenue generated and expenditures occur due to
monthly and annual precipitation patterns and total amounts and unexpected needs
for extensions, improvements and maintenance of the utilities. The Water and
Sewer Division maintains a reserve balance that may be used annually to
supplement lower than expected revenues from charges for services that could
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Section One
General
occur in a wet year when water consumption and sales may be diminished. The
reserve may also be used if unforeseen extensions, improvements or maintenance of
facilities is required, The reserve balance is also available to minimize the revenue
required from charges for services and to level out the fluctuation in rate increases
from year to year. The reserve balance fluctuated annually and amounted to
approximately $5,000,000 annually for the 5-year historic period. The target for
the reserve balance is approximately $3,000,000 annually.
Table 1-2 is a projection of the Sewer Division Revenue and Expenditures for the
5-year review period 2002 through 2006. The 2001 Budget figures are included for
information and to assist with the projections of revenue requirements for the next
5-year period.
Wilson & Company
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Table 1-2
Projected Sewer Revenue Requirements 2002-2006
¡/
Revenues 2001 2001 2002 2003 2004 2005 2006
Budget Amended
Charges for Services $ 4,850,000.00 $ 4,793,000.00 $ 5,119,565.00 $ 5,442,699.00 $ 5,781,553.00 $ 6,132,822.00 $ 6,519,668.00
Reimbursements $ - $ - $ - $ - $ - $ - $ -
Interest $ 325,000.00 $ 325,000.00 $ 185,000.00 $ 185,000.00 $ 185,000.00 $ 185,000.00 $ 185,000.00
Internal Charges $ - $ - $ - $ - $ - $ - $
Miscellaneous $ - $ - $ - $ - $ - $ - $
Total Revenue $ 5,175,000.00 $ 5,118,000.00 $ 5,304,565.00 $ 5,627,699.00 $ 5,966,553.00 $ 6,317,822.00 $ 6,704,668.00
Expenditures
General Government
Administration $ 507,839.00 $ 662,950.00 $ 637,150.00 $ 611,350.00 $ 585,550.00 $ 559,750.00 $ 534,000.00
Customer Accounting $ 698,454.00 $ 534,753.50 $ 575,850.00 $ 632,150.00 $ 688,300.00 $ 745,350.00 $ 803,250.00
Operations and Maintenance
Distribution $ - $ - $ - $ - $ - $ - $
Cross Connection $ - $ - $ - $ - $ - $ - $
Softening and Treatment $ - $ - $ - $ - $ - $ - $
Groundwater Remediation $ - $ - $ - $ - $ - $ - $
Capital Outlay $ 509,000.00 $ 509,000.00 $ 490,000.00 $ 650,000.00 $ 650,000.00 $ 650,000.00 $ 650,000.00
Collection and Treatment $ 2,211,155.00 $ 2,214,428.00 $ 2,258,000.00 $ 2,337,100.00 $ 2,419,000.00 $ 2,503,600.00 $ 2,591,200.00
Debt Service $ 1,983,487.00 $ 1,983,487.00 $ 2,013,565.00 $ 2,027,099.00 $ 2,023,703.00 $ 2,029,122.00 $ 2,036,218.00
Total Expenditures $ 5,909,935.00 $ 5,904,618.50 $ 5,974,565.00 $ 6,257,699.00 $ 6,366,553.00 $ 6,487,822.00 $ 6,614,668.00
Net to Reserves $ (734,935.00) $ (786,618.50) $ (670,000.00) $ (630,000.00) $ (400,000.00) $ (170,000.00) $ 90,000.00
Beginning Balance $ 3,521,557.00 $ 2,786,622.00 $ 3,000,000.00 $ 2,330,000.00 $ 1,700,000.00 $ 1,300,000.00 $ 1,130,000.00
Ending Balance $ 2,786,622.00 $ 3,000,000.00 $ 2,330,000.00 $ 1,700,000.00 $ 1,300,000.00 $ 1,130,000.00 $ 1,220,000.00
(*)
Target Fund Balance $ 1,200,000.00
* Adjustment for Rate Review
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Section One
General
Expenditures for the Water Division for the 5-year period are projected to increase
approximately 4 percent. Administrative and Customer Accounting is projected to
increase approximately 10.2 percent and Operation and Maintenance approximately
2.6 percent during the 5-year period.
Total Revenue is projected to increase 9.1 percent over the 5-year period.
Approximately a 9.3 percent increase in revenue from water rates over the 5-year
period will be required. The use of reserve funds will be utilized to level out the
amount of increase required in any given year.
Table 1-3 is a projection of the Water Division Revenue and Expenditures for the 5-
year review period 2002 through 2006. The 200 I Budget figures are included for
information and to assist with the projections of revenue requirements for the next
5-year period.
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Table 1-3
Projected Water Revenue Requirements 2002-2006
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Revenues 2001 2001 2002 2003 2004 2005 2006
Budget Amended
Charges for Services $ 6,300,000.00 $ 6,300,000.00 $ 6,461,438.00 $ 6,602,795.00 $ 6,711,365.00 $ 6,882,715.00 $ 7,063,268.00
Reimbursements $ - $ - $ - $ - $ - $ - $ -
Interest $ 325,000.00 $ 325,000.00 $ 140,000.00 $ 140,000.00 $ 140,000.00 $ 140,000.00 $ 140,000.00
Internal Charges $ - $ - $ - $ - $ - $ - $ -
Miscellaneous $ 288,000.00 $ 235,000.00 $ 220,000.00 $ 225,000.00 $ 230,000.00 $ 235,000.00 $ 240,000.00
Total Revenue $ 6,913,000.00 $ 6,860,000.00 $ 6,821,438.00 $ 6,967,795.00 $ 7,081,365.00 $ 7,257,715.00 $ 7,443,268.00
Expenditures
General Government
Administration $ 507,839.00 $ 662,950.00 $ 637,150.00 $ 611,350.00 $ 585,550.00 $ 559,750.00 $ 534,000.00
Customer Accounting $ 698,454.00 $ 534,753.50 $ 575,850.00 $ 632,150.00 $ 688,300.00 $ 745,350.00 $ 803,250.00
Operations and Maintenance
Distribution $ 1,285,354.00 $ 1,263,654.00 $ 1,386,170.00 $ 1,434,685.00 $ 1,484,900.00 $ 1,536,800.00 $ 1,590,700.00
Cross Connection $ 81,563.00 $ 47,692.00 $ 60,000.00 $ 60,000.00 $ 60,000.00 $ 60,000.00 $ 60,000.00
Softening and Treatment $ 2,249,903.00 $ 2,200,627.00 $ 2,000,000.00 $ 2,070,000.00 $ 2,142,500.00 $ 2,217,400.00 $ 2,295,000.00
Groundwater Remediation $ 20,000.00 $ - $ 20,000.00 $ 20,000.00 $ 20,000.00 $ 20,000.00 $ 20,000.00
Capital Outlay $ 1,215,000.00 $ 1,215,000.00 $ 1,334,000.00 $ 800,000.00 $ 800,000.00 $ 800,000.00 $ 800,000.00
Collection and Treatment $ - $ - $ - $ J- $ - $ - $ -
Debt Service $ 849,960.00 $ 849,960.00 $ 1,128,268.00 $ 1,314,610.00 $ 1,310,115.00 $ 1,313,415.00 $ 1,315,318.00
Total Expenditures and Transfers $ 6,908,073.00 $ 6,774,636.50 $ 7,141,438.00 $ 6,942,795.00 $ 7,091,365.00 $ 7,252,715.00 $ 7,418,268.00
Balance $ 4,927.00 $ 85,363.50 $ (320,000.00) $ 25,000.00 $ (10,000.00) $ 5,000.00 $ 25,000.00
Beginning Balance $ 2,909,713.00 $ 2,914,640.00 $ 2,000,000.00 $ 1,680,000.00 $ 1,705,000.00 $ 1,695,000.00 $ 1,700,000.00
Ending Balance $ 2,914,640.00 $ 2,000,000.00 $ 1,680,000.00 $ 1,705,000.00 $ 1,695,000.00 $ 1,700,000.00 $ 1,725,000.00
(*)
Target Fund Balance $ 1,700,000.00
* Adjustment for Rate Review
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Section One
General
Expenditures for the Sewer Division for the 5-year period are projected to increase
approximately 10.7 percent. Administrative and Customer Accounting is projected
to increase approximately 10.2 percent and Operation and Maintenance
approximately 10.8 percent during the 5-year period.
Total Revenue required is projected to increase 18.8 over the 5-year period.
Approximately a 19.4 percent increase in revenue from sewer rates over the 5-year
period will be required. Most of that increase will be required in the early years of
the 5-year period. The change is required to fund additional administrative and
customer services expenditures which have been reallocated between the Water and
Sewer Divisions starting the year 2001. The use of reserve funds will be utilized in
early years to level out the amount of increase required in any given year.
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Section Two
Sewer User Charge Evaluation
Projected Revenue Requirements
Projections of revenue required from charges for services for the Sewer Division
for 2002 through 2006 are shown in Table 2-1. Projected revenue requirements are
based on historical Sewer Division expenditures and on information provided by
the City and developed by Wilson & Company for anticipated future expenditures.
A brief description of the line items included in Table 2-1 follows.
1.
Administrative Costs: Includes administrative and general costs allocated to
the Sewer Division
2.
Customer Costs: Includes customer accounting and collection costs
allocated to the Sewer Division.
3.
O&M Costs: Includes operation and maintenance costs for the existing
wastewater collection and treatment facilities.
4.
Capital Improvements: Amount allocated annually for replacement of major
equipment items for wastewater collection and treatment.
5.
Debt Service: Includes the 1993A Bond Issue (Sewer), the 1994 Refunding
Bonds (Sewer), the1998A GO Refunding Bonds (Water and Sewer) and
Kansas Public Water Supply Loan Fund (KPWSLF) #1 and #2 (Water).
Bond Coverage: Includes an annual amount added to the normal revenue
6.
requirements in order to meet the required 125 percent bond coverage on the
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Sewer Division's principal and interest portion of the existing revenue
bonds.
7.
Misc. Revenue: Includes miscellaneous revenue from sources other than
charges for services, primarily interest on reserve accounts.
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Section Two
Sewer User Charge Evaluation
Available reserve funds in excess of target fund balance have been utilized to
minimize the amount of revenue required from charges for services. Significant
reserve funds are projected to be used during the 5-year review period to establish
the revenue level required from the minimum monthly customer charge (MMC).
The use of reserves enable the revenue generated from the MMC to transition from
the 35 percent of total (Water and Sewer) administrative and customer costs in
2002 to 50 percent oftotal (Water and Sewer) in 2006 without significant increases
in the early years.
Likewise, modest reserves are utilized in the early years (2002 and 2003) to
maintain a commodity charge that matches revenue requirements without year to
year fluctuations. As projected, the proposed increase in the commodity charge
will actually add to the reserve in later years (2004-2006).
The net change in the reserve balance as a result of utilizing the reserve to establish
the proposed Sewer Rate is a decrease of approximately $1,780,000.00.
Revenue Generated at Current Rates
The projected revenue requirements shown in Table 2-1 were compared to the
revenue to be generated at the current rates, Table 2-2. Projections for the number
of sewer accounts and billed sewage volume are given in Table 2-2. As shown in
Table 2-1 and Table 2-2 the revenue generated at current rates will fall short of the
revenue required and there will be a revenue deficit.
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Section Two
Sewer User Charge Evaluation
Table 2-1
Projected Revenue Requirements
Sewer Division
2002 2003 2004 2005 2006
$ $ $ $ $
Administrative 637,150 611,350 585,550 559,750 534,000
Customer 575,850 632,150 688,300 745,350 803,250
Balance to/from Reserves (585,000) (580,000) (575,000) (570,000) (560,000)
Subtotal 628,000 663,500 698,850 735,100 777,250
O&M 2,258,000 2,337,100 2,419,000 2,503,600 2,591,200
Capital Impr. 490,000 650,000 650,000 650,000 650,000
Debt & Bond Coverage 2,013,565 2,027,099 2,023,703 2,029,122 2,036,218
Miscellaneous (185,000) (185,000) (185,000) (185,000) (185,000)
Balance to/from Reserves (85,000) (50,000) 175,000 400,000 650,000
Subtotal 4,491,565 4,779,199 5,082,703 5,397,722 5,742,418
Required from Rates
(See Table 2-2) 5,119,565 5,442,699 5,781,553 6,132,822 6,519,668
Net to/from Reserves (670,000) (630,000) (400,000) (170,000) 90,000
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Section Two
Sewer User Charge Evaluation
Table 2-2
Revenue Generated at Current Rates
2002 2003 2004 2005 2006
Administrative Charge
No. of Accounts 19,080 19,160 19,240 19,320 19,400
MMC,$ 2.62 2.62 2.62 2.62 2.62
Projected Revenue, $ 599,875 602,390 604,906 607,421 609,936
Commodity Charge
Billed Sewage, 1000 hcf 2,259.00 2,270.00 2,281.00 2,293.00 2,304.00
Unit Cost, $/hcf 1.88 1.88 1.88 1.88 1.88
Projected Revenue, $ 4,246,920 4,267,600 4,288,280 4,310,840 4,331,520
Total Revenue
Administrative Charge, $ 599,875 602,390 604,906 607,421 609,936
Commodity Charge, $ 4,246,920 4,267,600 4,288,280 4,310,840 4,331,520
Total Revenue, $ 4,846,795 4,869,990 4,893,186 4,918,261 4,941,456
Required ITom Rates, $ 5,119,565 5,442,699 5,781,553 6,132,822 6,519,668
Surplus/(Deficit), $ (272,770) (572,709) (888,367) (1,214,561) (1,578,212)
Sect2.doc
112/4101
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Sect2.doc
I 1214ml
Section Two
Sewer User Charge Evaluation
Proposed Sewer User Rate Schedule
The system of sewer user charges established by ordinance for the City of Salina
divides the costs of collecting and treating sewage equitably among all users by
means of a minimum monthly charge plus a commodity charge.
The minimum monthly charge allocates all administrative costs (i.e. administrative
and customer costs allocated to the sewer division) equally among all users
regardless of the user's sewage flow volume. Adjustments to the existing
minimum monthly charge are required to recognize a reallocation of administrative
and customer services between the Water Division and Sewer Division. For this
review the administrative and customer costs for the Sewer Division is projected to
transition from 35 percent of total (Water and Sewer) administrative and customer
in 2002 to 50 percent in 2006. The minimum monthly charge (MMC) is calculated
as follows:
Annual Admin. Costs
MMC, $ =
(No. of Accounts)(12 months)
The commodity charge in dollars per hundred cubic feet ($/hcf) allocates all
operation, maintenance and replacement costs (i.e., O&M costs, capital
improvements, debt service, bond payments and bond coverage) proportionally to
all users based on the user's volume of sewage flow. For a residential user, the
commodity charge is based on the average monthly water meter consumption for
the winter months of January, February and March. Commercial and industrial
charges are based on monthly water meter consumption records. The unit
commodity charge is calculated as follows:
Annual Commodity Costs
Unit Cost, ($ / hcf) = A I S V I
nnua ewage 0 ume
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Sect2.doc
I 1214101
Section Two
Sewer User Charge Evaluation
Table 2-3 shows the results of the Commodity Charge and Minimum Monthly
Charge calculations for 2002 through 2006 based on the projected revenue
requirements.
Table 2-3
Proposed Sewer User Rate Schedule
"1.oø...., "l,....f" ~., ~.."
2002 2003 2004 2005 2006
Administrative Charge
Revenue Required, $ 628,000 663,500 698,850 735,100 777,250
No. of Accounts 19,080 19,160 19,240 19,320 19,400
MMC,$ 2.75 2.89 3.03 3.18 334
Commodity Charge
Revenue Required, $ 4,491,565
Billed Sewage, 1000 hcf 2,259.00
Unit Cost, $/hcf 1.99
4,779,199 5,082,703 5,397,722 5,742,418
2,270.00 2,281.00 2,293.00 2,304.00
2.11 2.23 236 2.50
Estimated Monthly Sewer Charges
Estimated total monthly sewer charges resulting from the proposed rates are shown
in Table 2-4 for typical customers and selected usage ranges. Table 2-5 shows the
percent increase from the previous year for the same customers.
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Section Two
Sewer User Charge Evaluation
Table 2-4
Estimated MontWy Sewer Charges
for Typical customers
Based on Schedule of Proposed Rates
Customer 1,.,-6 ("
Type and Average '\-IPO7 &#'1
Usage Usage, * Exist 2001 2002 2001' 2004 2005 2006
Range cu.ft. $ $ $ $ $ $
Residential
0-300 300 8.26 8.72 9.22 9.72 10.26 10.84
301-500 400 10.14 10.71 11.33 11.95 12.62 13.34
501-800 700 15.78 16.68 17.66 18.64 19.70 20.84
801-1100 1000 21.42 22.65 23.99 25.33 26.78 28.34
1101-1500 1300 27.06 28.62 30.32 32.02 33.86 35.84
1501-2000 1700 34.58 36.58 38.76 40.94 43.30 45.84
Commercial
2000-5000 3200 62.78 66.43 70.41 74.39 78.70 83.34
5001-10000 6900 132.34 140.06 148.48 156.90 166.02 175.84
10001-50000 21900 414.34 438.56 464.98 491.40 520.02 550.84
Large Users
In City 100000 1882.62 1992.75 2112,89 2233.03 2363.18 2503.34
In City 600000, 11282.62 11942.75 12662.89 13383.03 14163.18 15003.34
Outside City 600000 14105.24 14930.50 15830.78 16731.06 17706.36 18756.68
* Residential usage is based on the average monthly metered water consumption for
January, February, and March. Commercial and Large User usage is based on monthly
metered water consumption.
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Sec12.doc
I 1214101
Section Two
Sewer User Charge Evaluation
Table 2-5
Monthly Sewer Charge Percent Increases
for Typical customers
Based on Schedule of Proposed Rates
Customer Type Average 'V." 'V" 01.
and Usage Usage, 2002 2003 2004 2005 2006
Range cu.ft. % % % % %
Residential
0-300 300 5.57% 5.73% 5.42% 5.56% 5.65%
301-500 400 5.62% 5.79% 5.47% 5.61% 5.71%
501-800 700 5.70% 5.88% 5.55% 5.69% 5.79%
801-11 00 1000 5.74% 5.92% 5.59% 5.72% 5.83%
1101-1500 1300 5.76% 5.94% 5.61% 5.75% 5.85%
1501-2000 1700 5.78% 5.96% 5.62% 5.76% 5.87%
Commercial
2000-5000 3200 5.81% 5.99% 5.65% 5.79% 5.90%
5001-10000 6900 5.83% 6.01% 5.67% 5.81% 5.91%
10001-50000 21900 5.85% 6.02% 5.68% 5.82% 5.93%
;/
Large Users
In City 100000 5.85% 6.03% 5.69% 5.83% 5.93%
In City 600000 5.85% 6.03% 5.69% 5.83% 5.93%
Outside City 600000 5.85% 6.03% 5.69% 5.83% 5.93%
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Sect3.doc
11214101
Section Three
Water Rate Evaluation
Projected Revenue Requirements
Projection of revenue requirements from charges for services for the Water
Division for 2002 through 2006 are shown in Table 3-1. Projected revenue
requirements are based on historical Water Division expenditures and on
information provided by the City and developed by Wilson & Company for
anticipated future expenditures. These requirements consist of the following
expenditures:
1.
Administrative Costs: Includes administration and general costs and
allocated to the Water Division.
2.
Customer Costs: Includes customer accounting and collection costs
allocated to the Water Division.
3.
O&M Costs: Includes expenditures for the operation and maintenance of the
City's water supply, treatment, groundwater remediation, cross connection
4.
program and distribution facilities
Capital Improvements: Includes an amount allocated annually to the Water
¿
Division from the Water and Sewer Utility's Capital Outlay budget.
Debt Service: Includes the 1993A Bond Issue (Sewer), the 1994 Refunding
Bonds (Sewer), the1998A GO Refunding Bonds (Water and Sewer) and
Kansas Public Water Supply Loan Fund (KPWSLF) #1 and #2 (Water).
5.
6.
Bond Coverage: Normally 125 percent of principal and interest payment.
No additional revenue is required for the existing bonds in the Water
Division. The other long term financing is provided by long term loans from
the State of Kansas,
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I 1215101
Section Three
Water Rate Evaluation
7.
Misc. Revenue: Includes miscellaneous revenue from outside sources
including interest on reserve accounts, and sales tax collections. It does not
include non-rate generated revenue from sources such as water protection
fee, franchise fees, and water sales taxes.
Available reserve funds in excess of target fund balances have been utilized
to minimize the amount of revenue required from charges for services.
Significant reserve funds are projected to be used during the 5-year period to
establish the revenue level required from the administrate and customer
charge. The use of reserves enable the revenues generated from the
administrative charge to transition from the 65 percent of total (Water &
Sewer) administrative and customer costs in 2002 to 50 percent of total
(Water & Sewer) in 2006 without significant fluctuations from year to year.
Modest increases to the commodity charge will maintain revenue
requirements without year to year rate fluctuations and increase the reserve
balance.
The net change in the reserve balance as a result of utilizing the reserve to
establish the proposed Water Rate is a decrease of approximately $275,000.
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Sect3.doc
11~1
Section Three
Water Rate Evaluation
Table 3-1
Projected Revenue Requirements
Water Division
2002 2003 2004 2005 2006
$ $ $ $ $
Administrative 637,150 611,350 585,550 559,750 534,000
Customer 575,850 632,150 688,300 745,350 803,250
Balance to/from Reserves (390,000) (375,000) (360,000) (345,000) (325,000)
Subtotal 823,000 868,500 913,850 960,100 1,012,250
O&M 3,466,170 3,584,685 3,707,400 3,834,200 3,965,700
Capital Impr. 1,334,000 800,000 800,000 800,000 800,000
Debt & Bond Coverage 1,128,268 1,314,610 1,310,115 1,313,415 1,315,318
Misc. Revenue (360,000) (365,000) (370,000) (375,000) (380,000)
Balance to/from Reserves 70,000 400,000 350,000 350,000 350,000
Subtotal 5,638,438 5,734,295 5,797,515 5,922,615 6,051,018
Required from Rates 6,461,438 6,602,795 6,711,365 6,882,715 7,063,268
(See Table 3-2)
Net to/from Reserves (320,000) 25,000 (10,000) 5,000 25,000
Revenue Generated at Current Rates
The projected revenue requirements were compared to the revenue to be generated
at the current rates. As shown in Table 3-1 and Table 3-2, the revenue generated at
current rates will fall short of the revenue required and there will be a revenue
deficit.
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I 1214101
Section Three
Water Rate Evaluation
Table 3-2
Revenue Generated at Current Rates
2002 2003 2004 2005 2006
$ $ $ $ $
Projected Revenue 6,258,522 6,282,950 6,308,538 6,332,966 6,354,183
Revenue Required 6,461,438 6,602,795 6,711,365 6,882,715 7,063,268
Surplus/(Deficit) (202,916) (319,845) (402,827) (549,749) (709,085)
Existing Rate Structure
The current stepped rate structure was established in the 1987 rate study prepared
by Wilson & Company and as modified in the 1997 rate study. The equitability of
the rate structure was verified by comparing the percent of total consumption for
each meter size to the percent of total revenue generated for the year 2000. The
results of the comparison are shown in Table 3-3. As shown in the table, the
current stepped rate structure provides an adequate level of equitability in the
distribution of the water utility costs.
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Sect3.doc
11214101
Section Three
Water Rate Evaluation
Table 3-3
Percent Consumption vs. Percent Revenue
2000
Consum
%
Revenue
%
Meter Size
5/8" 55.8 61.5
3/4" 3.9 4.1
1" 7,6 7.5
1-1/2" 2.9 2.7
2" 20.5 16.9
3" 1.6 1.3
4" 6.1 4.8
6" 0.7 0.5
8" 0.8 0.7
Proposed Water Rate Schedule
The projected revenue requirements for both the administrative and commodity
categories for each of the planning years was compared to the revenue requirement
in each of these categories for the previous year to determine a percent increase in
the amount of revenue required. The percent increase required in Water Division
revenues is shown in Table 3-4.
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, 11214/01
Section Three
Water Rate Evaluation
Table 3-4
Percent Increase in Revenue Required
Percent Increase in Revenue Required 'tV" -(
2002 2003 2004 2005 2006
Administrative Charge
Previous Revenue, $ * 783,808 823,000 868,500 913,850 960,100
Projected Revenue, $ 823,000 868,500 913,850 960,100 1,012,250
Increase, % 5.0% 5.5% 5.2% 5.1% 5.4%
Commodity Charge
Previous Revenue, $ * 5,496,2365,638,438
Projected Revenue, $ 5,638,4385,734,295
Increase, % 2.6% 1.7%
5,734,295 5,797,515 5,922,615
5,797,515 5,922,615 6,051,018
1.1% 2.2% 2.2%
* From 200 I Rate Schedule
A schedule of proposed water rates is presented in Table 3-5. These rates are based
on the annual percent increase given in Table 3-4 being applied to minimum
monthly charges (MMC) for all meter sizes and the commodity charges for each
monthly usage block.
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11214101
Section Three
Water Rate Evaluation
Table 3-S
Proposed Water Rate Schedule
.,¿ '~--z.....,., -auf .,~t?e --r .... ')
Base* 4OOZ"" ~ 2004" ..2005 2006
>rø2-
MMC,$
Meter Size
518" 2.75 2.89 3.05 3.21 3.38 3.57
3/4" 4.38 4.60 4.86 5.12 5.38 5.68
1" 5.95 6.25 6.60 6.95 7.31 7.71
1-1/2" 9.25 9.72 10.26 10.80 11.35 11.97
2" 14.96 15.71 16.58 17.45 18.34 19.34
3" 39.29 41.26 43.55 45.83 48.15 50.77
4" 56.27 59.09 62.36 65.62 68.95 72.70
6" 1 04.44 109.67 115.74 121.79 127.96 134.92
10" 219.81 230.81 243.58 256.30 269.28 283.91
Commodity Charge
Unit Cost, $/hcf
Range cu. ft.
0-2000 2.03 2.09 2.13 2.16 2.21 2.26
2001-10000 1.82 1.87 1.91 1.94 1.99 2.04
Over 10000 1.63 1.68 1.71 1.73 1.77 1.81
* Current Rate Schedule
Estimated Monthly Water Use Charges
Estimated total monthly water use charges resulting from the proposed rates are
shown in Table 3-6 for typical customers and selected usage ranges. Table 3-7
shows the percent increase from the previous year for the same customers.
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11214/01
Section Three
Water Rate Evaluation
Table 3-6
Estimated Monthly Water Use Charges
for Typical Customers
Based on Schedule of Proposed Rates
Estimated Monthly Water Use Charges
for Typical Customers
Based on Schedule of Proposed Rates
Customer Type Average ~
and Usage Usage, Meter 2001 * 2002 2003 2004 2005 2006
~ 'u~- ......,.". .ve-, ì
Range cu.ft. Size $ $ $ $
Residential
0-300 300 5/8" 8.84 9.16 9.44 9.69 10.01 10.35
301-500 400 5/8" 10.87 11.25 11.57 11.85 12.22 12.61
501-800 700 5/8" 16.96 17.52 17.96 18.33 18.85 19.39
801-11 00 1000 5/8" 23.05 23.79 24.35 24.81 25.48 26.17
1101-1500 1300 5/8" 29.14 30.06 30.74 31.29 32.11 32.95
1501-2000 1700 5/8" 37.26 38.42 39.26 39.93 40.95 41.99
Over 2000 5000 5/8" 97.95 100.79 102.95 104.61 107.28 109.97
Commercial
2000-5000 3200 5/8" 65.19 67.13 68.57 69.69 71.46 73.25
5001-10000 6900 2" 144.74 149.14 152.77 155.71 160.05 164.50
10001-50000 21900 2" 395.13 407.03 415.47 421.72 432.37 443.13
50001-100000 72200 4" 1256.33 1295.45 1321.38 1340.08 1373.29 1406.92
Large Users
In City 200000 4" 3339.47 3442.49 3506.76 3551.02 3635.35 3720.10
In City 600000 6" 9907.6410213.0710400.1410527.1910774.3611022.32
Outside City 600000 6" 12462.88 12848.59 13086.98 13250.33 13563.92 13879.09
l.. S-?I
* Current Rate Schedule
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I I 1214/01
Section Three
Water Rate Evaluation
Table 3-7
Monthly Water Use Charge Percent Increase
for Typical Customers
Based on Schedule of Proposed Rates
Monthly Water Use Charge Percent Increase
for Typical Customers -Pl.
Based on Schedule of Proposed Rates 1--, ~
Customer Type Average i- 'Lt.>.ø' \' 'II'do
and Usage Usage, Meter 2002 2003 2004 2005 2006
Range cu.ft. Size % % % % %
Residential
0-300 300 5/8" 3.62% 3.06% 2.65% 3.30% 3.40%
301-500 400 5/8" 3.50% 2.84% 2.42% 3.12% 3.19%
501-800 700 5/8" 3.30% 2.51% 2.06% 2.84% 2.86%
801-ll00 1000 5/8" 3.21% 2.35% 1.89% 2.70% 2.71%
1101-1500 1300 5/8" 3.16% 2.26% 1.79% 2.62% 2.62%
1501-2000 1700 5/8" 3.11% 2.19% 1.71% 2.55% 2.54%
Over 2000 5000 5/8" 2,90% 2.14% 1.61% 2.55% 2.51%
V1
~,......
Commercial
2000-5000 3200 5/8" 2.98% 2.15% 1.63% 2.54% 2.50%
5001-10000 6900 2" 3.04% 2.43% 1.92% 2.79% 2.78%
10001-50000 21900 2" 3.01% 2.07% 1.50% 2.53% 2.49%
50001-100000 72200 4" 3.ll% 2.00% 1.42% 2.48% 2.45%
Large Users
In City 200000 4" 3.08% 1.87% 1.26% 2.3 7% 2.33%
In City 600000 6" 3.08% 1.83% 1.22% 2.35% 2.30%
Outside City 600000 6" 3.09% 1.86% 1.25% 2.37% 2.32%
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