City of McCall Water Rate Study – Draft Rate Recommendations June 2018

Agenda Summary of what we discussed last meeting Updated Revenue Needs Analysis Draft Rate Recommendations

Total Net Increase in Annual Budget Source of Difference Net Annual Change in Revenue Needs Inflation (3.0% per year) +$94,000 Impact of Sewer Annexation +$406,000 Net System Capital Investment +$538,000 Total +$1,038,000

Projected Revenue and Expenditures

Audit of Water Account Billings Calibrated model based on historic billing practices. Model results within 0.2% of actuals. Water account billings were reviewed and corrected 89 ERUs were added to the revenue stream Results in a projected revenue increase of approximately $40,000 annually.

Options for Increased Revenues Capitalization Charges About 7% of total revenue Highly variable, directly dependent on system growth rate Rates About 91% of total revenue Increases unpopular with residents, but best stable source of revenue that can be quickly implemented Misc. Non-Rate Revenues About 2% of total revenue Changes have nominal impact on total revenue

Capitalization Charge Buy-in What should you charge for each new equivalent connection to the water system? Current charge: $3,750 Future Charge per State of Idaho Required methodology (Loomis Formula) Capitalization Charge Components per ERU Distribution System $4,530 Water Treatment Plant $669 Storage Tanks $396 Pump Stations $110 Total Capitalization Charge $5,705

Capitalization Charge Comparison chart

Potential Rate Increase Approaches One time large increase vs. smaller gradual increases Bonding for New Tank vs. Pay as You Go Four options for discussion – Option 1 – Large initial increase, no bonding Option 2 – Gradual increase, no bonding Option 3 – Large initial increase, bond as necessary to minimize rate increase Option 4 – Gradual increase, bond as necessary to minimize rate increase

Potential Rate Increase Approaches One time large increase vs. smaller gradual increases Bonding for New Tank vs. Pay as You Go Four options for discussion – Option 1 – Large initial increase, no bonding Option 2 – Gradual increase (5 year implementation), no bonding Option 3 – Large initial increase, bond as necessary to minimize rate increase Option 4 – Gradual increase, bond as necessary to minimize rate increase New Option 3 – Three year implementation plan

Option 1 – Large Initial 47% increase 2019, 2.5%/year thereafter Roland to Update 47% increase 2019, 2.5%/year thereafter

Option 2 – Gradual (5 Year Implementation) Roland to Update 10% increase per year through 2023, 2.5%/year thereafter

Option 3 – Three Year Implementation Roland to Update 16% increase through 2021, 2.5%/year thereafter

Summary of Options Option 1 Option 2 Option 3 Annual Increase 2019 46.9% 10.1% 15.6% 2020 2.5% 2021 2022 2023 2024 Other Impacts Deferred Projects None $840,000 Available Cash @ 20 years* $2.1 million $0 $1.1 million * Current cash reserve = $1.85 million

Draft Rate Recommendations

Current Rate Structure 30,000 Monthly Use (gallons) 20,000 $0.71 /kgal $0.71 /kgal $0.71 /kgal 10,000 $0.00 Base Rate = (Per ERU) $33.70 $37.70 $68.32 $50.55 Class A Private Residences Out- Of- Town Class B Commercial /Industrial Class C Unmetered Accounts

Overall Rate Structure Options Uniform Seasonal Increasing Block

Rate Comparison – Uniform Structure (All results for Option 1 – 2018, Class A) 30,000 Monthly Use (gallons/ERU) 20,000 $0.71 /kgal $1.71 /kgal 141% 10,000 Roland to complete Base Rate = $33.70 $46.06 37% Typical Year-Round Resident Monthly Bill = $40.45 $62.31 54% Existing Proposed % Increase

Rate Comparison – Seasonal Structure (All results for Option 1 – 2018, Class A) Winter Summer 30,000 $1.84 /kgal 159% Monthly Use (gallons/ERU) 20,000 $0.71 /kgal $1.33 /kgal 87% 10,000 Roland to complete Base Rate = $33.70 $46.06 37% Typical Year-Round Resident Monthly Bill = $40.45 $62.27 54% Existing Proposed % Increase

Proposed Blocks Block 1: 0-5,000 gallons/month/ERU Block 3: Over 20,000 gallons/month/ERU Water use from all accounts in each block: Blocks applied on a per ERU basis. (e.g. An account with 2 ERUs will pay Block 1 rates for water use up to 10,000 gallons and Block 2 rates from 10,000 to 40,000 gallons.

Block Rates and Monthly Water Use

Block Rates and Monthly Water Use

Rate Comparison – Block Structure (All results for Option 1 – 2018, Class A) 30,000 $2.27 /kgal 220% Monthly Use (gallons/ERU) 20,000 $0.71 /kgal $1.81 /kgal 155% 10,000 90% $1.35/kgal Roland to complete Base Rate = $33.70 $46.06 37% Typical Year-Round Resident Monthly Bill = $40.45 $60.96 51% Existing Proposed % Increase

Draft Recommended Rates – Option 1 Monthly Base Rates ($/ERU) First ERU per Account   Customer Class Existing 2019 2020 2021 2022 2023 2024 Class A - Private Residence $ 33.70 $ 46.06 $ 47.22 $ 48.41 $ 49.61 $ 50.85 $ 52.12 Class B – Industrial/Commercial $ 37.70 Class C - Unmetered $ 68.32 $ 93.38 $ 95.73 $ 98.14 $ 100.57 $ 103.09 $ 105.66 Residential Out-of-Town $ 50.55 $ 69.09 $ 70.83 $ 72.62 $ 74.42 $ 76.28 $ 78.18 Each Additional ERU $ 42.19 $ 43.25 $ 44.34 $ 45.44 $ 46.58 $ 47.74 Class B - Indust Commercial $ 85.53 $ 87.68 $ 89.89 $ 92.12 $ 94.43 $ 96.78 $ 63.29 $ 64.88 $ 66.51 $ 68.16 $ 69.87 $ 71.61 Volume Rates ($/kgal) All Customers Uniform Rate Option Uniform Rate $ 0.71 $ 1.71 $ 1.75 $ 1.79 $ 1.84 $ 1.88 $ 1.93 Seasonal Rate Option Winter Rate - $ 1.33 $ 1.36 $ 1.40 $ 1.43 $ 1.47 $ 1.50 Summer Rate $ 1.98 $ 2.03 $ 2.07 Block Rate Option Block 1 $ 1.35 $ 1.39 $ 1.42 $ 1.45 $ 1.49 $ 1.53 Block 2 $ 1.81 $ 1.86 $ 1.90 $ 1.95 $ 2.00 $ 2.05 Block 3 $ 2.27 $ 2.33 $ 2.38 $ 2.44 $ 2.50 $ 2.57 Roland to clean up and format

Draft Recommended Rates – Option 2 Monthly Base Rates ($/ERU) First ERU per Account   Customer Class Existing 2019 2020 2021 2022 2023 2024 Class A - Private Residence $ 33.70 $ 34.17 $ 37.75 $ 41.71 $ 46.05 $ 50.85 $ 52.12 Class B – Industrial/Commercial $ 37.70 Class C - Unmetered $ 68.32 $ 69.27 $ 76.53 $ 84.56 $ 93.36 $ 103.09 $ 105.66 Residential Out-of-Town $ 50.55 $ 51.26 $ 56.63 $ 62.57 $ 69.08 $ 76.28 $ 78.18 Each Additional ERU $ 31.22 $ 34.51 $ 38.16 $ 42.16 $ 46.58 $ 47.74 Class B - Indust Commercial $ 63.29 $ 69.96 $ 77.36 $ 85.47 $ 94.43 $ 96.78 $ 46.83 $ 51.77 $ 57.24 $ 63.24 $ 69.87 $ 71.61 Volume Rates ($/kgal) All Customers Uniform Rate Option Uniform Rate $ 0.71 $ 1.35 $ 1.46 $ 1.59 $ 1.73 $ 1.88 $ 1.93 Seasonal Rate Option Winter Rate - $ 1.05 $ 1.14 $ 1.24 $ 1.47 $ 1.50 Summer Rate $ 1.44 $ 1.57 $ 1.71 $ 1.86 $ 2.03 $ 2.07 Block Rate Option Block 1 $ 1.07 $ 1.16 $ 1.26 $ 1.37 $ 1.49 $ 1.53 Block 2 $ 1.43 $ 1.55 $ 1.69 $ 1.84 $ 2.00 $ 2.05 Block 3 $ 1.78 $ 1.94 $ 2.11 $ 2.30 $ 2.50 $ 2.57 Roland to clean up and format

Draft Recommended Rates – Option 3 Monthly Base Rates ($/ERU) First ERU per Account   Customer Class Existing 2019 2020 2021 2022 2023 2024 Class A - Private Residence $ 33.70 $ 35.92 $ 41.70 $ 48.41 $ 49.61 $ 50.85 $ 52.12 Class B – Industrial/Commercial $ 37.70 Class C - Unmetered $ 68.32 $ 72.82 $ 84.54 $ 98.14 $ 100.57 $ 103.09 $ 105.66 Residential Out-of-Town $ 50.55 $ 53.88 $ 62.55 $ 72.62 $ 74.42 $ 76.28 $ 78.18 Each Additional ERU $ 32.83 $ 38.16 $ 44.34 $ 45.44 $ 46.58 $ 47.74 Class B - Indust Commercial $ 66.56 $ 77.36 $ 89.89 $ 92.12 $ 94.43 $ 96.78 $ 49.25 $ 57.24 $ 66.51 $ 68.16 $ 69.87 $ 71.61 Volume Rates ($/kgal) All Customers Uniform Rate Option Uniform Rate $ 0.71 $ 1.40 $ 1.58 $ 1.79 $ 1.84 $ 1.88 $ 1.93 Seasonal Rate Option Winter Rate - $ 1.09 $ 1.23 $ 1.43 $ 1.47 $ 1.50 Summer Rate $ 1.70 $ 1.98 $ 2.03 $ 2.07 Block Rate Option Block 1 $ 1.11 $ 1.26 $ 1.42 $ 1.45 $ 1.49 $ 1.53 Block 2 $ 1.48 $ 1.69 $ 1.90 $ 1.95 $ 2.00 $ 2.05 Block 3 $ 1.85 $ 2.11 $ 2.38 $ 2.44 $ 2.50 $ 2.57 Roland to clean up and format

Impact of Potential Rate Options Option 1 – Large Initial Existing 2019 2020 2021 2022 2023 2024 Typical Year-Round Resident Monthly Bill (Uniform Rate) $ 40.45 $ 62.31 $ 63.85 $ 65.42 $ 67.09 $ 68.71 $ 70.46 Typical Year-Round Resident Monthly Bill (Seasonal Rate) - $ 62.27 $ 63.78 $ 67.05 $ 68.74 $ 70.36 Typical Year Round Resident Monthly Bill (Block Rate) $ 60.96 $ 62.54 $ 64.06 $ 65.64 $ 67.30 $ 69.00 Option 2 – 5-year Transition Existing 2019 2020 2021 2022 2023 2024 Typical Year-Round Resident Monthly Bill (Uniform Rate) $ 40.45 $ 47.00 $ 51.62 $ 56.82 $ 62.49 $ 68.71 $ 70.46 Typical Year-Round Resident Monthly Bill (Seasonal Rate) - $ 46.88 $ 51.59 $ 56.78 $ 62.45 $ 68.74 $ 70.36 Typical Year-Round Resident Monthly Bill (Block Rate) $ 45.96 $ 50.53 $ 55.62 $ 61.18 $ 67.30 $ 69.00 Roland to format and add other options – See calcs on recommended rates sheet. Option 3 – 3-year Transition Existing 2019 2020 2021 2022 2023 2024 Typical Year-Round Resident Monthly Bill (Uniform Rate) $ 40.45 $ 49.22 $ 56.71 $ 65.42 $ 67.09 $ 68.71 $ 70.46 Typical Year-Round Resident Monthly Bill (Seasonal Rate) - $ 49.15 $ 56.68 $ 67.05 $ 68.74 $ 70.36 Typical Year-Round Resident Monthly Bill (Block Rate) $ 48.13 $ 55.61 $ 64.06 $ 65.64 $ 67.30 $ 69.00

Impact of Potential Rate Options Percent Increase in Annual Bill Typical Residence All Types of Accounts Less than 47% 73% 67% 47 - 60% 17% 18% 60 - 80% 8% 9% 80 - 100% 2% 3% More than 100% (doubled) 0.5% 2.5%   Maximum Increase 155% Minimum Increase 37% Average Increase 47% Roland to format and add other options – See calcs on recommended rates sheet.

Impact of Potential Rate Options Most water users (67%) will see increases less than 47% over their existing bill Nobody will see 200 – 300% billing increases. Highest observed increase is 155% Very few customers (2.5% or 83 customers) will see greater than 100% increase. Top 7 accounts most impacted by the proposed changes are listed below: Account No. % increase Name Service Address 1.1155.2 155% Lardo Properties LLC 411 Colorado St # 3 2.1600.1 153% Wilkinson, R. Michael & Sandra 269 Morgan Dr 1.3355.1 152% Allen-Nokes Inc. 200 W Forest St 2.1550.2 148% Pacific Western Bank-Rivers Crossing 256 Morgan Dr 1.3470.2 138% McNabb, Janice 310 W Forest St 2.4531.2 135% Rogers, Terry & Connie 1130 Heavens Gate Ct 1.8514.5 128% Klang, Charles R. 234 Rio Vista Blvd Roland to format and add other options – See calcs on recommended rates sheet.

Comparison to Other Water Providers Roland to create some useful comparison figures

Needed Decisions Which overall rate increase option (1, 2 or 3)? Which rate structure approach (uniform, seasonal, or block)? Minor rate approach decisions: Okay with elimination of commercial class? Reduced charge for additional ERUs? Any other needed changes to recommended rates?

Schedule for Completion July 19th – Final Report and Public Workshop August 9th – Formal Adoption

Rate Comparison Typical Resident - 2019 30,000 $1.85 /kgal +$1.14/kgal Monthly Use (gallons/ERU) 20,000 $0.71 /kgal $1.48 /kgal +$0.77/kgal 10,000 +$0.40/kgal $1.11/kgal Roland to complete Base Rate = $33.70 $35.92 +$2.22 Typical Year-Round Resident Monthly Bill = $40.45 $48.13 +$7.68 Existing Proposed Change