1. Pathways to Lasting Solutions June 9, 2009 City Council Work Session – No. 2 © 2008 Malcolm Pirnie, Inc. All Rights Reserved Water and Wastewater Rate Study

2. Pathways to Lasting Solutions AgendaAgenda 1.Review Prior Meeting 2.Objectives 3.Rate Alternatives 4.Impact on Median Customer 5.Closing Discussion / Guidance from Council

3. Pathways to Lasting Solutions Review Prior Meeting  Reviewed the rate study fundamentals  Council provided policy direction on:  Support for timing and magnitude of revenue increases to fund operations, maintenance, capital and financing plans (91% water, 92% wastewater over next 5 years)  Cost of service rates by class  Rate design – four block rates  Waterline replacement program monthly charge of $4.24 will eliminated included in the base charge, consistent with cost of service analysis  Effective date for new rates – January 2010

4. Pathways to Lasting Solutions Today’s Objectives – Guidance from Council on Rate Alternatives  Review water rate alternatives  Original Proposed Rates  Alt 1: Residential 1 st Block Lower  Alt 2: Residential Subsidy  Alt 3: Larger Residential Rate Blocks  Review wastewater rates  Adopt 1-year or 5-year rate plan

5. Pathways to Lasting Solutions Rate Making Industry Standards  Principles of Water Rates and Fees Manual M1 American Water Works Association, Fifth Edition, 2000  Water Rates, Fees, and the Legal Environment American Water Works Association, 2005  Developing Rates for Small Systems Manual 54 American Water Works Association, 2004  Financing and Charges for Wastewater Systems Water Environment Federation, 2004

6. Pathways to Lasting Solutions Rate Structure Characteristics Common to All Alternatives  Consistent with industry standards  Achieve same revenue increase required (across all classes)  Provide identical monthly service charges (base fees) by meter size  Outside-City volume charges 25% higher than inside-City  Wastewater rate structure remains unchanged

7. Pathways to Lasting Solutions Current and Proposed Water Base Fees Test Year 2010 Meter SizeCurrent Proposed FY 2010 ¾” $ 13.67$ 19.10 1” $ 22.97$ 30.10 1 ½” $ 45.22$ 55.10 2” $ 73.21$ 86.20 3” $ 136.39$ 167.00 4” $ 227.53$ 276.60 6” $ 455.14$ 539.50 8” $ 727.94$ 827.60 * Waterline replacement program monthly charge of $4.24 is assessed to each meter in addition to the base charge under the current fee.

8. Pathways to Lasting Solutions Original Proposed Residential Rates  15% tier differential  Cost of service by class by 2013  Tier 1 rate higher than multifamily, commercial and university uniform rate  Irrigation rate equal to residential Tier 4 rate

9. Pathways to Lasting Solutions Alt. 1: Residential 1st Block Lower  32% tier differential  Cost of service by class by 2013  Tier 1 rate equal to the lowest (multifamily) uniform rate  Irrigation rate at cost of service, between residential Tier 3 and 4

10. Pathways to Lasting Solutions Alt. 2: Phase In Cost of Service  15% tier differential  Residential cost of service subsidy of 8% in 2013  Tier 1 rate equal to the lowest (multifamily) uniform rate  Irrigation rate equal to residential Tier 4 rate

11. Pathways to Lasting Solutions Alt. 3: Larger Residential Rate Blocks  74% tier differential  Cost of service by 2013  Tier 1 rate equal to the lowest (multifamily) uniform rate  Irrigation rate equal to residential Tier 2 rate

12. Pathways to Lasting Solutions Current and Proposed Residential Wastewater Rates ChargeCurrent AmountProposed FY 2010 Base Fee – All Meter Sizes $ 9.83$11.80 Consumption Charge* $2.22 per 1,000 gallons $2.87 per 1,000 gallons * Based on January, February and March water consumption from the previous year usage for the residence. The average of the three months is the consumption used each month for the entire year.

13. Pathways to Lasting Solutions Current and Proposed FY 2010 Commercial Wastewater Rates ChargeDescriptionCurrentProposed Base Rate$9.83$11.80 Consumption Rate CARestaurants$ 3.73$ 5.03 CBBars & Taverns$ 4.75$ 5.79 CCEntertainment & Service$ 3.55$ 3.87 CDLaundries, Schools & Stores $3.23$ 3.77 CEOffice Buildings$ 2.98$ 3.12 CFHotels & Motels$ 2.59$ 3.66 CGHospitals, Athletic Clubs, Apt, Daycares, Dorms, Residences $2.21$ 2.68

14. Pathways to Lasting Solutions Customer Bill Impacts

15. Pathways to Lasting Solutions Residential Monthly Bill Impact (%) Water and Sewer Combined - 2010 1,000 gallons

16. Pathways to Lasting Solutions Residential Monthly Bill Impact (%) Water and Sewer Combined - 2010 1,000 gallons

17. Pathways to Lasting Solutions Residential Monthly Bill Impact (%) Water and Sewer Combined - 2010 1,000 gallons

18. Pathways to Lasting Solutions Residential Monthly Bill Impact (%) Water and Sewer Combined - 2010 1,000 gallons

19. Pathways to Lasting Solutions Residential Median Monthly Bills - 2010* $43.60 $51.83 * ¾ inch meter – water bill based on 4,000 gals. Sewer bill based on 3,000 gals. $50.97$51.12$51.36

20. Pathways to Lasting Solutions Residential Average Monthly Bills - 2010* $55.67 $67.48 * ¾ inch meter – water bill based on 7,000 gals. Sewer bill based on 5,000 gals. $66.52$66.14$65.41

21. Pathways to Lasting Solutions Multifamily and Commercial Classes Based on Average Consumption

22. Pathways to Lasting Solutions Multifamily Average Monthly Bills - 2010* $127.44 $154.70 * 1-inch meter – water and sewer bill based on 20,000 gals. $154.90$156.50$154.70

23. Pathways to Lasting Solutions Commercial Average Monthly Bills - 2010* $212.63 $254.58 * 1.5 inch meter – water and sewer bill based on 34,000 gals. $254.58 $260.70 $254.58

24. Pathways to Lasting Solutions Discussion and Guidance  Choose a water rate alternative  Original Proposed Rates  Alt 1: Residential 1 st Block Lower  Alt 2: Residential Subsidy  Alt 3: Larger Residential Rate Blocks  Adopt 1-year or 5-year rate plan?

25. Pathways to Lasting Solutions For Additional Information Contact Dennis Jackson Project Manager djackson@pirnie.com Isalah Rounds Analyst irounds@pirnie.com John Gallagher Principal, Quality Assurance jgallagher@pirnie.com Red Oak Consulting - Denver 100 Fillmore Street, Suite 200 Denver, CO 80206 Phone: (303) 316-6500 Fax: (303) 316-6599