1. 1 Proposed User Rate Adjustments March 11, 2008 Kathleen Gammell Director of Public Works Operations Evaluation

2. 2 A Nationwide Reality - Aging/Failing Water and Sewer Infrastructure.... utilities are grappling with ….. a convergence of several factors that translate to higher costs for supplying drinking water service: – Deteriorating infrastructure that needs to be replaced – Both growing and declining service populations – Increasing operating costs – More complex regulatory requirements – Undervaluation of water supply and service. (American Water Works Association, E-Main Stream, 9/12/06, Mary A. Parmelee, Editor)

3. 3 A Nationwide Reality - Aging/Failing Water and Sewer Infrastructure Communities across North America are at a turning point in financing the replacement of aging water and wastewater infrastructure… (American Water Works Association, 3/26/07) In the latest State of the Industry report … water professionals talked about not just aging infrastructure, but failing infrastructure. (American Water Works Association, E-Main Stream,Terry Rolan, 9/12/06

4. 4 City Challenges System – Wells have operated far beyond life expectancy and are showing signs of failing quality – Aging water and sewer pipes are breaking frequently – Sewer pipes are experiencing inflow & infiltration (rain water seeping into the sewer pipe), which increases UOSA costs – Routine Operation and Maintenance Costs continue to rise (UOSA costs, salaries, fuel, materials, equipment, outsourcing) New and More Complex Regulations – Higher wholesale water rates for new treatment processes – Increased UOSA debt for new treatment processes

5. 5 City Challenges (Cont) Capacity Needs – Commercial developments – Well replacement

6. 6 Engineering Evaluation Whitman Requardt Engineers completed a water and sewer system evaluation in Summer 2007 – Identified areas of near and long term improvements and associated costs for water and sewer system.

7. 7 Water System Capital Needs $27,695,000 over next ten years Water Connection Construction - Ensure redundancy from wholesale suppliers Water Meter Replacement, 2900 remaining Well Chlorination – Backup Water Supply SCADA – Monitoring / Control of System Study for Unaccounted For Water

8. 8 Water System Capital Needs (Cont) Water Capacity - Well Replacement - Service new commercial developments Water Mains / Hydrants - 13,640 linear feet are urgent - 43,295 linear feet are badly needed

9. 9 Sewer System Capital Needs $3,640,000 over next ten years Sanitary sewer relining - 16,400 linear feet are urgent - 14,300 linear feet badly needed Rehabilitate 50 manholes including manhole inserts to contain odor Install pump station Grinder to prevent pump station backups I&I Study Replace 700 partial service laterals

10. 10 Annual Operations and Maintenance Water and sewer pipe repair Hydrant repair Capital projects management Construction inspections Rising costs for personnel, equipment, materials, fuel, outsourcing Water quality sampling Meter reading Meter replacement Water and sewer system flushing Valve testing and repair

11. 11 Summary Regulations are becoming more stringent, resulting in higher consumption and capacity costs. The water and sewer system is old and needs attention now. Operation and Maintenance costs are rising. The current rates have been rendered inadequate for needed maintenance, repair and replacement.

12. 12 So How Does This Impact Me? Ensures delivery of water and collection of wastewater in the future Minimizes outages due to pipeline breaks Need User rate adjustment to cover costs Proposed areas of adjustment: – Base (minimum) fee is zero – Fees for usage will go up in line with surrounding jurisdictions – Water / Sewer Customers using 4,000 or less will have a lower monthly bill

13. 13 Proposed User Rate Adjustments March 11, 2008 Karen Spence Budget Manager Finance Evaluation

14. 14 Customer Base – Average Total Number of Residential Accounts - 3,690 – Average Total Number of Commercial Accounts - 295 Average Monthly Consumption: – Residential Accounts - 5,600 gallons/month – Commercial Accounts - 17,900 gallons/month Average Monthly Bill – Residential Accounts - $57.40 – Commercial Accounts - $194.11 Last assessment and adjustment to water and sewer rates – April 18, 1995 Current Status

15. 15 Current Water / Sewer Fund Revenue vs. Expenditures Projected (Includes $3.5 M for Unspent Capacity Purchase) With Tiered- Rate Adjustment Actual

16. 16 Analysis Highlights 10 year projection of revenue, operational & debt needs keeping fund self-sufficient Part 2 of a 2-part solution – Tap fees reserved for water & sewer capital fund – Water & Sewer consumption fee adjustment Implements a water conservation or tiered approach A four-tiered approach is used for residential & commercial accounts Recommend rates be re-evaluated every other year

17. 17 Manassas Park Water and Sewer Tiered Rates Gallons Used Current Charge $35 base, $4.00/1,000 Utility Bill Adjust Rates to $0 base, Tiered Rates Utility Bill Increase / (Decrease) since 4/95 1,000$39.00$11.75(69.87%) 2,000$43.00$23.50(45.35%) 3,000$47.00$35.25(25.00%) 4,000$51.00$47.00(7.84%) 5,000$55.00$58.756.82% 6,000$59.00$70.5019.49% 7,000$63.00$82.5030.95%

18. 18 Manassas Park Water and Sewer Tiered Rates Gallons Used Current Charge $35 base, $4.00/1,000 Utility Bill Adjust Rates to $0 base, Tiered Rates Utility Bill Increase / (Decrease) since 4/95 8,000$67.00 $94.5041.04% 9,000$71.00 $106.5050.00% 10,000$75.00 $118.5058.00% 11,000$79.00 $131.5066.46% 12,000$83.00$144.5074.10% 13,000$87.00 $157.5081.03% 14,000$91.00$170.5087.36% 15,000$95.00$184.7594.47%

19. 19 Residential Tiers Commercial Tiers Tier 1: 63% of accounts Tier 1: 53% of accounts 0 – 6,000 gals 0 – 10,000 gals Tier 2: 27% of accounts Tier 2: 13% of accounts 6,001 – 10,000 gals 10,001 – 20,000 gals plus $0.25 / 1000 gal plus $0.25 / 1000 gal Tier 3: 7% of accounts Tier 3: 13% of accounts 10,001 – 14,000 gals 20,001 – 40,000 gals plus $1.00 / 1000 gal plus $1.00 / 1000 gal Tier 4: 3% of accounts Tier 4: 21% of accounts 14,001 and above 40,001 and above plus $1.25 / 1000 gal plus $1.25 / 1000 gal Water and Sewer Tiered Rates

20. 20 Annual Residential Rate Adjustments 10 year Projection Fiscal Year Manassas Park Tiered Rate – Zero Base Base Rate$/1,000 gals 2009 $0 $11.75 2011 $0 $11.85 2013 $0 $12.00 2015 $0 $12.30 2017 $0 $12.60 2019 $0 $12.80

21. 21 Annual Commercial Rate Adjustments 10 year Projection Fiscal Year Manassas Park Tiered Rate – Zero Base Base Rate$/1,000 gals 20090.00 + EU* $12.25 20110.00 + EU $12.35 20130.00 + EU $12.50 20150.00 + EU $12.80 2017 0.00 + EU $13.10 2019 0.00 + EU $13.30 *EU – equivalent units – flat monthly rate charged to commercial customers based on industry standards and AWWA. Commercial average bill currently - $194.11 New average commercial bill – tiered rate $0 base - $221.25+EU increase 14%

22. 22 Monthly Utility Bill Comparison Average 5,600 gal usage Current Residential Bill Base Fee $35.00 Consumption 22.40 Total $57.40 New Residential Bill – tiered $0 base Base Fee $0.00 Consumption 65.80 Total $65.80 Increase – $8.40 or 15% Low 1,500 gal usage Current Residential Bill Base Fee $19.00 Consumption 6.00 Total $25.00 New Residential Bill – tiered $0 base Base Fee $0.00 Consumption 11.75 Total $11.75 Decrease – ($13.25) or (53%)

23. 23 Proposed User Rate Adjustments QUESTIONS?