1. Kevin Burnett Presented by CITY OF TULARE, CALIFORNIA

2. 2 Introduction Review purpose of study Overview of utility rate setting process Summary of projected revenue increases Preliminary rates Next steps

3. 3 Evaluate sufficiency of existing water and sewer revenue to: – Provide funding for current and future operating, maintenance, and capital expenses – Meet minimum reserve level requirements – Meet legal obligations associated with outstanding debt Develop rates which will generate sufficient revenue to meet cost of providing essential services Adjust rates between classes to appropriately reflect the cost to serve each class

4. 4 Cashflow model incorporates several financial targets: – Operating reserves: 90 days of operations and maintenance expense (O&M) – Debt service coverage: 1.25 times annual debt service – There must be $1.25 of net revenue for every $1.00 of annual debt service

5. 5 Yearly escalation factors: – Customer growth per year– 2.7% (per the General Plan) – Operating costs – 3.0% Capital projects planned in the City’s 10- year CIP

6. 6 Planning Project Initiation & Management Data Collection & Assessment Confirmation of Goals and Objectives Frequent Communication Analysis Rate Setting & Financial Plan Customer Statistics System Revenue Requirements Integration of Capital Improvement Plan Multi-year Financing Analysis Alternatives Analyses Communication Summary Report Written Public Presentations Adopted Rates & Financial Plan

7. 7 Determine revenue needed to meet utility costs Project O&M, capital and debt expenses Analyzes reserves Revenue Requirements Analysis Allocate utility costs by function and customer demand Cost of Service Analysis Develop rate structure for each customer class to collect appropriate level of revenues Rate Design Analysis Holistic Approach to Rate Design:

8. 8 Evaluate Current Financial Condition Operating Revenues lessOperating Expenses lessDebt Service lessTransfers lessCapital Expenditures lessReserve Requirements =Total Available Resources vs.Needed Capital Additions (ongoing R&R) and O&M Identify Optimum Funding Strategy

9. 9

10. 10 Water Fund – Additional revenue is needed to: – Meet cash reserve targets – Fund capital needs (average of $7.6 million a year) – Meet repair and replacement capital needs – Transmission line replacement ($33.9 million over next 10 years) – Continue to fund current service standards

11. 11 Sewer Fund – Additional revenue is needed to: – Meet debt service coverage requirements – Fund capital needs (average of $9.5 million a year) – Meet repair and replacement capital needs – Pipe replacement ($34 million over next 10 years)

12. 12 Option 1: Water Financial Plan Fiscal Year Revenue Increase Debt Issuance (millions)Fiscal Year Revenue Increase Debt Issuance (millions) 2016-1741%$20.732021-224%$- 2017-1812%-2022-232%- 2018-198%-2023-242%- 2019-206%13.832024-252%- 2020-216%-

13. 13 Option 2: Water Financial Plan Fiscal Year Revenue Increase Debt Issuance (millions)Fiscal Year Revenue Increase Debt Issuance (millions) 2016-1730%$20.732021-223%$- 2017-1830%-2022-232%- 2018-194%-2023-242%- 2019-204%13.832024-252%- 2020-214%-

14. 14 Sewer Financial Plan Fiscal Year Revenue Increase Debt Issuance (millions)Fiscal Year Revenue Increase Debt Issuance (millions) 2016-179%$-2021-221%- 2017-189%-2022-231%- 2018-199%-2023-241%- 2019-202%-2024-251%- 2020-212%-

15. 15

16. 16 Option 1 Meter SizeCurrent FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 ¾-inch $13.94$12.29$13.76$14.87$15.76$16.70 1-inch 17.1420.5222.9824.8226.3127.89 1 ½-inch 25.14 40.9345.8449.5152.4855.63 2-inch 37.7465.5173.3779.2484.0089.04 3-inch 57.13 131.13146.87158.61168.13178.22 4-inch 89.13204.87229.45247.81262.68278.44 6-inch 169.11409.63458.79495.49525.22556.73 8-inch 265.10655.43734.08792.81840.38890.80 10-inch 377.08942.271,055.341,139.771,208.161,280.65

17. 17 Option 2 Meter SizeCurrent FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 ¾-inch $13.94$11.33$14.73$15.32$15.93$16.57 1-inch 17.1418.9224.6025.5826.6027.67 1 ½-inch 25.14 37.7349.0551.0153.0555.17 2-inch 37.7460.3978.5181.6584.9188.31 3-inch 57.13 120.89157.16163.44169.98176.78 4-inch 89.13188.87245.53255.35265.57276.19 6-inch 169.11377.63490.92510.56530.98552.22 8-inch 265.10604.23785.5816.92849.60883.58 10-inch 377.08868.671,129.271,174.441,221.421,720.28

18. 18 Option 1 Class/UseCurrent FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 Residential 0-9,000 $0.564$0.664$0.744$0.803$0.852$0.903 9,001 – 30,000 0.813 1.0881.2181.3161.3951.478 > 30,000 1.6251.4521.6271.7571.8621.974 Multi Family Residential All Use 0.4620.5390.6030.6520.6910.732 Commercial All Use 0.7470.5410.6060.6550.6940.736 Industrial All Use 0.6301.1681.3081.4131.4981.587 School All Use 0.8711.0921.2231.3211.4001.484 City All Use 0.8710.9351.0471.1311.1991.270

19. 19 Option 2 Class/UseCurrent FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 Residential 0-9,000 $0.564$0.612$0.796$0.828$0.861$0.895 9,001 – 30,000 0.813 1.0031.3041.3561.4101.467 > 30,000 1.6251.3391.7411.8101.8831.958 Multi Family Residential All Use 0.4620.4970.6460.6720.6990.727 Commercial All Use 0.7470.4990.6490.6750.7020.730 Industrial All Use 0.6301.0771.4001.4561.5141.575 School All Use 0.8711.0071.3091.3621.4161.473 City All Use 0.8710.8621.1201.1651.2121.260

20. 20 Class/UseCurrent FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 Single Family $42.00$43.60$47.53$51.80$52.84$53.90 Multi Family (each unit) 32.3433.5736.5939.8940.6941.50 Mobile Home Parks (each space) 33.31 26.6329.0231.6332.2732.91 Senior Discount 21.0021.8023.7625.9026.4226.95 Commercial I ($/1,000 gals) 3.752.793.043.313.383.45 Commercial II ($/1,000 gals) 3.592.672.913.173.233.30 Commercial III ($/1,000 gals) 3.552.642.883.133.203.26 Commercial IV ($/1,000n gals) 5.464.064.424.824.925.02 Industrial Flow ($/1,000 gals) 2.542.793.043.313.383.45 BOD ($/100 pounds) 15.1116.0517.4919.0719.4519.84 TSS ($/100 pounds) 19.5421.5023.4425.5426.0626.58 Schools (per student per month) 1.480.7710.8410.9170.9350.954

21. 21 Finalize financial plans Develop rates Meet with elected officials to present recommended financial plans and rates April 7 – Present draft report and draft Prop 218 notice with BPU April 21 – Final report and final Prop 218 notice (begin 45 days) with BPU June 16 - Public hearing with BPU June 21 - First reading with City Council July 19 – Second reading with City Council September 1 – Rates effective

22. CITY OF TULARE, CALIFORNIA