2012 Stormwater Rate Study Preliminary Results City Council Public Works Committee Work Session September 24, 2012

www.fcsgroup.com

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Agenda • Background – History – Current customer classes and rate design – Key issues

• • • •

Forecast Assumptions Projected Debt Level Projected Rates Summary of Recommendations/Next Steps

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Background - History • Storm and Surface Water (“stormwater” or SSW) utility formed in 1990 with SDCs only • Monthly rates began in March 2001 • Last rate study in 2004, no increases since 2007

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What is the Stormwater Utility? • An enterprise fund like water and sewer. • It has physical infrastructure including pipes, ditches, catch basins, manholes and water treatment facilities. • It has employees to maintain, enhance and improve existing facilities and to review and approve new facilities. • It is required to be protective of the environment and to meet standards that maintain health and safety for the public. 4

Public Involvement/Education

-Education -Volunteer Activities

5

Illicit Discharge Program

-Scanning -Mapping -Water Quality Monitoring

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Construction Site Runoff Control • Review • Permitting • Inspection and Enforcement • Source Control • Monitoring

7

Good Housekeeping for Municipal Operations

-Street Cleaning -Vactor Waste -System Cleaning -Citizen Inquiries -Emergency Response - System Maintenance

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Capital Program

•WQ Retrofitting •Fish Passage •System Repairs •Replacement •Flood Control

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Why is a Storm Utility Needed? Flooding

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Failing Infrastructure Birchwood Culvert Before

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Birchwood Culvert Failure Baker Creek

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Fish

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Water Quality

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Rate Design Three customer classes: • Small footprint – Less than 1,000 square feet of impervious surface area (ISA) – Flat charge, currently $4.20 – 14% of accounts

• Medium footprint – 1,000-3,000 s.f. ISA – Flat charge, currently $7.00 – 69% of accounts (this class serves as benchmark)

• Large footprint – Over 3,000 s.f. ISA – “Per square foot” charge, currently $.00233/s.f. – 18% of accounts

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Medium-Footprint Rates by Year $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

*Graph Assumes Medium Footprint

Stormwater

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Credits • Credits at 20%, 50%, and 70% levels • Credits apply to: – Lots with qualified on-site stormwater facilities • Larger credit if there are discharge limits

– Institutions providing public education in environmental science – Lots with partially pervious gravel or approved pervious surface

• In addition, low-income discounts - same thresholds and percentages as water/sewer 17

Key Issues • No change is proposed in customer classes, rate design, or credits – Exception: expansion of low-income discount – Less complicated than the water and sewer rate study

• Primary issue with this rate study is just catching up and keeping up with the costs – The system needs capital investment – Changes in staffing and other operating costs are also proposed – Currently no outstanding stormwater debt, new debt is proposed

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Forecast Assumptions Policy/Topic

Assumption(s)

Reserve Funding

• Operating reserve policy – 45 days (≈ 12%) of budgeted operating expenses • No rate stabilization reserve at this time

System Reinvestment

• Long-term target: 50% of depreciation, with phase-in (10% in 2013, 15% in 2014, 20% in 2015, 25% in 2016, etc.)

Growth

• SFR: 0.7% – 1.3% per year plus annexations • Non-SFR: 1.3% – 2.3% per year

Inflation

• CPI projections from State economic forecast • ENR index for capital

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2013 Changes in Operating Budget 2013 Increases in Operating and Maintenance Budget Additional Personnel Costs: • Create new Natural Resources Division • Shift existing positions into Stormwater • Convert Limited-term & Part-time to Full-time Shift Costs of Street Sweeping to Stormwater Reallocation of Overhead Charges Wetland Mitigation Banking Study (2 years only) Other Changes and Inflationary Increases

$

Total O&M Budget Change above 2012 Level

$ 1,030,121

% Change in Operating Budget from 2012

294,872

240,900 139,698 157,233 197,418

21%

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2012-17 Capital Projects CIP Projection - Inflated Dollars

2012

2013

2014

2015

2016

Watershed Capital Projects Watershed Grants

50,000 -

1,366,800 959,000

780,909 100,000

645,189 -

636,427 -

598,440 -

Capital Projects less Grants

50,000

407,800

680,909

645,189

636,427

598,440

Other SWM Utility Projects Other SWM Grants

787,500 -

2,302,757 728,000

5,918,843 1,200,000

1,935,568 3,102,322 3,203,148 -

Capital Projects less Grants

787,500

1,574,757

4,718,843

1,935,568

Total Capital Expenditures Total Grants

837,500 -

3,669,557 1,687,000

6,699,752 1,300,000

2,580,757 3,738,749 3,801,588 -

Total Capital less Grants

837,500

1,982,557

5,399,752

2,580,757

3,102,322

3,738,749

2017

3,203,148

3,801,588

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Capital Funding Strategy 1. Grants and watershed surcharge where eligible 2. SDCs/fund balance/interest earnings to the extent available 3. State loans where eligible 4. Revenue bond issues every other year for the remainder Resulting bond issues: 2013: $2.975 million 2015: $3.05 million 2017: $2.93 million

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Debt Levels Debt Management Indicators Total Outstanding Debt Total Plant-in-Service

2012 -

2013

2014

2015

3,264,378

5,421,697

8,533,292

2016

2017

9,317,684 13,181,465

40,498,493 43,884,299 50,203,820 52,667,012 56,067,400 59,541,472

Debt as % of Total Plant-in-Service

0%

7%

11%

16%

17%

22%

Bonded Debt Service as % of Net Revenues

0%

42%

30%

42%

33%

44%

Debt Service Coverage - Bonds Only

n/a

2.40

3.32

2.37

3.00

2.29

2.34

2.34

1.97

2.19

1.64

Debt Service Coverage including State Loans

n/a

Even after funding capital program, projected debt levels are still moderate. 23

Projected Rates Monthly Rate Schedule Customer Class Small Footprint Medium Footprint ISA > 3,000 square feet

Existing 2012 2013 $ 4.20 $ 5.08 $ 7.00 $ 8.47 $ 0.00233 $ 0.00282

2014 $ 5.39 $ 8.98 $ 0.00299

2015 $ 5.71 $ 9.52 $ 0.00317

Across-the-Board % Increase 21% 6% Average SFR Monthly Impact* $ $ 1.47 $ 0.51 $ Cumulative Impact $ $ 1.47 $ 1.98 $ *Average Single-family Residential (SFR) is assumed to be Medium Footprint.

2016 $ 6.05 $ 10.09 $ 0.00336

6% 0.54 $ 2.52 $

2017 $ 6.42 $ 10.69 $ 0.00356

6% 0.57 $ 3.09 $

6% 0.61 3.69

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Total Monthly Charge – Water, Sewer, Stormwater Unmetered Single-Family Residence (metered in 2016) Water Bill Watershed Surcharge Total Water Bill Sewer Bill Stormwater Bill (Medium) Total Water/Sewer/Stormwater Bill Change From Prior Year % Change From Prior Year Metered Single-Family Residence (5/8" Meter, Monthly Usage: 6 ccf) Water Bill Watershed Surcharge Total Water Bill Sewer Bill Stormwater Bill (Medium) Total Water/Sewer/Stormwater Bill Change From Prior Year % Change From Prior Year

2012

2013

2014

2015

2016

$29.96 12.00 $41.96 33.23 7.00 $82.19

$32.66 12.30 $44.96 33.97 8.47 $87.40 $5.21 6.3%

$35.27 12.56 $47.83 35.07 8.98 $91.88 $4.48 5.1%

$38.09 12.84 $50.93 37.24 9.52 $97.69 $5.81 6.3%

$41.14 13.23 $54.37 39.47 10.09 $103.93 $6.24 6.4%

2012

2013

2014

2015

2016

2017

2018

$20.79 8.84 $29.63 33.23 7.00 $69.86

$22.58 9.09 $31.67 33.97 8.47 $74.11 $4.25 6.1%

$23.99 9.25 $33.24 35.07 8.98 $77.29 $3.18 4.3%

$25.44 9.43 $34.87 37.24 9.52 $81.63 $4.34 5.6%

$29.67 9.77 $39.44 39.47 10.09 $89.00 $7.37 9.0%

$31.25 10.05 $41.30 41.66 10.69 $93.65 $4.66 5.2%

$33.10 10.34 $43.44 43.16 11.01 $97.61 $3.96 4.2%

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Total Monthly Charge – Water, Sewer, Stormwater Apartment Building - 29,000 imp. sf (1" Meter, Monthly Usage: 25 ccf) Water Bill Watershed Surcharge Total Water Bill Sewer Bill Stormwater Total Water/Sewer/Stormwater Bill Change From Prior Year % Change From Prior Year Commercial - 29,000 imp. sf (2" Meter, Monthly Usage: 80 ccf) Water Bill Watershed Surcharge Total Water Bill Sewer Bill Stormwater Total Water/Sewer/Stormwater Bill Change From Prior Year % Change From Prior Year

2012

2013

2014

2015

2016

2017

2018

$82.70 21.00 $103.70 92.56 67.57 $263.83

$88.60 21.63 $110.23 103.50 81.76 $295.49 $31.66 12.0%

$93.80 21.98 $115.78 114.29 86.67 $316.74 $21.25 7.2%

$99.26 22.35 $121.61 122.07 91.87 $335.55 $18.81 5.9%

$106.72 23.26 $129.98 131.78 97.38 $359.14 $23.59 7.0%

$113.03 23.92 $136.95 140.26 103.22 $380.43 $21.29 5.9%

$119.57 24.59 $144.16 146.35 106.32 $396.83 $16.40 4.3%

2012

2013

2014

2015

2016

2017

2018

$258.29 56.20 $314.49 309.01 67.57 $691.07

$276.68 57.93 $334.61 328.45 81.76 $744.82 $53.75 7.8%

$293.09 58.83 $351.92 370.59 86.67 $809.18 $64.36 8.6%

$310.34 59.75 $370.09 396.52 91.87 $858.48 $49.30 6.1%

$333.20 62.31 $395.51 430.43 97.38 $923.32 $64.84 7.6%

$352.47 64.07 $416.54 459.26 103.22 $979.02 $55.70 6.0%

$372.57 65.84 $438.41 480.20 106.32 $1,024.93 $45.91 4.7%

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Stormwater Rate Comparison (Monthly, medium footprint) City Sumas Bellingham (Small) 2012 Blaine Anacortes Bellingham (Small) 2013 Arlington Mount Vernon Lynden Burlington Bellingham (Medium) 2012 Lynnwood Mukilteo Bellingham (Medium) 2013 Ferndale Marysville Kent Renton Stanwood Seattle (< 3,000 sq. ft.) Everett Tacoma Median 2012 (Medium-Footprint)

2012 $ 1.50 4.20 4.37 5.00 5.08 5.82 6.05 6.30 6.30 7.00 7.52 8.32 8.47 10.00 10.40 10.56 11.51 12.25 12.44 12.80 17.82 $ 7.92

Population 1,307 80,885 4,684 15,778 80,885 17,926 31,743 11,951 8,388 80,885 35,836 20,254 80,885 11,415 60,020 92,411 90,927 6,231 608,660 103,019 198,397

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Combined Utility Rate Comparison (Monthly, billed at 8 CCF, medium footprint, 5/8”x3/4” meter) Jurisdiction City of Seattle Seattle (Summer) City of Seattle (Winter) City of Blaine City of Arlington City of Stanwood Lake Whatcom Water & Sewer District City of Renton City of Kent (Summer) City of Kent (Winter) City of Mount Vernon City of Ferndale City of Tacoma (Summer) City of Lynden City of Tacoma (Winter) Mukilteo WSD City of Nooksack City of Bellingham - Unmetered, Proposed (2013) City of Anacortes City of Marysville City of Bellingham - Unmetered, Existing (2012) City of Everson City of Bellingham - Metered, Proposed (2013) City of Everett City of Sumas City of Bellingham - Metered, Existing (2012) City of Lynnwood Birch Bay Water & Sewer District

Water

Sewer

Stormwater

Total Bill

$50.40 $45.57 $19.75 $46.85 $25.29 $47.67 $36.73 $44.45 $36.91 $39.80 $32.17 $28.73 $34.84 $27.70 $27.35 $30.25 $32.66 $16.87 $25.11 $29.96 $25.56 $25.74 $21.36 $12.06 $23.85 $19.21 $24.90

$85.44 $85.44 $99.00 $68.15 $75.97 $65.66 $62.34 $52.71 $52.71 $52.60 $52.06 $46.41 $45.15 $46.41 $54.14 $45.22 $33.97 $47.49 $38.26 $33.23 $43.00 $33.97 $33.90 $53.93 $33.23 $35.38 $30.20

$12.44 $12.44 $4.37 $5.82 $12.25 n/a $11.51 $10.56 $10.56 $6.05 $10.00 $17.82 $6.45 $17.82 $8.32 n/a $8.47 $5.00 $10.40 $7.00 n/a $8.47 $12.80 $1.50 $7.00 $7.52 n/a

$148.28 $143.45 $123.12 $120.82 $113.51 $113.32 $110.58 $107.72 $100.18 $98.45 $94.22 $92.96 $92.32 $91.93 $89.81 $75.47 $75.10 $74.22 $73.77 $70.19 $68.56 $68.18 $68.06 $67.49 $64.08 $62.11 $55.10

*Excludes watershed surcharges

Tax Included $19.52 $18.77 $11.08 $6.04 $8.00 $0.00 $7.19 $6.46 $6.01 $3.68 $6.12 $6.01 $5.88 $5.93 $0.50 $4.53 $10.84 $4.86 $6.27 $10.09 $4.11 $9.58 $4.08 $5.94 $8.98 $3.73 $0.00

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Rate Comparisons • After rate increases, Bellingham stormwater rates are in the middle of the comparison group. • After water, sewer, and stormwater rate increases, combined utility bills in Bellingham are in the lower half of the comparison group. That remains true even if watershed surcharge is included.

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Lake Whatcom Capital Funding

Issue – Level of Capital Funding Desired • 2002 to 2011 average capital expenditure from SSWU 256K/yr. • 30% of Watershed Fund after debt service available for Capital. Thought to be 600K for near future but currently unknown. • Current SSWU rate model assumes 600K/yr revenue from Watershed to offset LW Capital expenditures. • Unknown level of County Capital expenditures and need for work outside City.

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Historical SSWU Lake Whatcom Capital $900

Inflated Project Costs (in Thousands)

$800 $700 $600 $500 $400 $300 $200 $100 $2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

*Average of $256K per year

LW Project Expenditures

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Lake Whatcom SSWU Capital Funding Options – • Allow Watershed Fee to replace SSWU capital contribution as in model. • Continue SSWU financing for Lake Whatcom at ½ current level (109K). Cost an additional $0.20/mo/ERU • Continue SSWU financing for Lake Whatcom at current level (217K). Cost an additional $0.41/mo/ERU • Other funding amount as desired. Additional LW Capital from SSWU would cost $0.16/mo/ERU/100K.

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Lake Whatcom 20 Year Capital Lake Whatcom Projects List

2012

2013

Geotechnical Eval Northshore Property A

Hip Grant Match

100

100

2017

2018

10

10

10

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

200

100

50

375 125

384

Bloedel Donovan Grant City Portion Bloed. Don

100

2016

400

Northshore Rd Grant City Portion NS Rd Grant

2015

550

Northshore Facility A-1 Hip Grant

2014

128

Huntington & Shep.s/o Acad SF/Infilt

400

Northshore Facility A-2 (AHHS)

400

Park Place Alum Fac

100

Brentwood 4 Pond Forest System

50

Facility Prop Acquisition B

450

Facility B

400

North Shore Estates Fac "C"

500

Pre Treatment Facilities (5)

500

Pre Treatment Facilities (5)

500

SB Crk Easements & Imps

400

Mill Wheel Pond Purchase and Imp

500

Roadway SF/infilt/biof Misc

300 200

Home Owner Incentive Cont.

100

100

100

100

100

100

100

100

100

Annual Watershed Program

100

100

100

100

100

100

100

100

100

500

500

500

500

500

500

500

500

500

Total Proposed Expenditures

953

1,359

750

600

560

510

510

600

600

600

600

600

600

600

600

600

600

600

600

600

600

Net Total Appropriations

853

400

650

600

560

510

510

600

600

600

600

600

600

600

600

600

600

600

600

600

600

Add'l WC Projects Needing Funding

Euclid Cedar Hills North Shore Drive/Agate Estates Beaver Ck/Stream Restoration

380 340 220

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Summary of Recommendations • Adopt proposed stormwater rates, which reflect: – – – –

Updated costs and growth estimates Increased staffing and other operating costs Renewed program of capital investment Moderate debt levels, with gradual transition to rate-funded system reinvestment

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2012 Stormwater Rate Study Presented by: Gordon Wilson FCS Group (425) 867 – 1802, ext. 224 [email protected]

www.fcsgroup.com

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