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Home My WebLink About2023/08/29 - Briefing Packet C Mason County Agenda Request Form Y /A t! To: Board of Mason County Commissioners From: Loretta Swanson,Director and Ext.450 Richard Dickinson,Deputy Director/U&W Department: Public Works Briefing: ❑ Public Hearing: ❑ Action Agenda: ❑ Workshop ❑X Briefing Date(s): August 29,2023 Agenda Date: TBD Internal Review: ❑ Finance ❑ Human Resources ❑ Legal ❑ Information Technology ❑ Other (This is the responsibility of the requesting Department) Below for Clerk of the Board's Use Only: Item Number: Approved: ❑ Yes ❑No ❑ Tabled ❑No Action Taken Ordinance/Resolution No. Contract No. County Code: Item: 2024 Utility Rate Workshop Back2round/Executive Summary: A rate analysis has been completed for the county-owned and operated utilities. The overall objective is to move all utilities into a self-sustaining position with consistent and stable rates while a.)meeting debt ratio requirements,b.) meeting affordability index goals, and c.)planning for future capital and large maintenance projects. Key take-aways: ■ Water rates are significantly less than needed—especially in Rustlewood. Rate increases of 80%(Beards Cove) and 311%(Rustlewood) are projected without any outside revenue sources. ■ A moderate increase(4%)is recommended for Belfair sewer. ■ Increases of 9%are recommended for North Bay and Rustlewood sewer. Debt Service Coverage Test. Utilities with debt were analyzed as to whether a target coverage ratio of 1.5 is met(all but Rustlewood water). ■ Beards Cove met the test all years ■ North Bay all years until 2031 and 2032 ■ Rustlewood and Belfair sewer a mix of yes and no with wide swings indicating rebalancing may help. Affordability Analysis. Utility rates were analyzed to determine if considered a"hardship"when compared to median household income(MHI). Wastewater rates should be at or below 2% of MHI and water at or below 2.5%per Washington Administrative Code and US EPA. ■ Beards Cove water and Belfair sewer existing and proposed future rates are within affordability targets. ■ Rustlewood water is presently well under the 2.5%target(0.8%). However,proposed rates would be considered an"Elevated"hardship(3.27%)without any transfers in. ■ North Bay and Rustlewood sewer rates are presently slightly above the 2%target and proposed rates are under 2.5%. Budget Impact• The Belfair and Rustlewood funds currently receive a mix of REET 2 and 0.09 Sales Tax revenue in addition to customer rate revenue. Rate adjustments may help reduce and/or eliminate a steady reliance on these funds over time. Public Outreach: Community meetings were attended in Rustlewood,Lakeland Village and Beards Cove. Staff will present proposed rates after adjusting per Commissioner guidance. C Mason County Agenda Request Form Y /A t! Requested Action: No action requested. Staff to present results of rate analysis and gather Commissioner guidance and direction. Attachments• Rate Analysis Summary Affordability Analysis Spreadsheet 7-20-23 Rate Models for Beard's Cove Water,Belfair Sewer,North Bay Sewer,Rustlewood Water and Rustlewood Sewer Purpose:To move all utilities into a self-sustaining position with consistent and stable rates while a.) meeting debt ratio requirements, b.) meeting affordability index goals, and c.) planning for future capital and large maintenance projects. Conclusion: It will take the County a few years of changes to get all utilities in a self-sustaining position. Summary: • Water Rates must increase significantly more than 9%in 2024 over 2023 to move the County forward in self-sustaining efforts. o Rustlewood Water will need continued REET and/or.09 fund support, an average of $71k per year,to buffer rate increases. W ith0ut S.W 2032 I 2023 204 2025 2026 20D 2028 2029 2030 2031 2032 ConsumptiwRateperERU>2 28 2Q 3�32 34 '- 53 35 »1 Consumption Rateper ERU>1 22 2 24 25 28 24 31 33 Monthly Base Rate per Connection 44 86 95 100 105 11 115 1211 127 Average We 44 m 1Q l91 211 221 M3 w"wwsub. 2023 Consumption Rate per ERU>2 15 ]5 15 15 15 15 15424 15 Consumption RateperERU>1 10 10 10 10 10 W 10 W Monthly Base Rate rConnection 44 44 44 44 44 44 44 44 44 Average Rate IN 91 Q Q wg MR Consurnp on Rate rERU>2 13 14 16 17 19 21 23 26Consum on Rate r ERu>1 12 13 24 15 17 18 19 23 Monthly Base Rate per Connection - 42 46 51 56 61 65 71 77 93 Average Rat! - 90 0 a n 103 106 111 • We will need to work hard to get state and federal capital grants to decrease the need for increased debt for capital needs. Whereas debt can smooth rate increases—grants help keep rates from increasing. Rates/Affordability 2024: Analysis Applicable MHI Rate%of Target (Under)Over Target 2023 Rates %Increase Utility Scenario Rate* Monthly MHI % $ % $ North Bay Sewer-All 136 5527 2.465/o 2.0% 110.54 0.5% 25.46 125 9% Belfair Sewer-All 105 5527 1.900/0 2.0°% 110.54 -0.1% -5.54 101 49/o RW Sewer-All 129 5527 2.33% 2.0% 110.54 0.3% 18.46 118 9% RW Water-All 181 5527 3.27% 2.5% 138.18 0.8% 42.82 44 311% RW Water-All 91 5527 1.65% 2.5% 138.18 -0.9% -47.18 44 107% Beards Cove Water-All 79 4945 1.60% 2.5% 123.63 -0.9% -44.63 44 80% • North Bay—Duplexes are$175 in 2023-making all"connections"the same rate in 2024 and thereafter • For Water-there is a base rate and tiered/usage rate-for this analysis we took the average cost/customer based on historical usage and tiered rate structured scenarios Capital and Repair& Replacement 2023-2032: • Fund 403 North Bay $15,955,000 • Fund 413 Belfair $18,322,000 • Fund 411 Rustlewood—Sewer $564,000 • Fund 411 Rustlewood—Water $524,000 • Fund 412 Beards Cove $3,400,000 Existing Debt(Capital Funding): Ending Description Due Date Balance Fund 2017 Refunding Bond 12/31/2042 3,805,000 403 Beard's Cove-USDA 12/1/2059 258,703 412 2020B GO Refunding Bond 12/31/2048 1,113,410 411 2020A GO Refunding Bond 12/31/2032 4,018,361 413 2021 Bond Refunding 12/1/2030 2,581,915 413 Total Existing Debt 11,777,388 • Columbia and Cashmere Valley-Receiving REET and.09 Funds to pay down this debt,scheduled for pay-off in 2027. Anticipated Debt/Grants/GF Subsidy(Capital Funding): Date Amount Description Expected Expected Fund Sewer Treatment Expansion 2031 13,150,000.00 403 Various 2024-2032 564,000.00 411 Various 2024-2032 524,000.00 411 Extension Project 2023 3,500,000.00 413 Flow permitting and irrigation system expansion 2027 4,200,000.00 413 Freight Corridor PS 2030 6,200,000.00 413 Total Projected Capital Funding Needs through 2032 28,138,000 Constraints: • Commission Boundaries on rate increases (min/max) • Affordability—what the MHI allows (%of MHI)to not over burden the cost of utilities on residents. • Capital Needs/Possible Debt of each utility. • Growth Rate of each utility and associated Capital Facility Charges (Based on capital needs to support growth). o Number of Customers supporting each utility today. • Water Consumption—Change in methodology of rate establishment—will increase burden on heavy users and stop subsidizing their more than average usage through single rate method. o Base+T1,T2 Base=630 CF T1=631-1260 CF T2=1261+CF o Inconsistent consumption—makes associated rates/revenues less reliable—causing base rates to be higher. ■ Consumption Notes: • 1 ERU=630 CF • Gallons/CF=748 Assumptions: • Inflation—year over year o Operations (General,wages, benefits) o Capital • Debt/Grants needed for Capital Improvements and major maintenance efforts. o % of capital planned completed estimated • GF subsidies—Most significant in Rustlewood Water • Consumption activity • Growth activity Applicable MHI Target (Under) Over Target 2023 Rates % Increase Utility Analysis Scenario Rate* Monthly Rate%of MHI % $ % $ North Bay Sewer-All 136 5527 2.46% 2.0% 110.54 0.5% 25.46 125 9% Note - Duplexes are $175- making all "connections" the same rate Belfair Sewer-All 105 5527 1.90% 2.0% 110.54 -0.1% -5.54 101 4% RW Sewer-All 129 5527 2.33% 2.0% 110.54 0.3% 18.46 118 9% RW Water-All 181 5527 3.27% 2.5% 138.18 0.8% 42.82 44 311% RW Water-All GF Sub 91 5527 1.65% 2.5% 138.18 -0.9% -47.18 44 107% Beards Cove Water-All 79 4945 1.60% 2.5% 123.63 -0.9% -44.63 44 80% For Water-there is a base rate and tiered/ usage rate -for this analysis we took the avergage cost/customer based on historical usage and tiered rate structured scenerios Wastewater fee study reveals hardship for low-income households I (pugetsoundinstitute.org)