City Council

CITY COUNCIL Monday, May 13, 2024 Council Chamber Special Session 6:00 PM FIRST FLOOR OF CITY HALL 7008 S. RICE AVENUE BELLAIRE, TX 77401 Agenda Mayor Gus E. Pappas Mayor Pro Tem Council Member Council Member Winfred C. Frazier Catherine Lewis Ross Gordon Council Member Council Member Council Member Cindy Cohen Taylor Brian Witt Jackie Georgiou City of Bellaire Texas Page 1 of 66 Agenda City Council May 13, 2024 SPECIAL SESSION (WORKSHOP) - 6:00 P.M. A. Call to Order and Announcement of a Quorum - Gus E. Pappas, Mayor. B. Presentation and Discussion: Presentation by Jason Gray with Willdan Financial Services on the utility cost-of-service and rate study, with an update from Mark Velasquez, Director of Public Works, and Beth Jones, Assistant City Manager, on water demand and system optimization as it relates to the cost of providing water service - Submitted by Terrence Beaman, Chief Financial Officer. Agenda Statement Report - Pdf C. Adjourn. City of Bellaire Texas Page 2 of 66 AGENDA STATEMENT City of Bellaire MEETING: City Council - May 13 2024 PREPARED BY: Todd Gross DEPARTMENT: Finance ITEM TITLE: Presentation by Jason Gray with Willdan Financial Services on the utility cost-of-service and rate study, with an update from Mark Velasquez, Director of Public Works, and Beth Jones, Assistant City Manager, on water demand and system optimization as it relates to the cost of providing water service - Submitted by Terrence Beaman, Chief Financial Officer. RECOMMENDATION: Terrence Beaman, Chief Financial Officer, recommends that City Council receive the report and provide feedback as appropriate. BACKGROUND/SUMMARY: Jason Gray, Managing Principal with Willdan Financial Services, will present the results of the utility cost-of-service and rate study. The study was undertaken to identify the City's cost of providing water, wastewater collection, wastewater treatment, solid waste and recycling, and stormwater drainage services and will recommend rates for Fiscal Year 2025 and beyond that recover the costs of providing these services. In addition, Mark Velasquez, Director of Public Works, and Beth Jones, Assistant City Manager, will provide an update on water demand and system optimization as it relates to the cost of providing water service. PREVIOUS COUNCIL ACTION: On January 22, 2024, Council approved Ordinance No. 24-004 for a contract with Willdan Financial Services in an amount not to exceed $57,010. CITY ATTORNEY REVIEW: ☐ Yes ☑ No Page 3 of 66  CITY OF BELLAIRE Water, Wastewater, and Solid Waste Rate Study Page 2 of 64 Council Presentation May 2024 Photo courtesy of Van Alstyne EDC Website Page 4 of 66  Agenda PRELIMINARY & SUBJECT TO CHANGE ▪ Background on Rates Page 3 of 64 ▪ Customers and Volumes ▪ Current and Forecast Cost of Service ▪ Proposed Rate Plan ▪ Solid Waste and Recycling ▪ Summary and Next Steps Page 5 of 66 2  3 BACKGROUND ON RATES Page 4 of 64 Page 6 of 66  21 st Century Water & Wastewater Rate Facts PRELIMINARY & SUBJECT TO CHANGE ▪ American Water Works Association (AWWA) forecasts that water and wastewater rates across the Page 5 of 64 U.S. will triple over the next 15 years ▪ Rate adjustments are primarily due to reasons beyond a utility’s direct control – inflation, necessary Capital Improvement Plans, wholesale costs, and other indirect expenses ▪ Average utility has been increasing rates 5-6% per year, a trend that is expected to continue and may accelerate ▪ Notably, 30-40% of utilities charge rates that do not cover their costs Page 7 of 66 4  City of Bellaire Water and Wastewater Rate Background PRELIMINARY & SUBJECT TO CHANGE ▪ City increased its water and wastewater rates by 10% in October 2023 Page 6 of 64 ▪ Inflation continues to drive up utility operating and capital costs annually ▪ City is currently expected to invest $4.37 million in CIP projects in FY2024-2028 – an amount that will likely increase with water/wastewater capital planning efforts ▪ City of Houston (COH) costs are forecast to increase due to annual rate adjustments ▪ Combination of above factors results in need to implement a new long-term rate plan Page 8 of 66 5  Current Water and Wastewater Rate Structure PRELIMINARY & SUBJECT TO CHANGE WATER RATE STRUCTURE Res, Comm, Sprinkler WATER RATE STRUCTURE Res, Comm, Sprinkler Base Charge by Meter Size Volume Rate per kGal Page 7 of 64 5/8 & 3/4” $9.99 0 - 2,000 $2.39 1” 24.97 2,001 - 4,000 3.21 1½” 49.98 4,001 - 6,000 4.01 2” 79.89 6,001 - 8,000 4.39 2½” 119.83 8,001 - 10,000 5.21 3” 149.78 10,000 - 15,000 6.00 4” 249.63 15,001 - 20,000 6.40 6” 499.26 20,000 - Above 7.20 8” 798.81 WW RATE STRUCTURE Res and Comm WW RATE STRUCTURE Res and Comm Base Charge by Meter Size Volume Rate per kGal All Meter Sizes $10.20 All Volumes $3.93 Page 9 of 66 6  Monthly Residential Charges | 10kGal Water and Wastewater PRELIMINARY & SUBJECT TO CHANGE $250 $218.14 Page 8 of 64 $200 $164.60 $150 $134.59 $123.95 $97.91 $93.45 $100 $90.83 $69.80 $50 $- Page 10 of 66 *Rates as of February 2024 Bellaire’s average residential user uses 9,689 gal. of water/mo. 7  8 CUSTOMERS & VOLUMES Page 9 of 64 Page 11 of 66  Water and Wastewater Accounts | Test Year 2024 PRELIMINARY & SUBJECT TO CHANGE Page 10 of 64 RATE MODEL CUSTOMER CLASS WATER Custom ers WASTEWATER Custom ers Residential 6,189 Residential 6,077 Res. Sprinkler 959 Commercial 292 Commercial 308 Government 5 Comm. Sprinkler - Government 19 Gov. Sprinkler 67 Total 7,542 Total 6,374 Page 12 of 66 9  Water Consumption by Customer Class| Test Year 2024 PRELIMINARY & SUBJECT TO CHANGE Page 11 of 64 Total Ground and Surface Water: 1.3B Gallons Total Metered Consumption: 1.1B Gallons Average System Water Loss: ±20.9% Page 13 of 66 10  TY Average Monthly Water Consumption (gallons) PRELIMINARY & SUBJECT TO CHANGE Monthly water usage Page 12 of 64 varies considerably with weather patterns, the model is based on the overall trend. Page 14 of 66 *West University Place average residential water use is 9,405 gal. per mo. 12  Historical and Forecast Water Accounts and Consumption PRELIMINARY & SUBJECT TO CHANGE Project team estimates Page 13 of 64 that forecast number of accounts (approx. 7,540 Accounts: acc) and metered water consumption (approx. 1.1B gallons) will remain relatively constant over the forecast period. However, actual water usage may vary considerably with weather patterns. Consumption: The model is based on the overall trend. Page 15 of 66 13  Page 14 of 64 WATER & WASTEWATER CURRENT AND FORECAST COST OF SERVICE Page 16 of 66 14  Key Assumptions for Forecast Financial and Rate Plan PRELIMINARY & SUBJECT TO CHANGE ▪ Forecast COH water purchases will remain at ▪ COH rate is forecast to increase by 9% each the test year levels (±693MG or 63% of total year Page 15 of 64 metered consumption) ▪ Known Water and WW CIP for FY 2024-2028 ▪ Most operating expenses will increase at 3% are: $4.37M* per year; certain expenses (e.g. insurance, fuel, ▪ Previously funded projects: $2.27M chemicals, etc.) increase at a higher rate ▪ Projects to be funded by long-term debt: ▪ TY2024 model adjustment is $63k for Water $2.1M Main Maintenance (based on 5-YR average) and $495k for COH water (based on actual ▪ New debt is expected to be issued in FY2026- purchases) 2028 ▪ FY2025 model adjustments are $472k (include ▪ New debt terms: 25-years, 4.0% interest chemicals, fuel, trash hauls, WWT maintenance, and other professional) *City is conducting a CIP study, and the final CIP number will change. ▪ The model includes additional O&M spending Recommended rate plan is based only on known CIP projects. Page 17 of 66 for known issues ($633k in FY2025) 15  CIP Forecast FY 2024-2028 Page 16 of 64 WATER WASTEWATER WAXXXX Central Well Chlorine Building $ 60,000 WW2203 Wastewater Treatment Plant Fine Screen Replacement$ 100,000 WAXXXX Renwick Well Generator 164,284 WW2202 Wastewater Collection System Improvements 275,000 WA2202 Fire Hydrant Rehabilitation and Replacement 100,000 Future Projects - WA2203 Water Distribution System Valve Improvements 232,000 Future Projects - WA2205 Priority Water Line Improvements 636,400 Future Projects - WAXXXX Water Tower Rehab 2,100,000 Future Projects - WA2205 Priority Water Line Improvements 700,000 Future Projects - Total Water CIP $ 3,992,684 Total Wastewater CIP $ 375,000 Total Water and Wastewater CIP $ 4,367,684 Page 18 of 66 16  City of Houston Annual Rate Adjustments ▪ COH applies annual rate adjustments based on inflationary indices described in Section 5.2 of the PRELIMINARY & SUBJECT TO CHANGE Master Ordinance and Ordinance No. 2010-305 (% adjustments) AND Ordinance No. 2021-515 (5- YR rate plan $ adjustments) Page 17 of 64 ▪ Historically, annual COH rate increases have ranged between 1.2% and 18.1% ▪ Base charge and excess charge increase at different paces $6.00 $5.50 5YR Average: 8.9% $5.00 $4.50 5YR Average: 7.8% $4.00 $3.50 $3.00 $2.50 $2.00 2020 2021 2022 2023 2024 Page 19 of 66 Base Charge Excess Charge 17  Forecast Cost of Service| Water and Wastewater PRELIMINARY & SUBJECT TO CHANGE Page 18 of 64 $16.3M $13.2M $10.4M Page 20 of 66 18  Forecast Net Revenue Requirement| Water and Wastewater PRELIMINARY & SUBJECT TO CHANGE Page 19 of 64 CURRENT AND FORECAST NET REVENUE REQUIREMENT Total Less Net Operating Surface Capital Debt Cost of Non-Rate Revenue Expenses Water (COH) Outlays Service Service Revenues Requirement TOTAL Revenue Requirement TY 2024 $ 4,999,428 $ 3,322,163 $ - $ 2,111,256 $ 10,432,847 $ 302,340 $ 10,130,507 FY 2025 5,749,215 3,411,444 712,962 2,109,220 11,982,841 302,340 11,680,501 FY 2026 5,891,717 3,709,062 366,458 2,109,213 12,076,450 302,340 11,774,110 FY 2027 6,095,878 4,033,183 380,539 2,055,134 12,564,734 302,340 12,262,394 FY 2028 6,308,682 4,394,161 628,635 1,908,446 13,239,924 302,340 12,937,584 FY 2029 6,530,515 4,770,655 322,642 1,845,326 13,469,137 302,340 13,166,797 FY 2030 6,761,779 5,189,421 358,808 1,798,086 14,108,094 302,340 13,805,754 FY 2031 7,002,897 5,645,558 641,044 1,741,566 15,031,064 302,340 14,728,724 FY 2032 7,254,310 6,153,680 391,022 1,743,402 15,542,413 302,340 15,240,074 FY 2033 7,516,479 6,683,661 399,219 1,740,157 16,339,516 302,340 16,037,176 Page 21 of 66 19  Page 20 of 64 WATER & WASTEWATER PROPOSED RATE PLANS Page 22 of 66 20  Page 21 of 64 WATER & WASTEWATER SCENARIO 1 | STATUS QUO Page 23 of 66 21  SCENARIO 1 | STATUS QUO ▪ Status Quo Scenario – Keeps the Existing PRELIMINARY & SUBJECT TO CHANGE Rate Structure and Tiers Page 22 of 64 ▪ 5-year rate plan with adjustments assumed to be effective October 1st of each year ▪ Assumes no change in fundamental rate structure ▪ Uniform percentage adjustments for base and volume charges ▪ Higher increases for water, lesser increases for wastewater ▪ Significant one-time rate increase in FY2025, Page 24 of 66 lesser increases afterwards 22  SCENARIO 1 | STATUS QUO | RATE PLAN PRELIMINARY & SUBJECT TO CHANGE Proposed Rate Plan The rate plan fully funds Current Effective Oct-24 Effective Oct-25 Effective Oct-26 Effective Oct-27 Forecast Oct-28 Page 23 of 64 all aspects of the water Water Rates -- Residential, Com m ercial, and Sprinkler Monthly Minimum Charge and wastewater utility 5/8" & 3/4" 1" $ 9.99 24.97 $ 12.29 30.71 $ 13.52 33.78 $ 14.19 35.47 $ 14.90 37.25 $ 15.65 39.11 based on the existing 1 1/2" 2" 49.98 79.89 61.48 98.26 67.62 108.09 71.00 113.50 74.55 119.17 78.28 125.13 market conditions and 2 1/2" 119.83 147.39 162.13 170.24 178.75 187.69 3" 149.78 184.23 202.65 212.78 223.42 234.60 assumptions. 4" 249.63 307.04 337.75 354.64 372.37 390.99 6" 499.26 614.09 675.50 709.27 744.74 781.97 8" 798.81 982.54 1,080.79 1,134.83 1,191.57 1,251.15 Volume Rate Per 1,000 Gal - 2,000 2.39 2.94 3.23 3.40 3.57 3.74 2,001 4,000 3.21 3.95 4.34 4.56 4.79 5.03 4,001 6,000 4.01 4.93 5.43 5.70 5.98 6.28 6,001 8,000 4.39 5.40 5.94 6.24 6.55 6.88 8,001 10,000 5.21 6.41 7.05 7.40 7.77 8.16 10,001 15,000 6.00 7.38 8.12 8.52 8.95 9.40 15,001 20,000 6.40 7.87 8.66 9.09 9.55 10.02 20,001 Above 7.20 8.86 9.74 10.23 10.74 11.28 Wastew ater Rates - Residential and Com m ercial Monthly Minimum Charge All Meters $ 10.20 $ 11.83 $ 12.54 $ 13.17 $ 13.83 $ 14.38 Volume Rate Per 1,000 Gal Volume Charge 3.93 4.56 4.83 5.07 5.33 5.54 Page 25 of 66 23  SCENARIO 1 | STATUS QUO | IMPACT ON BILLS PRELIMINARY & SUBJECT TO CHANGE Proposed Rate Plan Effective Effective Effective Effective Forecast Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Page 24 of 64 Residential Monthly Charge -- 5/8" Meter 5,000 Gal W Total $ 55.05 $ 65.62 $ 70.80 $ 74.34 $ 78.06 $ 81.55 5,000 Gal WW Increase -- $ 10.57 5.18 3.54 3.72 3.50 Increase -- % 19.2% 7.9% 5.0% 5.0% 4.5% 10,000 Gal W Total 97.91 116.96 126.36 132.68 139.32 145.61 10,000 Gal WW Increase -- $ 19.05 9.40 6.32 6.63 6.29 Increase -- % 19.5% 8.0% 5.0% 5.0% 4.5% 20,000 Gal W Total 199.21 238.81 258.57 271.50 285.08 298.13 20,000 Gal WW Increase -- $ 39.60 19.76 12.93 13.58 13.05 Increase -- % 19.9% 8.3% 5.0% 5.0% 4.6% Com m ercial Monthly Charge -- 2" Meter 20,000 Gal W Total $ 269.11 $ 324.79 $ 353.15 $ 370.81 $ 389.35 $ 407.61 20,000 Gal WW Increase -- $ 55.68 28.36 17.66 18.54 18.26 Increase -- % 20.7% 8.7% 5.0% 5.0% 4.7% 40,000 Gal W Total 491.71 593.09 644.63 676.86 710.70 743.97 40,000 Gal WW Increase -- $ 101.38 51.54 32.23 33.84 33.27 Increase -- % 20.6% 8.7% 5.0% 5.0% 4.7% Page 26 of 66 24  Page 25 of 64 WATER & WASTEWATER SCENARIO 2 | LIMITED TIERS Page 27 of 66 25  SCENARIO 2 | LIMITED TIERS ▪ Conservation Scenario – Introduces new tier PRELIMINARY & SUBJECT TO CHANGE structure for Water to promote conservation: Page 26 of 64 Gallons Used Volumetric Rate 0 – 5,000 $3.50 5,000 – 10,000 $5.25 10,000 – 15,000 $7.88 15,000 – 20,000 $9.84 20,000 - Above $12.30 ▪ Wastewater tier structure remains unchanged ▪ New tier structure will benefit low- and moderate-use customers (up to 10k gal./mo.) ▪ High-use customers (over 20k gal/mo.) will be Page 28 of 66 impacted the most 26  SCENARIO 2 | LIMITED TIERS | RATE PLAN PRELIMINARY & SUBJECT TO CHANGE The rate plan fully funds Proposed Rate Plan Page 27 of 64 Effective Effective Effective Effective Forecast all aspects of the water Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Water Rates -- Residential, Commercial, and Sprinkler and wastewater utility Monthly Minimum Charge 5/8" & 3/4" $ 9.99 $ 11.99 $ 12.83 $ 13.47 $ 14.14 $ 14.85 based on the existing 1" 24.97 29.96 32.06 33.66 35.35 37.12 1 1/2" 49.98 59.98 64.17 67.38 70.75 74.29 market conditions and 2" 79.89 95.87 102.58 107.71 113.09 118.75 2 1/2" 119.83 143.80 153.86 161.55 169.63 178.11 assumptions. 3" 149.78 179.74 192.32 201.93 212.03 222.63 4" 249.63 299.56 320.52 336.55 353.38 371.05 6" 499.26 599.11 641.05 673.10 706.76 742.10 8" 798.81 958.57 1,025.67 1,076.96 1,130.80 1,187.34 Volume Rate Per 1,000 Gal - 5,000 2.39 - 4.01 3.50 3.75 3.93 4.13 4.34 5,001 10,000 4.01 - 5.21 5.25 5.62 5.90 6.19 6.50 10,001 15,000 6.00 7.88 8.43 8.85 9.29 9.75 15,001 20,000 6.40 9.84 10.53 11.06 11.61 12.19 20,001 Above 7.20 12.30 13.17 13.82 14.52 15.24 Wastewater Rates - Residential and Commercial Monthly Minimum Charge All Meters $ 10.20 $ 11.73 $ 12.55 $ 13.18 $ 13.84 $ 14.39 Volume Rate Per 1,000 Gal Volume Charge 3.93 4.52 4.84 5.08 5.33 5.54 Page 29 of 66 27  SCENARIO 2 | LIMITED TIERS | BILL IMPACT PRELIMINARY & SUBJECT TO CHANGE Proposed Rate Plan Effective Effective Effective Effective Forecast Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Page 28 of 64 Residential Monthly Charge -- 5/8" Meter 5,000 Gal W Total $ 55.05 $ 63.82 $ 68.28 $ 71.70 $ 75.28 $ 78.64 5,000 Gal WW Increase -- $ 8.77 4.47 3.41 3.58 3.36 Increase -- % 15.9% 7.0% 5.0% 5.0% 4.5% 10,000 Gal W Total 97.91 112.66 120.55 126.58 132.91 138.88 10,000 Gal WW Increase -- $ 14.75 7.89 6.03 6.33 5.97 Increase -- % 15.1% 7.0% 5.0% 5.0% 4.5% 20,000 Gal W Total 199.21 246.45 263.70 276.89 290.73 304.06 20,000 Gal WW Increase -- $ 47.24 17.25 13.19 13.84 13.33 Increase -- % 23.7% 7.0% 5.0% 5.0% 4.6% Commercial Monthly Charge -- 2" Meter 20,000 Gal W Total $ 269.11 $ 330.33 $ 353.45 $ 371.13 $ 389.68 $ 407.96 20,000 Gal WW Increase -- $ 61.22 23.12 17.67 18.56 18.28 Increase -- % 22.7% 7.0% 5.0% 5.0% 4.7% 40,000 Gal W Total 491.71 666.82 713.49 749.17 786.63 823.69 40,000 Gal WW Increase -- $ 175.11 46.68 35.67 37.46 37.06 Increase -- % 35.6% 7.0% 5.0% 5.0% 4.7% Page 30 of 66 28  Scenario Comparison PRELIMINARY & SUBJECT TO CHANGE Effective Effective Effective Effective Effective Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Residential Monthly Charge -- 5,000 Gal Water, 5,000 Gal WW Page 29 of 64 Scenario I -- Status Quo $ 55.05 $ 65.62 $ 70.80 $ 74.34 $ 78.06 $ 81.55 Scenario II -- Conservation 55.05 63.82 68.28 71.70 75.28 78.64 Increase -- Dollars Scenario I -- Status Quo 10.57 5.18 3.54 3.72 3.50 Scenario II -- Conservation 8.77 4.47 3.41 3.58 3.36 Increase -- Percentage Scenario I -- Status Quo 19.2% 7.9% 5.0% 5.0% 4.5% Scenario II -- Conservation 15.9% 7.0% 5.0% 5.0% 4.5% Residential Monthly Charge -- 10,000 Gal Water, 10,000 Gal WW Scenario I -- Status Quo $ 97.91 $ 116.96 $ 126.36 $ 132.68 $ 139.32 $ 145.61 Scenario II -- Conservation 97.91 112.66 120.55 126.58 132.91 138.88 Increase -- Dollars Scenario I -- Status Quo 19.05 9.40 6.32 6.63 6.29 Scenario II -- Conservation 14.75 7.89 6.03 6.33 5.97 Increase -- Percentage Scenario I -- Status Quo 19.5% 8.0% 5.0% 5.0% 4.5% Scenario II -- Conservation 15.1% 7.0% 5.0% 5.0% 4.5% Page 31 of 66 29  Scenario Comparison PRELIMINARY & SUBJECT TO CHANGE Effective Effective Effective Effective Effective Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Residential Monthly Charge -- 20,000 Gal Water, 20,000 Gal WW Page 30 of 64 Scenario I -- Status Quo $ 199.21 $ 238.81 $ 258.57 $ 271.50 $ 285.08 $ 298.13 Scenario II -- Conservation 199.21 246.45 263.70 276.89 290.73 304.06 Increase -- Dollars Scenario I -- Status Quo 39.60 19.76 12.93 13.58 13.05 Scenario II -- Conservation 47.24 17.25 13.19 13.84 13.33 Increase -- Percentage Scenario I -- Status Quo 19.9% 8.3% 5.0% 5.0% 4.6% Scenario II -- Conservation 23.7% 7.0% 5.0% 5.0% 4.6% Commercial Monthly Charge -- 40,000 Gal Water, 40,000 Gal WW Scenario I -- Status Quo $ 491.71 $ 593.09 $ 644.63 $ 676.86 $ 710.70 $ 743.97 Scenario II -- Conservation 491.71 666.82 713.49 749.17 786.63 823.69 Increase -- Dollars Scenario I -- Status Quo 101.38 51.54 32.23 33.84 33.27 Scenario II -- Conservation 175.11 46.68 35.67 37.46 37.06 Increase -- Percentage Scenario I -- Status Quo 20.6% 8.7% 5.0% 5.0% 4.7% Scenario II -- Conservation 35.6% 7.0% 5.0% 5.0% 4.7% Page 32 of 66 30  Page 31 of 64 SANITATION AND RECYCLING Page 33 of 66 31  Monthly Residential Charges | Sanitation and Recycling PRELIMINARY & SUBJECT TO CHANGE $45 $40.00 $40 $36.31 Page 32 of 64 $35 $30 $27.76 $25 $20.19 $20.30 $20.84 $20 $15 $11.95 $10 $5 $- Page 34 of 66 *Houston Sanitation Department is funded from the General Fund 32  Solid Waste Key Assumptions ▪ Operating expenses are forecast to increase PRELIMINARY & SUBJECT TO CHANGE by 3-4% annually Page 33 of 64 ▪ Republic Services and Recycle America costs are forecast to increase by 5% each year ▪ No change in 2/1 (trash/recycling) pickup policy ▪ Fleet vehicles will be replaced according to the Fleet Replacement Schedule ▪ 6,066 active SW accounts in the Test Year. The number of SW accounts will remain flat for the forecast period Page 35 of 66 ▪ Rate increases in October of each year 33  Forecast Cost of Service | Solid Waste PRELIMINARY & SUBJECT TO CHANGE Page 34 of 64 $2.8M $2.4M $2.1M Page 36 of 66 34  Forecast Net Revenue Requirement| Solid Waste PRELIMINARY & SUBJECT TO CHANGE FORECAST SANITATION NET REVENUE REQUIREMENT Page 35 of 64 Total Less Net Operating Contracted Capital Debt Cost of Non-Rate Revenue Expenses Services Outlays Service Service Revenues Requirement Sanitation Revenue Requirement TY 2024 $ 1,467,976 $ 348,750 $ 260,109 $ - $ 2,076,835 $ (32,760) $ 2,044,075 FY 2025 1,520,162 366,475 176,852 - 2,063,489 (32,782) 2,030,707 FY 2026 1,574,321 385,101 237,394 - 2,196,816 (32,805) 2,164,011 FY 2027 1,630,533 404,672 241,523 - 2,276,728 (32,827) 2,243,901 FY 2028 1,688,880 425,239 278,324 - 2,392,443 (32,849) 2,359,594 FY 2029 1,749,449 446,850 251,844 - 2,448,144 (32,871) 2,415,272 FY 2030 1,812,331 469,559 293,214 - 2,575,105 (32,894) 2,542,211 FY 2031 1,877,620 493,423 292,240 - 2,663,282 (32,916) 2,630,366 FY 2032 1,945,413 518,498 185,023 - 2,648,934 (32,938) 2,615,996 FY 2033 2,015,813 544,848 242,501 - 2,803,162 (32,960) 2,770,202 Page 37 of 66 35  Solid Waste Rate Plan and Impact on Monthly Bill PRELIMINARY & SUBJECT TO CHANGE Page 36 of 64 CITY OF BELLAIRE SANITATION RECOMMENDED RATE PLAN Forecast Forecast Forecast Forecast Forecast Current Oct-24 Oct-25 Oct-26 Oct-27 Oct-28 Solid Waste Monthly Fee - All Residential Residential -- Sanitation $ 24.72 $ 26.45 $ 27.77 $ 28.88 $ 30.04 $ 31.24 Residential -- Recycling 3.04 3.25 3.42 3.55 3.69 3.84 Total $ 27.76 $ 29.70 $ 31.19 $ 32.44 $ 33.73 $ 35.08 Increase - $ 1.94 1.49 1.25 1.30 1.35 Increase - % 7.0% 5.0% 4.0% 4.0% 4.0% Page 38 of 66 36  37 SUMMARY Page 37 of 64 Page 39 of 66  Summary and Next Steps PRELIMINARY & SUBJECT TO CHANGE ▪ Review proposed rate plans Page 38 of 64 ▪ Revise recommendations based on Council feedback from workshop ▪ Prepare final Council presentation and present formal rate plan for adoption Page 40 of 66 38  39 QUESTIONS & DISCUSSION Page 39 of 64 Page 41 of 66  Page 40 of 64 2024 Stormwater Rate Study Council Presentation May 2024 Page 42 of 66 Business Confidential - Willdan  Agenda PRELIMINARY & SUBJECT TO CHANGE Page 41 of 64 BACKGROUND ON STORMWATER FEE STORMWATER CALCULATION MANAGEMENT AND METHODOLOGY UTILITIES STORMWATER PRESENTATION PROPOSED RATE PLAN SUMMARY Page 43 of 66 2  Page 42 of 64 BACKGROUND ON STORMWATER UTILITIES Page 44 of 66 3  Facts about Stormwater Management PRELIMINARY & SUBJECT TO CHANGE ▪ Urbanization and development has a significant impact how water moves after storm Page 43 of 64 events ▪ EPA has issued regulations requiring cities to create and implement comprehensive stormwater management plans ▪ These regulations and increasing urbanization have led to higher stormwater-related costs ▪ In the past, cities have mostly absorbed stormwater costs in utility and general funds ▪ As costs continue to rise and restrictions on general revenues tighten, cities are increasingly establishing separate utilities to finance and manage stormwater operations Page 45 of 66 4  Facts about Stormwater Utilities PRELIMINARY & SUBJECT TO CHANGE ▪ The latest Stormwater Utility Survey conducted in 2023 by Western Kentucky Page 44 of 64 University identified over two thousand stormwater utilities (SWUs) located in 42 U.S. states and DC ▪ Most SWUs are located in Minnesota, Florida, Texas, Pacific Northwest and Upper Midwest ▪ 11 states have 100 or more SWUs ▪ Monthly fees range from $0 to $45 (for Source: Western Kentucky University | 2023 residential rate payers) ▪ Average monthly single-family residential Page 46 of 66 fee is $6.06 5  Bellaire Stormwater Background ▪ Currently, the City doesn’t have a Drainage PRELIMINARY & SUBJECT TO CHANGE utility (PW department is managing drainage projects) Page 45 of 64 ▪ Over 95% of properties in Bellaire are at risk of flooding* ▪ City Staff has identified up to $9 million of stormwater capital improvements to address flooding issues and improve drainage systems in the City (CIP project DR2202 - Regional Drainage Program). ▪ Combination of above factors results in need to create a Drainage utility and implement a new long-term drainage fee rate plan Page 47 of 66 *Source: riskfactor.com 6  Stormwater Rate Comparison PRELIMINARY & SUBJECT TO CHANGE Page 46 of 64 * Based on a single residence with ISA of 3,500 sq. ft. Page 48 of 66 ** No Stormwater fee data was found for other neighboring cities 7  8 STUDY METHODOLOGY Page 47 of 64 Page 49 of 66  Stormwater Fee Calculation Methodology PRELIMINARY & SUBJECT TO CHANGE Page 48 of 64 2 | Determine 3 | Determine 4 | Calculate 1 | Calculate Current & Current & Stormwater Fee Impervious Forecast Forecast Cost of per Equivalent Surface Area Accounts Service Residential Unit Page 50 of 66 9  Impervious Surface Area Calculation PRELIMINARY & SUBJECT TO CHANGE Total Residential accounts: 6,189 Page 49 of 64 Total Non-Residential accounts: 308 Project team estimates that the number of accounts will remain relatively constant over the forecast period. Top 6 largest non-residential customers by ISA (250k+ sq. ft.) : 1. CenterPoint Energy 2. SLS Properties 3. Episcopal High School 4. Houston ISD 5. CCI Bellaire (aka. Capital Commercial Investments, Inc.) Page 51 of 66 6. Protestant Episcopal Church 10  Impervious Surface Area (ISA) in sq. ft. PRELIMINARY & SUBJECT TO CHANGE Page 50 of 64 Total Non-Residential Accounts = 308 Page 52 of 66 11  Forecast Cost of Service PRELIMINARY & SUBJECT TO CHANGE 20% of PW Budget is allocated to Drainage Utility (this number is Page 51 of 64 highly preliminary) Operating and personnel expenses are forecast to increase 3-5% per year (some expenses are increasing at a higher rate than others) City is expected to fund $9 million in stormwater capital improvement projects (CIP) (this number is subject to change pending stormwater study results) Founding Sources: $3M from GF and $6M with new debt in FY2025. The debt will have a 25-year term Page 53 of 66 and 4.0% APR 12  Page 52 of 64 STORMWATER PROPOSED RATE PLANS Page 54 of 66 13  Notes on Proposed Rate Plan – O&M Plan PRELIMINARY & SUBJECT TO CHANGE ▪ Generates sufficient revenue to fund only O&M expenditures and Capital Outlays of Page 53 of 64 the Drainage Facility ▪ 5-year rate plan with adjustments assumed to be effective October 1st of each year ▪ Assumes a flat rate for Residential customers and Tier-based rate structure for Non- Residential ▪ Tier structure is based on the Impervious Surface Area (ISA) in sq. ft. Page 55 of 66 14  Recommended Monthly Fees – O&M Plan PRELIMINARY & SUBJECT TO CHANGE Current 2025 2026 2027 2028 2029 A new fee structure with Page 54 of 64 fixed rates for Residential Storm w ater Monthly Fees customers and tier-based Residential $ - $ 4.00 $ 4.25 $ 4.50 $ 4.75 $ 5.00 rates for Non-Residential customers based on the average imperious Non-Residential surface area (ISA) - 10,000 $ - $ 4.00 $ 4.25 $ 4.50 $ 4.75 $ 5.00 10,001 50,000 - 4.80 10.20 16.20 22.80 30.00 50,001 100,000 - 12.00 25.50 40.50 57.00 75.00 100,001 250,000 - 28.00 59.50 94.50 133.00 175.00 250,001 500,000 - 56.00 119.00 189.00 266.00 350.00 500,001 Above - 120.00 255.00 405.00 570.00 750.00 Page 56 of 66 15  Net Revenue Forecast – O&M Plan PRELIMINARY & SUBJECT TO CHANGE The proposed rate Page 55 of 64 plan fully funds O&M Expenditures 2025 2026 2027 2028 2029 2030 2031 2032 2033 and Capital Outlays Revenues $ 323,328 $ 357,420 $ 396,442 $ 437,463 $ 480,481 $ 506,267 $ 530,471 $ 554,675 $ 578,879 Less Cost of Service Operating Costs 279,174 292,382 305,439 319,102 333,401 348,364 364,024 380,415 397,571 Capital Outlays 30,760 27,031 27,553 29,345 31,826 34,877 28,242 36,002 36,564 Debt Service - - - - - - - - - Total Cost of Service 309,934 319,413 332,992 348,448 365,226 383,241 392,267 416,417 434,135 Net Revenues 13,394 38,007 63,450 89,015 115,255 123,026 138,204 138,258 144,744 4.1% 10.6% 16.0% 20.3% 24.0% 24.3% 26.1% 24.9% 25.0% Drainage Fund Balance 13,394 51,401 114,851 203,866 319,121 442,147 580,351 718,609 863,353 Page 57 of 66 16  Notes on Proposed Rate Plan – CIP Plan PRELIMINARY & SUBJECT TO CHANGE ▪ In addition to the revenue required for O&M expenditures and Capital Outlays, generates Page 56 of 64 additional revenue to fund the debt service ▪ Allows the City to issue up to $6M in new debt to fund Stormwater CIP ▪ Requires significantly higher base rates, may create the shock among customers ▪ This rate plan also assumes a flat rate for all Residential customers and Tier-based rates for Non-Residential ▪ Tier structure is based on the Impervious Page 58 of 66 Surface Area (ISA) in sq. ft. 17  Recommended Monthly Fees – CIP Plan PRELIMINARY & SUBJECT TO CHANGE A new fee structure with Page 57 of 64 Current 2025 2026 2027 2028 2029 fixed rates for Residential customers and tier-based Storm w ater Monthly Fees rates for Non-Residential Residential $ - $ 6.00 $ 7.00 $ 8.00 $ 9.00 $ 9.50 customers based on the average imperious surface area (ISA) Non-Residential - 10,000 $ - $ 6.00 $ 7.00 $ 8.00 $ 9.00 $ 9.50 10,001 50,000 - 7.20 16.80 28.80 43.20 57.00 50,001 100,000 - 18.00 42.00 72.00 108.00 142.50 100,001 250,000 - 42.00 98.00 168.00 252.00 332.50 250,001 500,000 - 84.00 196.00 336.00 504.00 665.00 500,001 Above - 180.00 420.00 720.00 1,080.00 1,425.00 Page 59 of 66 18  Net Revenue Forecast – CIP Plan PRELIMINARY & SUBJECT TO CHANGE The proposed rate Page 58 of 64 plan fully funds O&M Expenditures, 2025 2026 2027 2028 2029 2030 2031 2032 2033 Capital Outlays and Revenues $ 484,992 $ 584,729 $ 700,859 $ 824,981 $ 912,721 $ 919,752 $ 919,752 $ 919,752 $ 919,752 New Debt Service Less Cost of Service Operating Costs 279,174 292,382 305,439 319,102 333,401 348,364 364,024 380,415 397,571 Capital Outlays 30,760 27,031 27,553 29,345 31,826 34,877 28,242 36,002 36,564 Debt Service - 384,072 384,072 384,072 384,072 384,072 384,072 384,072 384,072 Total Cost of Service 309,934 703,485 717,064 732,520 749,298 767,313 776,338 800,489 818,207 Net Revenues 175,058 (118,756) (16,205) 92,461 163,423 152,439 143,414 119,263 101,545 36.1% -20.3% -2.3% 11.2% 17.9% 16.6% 15.6% 13.0% 11.0% Drainage Fund Balance 175,058 56,302 40,097 132,559 295,982 448,421 591,835 711,098 812,643 Page 60 of 66 19  20 SUMMARY Page 59 of 64 Page 61 of 66  Presentation Summary ▪ Increasing stormwater costs are a result of urbanization and compliance with EPA Page 60 of 64 regulations ▪ Rate plan implementation is required to ensure that drainage utility recovers its cost of service ▪ Drainage fees should be reviewed next year after collecting 12-months of COS data for drainage utility Page 62 of 66 21  22 QUESTIONS & DISCUSSION Page 61 of 64 Page 63 of 66  Page 62 of 64 City of Bellaire Water Demand and System Optimization Page 64 of 66 Pumping Data Page 63 of 64 Page 65 of 66 Pumping Data Page 64 of 64 Page 66 of 66